Los Angeles — Spiritus, a direct air capture startup originally established to remove carbon dioxide (CO2) from the atmosphere for underground storage, is shifting its business model to selling captured CO2 for enhanced oil recovery (EOR). The move reflects broader challenges facing the carbon removal sector amid reduced federal support and declining corporate demand for carbon credits in the United States.
Based in Los Alamos, New Mexico, Spiritus has signed letters of intent with three oil and gas producers across the Rockies, Midwest, and Gulf Coast regions to supply over three million tonnes of CO2 annually. This volume of CO2 is anticipated to boost oil production by more than 70 million barrels through EOR, a method that injects CO2 into mature oil wells to extract residual oil.
Spiritus CEO Charles Cadieu acknowledged the difficult market conditions for carbon removal technologies, noting that commercial opportunity is now more attractive in the EOR sector. “There’s no way to get around it. The removal market is challenged right now,” he said, emphasizing that the company’s strategy is to follow where economic demand exists. Cadieu declined to disclose the identities of the oil and gas partners or the pricing arrangements but stated the CO2 would be competitively priced against existing supplies.
The transition comes amid a turbulent period for many direct air capture companies, which seek to commercialize the still largely experimental technology that captures CO2 directly from ambient air through mechanical and chemical processes. Last year, the U.S. Energy Department canceled funding for about half of the 21 direct air capture hub projects initiated under the Biden administration, a decision inherited from the previous Trump administration. Meanwhile, Microsoft, once the sector’s largest corporate buyer of carbon removal credits, slashed its purchases by roughly 80% this year, reallocating resources toward artificial intelligence development.
These setbacks have forced businesses reliant on federal funding and major corporate buyers to reconsider their strategies. Other firms have responded differently: startup Noya ceased operations entirely, CarbonCapture Inc’s True North Carbon moved its pilot project to Canada, and European companies have consolidated amid shifting market dynamics. Some industry observers highlight a growing perception of the U.S. as an uncertain environment for deploying carbon removal, prompting companies to explore opportunities in regions with stronger policy frameworks and regulatory clarity.
Spiritus currently operates a pilot facility near Santa Fe, New Mexico, but has yet to deliver carbon removal credits commercially. The company aims to bring its first commercial plant online within two years, located at one of its oil and gas partners’ sites.
The pivot to using CO2 for EOR has drawn criticism from some researchers who argue it delays the transition away from fossil fuels by extending the operational life of oil fields. Cadieu acknowledged these concerns but maintained that Spiritus does not share the view that fossil fuel use should end immediately. Other direct air capture companies, such as Climeworks AG, have publicly stated they will not sell captured CO2 for EOR, underscoring a divide within the industry over commercial applications.
Amid ongoing debates, scientists stress that meeting global climate targets will require the removal of several billion tonnes of CO2 annually by mid-century—a scale the industry has yet to achieve. In this context, Spiritus and similar companies are navigating a complex terrain of economic viability, technological challenge, and environmental responsibility.