Corporate MovesNovember 9, 2023

BlackRock to Develop World's Largest Direct Air Capture Plant With Occidental

The asset manager is investing $550 million in a joint venture with the oil and gas giant’s 1PointFive subsidiary.

Reported by Michael Katz

Asset management giant BlackRock Inc. is investing $550 million in a joint venture with a subsidiary of Occidental Petroleum Corp. to build what the companies identify as the world’s largest facility for direct air capture. The companies declined to reveal the joint venture’s ownership split.

Direct air capture technologies use chemicals to extract carbon dioxide directly from the atmosphere and can be performed at any location, unlike carbon capture, which typically occurs at the point of emission, such as at a steel mill. Using DAC, carbon dioxide can be permanently stored in deep geological formations or used for various applications.

Construction of the facility, called Stratos, began in late April about 30 miles northwest of Odessa, Texas, in the Permian Basin, and is now approximately 30% complete, according to the companies. The plant, intended to capture 500,000 tons of carbon dioxide per year, is expected to be operational by the middle of 2025.

“STRATOS represents an incredible investment opportunity for BlackRock’s clients to invest in this unique energy infrastructure project,” BlackRock Chairman and CEO Larry Fink said in a statement, adding that the joint venture “underscores the critical role of American energy companies in climate technology innovation.”

BlackRock formed the joint venture through a fund managed by its diversified infrastructure business with Occidental subsidiary 1PointFive Inc., a carbon capture utilization and sequestration company. According to 1PointFive, it aims to open more than 100 DAC plants worldwide by 2035.

The Occidental subsidiary also announced the new facility will be able to store carbon dioxide in saline formations, creating a carbon removal credit that businesses can buy. The firm has applied for a permit for geologic sequestration of carbon and stated that, once that is approved, the sequestration operations will be performed under an EPA-approved monitoring, reporting and verification program.

“We are excited to partner with BlackRock on this transformative facility that will provide a solution to help the world reach net-zero,” Occidental President and CEO Vicki Hollub said in a statement. “This joint venture demonstrates that Direct Air Capture is becoming an investable technology, and BlackRock’s commitment in STRATOS underscores its importance and potential for the world.”

The statement about the joint venture included the announcement that Houston-based 1PointFive has signed CO₂ removal credit purchase agreements with customers, including Amazon, Airbus, All Nippon Airways, TD Bank Group, the Houston Astros and the Houston Texans.

In August, 1PointFive received a grant from the U.S. Department of Energy’s Office of Clean Energy Demonstrations for the development of another DAC facility, located outside of Corpus Christi, Texas, to be adapted from the design for Stratos. The hub is intended to be capable of removing up to 1 million metric tons of carbon dioxide per year.

Since it announced its decision in early 2020 to make sustainability the focus of its entire investment strategy, BlackRock has been on the receiving end of criticism both for investing in oil and gas companies like Occidental and for not investing in them.

Last year, a group of 19 Republican state attorneys general sent a scathing letter to BlackRock accusing the firm of using state pension fund assets to “force the phase-out of fossil fuels, increase energy prices, drive inflation and weaken the national security of the United States.”

The letter was followed by a group of states, mostly those with Republican governors or attorneys general, enacting laws and policies aimed at punishing BlackRock and other companies with sustainable investing policies, including a 2021 law in Occidental’s home state of Texas that requires the state’s retirement systems and pension funds to divest from any company that refuses to invest in fossil fuels.

In a response to the letter from state attorneys general—a response BlackRock has since cited multiple times—it stated that the “money we manage is not our own. It belongs to our clients, many of whom make their own asset allocation and portfolio construction decisions.” The firm added that “many of our clients are choosing to invest in a mix of traditional energy companies, natural gas infrastructure, renewables and new decarbonization technologies because of the investment opportunities stemming from their crucial role in the economy.”

However, it was this response that spurred New York City’s comptroller, Brad Lander, to send a letter to BlackRock, accusing it of bailing on its commitment to fight climate change.

“BlackRock has repeatedly and rightly recognized climate change as an investment risk,” Lander wrote. “Unfortunately, despite these repeated proclamations, in its September 6 response to the attorneys general, BlackRock now abdicates responsibility for driving net zero alignment in its own portfolio by saying that it does not ask companies to set specific emissions targets.”