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Buyer nixes deal for controversial Wyoming natural gas assets

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A Texas company says it will not purchase natural gas assets in west-central Wyoming because of a groundwater investigation by federal regulators.

Residents blame groundwater well pollution on drilling in the area.

Legacy Reserves LP of Midland, Texas, said it will not buy the assets in the Pavillion area owned by Calgary, Alberta-based Encana Corp. The company had announced earlier this month its plans to buy the assets for $45 million in cash.

The company had a chance to “really appreciate” the ongoing U.S. Environmental Protection Agency Superfund investigation into groundwater pollution in the area while it was considering the deal, said Tom Fitzsimmons, business unit leader in Wyoming for Legacy Reserves.

“We felt the timing for us to close on this acquisition wasn’t a good time for us until that uncertainty was eliminated,” he said.

The purchase was set to close Thursday. It would have included properties, a natural gas gathering system, a gas processing plant and related compression facilities.

Encana Corp. spokesman Randy Teeuwen said Legacy Reserves nixed the deal because of the attention surrounding the investigation and uncertainty regarding further development, “although Encana retained responsibility for any outcome resulting from the ongoing groundwater investigation undertaken by EPA.”

Asked about the future of Encana’s assets in the Pavillion area, Teeuwen said “We’re not actively marketing it at this point.”

The EPA announced testing results on Nov. 9 from two monitoring wells it drilled and others in the Pavillion area as part of its investigation into residents’ complaints about tainted water wells. The tests found high levels of methane, benzene and other chemicals, as well as high methane levels.

EPA Administrator Lisa Jackson told a television program interviewer in mid-November the test results were “of concern.”

In an interview on the program EnergyNOW!, which airs on the Bloomberg cable channel, Jackson said it was possible that the oil and gas industry practice of hydraulic fracturing, or fracking, may have been responsible for the pollution.

But Encana Corp. spokesman Doug Hock disputed any connection between its wells and the test results and told the Star-Tribune the “science remains inconclusive.”

Fracking, in which water, sand and chemicals are pumped underground to fracture open pathways for oil and gas, is used in nearly all oil and natural gas wells in Wyoming, including in those wells drilled into the Pavillion field.

The practice — which is regulated by state officials in Wyoming — has drawn widespread scrutiny from environmentalists and residents who fear the practice could pollute water wells. Industry representatives regularly dismiss such concerns about the practice, which they say has been performed millions of times without incident. They often point to poor well construction and pre-existing geological pathways for pollution as possible sources.

There’s little hard proof fracking pollutes drinking water but there has been very little examination of a possible link. Urged by Congress, the EPA is at the beginning of a large-scale study to examine possible connections between fracking and bad water. Pavillion was considered and rejected for that study.

The EPA has said it will announce its conclusions from the Pavillion investigation in the spring.

Reach Jeremy Fugleberg at 307-266-0623 or jeremy.fugleberg@trib.com. Read his blog at http://trib.com/news/opinion/blogs/boom/ and follow him on Twitter: @jerenergy.

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