Expansion plans for an Illinois refinery will encounter a small delay and slightly higher costs after a state environmental board rejected key air permits for the project earlier this month, one of the project proponents said Thursday.

Calgary-based EnCana Corp. (ECA) and partner ConocoPhillips (COP) plan to boost capacity at the Wood River, Illinois, refinery to process more of the heavy oil sands crude in a $4 billion expansion.

In early June, however, the Illinois Environmental Protection Agency was forced to overturn its approval for the project after environmental groups petitioned the Environmental Appeals Board, part of the U.S. EPA.

"(The expansion) will probably cost us a little more and take us a little longer," EnCana's chief executive Randy Eresman told reporters in Calgary.

The delay before receiving the necessary air permits will likely be measured "in months," Eresman added.

The companies still need to address emissions controls at Wood River before they can receive the air permits, said Brian Ferguson, who will head the integrated oil unit to be spun off from EnCana's natural gas business.

He added, however, that these were relatively minor issues.

"We've always been optimistic about the project and ultimately getting all the approvals that we require," Ferguson said, noting the project's importance in supplying gasoline and other transportation fuels in the region.

EnCana and ConocoPhillips formed a joint venture in 2006, swapping stakes in EnCana's producing oil sands assets in Alberta for a share in two of ConocoPhillips' U.S. refineries. The companies plan to hike volumes of the heavy oil sands crude at Wood River and the Borger, Texas, refinery to 550,000 barrels a day by 2015.

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