CRC approves California’s first CCS project

“We are pleased to advance California’s first CCS project to the next stage of its development highlighting our ability to deliver carbon management solutions while reducing our own emissions,” said Francisco Leon, CRC’s President and Chief Executive Officer.

“This project strengthens Carbon TerraVault’s economic opportunities and positions us to create lasting value for our shareholders and partners. Carbon TerraVault remains at the forefront of providing innovative decarbonisation solutions that support a cleaner, affordable, and reliable energy future for California.”

“This project represents another step forward in California’s world-leading pathway to combat climate change and achieve carbon neutrality over the next two decades,” said California Natural Resources Secretary Wade Crowfoot. “While slashing carbon pollution is the main thrust of our climate programs, capturing and removing carbon from our atmosphere is also essential to meeting our carbon targets. This project, which repurposes fossil fuel extraction infrastructure and expertise to sequester carbon, is a forward-looking way to remove emissions while creating jobs in an emerging sector. Simply put, getting projects like this operating in a safe and effective way is critical for our climate progress.”

Project approval follows CRC’s recent receipt of final Class VI well permits from the Environmental Protection Agency (EPA) for underground injection and storage of carbon dioxide (CO₂) into the 26R reservoir, located at CRC’s Elk Hills Field in Kern County, California. The 26R reservoir is part of CTV’s joint venture with Brookfield.

“This announcement underscores California’s leadership in carbon capture and sequestration in the US and reaffirms our commitment to collaborating with the right partners on impactful and economically viable energy solutions that advance the transition to net zero,” said Natalie Adomait, Managing Partner at Brookfield. “Together with CRC, we are deploying our clean energy expertise to accelerate decarbonisation and drive capital deployment across California’s critical industries.”

26R is one of two depleted oil and natural gas reservoirs that comprise the CTV I storage site, with an expected injection rate of 1.46 million tpy of CO₂ storage. Total estimated capacity of 26R is up to 38 million t.

Cryogenic gas plant CCS project highlights

• Capture and sequestration: CRC plans to capture and, through its joint venture with Brookfield (CTV JV), permanently store up to 100 000 tpy of CO₂ from its Elk Hills cryogenic gas plant in the 26R reservoir.
• First injection: operations are expected to commence in late 2025.
• Capture incentives and revenue equivalents: CRC is expected to qualify for US$85/t in 45Q tax credits, with potential for low carbon fuel standard (LCFS) credit generation and reduction in cap-and-trade (C&T) liabilities pending California Air Resources Board (CARB) rulemaking. Decarbonised gas throughput is projected to increase propane recovery by up to 100 bpd of natural gas liquids.
• Operating costs: the project’s proximity to CRC’s 26R reservoir will minimise transportation costs associated with sequestration.
• Operating profitability: Through this project, CTV JV is projected to generate EBITDA1 of US$50 - US$60 per t in sequestration fees paid by CRC, consistent with the economic type curve2 for CTV storage-only projects.
• Capture capital investment: CRC’s capture project capital spending is estimated at US$14 - US$18 million.
• Reduced greenhouse gas (GHG) emissions: project expected to lower Scope 1 and 2 emissions from the Elk Hills Power Plant by up to 7%.

CRC’s internal rate of return from this capture and storage project is expected to be at the high-end of its previously disclosed range of 10% - 30%.

¹ EBITDA is a non-GAAP measure. Estimates include realisation of tax credits which may change based on future IRS guidance and other factors and assumes that wage and apprenticeship requirements are met. Based on a storage-only project. Assumes full utilisation of the CTV I – 26R reservoir and Brookfield’s full participation in this project with storage buy-in capital prorated to cryogenic plant CCS project’s capital needs.

² For information on CTV economic type curve, please see CRC’s Q222 earnings release at www.crc.com/investor-relations/events-and-presentations.

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