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INCOME TAXES | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Net income before income taxes, for all periods presented, was generated from domestic operations. The following table summarizes components of our income tax provision:
| Year ended December 31,
| 2024 |  | 2023 |  | 2022
| (in millions)
Federal | $ | 42 |  |  | $ | 146 |  |  | $ | 10 |
State and local | 27 |  |  | 3 |  |  | 1 |
Current | 69 |  |  | 149 |  |  | 11 |
Federal | $ | 51 |  |  | $ | (12) |  |  | $ | 141 |
State and local | 20 |  |  | 47 |  |  | 85 |
Deferred tax provision | 71 |  |  | 35 |  |  | 226 |
Total income tax provision | $ | 140 |  |  | $ | 184 |  |  | $ | 237 |
Income taxes paid by jurisdiction are as follows:
| Year ended December 31,
| 2024 |  | 2023
| (in millions)
Federal | $ | 73 |  |  | $ | 120 |
State and local | 32 |  | 1
Total taxes paid | $ | 105 |  |  | $ | 121 |
Our effective tax rate differs from the amount computed by applying the U.S. federal income tax statutory rate to income before income taxes as follows:
| Year ended December 31,
| 2024 |  | 2023 |  | 2022
| Amount | Percent |  | Amount | Percent |  | Amount | Percent
U.S. federal statutory tax rate | $ | 108 |  | 21 | % |  | $ | 157 |  | 21 | % |  | $ | 160 |  | 21 | %
State and local income taxes, net of federal income tax effect(a) | 38 |  | 7 |  |  | 40 |  | 5 |  |  | 68 |  | 9 |
Tax credits |  |  |  |  |  |  |  |
Marginal well credit | (12) |  | (2) |  |  | — |  | — |  |  | (8) |  | (1) |
Other tax credit | — |  | — |  |  | (1) |  | — |  |  | (5) |  | (1) |
Nontaxable or nondeductible items | 9 |  | 2 |  |  | 6 |  | 1 |  |  | 4 |  | 1 |
Change in valuation allowances | — |  | — |  |  | (17) |  | (2) |  |  | 17 |  | 2 |
Other adjustments | (3) |  | (1) |  |  | (1) |  | — |  |  | 1 |  | — |
Effective tax rate | $ | 140 |  | 27 | % |  | $ | 184 |  | 25 | % |  | $ | 237 |  | 31 | %
(a)State and local income taxes are predominately in California. During the year ended December 31, 2023, we released a valuation allowance for a portion of the tax loss on the sale of our Lost Hills assets after we jointly agreed to amend the original tax treatment with the buyer. See Note 9 Divestitures and Acquisitions for more information on the Lost Hills transaction. This valuation allowance was initially recorded during the year ended December 31, 2022 for the realizability of a capital loss on the sale of Lost Hills, the deductibility of which was limited. Changes related to the valuation allowance related to state taxes is included as state and local income taxes, net of federal income tax effect in our rate reconciliation above. The tax effects of temporary differences resulting in deferred income tax assets and liabilities at December 31, 2024 and 2023 were as follows:
| 2024 |  | 2023
| Deferred Tax Assets |  | Deferred Tax Liabilities |  | Deferred Tax Assets |  | Deferred Tax Liabilities
| (in millions)
Property, plant and equipment | $ | — |  |  | $ | (700) |  |  | $ | 19 |  |  | $ | (286) |
Deferred compensation and benefits | 66 |  |  | — |  |  | 40 |  |  | — |
Asset retirement obligations | 342 |  |  | — |  |  | 157 |  |  | — |
Interest expense carryforward | 158 |  |  | — |  |  | 161 |  |  | — |
All other | 169 |  |  | (75) |  |  | 96 |  |  | (55) |
Total deferred taxes | $ | 735 |  |  | $ | (775) |  |  | $ | 473 |  |  | $ | (341) |
We expect to realize our deferred tax assets through future operating income and reversal of taxable temporary differences. The amount of deferred tax assets considered realizable is not assured and could be adjusted if estimates change. Changes in our deferred tax assets and liabilities during 2024 primarily relates to the acquisition of Aera as described in Note 2 Aera Merger. We recorded a net deferred tax liability of $101 million in purchase accounting related to the Aera acquisition and a deferred tax liability of $1 million was recorded to accumulated other comprehensive income related to our pension and other postretirement benefit plans. Net Operating Loss and Tax Credit Carryforwards As of December 31, 2024, our U.S. federal net operating loss carryforwards was $29 million, which begins to expire in 2037. Our carryforward for disallowed interest expense of $753 million does not expire. As of December 31, 2024, our California net operating loss carryforwards was $2 billion, which begins to expire in 2029, and our tax credit carryforwards were $21 million, which begin to expire in 2041. California has suspended the use of net operating loss carryforwards for tax years 2024 through 2026 and also limited the utilization of tax credits up to $5 million per year for the same period. Our ability to utilize a portion of our net operating loss, tax credit and interest expense carryforwards is subject to an annual limitation. As a result, we recognized a deferred tax asset of $2 million for U.S. federal net operating loss carryforwards (that do not expire) and $24 million for California net operating loss carryforwards. Additionally, we recognized a deferred tax asset for $7 million of our California tax credit carryforwards, included in the all other category in the deferred tax table above. We expect our remaining carryforwards will expire unused. Other We did not record a liability for unrecognized tax benefits as of December 31, 2024 and 2023. We remain subject to audit by the Internal Revenue Service for calendar years 2021 through 2023 and by California for calendar years 2020 through 2023.

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