Jessica Ernst began legal action against Alberta's energy regulator and Calgary-based energy company Encana (TSX:ECA) in 2007, and amended her statement of claim in 2011 to include Alberta Environment.
Last month, Chief Justice Neil Wittmann of Court of Queen's Bench dismissed the government's application to strike it from the lawsuit.
An Alberta Justice spokeswoman gave no reason for the government's decision not to appeal.
Ernst alleges fracking on her land northeast of Calgary released hazardous amounts of chemicals such as methane into her well and that her concerns were not properly investigated.
She says she is delighted and surprised by the province's decision not to appeal and is looking forward to reading the government's statement of defence.
"After seven arduous years a stunning victory stands," Ernst said Tuesday from her home in the hamlet of Rosebud. "The truth will have its day in court."
In its statement of defence, Encana has denied all of Ernst's allegations.
In September, the Alberta Court of Appeal upheld another ruling that said Ernst could not include the province's energy regulator in her lawsuit.
Ernst said she is seeking leave to appeal the September ruling to the Supreme Court of Canada.
Hydraulic fracturing involves pumping water, nitrogen, sand and chemicals at high pressure underground to fracture rock and allow natural gas or oil to flow through wells to the surface.
— By John Cotter in Edmonton
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