Alberta regulator orders oilsands operator to abandon its assets 

An Alberta oilsands company has been ordered to abandon its operations after repeatedly failing to address a string of problems — including cracked pipelines, leaking tanks and other critical repairs — over almost three years.

The abandonment order, issued this week by the Alberta Energy Regulator against Sunshine Oilsands Ltd., said its operations pose a risk to public and environmental safety and must be fully decommissioned. Sunshine operations include a long list of well sites in the Athabasca oilsands.

The regulator said Sunshine had failed to comply with operational requirements and demonstrated that it lacked the capability — and financial wherewithal — to comply with federal and provincial environmental laws.

Despite repeated assurances that the company would soon have the cash flow needed to fix its problems, "the funding has not materialized," wrote Colin Woods, an AER manager of field operations.

"Sunshine has been unable to provide the AER with substantive evidence that any future funding is assured and will be sufficient to enable Sunshine to come into, and to maintain, compliance."

Sunshine Oilsands is the latest in a string of financially distressed operators ordered to abandon their inventories due to concerns over operational safety, including Tallahassee Exploration Inc. in June 2024 and Revitalize Energy in November 2024. 

Sunshine Oilsands did not respond to requests for comment. 

Chronic disrepair, financial issues

Regulatory documents paint a picture of an operation in chronic disrepair and an operator under financial duress. 

The abandonment order follows previous orders dictating Sunshine needed to shut down and surrender its assets, which include its West Ells project, located 115 kilometres north of Fort McMurray, Alta. The in-situ oilsands plant relies on horizontal wells and injected steam to extract bitumen from deep below the surface. 

Previous infractions at the site, which has been operational since 2017, include broken turbines, leaking pipelines and containment units that were at risk of spilling over.

On Nov. 14, 2024, citing a history of non-compliance and ongoing financial distress, the AER ordered Sunshine to suspend all operations.

The order required the operator to post a security deposit of more than $6.1 million and provide a series of "reasonable care measures" that it would adopt to improve operational safety. 

However, Sunshine's plan was deemed "deficient," and the company never came up with an acceptable strategy for how it would come into compliance, regulatory documents said. 

In January, as the company continued to falter, Sunshine officials told the AER in writing that it was still struggling to secure $1.3 million in financing required to provide staffing, fuel and critical repairs at West Ells. It told the AER the funds would not be available until June or July. 

At that point, the AER said it was "no longer satisfied that Sunshine had the ability to adequately monitor the infrastructure at its sites." 

On Feb. 24, the AER issued another order, this one directing the Orphan Well Association — the industry-funded agency tasked with cleaning up wells in Alberta that have been abandoned or no longer have a responsible owner — to manage all Sunshine-licensed sites.

Sunshine wanted to take back its operations

More problems surfaced after that, said the documents 

Brush surrounding the West Ells site was not properly maintained, and inspectors found signs that the grass near a south flare stack had caught fire from a falling ember.

Damaged containment tanks were not properly drained and continued to leak through the spring.

A pipeline had been improperly shut down and purged, resulting in the line splitting. Multiple failure points were found along the line, resulting in a rupture. 

According to the regulator, Sunshine Oilsands wanted to take back custody and control of its sites. 

In April, the company wrote to AER and "stated its desire" to resume custody and control of its assets. But the request was refused due to the company's ongoing failure to comply with the previous orders.  The company had fallen behind on its payments to the regulator and had never delivered the operational plans that were required.

During a May meeting with the regulator one week before the abandonment order was issued, the company could not say how it would maintain operations, including how qualified staff would be paid and how urgent repairs would be completed.

According to the regulator, the Orphan Well Association will maintain control and custody of the company's assets indefinitely to ensure public safety and environmental protection.