Regulator orders Alberta oilsands site to shut down following string of alleged infractions

An oilsands operator in northern Alberta has been ordered to shut down due to repeated failures to meet its regulatory obligations.

The Alberta Energy Regulator has issued an order requiring Calgary-based Sunshine Oilsands Ltd. to suspend its wells, facilities and pipelines following a string of infractions dating back more than two years. 

The order, issued Nov. 14, requires the operator to post a security deposit of more than $6.1 million, which represents 100 per cent of the company's estimated inactive liability.

The order highlights a series of infractions related to the company's West Ells facility, including broken turbines, leaking pipelines and containment units that were at risk of spilling over. 

The SAGD (steam-assisted gravity drainage) oilsands facility is located in the northwestern stretches of the Athabasca oilsands, about 60 kilometres west of Fort McKay. It uses horizontal wells and injected steam to heat bitumen and bring it to the surface.

The $6.1-million deposit was deemed necessary by the regulator due to the company's poor compliance history and ongoing "financial distress," the AER said in a report detailing a string of infractions dating back more than two years.

The operator must also provide the regulator with a series of "reasonable care measures" it will adopt to improve the operation of its sites.

"The company has repeatedly failed to comply with regulatory requirements and address compliance issues in a timely manner," the regulator said in a statement.

Sunshine Oilsands — an oilsands exploration, development and production company — must immediately report any hazards that present a risk to public safety or the environment, the regulator said. 

"The AER has issued this order to ensure that the sites licensed to Sunshine Oilsands will not pose a risk to public safety or the environment," the regulator said in an advisory.

"Failure to comply with this order may result in escalation of enforcement, which could include an abandonment order."

CBC News is awaiting comment from Sunshine Oilsands. Federal Environment Minister Steven Guilbeault declined to comment.

Alberta Energy Minister Brian Jean's office issued a statement Tuesday that said the AER is responsible for taking steps when it sees that an energy company is failing to meet its requirements under the Responsible Energy Development Act.

"We want companies that are going to operate safely, follow regulations and be good partners, which is by far the vast majority of operators," the statement said. "We are fully supportive of the AER's efforts to enforce the regulations in place."

Broken turbines, pipeline leaks

According to the order, turbines used to generate power on the site had fallen into disrepair.  

One of them, known as the north turbine, was still being used, despite being "inoperable," the regulator said. The turbine's heat recovery system was broken.

Another turbine was also broken but the operator told the regulator that it would not be fixed due to the costs associated with the necessary repairs.

At the time when the order was issued by the AER, neither of the turbines had been fixed and the company continued to operate the broken north turbine.

Questionable containment

Some secondary containment sites were also of concern to inspectors. According to the order, piling boots being used to secure four tanks at the West Ells facility had fallen into disrepair. 

Pile boots are specialized attachments used in the installation of piles, which act as the foundation for such tanks, especially in marshy and uneven landscapes.

The issue with the containment tanks was reported to the AER in May 2023. The company told the regulator in November of that year that the broken tanks would be taken out of service to mitigate the risks of a leak.

On Oct. 16 of this year, an AER inspector discovered that one of the faulty tanks had been put back into service without repair or any additional measures to contain a possible leak.

On the same day, an inspector discovered that steam was actively leaking from a pipeline, from three separate locations along the line.

According to the order, the inspector was told by a Sunshine operator that the company had been aware of the leaks since the week before.

Sunshine was issued a notice of non-compliance at the time for failing to immediately report the three separate releases. 

The regulator also found the company had not investigated the releases as required and did not have adequate an adequate leak detection program in place. 

A report from the AER details nearly 20 contraventions of Alberta's Environmental Protection and Enhancement Act and the Water Act dating back to April 2022.

In nine of them, Sunshine blamed a lack of funds for the operational issues, which ranged from lack of environmental monitoring, missed audits, "out of control" calibration on equipment and delayed repairs to key on-site infrastructure.

The report also details nine outstanding operational issues discovered by provincial inspectors during field inspections.

The issues included a breached berm that had not been repaired since it was discovered in June 2022 when an inspector found that a pond had formed at the back of a pad. As of October, the pond was still present and no maintenance on the leaking containment pond had been done.

Other outstanding infractions include the company's lack of oversight on its pipelines. The company told the regulator that it doesn't have a leak-detection program. The regulator said it remains unclear how often the lines are patrolled for possible spills.

The AER report also details 17 wells that had been improperly abandoned by the operator, a lack of reporting, and mounting debts that left the operator struggling to meet the demands of its daily operation. 

Mounting debts

Construction on the West Ells facility began in 2012. The AER found the operation has been struggling to meet its operational targets for years.

Sunshine is "highly financially distressed," the regulator said. 

Due in part to Sunshine's failure to conduct maintenance and repairs required for normal operation, to pay for services required to satisfy regulatory conditions, and to "adequately fund expenses that are typical for normal operation," the company has been unable to achieve its potential production, the AER said.

Instead of the estimated 5,000 barrels of oil per day it was expected to produce, the operation has instead averaged only 1,102 barrels per day over the past three years, and 971 per day in 2024.

According to the report, Sunshine has failed to pay off its debts to the AER for the orphan fund levy, and for a series of administration fees.

The company made a repayment plan but it was deficient and the operator's total debts are now about $50,000 for the orphan fund and more than $70,000 for outstanding administration fees. As of September, Sunshine has municipal tax arrears of approximately $34.8 million, the regulator said. 

"Sunshine does not have the capacity to meet its regulatory and liability obligations," the regulator said, adding it "poses a risk to public safety and the environment."