coalbed methane in south central Alberta

Encana 1

coalbed methane in south central Alberta

3 about Encana

4 about coalbed methane

5 CBM development

8 well development

10 what to expect

14 safety

18 environment

24 our relationship with the community

26 building rapport, respect and trust

table of contents

We take pride in being a trusted contributor in the communities where we work and live.

about Encana 3

about Encana Encana is a high-growth, low-cost leader in natural gas production, including coalbed methane. By providing a clean, affordable, abundant resource for future generations, Encana is helping reshape North America’s energy portfolio. We take pride in being a trusted contributor in the communities where we work and live. And by helping to grow the North American economy, Encana helps to build sustainable communities.

We have the skills, expertise and current technology to maximize the value of our

vast North American assets. A leader in innovation, Encana is pioneering a low-cost

approach to maximize margins and efficiencies. We apply the latest technologies

endeavor to use existing infrastructure to extract natural gas and coalbed methane

more efficiently, while minimizing our developmental footprint. This involves drilling,

completion, tie-in and production of multiple wells from a single well pad.

Even though the natural gas game has changed, our commitment to safety, the

environment and the community has not. We conduct our business ethically and

responsibly. The health and safety of our employees, contractors and the community

continue to be our priorities.

4 about coalbed methane

about coalbed methane Encana is the leading producer of coalbed methane (CBM) in Alberta, with the majority of our CBM activity situated in the south central area of the province. This booklet provides an overview of our CBM resource play.

CBM is: � composed primarily of methane, carbon dioxide and other components derived

from coal

� produced at the surface in the form of a low-pressure, sweet methane gas. This methane gas is processed and developed at only five pounds per square inch (psi), lower than the pressure of gas supplied to your home (about 15 psi)

� similar to pipeline-quality sweet natural gas with a high methane content (often greater than 90 percent)

� widely recognized as the cleanest-burning fossil fuel, producing the fewest emissions of any hydrocarbon

� used in homes and businesses every day to fuel furnaces, dryers, water heaters and gas stoves

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A resource play is a large-scale, repeatable development

program that unlocks gas assets through the innovative

application of technology. Encana has nine natural gas resource plays across

North America.

6 Coalbed Methane

how is CBM produced?

Continuous improvement in our operations – in safety, environmental protection

and cost reduction – is simply good business. By applying innovative approaches to

existing technology, and with a focus on consistently reducing our costs by applying a

manufacturing approach that involves repeatable, transferable applications, we’ve been

able to create greater efficiencies and reduce our environmental footprint.

The Horseshoe Canyon extends across a vast area where each square kilometre is

highly gas-charged, making it an ideal formation in which we’ve successfully applied

these repeatable applications.

Stimulation when applied to CBM is different from what might be called traditional

fracturing. That’s because coal, unlike other rock formations, is naturally fractured.

This natural fracturing is called a cleat system. In CBM stimulation, we pump nitrogen

(N2) into a coal zone, which causes the natural cleats in the coal to be further

interconnected. This allows the methane gas to flow into the well. Nitrogen is inert and

safe – in fact, 78 percent of the air we breathe is composed of nitrogen.

CBM stimulation is a safe and proven way to develop natural gas. We meet, and strive to

exceed, the requirements for CBM stimulation set out by government regulatory agencies.

By applying repeatable applications and using and improving upon proven technologies,

we have and expect to continue to achieve sustainable production growth of low-cost

natural gas supplies for years to come.

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CBM development an energy source for North America

Much of Canada’s CBM resource potential is in Alberta, where multiple layers of coal

underlie half of the province. The Alberta Geological Survey estimates there may be up

to 500 trillion cubic feet of natural gas in Alberta’s coals. The main formations include

the Horseshoe Canyon coals and Mannville coals. To date, about 90 percent of the

current CBM development in Alberta has occurred in the Horseshoe Canyon coals.

CBM wells are tied-in to existing pipeline infrastructure whenever possible, and flaring is not part of normal production operations.

8 Coalbed Methane

Edmonton

Calgary Horseshoe Canyon Coals

Mannville Coals

Encana’s CBM resource play has been guided by

our decades of experience in southern Alberta shallow

gas operations. For more than 50 years our sweet gas wells have produced natural gas from shallow conventional reservoirs.

We are applying that same

knowledge in developing CBM.

why develop CBM?

Natural gas is the viable energy option for a carbon-constrained world.

� natural gas is clean, producing up to 65 percent fewer emissions than coal and 25 percent less than oil

� natural gas is affordable, in many regions up to 30 percent less expensive as a transportation fuel than diesel or gasoline

� natural gas is abundant, with vast unconventional reserves unlocked by sweeping

technological advancements

Recent industry estimates reveal upwards of 100 years of natural gas supply available

in North America (based on current usage) which could significantly reduce U.S. and

Canadian dependence on foreign oil.

Every day, many North Americans rely on natural gas to heat their homes, cook their

food and generate the electricity they use. Given the abundance of natural gas in North

America, we see great potential in expanding its use as a cleaner energy alternative for

generating electricity and as a viable fuel source for transportation.

Natural gas electrical generation produces zero mercury emissions, 99 percent fewer

sulphur dioxide (SO2) emissions and up to 80 percent fewer nitrogen oxides (NOX)

emissions compared to electricity generated by coal. It also emits up to 65 percent less

carbon dioxide (CO2). That’s cleaner, healthier air.

Encana 9

Edmonton

Calgary Horseshoe Canyon Coals

Mannville Coals

To date 90 percent of CBM development in Alberta occured in the Horseshoe Canyon coals

map source: www.crcb.ca/docs/images/zone/coalzonesCBMmap

10 Coalbed Methane

our Horseshoe Canyon CBM development

The Horseshoe Canyon Coals of Alberta are dry coals and produce negligible amounts

of water. Other documented CBM projects in North America have water production

associated with at least the initial start-up (or dewatering) phase. The absence of water

makes the development of Horseshoe Canyon coals more viable.

The CBM we produce from the Horseshoe Canyon coals is high-quality and almost

pure methane, producing the fewest emissions of any hydrocarbon. As a shallow

formation, it enables us to apply minimal disturbance techniques resulting in lower

impact on the land base.

Having been in the area for over five decades, we endeavour to use existing

infrastructure and facilities as much as possible.

Horseshoe Canyon CBM Well depth: ~200 – 950m

Encana’s Clearwater Business Unit

11 CBM development

our Mannville coals CBM development

The next development of Alberta’s CBM resources is taking place in the Mannville

coals, which are about 900 metres deeper than the Horseshoe Canyon coals. This

formation is located from northwest of Edmonton to southeast of Calgary.

Encana has been developing the technology necessary to economically and responsibly

produce CBM from these deeper Mannville coals. We anticipate technological

breakthroughs to continue, which will advance the efficiency and extend the life cycle

of our operations.

The deeper Mannville coals provide us the opportunity to use proven drilling

techniques that make it possible to drill a number of wells from the same well pad,

lightening our environmental footprint.

Edmonton

Mannville CBM Well depth: ~800 – 1,800m

Encana’s Clearwater Business Unit

well development

meeting with landowners well site selection/preparation drilling

� our Surface Land agent discusses the proposed lease location with you, gathers information about your land and obtains your permission to survey

� the land is then surveyed and other pre-application work is undertaken (archaeological, soil, environmental sensitivity and wildlife assessments, as necessary)

� next, we work towards a mutually beneficial Surface Lease Agreement and Pipeline Right-of-Way Agreement – as per the Energy Resources Conservation Board (ERCB) directives, we will conduct public involvement programs in the area

� we will then submit our application to the ERCB for review and approval

� location of the well is decided on by both Encana and the landowner

� after receiving permission from the landowner and approval from the ERCB, the location is surveyed and staked

� we strive to limit our impact on quality of life and land use

� drilling can take one day in the Horseshoe Canyon coals to several days in the Mannville coals

1 2 3

completions production reclamation

� after the well has been drilled and the production casing cemented in from top to bottom, there is a second peak of activity called the completions phase

� First, the wells are logged and perforated. Most wells then require a stimulation treatment to help increase the well’s CBM and natural gas flow rate. Next, the well is tested or flowed back. During this stage, the CBM and natural gas is flared or incinerated. Flaring or incineration are important safety measures that dispose of the CBM and natural gas responsibly. The well will be tied-in to an existing pipeline whenever possible to minimize flaring or incineration.

� on deeper CBM wells, like those in the Mannville area, production tubing is installed

� the well completions process takes from one to 60 days – once the well is completed and put on production, the physical footprint on the lease site is significantly reduced and remains so for the entire production phase

� if the well is successful, it will be tied-in to a CBM and gas gathering system

� in most cases, after the well is tied-in to the pipeline, a small red fence will be installed to protect the wellhead and the length of pipeline above ground to the point it connects to the wellhead

� sometimes compressors are used at individual well sites and centralized gathering points to collect CBM and natural gas and compress it for transportation

� in areas that are in close proximity to residents, we install sound reduction packages on the compressors in accordance with ERCB noise control guidelines

� eventually every well will stop producing oil, CBM or natural gas

� when a well comes to the end of its productive life cycle, we are committed to returning the lease site as closely as possible to its original state

� in most cases, there will be no physical evidence of a well ever having been located on a particular site

4 5 6

14 Coalbed Methane

what to expect

during production operationsmanaging noise

The noise associated with drilling and well completion operations is temporary, but

could extend until the completions phase is finished. Noise suppression will be in

place to muffle the engine noise from the drilling rig. To minimize noise during the well

testing or flow back, a larger-diameter and tall flare stack will be used during flaring or

incineration, which is the controlled, short-term burning of CBM and/or natural gas that

cannot be processed for sale or use because of technical or economic reasons. During

incineration, there may be elevated noise levels which will stop as soon as the testing is

complete. Throughout the production phase, we do not anticipate any significant noise

during the regular operation of the well.

Encana uses noise suppression equipment at compressor stations that

meets or exceeds regulatory requirements.

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land use

Encana strives to minimize the surface impact of its operations wherever possible. For the

Horseshoe Canyon CBM wells for example, we lease or rent approximately 100 x 100

metre sites for drilling wells. When the wells are tied-in, we only require a three-metre

diameter area for the wellhead. We continue to lease the 100 x 100 metre site, but

return the remaining land back into the surface landowner’s hands for productive use.

Encana has also introduced new round fences for Horseshoe Canyon CBM wells.

These fences take up less space than the typical square fences and are designed to

make it easier for surface landowners to maneuver their equipment. We will monitor

the well and may need to return to service the well, depending on the well’s flow

characteristics and production levels.

16 Coalbed Methane

potential emissions and odours

Emissions may occur during well clean-up and after reservoir stimulation, when some

flaring is necessary. When pure natural gas and/or CBM is burned, it primarily produces

carbon dioxide (CO2) and water vapour (the same products of combustion emitted

from the chimney of a home that is heated by natural gas). Once the well is tied-in and

producing natural gas and/or CBM, there will be no continuous flaring and therefore we

do not expect noticeable odours from the well. However, if you have a concern about

an odour, please call your local field office.

potential flaring or incineration

The flow rates of some wells have the potential to create noise during well testing or

flow back which is when flaring or incineration occurs. Our goal is to limit the amount

of natural gas and/or CBM flared and conserve both so they can be marketed. When

we must flare, it will be temporary and we may use a taller and larger-diameter flare

stack, which helps lower the noise but is more visible. Notification of proposed flaring

is provided to members of the public, prior to the start of flaring, in accordance with

ERCB Directive 60.

Encana 17

traffic

While there will be increased traffic during the construction, drilling and completion

phases of our operations, we strive to minimize disruption to local communities.

well abandonment and site reclamation

After production rates have declined to the point where the well becomes unviable

and the location is no longer required, we properly abandon the well. Additionally, we

return the lease site area as close to its original state as possible. Soil and reclamation

professionals assess the land and carry out remediation and restoration of the site. The

landowner is informed of the site work that is carried out. An application for a Certificate

of Restoration is submitted to Alberta Environment. Upon approval, the surface lease

agreement is terminated and the restored land is returned to the landowner.

well spacing

To properly manage the CBM reservoir and maximize CBM recovery, we may

need to drill approximately four to eight wells or more per section. However, this

doesn’t necessarily mean using four to eight new surface lease sites. We look for

recompletion opportunities in existing wells where new gas-producing formations can

be reached. We also look for opportunities to drill new wells from existing well sites.

18 Coalbed Methane

safetyour safety commitment

Operating safely is critical to our business. Through our Environment, Health and

Safety (EH&S) management system and principles, human resources policies and

practices and our Corporate Constitution, we are committed to giving priority to the

health, safety and welfare of our employees and contractors, visitors to our worksites,

and communities which may be affected by our activities. We demonstrate our

commitment to workplace health and safety by identifying issues, providing training,

engaging with our industry peers and regulatory agencies, communicating openly and

working collaboratively with our employees and contractors.

Encana 19

Our safety program for CBM operations includes:

� assigning staff dedicated to safety in the field

� offering comprehensive safety training for field employees

� putting safety requirements in place for our contractors

� reviewing contractor safety performance prior to hiring

� providing job-specific safety orientations

� performing safety inspections of worksites

� requiring only qualified and competent workers on Encana worksites

� displaying appropriate warning signage on site

Safety is a top priority for our staff. Key safety initiatives drive continuous

improvement in safety performance by:

� focusing on improving employee and contractor safety performance

� supporting a drug and alcohol-free work place

� stressing the importance of safe driving

We investigate health and safety incidents, create regular health and safety reports and

review them with our operating groups. Action plans are then prepared to ensure we

continue to operate safely.

Worker and public safety is a top priority for our field staff.

20 Coalbed Methane

our emergency response plan

At Encana, emergency response and safety are integral to our operations. We

recognize that different emergencies require different responses. As part of our

Emergency Response Plan, all Encana sites incorporate local emergency response and

crisis management procedures. This ensures that incidents will be effectively managed

and that any potential impact on the site, community, environment or business will

be mitigated.

Our employees and contractors also regularly conduct exercises and drills to reinforce

and verify our emergency response capabilities, ensuring we are prepared for an

incident. We work collaboratively with local emergency responders to make these

sessions as realistic as possible.

Assessing and dealing with the cause of the emergency and notifying stakeholders

and communities about what is happening are key elements of our plans. Encana’s

systematic approach to emergency response and safety is designed to protect the

community, our employees and contractors, and the environment.

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If you believe there is an emergency that relates to our operations, please call our 24-hour emergency number collect at 403.645.3333

22 Coalbed Methane

environmentEncana’s environmental objectives are to: � minimize emissions and make efficient use of energy

� minimize water use, and when we do use water to do so responsibly

� minimize the footprint of our operations on the land base

� operate in a responsible manner aligned with our Corporate Responsibility Policy

minimizing our physical footprint

Encana strives to minimize the impact of our natural gas and/or CBM development

activities on the environment. From the use of advanced technologies and planning

tools to specific equipment and work scheduling, we have developed a number of

minimal disturbance practices that guide our activities in specific areas.

Minimal disturbance starts with careful preparation and pre-field project planning.

We work closely with communities and individual landowners to gain a thorough

understanding of a specific area and determine the least disruptive locations for access

roads, well sites, pipelines and associated infrastructure.

Encana 23

minimal disturbance practices

We use the latest technology such as spatial landscaping, to help identify and avoid

ecologically and culturally sensitive areas. In special areas, on-site surveys for vegetation,

archaeological and cultural resources, wildlife and wildlife habitat are conducted by

environmental specialists who identify potential sensitivities, such as nesting migratory birds

or seasonal wetland areas. With this information, planning and timing of our activities can

be coordinated to significantly reduce impact and avoid contact with wildlife.

examples of environmental care in our operations

In some sensitive grassland areas, Encana conducts a significant portion of our drilling

between late fall and early spring when the ground is more likely to be frozen and

protected by snow cover. This practice protects prairie grasses and wildflowers, limits

soil erosion and helps reduce vehicle tracks.

Depending on the environmental sensitivities of the landscape, Encana also uses

specialized equipment, such as construction equipment with rubber tracks that

disperses weight more effectively. This minimizes soil compaction and reduces the

length of time it takes grassland areas to recover from the presence of vehicles

and equipment.

New drilling technology and specialized equipment enables us to drill and complete

wells in less time and to continually look at other ways to reduce our footprint.

Specialized pipeline equipment, rather than trenching, is used to plough in a pipeline in

the majority of cases reducing the need for topsoil handling on the pipeline rights-of-way.

Wherever possible, Encana makes use of existing access roads and/or trails on the

landscape. All employees and contractors are expected to adhere to speed limits and

road safety guidelines for protecting wildlife and the public.

Encana works with farmers and other members of the agricultural industry to ensure their interests are taken into consideration at the development planning stage, resulting in minimal impact or disruption to their operations.

24 Coalbed Methane

groundwater

The protection of groundwater is important to Encana. We carefully select our well

site locations and avoid wetlands. We drill and produce natural gas and/or CBM in a

manner that protects aquifers, and we monitor the integrity of our operations.

Encana supports Alberta Environment’s initiative to map Alberta’s groundwater. We

partner with Ducks Unlimited Canada to initiate projects that provide protection for

and education about wetlands. We also partnered with Inside Education to build an

interactive curriculum – titled “Hidden Water” – for teachers to help grades seven

to nine students understand that groundwater is part of a dynamic system, and to

stress the importance of appropriately managing groundwater for future generations.

Inside Education is a non-profit society that provides natural resources and

environmental education.

We have been safely and responsibly developing CBM in Alberta for more than five

years and have focused our CBM production on the Horseshoe Canyon coals. These

coals are considered dry, as there is little or no associated water production.

We partner with Ducks Unlimited Canada to initiate projects that

provide protection for and education about wetlands

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well construction protects aquifers

Natural gas and/or CBM wells are isolated from freshwater aquifers by the well’s

construction design. Steel pipe, also called casing, is placed in the wellbore. The space

between the surrounding rock and the outside of the pipe is then completely filled with

impermeable cement to ensure natural gas and CBM can only flow from the producing

zone up the inside of the pipe to the wellhead at the surface.

We comply with Alberta Government’s comprehensive groundwater regulations.

Protection regulations include restrictions on the depths and distance from a water

well at which natural gas and CBM well stimulation can take place, and on the types of

materials that can be used for drilling and completing natural gas and CBM wells.

In the Horseshoe Canyon formations, thin seams of coal and gas-bearing sandstone are situated between impermeable layers of shale.

26 Coalbed Methane

water well testing

In April 2006, Alberta Environment introduced water well testing requirements in areas

of shallow CBM development. Encana and all other companies producing CBM above

the base of groundwater protection are required to offer water well testing to residents

for all water wells within 600 metres of a CBM well before it’s drilled. These water well

tests are intended to help establish baseline data for routine potability, bacteriological

parameters, presence and composition of any hydrocarbon and the water well yield

prior to CBM development. In addition, if a landowner or occupant perceives a change

in their well water quantity or quality following our CBM development, the water well

may be re-tested (the landowner or occupant must first register his or her water well

concern with Alberta Environment).

A number of factors including water consumption, groundwater sources, well

maintenance and completion, and precipitation variances can significantly affect water

quality and quantity in a water well. Based on thousands of tests, and our experience

with investigations of water well concerns, these factors have a far greater potential to

impact water quantity and quality than our operations.

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CBM and natural gas-bearing zones are isolated from freshwater aquifers by the well’s

construction. Once the hole has been drilled, usually with fresh water, steel pipe

(also called casing) is placed in the wellbore. The space between the surrounding rock

and the outside of the pipe is then completely cemented from top to bottom, so CBM

and natural gas can only flow from the producing zone up the inside of the pipe to the

wellhead at the surface.

example of drilling and well design to protect aquifers – Horseshoe Canyon coals

Outer Steel Casing Pipe

Ground level Ground level

Inner Steel Casing Pipe

Cement

Cement

Total Vertical Depth

~5

~8

28 Coalbed Methane

Our approach to building stakeholder relationships is based on respect and providing timely communication about current and proposed developments.

Encana 29

our relationship with the community being a good neighbour

We take our responsibilities to the communities in which we operate seriously.

We understand that in the primary stages of development it isn’t always easy

having oil, CBM and natural gas operations in your backyard. We believe in being

a good neighbour and continue to look for ways to improve our relationships with

landowners and other community stakeholders.

we consider stakeholder interests in all our operations by: � conducting public consultation in accordance with industry/regulatory guidelines

� consulting with landowners and residents who may have questions about our proposed or existing activities

� providing opportunities for community awareness and input about our operational plans in proximity to residents, landowners and Aboriginal communities

30 Coalbed Methane

building rapport, respect and trustwe are committed to continuous and lasting improvements by: � conducting regular reviews of our Community Involvement activities, donations and

sponsorships in each of our communities

� asking landowners, residents, communities and other stakeholders for feedback on

our role as a corporate neighbour

Our approach to building these relationships is based on respect and providing timely communication about current and proposed developments. We believe that community consultation is a collaborative process shared by the company and residents in the communities where we operate.

In the summer of 2010, Encana conducted a Stakeholder Engagement Survey to gain an understanding of the public’s perception of our approach to corporate responsibility and communication. The results from this survey will guide our community relations efforts in our operating areas and are an invaluable part of our community consultation.

Encana 31

Courtesy Matters™

Our resource play strategy means long-term development in any given area, so our

reputation and the relationships we have with the community are critically important to

the success of our operations. The results of a stakeholder engagement survey that we

conducted in 2006 indicated that contractor practices and behaviours were not always

aligned with Encana’s high standards. Common nuisance issues were associated with

oil, CBM and natural gas development and had to be addressed. In response to this

feedback, Encana initiated a company-wide program called Courtesy MattersTM.

Courtesy Matters focuses on desired behaviour and respecting the needs of our

stakeholders specifically in regards to noise, dust, traffic and garbage issues. The

program encourages Encana field staff and contractors to recognize that they are

essentially working in someone’s backyard, and that they must act accordingly.

our commitment to landowners

All Encana contractors, including broker land agents, are expected to uphold the same

principles and high standards expected of our employees. When approached by a land

agent, community members should expect to be treated with courtesy and respect.

Agents are expected to have all the relevant facts regarding the location and timing of a

project, as well as general information required by regulatory agencies. Land agents are

not experts in all facets of the oil, CBM and natural gas industry, so we encourage them

to refer specific concerns to designated Encana employees.

We believe open, two-way communication is the key to building relationships with our

communities. We value your feedback and welcome your questions or concerns about

our operations.

Open communication is the key to building productive working relationships.

Courtesy Matters hotline: 1.888.568.6322

32 Coalbed Methane January 2011