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U.S. judge puts brakes on Imperial oil sands gear

A controversial plan to transport oil sands equipment using scenic U.S. highways has hit another setback, after a judge ordered the state of Montana to stop issuing any permits that would enable the haul to continue.

The ruling comes as a victory for environmental and local advocacy groups in Montana, who have sought to stop Imperial Oil Ltd. from moving 207 South Korean-built modules to the Fort McMurray area from an inland port at Lewiston, Idaho. Imperial needs the equipment for its $10.9-billion Kearl oil sands mine, which is currently under construction, and has already warned that delivery delays are disrupting its scheduling plans.

Imperial says it still believes Kearl will be ready to operate in late 2012, but at least one analyst is now warning the project could be substantially delayed as the company struggles to bring parts to site.

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The start of operations could be moved back "by a year or more," said Randy Ollenberger, an analyst with BMO Nesbitt Burns Inc. Imperial "hasn't really shifted the timetable yet, but it seems pretty clear to me that they're going to have to."

Part of the problem involves the relatively slim window for starting up oil sands projects – work that is typically done in summer months, before winter's severe weather sets in. If Imperial misses that window, it may be forced into a lengthy pause, Mr. Ollenberger said.

"If you get a bunch of delays that push it back to December, that means really you're probably pushing the startup back until mild weather in May," he said.

The Montana ruling alone is likely to create additional headaches for the company, which has already waited nearly a year to move some modules from their port storage.

A judge found that the Montana Department of Transportation, which must give permits for the over-sized loads to move, failed to adequately consider alternative routes. It also failed to properly assess the environmental impacts of the 75 road turnouts Imperial must build in order to haul the over-sized loads over two-lane mountain highways.

The department did not contemplate whether those turnouts will be temporary or permanent, the judge said. That consideration is important in determining whether the route will become a full-fledged industrial corridor for years to come.

"It seems that in order to determine the significance of impacts one must first determine the scope of the project," the judge ruled. "Whether the turnouts are left in place will necessarily effect [sic] whether the route will accommodate future loads of similar size."

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The ruling, which the state said Wednesday it will appeal, makes the equipment haul "very problematic," said Tom France, a lawyer and regional executive director with the National Wildlife Federation, one of a number of groups that have fought the equipment moves.

Imperial can appeal the decision, or work to amend its environmental assessment work. But such efforts are not likely to be quick.

"They're not going to fix this in a day. I don't see how they're going to run this summer," Mr. France said.

For its part, Imperial is "disappointed" in the ruling and has already "begun implementing our contingency plan, which is to move equipment on all available alternatives routes," Imperial spokeswoman Laura Bishop said. She declined comment on whether Imperial will appeal.

The company has already split 33 modules into 60 smaller components, at a cost over $15-million, so they would fit on a different highway system. The first of those split modules began its trip Friday evening; it was expected to arrive in Edmonton, where it will be reassembled, on Wednesday.

Forty-five other modules, which are smaller in size, have already been brought to the site after being delivered to Vancouver, Washington. But it remains unclear how the company will move the remainder of the 207 modules, some of which have yet to be manufactured.

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Imperial has said it will decide how to build those pieces when it knows whether it can take them on the Montana route, which the company says is the only road network that can accommodate the full-sized equipment.

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About the Author
Asia Bureau Chief

Nathan VanderKlippe is the Asia correspondent for The Globe and Mail. He was previously a print and television correspondent in Western Canada based in Calgary, Vancouver and Yellowknife, where he covered the energy industry, aboriginal issues and Canada’s north.He is the recipient of a National Magazine Award and a Best in Business award from the Society of American Business Editors and Writers. More

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