California Resources Corp. began injecting carbon dioxide into the century-old Elk Hills oil field in Kern County in May — the first dedicated CO2 storage project of its kind in the United States, per the EPA — while the state's own carbon storage rules remain unwritten more than 19 months past their January 2025 statutory deadline.

The result is a regulatory gap at the largest operating test of geologic carbon storage in California. Until the Air Resources Board finalizes rules under Senate Bill 905, the state cannot hold CRC to a tougher standard than the federal government or independently verify that injected CO2 stays underground.

"If something does go wrong, there are a lot of really important questions about who would actually address those concerns and impacts," said Michelle Ghafar, an Earthjustice attorney representing groups suing to stop the project. "And we have a history of oil companies not taking responsibility for cleaning up their messes."

What is at stake financially?

Elk Hills storage does not turn a profit on its own. CRC and its affiliates can draw on four public funding streams:

• Federal 45Q-style tax credit, $85/ton: roughly $8.5 million a year at the current ~100,000 metric tons/year pace. Filling the reservoir within the credit's 12-year window could yield $3.2 billion for phase one alone; statewide plans could reach $30 billion.
• Low Carbon Fuel Standard credits, $72/ton: CRC has applied to qualify; benefits may flow to a related company.
• Cap-and-invest, $29/ton: unwritten rules will decide whether buried carbon counts as reduced pollution.
• Manufacturing Decarbonization Incentive: a $4 billion pool of cap-and-invest allowances for carbon capture investment.

"If you're a driver, you should care how this money is being spent," said Danny Cullenward, vice chair of an independent committee reviewing the carbon market. "You are also paying a lot of money for very large oil companies to experiment with these technologies in the absence of a regulatory framework."

Who watches 913 aging wells?

Elk Hills has produced oil since 1910, and old wellbores are the central engineering risk. FracTracker Alliance counted 913 oil and gas wells within one mile of the project's four injection wells in an analysis for Consumer Watchdog; most are unplugged. In 2024, a retired federal geoscientist warned that 204 wells pierce the sealing rock layer above the target reservoir and could become CO2 escape routes.

The EPA required CRC to plug or replug about 200 wells before injection began, relying on CalGEM records, spokesperson Mikayla Rumph said. CalGEM confirmed it reviewed those wells and retains authority over other wells in the field but will not regulate the injection wells themselves.

Federal rules mandate regular integrity testing only on the injection wells, not the hundreds of older wells around them. "There's not a lot of going back and checking these old wells until they become a problem," said Forrest Smith, a petroleum engineer who spent six years overseeing aging wells for the National Park Service. "It's really making sure that the companies doing this are staying on top of it."

CRC declined to comment on the FracTracker analysis but said the risks have been addressed. The nearest community, Valley Acres, sits less than four miles from the injection site.

What do the unfinished rules require?

The Air Resources Board released its first regulatory outline in May and expects to finish the rules this year. The outline requires operators to monitor sites, disclose results, and prove financial capacity to fix a leak or plug a well for 100 years after injection ends. Whether that 100-year standard applies to Elk Hills now — or the shorter federal standard governs in the interim — remains unclear.

CRC has committed to monitoring groundwater and tracking the CO2 plume for 50 years post-injection, backed by a $9.1 million letter of credit for plugging and site care plus a separate $24.6 million insurance policy for incident response. The company asked the board to define what the second 50 years would require, arguing risk falls once the plume settles.

Air board division chief Matthew Botill said SB 905 never gave his agency power to override permitting agencies or to approve and block projects — something "outside" the state's "direct regulatory purview." Staffing and budget shortfalls delayed the rules, the board said.

How big could this get?

CRC — whose Carbon TerraVault joint venture with Brookfield Asset Management runs the project — currently injects CO2 captured from its Elk Hills cryogenic gas plant. It also plans to capture from a nearby natural-gas power plant, and is pressing the CPUC to let gas plants fitted with capture count as clean power, which CEO Francisco Leon called "a game changer" in May.

A statewide build-out would need CO2 pipelines. California lifted its pipeline moratorium last year, and new Office of the State Fire Marshal rules took effect last month — though they do not require odorization, leaving nearby residents no way to smell a leak, said Consumer Watchdog researcher Liza Tucker.

Injections continue while a lawsuit from Kern County community and environmental groups remains unresolved; it argues the environmental review never grappled with where all the captured carbon will originate.

Watch item: the Air Resources Board's final SB 905 rules, expected this year, and the pending court decision on the project's environmental review.