The megalaw that President Donald Trump signed last month includes a raft of provisions to pump up the fossil fuel industry. But one driller with ties to Trump could get an outsize boost: Occidental Petroleum.
That’s because the law increased tax incentives for using captured carbon dioxide to squeeze more crude out of sputtering oil wells or to create low-carbon products like sustainable aviation fuel. When it comes to capturing carbon and using it to extract more oil, Occidental is the industry leader, according to energy analysts and drilling data.
“Since they are the pacesetter, they are the ones best positioned to take advantage of an enhanced tax credit,” Skip York, an energy fellow at Rice University’s Baker Institute think tank, said of the company.
The megalaw’s increased subsidies for Occidental and other drillers come amid a broader push by Trump and congressional Republicans to rebalance U.S. energy markets to favor fossil fuels over renewable sources of power. That has included easing environmental permitting bottlenecks for drillers while adding red tape for wind and solar projects. Trump’s One Big Beautiful Bill Act also includes a $1 billion fund to subsidize oil, gas and coal developments — a generous provision that surprised even some of the GOP lawmakers who voted for it.
The expanded carbon capture subsidy was one of the only provisions intended to limit climate change that survived in the Trump-led rewrite of the tax code. But the megalaw has shifted the focus of the subsidy from reducing carbon emissions toward encouraging additional production of oil, raising questions about whether the changes could fuel further warming. The tax tweaks could also promote the development of environmentally friendly CO2-based goods, such as green concrete.
Either way, Occidental stands to benefit due to its sprawling network of carbon dioxide processing facilities, pipelines and injection wells. The company already uses that system to squeeze additional crude from wells that have seen declining oil production.
It operated over 3,200 CO2 injection wells in 2022 — the most in the U.S. — according to a report published last year by the industry consulting firm Advanced Resources International. That represented 37 percent of all injection wells, or four times as many as its closest competitor, Kinder Morgan. Injection wells are used to pump carbon dioxide into underground oil fields, in order to force the crude to the surface through nearby production wells.
Occidental has also made several investments in carbon reuse startups and is the first oil company to begin building a direct air capture facility to pull CO2 from the sky. Those investments give the Houston-based driller other ways to cash in on the tax code revisions.
Prior to the megalaw’s passage, companies could collect subsidies of $60, $85, $130 or $180 per metric ton of CO2, depending on whether the carbon was captured from an industrial facility or the atmosphere, and whether the gas was used or stored. The lowest payments went for climate pollution scrubbed from smokestacks and converted into carbon-based products or stored via enhanced oil recovery injection wells. The highest were for tons that were removed from the sky by direct air capture plants, which use absorbent materials to suck CO2 from the air, and permanently store the gas in saline aquifers or other geologic formations.
Trump’s tax law increased and simplified the climate subsidy for new projects. Now all carbon trapped by industrial emitters is worth $85 per ton and all CO2 extracted by direct air capture plants is worth $180 — regardless of whether it’s injected into depleted oil fields, stored in rock or used to make carbon-based products.
How the megabill benefits Occidental
The changes mean that any enhanced oil recovery projects that have started up since Trump enacted the megalaw will generate at least $25 more for each ton of captured carbon than they would have before the bill was signed.
That’s good news for Occidental and other companies that specialize in enhanced oil recovery operations. Whether the climate will also benefit from the change is less clear, experts say.
“Valuing the [enhanced oil recovery] equally with storage could divert more investment into those companies doing EOR and less from the companies doing pure storage,” said Anna Littlefield, a former Occidental geologist who is now the carbon capture program manager at the Colorado School of Mines. “In the end, that could equate to less CO2 stored.”
Occidental didn’t respond to questions about how the tax tweak will affect the climate, the company’s investment strategy, and the extent of its lobbying on the provision, known as 45Q because of its place in the tax code.
“We are pleased that President Trump and Congress preserved and expanded 45Q to encourage the development of direct air capture technology that will secure US energy independence and grow American industry,” Occidental spokesperson William Fitzgerald said in an email. “Just as the shale revolution transformed US production, using CO2 from DAC for EOR is the best proven technology available to protect America’s energy security and lead to US energy dominance.”
The 45Q tax credit is a historically bipartisan carbon capture subsidy that was established in 2008 by then-President George W. Bush. This is the third time it’s been expanded. The other instances occurred during Trump’s first term and during the Biden administration.
The latest changes could lead Occidental to pursue more enhanced oil recovery developments, according to Baker Institute’s York, who is also the chief energy strategist at the consulting firm Turner, Mason & Co.
“The places that were economic at $60 a ton, they can get bigger,” he said, referring to oil fields that already have CO2 pipelines and other infrastructure that can be easily expanded.
The tax tweak also “opens up those places where the economics weren’t attractive at 60 [dollars per ton] but are attractive at 85,” York said. The main question is “how much bigger is that opportunity set for them now than it was?”
The subsidy boost for alternate uses of captured carbon would also give Occidental new ways to profit from Stratos, according to the Carbon Capture Coalition, an advocacy group that includes the oil company. The facility is set to become the world’s largest direct air capture plant when it begins operations in West Texas later this year.
When Occidental began building Stratos in 2023, the company expected that the only way it could collect $180 for each ton of CO2 the plant captured was if it stored the gas in a saline aquifer. But because the massive project didn’t come online before the megalaw’s passage, it will be able to generate the same level of subsidies if the company decides to instead divert the CO2 into its Permian Basin oil fields.
“It gives them additional optionality at the outset,” said Jessie Stolark, executive director of the Carbon Capture Coalition, referring to the 500,000 tons of CO2 per year that Stratos is designed to collect. What Occidental does with all that climate pollution “is just going to come down to project economics,” she said.
Occidental CEO Vicki Hollub told financial analysts in May that the company views direct air capture plants primarily as components of its petroleum production efforts.
“We’re building our DAC business toward a business that will use CO2 for enhanced oil recovery to get more oil out of the existing reservoirs that we have here in the United States to help extend our energy independence,” Hollub said during an earnings call. Carbon removal “credits will continue, I believe, to help us build the bridge between now and making the EOR realizations happen over time.”
Oil lobbying preceded tax changes
The tax tweak came after Occidental and other drillers unleashed a wave of political spending to help Republican candidates in the 2024 elections.
It also followed a lobbying push by small oil producers in the home state of Senate Energy and Natural Resources Chair John Barrasso (R-Wyo.), according to the Carbon Capture Coalition, which was previously known as the National Enhanced Oil Recovery Initiative. The coalition said it urged lawmakers to preserve the climate subsidy on behalf of its members, which include environmental groups as well as oil companies.
During the 2024 presidential race, Hollub was one of roughly two dozen oil CEOs who last April attended a dinner at Trump’s Mar-a-Lago resort, where he promised to slash environmental rules in exchange for $1 billion in contributions from the industry. The following month, Hollub co-hosted a fundraiser for Trump where she planned to press him to maintain tax credits for carbon capture, Reuters reported at the time. It is unclear whether she made the request.
After Trump won, Occidental gave $1 million to his inaugural committee, Federal Election Commission data shows. Chevron was the only oil company that gave more to the committee than Occidental.
The company also gave over $7 million to groups supporting Republican congressional candidates in the 2024 cycle, according to donation records analyzed by the transparency group OpenSecrets. Occidental didn’t directly donate to Democratic groups in 2023 or last year, although its political action committee gave $32,500 to Democratic candidates over the same period — about 14 percent of the PAC’s total giving during that time.
After returning to office, Trump followed through on his deregulatory vow — even though the oil industry only managed to raise about a quarter of a billion dollars for his campaign. The White House didn’t respond to a request for comment.
Although the president and Congress rewrote the tax code in a way that favors the oil industry, the changes could still have positive environmental effects, according to some analysts.
“Whether you like the place that we’re in politically or not, I can see upsides to the U.S. doing a really good job at figuring out carbon capture technology and learning how to drive the cost of that down over time,” said Sheila Olmstead, former economic adviser to then-President Barack Obama who is now an environmental policy professor at Cornell University. “Think of it as a small silver lining, rather than the best outcome.”
Timothy Cama contributed reporting.
This story also appears in Energywire.
