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Imperial’s Kearl oil sands budget jumps 36%

Imperial Oil Ltd.'s budget for its newest oil sands project has ballooned by 36 per cent now that the company has revamped its construction plans, which include changes to its tailings ponds and expansion effort.

The Kearl project, a new mining project that is more than two-thirds complete, will cost $10.9-billion to build, up from the company's $8-billion estimate in 2009, Imperial disclosed on Thursday in a slideshow presentation to investors, which has also been filed with Canadian and U.S. regulators.

Cost inflation is once again haunting oil sands projects, but Imperial's $3-billion increase is tied to the project's redesign, which was announced last fall, Pius Rolheiser, a spokesman for the company, said Friday. Imperial originally wanted to build Kearl in three stages, but now intends to construct the initial phase, go through a "debottlenecking" period, then expand, he said.

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The new blueprints and expenses reflect, for example, changes to its tailings pond system - Imperial's effort to meet Alberta's so-called directive 74, aimed at forcing oil sands companies to clean up their toxic byproducts more quickly. Kearl is not expected to meet directive 74's targets on schedule, but instead reach the goalposts over the lifetime of the project.

The "different development plan incorporates new regulation and optimizes full resource development," Imperial said in the Kearl section of its slideshow.

Suncor Energy Inc. is the only oil sands mining outfit with plans that outright meet directive 74's rules.

While all oil sands companies must deal with inflation and increasingly expensive facets of the industry like tailings ponds and carbon dioxide regulations, Kearl has a unique problem. Much of the facility has been prefabricated, with the modules shipped to the site for final construction. Imperial has 205 of these modules coming from South Korea, with plans to truck most of them to Fort McMurray through Idaho and Montana. So far, its transportation plan has been stymied by opponents, and the company is now disassembling, shipping, and reassembling some of the 33 modules already on North American soil, at a cost of about $500,000 each.

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About the Author

Carrie Tait joined the Globe in January, 2011, mainly reporting on energy from the Calgary bureau. Previously, she spent six years working for the National Post in both Calgary and Toronto. She has a master’s degree in journalism from the University of Western Ontario and a bachelor’s degree in political studies from the University of Saskatchewan. More

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