Getting the Legals Right Grant Parker, Partner Carbon Farming Conference 23 October 2012

1. Getting the Legals Right • Grant Parker, Partner Carbon Farming Conference 23 October 2012

2. Overview • What type of Carbon Farming Initiative project? • sequestration or emissions avoidance? • Kyoto (compliance) or non-Kyoto (voluntary)? • Is the methodology approved? • How should the project be structured? • Getting the contracts right • What constraints will the project place on future use of the land? • Conclusion

3. What type of CFI project? • Emissions avoidance project or sequestration project • Kyoto project or non-Kyoto project • Kyoto project credits usable in Australian compliance market and potentially in international compliance markets, e.g. European Union from 2018 • Non-Kyoto project credits usable in Australian voluntary market and potentially in international voluntary markets

4. Is the methodology approved? • Methodologies must be approved by Minister, which requires compliance with offsets integrity standards • additionality, i.e. on ‘positive list’ • measurable • verifiable • supported by peer-reviewed scientific results • deduction for ‘leakage’ caused outside project • sequestration project to take account of significant cyclical variations in carbon sequestered over 100 years • conservative

5. How should the project be structured? • Clean Energy Regulator cannot declare project eligible unless • methodology • applicant is project proponent • applicant is recognised offsets entity • for sequestration projects • certain types of Crown land require relevant Minister’s consent • each person holding an ‘eligible interest’ (being a legal interest in the land) has consented, e.g. lessor, mortgagor • project is not an ‘excluded offsets project’, i.e. not on ‘negative list’

6. How should the project be structured? • Credits can only be issued to person who is both a recognised offsets entity and the project proponent • Project proponent for sequestration project must hold carbon sequestration right for project area • Project proponent responsible for submitting offsets report to Regulator for each reporting period

7. How should the project be structured? • Marketability of volume of credits likely to be generated will affect whether aggregation required • Australian Financial Services Licence for dealing in credits unless doing on own behalf

8. Getting the contracts right • Allocation of returns, responsibilities and risks • credits only issued at end of reporting period • upfront payment by project developer? • automatic sale into market or ability to hold? • what if credits generated are greater or lesser than anticipated? • responsibility for compliance with CFI legislation obligations allocated • project costs addressed, e.g. auditing • appropriate insurances considered and obtained

9. Constraints on future use of land • For sequestration projects • registration or notation of project on land title governed by differing legislation in States and Territories • carbon maintenance obligation may be registered on title in limited circumstances • voluntary withdrawal requires handback of credits unissued or their equivalent • consider how project with affect marketability of land on sale

10. Conclusion • Undertaking a CFI project requires careful consideration • A reasonable degree of knowledge is required to prepare or review a proposal for a project • A project will not proceed if there is not an approved methodology • Consider the marketability of the credits generated • Get the project structure right at the outset

11. Conclusion • Get the right contracts prepared and reviewed • Make sure the project doesn’t adversely affect the value of your asset

12. Thank you