New 'blue hydrogen' proposal in Elk Hills would be California's first
Dec. 8—A large local oil producer announced an agreement Wednesday with an Oklahoma company for construction of a natural gas-fueled hydrogen plant whose byproduct carbon dioxide would be buried permanently in western Kern County's Elk Hills Oil Field.
Long Beach-based California Resources Corp.'s deal with Lone Cypress Energy Services LLC, based in Tulsa, was touted as California's first so-called "blue hydrogen" project, creating up to 125 temporary construction jobs and as many as 18 permanent positions.
If a final decision is made late next year to move forward with construction, the Lone Cypress Hydrogen Project would, by the end of 2025, generate 30 tons per day of hydrogen for use in transportation or industrial applications, plus 100,000 metric tons per year of carbon dioxide.
Terms of the agreement were not disclosed, but a news release issued Wednesday said Lone Cypress would pay an injection fee based on how much CO2 is sequestered at the oil field. In exchange, the Oklahoma company would receive on-site transportation and storage of carbon, plus 50 surface acres at Elk Hills — or double that much land if the project is expanded to produce 60 tons per day of hydrogen and 200,000 metric tons per year of CO2.
The project would piggyback on CRC's existing joint-venture partnership with Canadian-based Brookfield Asset Management Inc., which has a 49 percent stake to CRC's 51 percent in an entity called Carbon TerraVault JV Holdco LLC. CRC unveiled the partnership in August when it announced Brookfield had agreed to contribute a half-billion dollars toward the deposit of 5 million metric tons per year for a total of 200 million metric tons in a large geologic formation at Elk Hills.
Hydrogen energy production and carbon sequestration are not new ideas in Kern, though no such plants have yet been built in the county. What's different about the project disclosed Wednesday is that it would be the first proposal to combine the two technologies beyond a purely theoretical discussion.
Another difference is that the other two hydrogen generation plants proposed locally would be fueled entirely by renewable energy, making them "green hydrogen" projects. Making blue hydrogen in Kern would tap another resource produced locally, natural gas, in a process considered net-zero carbon intensity because the CO2 would be buried.
Government incentives are one reason why the proposal makes sense from a financial perspective: State and federal cash and credits are being made available to promote capture and burial of carbon; the same or related funding sources also support greater use of hydrogen, which when combusted produces only water.
The technologies involved are seen as helpful to Kern's economic development as Sacramento's climate policies increasingly discourage oil and gas production while encouraging a fast transition to cleaner energy.
"Energy is one of our region's most important traded sectors," J.P. Lake, executive director of Kern's B3K Prosperity economic development collaboration, said in an email statement Wednesday.
"Innovative projects like the one announced today by CRC, Carbon TerraVault and Lone Cypress Energy have the potential to build on our legacy strengths, evolve our energy industry and provide quality jobs for local workers," Lake continued. "We're hopeful for good news when the partners announce their final investment decision next year."
In Wednesday's news release, CRC President and CEO Mark A. "Mac" McFarland said the company is excited to be at the forefront of California's energy transition. Carbon TerraVault project represents a "meaningful step forward" in the company's rollout of carbon capture and storage technology, he added, and one that the company believes will lead to "many projects to come."
Lone Cypress develops and operates infrastructure across the energy industry, developing, managing and operating projects while specializing in hydrogen generation and distribution, waste-to-energy technology and traditional oil and gas facilities. It said in Wednesday's release that the Elk Hills project, where it plans to deploy what CRC called steam methane reformation technology, might not be Lone Cypress' only facility in California.
"CTV's unique expertise in subsurface operations and permitting, large CO2 storage position and ability to deliver on highly complex and capital-intensive projects provide us with a clear line of sight as we continue to evaluate additional projects in California," President and founder Greg Brooks stated.
The release said the agreement with Lone Cypress gives the CRC-Brookfield joint venture the right to take a majority stake in the Lone Cypress project and to provide carbon-sequestration services for all subsequent hydrogen projects the Oklahoma company may build in California.