Transportation woes threaten to delay Imperial oil sands project

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A months-long battle over the transportation of industrial equipment across a scenic U.S. mountain road is now causing serious disruptions at the oil sands' biggest new project.

In the first indication that it is suffering from the delay in shipping critical components to its Kearl oil sands mine, Imperial Oil Ltd. is rearranging its construction schedule at the project and warning that it will have to build some elements in winter rather than summer.

The company still believes it can finish Kearl by late 2012. But the company's move to reschedule construction shows how seriously transportation problems are affecting the $10.9-billion mine, amid protests in Montana and Idaho.

The delays are "putting significant schedule pressure on the project," Imperial spokesman Pius Rolheiser said.

"We're now looking at having to do some out-of-sequence construction, some of out-of-season construction."

Though issues involved in building mammoth oil sands projects normally go unseen, Imperial's transportation woes have brought into stark focus the immense challenges involved in building out the next wave of Canada's most important energy initiative. They've also how shown fragile that expansion can be.

Indeed, trouble on a single highway has now forced substantial changes at Kearl, which is among the largest ongoing construction undertakings in Canada today. Kearl is expected to produce 110,000 barrels per day of crude oil in its first phase.

The problem stems from a controversy that erupted in Idaho and Montana after Imperial proposed hauling dozens of monster mine components along Highway 12, a two-lane scenic byway through some of those states' most prized landscapes. Last year, 33 South Korean-made mine modules, each weighing as much as 266 tonnes, were delivered up the Columbia River to Lewiston, Idaho.

But not a single one has made it up Highway 12 and to the Kearl site. Local residents have sought to block those movements, citing concern about the environment and potential damage to local pipelines, sewers and rivers. They've also raises worries about the road being blocked to emergency services during the overnight hauls.

Critics say they are hopeful Imperial's problems will convince other companies not to consider the controversial route, saying they want no part of oil sands development crossing their lands - even if the expansion in Canada's oil output will fuel American vehicles.

"If Canada is going to benefit from these projects - although that's questionable on its own - then I think the impacts should be born by Canada and not by the United States," said Zack Porter, campaign coordinator with a group called All Against the Haul.

"Imperial Oil did not do its homework on this route."

Imperial, which spent at least three years planning the move, has long maintained the delays have not had a major effect. Now, the company is acknowledging the toll the protests have taken - even though it still hopes to have Kearl built by the end of next year.

But, Mr. Rolheiser said, "the delays we've experienced in getting equipment to the site where it's needed, when it's needed, obviously make that more difficult."

That admission comes after a favourable ruling this week raised hopes that Imperial will be able to use Highway 12. Late Monday, a hearing officer recommended the company be permitted to continue its haul through Idaho. But that decision is followed by potentially three months allocated to allow the Idaho Transportation Department to render a final decision.

That's just Idaho. In Montana, Imperial is fighting a legal battle over whether it must file an environmental assessment before it can move loads. A ruling is expected soon.

Even the company's plan B has encountered delays. In the past few months, it has worked to split modules into smaller sizes for an alternate route up Highway 95 into British Columbia. It has transformed the 33 megamodules into 60 smaller ones, at a per-module cost of $500,000.

But even after securing permission to transport two modules on that route, it has run into problems securing an escort, with police tied up at a governors' conference and July 4 holiday celebrations.

"So it will likely be around the middle of July that we move the first of these disassembled modules," Mr. Rolheiser said. "It's a complicated situation."

The 33 are among 205 expected modules; of those, 45 are small enough to travel on interstates, and have already been delivered to Kearl. But others have not yet been built, and Imperial said with some modules, it's waiting to make manufacturing decisions until it has transportation routes sorted out.

So far, only one of the Lewiston modules has moved from the inland port - but it hasn't made it far. It now sits a few kilometres across the Montana border, parked outside the entrance to the Lolo Hot Springs. Nate Jones, a pool attendant there, isn't impressed by the 227,000-kilogram behemoth, which he says is as big as the hot springs bar and restaurant.

"With it sitting here taking up space, I'm sure it's diverting some customers," he said.

Mr. Jones has no problems with the megaloads crossing Highway 12, however. He blames "all the damn hippies running around" for opposing the moves; he would rather see more trucks.

"As far as I'm concerned, let them go let them do what they need to do," he said of Imperial. "With the lawsuit keeping it stopped here, it's preventing money from coming into Montana."