Exxon Mobil Corp. (XOM) is developing a plan to excavate the portion of a pipeline that leaked thousands of barrels of oil into a residential neighborhood in a small Arkansas town Friday afternoon.

The move is a step toward assessing the damage to the line and determining what caused it to rupture, an Exxon spokesman said.

The pipeline remained closed and some 22 Mayfower, Ark., homes remained evacuated Monday as crews worked to clean up the oil that flooded parts of the neighborhood. The U.S. Environmental Protection Agency categorized the incident as a "major spill," which means more than 250 barrels were released.

Exxon has said a few thousand barrels have been observed in the area, but it has prepared a response suitable for a release as large as 10,000 barrels, to be cautious.

The company's plan to dig out a portion of the pipeline, buried about two feet underground, will have to be reviewed by the U.S. Department of Transportation, Exxon said Monday.

The spill has reignited debate about the safety of the U.S. pipeline network. The pipeline was carrying heavy Canadian crude from Patoka, Ill., to refineries along the Texas Gulf Coast. Environmentalists have seized upon the incident to reassert their opposition to the proposed Keystone XL pipeline, which would deliver large volumes of crude from Canadian tar sands to the Gulf Coast.

Exxon's pipeline had once shipped Gulf Coast crude north to the Chicago area but was little used when the company decided to reverse the flow in 2006 to carry Canadian oil. The leaking section of pipeline was built in the late 1940s but passed a high-pressure test in January 2006 and an internal inspection in July 2010 done by a piece of equipment that measures for metal loss or other anomalies, according to Exxon Mobil officials.

U.S. crude oil futures prices fell Monday on concerns that the closure of the 95,000 barrel-a-day pipeline will cause bottlenecks in the middle of the country, such as at the Cushing, Okla. terminal that is the delivery point for the Nymex crude oil futures contract. Exxon has not said when it will be able to restart the line.

Mayflower, a town of fewer than 3,000, is in Faulkner County, about 25 miles northwest of Little Rock, Ark. Faulkner County Judge Allen Dodson said the streets of the subdivision were being steam cleaned Monday to remove oily residue still stuck to the surface. Freestanding oil in yards was being sucked up, and oil-soaked leaves were being cleared, he said.

Exxon said Monday that it has 120 workers in the area and has deployed 15 vacuum trucks and 33 storage tanks. So far, 12,000 barrels of water and oil have been recovered. Oil has been held back from reaching a nearby Game and Fish Commission lake.

Mr. Dodson said a timeline for residents to return to their homes is still in the works, but should be more clear in the next day or so.

"I'm optimistic," he said. "Folks who just had oil run by on the street are going to be able to return sooner than folks with oil in their yards."

And, he said, the fumes in the air have started to clear.

"To the untrained nose, it has greatly improved. It smells better than if you were just paving a road," he said.

Delane Finton, who lives a few doors down from the evacuated homes said she hadn't known how close the pipeline was to her home despite having lived there for seven years. She said she was out of town when the spill occurred and heard about it from neighbors before returning to find her once-quiet neighborhood buzzing with activity.

"I look out my window and I see yellow suits, helicopters flying over, there's trucks parked one right after the other," she said.

Ms. Finton said much of the oil seems to have been cleared from the streets, but an area between two houses is "totally black. It's just saturated into the ground."

Write to Alison Sider at alison.sider@dowjones.com

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