Exxon’s new project will capture carbon to drill for more oil

Exxon sold carbon capture and storage as a climate solution — but under new Trump tax credits, public funds will be directed toward more oil extraction with less regulation.

Jul 25, 2025

A newly operating carbon capture facility in Louisiana that was previously billed as a climate solution by ExxonMobil will now be used to drill for more oil, a partner in the project announced last week.

Exxon said in 2022 that it would transport and permanently store carbon captured from the world’s largest ammonia-producing facility, owned by agriculture fertilizer company CF Industries, in Donaldsonville, Louisiana. But after Congress this month increased tax incentives for companies that use captured carbon to extract more oil from wells, CF Industries said the project would be used for that purpose until it receives permits for “dedicated permanent storage.” President and CEO Tony Will cited the “valuable” tax credits the venture would generate in the announcement.

Climate advocates and policy experts say enhanced oil recovery leads to more fossil fuel production, increasing climate pollution. They fear the boost in tax credits will mean more polluting projects across the country, benefitting oil giants at the expense of taxpayers, as carbon capture ventures have been unprofitable without public subsidies. And they say the public has been misled about the purpose of carbon capture.

“Injecting CO2 into an oil and gas well for enhanced oil recovery is not a form of storage,” said Jane Patton, fossil economy campaign manager at the Center for International Environmental Law and a lifelong Louisiana resident. “Oil and gas wells are designed to pull things up from the ground, so there is absolutely no incentive, there is no requirement, there is no monitoring” to ensure carbon dioxide stays there.

Who benefits from enhanced oil recovery

The subsidy increase for enhanced oil recovery is part of a change to 45Q, a tax incentive established to boost investments in carbon capture and storage (CCS) — a set of technologies used to sequester carbon dioxide — for the stated purpose of reducing emissions. The new bill will put credits for enhanced oil recovery on par with credits for permanent storage, both of which were expanded under the Biden administration.

Exxon intensely lobbied Congress for years to pour public funds into carbon capture. The oil giant spent millions advertising the idea that the technology would allow society to continue burning fossil fuels while still significantly reducing greenhouse gas emissions across the globe. But internal company documents show that Exxon and other oil majors knew that capturing carbon was difficult, expensive, and “limited” in its ability to fight climate change.

Still, with the new credits, Exxon and other oil and gas companies got the public subsidies they wanted — but instead of climate solutions, the public will be funding more fossil fuel extraction, just as regulations to curb emissions from oil and gas plants and rules for their permitting are clawed back.

“It becomes a revenue stream, but then your incentive is not to reduce emissions or even reduce production. It's to do as much of the thing that was creating CO2, and functionally, sell as much of that CO2 to the government,” said Steven Feit, a senior attorney and research manager at the Center for International Environmental Law.

Feit said the enhanced carbon capture credits in Trump’s bill — which delivered a wishlist to fossil fuel companies aimed at eviscerating climate policies and undercutting clean energy — is indicative of the purpose CCS has always served. “This should leave no doubt about what CCS is, who it benefits, and what its role is,” he said.

Exxon’s new carbon capture venture

Exxon had promised its carbon capture endeavor in Louisiana could help decarbonize the global economy.

But drilling for more oil — what the carbon captured at Donaldsonville will now be used for — means increasing carbon emissions when that oil is burned. Oil and gas wells present a compounding public health threat to communities: studies show that children living near those wells face a higher risk of a rare form of leukemia, for example.

“Now, these CCS projects will be used to attempt to pump out more oil and gas from wells that are either unproductive or inactive — creating more emissions and environmental and public health damage to the people leaving here, all while turning Louisiana into an active dumping ground for industrial waste,” said Jackson Voss, climate policy coordinator at the Louisiana-based consumer advocacy organization Alliance for Affordable Energy.

The Donaldsonville Complex, the biggest industrial polluter of point-source emissions in the country, is known to many locals for spewing cancer-causing toxins on the nearby majority-Black community, including an elementary school just a mile away, according to recent reporting by The Lens.

But the partnership has allowed CF Industries to market “blue ammonia,” a product supposedly involving less carbon emissions, while expanding its production capacity in the region.

Exxon and CF Industries did not respond to requests for comment about enhanced oil recovery or the new venture.

Initially, the captured carbon was slated to be stored permanently in Louisiana; the company now says Exxon will transport it to a facility in Texas once it obtains the required permits, which it has applied for.

Anika Juhn, an energy data analyst at the independent think tank Institute for Energy Economics and Financial Analysis (IEEFA), said the new tax credits for enhanced oil recovery would make managing carbon capture projects easier when multiple developers are involved, even if there are uncertainties and delays — as long as existing oil and gas wells are a readily available option to receive the CO2.

“At the end of the day, this flexibility will enable more projects to reach completion than might have been the case otherwise,” said Juhn.

More carbon capture and drilling, less oversight

While oil companies have lobbied for subsidies for more drilling, they’ve also pushed for less oversight and regulation of their projects while leaving more responsibility for their cleanup on taxpayers.

In Louisiana,186,000 oil and gas wells have been abandoned or orphaned by their operators, shifting the burden for plugging or cleanup onto the public. Louisiana now has the largest number of planned carbon storage wells in the country, thanks to growing tax incentives, but their positioning next to abandoned wells could create more problems for containing the gas.

“CCS was already premised on completely unproven claims, being stewarded by an industry that has had few qualms about cutting corners and abandoning infrastructure when it suits their bottom lines, in a state where regulatory oversight is lax to say the least,” said Voss.

In the hopes of faster approval and more relaxed oversight for carbon capture projects, the fossil fuel industry is also working to transfer permitting and regulation of wells for underground geologic carbon storage in states like Texas and Ohio.

Oil lobbyists also fought to weaken safety regulations governing carbon capture pipelines used for transport — the largest network of which is also owned by Exxon — which have caused disastrous ruptures and leaks, endangering nearby communities. Those rules were revoked by Trump, who has since cut staffers at the federal pipeline agency, where enforcement actions have starkly declined.

Shrinking regulations and agency staff at the EPA and IRS could allow companies to take even further advantage of carbon capture credits at the public’s expense, said Paul Blackburn, an attorney and energy policy advisor for the Bold Alliance, an advocacy network of communities across rural states fighting fossil fuel projects. “Without monitoring and enforcement, nothing will stop the carbon capture and oil industries from simply lying about how much carbon they capture and use in order to swindle taxpayers.”

Big Oil knew carbon capture would be used for more drilling

The fossil fuel industry has deployed captured carbon to drill for more oil since the 1970s — yet the process was hard to make profitable until it was tied to public subsidies for CCS. Today, the vast majority of existing carbon capture projects — more than 82%, according to one analysis — are used for enhanced oil recovery.

Even before the company pushed for public subsidies, Exxon knew enhanced oil recovery would comprise most of their carbon capture operations.

“EOR is consistently cited as one of the most viable early opportunities for large scale implementation of CCS,” wrote technical experts at Exxon in a 2011 journal article.

It’s unlikely that will change, especially with the additional subsidies for enhanced oil recovery in 45Q, the carbon capture tax incentive. A 2024 report by IEEFA found that, since CCS projects are so expensive and often underperform, “shifting [from enhanced oil recovery] to permanently storing CO2 to reduce global emissions makes the financial case [for CCS] much more challenging.”

“Oil produced using the 45Q tax credit is taxpayer subsidized oil, not free market oil,” said Blackburn, of the Bold Alliance.

Even some pro-fossil fuel Republicans and an oil billionaire have sought to put an end to oil companies’ carbon capture plans. In a joint letter to Congress before the bill passed, Cameron Sholty, executive director of Heartland Impact, an arm of the fossil-fuel funded front group Heartland Institute, pleaded with representatives to reject the tax incentives. “This is a subsidy for an already wealthy industry for an unproven technology that does nothing to reduce emissions,” he wrote.