CORRECT: Imperial Oil, Exxon To Pursue New Routes For Oil-Sands Equipment

After encountering legal challenges to their plan to move giant loads of oil-sands equipment through Idaho and Montana, Imperial Oil Ltd. (IMO) and Exxon Mobil Corp. (XOM) said Monday they will break down the loads into smaller pieces and pursue other routes, at a great expense.

Many of the 205 pieces of large oil-sands equipment built in South Korea were destined to travel through Idaho and Montana on two-lane U.S. Highway 12, with Imperial planning to widen the road in some cases to make room for the giant pieces of equipment on the scenic highway through Montana's Lolo pass.

Imperial, 70% owned by Exxon Mobil, wanted to use the low-traffic scenic route to ship oversized loads larger than two lanes of traffic and several times longer than the average semi trailer, by moving the modules very slowly at night and pulling over every few miles to let any traffic pass.

But the company faces legal challenges in both states claiming that Imperial's plan would potentially damage tourism revenues, the local highways and environment.

After facing months of permitting delays and legal obstacles, Calgary-based Imperial Oil now says it will to break up the equipment into smaller pieces so it can be transported in semi trucks on interstate highways in Washington State, Idaho and Montana--or face a delay of the $11 billion Kearl oil-sands project, which is scheduled to begin operations by the end of next year.

Each of about 150 oversized modules will cost about $500,000 to disassemble and reassemble after a roughly 1,300-mile journey from the port of Vancouver, Wash., to Kearl Lake, Alberta.

It also amounts to about 5,000 to 6,000 hours of skilled labor by technicians per module, Imperial Oil spokesman Pius Rolheiser said.

"They were not intended originally to be disassembled into smaller loads," Rolhieser said, "So it's significant, not only the cost but as a technical challenge."

However, Rolhieser said the extra cost will not raise the budget of the project. He said the permitting delays will make meeting the schedule to begin production next year "more challenging," though he added the project is still on track to meet that timeline.

The first phase of the Kearl project is expected to produce 110,000 barrels of oil a day from the 4.6-billion-barrel reserve in northern Alberta. Subsequent phases would bring the project up to 345,000 barrels a day.

Rolhieser said that Imperial is still pursuing permits to allow it to move the larger pieces of equipment through Montana and Idaho.

Shares of Imperial Oil closed down 4.6% Monday at $38.35 on the New York Stock Exchange amid a broader pullback in oil and gas equities.

-By Edward Welsch, Dow Jones Newswires; 403-229-9095; edward.welsch@dowjones.com

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