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SeShape.Intersect could return unexpected geometries when two shapes have any vertices that are too close to each other.
This problem can occur when the distance between shapes is too small for ArcSDE to intercept correctly with each shape's current resolution.
This is a known limitation for ArcSDE 9.1. For ArcSDE 9.2 and higher, setting the environment variable 'SGMAXRESOVERLAY' to 1 fixes this problem. However, this workaround only works for Java Runtime Environment (JRE) 1.5 or higher.
If this environment variable is set, ArcSDE APIs increase the shape's resolution before certain types of processing, such as intersection, and decrease it afterwards.
It is not recommended to set the environment variable 'SGMAXRESOVERLAY' permanently. Doing so causes the results to change slightly from the existing code, as well as, increases the cost of overlay.