Oxy recognizes the importance of the issue of climate change and the related scientific, technical, economic and policy assessments ongoing in many countries and in international organizations. Efforts to mitigate or adapt to climate change, while maintaining reliable, cost-effective energy supplies, present both challenges and opportunities for Oxy. Our longstanding environmental policy is to seek continuous improvement in resource recovery, conservation, pollution prevention and energy efficiency. Oxy’s management of GHG emissions under this policy is consistent with the company’s commitment to be an efficient, low-cost producer of oil and gas and chemicals. In 2007, Oxy established a committee of senior managers and employees, led by a company vice president, to further integrate climate change issues into our business decision-making, with direction from the Board of Directors’ Environmental, Health and Safety Committee.

Oxy is engaged in developing GHG emission estimates for reporting under federal, state and voluntary programs, evaluating proposed regulations and assessing carbon credit trading markets and voluntary initiatives, and we discuss these matters with stakeholders and the public. Oxy encourages efforts to increase the understanding of human influences on climate, and we support the development of practical GHG emissions mitigation technology.

Regulation of GHGs

There is an ongoing effort by the scientific community to assess and quantify the effects of climate change and the potential human influences on climate. Notwithstanding the status of these efforts, various U.S. and foreign jurisdictions, including the U.S. federal government and the states of California and New Mexico, have adopted legislation, regulations or policies that seek to control or reduce the production, use or emissions of GHGs, to control or reduce the production or consumption of fossil fuels, and to increase the use of renewable or alternative energy sources. Such measures are also pending in other jurisdictions. Federal and state permitting programs have been initiated to regulate GHG emissions sources. California and New Mexico have adopted regulations for statewide GHG cap-and-trade programs. Several challenges are pending over the legality, scope and timing of GHG-related regulations.

We believe any approach to regulating GHG emissions should be holistic, and we do not support efforts that regulate some sectors while omitting others. Patchwork programs that focus on a particular state or region have inherent geographic restrictions in their ability to affect any human-induced climate change, may conflict with one another, and are necessarily cost-inefficient. The need for mandatory GHG emission controls in the U.S. is a decision that should be based on informed science and determined by Congress, after due consideration of the social and economic costs and consequences.

Carbon Dioxide Sequestration

Notwithstanding the uncertainty about GHG regulation, Oxy continues to pursue measures to manage and control GHG emissions — while continuing to expand our operations — and to promote the viability of carbon sequestration in oil and gas reservoirs. New and existing technology has the potential to significantly reduce GHG emissions if it can be commercialized at a large scale. Underground injection of CO₂, especially as practiced during EOR, is a ready and proven method for the large-scale geologic sequestration of CO₂ that otherwise would be emitted to the atmosphere. Oxy is an industry leader in CO₂ injection for EOR. We operate more than 25 active CO₂ flood projects, injecting more than 500 billion cubic feet of CO₂ per year, or over 25 million metric tons in 2010. Approximately 40 to 45 percent of this amount is newly sourced from Oxy and other commercial suppliers, and the remainder is recycled from our producing wells. Ultimately, essentially all injected CO₂ becomes sequestered in the oil and gas reservoir.

Production at many other mature oilfields could be increased with CO₂ EOR if additional economical sources of CO₂ become available to supplement natural sources. A good example is the Century Plant, a new West Texas hydrocarbon gas processing plant where CO₂ that otherwise would have been emitted is instead being captured for injection in Oxy’s EOR operations. Oxy is actively pursuing similar projects with other parties.

CO₂ EOR provides a real-world demonstration of the commercial and technical viability of geologic storage in oil and gas reservoirs. The continuing use of natural sources of CO₂ in EOR is essential to support investment in and expansion of infrastructure that can be used in the future to transport and inject CO₂ from man-made sources.

Methane Capture

In our oil and gas business, we are pursuing initiatives to bring natural gas (methane) to market rather than flaring or emitting it to the atmosphere. Methane is a clean-burning fossil fuel and has 40 percent lower GHG emissions relative to coal. OxyChem’s operations make extensive use of natural gas as an energy source. Our ongoing efforts to capture methane emissions under the EPA’s voluntary Natural Gas STAR Program have helped keep our rate of growth of estimated GHG emissions from oil and gas operations well below our rate of increased production. Oxy, recognized by the EPA in 2008 as Production Partner of the Year and in 2009 for Continuing Excellence, has implemented a broad spectrum of projects that reduced cumulative estimated methane emissions by approximately 20 billion cubic feet from 1990 through 2009.

Cogeneration

More than 25 years ago, Oxy began building several highly efficient cogeneration plants for electrical power and steam to supply our oil and gas and chemical operations. Cogeneration, or combined heat and power (CHP), significantly increases electrical power generation efficiency over traditional methods while reducing CO₂ emissions by as much as 66 percent. Oxy’s CHP facilities use natural gas and hydrogen as fuel. The GHG emission-reduction benefits from Oxy’s CHP facilities are substantial. Based upon typical assumptions, Oxy’s CHP facilities at full utilization are estimated to reduce GHG emissions by 4 million metric tons per year compared to the case where equivalent power is supplied from the U.S. national electrical grid.

For additional information about how Oxy is assisting in the development of reasonable GHG regulations, please see our Collaborative Leadership story located on the HES Performance Overview page.