Sandridge Exploration & Production LLC v. Oxy USA Inc.

The federal district court for the Southern District Court of Texas granted a motion to dismiss a case concerning a dispute between two oil and natural gas companies over the ownership of carbon sequestration credits. Sandridge Exploration alleged that Oxy USA Inc. breached the parties’ contract by not capturing carbon dioxide for enhanced oil recovery and sharing 75% of the associated Internal Revenue Code Section 45Q carbon credit with them. This carbon credit allows taxpayers to claim a sequestration credit for carbon captured at a qualified facility. The district court granted the defendant’s motion to dismiss, finding that the contract did not obligate Oxy to use the captured carbon for enhanced oil recovery.