The Forest Protocol & Project Case StudyAlligator River Avoided Conversion Project

California Cap-and-Trade WorkshopClimate Action ReserveJune 14, 2011

CONFIDENTIAL - Subject to NDA2 | Blue Source | A Leading Climate Change Portfolio

Overview

About Blue Source

Forestry Project Commercialization using the CAR Protocol Case Study: Alligator River Avoided Conversion Project

Forestry’s Role in the Carbon Markets

CONFIDENTIAL - Subject to NDA3 | Blue Source | A Leading Climate Change Portfolio

About Blue Source

Carbon Credit Portfolio

Leading domestic project development and marketing for over 10 years

100-200M tonne portfolio (function of specs) Have sold over 20M tonnes over the past 10 years Projects sourced from 49 states and most provinces in Canada Transacted what is believed to be the largest volume voluntary

sale to date (9,000,000 tCO2e) Transacted what is believed to be the highest value voluntary

sale to date ($12,000,000) Federal and state carbon advocacy leadership Developed the first protocols in numerous carbon categories More CAR listed forestry projects than any other developer

Blue Source has built the largest portfolio of North American emission reduction credits and projects.

CONFIDENTIAL - Subject to NDA

Forestry Project Commercialization using the CAR Protocol

Feasibility Study / Due Diligence

Project Submittal Form

Forest Carbon Inventory – Design and Implementation

Management Plan

Project Design Document (PDD) Development

Verification

Registration

Marketing

5 | Blue Source | A Leading Climate Change Portfolio

Blue Source has extensive experience in creating and selling tonnes in the market. Speed, technical knowledge, and pricing strategies are central to the service offering

CONFIDENTIAL - Subject to NDA

Alligator River Avoided Conversion Project

Native forest stands consisting of mixed pine and bottomland hardwoods

Pre-sold tonnes to help achieve near term revenue to landowner

6 | Blue Source | A Leading Climate Change Portfolio

2,750 Acres in Hyde County, NC

Permit to convert to agriculture

Based on anticipated carbon revenue decided to protect forest via easement instead

CONFIDENTIAL - Subject to NDA

Alligator River Avoided Conversion Project

A lot of steps: Designation of Authority Form Project Submittal Form Attestation of Title Boundary Map Signed Easement Inventory Growth Model Monitoring Plan Project Design Document First Verification Project Implementation Agreement Initial Registration of Tonnes Marketing of Project Ongoing monitoring/verification Transfer of Tonnes to Buyer

7 | Blue Source | A Leading Climate Change Portfolio

Process to date: First biomass CRTs issued Verification of first soils-based CRTs

underway (ARB stakeholder call confirmed inclusion)

First-of application of protocol – many delays but will be a model for others to follow

CONFIDENTIAL - Subject to NDA

Forestry Demand

Offset Type (% Volume) Traded in Global Voluntary Market in 2010

Forestry garnered 42% of the market, a total of 29 MtCO2e.

8 | Blue Source | A Leading Climate Change Portfolio

CONFIDENTIAL - Subject to NDA9 | Blue Source | A Leading Climate Change Portfolio

Forestry Supply

Domestic forest offset projects have gained momentum due to primacy as a compliance grade offset in draft regional and federal legislation, strong demand in the voluntary market and inclusion of forestry protocols in all domestic registries.

Vast landscape of project types and geographic diversity Improved Forest Management (IFM) Avoided Conversion (AC / REDD) Afforestation Reforestation

Potential volume on par with CCS or Renewable Energy 320 MT/yr US supply (McKinsey, 2007)

Challenges exist in aggregating numerous small projects and landowners

CONFIDENTIAL - Subject to NDA

• No up-front, out-of-pocket costs

• Full forest + carbon inventory and assessment

• 10-year FSC management plan and certification

• 100% of FSC-certified wood product revenues

• 50%+ of forest carbon revenues – important new source of annual cash flow

• Inclusion in landscape-scale conservation project designed by TNC

Landowner Benefits

• Focus and protect public/private investments

• Active and engaged landowners

• Repair degraded forests; maintain desired conditions

• Keep working landscapes working and in private ownership

Public Benefits

Blue Source – The Nature Conservancy ‘Working Woodlands’ Program

10 | Blue Source | A Leading Climate Change Portfolio

CONFIDENTIAL - Subject to NDA11 | Blue Source | A Leading Climate Change Portfolio

Blue Source Transaction Structures

Unit-Contingent

Portfolio Firm

Pre-Compliance Diversification

Options

Upfront Financing Considerations

Fixed and Variable Pricing

CONFIDENTIAL - Subject to NDA

Thank You!

12 | Blue Source | A Leading Climate Change Portfolio

Kevin TownsendChief Commercial OfficerBlue Source P: 801.438.1540E: ktownsend@bluesource.com