Texas Tests a High-Stakes Bet on Air Capture

Occidental-backed project wins US approval as companies buy credits and critics question climate impact

11 Apr 2025

Texas is positioning itself at the centre of a new phase of the US energy industry by backing the world’s largest direct air capture project, tying carbon removal technology to continued oil production in the Permian Basin.

Stratos, a direct air capture facility being developed by 1PointFive, a subsidiary of Occidental Petroleum, has received final approval from the US Environmental Protection Agency to store carbon dioxide underground. The project is under construction in Ector County and is expected to begin operations later this year.

Once operational, the plant is designed to remove up to 500,000 tonnes of carbon dioxide a year from the atmosphere. The captured gas will be injected into underground reservoirs, both for permanent storage and for enhanced oil recovery, a process that uses carbon dioxide to extract additional crude from ageing fields.

Occidental argues the approach allows it to reduce the net emissions of its operations while extending the productive life of existing assets. “This is a transformative step in how we think about the future of energy,” said Vicki Hollub, the company’s chief executive. “We’re addressing emissions while creating new business opportunities.”

The project reflects a broader shift among US oil producers, particularly in Texas, towards carbon management technologies supported by federal policy. Tax credits expanded under the Inflation Reduction Act have significantly improved the economics of carbon capture, offering up to $180 per tonne for carbon dioxide removed directly from the air and permanently stored.

Demand is also being driven by large technology and telecoms groups seeking to meet corporate climate targets. Microsoft and AT&T have agreed to purchase carbon removal credits from Stratos, adding to a growing voluntary market for such offsets.

Critics question whether linking direct air capture to oil recovery undermines climate objectives, arguing that the additional crude produced will ultimately add to global emissions. Supporters counter that large-scale carbon removal is unlikely to develop without the capital, infrastructure and technical expertise of the oil industry.

For Texas, the project underlines how its energy economy is adapting rather than retreating. The state remains the largest oil producer in the US, but it is also emerging as a hub for carbon capture, hydrogen and other low-carbon technologies.

Stratos is being closely watched by policymakers and investors as a test case for whether carbon removal can be scaled quickly enough and cheaply enough to play a meaningful role in climate policy, while still fitting within the commercial logic of the fossil fuel industry.