Steam-assisted gravity drainage (SAGD), the leading commercial in situ bitumen recovery process, involves the underground injection of steam and produces at the well head a hot fluid containing water, hydrocarbons, and sand. This fluid is subjected to separation by diluent addition and gravity in several parallel treaters. Occasionally, the separation may be disrupted in one or few treaters by the occurrence of an unresolved interface or "rag layer" while continuing without disruption in the rest of the treaters. In the current study, we investigate "rag layer" occurrence based on the quantification of laboratory-scale and SAGD field tests and imaging of the "rag layer" morphology. The quantification results show that the formation and volume of the "rag layer" are affected by solids, mixing speed, and solvent addition. The microscopic images demonstrate the presence of both water-in-oil or oil-in water emulsions with a distinct transition between the continuous phases. The visual detection boundaries of the "rag layer" are defined as the threshold between the agglomerated and individual droplet layers. The extent of agglomeration increases in the proximity to the oil-water interface. The contribution of hydrophobic fine inorganic solids (less than 10 μm) to forming a "rag layer" is supported by their accumulation observed at the treaters' oil-water interface, compared to the feed. In well-controlled field operations, the perceived randomness of "rag layer" occurrence could be associated with the fluctuation of fine solid contents in the feed.