Sunshine Oilsands: the Orphan Well Association needed no orphan designation

Justice B.B. Johnston of the Court of King's Bench of Alberta put Sunshine Oilsands Ltd. into receivership on the application of the Orphan Well Association (the OWA), over the company's opposition. By an order pronounced October 23, 2026, PricewaterhouseCoopers Inc., LIT is receiver and manager of all of Sunshine's current and future property located in Alberta, appointed under s. 13(2) of the Judicature Act, s. 99(a) of the Business Corporations Act and s. 106.1 of the Oil and Gas Conservation Act, per the Receivership Order, Oct. 30, 2026, para. 2. The applicant was no lender: since February 2025, under an order of the Alberta Energy Regulator, the OWA has been providing reasonable care and measures for Sunshine's licensed wells, pipelines and facilities, which the company has not operated since, per the Reasons, Oct. 27, 2026, paras. 1, 4, 15–17, 72.

The reasons, dated and filed October 27 and reported as Orphan Well Association v Sunshine Oilsands Ltd, 2026 ABKB 751, take up first whether the OWA could apply at all. Sunshine argued that the OWA's delegated authority under s. 3(1)(b)(ii) of the Orphan Fund Delegated Administration Regulation is confined to specified functions concerning orphan sites, and that its licensed assets had not been designated as orphans. The regulation's phrase "only in relation to," the court held, "limits the purposes for which the delegated power may be exercised; it does not require a prior orphan designation or confine the remedy to property already formally declared orphaned." The OWA also has standing as an interested person, per the Reasons, Oct. 27, 2026, paras. 40–41, 46, 48.

The AER appeared and took no position. Creditors including the Regional Municipality of Wood Buffalo, the Municipal District of Opportunity, Pacific Alliance Asia Opportunity Fund L.P. and Burgess Energy Holdings, LLC supported the application, per the Reasons, Oct. 27, 2026, paras. 5–6 and p. 12.

Shut in since February 2025

Sunshine is an Alberta oil and gas company listed on the Hong Kong stock exchange, holding AER licences for 284 wells, 13 pipelines and five other facilities, the West Ells Facility among them. On November 14, 2024 the AER issued a Suspension and Reasonable Care and Measures Order over those assets, detailing concerns that included equipment in disrepair, deficient secondary containment, pipeline releases and unpaid AER fees and levies; in the regulator's assessment, Sunshine "was highly financially distressed and posed a risk to public safety and the environment." Sunshine had 14 days to submit a reasonable care and measures plan and to post a security deposit of $6,091,318, per the Reasons, Oct. 27, 2026, paras. 8, 10–12.

Sunshine did not comply; in January 2025, the reasons record, it told the AER it lacked the funds to fill the steam pipeline with inert gas and to repair turbines and secondary containment. On February 24, 2025 the AER directed and authorized the OWA to exercise the regulator's powers, to provide reasonable care and measures and to suspend the wells and facilities and discontinue the pipelines, and restricted Sunshine and its contractors from acting at the sites without the OWA's approval, per the Reasons, Oct. 27, 2026, paras. 13, 15–16.

The OWA completed the suspension work and, the reasons say, has monitored the sites since. Along the way it identified pipelines not made safe for winter conditions, pipeline failures, leaking tank valves without proper secondary containment, more than 4,000 cubic metres of fluid remaining in tanks and vessels, a flare stack fire associated with inadequate vegetation management and impassable access roads, among other issues. On May 9, 2025 the AER issued an Abandonment Order requiring Sunshine to abandon the licensed assets within 24 months, per the Reasons, Oct. 27, 2026, paras. 17–18, 21.

The OWA applied for a receiver on May 13, 2025, and by a Consent Procedural Order of May 23, 2025 the application was adjourned pending Sunshine's appeals of the AER's orders. On August 18, 2026 an AER panel confirmed the November Order and the Abandonment Order; no application for permission to appeal was filed. As the reasons summarize them, the panel's findings included that Sunshine had not significantly improved its compliance record since at least 2019, relied on speculative funding plans and had not proven itself to be a responsible operator. The reasons also record that Sunshine admitted at the panel's hearing that it had chosen to pursue appeals rather than address compliance, per the Reasons, Oct. 27, 2026, paras. 22–25, 80.

What is owed

As of September 2026, the reasons record, Sunshine owed the OWA $1,883,238.98 in outstanding invoices and had made no payment for amounts incurred since November 2025; the OWA continues to incur approximately $50,000 a month. The assets' deemed liabilities, related to the estimated costs of abandonment, reclamation and other activities, were $6,091,318 as of the November Order and are now estimated at over $10 million as of April 2025. The OWA's first affidavit identified $8,791,232.22 in PPR-registered liabilities, and an updated PPR search disclosed approximately $26,729,505.74 in additional liabilities, for a combined total of approximately $35,520,737.96. The realizable value of the assets, the court said, is uncertain, per the Reasons, Oct. 27, 2026, paras. 27–29, 31, 77.

What "only in relation to" limits

Section 106.1 of the Oil and Gas Conservation Act, as the reasons set it out, allows the Regulator to apply for the appointment of a receiver of a licensee's property, with no limit on when or how. The regulation, as the reasons quote it, delegates that power to the OWA on the condition Sunshine relied on: that it act "only in relation to the suspension, abandonment, remediation and reclamation of orphan sites and to providing reasonable care and measures to prevent impairment or damage in respect of orphan sites." The condition governs purpose, the court held, and the words "and to" "confirm that providing reasonable care and measures is in addition to the reference to orphan sites rather than limited by its mention," per the Reasons, Oct. 27, 2026, paras. 42–45, 48. The wording the reasons give for both provisions appears to differ from the current official consolidations of the Act and the regulation published by Alberta King's Printer.

The OWA, the court found, was exercising a dual purpose: its statutory mandate to decommission orphaned wells, pipelines and facilities whose owners are unable to do so for financial reasons, and its mandate under the February Order. The reasons add that there is no industry safeguard in Alberta other than the OWA for the safe decommissioning and reclamation of sites that have not been remediated: "In the absence of the OWA exercising its mandate, the cost would ultimately be borne by the public" (Reasons, Oct. 27, 2026, paras. 49–50).

Sunshine also argued that the OWA could not rely on the general powers in s. 99(a) of the Business Corporations Act or s. 13(2) of the Judicature Act. The court did not read Lévis (City) v Fraternité des policiers de Lévis Inc, 2007 SCC 14, as limiting it in the manner Sunshine suggested: s. 106.1 and the regulation "do not establish an exhaustive receivership code nor prescribe different criteria for appointment," and the statutes "act in harmony," citing Orphan Well Association v Grant Thornton Ltd, 2019 SCC 5, the Redwater decision, per the Reasons, Oct. 27, 2026, paras. 53–55.

An interested party acting for the benefit of the public interest need not be a creditor, the court added, citing Alberta Health Services v Networc Health Inc., 2010 ABQB 373 and Law Society of Alberta v Higgerty, 2023 ABKB 499, and until Sunshine's environmental obligations are satisfied the OWA "remains the most significant stakeholder." It is a creditor too, for the $1,883,238.98, per the Reasons, Oct. 27, 2026, paras. 56–58.