Staff Initials: Dept. Head: CAO: Page 1 of 1

Peace River Regional District REPORT

To: Regional Board Date: February 17, 2012 From: Director Hiebert Subject: Memorandum of Understanding to investigation and develop two (2) potable water stations serving the communities of Tomslake/Tupper and Farmington RECOMMENDATION(S): That the Regional Board authorize the Chair and CAO to sign on behalf of the Regional District to enter into a Memorandum of Understanding with Encana Corporation and Agricultural and Agri-Food (AAF) Canada, for the investigation and development of two (2) potable water stations serving the communities of Tomslake/Tupper and Farmington. BACKGROUND/RATIONALE: At the initiative of Encana Corporation they have offered to assist with the further development of two pre-existing water test wells. The agreement includes the following: Encana will provide: $70,000 for well testing and feasibility studies.

Up to 80% of the estimated capital cost of $570,000 (equal to $456,000). In-kind engineering services as available. Disposal of treated water effluent.

PRRD will provide: Lead for public consultation Project management Final ownership and operational costs 20% of capital cost (equal to $114,000) AAF Canada will provide: In-kind engineering advice, as available. Attached is the memorandum of understanding and a diagram of the process for consideration and completion of the project. STRATEGIC PLAN RELEVANCE:

Not anticipated by strategic plan. FINANCIAL CONSIDERATION(S):

Source of PRRD capital funds recommended to come from Area ‘D’ Fair Share Funds. Operational expenses to be collected through service area(s) upon elector assent.

Farmington & Tomslake Water Stations Process Flowchart (2012)

Community Information Notice

PROCESS MAP- P r o p o s e d

Farmington & Tomslake Water Stations Peace River Regional District

Liaise with Community Association Presidents

Memorandum of Understanding between Partners

PRRD ~ AAFC ~ Encana

Well Tests & Feasibility Studies Project Estimates Class ‘D’

Regional District Board Approval to Proceed

Community Information Meetings

April

May

February 23

February 1-21

Pro

po

sed

tim

elin

e

Pro

po

se

NO March

April-May

Yes

NO

Partnership

Budget & Commitment Review

Yes

NO

P r o c e e d ? Service Area Concept options/Costs Ye

s

May

Community Information Meetings June NO

Preferred Service Area Option Analysis

Yes

Regional District Process Elector Assent

NO

Yes

July

Detailed Design

Tender

Construction

August

November Farmington & Tomslake Water Stations

Operations Begin

Contributors

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MEMORANDUM OF UNDERSTANDING THIS MEMORANDUM OF UNDERSTANDING dated this ___ day of ___________, 2012 AMONG:

PEACE RIVER REGIONAL DISTRICT, a local government authority organized under the laws of the Province of British Columbia, and having an office in Dawson Creek, British Columbia (“PRRD”) and

AGRICULTURE AND AGRI-FOOD CANADA, a federal government department, and having an office in Ottawa, Ontario (“AAFC”)

and

ENCANA CORPORATION, a corporation organized under the laws of the Province of Alberta, and having an office in Calgary, Alberta (“Encana”) (collectively, “Parties”)

RECITALS:

A. The Parties desire to build two water distribution facilities for area residents at Tomslake Hall and Farmington Hall, British Columbia (the “Project”) if well pump tests confirm the viability of the water source.

B. The Parties must complete some preliminary steps before proceeding with construction of the Project, however wish to set out certain principles regarding the Project.

NOW THEREFORE in consideration of the premises and provisions herein stated and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged, the Parties agree as follows:

ARTICLE 1. Definitions 1.1 For the purposes of this MOU:

a) “Definitive Agreement” means the agreement referred to in Article 5 that will define timelines, roles and responsibilities, payment obligations and termination;

b) “Effective Date” means the date of this MOU;

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c) “Initial Estimated Project Costs” means the original cost estimate of $570,000 for the

Project which includes the amount referred to in section 3.1;

d) “Final Estimated Project Costs” means the updated and final estimate of the costs for the Project to be completed in accordance with the timelines set out in Schedule ‘A’;

e) “MOU” means this Memorandum of Understanding;

f) “Party” means PRRD, AAFC or Encana, as the context requires and “Parties” means

all of PRRD, AAFC or Encana;

g) “Termination Date” means the date the MOU is terminated pursuant to Article 7.

ARTICLE 2. Purpose and Principles 2.1 This MOU is intended to set forth the basic terms under which the Parties are prepared to proceed with the Project and determine whether the Parties wish to negotiate a Definitive Agreement if a positive decision to proceed with the Project is made. 2.2 It is the intention and agreement of the Parties that the cost and risk of the Project is shared as set out herein.

ARTICLE 3. Immediate Obligations

3.1 Encana agrees to provide up to $70,000 to _____ to be used to fund the pump tests at Tomslake Hall and Farmington Hall.

3.2 PRRD agrees to complete the following public engagement obligations after providing

Encana the opportunity to provide input into:

a) [NTD: insert obligations]. b) [NTD: insert obligations]. c) [NTD: insert obligations].

ARTICLE 4. Conditions Precedent and Terms and Conditions

The following are the terms and conditions pursuant to which the Parties are prepared to proceed with the Project if well pump tests confirm the viability of the water source, agreement among all Parties is reached on the Final Estimated Project Costs as well as the handling of the reject water, and public engagement obligations are met to the satisfaction of all Parties:

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4.1 Encana agrees to provide the following:

a) Advisory technical support for both facilities; b) Up to 80% of the Initial Estimated Project Costs which equals $456,000. If the Final

Estimated Project Costs is less than the Initial Estimated Project Costs, Encana shall only pay 80% of the Final Estimated Project Costs;

c) Use its best efforts to follow the timelines set out in Schedule ‘A’.

4.2 PRRD agrees to provide the following:

a) Up to 20% of the Initial Estimated Project costs which equals $114, 000; b) Use its best efforts to follow the timelines set out in Schedule ‘A’; c) Management of the land subdivision and related permitting and zoning

requirements;

d) Leadership related to public engagements; and d) Long-term management of both facilities including maintenance and capital replacement requirements.

4.3 AAFC agrees to provide the following:

a) Supervision and coordination for the pump tests and subsequent evaluation, engineering design and evaluation, and construction support for both facilities;

b) Use its best efforts to follow the timelines set out in Schedule ‘A’.

4.4 Encana and PRRD agree to work together to create and develop a reject water removal plan.

4.5 Payment of Funds

a) Commensurate with the execution and delivery of this MOU, Encana will pay to ___________ the sum of $70,000 to be used to fund the pump tests at Tomslake Hall and Farmington Hall.

b) All Parties will make a decision on whether to participate and proceed with the

Project after a review of these conditions precedent:

i. Pump tests confirm the viability of the water source; ii. Agreement among all Parties is reached on the Final Estimated Project Costs

as well as the handling of the reject water; and

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iii. Public engagement obligations are met to the satisfaction of all Parties.

c) Within five (5) business days of giving notice of its intent to proceed with the Project, the Parties will be required to:

i. [NTD: Pay?], and

ii. [NTD: deliver?]

4.6 Remedies

a) If any Party is in default in the payment of monies or if there is any disagreement among the Parties, the Parties agree to proceed to mediation.

ARTICLE 5. Definitive Agreement

5.1 If the Parties decide to proceed with the Project this MOU will not terminate but will continue to govern the relationship between the Parties and be binding on their terms until a Definitive Agreement is reached. 5.2 The Parties will commence and diligently conduct negotiations towards a Definitive Agreement based on and incorporating the terms set forth herein unless a negative decision to construct is made by the Parties, in which case, all such negotiations shall cease

ARTICLE 6. Representations and Warranties 6.1 PRRD represents and warrants that it has full authority to enter into this MOU and that upon execution of this MOU by the other Parties hereto, this MOU shall be binding and enforceable against PRRD.

6.2 AAFC represents and warrants that it has full authority to enter into this MOU and that upon execution of this MOU by the other Parties hereto, this MOU shall be binding and enforceable against AAFC. 6.3 Encana each represent and warrants that it has full authority to enter into this MOU and that upon execution of this MOU by the other Parties hereto, this MOU shall be binding and enforceable against Encana.

ARTICLE 7. Term

7.1 This MOU shall be effective three (3) years from the Effective Date at which point it shall terminate unless:

a) it is earlier terminated pursuant to this Article 7; or b) it is extended pursuant to section 5.1.

7.2 The Parties may in their sole and absolute discretion elect to terminate this MOU at any time up to the notice of its intent to proceed with the Project by providing the other Parties five (5) business days’ prior written notice, in which case, no Party shall have any further obligation to any other, except with respect to accrued liabilities, and this MOU will terminate.

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7.3 On the Termination Date this MOU shall expire and be of no further force and effect, and, except for the provisions of sections 8.1 which shall survive any termination of this MOU, the Parties shall have no further obligations to one another with respect hereto, except any accrued liabilities. In the event this agreement has been terminated before the pump tests referred to in section 3.1 have been completed, _____ shall pay Encana the remaining balance of the $70,000.

ARTICLE 8. Liability and Indemnities 8.1 Each Party (the “Indemnifying Party”) agrees to be liable for and protect, defend, indemnify and hold harmless, release and discharge the other (the “Indemnified Party”) from and against any and all actions, causes of action, suits, debts, dues, sums of money, losses, expenses, damages, costs (including solicitor-client costs and costs of professional advisors), interest, covenants, indemnities, liabilities (including, without limitation, indemnification or third party liability), fines, penalties, claims, orders and demands of any kind and nature whatsoever, at law or in equity, that the Indemnified Party incurs as a result of:

a) any representation and warranty by the Indemnifying Party set forth in Article 6 being untrue; or

b) any breach of the terms and conditions of this MOU by the Indemnifying Party.

8.3 The rights, duties and obligations of the Parties under this MOU shall be separate and distinct, not joint or collective or joint and several.

ARTICLE 9. General

9.1 Notices All notices shall be in writing, personally delivered or sent by facsimile transmission to the intended recipient at the addresses set forth below.

If to PRRD:

If to AAFC: If to Encana: Encana Corporation 150 – 9th Avenue S.W. Calgary, AB T2P 2S5 Attention: Noel Millions Facsimile Number: 403/699-2902 Such notice shall be deemed to have been given to and received by the addressee in the case of delivery by mail on the seventh (7th) day after posting, in the case of personal delivery on the day of actual delivery, and in the case of delivery by fax on the day of actual receipt of the fax as

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evidenced by a transmission report confirming such receipt. In times of labour strikes or slow-downs affecting mail delivery, notice shall be effective only if personally delivered or given by fax. Either party may by notice change its designated address for delivery of notices. 9.2 No Party may assign, transfer, or otherwise deal with its rights or obligations under this MOU without the prior agreement thereto in writing by the other Parties, provided that no consent shall be required for an assignment by a Party to its Affiliate.

9.3 This MOU shall inure to the benefit of and be binding upon each of the Parties and their respective successors, permitted assignees and transferees.

9.4 This MOU supersedes any other agreement between the Parties relating to the matters within and constitutes the entire agreement between the Parties.

9.5 No amendment of this MOU shall be binding upon any Party unless and until it is evidenced in writing and executed by all of the Parties.

9.6 In case any of the provisions of this MOU should be invalid, illegal or unenforceable in any respect, the validity, legality or enforceability of the remaining, provisions contained herein shall not in any way be affected or impaired thereby.

9.7 This MOU shall be governed by the laws of the Province of British Columbia. 9.8 The Parties agree that this MOU does not create any relationship of agency, partnership, joint venture, or other such association between the Parties.

9.9 This MOU may be signed in counterparts and all executed counterparts together shall constitute one agreement. Signature pages from separate counterparts may be delivered electronically and may be combined to form a single counterpart. This MOU is not binding upon any Party unless and until executed by all Parties.

IN WITNESS WHEREOF, the Parties have indicated their agreement hereto by their signatures below this _____ day of ______January_______, 2012. PEACE RIVER REGIONAL DISTRICT Per:_________________________________ Name: Fred Banham Title: Chief Administrative Officer AGRICULTURE AND AGRI-FOOD CANADA Per:_________________________________ Name:_______________________________ Title:________________________________

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ENCANA CORPORATION Per:_________________________________ Name: Jim Roberts, P.Eng Title: Team Lead – Dawson Creek Property Team

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Schedule ‘A’

Attached to and forming part of the Memorandum of Understanding among Peace River Regional District, Agriculture and Agri-Food Canada and Encana Corporation dated ___ day of ________, 2012