Carbon management projects in Kern net $500 million investment

·3 min read

Aug. 5—A Canadian-based asset management firm has agreed to contribute a half-billion dollars, with the possibility of twice that much still to come, in support of a local oil producer's plans to develop carbon management projects in Kern County.

California Resources Corp.'s joint venture with a fund run by Brookfield Asset Management Inc. will provide $10 per metric ton of carbon dioxide injected into a large geologic formation in the Elk Hills Oil Field. The partnership proposes to deposit 5 million metric tons per year for a total of 200 million metric tons.

"Reaching this target would require an estimated $2.5 billion of total capital, and Brookfield could make additional investments of more than $1 billion in the strategic partnership assuming it fully participates in these CCS (carbon capture and sequestration) projects," Long Beach-based CRC said in a news release this week.

Kern is emerging as a West Coast leader in CCS, a field of technology intended to address climate change by taking CO2, a common greenhouse gas, out of the atmosphere and burying it deep underground indefinitely. The county is considered an ideal place for such work, partly because of its abundance of depleted oil and gas reservoirs but also because of existing gas infrastructure and local industrial expertise.

Environmental groups have expressed worries about potentially dangerous leaks from CCS, the activity's high energy intensity and the idea of subsidizing oil companies. But local officials see CCS as a potential job engine that could attract major investment and help Kern transition away from its economic dependence on oil and gas production.

CRC's release pointed to financial support for CCS in the form of the state's cap-and-trade and Low Carbon Fuel Standard programs, as well as a federal tax credit of $50 per ton of CO2 captured and permanently stored.

The Ontario-based firm's Brookfield Global Transition Fund is touted as the largest of its kind dedicated to transitioning to a net zero carbon economy. The company said in June the fund had raised $15 billion, a sixth of which has already been allocated.

For CRC, one of California's biggest oil and gas producers, the joint venture announced Wednesday lowers financial risk, adds development expertise and brings new capital for accelerating its carbon management strategy.

"It also enables CRC to maintain capital discipline and financial flexibility to achieve our corporate objectives including achieving our Full-Scope Net Zero 2045 goal," President and CEO Mac McFarland said in a news release.

Brookfield Renewable's Connor Teskey added, "Partnering with CRC presents a great opportunity to continue the growth of our CCS business and expand the scope of decarbonization solutions we provide to our customers."

The joint venture projects laid out in the release will be owned 51 percent by CRC and 49 percent by Brookfield. A CRC spokesman said by email all the projects will be located in Kern.

In March, county government initiated a review of a CCS project proposed by CRC that would be the first in Kern. Dubbed Carbon TerraVault I, it would gather CO2 from a variety of industrial sources and bury it in former oil reservoirs using half a dozen injector wells in the Elk Hills Oil Field about 26 miles southwest of Bakersfield.

CRC says Carbon TerraVault I would bury more than 1 million metric tons of CO2 per year — equivalent to taking 200,000 passenger vehicles off the road — up to a total of 48 million tons.