Long Beach-based California Resources Corp., the state’s largest oil and natural gas producer, has purchased an Irvine-based pipeline company and plans a data center next to its Kern County oilfield operations.
California Resources, or CRC, announced earlier this month that it has acquired Crimson Midstream Holdings from Kansas City-based CorEnergy Infrastructure Trust for a cash price of $63 million.
Crimson operates a 2,000-mile-long pipeline network within California with a combined transportation capacity of 400,000 barrels of oil per day, the announcement said. The network includes four separate pipelines and related infrastructure.
Oil and gas transportation options
In remarks to investment analysts during CRC’s second quarter earnings conference call, Chief Executive Francisco Leon said major portions of Crimson’s pipeline network “run through the heart of our producing fields.”
The transaction connects CRC’s oil and natural gas production directly to the state’s highest value markets, he said.
Before the deal can be finalized, CRC will have to obtain approval from the California Public Utilities Commission, since Crimson is classified as a common carrier network subject to the commission’s jurisdiction. The commission’s final approval is expected within a few weeks, Leon said.
Besides the Crimson pipeline network’s geographic convenience, the acquisition gives CRC options to transport its oil and natural gas that avoid pipelines caught up in marketing disputes that can drive up transportation costs, he said.
“We have taken proactive strategic steps to broaden our transportation and marketing options and improve the reliability of our market access through new agreements and partnerships,” Leon said in the conference call with investment analysts.
He also called the acquisition a logical step in CRC’s growth trajectory, following last year’s purchase of Berry Corp. that turned CRC into the state’s largest oil producer.
“The expansion of our midstream infrastructure and marketing capabilities was a logical step to bolster our long-term strategy,” Leon said. “Greater control of critical infrastructure will provide options to enhance the commercial capabilities of our business and stability of our operations.”
Data center development
In the call, Leon also unveiled CRC’s entry into one of the hottest markets: building data centers. CRC has partnered with Calgary, Alberta-based Beacon Data Centers to jointly develop a data center next to its Elk Hills Oil Field operations in western Kern County, Leon said.
The project, dubbed the Golden Valley Technology Hub, would span 100 acres and would involve the use of 275 megawatts of electricity. Much, if not all, of that energy would be drawn from an existing cogeneration power plant at the company’s Elk Hills Oil Field site that has been used to power the oil wells, drilling equipment and other oil-related infrastructure. The data center will also use a closed-loop cooling system to absorb heat from computer servers. Closed-loop systems recirculate the liquid coolant with minimal evaporation, reducing the overall need to draw water from outside sources.
“The proposed behind-the-meter design is expected to minimize power and water usage,” Leon said.
As the data center development is still in its preliminary stages, details on the cost of the project and the timeline were not available.
But Beacon Data Centers would fund the early-stage development of the data center, he said.
As for the timeline, CRC has submitted its application for a conditional use permit and that the company expects the environmental review process to start later this year, he said.
In a statement to the Business Journal, CRC said the project would need to complete applicable permitting and environmental review requirements, secure necessary approvals and reach key commercial and development milestones before construction could begin.
The company has taken a low-key approach to the project up until now.
“We’re very comfortable starting with project development and not with the headline, because that’s ultimately what gets projects done in California,” Leon said as part of his response to an investment analyst’s question about how the project came about and next steps.
Such developments have been a source of controversy for many communities nationwide. In Los Angeles County, Monterey Park this past June enacted a ban on new data center development and public officials in other communities are facing similar pressures from many of their residents.
During the call, Leon also mentioned another major milestone the company notched during the second quarter.
In late May, CRC achieved its first carbon dioxide injection into its Carbon TerraVault underground storage reservoir at its Elk Hills oil field operations – essentially putting the CO2 back where it came from. This also marked the first revenue of approximately $1 million from the Carbon Terra Vault operation since it launched as a partnership with Toronto-based Brookfield Renewable Partners four years ago. That’s against $9 million in expenses during the second quarter.
“This places us on an esteemed list of commercial-scale sequestration operators globally,” Leon said.
