ENCANA'S REPLY TO CRITICISM

>Thank you for your email, and your views. I am taking the liberty of
>incorporating my recent reply to a gentleman in Denmark who passed along a
>request for an EnCana perspective on some of the general accusations which
>are similar to yours..... I should mention that the OCP construction is now
>virtually complete, with the route now in several stages of reclamation.
>Here's the excerpt (the questions are similar)....
>
>ACCUSATION: The zone of Encana's oil production has been documented to
>contain high levels
>of contamination in waters and soil, resulting in illnesses of many
>inhabitants. Air pollution has greatly diminished the productivity of
>farmers'
>crops. ---------------------
>
>OUR REPLY: City Investing was one of the original private companies formed
>by Ecuadorians in the early 1970s to exploit some of Ecuador's oil reserves
>in the Oriente. The company operated according to the local norms and
>standards. In 1996, Canadian-owned Pacalta Resources acquired City
>Investing and immediately proceeded to upgrade the previously inadequate
>operations to environmental and operating standards that would be more
>similar to those in Canada. When EnCana (AEC, at the time) acquired Pacalta
>Resources in 1999, we found that Pacalta had made great strides in those
>endeavours, but more work was required.
>
>Our remediation projects included replacement or upgrades of corroding
>pipelines and storage tanks; proper disposition of wastes; and biological
>remediation of hydrocarbon-soaked soils. These initiatives involved an
>early expenditure of some $250 million to retrofit almost 95% of the City
>Investing equipment. We are not done yet; EnCana has budgeted funds for
>further environmental remediation on original and recently acquired blocks.
>Since EnCana has been operating in Ecuador, we have also achieved the
>following:
>
>Increased production from approximately 4,000 barrels of oil per day (bopd)
>to approximately 40,000 bopd with a capacity to produce in excess of 80,000
>bopd.
>A substantial portion of our produced gas is captured (that's natural gas
>compounds that come up from the oil reservoir and have traditionally been
>considered waste gases). These captured gases are processed for refining to
>some fuels, including feedstock for electric power generation. Our own power
>plant using flare gases reduces the requirement we used to have for diesel
>fuel. In the process we also removed flare pits and installed flare stacks
>with blowers for improved combustion for those more remote areas where it is
>not feasible for gas to be captured for fuel usage. On the question of
>flares, City Oriente was producing about 4,000 bopd and had five well
>flares. In Tarapoa, we have increased capacity to 40,000 + bopd (capacity
>in excess of 80,000 bopd) and have a total of six flares, three of which are
>associated with the captured gas fuel system and used only in the event of
>an operational upset at the power plant we built.) Air pollution you
>reference is not from EnCana operations, but from the state oil production
>facilities which do not have the same level of operating enhancements as
>those within our operations.
>To reduce our footprint, directional drilling is done from pads wherever
>possible. Normally 8 to 12 wells can be drilled from one pad, instead of
>clearing and using multiple drill sites.
>A further initiative includes produced water re-injection (US$15 million)
>rather than down-well disposal, or the use of lagoons. This process has the
>added benefit of increased oil recovery.
>We have also introduced land farming of drilling cuttings, extensive and
>time consuming bio-remediation of oil soaked lands from previous
>owner-operations, extensive revegetation projects and more recently,
>reforestation projects of cleared homestead lands, using Mahogany and
>Jacaranda, thereby not only reforesting but also establishing the start of a
>meaningful sustainable economic activity for residents for their future
>years.
>
>We are often asked about ongoing investments in environmental cleanup.
>Costs are difficult to separate out because most of these projects, aside
>from their obvious environmental impact, also make good business sense.
>They are simply imbedded in individual project costs as we strive to
>achieve, overall, best practices. A "best guesstimate" is that we spend
>US$5 - 10 million annually on environmental related projects either directly
>or as part of facilities projects.
>===========================
>
>ACCUSATION: While Encana has already earned itself a far from respectable
>reputation in
>Ecuador's Amazon, it is now the lead shareholder of a controversial new
>pipeline, called the OCP, or Oleoducto de Crudos Pesados (Heavy Crude
>Pipeline). The OCP is a private consortium made up of 7 foreign oil
>companies
>involved in building the 500 km-long pipeline. The pipeline will double oil
>production in the Amazon (thereby encroaching on previously unexplored
>indigenous territories) and carry oil from the Amazon to the Pacific, over
>94
>seismic fault lines of the Andes, and will bisect 7 protected areas. The
>pipeline has been met with dozens of demonstrations across the country and
>construction has resulted in environmental and human rights violations. The
>
>OCP has contracted police to protect the pipeline, who have been involved in
>
>intimidation and use of force against landowners unwilling to sign over
>their
>land. At this point, the number of compensation claims is great, and it is
>anticipated that hundreds of families will be putting forth legal actions
>against the OCP.
>
>The OCP is required by its contract to adhere to World Bank standards.
>However,
>an ex-World Bank employee who wrote many of their environmental and social
>policies, has published an independent reports documenting violation of
>these
>standards.--------------
>
>OUR REPLY: First, I must dispute your assertions about EnCana's reputation
>in the Amazon. May I refer you to the Ecuadorian portion of the Community
>Investment site of our our webpage (www.encana.com) We have just completed a
>seismic program within the allowed areas of the Cuyabeno, under the
>supervision of an extensive Scientific Advisory Committee, and weeks ago
>received the signed endorsement of more than 120 people representing family
>components of the Indigdenous groups within the seismic program area. (While
>a single source contact would be ideal, the populations in the area demand,
>and receive, individual and small group consultations).
>
>Now, about OCP. The evolving political, social, environmental and economic
>parameters in Ecuador posed its challenges for a project that had been
>desired within Ecuador for about a decade! The 500-kilometre project
>features some innovative community development projects, as well as very
>unique, if not precedent setting, approaches toward construction of a
>pipeline in a variety of environments. OCP maintains a website
>(www.ocpecuador.com) which features a lot of information about the project,
>its contracts, the community programs and an update on the status of
>construction. For all of your other questions related to OCP, we recommend
>you discuss them with the senior management of OCP, available through the
>OCP website.
>
>EnCana prefers to take majority interest in its exploration and development
>properties to ensure maximum efficiencies are realized. In today's world, a
>pipeline is a contracted service. The pipeline project has been identified
>as a national need for more than 10 years. The significant cost of the
>mammoth project was not something that Ecuador's economy could sustain nor
>could an individual producer take on. The consortium approach was deemed to
>be the best vehicle to bring the national pipeline to reality. The
>consortium operates on a consensus, whereby 75% of the vote is required for
>most decisions, and in bigger issues, that consensus must be 100%. Some of
>the partners are national oil companies, others from the private sector.
>There were two minor environmental violations of which I am aware. One was
>the beginning of right-of-way clearing before the permit was issued (and
>EnCana's representative in the consortium was crtainly heard on the need for
>respect for regulatory processes. The more recent violation was in veering
>off the assigned right of way to provide more stable anchoring of the pylons
>for the air-hoist mechanism that was transporting pipe above treeline to
>significantly reduce the normal impact of traditional transportation
>practices. The violation was an "at the moment" decision, and hindsight
>suggests greater environmental damage would have occured if the supporting
>pylon system had not been more effectively anchored. The Ministry of
>Environment recorded the violation, admonished the consortium and OCP has
>taken steps to repair the incursion.
>
>We are familiar with the generalist accusations that you passed along
>seeking our comment. More than 97% of the right-of-way landowners have
>signed agreements. The entire process of right-of-way acquisition was
>followed consistently to ensure that all people affected by the right-of-way
>were treated fairly and equitably. As with similar projects in other
>countries, including Canada, there are people who oppose the project and the
>democractically elected governments establish processes for appeal or for
>review of perceived aggrievances. So-called general assertions of human
>rights violations, or environmental destruction would, I assure you, be
>thoroughly reviewed by the Government of Ecuador. We at EnCana have yet to
>find substantive allegations that warrant detailed investigation on our
>part. The Government of Ecuador has a system in place that must test the
>veracity of claims or complaints.
>
>You will find OCP's response to the "Goodland Report" on the OCP website.
>
>In closing, the reality is that Ecuador presents the political, geographic
>and social challenges found in developing countries. But there are none of
>the civil wars, or institutionalized terrorism and human rights abuses that
>are so prevalent in today's world.
>
>It is very important to remember that Ecuador is guided by a freely-elected
>government. The country has established its policy, regulations and
>procedures governing the development of its oil and gas resources. EnCana,
>as one of seven owners of the OCP pipeline, works constructively with the
>other sponsors and the management of OCP to ensure that OCP works toward
>environmental, social and behavioural standards that generally reflect North
>American norms.
>
>Are we perfect? No, but we're taking more than a 'swing of the bat.' We
>are in the process of creating and introducing a company-wide Corporate
>Responsibility policy and supporting principles, guidelines and management
>systems. Meanwhile, our corporate and Ecuadorian teams are working daily
>towards excellence --- operationally, environmentally, socially. We know
>excellence is an unachievable goal, but its pursuit is what motivates us to
>improve. With respect, criticism that is fair in process and clear in
>standard also can be useful in that pursuit.
>
>EnCana is proud of its corporate and Ecuadorian team efforts to help a
>country and its communities develop their own capacities economically and
>socially while we conduct ourselves responsibly in the development of
>natural resources. We cannot prescribe legitimacy to the general
>accusations in circulation, reflecting inaccurate hearsay and
>unsubstantiated claims promulgated by not-so-well-intentioned organizations
>to further their own agenda.
>
>Again, thank you for being patient for the response; by way of observation,
>yours is the only email we received that expressed a willingness to maintain
>an open mind and to at least hear another perspective. The other two dozen
>have simply been accusatory by subscribers who firmly believe corporations
>must be guilty until proved otherwise....
>END OF REPLY TO DANISH EMAILER....
>