Chevron Corporation has hit the brakes on its ambitious carbon capture and storage project in California’s San Joaquin Valley. The $1 billion initiative was designed to remove up to 1 million metric tons of carbon dioxide each year by 2030—a key component of Chevron’s strategy to cut emissions while still producing oil.
The decision to pause construction stems from a tangled web of economic, regulatory, and logistical challenges linked to carbon capture and storage (CCS) technology—a sector that has proven to be fraught with hurdles, particularly in California. Spokesperson Veronica Flores highlighted that the company is “re-evaluating the pace and scope of its investments” due to an “unfavorable policy landscape and uncertainty around future incentives.”
Carbon capture technology is intended to trap carbon dioxide emissions from industrial sources, compress them, and securely store them underground. Proponents argue it serves as a vital solution, allowing the continued use of fossil fuels with a lower environmental impact. Critics, however, caution that CCS remains expensive and largely untested at a mass scale. They argue it diverts focus from more sustainable energy options like wind and solar.
Chevron’s halted project reflects a broader trend in an industry grappling with the complexities of CCS development. The Global CCS Institute reports that fewer than 35 commercial CCS facilities are currently operational worldwide, despite numerous proposals that have emerged. Even legislative efforts like the 2022 Inflation Reduction Act, which boosted the federal tax credit for permanent CO₂ storage, fall short of addressing the daunting upfront costs and regulatory red tape that companies face—especially in states like California that impose additional permitting challenges. Notably, Chevron had yet to seek a Class VI well permit from the EPA, while these permits can take years to secure.
Dr. Michael Gerard, from the Sabin Center for Climate Change Law, remarked, “The delay shows how hard it is to scale CCS when you’re trying to deal with both federal and state regulators.” He emphasized the absence of a streamlined pathway, complicating efforts for companies looking to invest in CCS.
Cypress Park had initially sought to use captured carbon to enhance oil recovery—an approach that has drawn both attention and criticism. Enhanced Oil Recovery (EOR) involves injecting carbon into aging wells to extract more crude. This method, while established in other regions, meets significant opposition in California, where environmental advocates argue it undermines climate objectives. Nonetheless, Chevron believed this strategy would strengthen the economic viability of CCS while mitigating net emissions.
The groundwork for the project began in 2022, supported by a $16 million grant from the U.S. Department of Energy for preliminary studies. Results from these studies, released in 2023, suggested that the geological features of the Kern River area could safely hold billions of tons of CO₂. However, the steep costs associated with the infrastructure needed for CO₂ transport and monitoring complicated matters further.
Several obstacles played a role in Chevron’s decision to pause construction:
- Permitting delays: As of mid-2024, the EPA has issued just two Class VI well permits in California, with approval processes often stretching beyond three years—leaving companies in a state of limbo.
- Local opposition: There are significant concerns from environmental groups and community activists in Kern County about potential groundwater contamination and seismic risks. Chevron has faced multiple lawsuits demanding comprehensive environmental reviews.
- Uncertain economics: Despite the tax credit adjustments, CCS remains a costly venture. The International Energy Agency reported that median costs for CCS ranged between $60 and $110 per metric ton of CO₂—hardly sustainable under current financial conditions.
- Slow market uptake: With limited demand for captured CO₂ and inadequate pipeline infrastructure, the economic rationale for CCS remains tenuous. Chevron stated in early investor communications that the absence of offtake agreements complicates financing efforts.
California originally positioned CCS as a crucial element of its goal to achieve net-zero emissions by 2045. Senate Bill 905, enacted in 2022, aimed to establish a regulatory framework for CCS projects. However, critics argue that the law lacks sufficient provisions for implementation. James Cooley, an energy analyst, noted, “There’s talk of CCS being essential, but not the will to actually support it through faster permitting or pipeline development.”
Chevron’s project promised hundreds of construction jobs and around 80 permanent positions in Kern County—a region heavily reliant on the oil and gas sector and struggling with recent job losses due to environmental restrictions. Local supervisors championed the project as a means to maintain traditional energy employment while achieving climate goals. However, the project’s suspension has left those prospects uncertain.
Kern County Supervisor David Couch stated, “This isn’t just about carbon. It’s about jobs, about keeping our community viable while the rest of the state works out what it actually wants to do about energy.”
The implications of Chevron’s decision reach far beyond California. Other energy giants, such as Occidental and ExxonMobil, are also exploring CCS projects. But Chevron’s pause sends a strong signal about the difficulties in this sector. Amanda Su, a partner at IE Advisors, noted that without a clearly defined framework for permitting, storage, and revenue generation, companies will remain hesitant to commit to CCS initiatives.
Chevron has asserted it is not abandoning its CCS initiative but merely placing it “on hold” to conduct further evaluations. While the company continues its pilot programs globally, the San Joaquin Valley project was intended to be a key domestic showcase. The suspension not only casts doubt on Chevron’s long-term plans but also poses a challenge for California’s broader decarbonization objectives, which anticipate a significant uptick in CCS technology by the latter part of this decade.
In the absence of rapid advancements in CCS, California may find itself leaning more heavily on renewable resources, energy storage solutions, and increased efficiency measures—all requiring ongoing public investment and bipartisan agreement.
Whether Chevron will revisit the project remains uncertain. The company’s current stance highlights the ongoing tensions in the conversation surrounding American energy policy—the challenge of reducing emissions while safeguarding jobs and fostering innovation that may not see immediate returns.
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