APPLICATION FOR PARTICIPATION IN A SOIL CARBON POOL FROM RANGELAND

MANAGEMENT AND SALES CONTRACT FOR EXCHANGE SOIL OFFSETS (XSOs)

I, Your Name, hereby apply for participation in a soil carbon pool known as Sample managed by North Dakota Farmers Union to register Exchange Soil Offsets (XSOs) with the Chicago Climate exchange (CCX) for the calendar years N/A through N/A, plus additional years preceding this period, as allowed by CCX protocols, as applicable, and hereafter referred to as the "contracted period," on property that I own or control. I hereby agree that XXX.X acres shall participate in a rangeland management program as defined by the rules of the Chicago Climate Exchange. I further agree that I will abide by the rules of the CCX as they pertain to XSOs and to the conditions for Pool participation as set forth in this agreement.

Purchaser agrees to buy and seller agrees to sell and deliver to purchaser free from liens and encumbrances at 1415 12th Avenue SE, Jamestown, North Dakota 58401, the rights to the Exchange Soil Offsets (XSOs) created during the contracted period through the application of RANGELAND MANAGEMENT PRACTICES as entered into the NFU Carbon Credit Program database.

XSOs will accrue for the enrolled land at the applicable rate for the eligible practice and Land Resource Region, as defined by the Chicago Climate Exchange. 20% of the accrued XSOs shall be held in reserve by the Purchaser until December 31, N/A.

Seller warrants that the XSOs covered by this contract comply with all rules of the Chicago Climate Exchange. In particular, Seller warrants that the land from which the XSOs covered by this contract arise shall be in continuous RANGELAND MANAGEMENT during the contracted period. In the event that the practice fails to meet these requirements, all XSOs from such acreage shall be null and void and any payments for XSOs delivered on or prior to December 31, N/A shall be repaid subject to interest and penalties as provided in this agreement.

The transfer price of the XSOs covered by this contract shall be the net sales price as determined by sale through the Chicago Climate Exchange less a 10% service fee. Exchange offset registration and sales fees and offset verification costs are the responsibility of the offset project owner, and will be deducted from pool proceeds prior to payment calculations.

Sale of XSOs covered by this contract shall be at the sole discretion of the Purchaser, however all XSOs shall be priced no later than 365 days after December 31, N/A. Payment for XSOs covered by this contract shall be made on an annual or semi-annual basis. The parties to this contract hereby agree that the title to the XSOs shall be automatically delivered to the Purchaser on the first day of January following the year of in which sequestration occurred. By signature hereto, Seller irrevocably conveys title to the XSOs stated above as of the first day of January following the year in which sequestration occurred. Seller further warrants compliance with the terms and conditions contained in the Agreement for the contracted period.

CCX Offset Project Terms and Conditions: By registering a project with Chicago Climate Exchange (CCX), each project owner agrees to and acknowledges the following Terms and Conditions in relation to the project and the Exchange Offsets issued by CCX:

1. The enrolled project meets all applicable eligibility rules of the Chicago Climate Exchange.
2. CCX will issue to the CCX Registry account of the project owner, or its designated aggregator, a quantity of Exchange Offsets that conforms to the applicable CCX Rules. Project owners will be notified of acceptance/rejection of their XSOs into the CCX Registry account by the designated aggregator at or before the time of the first payment due the Seller hereunder.
3. Each sale of Exchange Offsets executed through the Chicago Climate Exchange shall represent a complete transfer of all legal rights associated with the mitigation of greenhouse gases that relate to the quantity and time periods associated with the Exchange Offsets that are established through fulfillment of the Terms of this contract.
4. The project owner or its CCX-registered aggregator may sell or retain the Exchange Offsets earned under the provisions of this agreement.
5. The project owner shall retain full legal ownership of all greenhouse gas mitigation rights that may accrue: (a) on lands or via activities not included in the CCX-registered project; (b) in excess of the quantity of Exchange Offsets issued by CCX to CCX-registered projects; (c) before or after the contract period for the CCX-registered project.
6. Neither CCX nor North Dakota Farmers Union make any warranty as to the marketability or market value of CCX Exchange Offsets.
7. Each project owner, and, when applicable, its aggregator, is required to periodically submit a signed project report that confirms conformance with the terms herein. Representatives of CCX may conduct on-site inspection of registered projects and related documents. Each project owner agrees to provide access in such cases in a prompt and cooperative manner. All CCX offset projects and project reports and verification reports are subject to inspection and audit by the provider of regulatory services designated by CCX and by other independent experts as may be engaged by CCX.
8. CCX may request additional information and/or access to registered projects for the purpose of advancing understanding of greenhouse gas mitigation projects. Project owners may decline such access without penalty. In no cases shall research findings cause a reduction in the quantity of Exchange Offsets to be issued to a registered project.
9. Failure to conform to the provisions established herein may result in termination of enrollment in CCX and prohibition from all further participation in CCX.

CCX Eligibility Requirements: All CCX-eligible carbon sequestration projects (i.e. forestry and soil projects) that produce less than 12,500 metric tons CO2 equivalent of Exchange Offsets per year must be registered through a CCX-registered aggregator. Projects that are represented in CCX by an Aggregator are referred to as "pooled projects." The "pool" refers to the multiple projects represented by the Aggregator. Each aggregator is assigned a CCX Registry account which will hold all Offsets issued to projects it represents. Aggregators shall also be Authorized Traders in the CCX Trading Platform for such offsets. Aggregators shall be responsible for receiving from individual projects the CCXrequired project reports, and for submitting to CCX summary reports of projects they represent. The terms of the business and legal relationships between aggregators and project owners are left to the discretion of those parties

Verifier: Is a technically expert entity that is approved by CCX to conduct verification of CCX Exchange Offset projects.

Offset Issuance: CCX-eligible greenhouse gas mitigation projects can be recorded in the CCX Registry and will be issued Exchange Offsets annually on the basis of mitigation tonnage realized during the contracted period. 

Vintage: The vintage of an instrument is defined as the first year the designated instrument may be used for compliance with the CCX emission reduction schedule, or, as applicable, purchase reduction schedule.

Trading Authority: Noth Dakota Farmers Union shall have sole authority to access the CCX Trading Platform and Registry account(s) holding the Offsets issued to projects it represents and to execute sales on the CCX electronic trading platform on behalf of project owners and distribute sales proceeds to project owners in accordance with the terms stated in this contract.

Eligible projects and XSO issuance rates: Projects involving specified Agricultural soil carbon sequestration activities in designated states, counties and parishes in the U.S. shall be eligible to earn XSOs. Eligible projects include (1) Non-degraded rangeland managed to improve carbon sequestration through grazing practices; (2) Restored, previously degraded rangeland as a result of changes in management practices undertaken on or after January 1, 1999. Exchange Soil Offsets will be earned at a specified rate of metric tons CO2 per acre per year in eligible geographic areas. Verification shall be conducted in accordance with provisions contained in Chapter 10 of the CCX Rulebook. Chapter 10 provides the protocol and standards for rangeland sequestration Exchange Soil Offsets. The rangeland improvement project commitment must be maintained throughout the terms of this contract on the acres specified upon project registration.

Eligible Project Areas: Eligible geographic areas are defined according to USDA Land Resource Region (LRR). Rangeland projects are also bounded by average annual precipitation levels for the specific region. Rangeland projects must take place in areas where long-term annual average precipitation is not less than 14" and not greater than 40".  CCX Rulebook provides specific designation of eligible LRR's.

Requirements and Overall Approach of Crediting CO2 Sequestration: Certain rangelands managed to enhance carbon storage in the soil are eligible for inclusion providing the following qualifications are met: (1) The project takes place on rangeland, which is defined by the NRCS as: "Land on which the historic plant community is principally native grasses, grasslike plants, forbs or shrubs suitable for grazing and browsing. In most cases, range supports native vegetation that is extensively managed through the control of livestock rather than by agronomy practices, such as fertilization, mowing, or irrigation. Rangeland also includes areas that have been seeded to introduced species (e.g., clover or crested wheatgrass) but are managed with the same methods as native range." (2) The project is in a geographic area for which data on soil sequestration rates for rangeland are available to CCX. Figure 9.5A maps these areas; and (3) Project involves rangeland management practices that include use of ALL of the following tools: (a) Light or Moderate Stocking rates; (b) Sustainable Livestock Distribution. The Natural Resources Conservation Service (NRCS) Field Office Technical Guides publish guidelines for managing the controlled harvest of vegetation with grazing animals. Stocking rates and livestock distribution criteria are defined according to County and State in the NRCS "Prescribed Grazing Specification" code. Rangeland that can be classified as degraded prior to inception of the project may be eligible for different crediting rates.

Definition of Degraded Rangeland: For CCX purposes, rangeland will be classified as degraded if it meets the definitions as set forth in the Natural Resources Conservation Service National Handbook of Conservation Practices. Degraded rangeland indicators specific to soil carbon storage are listed in Figure 9.5B and include: (a) Soil surface loss or degradation; (b) Heavy Stocking rates (exceeding carrying capacity of project land). It is the responsibility of the project owner, at the time of submission of this application, to make the case that the contracted area meets the definition of degraded rangeland.  Contracts will not change rate during the contract period.

Protocol for Recording Rangeland Management Practices: The preceding data may be supported/documented via the following methods (to be confirmed via site visit by CCXapproved verifier): (a) Photographs of project site (e.g. aerial, remote sensing); (b) Ranch records of stocking rates and grazing rotation patterns; (c) Records from agricultural extension agents or other agencies performing a monitoring function.

Noncompliance: In the case of noncompliance with the Terms and Conditions contained in this CCX Exchange Soil Offsets contract, the owner of the noncompliant project shall return a quantity of CCX Exchange Offsets and/or Exchange Allowances that is equal to the total quantity of XSOs that have been issued to the project during the years through 2012, or present payment in an amount equal to the cost of acquiring such replacement offsets or allowances The owner shall also pay to the aggregator, a penalty equal to twenty percent (20%) of the value of all offsets or allowances covered under this Agreement as well as interest accruing on said amounts from the date of noncompliance as well as all costs incurred by aggregator in enforcing this provision inclusive of reasonable attorney fees. The owner of the noncompliant project may be prohibited from further participation in CCX.

Agricultural soil carbon reserve pool: Each CCX XSO project shall be required to place 20% of the offsets it earns into a CCX soil carbon reserve pool. Such XSOs shall remain the property of the project owner(s) (pool participants in the case of aggregated projects) and all XSOs that remain in the pool shall be released to the project owners in late N/A. In the event that a project owner does not conform to the XSO performance requirements listed herein such event shall be promptly reported to CCX (such reporting shall occur through a project's aggregator if the project is registered through an aggregator), CCX will then cancel offsets held in the Reserve Pool in an amount equal to the quantity of XSOs previously issued to the project.

CCX Non-registration: In the event the CCX ceases to accept XSOs for the registration in any given year during the term of this Agreement, both Seller and Purchaser shall be relieved of any duties of obligations as provided under this Agreement, as it relates to XSOs for the year which is not able to be registered and all years remaining under the terms of this Agreement.

Crediting Rates: Eligible rangeland project crediting rates are based on appropriate below-ground carbon sequestration rates according to Land Resource Region, as well as status of the land (degraded or non-degraded) prior to inception of project. Rates are as follows (in metric tons CO2/acre/year).

Fulfillment of Obligations: The commitments and obligations of the seller that are created by this contract shall terminate at midnight on December 31, N/A.

Sub-contracting: In the event that a transfer of operational control of contracted acreage occurs during the contracted period, a sub-contract may be created. Subcontracts are designated with an "S" following the two-letter state code in the Contract Number. All of the Terms and Conditions of the original Agreement shall apply to the sub-contract. Responsibility for obtaining a subcontract falls on the original contract holder. In the even that a subcontract cannot be obtained within 90 days of the transfer of operational control, the acres shall be considered non-compliant, and the original contract holder shall return a quantity of CCX Exchange Offsets that is equal to the total quantity of XSOs that are found to be noncompliance or present payment in an amount equal to the cost of acquiring such replacement offsets or allowances plus applicable exchange fee associated with offset replacement. XSO's earned and held in escrow, as well as penalties for non-compliance caused by the actions of the sub-contract holder shall remain the responsibility of the original contract holder for the contract period prior to January 1 of the year in which the transfer occurred.