Scott Gruber: Yes, just staying on the capture project at the Elk Hills gas plant, does the economic range there, $50 million to $70 million of EBITDA per ton, just consider the 45Q credits? Or does it also include LCFS? And just some color on the LCFS qualification process and outlook to tap that market as well?
Francisco Leon: Scott, yes, so the $50 million to $75 million is the range of what we see in California as being the value for pore space for storage-only projects. So whether it’s our emissions or third-party emissions, that’s the rate to pay for pore space and that’s what this is signaling. There may be a pass-through of credits. There may be cash. Those are negotiations that are happening with between the emitters and the JV. So it could be a combination of the two. I think the way to think about this project is you get 45Q, which is, by the way, an after-tax number, so you gross up that for before tax and it’s over $100 per ton. Then we’re going to look to apply for LCFS pathway because this is a project that ultimately feeds a power plant that goes to providing power for the oil field and you’re bringing lower carbon molecules and electrons in this case into the mix.
We feel it qualifies for LCFS. So we’re starting that project. We’re also paying California carbon tax for any form of emissions throughout the state. Any industrial group has to pay those carbon taxes. So we see this as being an offset by reducing the emissions and less greenhouse gas cost to CRC. And as I talked about before, there’s propane and an incremental yield. So the economics for — we have to look at the economics two ways, right? The economics for the JV are, as we discussed, this $50 to $75 per ton give you an unlevered return of between 10% to 30%. Big range, but that’s what we can disclose right now. So this project will be consistent on that basis. But on top of that, there’s a CRC economics, which brings in twofold; our participation in the JV, but also the added increases and benefits that we see beyond 45Q.
Could be credit, but definitely more propane. It’s a good thing in avoidance of carbon tax. So good returns all around anticipated. It also is a light capital per ton project. So capital for this system is on the lower end. So we see very strong returns across the board.
Scott Gruber: I appreciate all that color. And then turning to your asset sales. It looks like the P&A activity on the 90-acre parcel at Huntington Beach is going to step up to 40 wells next year. Can you give us a sense of the costs associated with that? And then just ultimately, what’s the cost to clean up the property, P&A, all the wells on the property, rezone and get it ready for sale? Do you have a better sense for costs associated with that?
Francisco Leon: Yes. Thanks for the question. So we’re making really good progress on the one acre property. So as a reminder, we have the large field Huntington Beach, which is 90 acres. That’s going to be — it’s going to take more time to abandon and monetize. But we are focused on another field that’s about five blocks away, which is one acre. We referred to it as Fort Apache. We’re making really good progress there. We’ve abandoned — we completed abandonment of the wells that we’re producing in there. So that’s done. We’re in the process of completing all the surface abandonment. We’re working with the city and regulators to get that site ready to be sold and we’re looking to call for offers here in the fourth quarter.
So what we wanted to do, to answer your question more specifically, is once we have a dollar per ag for value established by the market, that’s when we would like to talk about cost as well, right? So to give a read through, one acre abandonment to sale looks like in this part of the world, right? So we want to give an all-in kind of answer to the process that ultimately can be applied to the 90-acre property as well alongside with some time line to the bigger property. But the focus right now is on the one acre, and I feel we’re making good progress. So more to come.
Scott Gruber: Got it. Thanks for those details. Thank you.
Operator: Thank you. And our next question today comes from Noel Parks with Tuohy Brothers Investment Research. Please go ahead.
Noel Parks: Hi, good morning.
Francisco Leon: Good morning.
Noel Parks: Just a couple of things. In your discussion about the capture of the storage project in the pre-combustion capture system, you talked a little bit about it. I’m not really familiar with those systems, but I was curious about who — or if you can characterize what sort of equipment vendor you’d be using for that? Is that as a proprietary technology or something that’s widely available?
Francisco Leon: It’s, yes, available. It’s an amine technology. Let me turn it over to Omar to provide more details, but we will be doing the works. CRC will be doing the work. Go ahead, Omar.
Omar Hayat: Just a little bit more color on the technology. It’s not a new technology. It’s an amine plant that was put in place with our cryogenic gas plant several years ago, but we are repurposing, adding equipment to it to get to the point where we can execute this project. So to answer your question, this is a proof in place.
Francisco Leon: So a proven technology within our control, within our field and that’s what gets us really excited because at the end of the day, we have nationally a lot of things to prove in terms of the viability of CCS. And there’s a lot of moving parts from interstate pipelines in other places to some concerns about injecting of CO2. But what we created at Elk Hills is this opportunity to have it all in one place, take a lot of the variables away and including here the emission capture, which ultimately — we know it’s going to work. We know what the capital cost is going to be. And this gets us into a fast track to be injecting by 2025. So I’m really excited about it.
Noel Parks: Great. And interesting also to hear you talk about third-party RSG certification being something on track for next year. I was just curious which program or regime are you using for that?
Francisco Leon: I don’t know if we’re bound on some confidentiality to talk about it, but it would be one of the — there’s two big national companies, that most companies USA would be one of them.
