Habitat Loss Risk Report

WHEREAS:

EnCana Corporation is the lead firm in the Oleoducto de Crudos Pesados (OCP) [Heavy Oil Crude Pipeline] project in Ecuador. An EnCana employee is now heading the OCP consortium.

WestDeutsche Landesbank of Dusseldorf, the lead firm in a consortium of banks financing the OCP, has confirmed that the financing contract specifies that OCP must comply with World Bank Social and Environmental Safeguard Policies. OCP has stated that it is in conformance with this contractual obligation. On December 19, 2001 two World Bank Vice Presidents wrote a letter to the former OCP President expressing "deep concern about the impact of the construction of the OCP pipeline…" The letter requests "that OCP provide specific, independent verification of compliance with World Bank standards or, alternatively, refrain from claiming any such compliance."

On September 9, 2002 an independent review of the Environmental Impact Assessment (EIA) performed in preparation for the OCP ("Independent Assessment of OCP with the World Bank's Environmental and Social Policies") was published. In sum, the report claims:

1. The EIA for OCP was not conducted by independent experts as specified by World Bank Guidelines. The EIA was carried out by Entrix Ecuador. The President of Entrix Ecuador is the Environmental Coordinator of OCP.
2. The Analysis of Alternative pipeline routes is inadequate. The route was chosen before the Terms of Reference for the EIA were set and without adequate public consultation.
3. The EIA does not evaluate the main impacts of the OCP, specifically a doubling of oil production in the Amazon.
4. The EIA fails to address effective means of minimizing the loss of natural habitats and the need to create offsets, as specified by World Bank Guidelines.

The report's author, Dr. Robert Goodland, wrote most of the World Bank's Social and Environmental Safeguard Policies during his 25-year career with the World Bank. Mr. Goodland's report contradicts the findings of Stone & Webster Engineers Inc. (S&W), published April 19, 2002 in which S&W states it cannot identify any non-compliance. S&W is an engineering and construction company, commissioned by the OCP to review project status.

Construction of the OCP has encountered significant local opposition. The OCP consortium will spend US$1.3 billion, or about US$200 million more than specified in the original contract.

With confidence in corporate bookkeeping shaken, investors are scrutinizing other possible 'off-balance-sheet' liabilities, including the embedded risks associated with projects such as the OCP. EnCana's June 2002 MD&A report makes no reference to risks presented by inadequate community and stakeholder consultation. Resource extraction companies operating in developing countries have experienced discounts in share price as a result of community opposition to projects.

RESOLVED: that EnCana prepare a report to shareholders (at reasonable cost and omitting proprietary information) by June 30, 2003 detailing the range of potential financial liabilities associated with the OCP project, specifying community compensation and mitigation of loss of natural habitat, and disclosing policies and management systems in place at EnCana to avoid and mitigate such risks in future.

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