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Encana demands review of EPA report on Wyoming groundwater pollution

CALGARY - Encana Corp. said Monday there are serious flaws in a U.S. government report that links its Wyoming natural gas wells to groundwater pollution and that an independent analysis of the data must be undertaken.

[Find Andrew Nikiforuk's Tyee story on the U.S. report here.]

The Calgary-based energy giant (TSX:ECA) said the preliminary findings of the Environmental Protection Agency's draft report "are conjecture, not factual and only serve to trigger undue alarm."

The report should not have been released before being verified by third-party scientists, Encana added.

"These preliminary conclusions do not stand up to the rigour of a non-partisan, scientific-based review and that is of paramount importance to every natural gas producing community, every citizen and business that relies on natural gas and every industry worker," said Eric Marsh, senior vice-president of Encana's U.S. operations.

Drilling for natural gas trapped in underground rocks -- so-called shale gas -- has expanded sharply in recent years in both Canada and the United States as new drilling techniques have tapped into previously hidden reserves.

Shale gas now accounts for about a third of all U.S. gas output, and has lead to an economic boom in parts of Pennsylvania, the U.S. rural Midwest and western states.

But it has also led to rising environmental concerns as well.

Last week, the EPA released a draft report that said a controversial practice known as hydraulic fracturing, or "fracking" -- in which sand, water and chemicals are blasted into rock deep underground to release natural gas -- may be to blame for groundwater pollution in the small community of Pavillion, Wyoming.

The EPA said chemical compounds likely associated with fracking had been detected in the groundwater. Pavillion residents have said their well water reeks of chemicals and health officials warned them last year not to drink it.

The agency said Thursday that its announcement was the first step in a process of opening up its findings for review by the public and other scientists.

"EPA's highest priority remains ensuring that Pavillion residents have access to safe drinking water," said Jim Martin, EPA regional administrator in Denver. "We look forward to having these findings in the draft report informed by a transparent and public review process."

Among its concerns, Encana said the two monitoring wells the EPA drilled into the natural gas reservoir were up to 300 metres deep, whereas groundwater wells are typically less than a third of that depth. Finding natural gas at the bottom of the deep wells is "an entirely expected result," Encana said.

"The results in the EPA deep wells are radically different than those in the domestic water wells, thereby showing no connection," the company said in a release.

"Natural gas developers didn't put the natural gas at the bottom of the EPA's deep monitoring wells, nature did."

The company also says the report ignores the history of the Pavillion area, where water quality issues predate natural gas development.

Encana cites U.S. Geological Survey reports as far back as the 1880s about poor water quality in the Pavillion area. USGC reports dating to 1959 found naturally occurring sulphate, total dissolved solids and acid levels that make the water there unfit for drinking. Natural gas drilling began there in 1960.

But the Natural Resources Defence Council had a hydrogeologist and toxicologist look at the EPA study and found the research to be "excellent" and "highly credible," said Kate Sinding, a senior attorney with the environmental group.

She called Encana's rebuttal "exactly what you would expect to see from a gas company."

"This is an industry that repeatedly, over the past several years, has been making the claim that there's no confirmed case of contamination from fracking. The EPA study puts the lie to that, and they're desperately trying to salvage it," she said.

However, the NRDC does agree more research is necessary.

"I think what last week's report from the EPA shows is that there is still a lot to be learned and understood about the risks," Sinding said.

"So the first thing that we look to from the regulatory community is continued and deeper examination and understanding of the risks and then regulatory solutions, if possible, that respond to those risks."

Encana acquired the Pavillion asset in 2004 through its acquisition of Tom Brown Inc. and drilled the last well there three years later. The mature field with 125 wells comprises a mere 0.3 per cent of the company's daily production.

Encana, which has been selling non-core assets across Canada and the United States to shore up its finances, had planned to sell the Pavillion assets for $45 million to Midland, Texas,-based Legacy Reserves. The deal fell through last month amid what Encana said were Legacy's concerns about the EPA investigation.

Encana is one of North America's biggest natural gas producers, with operations in Western Canada, the southeastern United States and elsewhere. It pioneered many of the fracking techniques the industry uses today.

Encana shares fell nearly 3.6 per cent to $18.85 in early-afternoon trading Monday on the Toronto Stock Exchange.

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