Pump jacks and pipelines clutter the Elk Hills oil field of California, a scrubby stretch of land in the southern Central Valley that rests above one of the nation’s richest deposits of fossil fuels.

Oil production has been steadily declining in the state for decades, as tech jobs have boomed and legislators have enacted rigorous environmental and climate rules. Companies, towns, and residents across Kern County, where the poverty rate hovers around 18%, have grown increasingly desperate for new economic opportunities.

Late last year, California Resources Corporation (CRC), one of the state’s largest oil and gas producers, secured draft permits from the US Environmental Protection Agency to develop a new type of well in the oil field, which it asserts would provide just that. If the company gets final approval from regulators, it intends to drill a series of boreholes down to a sprawling sedimentary formation roughly 6,000 feet below the surface, where it will inject tens of millions of metric tons of carbon dioxide to store it away forever. 

They’re likely to become California’s first set of what are known as Class VI wells, designed specifically for sequestering the planet-warming greenhouse gas. But many, many similar carbon storage projects are on the way across the state, the US, and the world—a trend driven by growing government subsidies, looming national climate targets, and declining revenue and growth in traditional oil and gas activities.

Since the start of 2022, companies like CRC have submitted nearly 200 applications in the US alone to develop wells of this new type. That offers one of the clearest signs yet that capturing the carbon dioxide pollution from industrial and energy operations instead of releasing it into the atmosphere is about to become a much bigger business. 

Proponents hope it’s the start of a sort of oil boom in reverse, kick-starting a process through which the world will eventually bury more greenhouse gas than it adds to the atmosphere. They argue that embracing carbon capture and storage (CCS) is essential to any plan to rapidly slash emissions. This is, in part, because retrofitting the world’s massive existing infrastructure with carbon dioxide–scrubbing equipment could be faster and easier than rebuilding every power plant and factory. CCS can be a particularly helpful way to cut emissions in certain heavy industries, like cement, fertilizer, and paper and pulp production, where we don’t have scalable, affordable ways of producing crucial goods without releasing carbon dioxide. 

“In the right context, CCS saves time, it saves money, and it lowers risks,” says Julio Friedmann, chief scientist at Carbon Direct and previously the principal deputy assistant secretary for the Department of Energy’s Office of Fossil Energy.

But opponents insist these efforts will prolong the life of fossil-fuel plants, allow air and water pollution to continue, and create new health and environmental risks that could disproportionately harm disadvantaged communities surrounding the projects, including those near the Elk Hills oil field.

“It’s the oil majors that are proposing and funding a lot of these projects,” says Catherine Garoupa, executive director of the Central Valley Air Quality Coalition, which has tracked a surge of applications for carbon storage projects throughout the district. “They see it as a way of extending business as usual and allowing them to be carbon neutral on paper while still doing the same old dirty practices.”

A slow start

The US federal government began overseeing injection wells in the 1970s. A growing number of companies had begun injecting waste underground, sparking a torrent of water pollution lawsuits and the passage of several major laws designed to ensure clean drinking water. The EPA developed standards and rules for a variety of wells and waste types, including deep Class I wells for hazardous or even radioactive refuse and shallower Class V wells for non-hazardous fluids.

In 2010, amid federal efforts to create incentives for industries to capture more carbon dioxide, the agency added Class VI wells for CO₂ sequestration. To qualify, a proposed well site must have the appropriate geology, with a deep reservoir of porous rock that can accommodate carbon dioxide molecules sitting below a layer of nonporous “cap rock” like shale. The reservoir also needs to sit well below any groundwater aquifers, so that it won’t contaminate drinking water supplies, and it must be far enough from fault lines to reduce the chances that earthquakes might crack open pathways for the greenhouse gas to escape. 

The carbon sequestration program got off to a slow start. As of late 2021, there were only two Class VI injection wells in operation and 22 applications pending before regulators.

But there’s been a flurry of proposals since—both to the EPA and to the three states that have secured permission to authorize such wells themselves, which include North Dakota, Wyoming, and Louisiana. The Clean Air Task Force, a Boston-based energy policy think tank keeping track of such projects, says there are now more than 200 pending applications.

What changed is the federal incentives. The Inflation Reduction Act of 2022 dramatically boosted the tax credits available for permanently storing carbon dioxide in geological formations, bumping it up from $50 a ton to $85 when it’s captured from industrial and power plants. The credit rose from $50 to $180 a ton when the greenhouse gas is sourced from direct-air-capture facilities, a different technology that sucks greenhouse gas out of the air. Tax credits allow companies to directly reduce their federal tax obligations, which can cover the added expense of CCS across a growing number of sectors.

The separate Bipartisan Infrastructure Law also provided billions of dollars for carbon capture demonstration and pilot projects.

A tax credit windfall 

CRC became an independent company in 2014, when Occidental Petroleum, one of the world’s largest oil and gas producers, spun it off along with many of its California assets. But the new company quickly ran into financial difficulties, filing for bankruptcy protection in 2020 amid plummeting energy demand during the early stages of the covid-19 pandemic. It emerged several months later, after restructuring its debt, converting loans into equity, and raising new lines of credit. 

The following year, CRC created a carbon management subsidiary, Carbon TerraVault, seizing an emerging opportunity to develop a new business around putting carbon dioxide back underground, whether for itself or for customers. The company says it was also motivated by the chance to “help advance the energy transition and curb rising global temperatures at 1.5 °C.”

CRC didn’t respond to inquiries from MIT Technology Review.

In its EPA application the company, based in Long Beach, California, says that hundreds of thousands of tons of carbon dioxide would initially be captured each year from a gas treatment facility in the Elk Hills area as well as a planned plant designed to produce hydrogen from natural gas. The gas is purified and compressed before it’s pumped underground.

The company says the four wells for which it has secured draft permits could store nearly 1.5 million tons of carbon dioxide per year from those and other facilities, with a total capacity of 38 million tons over 26 years. CRC says the projects will create local jobs and help the state meet its pressing climate targets.

“We are committed to supporting the state in reaching carbon neutrality and developing a more sustainable future for all Californians,” Francisco Leon, chief executive of CRC, said of the draft EPA decision in a statement. 

Those wells, however, are just the start of the company’s carbon management plans: Carbon TerraVault has applied to develop 27 additional wells for carbon storage across the state, including two more at Elk Hills, according to the EPA’s permit tracker. If those are all approved and developed, it would transform the subsidiary into a major player in the emerging business of carbon storage—and set it up for a windfall in federal tax credits. 

Carbon sequestration projects can qualify for 12 years of US subsidies. If Carbon TerraVault injects half a million tons of carbon dioxide into each of the 31 wells it has applied for over that time period, the projects could secure tax credits worth more than $15.8 billion.

That figure doesn’t take inflation into account and assumes the company meets the most stringent requirements of the law and sources all the carbon dioxide from industrial facilities and power plants. The number could rise significantly if the company injects more than that amount into wells, or if a significant share of the carbon dioxide is sourced through direct air capture. 

Chevron, BP, ExxonMobil, and Archer Daniels Midland, a major producer of ethanol, have also submitted Class VI well applications to the EPA and could be poised to secure significant IRA subsidies as well.

To be sure, it takes years to secure regulatory permits, and not every proposed project will move forward in the end. The companies involved will still need to raise financing, add carbon capture equipment to polluting facilities, and in many cases build out carbon dioxide pipelines that require separate approvals. But the increased IRA tax credits could drive as much as 250 million metric tons of additional annual storage or use of carbon dioxide in the US by 2035, according to the latest figures from the Princeton-led REPEAT Project.

“It’s a gold rush,” Garoupa says. “It’s being shoved down our throats as ‘Oh, it’s for climate goals.’” But if we’re “not doing it judiciously and really trying to achieve real emissions reductions first,” she adds, it’s merely a distraction from the other types of climate action needed to prevent dangerous levels of warming. 

Carbon accounting

Even if CCS can help drive down emissions in the aggregate, the net climate benefits from any given project will depend on a variety of factors, including how well it’s developed and run—and what other changes it brings about throughout complex, interconnected energy systems over time.

Notably, adding carbon capture equipment to a plant doesn’t trap all the climate pollution. Project developers are generally aiming for around 90%. So if you build a new project with CCS, you’ve increased emissions, not cut them, relative to the status quo.

In addition, the carbon capture process requires a lot of power to run, which may significantly increase emissions of greenhouse gas and other pollutants elsewhere by, for example, drawing on additional generation from natural-gas plants on the grid. Plus, the added tax incentives may make it profitable for a company to continue operating a fossil-fuel plant that it would otherwise have shut down or to run the facilities more hours of the day to generate more carbon dioxide to bury. 

All the uncaptured emissions associated with those changes can reduce, if not wipe out, any carbon benefits from incorporating CCS, says Danny Cullenward, a senior fellow with the Kleinman Center for Energy Policy at the University of Pennsylvania.

But none of that matters as far as the carbon storage subsidies are concerned. Businesses could even use the savings to expand their traditional oil and gas operations, he says.

“It’s not about the net climate impact—it’s about the gross tons you stick under ground,” Cullenward says of the tax credits.

A study last year raised a warning about how that could play out in the years to come, noting that the IRA may require the US to provide hundreds of billions to trillions of dollars in tax credits for power plants that add CCS. Under the scenarios explored, those projects could collectively deliver emissions reductions of as much as 24% or increases as high as 82%. The difference depends largely on how much the incentives alter energy production and the degree to which they extend the life of coal and natural-gas plants.

Coauthor Emily Grubert, an associate professor at Notre Dame and a former deputy assistant secretary at the Department of Energy, stressed that regulators must carefully consider these complex, cascading emissions impacts when weighing whether to approve such proposals.

“Not taking this seriously risks potentially trillions of dollars and billions of tonnes of [greenhouse-gas] emissions, not to mention the trust and goodwill of the American public, which is reasonably skeptical of these potentially critically important technologies,” she wrote in an op-ed in the industry outlet Utility Dive.

Global goals

Other nations and regions are also accelerating efforts to capture and store carbon as part of their broader efforts to lower emissions and combat climate change. The EU, which has dedicated tens of billions of euros to accelerating the development of CCS, is working to develop the capacity to store 50 million tons of carbon dioxide per year by 2030, according to the Global CCS Institute’s 2023 industry report.

Likewise, Japan hopes to sequester 240 million tons annually by 2050, while Saudi Arabia is aiming for 44 million tons by 2035. The industry trade group said there were 41 CCS projects in operation around the world at the time, with another 351 under development.

A handful of US facilities have been capturing carbon dioxide for decades for a variety of uses, including processing or producing natural gas, ammonia, and soda ash, which is used in soaps, cosmetics, baking soda, and other goods.

But Ben Grove, carbon storage manager at the Clean Air Task Force, says the increased subsidies in the IRA made CCS economical for many industry segments in the US, including: chemicals, petrochemicals, hydrogen, cement, oil, gas and ethanol refineries, and steel, at least on the low end of the estimated cost ranges. 

In many cases, the available subsidies still won’t fully cover the added cost of CCS in power plants and certain other industrial facilities. But the broader hope is that these federal programs will help companies scale up and optimize these processes over time, driving down the cost of CCS and making it feasible for more sectors, Grove says.

‘Against all evidence’

In addition to the gas treatment and hydrogen plants, CRC says, another source for the captured carbon dioxide could eventually include its own Elk Hills Power Plant, which runs on natural gas extracted from the oil field. The company has said it intends to retrofit the facility to capture 1.5 million tons of emissions a year.

Still other sources could include renewable fuels plants, which may mean biofuel facilities, steam generators, and a proposed direct-air-capture plant that would be developed by the carbon-removal startup Avnos, according to the EPA filing. Carbon TerraVault is part of a consortium, which includes Avnos, Climeworks, Southern California Gas Company, and others, that has proposed developing a direct-air-capture hub in Kern County, where the Elk Hills field is located. Last year, the Department of Energy awarded the so-called California DAC Hub nearly $12 million to conduct engineering design studies for direct-air-capture facilities.

CCS may be a helpful tool for heavy industries that are really hard to clean up, but that’s largely not what CRC has proposed, says Natalia Ospina, legal director at the Center on Race, Poverty & the Environment, an environmental-justice advocacy organization in Delano, California. 

“The initial source will be the Elk Hills oil field itself and the plant that refines gas in the first place,” she says. “That is just going to allow them to extend the life of the oil and gas industry in Kern County, which goes against all the evidence in front of us in terms of how we should be addressing the climate crisis.”

Critics of the project also fear that some of these facilities will continue producing other types of pollution, like volatile organic compounds and fine particulate matter, in a region that’s already heavily polluted. Some analyses show that adding a carbon capture process reduces those other pollutants in certain cases. But Ospina argues that oil and gas companies can’t be trusted to operate such projects in ways that reduce pollution to the levels necessary to protect neighboring communities.

‘You need it’

Still, a variety of studies, from the state level to the global, conclude that CCS may play an essential role in cutting greenhouse-gas emissions fast enough to moderate the global dangers of climate change.

California is banking heavily on capturing carbon from plants or removing it from the air through various means to meet its 2045 climate neutrality goal, aiming for 20 million metric tons by 2030 and 100 million by midcentury. The Air Resources Board, the state’s main climate regulator, declared that “there is no path to carbon neutrality without carbon removal and sequestration.” 

Recent reports from the UN’s climate panel have also stressed that carbon capture could be a “critical mitigation option” for cutting emissions from cement and chemical production. The body’s modeling study scenarios that limit global warming to 1.5 °C over preindustrial levels rely on significant levels of CCS, including tens to hundreds of billions of tons of carbon dioxide captured this century from plants that use biomatter to produce heat and electricity—a process known as BECCS.

Meeting global climate targets without carbon capture would require shutting down about a quarter of the world’s fossil-fuel plants before they’ve reached the typical 50-year life span, the International Energy Agency notes. That’s an expensive proposition, and one that owners, investors, industry trade groups, and even nations will fiercely resist.

“Everyone keeps coming to the same conclusion, which is that you need it,” Friedmann says.

Lorelei Oviatt, director of the Kern County Planning and Natural Resources Department, declined to express an opinion about CRC’s Elk Hills project while local regulators are reviewing it. But she strongly supports the development of CCS projects in general, describing it as a way to help her region restore lost tax revenue and jobs as “the state puts the area’s oil companies out of business” through tighter regulations.

County officials have proposed the development of a more than 4,000-acre carbon management park, which could include hydrogen, steel, and biomass facilities with carbon-capture components. An economic analysis last year found that the campus and related activities could create more than 22,000 jobs, and generate more than $88 million in sales and property taxes for the economically challenged county and cities, under a high-end scenario. 

Oviatt adds that embracing carbon capture may also allow the region to avoid the “stranded asset” problem, in which major employers are forced to shut down expensive power plants, refineries, and extraction wells that could otherwise continue operating for years to decades.

“We’re the largest producer of oil in California and seventh in the country; we have trillions and trillions of dollars in infrastructure,” she says. “The idea that all of that should just be abandoned does not seem like a thoughtful way to design an economy.”

Carbon dioxide leaks

But critics fear that preserving it simply means creating new dangers for the disproportionately poor, unhealthy, and marginalized communities surrounding these projects.

In a 2022 letter to the EPA, the Center for Biological Diversity raised the possibility that the sequestered carbon dioxide could leak out of wells or pipelines, contributing to climate change and harming local residents.

These concerns are not without foundation.

In February 2020, Denbury Enterprises’ Delta pipeline, which stretches more than 100 miles between Mississippi and Louisiana, ruptured and released more than 30,000 barrels’ worth of compressed, liquid CO₂ gas near the town of Satartia, Mississippi. 

The leak forced hundreds of people to evacuate their homes and sent dozens to local hospitals, some struggling to breathe and others unconscious and foaming at the mouth, as the Huffington Post detailed in an investigative piece. Some vehicles stopped running as well: the carbon dioxide in air displaced oxygen, which is essential to the combustion in combustion engines.

There have also been repeated carbon dioxide releases over the last two decades at an enhanced oil recovery project at the Salt Creek oil field in Wyoming. Starting in the late 1800s, a variety of operators have drilled, abandoned, sealed, and resealed thousands of wells at the site, with varying degrees of quality, reliability, and documentation, according to the Natural Resources Defense Council. A sustained leak in 2004 emitted 12,000 cubic feet of the gas per day, on average, while a 2016 release of carbon dioxide and methane forced a school near the field to relocate its classes for the remainder of the year.

Some fear that similar issues could arise at Elk Hills, which could become the nation’s first carbon sequestration project developed in a depleted oil field. Companies have drilled and operated thousands of wells over decades at the site, many of which have sat idle and unplugged for years, according to a 2020 investigation by the Los Angeles Times and the Center for Public Integrity.

Ospina argues that CRC and county officials are asking the residents of Kern County to act as test subjects for unproven and possibly dangerous CCS use cases, compounding the health risks facing a region that is already exposed to too many.

Whether the Elk Hills project moves forward or not, the looming carbon storage boom will soon force many other areas to wrestle with similar issues. What remains to be seen is whether companies and regulators can adequately address community fears and demonstrate that the climate benefits promised in modeling studies will be delivered in reality. 

Update: This story was updated to remove a photo that was not of the Elk Hills oil field and had been improperly captioned.