A real estate development - said to be the biggest so far in Western Canada - could see a two-block area in the heart of Calgary's downtown levelled or incorporated into two office towers, sources say.

The development by energy giant EnCana Corp. is being fuelled by gushing oil and natural gas profits and could see the company spend $500 million or more to move all of its 3,200 Calgary employees and contractors into the two-block development.

However, sources at Calgary's city hall say Mayor Dave Bronconnier is trying to keep a tight lid on news about the development on the central-east side of downtown because of sensitive issues involved.

"It's a game of checkers right now ... and, if all the blocks fall into place, Bronconnier could justifiably claim to have revived this blighted east side," says one highly placed source.

Bronconnier could not be reached for comment.

The two blocks currently host several high-profile residents - including the war veterans who gather at the No. 1 Legion hall, the destitute individuals and families who rely on the Calgary Urban Project Society's (CUPS) community health centre, and police who use the Andrew Davidson Building as their headquarters.

There are also heritage buildings in the area, including an old firehall now occupied by Budget Car & Truck Rental and the North-West Travellers Building that was recently restored by heritage developer Neil Richardson.

The area in question is bordered by 5th Avenue on the north, 7th Avenue on the south, 1st Street S.E. on the east and Centre Street on the west.

EnCana spokeswoman Almas Kassam says no startup date has been set, but the target is to have the project completed within five years.

Kassam refuses to confirm negotiations are under way to tie up all of the two-block area, saying there is a company policy prohibiting comment on anything that may or may not be pending.

However, she confirms that the company has just closed bids from a number of prominent architectural firms and that an announcement on who will be "the signature architect" for the development is expected in the next four to six weeks.

Given that the overall design architect has not yet been chosen, Kassam says the two-office tower plan is merely industry speculation. "We may do two or three towers. We may only do one," Kassam says.

The proposed development could also kickstart revival of another city block just north of old City Hall and two blocks east of the area EnCana is trying to sew up, city sources say.

That block is bounded by 6th Avenue on the north, 7th Avenue to the south, 3rd Street to the east and Macleod Trail to the west. It contains the Central Library, the former police headquarters building, a parkade and the provincial court building.

Sources speculate that a new police headquarters may be built on the block and it could also contain CUPS and the nearby Bow Valley College.

While declining comment on where all the players may eventually end up due to the early stages of the negotiation, city aldermen Dale Hodges and Joe Ceci both confirm that they have heard the development would take up the vast majority of the two blocks.

"It's a mad plot," Ald. Hodges says jokingly. "There are budgets ricocheting all over the place."

Both aldermen say the redevelopment of the two blocks will bring in more city taxes given that EnCana's building use will be all corporate, whereas police and some other current property residents are tax exempt.

The proposed development could also represent a major step in tearing down the psychological barrier that Centre Street has always posed to commercial office developers, Ceci adds. Before now, the vast majority of privately funded office towers have risen west of Centre Street.

"This should break the curse (of the Centre Street barrier,)" Ceci adds.

Veteran real estate broker Tom Dixon says he believes this will be the only commercially financed development that covers two city blocks in Western Canada, or perhaps all of Canada.

"This is certainly unprecedented in Calgary because there is nothing that bridges two full city blocks," Dixon says.

Dixon adds he has heard plans could include one of the EnCana towers soaring more than 60 storeys high - making it the tallest office building in Western Canada and topping the 56-storey Petro-Canada tower a few blocks away.

Speculation has also suggested a second EnCana tower may be between 40 and 50 storeys, with the two towers connected over 6th Avenue at the fourth- or fifth-storey level.

Dixon says he has also heard the two towers will boast more than two million sq. ft. of office space.

Most Calgarians are familiar with the twin Bankers Hall towers that stand 52 storeys high - but they were built on just one city block.

"You'd be hard pressed to find something that has the kind of density EnCana is thinking of on two distinct city block locations anywhere," Dixon says. "The most obvious concern would be that it is creating a lot of space that is not required, but their (EnCana's) position is that the market is so undersupplied currently that by the time this is finally completed ... it won't have an impact on the market."

A small part of the development emerged several weeks ago when EnCana and Bronconnier confirmed that several pieces in the two-block area, including the historic York Hotel at the corner of Centre Street and 7th Avenue, were purchased by EnCana, or committed to the company.

Neil Richardson, owner of Heritage Property Corp., is one of the property owners in the two-block area.

His company owns the North-West Travellers Building that was recently restored and two other buildings that were formerly occupied by the Salvation Army.

Richardson confirms he is in negotiations with EnCana's agent about the sale of his properties that sit in the block bounded by 5th Avenue to the south, 6th Avenue on the north, 1st Street on the east and Centre Street to the west.

He also says it is his desire to have the Travellers building, which is designated a provincial heritage building, preserved in the redevelopment.

Mohammed Ali owns the Budget Car & Rental outlet in the old firehall that sits at the corner of 6th Avenue and 1st Street S.E., just north of Richardson's Travellers building.

The firehall is owned by the City of Calgary and is on long-term lease to Ali's holding company.

Ali says his discussions revolve around him getting space in the new development with the firehall preserved, or just leaving things the way they are with the new EnCana development abutting the firehall property.

CUPS executive director Carlene Donnelly could not be reached for comment.

Bryan Fallwell, owner of the Billingsgate Fish Market several blocks east of CUPS, says his real estate agent was approached to see if a deal could be made to buy his fish market to serve as a new home for CUPS.

While Fallwell adds he doesn't think the talks panned out, his real estate agent Tim Sommer refused comment, saying the timing of the story "wouldn't help the deal."

The City of Calgary also owns the Andrew Davidson Building at the corner of 6th Avenue and 1st Street S.E., which is also the headquarters for the Calgary Police Service.

"I don't know how much information is available at this point, because it is just so early in the process," says police spokesman Don Stewart.

However, Ald. Hodges confirms that talks are under way to move police out of the building to make way for EnCana, but he says it's still undecided where police would be relocated.

"The police building is not coming down very fast because we don't have another place for them right now," Hodges says.

Sources say potential new sites for police headquarters could include CP Rail land facing onto 9th Avenue S.E., across from the King Eddy Hotel, and on the old Safeway grocery store site in East Village. However, police have apparently vetoed the King Eddy location due to its proximity to the tracks.

Bronconnier has also vowed that the No. 1 Legion would never be sold. The city owns the building and the Royal Canadian Legion holds a lease until 2012.

But Hodges notes that the EnCana development could either abut the Legion or grow over top of it.

(Bob Beaty can be reached at beaty@businessedge.ca)