A SanLing well site near Buffalo, Alberta on Sept. 4, 2018.Todd Korol/The Globe and Mail
Alberta’s energy regulator has suspended the operating licences for thousands of wells and pipelines belonging to a Calgary-based oil company that owes the regulator $67-million, saying it has little confidence in the company’s ability to safely operate.
The Alberta Energy Regulator (AER) says it repeatedly tried to get SanLing Energy Ltd. to meet its environmental and security obligations. But its failure to do so led to the regulator suspending the licences for all 2,266 wells, 2,170 pipelines and 227 other facilities that SanLing owns in the province.
“If SanLing, or any company, wants to do business in Alberta, they must follow our rules,” Blair Reilly, AER’s director of enforcement and emergency management, said in a statement.
“We cannot allow a company that has ignored the rules continue to operate – that’s not in Alberta’s interest.”
SanLing did not return multiple requests for comment on Friday.
The company has been the subject of several AER investigations and non-compliance orders since 2019, mostly centered around its inability to demonstrate that it is taking reasonable care and measures to prevent damage to its infrastructure.
In September, for example, the AER warned the company over failing to abandon 54 wells upon expiration of the associated mineral leases. It also failed to remediate another two locations, plus the AER found SanLing’s oilfield waste was not being stored in accordance with the rules.
The company also failed to pay the regulator $67-million in security deposits for the eventual costs associated with closing and cleaning up its oil wells, also known as its end-of-life obligations. The total liability for Alberta’s oil and gas sector was approximately $30-billion at the end of 2020.
In June, the AER found that SanLing was not operating or maintaining its pipeline systems properly, and failed to either clean up or return a pipeline to service even after it lay empty, devoid of any oil flows for 12 months.
Despite numerous meetings with and letters to SanLing, the AER says the company failed to properly meet various environmental obligations or provide plans about how it would do so.
Those combined factors gave the AER “grounds to believe that SanLing has contravened regulations and rules under the jurisdiction” of the regulator by failing to take reasonable measures to prevent damage to the oil company’s various sites scattered throughout Alberta.
“It is necessary to suspend the wells and facilities and discontinue the pipelines associated with SanLing licences in order to protect the public and the environment,” Mr. Reilly wrote in his decision, posted online.
The company now has 30 days to shut-in, seal, lock and chain its wells and discontinue its pipelines. It also must provide the AER with a plan of how it intends to meet its environmental obligations, including past orders to clean up historic spills and contamination.
Only once SanLing meets all of the conditions in Friday’s order will the regulator consider whether the company can resume operations.
SanLing is one of a wave of Chinese investors who quietly picked up a host of energy companies in the wake of the 2014 industry slump.
A 2017 Globe and Mail investigation found that a handful of well-connected Chinese financiers and oil executives had spent nearly $2-billion in a series of deals since Ottawa imposed restrictions on buying by state-owned enterprises in 2012, a move thought to have soured China on the Canadian oil patch.
They largely bought up assets from debt-hobbled domestic producers and companies in receivership.
SanLing, for example, purchased in the spring of 2016. Court documents put the price at $59.7-million – less than half the $172-million Spyglass owed lenders when the junior oil company was pushed into receivership the previous fall.
The AER said in a statement Friday it has “little confidence in SanLing’s ability to conduct its operations safely,” and has cancelled the licences “to protect the public and environment and to minimize financial risk.”
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.
Emma Graney