To capture CO2 in the US, climate tech startups partner with oil and gas

Climeworks, the Swiss company that’s capturing CO2 emissions for Microsoft, Stripe, and Shopify, is crafting plans to expand across the US, which is becoming the destination for companies that want to suck carbon dioxide out of the atmosphere.

“The US is a very interesting place, perhaps the most interesting place at the moment … from a market perspective, but also from a policy perspective,” says Christoph Beuttler, Climeworks’ chief climate policy officer. The Inflation Reduction Act more than tripled tax credits for direct air capture (DAC) and storage projects. And the 2021 Bipartisan Infrastructure Law includes $12 billion for capturing and storing carbon dioxide. 

Together with other partners, Climeworks has applied for a slice of the $3.5 billion in grants the Department of Energy plans to dole out to develop carbon removal hubs across the US. With that funding, it hopes to build new carbon-sucking plants in California, Louisiana, and North Dakota.

To gain a foothold in the US, Climeworks plans to partner with an oil and gas company for the first time. The pivot signals how hard it could be for the carbon removal industry to untangle itself from the fossil fuel industry moving forward, especially in the US.

Climeworks builds direct air capture plants that filter CO2 out of the ambient air. That’s supposed to keep the gas from building in the atmosphere and further heating up the planet. Back in 2017, the company became the first to use that technology to capture CO2 and sell it as a product for things like carbonated drinks. Then, in 2021, it opened up the world’s largest operating DAC facility to date in Iceland. Until now, Climeworks has differentiated itself from several other pioneering DAC companies by not working alongside fossil fuel companies.

But it’s proving hard to sidestep them in the US, the world’s biggest oil and gas producer. Moreover, fossil fuel companies have been fans of carbon capture technologies that could help them stay in business despite efforts to switch to clean energy.

Oil giant Occidental, for example, is working with Canadian DAC company Carbon Engineering to build carbon-sucking plants in Texas. Even though the first plant is still under construction, Occidental is already using it to sell “net-zero oil.” That’s essentially just plain old polluting oil that’s been extracted with the help of CO2, which companies can shoot into depleting oil fields to push out hard-to-reach reserves.

It’s a process called enhanced oil recovery (EOR), and Climeworks says it refuses to use its technology for that purpose. Even so, Climeworks isn’t ruling out partnerships with oil and gas companies when it comes to finding other ways to store the CO2 it captures.

“That’s what oil and gas can do really well,” Beuttler says. “They know the underground, they know the geologic subsurface and therefore they are a great storage partner.”

DAC companies typically have to find partners to handle the storage side of things. In Iceland, Climeworks partners with a startup called Carbfix, which grew out of a joint research project between universities and a geothermal utility company.

In California, Climeworks plans to work with a subsidiary of an oil and gas company called California Resources Corporation (CRC). Together, they want to build California’s first DAC hub in Kern County — a place pockmarked with oil and gas wells. There, the CO2 could be stored in depleted reservoirs.

Kern County has historically been one of the nation’s top oil producing counties. It’s also home to CRC’s flagship gas operation. But oil and gas permitting there was suspended early this year pending a review of whether a local ordinance is in line with the California Environmental Quality Act. The drama unfolding in Kern between the fossil fuel industry and lawmakers who’ve set ambitious climate goals for the state has reportedly already taken its toll on CRC’s financial outlook. And leaning into carbon removal could give the company another revenue stream.

In Louisiana, Climeworks’ storage partner is a company called Gulf Coast Sequestration (GCS), which has applied for permits for underground injection wells to hold captured CO2. Louisiana is another big gas-producing state, and GCS’s head of business development is also president of an energy development firm involved in gas-related investments around the world. Climeworks hasn’t announced its partners in North Dakota yet, but Reuters reports that it’s working alongside the University of North Dakota.

All three projects are still tentative since the DOE isn’t expected to announce the grantees for its $3.5 billion program until later this year. The DOE initially planned to develop four hubs across the US, but applications have been filed for at least nine different proposed hubs, according to Reuters. Looking at the projects Reuters identified, Climeworks appears in more applications than any of its peers. And Beuttler says his company could move forward with plans to expand in the US even if it isn’t chosen as a grant recipient.