Legacy Reserves LP has backed out of a deal to buy some of Encana Corp.’s natural gas assets in Wyoming because of a groundwater well pollution investigation by federal authorities.

The Midland, TX-based operator acknowledged earlier this month that it had agreed to pay Encana $45 million in cash for some of the Calgary operator’s properties in the Pavillion, WY, area. However, Legacy had a chance to review the ongoing investigation by the U.S. Environmental Protection Agency (EPA) into groundwater pollution in the area and decided that the acquisition posed some uncertainty, said a Legacy spokesman.

In mid-November EPA reported sampling results that indicated two monitoring wells installed to test water supplies deep within an aquifer near gas drilling locations in Pavillion had high levels of benzene and other chemicals, including petroleum-related compounds (see Daily GPI, Nov. 14). According to EPA, 42 private drinking water and four stock wells were sampled.

Legacy’s purchase, which was to include land, a gas processing plant and gathering system as well as related compression facilities, had been set to close on Thursday.

Encana already has agreed to remediate four old waste pits in the area that were there before it began development in the region. The voluntary cleanup is being done in cooperation with the Wyoming Department of Environmental Quality.

“Although Encana retained responsibility for any outcome resulting from the ongoing groundwater investigation undertaken by EPA, due to the continued attention surrounding the investigation, and uncertainty regarding further development, Legacy is not prepared to go forward with the transaction,” Encana said.

EPA has not speculated as to the cause of the groundwater pollution. Conclusions are to be released next spring, the agency said.

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