Greenhouse Gases

California Resources Corporation (CRC) works to increase energy efficiency and reduce emissions of greenhouse gases (GHG) and other compounds in our production of oil, natural gas liquids, natural gas and electricity throughout our operations. We actively contribute to the state’s efforts to mitigate and adapt to climate change while maintaining reliable, affordable energy supplies for all Californians.

GHG Emissions

The U.S. Environmental Protection Agency (EPA) and the State of California have issued GHG emissions estimating protocols that are used by CRC facilities to report GHG emissions. The EPA requires reporting for certain direct GHG emissions source categories and certain GHG supplier categories, as well as carbon dioxide (CO2) injection for enhanced oil recovery. CRC provides such data for our oil and gas operations and for the natural gas power plants and natural gas and natural gas liquids facilities we operate. These data are available on the EPA website. The California Air Resources Board (CARB) has separate and more stringent regulations for reporting GHG emissions and we report to CARB on our covered operations. The California definitions and methodologies under California’s Mandatory GHG Reporting Regulation are somewhat different from those specified by the EPA for its GHG reporting program. The data for CRC facilities in California, which are verified by third-party firms certified by the state, are available through the CARB website. The company also reports voluntarily on our GHG management program and emissions to the CDP (formerly called the Carbon Disclosure Project). In 2020, we received an “A-” from CDP, scoring at CDP’s Leadership Level and earning the highest ranking among all U.S. oil and natural gas companies, tying for first with one other U.S.-based E&P with global operations. Scoring at CDP’s Leadership Level for two years in a row further highlights CRC’s differentiated value as a dedicated and dependable energy producer for Californians with 2030 Sustainability Goals that align with California’s, as highlighted in our recent 2019 Sustainability Report (PDF).

GHG emissions from upstream facilities operated by CRC have decreased steadily from 2017 through 2019 by 22 percent on an absolute basis and by 14.3 percent relative to production on a per barrel oil equivalent basis. Importantly, total methane emissions from our upstream and midstream operations have decreased by nearly 63 percent over the same period. These Scope 1 emissions are reported, consistent with California’s Mandatory GHG Reporting Regulation, as metric tons of CO2 equivalent and our emission reports are subject annually to independent third-party verification.

CRC's Upstream Scope 1 GHG Emissions are Lower on an Absolute and Per BOE Basis

CRC's GHG Emissions From All Upstream and Midstream Operations Continue to Decrease

CRC Funding of State GHG Reduction Investments

CRC accounts for and reports emissions of GHGs to CARB under California’s pioneering Cap-and-Trade program. These emission reports undergo third-party verification to ensure accuracy. CRC mitigates our GHG emissions through state-issued allowances and approved offsets. Most allowances are initially sold by CARB at state auctions and offsets are subject to rigorous review by CARB under approved quantification protocols. CARB uses the proceeds raised by these auctions to fund billions of dollars of environmental projects that mitigate climate change and further the goals of reducing emissions, improving energy efficiency and achieving carbon neutrality to meet the goal of the Paris Climate Accord to limit temperature rise to less than 2 degrees Celsius by 2050.

Unlike CRC, oil and gas producers in other states and countries do not account for and mitigate their GHG emissions from their operations under California’s Cap-and-Trade program, and they don’t contribute to California’s GHG mitigation investments. They also don’t apply California’s other leading environmental standards. As a result, replacing oil and gas imports with local California production would help to mitigate GHG emissions and improve global environmental quality.

The state’s GHG reduction fund has received auction proceeds of more than $12.5 billion under the Cap-and-Trade program, and invested $12.72 billion from GHG auction proceeds in over 428,000 projects in 16 categories from fiscal years 2013 through 2019, according to CARB’s 2020 Annual Report (PDF) to the Legislature.

As reported in CRC’s securities filings, CRC allocated approximately $232.5 million from 2013-2019 to mitigate or offset GHG emissions under the Cap-and-Trade program. Approximately $211.8 million was used to purchase GHG allowances at auction or from third parties, and CRC purchased $20.7 million in offsets generated under sustainable forestry and other reduction protocols. The following table illustrates how CRC’s Cap-and-Trade expenditures advance the state’s GHG mitigation goals. CRC’s Cap-and-Trade expenditures, if invested by CARB in the manner noted in its Annual Report, would translate into the following GHG reduction investments.

Illustrative CRC Funding of State GHG Reduction Investments through California’s Cap-and-Trade Program (2013-2019)

Project Investment CARB GHG Reduction Fund Allocation1 CRC GHG Investment Amount2 ($MM)
CRC Direct Sustainable Forestry Offsets 20.7
High-Speed Rail Project 21.8% 46.2
Low Carbon Transportation 18.1% 38.3
Affordable Housing and Sustainable Communities 15.4% 32.7
Transit and Intercity Rail Capital 8.9% 18.8
Sustainable Forests (excluding CRC’s direct offsets) 5.1% 10.8
Community Air Protection 6.9% 14.7
Low Carbon Transit Operations 4.0% 8.4
Low-income Weatherization 1.7% 3.7
Dairy Methane 2.4% 5.1
Agricultural Replacement Measures 2.1% 4.5
Transformative Climate Communities 2.0% 4.3
Fire Prevention 1.6% 3.3
Waste Diversion 1.3% 2.8
Urban Greening 1.3% 2.7
Others (e.g., wildfire prevention, wetlands restoration, climate adaptation) 7.3% 15.4
Total $232.5

1California Air Resources Board, Greenhouse Gas Reduction Fund Appropriations by Fiscal Year (as of October 15, 2019), reflecting totals for FY 2013-14 through 2019-20.

2This column includes the $20.7 million incurred to purchase sustainable forestry offsets and applies CARB’s investment allocation for statewide GHG mitigation to the $211.8 million CRC incurred to purchase GHG allowances from 2013 through 2019 to illustrate the types of projects and levels of funding from CRC’s participation in the Cap-and-Trade program.