Statement of Defence filed in response to Jessica Ernst's
Fresh Statement of Claim

Ms. Ernst has publicized claims that coalbed methane (CBM) development near her home has affected the quality of water in her water well and other wells in her community. She first initiated legal action against Encana and Alberta regulators in 2007 and in April 2011 filed an amended Statement of Claim that sues Encana for $11.7 million, the Energy Resources Conservation Board (ERCB) for $10.75 million and the Alberta Crown for $10.7 million. The Defendants filed a motion to strike the amended Statement of Claim on the grounds that it was improper. As a result, Ms. Ernst was ordered by the Court to file a Fresh Statement of Claim, which she did on June 25, 2012; Encana denies each and every allegation contained in the Fresh Statement of Claim. Encana filed a Statement of Defence on August 19, 2013.

Since becoming aware of Ms. Ernst's concerns, Encana has offered to test Ms. Ernst’s water well on a number of occasions. To date, Encana has been unable to obtain Ms. Ernst's cooperation in order to perform any tests on her property. Encana has always firmly believed that Ms. Ernst's claims are not supported by the facts and her lawsuit is without merit.

The two natural gas wells at issue were vertically drilled and are located 6.4 and three kilometres respectively from the Ernst property. Both wells have since been shut in and are no longer producing natural gas. Neither of the wells at issue were hydraulically fractured; rather, nitrogen was used to stimulate the coal bed to produce natural gas from the wells. Nitrogen is inert and safe. In fact, 78 percent of the air we breathe is composed of nitrogen.

In respect of the development of the two wells cited in the claim, Encana conducted its operations safely, diligently and in accordance with accepted and established industry practice and complied with, or exceeded, the requirements of all relevant laws, regulations and directives in respect of its operations in the Rosebud area. Encana took all necessary and reasonable precautions to protect the Ernst property from foreseeable harm, including groundwater testing and monitoring before, during and after the two wells were drilled and completed.

In response to public concern from individuals in the Rosebud area, Alberta Environment retained the Alberta Research Council (ARC) (now called Alberta Innovates) to complete a groundwater investigation in the area. Encana co-operated fully with both Alberta Environment and ARC and provided them with all available information. When the investigation was completed in January 2008, Alberta Environment released a report showing that no water wells were affected by CBM development. Rather, the quality issues were predominantly due to naturally occurring methane, poor water well construction and maintenance issues.

Encana has been safely and responsibly producing natural gas and CBM in the Rosebud area and across Alberta for decades and is an active part of the community. We have partnered with various communities and organizations in rural Alberta on a range of projects including libraries, soccer fields, arenas, local sports teams, theaters and the arts, and local sports teams. We look forward to our continued role as a contributing, accepted member of these communities for years to come.

Background Technical Information

Hydraulic Fracturing Vs. Stimulation

Typically, Encana will complete a natural gas well in this region by using one of two processes. The first is used to extract natural gas from sand formations using a process called hydraulic fracturing. Hydraulic fracturing is a controlled operation that pumps a mixture of fluids, comprised primarily of water, sand and a small amount of chemical additives into the wellbore to the target formation at a high pressure. As the mixture is forced through perforations in the wellbore into the surrounding rock, the pressure causes the rock to fracture, allowing the gas to flow through the wellbore to the surface.

The second process, called stimulation, is used to extract CBM from coal seams. The coal seams are stimulated by pumping inert nitrogen gas into individual coal seams at a high rate. This stimulation performs two functions: it provides a near-wellbore access to the natural cleats in the coal seam allowing the CBM to flow from the coal seam to the wellbore and aids in the flushing of drilling water from the coal seams, allowing gas to flow more effectively.

Neither of the two wells at issue were hydraulically fractured.

Status of the two wells

The 06-04 Well is a vertically drilled natural gas well, with a surface location approximately 6.4 kilometres southwest of the Ernst Property. The 06-04 Well was initiated and completed between July 3 and October 10, 2001. The well was determined to be unproductive, and was abandoned on October 8, 2004.

The 05-14 Well is a vertically drilled natural gas well, with a surface location approximately three kilometres southwest of the Ernst Property. The 05-14 Well was initiated and completed on October 13, 2003. The well was determined to be unproductive, and was abandoned on October 10, 2004.

ECA stock price

TSX $14.27 Can -0.540

NYSE $11.11 USD -0.510

As of 2017-12-15 16:03. Minimum 15 minute delay