Nearly four years ago, California lawmakers directed state regulators to prepare for an emerging industry built around a bold climate promise: permanently burying carbon dioxide deep underground.
The 2022 law required regulators to write rules governing how companies would monitor stored carbon and respond if something went wrong. It set a January 2025 deadline for companies to prove they could cover cleanup costs and other liabilities, and called for a single, streamlined application to coordinate permitting across multiple agencies.
More than 19 months past that deadline, California still hasn’t finalized its carbon storage regulations.
Meanwhile, in May, California Resources Corp., the state’s largest oil producer, began injecting carbon dioxide underground at Elk Hills, a century-old oil field in rural Kern County. The move made the project a closely watched test case — the U.S. Environmental Protection Agency, which approved the injections, says it knows of no other similar project operating anywhere else in the country.
Without its own rules in place, California cannot hold companies like CRC to standards tougher than the federal government’s, nor can it guarantee that the carbon — a gas that can be lethal in high concentrations and drives climate change — stays underground for good.
“If something goes wrong, there are really important questions about who would actually address those concerns and consequences,” said Michelle Ghafar, an Earthjustice attorney representing groups suing to halt the project. “And we have a track record of oil companies not taking responsibility for cleaning up their messes.”
State leaders have championed the Elk Hills project. Gov. Gavin Newsom has pointed to the carbon injections there as proof that “innovation and ambition are what California is all about.” State Sen. Anna Caballero, who authored the law establishing the rules, said she never intended for it to stall projects already underway.
California is counting on carbon capture to help meet its aggressive climate goals. Supporters have long pitched it as a fix for industries that are difficult to clean up, such as cement manufacturing. But the California Air Resources Board, the state’s top climate regulator, has told CalMatters it likely can’t cut emissions 85% below 1990 levels without dramatically expanding carbon capture — potentially even at natural gas power plants.
Writing the carbon storage rules falls to the air board. Two other agencies already oversee pieces of the project: the Geologic Energy Management Division, or CalGEM, which regulates oil and gas wells, and the U.S. EPA, which permits injection wells under federal safe drinking water law.
Yet questions remain about who’s actually in charge. It’s unclear which agency would be responsible if, say, carbon leaked through one of the field’s older wells. CalGEM regulates those wells, but the company’s own emergency plan calls for notifying the EPA when something goes wrong.
Air board officials say staffing shortages kept them from finishing the rules on time. They point to existing oversight, including the federal permit designed to protect drinking water and a Kern County approval whose environmental review is now being challenged in court.
The financial stakes are enormous. The project could generate billions of dollars in public funding — a mix of federal tax credits and money from California drivers — if it expands as planned.
“If you’re a driver, you should care about how this money is spent,” said Danny Cullenward, a climate policy expert and vice chair of an independent committee that reviews the state’s carbon market. “You’re also paying a lot of money for big oil companies to experiment with these technologies without a regulatory framework.”
The company sees its storage business as being in step with the state’s goals — and as a business opportunity. “Our goal is to be a partner to the state in its transition to the future it envisions for itself,” said Jas Sajjan, the company’s senior vice president of government affairs.
**Depleted reservoirs pierced by decades of drilling**
Amid the scrub-covered hills of Elk Hills west of Bakersfield, an oil worker in a hard hat cranked open a green valve by hand. Nearby, a red digital counter ticked upward like a scoreboard, tallying the tons of carbon dioxide as California’s largest oil producer began pumping the gas deep underground.
The scenes, captured in promotional photos the company released of the May injections, were among the images CRC chose to mark the moment. Elk Hills is the first project from Carbon TerraVault, a joint venture CRC formed with New York-based investor Brookfield Asset Management to develop its carbon capture projects.
For decades, oil companies have injected carbon dioxide into aging fields to squeeze out more crude — a practice banned in California known as enhanced oil recovery. At Elk Hills, the carbon is injected solely for permanent storage, with the EPA saying it’s the only known project of its kind in the country.
The company, federal regulators and state officials consider the field’s vast depleted reservoirs well-suited for storage, since they trapped oil and gas underground for millions of years.
But the very quality that makes the reservoir attractive for storage also creates risk. Drilling here dates back to 1910, and old wells could offer pathways for carbon dioxide to migrate back to the surface. The nearest community, Valley Acres, sits less than four miles away.
FracTracker Alliance, a nonprofit that maps oil and gas development, identified 913 oil and gas wells within a mile of the project’s four injection wells, according to a new analysis prepared for the consumer advocacy group Consumer Watchdog. Most of those wells remain unsealed, and even sealed wells can degrade over time, said Kyle Ferrar, the group’s western program director. The true number could be even higher, he added, since older records sometimes omit wells entirely.
The concern isn’t new. In 2024, a retired federal geoscientist who reviewed the project warned that 204 wells pierce the rock layer meant to seal in the reservoir now receiving injections — potentially creating escape routes for the carbon dioxide.
The project’s emergency response plan and underlying permit are built around the Safe Drinking Water Act, which also requires surface air monitoring and a public notification plan in case of emergency.
But experts say that leaves a gap: federal rules require regular integrity testing only on injection wells themselves, not the hundreds of older wells surrounding them, said Forrest Smith, a petroleum engineer who spent six years as the sole National Park Service engineer overseeing thousands of aging oil and gas wells. That means much of the responsibility for catching problems falls on the company itself.
“These older wells don’t get looked at much until they become a problem,” he said. “It comes down to making sure the companies doing this work keep tight controls.”
The company declined to comment directly on the FracTracker analysis or the geoscientist’s earlier concerns, but said the risks have already been addressed. Before injections began, the EPA required the company to seal or reseal roughly 200 wells, the agency said in a news release, relying on records from CalGEM, the state’s oil and gas regulator, according to EPA spokesperson Mikayla Rumph.
CalGEM confirmed it reviewed the wells the EPA ordered sealed. The state retains authority over other wells at the field, including monitoring wells tied to the project, but won’t regulate the injection wells themselves, said CalGEM spokesperson Jacob Roper.
**Rules were never meant to slow projects down**
California released the first draft of its carbon capture regulations in May, and environmental groups say it falls short of what the law requires. The air board expects to finalize the rules later this year.
Oil industry representatives and business groups, meanwhile, want the long-delayed process wrapped up — not expanded.
The air board’s proposal would require companies to monitor their sites, disclose the results and prove they can afford to fix a leak or seal a well for 100 years after injections stop. But because the board hasn’t finalized enforceable rules, it’s unclear whether that 100-year standard currently applies to Elk Hills, or whether the shorter federal standard governs in the meantime.
The draft also doesn’t specify whether companies’ monitoring would be independently verified, or spell out when a leak or earthquake would trigger notification to nearby residents.
CRC has told the EPA it plans to monitor groundwater quality and track the underground carbon dioxide plume for 50 years after injections end. The company has also posted a $9.1 million letter of credit to cover well-sealing and site maintenance, and purchased a separate $24.6 million insurance policy to cover response costs if something goes wrong.
It has asked the air board to spell out what additional coverage would be required for the following 50 years, arguing the risk diminishes once the plume stabilizes.
At a virtual public meeting in June, Jon Kendrick of the California Chamber of Commerce urged the air board to avoid duplicating federal requirements. In written comments, CRC asked the board not to impose broader, California-specific requirements.
Katie Valenzuela, an environmental justice policy advocate, said the board’s draft leans too heavily on letting companies police themselves. “What’s the point of having standards and rules if there’s no mechanism to ensure they’re followed?” she asked during the meeting.
Matthew Botill, a division chief at the air board, said the underlying 2022 law, Senate Bill 905, never gave the board authority to override approvals already granted by other agencies. In a separate interview with CalMatters last year, Botill said his agency lacked the budget to hire the experts needed to finish the rules on time. Even once the rules take effect, he said, the board wouldn’t have authority to approve or block individual projects — that falls outside the state’s direct regulatory reach, he added.
That was by design. While the bill moved through the Legislature, Caballero sent a letter urging agencies not to let the new rules delay projects already in motion.
Caballero told CalMatters the law was meant to coordinate existing agencies, not create a new gatekeeper. California needs projects like Elk Hills, she said, to meet its climate targets and support jobs.
“We want to encourage the kind of investment that helps California meet its climate goals while creating and protecting jobs,” she said.
**A technology that could spread statewide**
With billions of dollars in public funding on the table, carbon storage projects could multiply across California.
CRC is currently injecting carbon captured at its cryogenic gas plant at Elk Hills, which chills gases to extremely low temperatures to separate them.
The company also plans to draw carbon from a nearby natural gas power plant, adding another source of carbon dioxide for the project.
CRC is pressing state utility regulators to classify natural gas plants equipped with carbon capture as clean energy. If regulators agree, utilities could sign long-term contracts for that electricity — opening a new market for the company. CEO Francisco León called the prospect “an inflection point” and “an incredible opportunity” during a May earnings call.
The company has also signed deals to bury carbon dioxide from other businesses, part of a broader plan to turn its storage sites into hubs for industrial emissions from across the state.
A statewide expansion would likely require new pipelines to move that carbon to injection sites. California lifted its moratorium on such pipelines last year, and new safety rules from the Office of the State Fire Marshal took effect last month. Those rules don’t require the gas to be scented, meaning people near a leak wouldn’t necessarily be able to smell it, said Liza Tucker, a researcher with Consumer Watchdog.
In a new report, Tucker argues that carbon storage amounts to a lifeline for an industry the state is supposed to be phasing out.
“All it does is lock us in and force us to keep fossil fuels alive for a lot longer than we should,” Tucker said.
For now, the company continues injecting carbon at Elk Hills while a lawsuit challenging the project remains unresolved. The suit, filed by a coalition of Kern County community and environmental groups, argues the project’s environmental review never fully examined where all that carbon comes from — including the capture and transport of carbon dioxide from industrial sources into a region already among the most polluted in the country.
Ghafar, the Earthjustice attorney, said no single agency is examining the full scope of risk the project poses. Federal regulators are focused mainly on drinking water protections, while state agencies oversee separate pieces of the puzzle — leaving unanswered the question of who would step in if carbon dioxide escaped to the surface.
“It’s really alarming that injections have started when we don’t even have a court ruling yet on these really important questions about whether the risks of leaks, disasters and proper regulation have been fully addressed,” Ghafar said. “There really isn’t one single agency or entity looking at the full picture.”
Original source: CalMatters
