Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemption from certain information circular requirements regarding reserves data and other oil and gas information -- Split-off entity exempt from certain disclosure requirements of NI 51-101 subject to certain conditions, including the condition to provide a modified statement of reserves data and other oil and gas information containing the information contemplated by, and consistent with, U.S. Disclosure Requirements -- Comparability of oil and gas reports essential to information circular -- Impracticable for split-off entity to prepare NI 51-101 reports prior to filing deadline -- Modified annual oil and gas forms and reliance on U.S. disclosure requirements.

Applicable Legislative Provisions

National Instrument 51-101 Standards for Disclosure for Oil and Gas Activities, s. 8.1.

National Instrument 51-102 Continuous Disclosure Obligations, s. 13.1.

Form 51-102F5 Information Circular, Item 14.2.

October 20, 2009

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO

(the Jurisdictions)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

ENCANA CORPORATION (EnCana) AND

7050372 CANADA INC. (IOCo)

(the Filers)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filers (the Application) for a decision under the securities legislation of the Jurisdictions (the Legislation) that:

(a) EnCana be exempt, subject to certain conditions, from the requirement to provide, under National Instrument 51-102 Continuous Disclosure Obligations, and more specifically under Item 14.2 of Form 51-102F5 Information Circular (Form 51-102F5), in the information circular (the Information Circular) to be sent to certain securityholders of EnCana in connection with an Arrangement (as defined herein), certain reserves data and other oil and gas information in respect of the IOCo Assets (as defined herein) in accordance with Item 5.5 of Form 41-101F1 Information Required in a Prospectus (Form 41-101F1) (the Circular Disclosure Relief);

(b) IOCo, upon completion of the Arrangement (as defined herein), be exempt, subject to certain conditions, from the requirements to disclose information concerning oil and gas activities in accordance with the following sections of National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (NI 51-101):

(i) section 2.1;

(ii)

A. sections 5.2(a)(iii) and (iv),

B. sections 5.2(b) and (c), and

C. section 5.3,

but only in respect of reserves as disclosed in accordance with US Disclosure Requirements (as defined below); and

(iii) sections 5.8, 5.15(a), 5.15(b)(i) and 5.15(b)(iv);

including as those requirements pertain to prospectuses, annual information forms and other disclosure documents (the Continuous Disclosure Relief); and

(c) this decision and the Application (collectively, the Confidential Material) be kept confidential and not be made public until the earlier of: (i) the date on which EnCana mails the Information Circular; (ii) the date that EnCana advises the Decision Makers that there is no longer any need for the Confidential Material to remain confidential; and (iii) the date that is 90 days after the date of this decision.

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Alberta Securities Commission is the principal regulator for the Application;

(b) EnCana and IOCo have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island and Yukon; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102 and CSA Staff Notice 51-324 Glossary to NI 51-101 Standards of Disclosure for Oil and Gas Activities have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filers:

The Arrangement

1. On May 11, 2008, EnCana issued a news release which described its intention to split EnCana into two focused energy companies -- one a natural gas company and the other an oil company, respectively GasCo and IOCo. Due to an unusually high level of uncertainty and volatility in the global debt and equity markets, EnCana announced on October 15, 2008 a revision to the original corporate reorganization schedule and delayed seeking shareholder and court approval for the transaction until clear signs of stability returned to the financial markets. On September 10, 2009 the board of directors of EnCana unanimously approved and announced plans to proceed with the transaction.

2. The transaction will be implemented through a court-approved plan of arrangement (the Arrangement) under Section 192 of the Canada Business Corporations Act (CBCA).

3. As a result of the Arrangement, the holders (Shareholders) of common shares of EnCana (an EnCana Share) will receive, in exchange for each EnCana Share currently held, one new common share in EnCana and one common share of IOCo, which will undergo an amalgamation pursuant to a later step in the Arrangement with Cenovus Energy Inc. (Subco), currently a wholly subsidiary of EnCana, and become Cenovus Energy Inc.

4. EnCana will be required to obtain approval of the Arrangement from the Shareholders. In order to obtain such approval, EnCana must prepare and send an information circular in accordance with Form 51-102F5 to all Shareholders and hold a meeting of Shareholders (the Meeting). The Arrangement is expected to be completed as soon as practicable following the Meeting (the Effective Date). The Meeting is presently expected to be held on November 25, 2009. It is presently expected that the Information Circular will be mailed to Shareholders in late-October, 2009. The Arrangement is expected to be completed on or about November 30, 2009.

5. Prior to the Effective Date, Subco will acquire from EnCana the businesses that will be carried on by IOCo, being principally the Integrated Oil Division and the Canadian Plains Division of EnCana (the IOCo Assets).

EnCana Corporation

6. EnCana is a reporting issuer (or the equivalent thereof) in each of the provinces and territories of Canada.

7. To its knowledge, EnCana is not in default of any of the requirements of the securities legislation in any of the provinces or territories in which it is a reporting issuer.

8. On September 29, 2008, EnCana obtained, from the securities regulatory authorities of each of the provinces and territories of Canada a decision (the EnCana Order) providing exemptive relief from certain requirements of NI 51-101 subject to certain conditions including, but not limited to, a condition that disclosure be provided that is consistent with the disclosure requirements relating to reserves and oil and gas activities under United States securities legislation (including disclosure requirements or guidelines issued or referenced by the SEC) as interpreted and applied by the SEC (US Disclosure Requirements).

9. EnCana satisfies the basic qualification criteria as set out in Section 2.2 of National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101) and has a "current AIF" and "current annual financial statements" as such terms are defined in Section 1.1 of NI 44-101.

IOCo

10. IOCo was incorporated as a corporation under the CBCA on September 24, 2008 as 7050372 Canada Inc.

11. The head office of IOCo is in Calgary, Alberta. Upon the Arrangement becoming effective, the head office of IOCo will continue to be located in Calgary, Alberta and IOCo will be named Cenovus Energy Inc.

12. To its knowledge, IOCo is not in default of any of the requirements of the securities legislation in any of the provinces or territories in which it will become a reporting issuer.

13. Prior to the Effective Date, IOCo will not have any material assets and will not have conducted any active business activities, other than in respect of the Arrangement and, in the absence of exemptive relief, IOCo will not be a reporting issuer (or the equivalent thereof) in any jurisdiction.

14. Following completion of the Arrangement, IOCo anticipates that it will be a reporting issuer (or equivalent thereof) in each of the provinces and territories of Canada and will be an issuer engaged in oil and gas activities as defined in NI 51-101.

15. Prior to and but for the Arrangement, the IOCo Assets are and would be subject to the EnCana Order.

16. Following the Effective Date, IOCo does not expect to have full access to the information systems pertaining to, among other things, the historical (including for the year ended December 31, 2009) reserves data and other oil and gas information in respect of the IOCo Assets until January 2010.

17. Given the quantity of reserves data and other oil and gas information in respect of the IOCo Assets and the fact that EnCana will have, directly or indirectly, held the IOCo Assets for 11 out of the 12 months of the year ended December 31, 2009, it is not practicable for IOCo to be prepared to provide information that is inconsistent with the EnCana Order prior to IOCo's first required annual NI 51-101 filing by March 31, 2010.

The Information Circular

18. Form 41-101F1 requires the Information Circular to contain, inter alia, certain reserves data and other oil and gas information prescribed by Form 51-101F1 in respect of the IOCo Assets as at the date of the most recent audited balance sheet of IOCo to be included in the Information Circular, which is expected to be December 31, 2008.

19. The Information Circular will contain the following disclosure regarding IOCo and EnCana (collectively, the Proposed Reserves Disclosure):

IOCo Reserves Disclosure

(a) reserves data and other oil and gas information in respect of the IOCo Assets as at December 31, 2008 presented in a form consistent with US Disclosure Requirements and with the form of disclosure permitted under the terms of the EnCana Order, together with comparative reserves data and other oil and gas information in respect thereof for 2007 and 2006, in each case presenting reserves estimates prepared by independent qualified reserves evaluators (collectively, the IOCo Reserves Disclosure);

(b) the Report on Reserves Data by Independent Qualified Reserves Evaluators in respect of the IOCo Reserves Disclosure in substantially the same form (as amended to accurately reflect the form of IOCo Reserves Disclosure being the subject of such report) as provided by EnCana for its December 31, 2008 reserves in its February 20, 2009 AIF; and

(c) the Report of Management and Directors on Reserves Data and Other Information in respect of the IOCo Reserves Disclosure as executed by the appropriate officers and directors of EnCana, and in substantially the same form (as amended to accurately reflect the form of IOCo Reserves Disclosure being the subject of such report) as provided by EnCana for its December 31, 2008 reserves in its February 20, 2009 AIF;

EnCana Reserves Disclosure

(a) Reserves data and other oil and gas information in respect of EnCana as at December 31, 2008 presented in a form consistent with the terms of the EnCana Order (the EnCana Reserves Disclosure);

(b) the Report on Reserves Data by Independent Qualified Reserves Evaluators in respect of the EnCana Reserves Disclosure in a form consistent with the terms of the EnCana Order; and

(c) the Report of Management and Directors on Reserves Data and Other Information in respect of the EnCana Reserves Disclosure as executed by the appropriate officers and directors of EnCana and in a form consistent with the terms of the EnCana Order.

20. In the event that a material change occurs in respect of EnCana which, had such material change occurred on or before December 31, 2008, would have resulted in a significant change to the information contained in the Proposed Reserves Disclosure, the Proposed Reserves Disclosure will include the disclosure required under Part 6 of NI 51-101 in respect of such material change.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that:

1. The Circular Disclosure Relief is granted provided that EnCana includes or incorporates by reference the Proposed Reserves Disclosure in the Information Circular.

2. The Continuous Disclosure Relief is granted provided that:

(a) Annual Filings -- IOCo files with the securities regulatory authorities the following not later than the date on which it is required by the Legislation to file audited financial statements for its most recent financial year:

(i) a modified statement of reserves data and other oil and gas information relating to its oil and gas activities containing the information contemplated by, and consistent with, US Disclosure Requirements;

(ii) a modified report of qualified reserves evaluators in a form acceptable to the principal regulator; and

(iii) a modified report of management and directors on reserves data and other information in a form acceptable to the principal regulator;

(b) Use of COGE Handbook -- IOCo's estimates of reserves and related future net revenue (or, where applicable, related standardized measure of discounted future net cash flows (the standardized measure)) are prepared or audited in accordance with the standards of the COGE Handbook modified to the extent necessary to reflect the terminology and standards of the US Disclosure Requirements;

(c) Consistent Disclosure -- subject to changes in the US Disclosure Requirements and NI 51-101 and related policies, IOCo is consistent in its application of standards relating to oil and gas information and its disclosure of such information, within and between reporting periods, and without limiting the generality of the foregoing, in any disclosure made to the public, IOCo's estimates of reserves and related future net revenue (or, where applicable, related standardized measure) must be consistent with the reserves and related future net revenue (or, where applicable, related standardized measure) reported in its most recent filing with the Decision Maker;

(d) Disclosure of this Decision and Effect -- IOCo

(i) at least annually, files on SEDAR (either as a separate document or in its annual information form) a statement:

(A) of IOCo's reliance on this decision;

(B) that explains generally the nature of the information that IOCo has disclosed or intends to disclose in the year in reliance on this decision and that identifies the standards and the source of the standards being applied (if not otherwise readily apparent); and

(C) to the effect that the information that IOCo has disclosed or intends to disclose in the year in reliance on this decision may differ from the corresponding information prepared in accordance with NI 51-101 standards (if that is the case), and briefly describes the principal differences between the standards applied and the requirements of NI 51-101; and

(ii) includes, reasonably proximate to all other written disclosure that IOCo makes in reliance on this decision, a statement:

(A) of IOCo's reliance on this decision;

(B) that explains generally the nature of the information being disclosed and identifies the standards and the source of the standards being applied (if it is not otherwise readily apparent);

(C) that the information disclosed may differ from the corresponding information prepared in accordance with NI 51-101 standards; and

(D) that reiterates or incorporates by reference the disclosure referred to in paragraph 2(d)(i)(C); and

(e) the Continuous Disclosure Relief will terminate on December 31, 2010.

3. The Confidential Material will be kept confidential and not be made public until the earlier of: (i) the date on which EnCana mails the Information Circular; (ii) the date that EnCana advises the Decision Makers that there is no longer any need for the Confidential Material to remain confidential; and (iii) the date that is 90 days after the date of this decision.

"Glenda A. Campbell, QC"
Alberta Securities Commission
 
"Stephen R. Murison"
Alberta Securities Commission