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.
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.
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