In Montana, a rough road for oil sands equipment

Reuters News
Posted: Jan 18, 2012 3:48 PM
In Montana, a rough road for oil sands equipment

By Braden Reddall

LOLO HOT SPRINGS, Montana (Reuters) - Along a remote stretch of mountain highway near the Idaho/ Montana border, on the very same route that nearly killed the legendary 19th century explorers Lewis & Clark, two men are huddled in the snow, guarding a gargantuan blue box owned by Canada's Imperial Oil Ltd.

Pulled by truck, this house-sized "test module" set off from an inland Idaho port nine months ago to demonstrate how Exxon Mobil-owned Imperial planned to ship millions of pounds of Korean-made equipment across the back roads of Idaho and Montana to its oil sands project in Alberta.

Unlike in earlier times, though, it's not brutal weather or lack of food that have brought the expedition to a halt high in the Bitterroot Mountains. Rather, it's a coalition of local officials and environmental groups, who have sued to block the construction of a "high and wide" transportation corridor through some of the most remote and scenic landscapes in the country.

Just as opposition to the Keystone pipeline threatens to handicap tar sands production by making it hard to get oil out, opposition to the so-called "megaload" shipments may make it far more time-consuming and costly to get critical equipment in. And in both cases, the specific issue at hand is part of a broader fight about the environmental costs and economic benefits of oil sands development.

The Kearl Module Transportation Plan, as the megaloads scheme is officially known, involves loads that are 200 feet long, 30 feet high, and 24 feet wide - too big for interstate highways. Thus, after being shipped by boat from Korea to Lewiston, Idaho, they would move along two-lane roads, requiring the construction of 75 turnouts in Montana, reinforcement of bridges, and relocation of traffic lights and utility lines along more than 300 miles of roads. If all that sounds expensive, alternate methods of getting the Imperial loads to Canada will cost $70 million more.

Ray Dayton, a Montana District Court judge, temporarily blocked the plan last July in response to the lawsuit by Missoula County and local and national environmental groups. At a court hearing on January 6, he pressed Imperial lawyers on what may be the central question in the dispute: would the route be used only for the 200 loads for which Imperial has sought a permit, or would it become a major oil sands supply line that might remain place for decades to come.

Putting himself in the shoes of a concerned citizen on the route, Dayton wondered aloud: "Is it something I'm going to have to cope with for a year, 200 loads? Or 20 years, the rest of my life?"

"It does trouble me," he later added.

Stephen Brown, a local lawyer representing Imperial, said the company had set aside $20 million to remove turnouts if that is what the Montana Department of Transportation decided to do, arguing that Dayton should only consider the 200 shipments for which Imperial has sought a permit.

But James McCubbin, a Missoula County deputy attorney arguing for the plaintiffs, said that was the wrong way to look at it. "The proposal is not just to move 200 loads," McCubbin told the court. "The proposal is to engage in this extensive construction and modification of that route."

Dayton's decision on whether to allow the shipments, or perhaps order further environmental review, is expected within the next few weeks.

The project also faces a federal lawsuit in Idaho, which argues that use of Highway 12 on the Idaho side, which runs alongside the pristine Lochsa River, is a violation of the Wild and Scenic Rivers Act. That case is in its early stages, and the U.S. Forest Service and Federal Highway Administration have until the end of this month to turn over paperwork related to the issue.


The dispute has already proven expensive for Imperial: 33 megaloads that were stuck in Lewiston for more than a year have been broken down into 75 smaller modules, and all but about 20 of those have since been sent via an alternative route that uses interstate highways. Dozens more have been shipped by interstate directly from Pasco, Washington, downstream from Lewiston.

Montana court documents reveal an estimate of 2,000 man-hours and $500,000 to break down modules to fit under interstate overpasses. In August, Imperial said the rejigged shipments would add $70 million in costs, on top of the $250 million Imperial agreed in October 2009 to pay Sung Jin Geotec Co Ltd to build the modules.

The Kearl project is on track to start up with 110,000 barrels per day of production late this year, at a cost nearly a quarter above initial estimates. And Imperial just last month said it was doubling down on its oil sands investment, announcing a second phase of Kearl that will cost C$8.9 billion. Kearl is eventually expected to produce 345,000 barrels per day, tapping 4.6 billion barrels of estimated reserves.

Sung Jin, for its part, had at one point said that oil sands equipment contracts could be worth $1.5 billion, though a spokesman last week would not confirm that forecast.

Pius Rolheiser, a spokesman for Imperial, said there had not yet been a decision on whether the second phase of the Kearl project will include Korean-built equipment.

While the Montana route makes it more cost-effective to manufacture oil sands gear in Asia - not just for Imperial, but potentially for other oil companies as well - not everyone sees that as a priority.

As Kim Wilson, attorney for the National Wildlife Federation, the Montana Environmental Information Center (MEIC) and Sierra Club, told the Missoula court: "It's not the job of the state to save money for Imperial."


In court papers, Imperial lawyers cited a study that found the Kearl project would generate $20 million in construction work for Montana and $2.3 million in tax revenue, with no negative economic impact. In the "Treasure State," which has historically been friendly to resource-extraction, many argue that even a modest boost for the moribund construction industry is something to be welcomed.

Thomas Robertson, a 59-year-old who has owned his property on Highway 12 for 17 years, believes most of his ranch-owning neighbors support the megaloads shipments. "They want the income and the jobs," he said on recent afternoon as he watched a massive bald eagle fly between two trees. "But around here it's conservative," he said, adding that it was a different story down in "liberal" Missoula.

Indeed, the active environmental community in the college town of Missoula has cited the impact of new turnouts on nearby rivers; noise and air pollution; traffic problems; and potential delays for emergency vehicles racing to get people from remote locations to hospitals if they get stuck behind a module. Many also oppose oil sands development in general due to concerns about global warming, and they see the megaload dispute as part of this larger fight.

"There were direct and cumulative impacts that we were concerned about and I know residents in Missoula were concerned about," said Kyla Maki of the MEIC. "The idea that projects aren't connected to future projects or their end use, and that you don't have to consider those impacts, needs to be challenged."

At least a few temporary jobs have been created here in Lolo Hot Springs, a tiny resort near the Idaho border, where Jay Gilmartin and others watch over the test module. While it may disrupt the picturesque view outside the Bear Cave Bar & Grill, Gilmartin said he was glad to have the work.

A colleague nearby, who said he had previously done work for KBR Inc in Iraq and Kuwait, thought this job could last until April.

In the meantime, the megaload guards take a wry view of their unusual occupation and the leviathan in their charge. Said Gilmartin: "We're waiting for two of every animal to show up so we can fill this thing."

The court cases are County of Missoula et al vs Montana Department of Transportation and Imperial Oil Resources Ventures Ltd, in Montana's Fourth Judicial District Court, Missoula County, No. DV-11-424, and Idaho Rivers United vs U.S. Forest Service and U.S. Federal Highway Administration, U.S. District Court for the District of Idaho, No. 11-CV-095.

(Reporting By Braden Reddall, editing by Jonathan Weber and Lisa Shumaker)