May 10, 2010 Bidder's Meeting Webinar - Question & Answer Session
Note: Questions from Proponents on the Request for Qualifications (RFQ), the RFQ process or related documents, and PCT’s answers to them will be posted on this page. PCT’s answers to Proponent's questions are for general information only, do not constitute legal or other advice and do not amend or form part of the RFQ, unless confirmed by Addendum or revised RFQ documents.
Q: Is sequestration in wood products allowed under the RFQ?
A: Although not explicitly disallowed by the regulation or the BC Forest Offset Guide, in order to include sequestration in wood products there would be a significant amount of scientific research and protocol adaptation needed in order to comply with BC's Emission Offsets Regulation requirements.
Q: Are projects located on the Agriculture Land Reserve allowed?
A: Projects located on the Agricultural Land Reserve would qualify under this RFQ.
Q: What is the minimum project size?
A: The Forest Offset RFQ states no project size restrictions. However, preparing project documents, third party validation and verification, project maintenance, risk mitigation, security and permanence requirements all have costs which will effectively dictate a minimum project size.
Q: Would afforestation of old logging roads and natural disturbances, such as landslides less than 20 meters in width, qualify under this call?
A: No, the definition of afforestation does not include planting of widths less than 20 meters. Please see the BC Forest Offset Guide for more details.
Q: Can select seed or fertilization be used in areas which have been damaged by fire or insects?
A: If the damaged area is being reforested, select seed and fertilization can be considered a project if the use of select seed and fertilization is not the business as usual practice. Please see the BC Forest Offset Guide for more details.
Q: Do you need a project underway to submit to call?
A: No.
Q: Are you considering forest rehabilitation under the call?
A: No, for this call we are looking strictly at afforestation, select seed and fertilization activities.
Q: Can you define grassland?
A: Native grassland are grassland areas which do not have enough tree cover on them to qualify as forest land. Forest land is defined as physically capable of growing trees over 5 meters tall at maturity with a crown closure of at least 25%.
Q: In southern interior of BC there is private land that is transitional to forest land and can support trees. How do we determine eligibility?
A: Native forest land that was cleared before 1989, which is grassland but which could support forest land, would be eligible for afforestation. Please see the BC Forest Offset Guide for more details.
Q: Will private forest land that was logged before 1989, and since then left as unplanted, abandoned land with brush cover, be eligible for afforestation?
A: Yes.
Q: What types of afforestation projects do you see possible on crown forest tenures given the exclusion of not sufficiently restocked areas?
A: Afforestation projects on Crown land are possible on areas cleared for pasture land that were not successful as pasture land, some areas of brush that could be productive forests, some areas of not sufficiently restocked lands that qualify for afforestation (cleared before 1990), roads and landings greater that 20 meters in width, and open pit mines.
Q: One of the Desirable Criteria respondents will be evaluated on is track record. Given that this is a new compliance market, how can this be measured?
A: The category is to determine competency in managing projects of this size and type. The demonstration of track record does not have to be specifically on offset projects, it could be demonstrated by experience on similar sized forest projects.
Q: Where can I find the List of Screened Validation and Verification Bodies?
A: The List of Screened Validation and Verification Bodies is available on PCT’s website, under List of Resources.
Q: Can you suggest any service providers in BC that are experienced with these projects?
A: PCT does not maintain a referral list of carbon consultants, service providers or turnkey project developers. However, proponents could pose that question to Validators and Verifiers on PCT’s List of Screened Validation and Verification Bodies.
Q: Could PCT identify a protocol that deals with select seed and fertilization which we can adapt?
A: PCT does not have a recommended protocol for project types under this call. One resource a proponent could utilize in choosing protocols is the Western Climate Initiative’s Offset Protocol Review Report. The report evaluates several greenhouse gas reduction program quantification protocols, including forest protocols, to determine their suitability under the WCI programme and the level of effort needed to make them compliant. Please note that, although the WCI has many similar criteria as BC’s Emission Offsets Regulation, there are differences; for example, the Offset Protocol Review Report does not consider if a protocol meets BC specific requirements, and its list of protocols evaluated may not be exhaustive.
Q: Could a VCS Methodology suffice as a “Protocol” for purposes of the Emission Offsets Regulation?
A: There are a number of emission reduction programs which utilize quantification protocols that may be appropriate for a project. However, as far as we can determine, all will require some level of adaptation to BC’s requirements.
Q: Is there a plan to eventually move towards a single approved protocol for these projects?
A: Yes, this is being examined, but an approved protocol is not expected within the time frame of this RFQ.
Q: PCT is proposing inclusion of some very exciting carbon pools and processes. Your suggestions of accounting for soil pools, long lived wood products, offsite fertilizer production and net 100 year benefit of a forest project are good, but complex. Does the PCT have any recommendations for how project proponents new to the Carbon Market can successfully develop a project and the all-important Project Plan?
A: The BC Forest Offset Guide, the (adapted) quantification protocol, and the RFQ documents will give respondents the guidance needed on how to successfully develop a forest carbon project in BC. PCT also provides a Project Plan Template as Appendix B in its EOR Guidance Document.
Q: If a Project was to harvest early, can the credits simply be paid back with interest?
A: The regulations require that sequestration projects achieve the atmospheric effect of a GHG reduction of at least 100 years or the equivalent. Harvesting is allowed, and any plans to harvest before 100 years must be indicated in the Project Plan; offsets volumes would have been adjusted accordingly to achieve the required atmospheric effect. Early harvest would create a partial reversal of the offset, and would not be allowed under the Offset Purchase Agreement. There would be contractual penalties for such a deliberate breach of contract.
Q: If a project receives a payment of initial application cost, would it be able to cover monitoring and verification costs?
A: The intent of payment of initial application costs is to provide funds for some of the project start-up costs. As such, any requests for initial application costs to cover monitoring and verification costs would likely not qualify.
Q: Please explain what a 25 year Offset Purchase Agreement is, if you are looking for 100 year permanence?
A: The 25 year limit on the payment period of the Offset Purchase Agreement has been chosen to match the expected extension to the validation period of the baseline. The Emission Offsets Regulation requires sequestration projects to have the equivalence of atmospheric reduction of at least 100 years; therefore the liability period could extend beyond the initial term of the contract. The base case is that the liability period will be 100 years after the recognition of the last delivered offset. Some protocols may provide for ways to reduce the liability period by discounting or normalizing the offset volumes delivered, or through the recognition of carbon sequestered in wood products. Any such mechanism must comply with the EOR.
Q: What happens to offsets generated after the 25 year contract expires?
A: In the contract, PCT may contemplate a right of first refusal or an optional extension if the baseline can be re-validated. If the right of first refusal is not exercised, there may be other markets for the incremental offsets after the contract expires. Note that, for projects on Crown Lands, the assignment agreement and special use permit may also have terms and conditions impacting the sale of offsets beyond the contracting period.
Q: When is PCT expecting the offsets to be delivered?
A: PCT is looking for delivery of realized and verified offsets. Delivery is scheduled by a project proponent. A project is to propose a delivery schedule in the bid documents.
Q: Is the assignment of carbon rights on private lands arranged through a private contract?
A: Yes.
Q: What if land tenure (e.g. lease) on which the project takes place is transferred to a third party? Will the duties and obligations outlined in an offset purchase agreement with PCT attach to the tenure as some sort of easement and flow through to the third party?
A: The Offset Purchase Agreement may allow such flow-through of responsibility to the purchasing party with PCT approval, with such approval not to be reasonably withheld. Any such transfer must address the permanence and security requirements of the Offset Purchase Agreement, and must not weaken PCT’s position.
Q: Can permanent “set-asides” of existing mature timber be used to satisfy the reversal risk criteria related to afforestation, select seed, or fertilization?
A: Respondents are required to propose mechanisms for addressing reversal risk; however, a “set-aside” may be considered to be a forest conservation project which does not qualify under this RFQ.
Q: Are you considering any ex-ante agreements?
A: PCT will sign multi-year offset purchase agreements with project developers; however, PCT only accepts delivery of verified ex-post offsets.
Q: What requirements will there be for verification post contract?
A: Verification is only required for recognition of offsets. Post contract there will continue to be a monitoring and reporting requirement which may be subject to an audit. Terms and conditions of that requirement, and any associated liabilities, will be outlined in the Offset Purchase Agreement.
Q: Is the Letter of Intent issued before a Project Plan has been validated?
A: Yes, a Letter of Intent (LOI) will be issued to Projects selected off the Qualified Suppliers List. Once a Letter of Intent is executed, respondents will then develop their project plan and have it validated by a third party validator.
Q: Does the bid need to include a validated Project Plan?
A: No, a Project Plan only needs to be developed and validated if a proposal is chosen off the qualified suppliers list and a Letter of Intent has been signed.
Q: Does the bid need to include a Risk Management and Contingency Plan?
A: No, the Risk Management and Contingency Plan required by the Emission Offsets Regulation (EOR) for sequestration projects is a component of the Project Plan. However, the RFQ requires the respondent to outline key aspects of the Risk Management Plan in the Project Information Document for evaluation.
Q: Does the bid need to include an approved Quantification Protocol?
A: A respondent needs to include an internationally recognized quantification protocol adapted to meet BC’s regulations. The proposed adaptations only need to be blacklined at this stage. The protocol will need to be finalized and validated if a project is chosen off the qualified suppliers list to move forward and a Letter of Intent has been executed.
Q: For projects on Crown Lands, what is the procedure to obtain an Assignment Agreement and a Special Use Permit?
A: The assignment of carbon rights from Crown Lands is new, and the application process is currently being finalized. Projects selected to proceed to a LOI will be directed to the appropriate government contacts.
Q: How will PCT ensure that it has the capability and capacity to assess the content and validity of the Project Plans?
A: Proposals will be evaluated by an evaluation team which will comprise PCT staff and any outside experts, as deemed appropriate by PCT.
Q: For Crown Lands, who has the responsibility for assigning offsets to the project proponent?
A: The mechanism for assigning offsets is under development. Once a project gets to the assignment agreement stage, PCT will direct Projects to the responsible Ministry branch.
Q: How is the $3 million dollars budget allocated? Is it annual? Is it discounted? If a project came in at $5 over 25 years, is it too big?
A: The total budget for the call is $3 million over the life of the project. It is in dollars spent, including any initial allocation costs paid. It is not discounted. If a project selected off the qualified suppliers list was over the remaining budget, it would be given the opportunity to adjust its bid (price/volume/term) to match the remaining budget.
Q: How is the levelized bid price determined?
A: Bid prices will be levelized for evaluation purposes. Proponents will bid in any initial application costs as well as annual prices and volumes. This information will be used to calculate a levelized price, which is the NPV of costs divided by the NPV of volumes, using a 4% real discount rate and assuming a 2% inflation rate.
Q: Do project co-benefits contribute to PCT’s project review criteria?
A: No; however, projects are expected to create no net environmental harm.
Q: What price is PCT willing to pay for offsets?
A: Bid price is one of the competitive factors of this RFQ. PCT has not published any price signals.
Q: For the land based forest offsets in the call. you will not see a significant sequestration of carbon for a number of years. How does this call address PCT’s immediate need for offsets?
A: PCT is developing a portfolio that will include both short- and long-term offsets. In addition, once the Western Climate Initiative cap-and-trade program is enacted, it is expected that the generation of offsets will be substantially limited to certain sectors, including land-based forests. This targeted RFQ recognizes the long-term nature of forest offsets, and the need for early action to include them in PCT’s portfolio.
Q: Could PCT buy Forest Offsets that do not meet the specific project types under this RFQ, under the open call for offsets?
A: Yes, the Open Call for Offsets Projects (PCT-2379) does not restrict project types. Please note that the Open Call for Offsets does not have a dedicated budget for forest offset projects and does not have a provision for payment of initial application costs. Projects accepted under our Open Call for Offsets must meet our portfolio criteria.
Q: Have you done any work on what the potential magnitude of forest offsets is in BC?
A: Yes, there has been some preliminary work done on this, and it indicates there are significant opportunities available.
May 10, 2010 Bidder's Meeting Webinar - Question & Answer Session
Note: Questions from Proponents on the Request for Qualifications (RFQ), the RFQ process or related documents, and PCT’s answers to them will be posted on this page. PCT’s answers to Proponent's questions are for general information only, do not constitute legal or other advice and do not amend or form part of the RFQ, unless confirmed by Addendum or revised RFQ documents.
Q: Is sequestration in wood products allowed under the RFQ?
A: Although not explicitly disallowed by the regulation or the BC Forest Offset Guide, in order to include sequestration in wood products there would be a significant amount of scientific research and protocol adaptation needed in order to comply with BC's Emission Offsets Regulation requirements.
Q: Are projects located on the Agriculture Land Reserve allowed?
A: Projects located on the Agricultural Land Reserve would qualify under this RFQ.
Q: What is the minimum project size?
A: The Forest Offset RFQ states no project size restrictions. However, preparing project documents, third party validation and verification, project maintenance, risk mitigation, security and permanence requirements all have costs which will effectively dictate a minimum project size.
Q: Would afforestation of old logging roads and natural disturbances, such as landslides less than 20 meters in width, qualify under this call?
A: No, the definition of afforestation does not include planting of widths less than 20 meters. Please see the BC Forest Offset Guide for more details.
Q: Can select seed or fertilization be used in areas which have been damaged by fire or insects?
A: If the damaged area is being reforested, select seed and fertilization can be considered a project if the use of select seed and fertilization is not the business as usual practice. Please see the BC Forest Offset Guide for more details.
Q: Do you need a project underway to submit to call?
A: No.
Q: Are you considering forest rehabilitation under the call?
A: No, for this call we are looking strictly at afforestation, select seed and fertilization activities.
Q: Can you define grassland?
A: Native grassland are grassland areas which do not have enough tree cover on them to qualify as forest land. Forest land is defined as physically capable of growing trees over 5 meters tall at maturity with a crown closure of at least 25%.
Q: In southern interior of BC there is private land that is transitional to forest land and can support trees. How do we determine eligibility?
A: Native forest land that was cleared before 1989, which is grassland but which could support forest land, would be eligible for afforestation. Please see the BC Forest Offset Guide for more details.
Q: Will private forest land that was logged before 1989, and since then left as unplanted, abandoned land with brush cover, be eligible for afforestation?
A: Yes.
Q: What types of afforestation projects do you see possible on crown forest tenures given the exclusion of not sufficiently restocked areas?
A: Afforestation projects on Crown land are possible on areas cleared for pasture land that were not successful as pasture land, some areas of brush that could be productive forests, some areas of not sufficiently restocked lands that qualify for afforestation (cleared before 1990), roads and landings greater that 20 meters in width, and open pit mines.
Q: One of the Desirable Criteria respondents will be evaluated on is track record. Given that this is a new compliance market, how can this be measured?
A: The category is to determine competency in managing projects of this size and type. The demonstration of track record does not have to be specifically on offset projects, it could be demonstrated by experience on similar sized forest projects.
Q: Where can I find the List of Screened Validation and Verification Bodies?
A: The List of Screened Validation and Verification Bodies is available on PCT’s website, under List of Resources.
Q: Can you suggest any service providers in BC that are experienced with these projects?
A: PCT does not maintain a referral list of carbon consultants, service providers or turnkey project developers. However, proponents could pose that question to Validators and Verifiers on PCT’s List of Screened Validation and Verification Bodies.
Q: Could PCT identify a protocol that deals with select seed and fertilization which we can adapt?
A: PCT does not have a recommended protocol for project types under this call. One resource a proponent could utilize in choosing protocols is the Western Climate Initiative’s Offset Protocol Review Report. The report evaluates several greenhouse gas reduction program quantification protocols, including forest protocols, to determine their suitability under the WCI programme and the level of effort needed to make them compliant. Please note that, although the WCI has many similar criteria as BC’s Emission Offsets Regulation, there are differences; for example, the Offset Protocol Review Report does not consider if a protocol meets BC specific requirements, and its list of protocols evaluated may not be exhaustive.
Q: Could a VCS Methodology suffice as a “Protocol” for purposes of the Emission Offsets Regulation?
A: There are a number of emission reduction programs which utilize quantification protocols that may be appropriate for a project. However, as far as we can determine, all will require some level of adaptation to BC’s requirements.
Q: Is there a plan to eventually move towards a single approved protocol for these projects?
A: Yes, this is being examined, but an approved protocol is not expected within the time frame of this RFQ.
Q: PCT is proposing inclusion of some very exciting carbon pools and processes. Your suggestions of accounting for soil pools, long lived wood products, offsite fertilizer production and net 100 year benefit of a forest project are good, but complex. Does the PCT have any recommendations for how project proponents new to the Carbon Market can successfully develop a project and the all-important Project Plan?
A: The BC Forest Offset Guide, the (adapted) quantification protocol, and the RFQ documents will give respondents the guidance needed on how to successfully develop a forest carbon project in BC. PCT also provides a Project Plan Template as Appendix B in its EOR Guidance Document.
Q: If a Project was to harvest early, can the credits simply be paid back with interest?
A: The regulations require that sequestration projects achieve the atmospheric effect of a GHG reduction of at least 100 years or the equivalent. Harvesting is allowed, and any plans to harvest before 100 years must be indicated in the Project Plan; offsets volumes would have been adjusted accordingly to achieve the required atmospheric effect. Early harvest would create a partial reversal of the offset, and would not be allowed under the Offset Purchase Agreement. There would be contractual penalties for such a deliberate breach of contract.
Q: If a project receives a payment of initial application cost, would it be able to cover monitoring and verification costs?
A: The intent of payment of initial application costs is to provide funds for some of the project start-up costs. As such, any requests for initial application costs to cover monitoring and verification costs would likely not qualify.
Q: Please explain what a 25 year Offset Purchase Agreement is, if you are looking for 100 year permanence?
A: The 25 year limit on the payment period of the Offset Purchase Agreement has been chosen to match the expected extension to the validation period of the baseline. The Emission Offsets Regulation requires sequestration projects to have the equivalence of atmospheric reduction of at least 100 years; therefore the liability period could extend beyond the initial term of the contract. The base case is that the liability period will be 100 years after the recognition of the last delivered offset. Some protocols may provide for ways to reduce the liability period by discounting or normalizing the offset volumes delivered, or through the recognition of carbon sequestered in wood products. Any such mechanism must comply with the EOR.
Q: What happens to offsets generated after the 25 year contract expires?
A: In the contract, PCT may contemplate a right of first refusal or an optional extension if the baseline can be re-validated. If the right of first refusal is not exercised, there may be other markets for the incremental offsets after the contract expires. Note that, for projects on Crown Lands, the assignment agreement and special use permit may also have terms and conditions impacting the sale of offsets beyond the contracting period.
Q: When is PCT expecting the offsets to be delivered?
A: PCT is looking for delivery of realized and verified offsets. Delivery is scheduled by a project proponent. A project is to propose a delivery schedule in the bid documents.
Q: Is the assignment of carbon rights on private lands arranged through a private contract?
A: Yes.
Q: What if land tenure (e.g. lease) on which the project takes place is transferred to a third party? Will the duties and obligations outlined in an offset purchase agreement with PCT attach to the tenure as some sort of easement and flow through to the third party?
A: The Offset Purchase Agreement may allow such flow-through of responsibility to the purchasing party with PCT approval, with such approval not to be reasonably withheld. Any such transfer must address the permanence and security requirements of the Offset Purchase Agreement, and must not weaken PCT’s position.
Q: Can permanent “set-asides” of existing mature timber be used to satisfy the reversal risk criteria related to afforestation, select seed, or fertilization?
A: Respondents are required to propose mechanisms for addressing reversal risk; however, a “set-aside” may be considered to be a forest conservation project which does not qualify under this RFQ.
Q: Are you considering any ex-ante agreements?
A: PCT will sign multi-year offset purchase agreements with project developers; however, PCT only accepts delivery of verified ex-post offsets.
Q: What requirements will there be for verification post contract?
A: Verification is only required for recognition of offsets. Post contract there will continue to be a monitoring and reporting requirement which may be subject to an audit. Terms and conditions of that requirement, and any associated liabilities, will be outlined in the Offset Purchase Agreement.
Q: Is the Letter of Intent issued before a Project Plan has been validated?
A: Yes, a Letter of Intent (LOI) will be issued to Projects selected off the Qualified Suppliers List. Once a Letter of Intent is executed, respondents will then develop their project plan and have it validated by a third party validator.
Q: Does the bid need to include a validated Project Plan?
A: No, a Project Plan only needs to be developed and validated if a proposal is chosen off the qualified suppliers list and a Letter of Intent has been signed.
Q: Does the bid need to include a Risk Management and Contingency Plan?
A: No, the Risk Management and Contingency Plan required by the Emission Offsets Regulation (EOR) for sequestration projects is a component of the Project Plan. However, the RFQ requires the respondent to outline key aspects of the Risk Management Plan in the Project Information Document for evaluation.
Q: Does the bid need to include an approved Quantification Protocol?
A: A respondent needs to include an internationally recognized quantification protocol adapted to meet BC’s regulations. The proposed adaptations only need to be blacklined at this stage. The protocol will need to be finalized and validated if a project is chosen off the qualified suppliers list to move forward and a Letter of Intent has been executed.
Q: For projects on Crown Lands, what is the procedure to obtain an Assignment Agreement and a Special Use Permit?
A: The assignment of carbon rights from Crown Lands is new, and the application process is currently being finalized. Projects selected to proceed to a LOI will be directed to the appropriate government contacts.
Q: How will PCT ensure that it has the capability and capacity to assess the content and validity of the Project Plans?
A: Proposals will be evaluated by an evaluation team which will comprise PCT staff and any outside experts, as deemed appropriate by PCT.
Q: For Crown Lands, who has the responsibility for assigning offsets to the project proponent?
A: The mechanism for assigning offsets is under development. Once a project gets to the assignment agreement stage, PCT will direct Projects to the responsible Ministry branch.
Q: How is the $3 million dollars budget allocated? Is it annual? Is it discounted? If a project came in at $5 over 25 years, is it too big?
A: The total budget for the call is $3 million over the life of the project. It is in dollars spent, including any initial allocation costs paid. It is not discounted. If a project selected off the qualified suppliers list was over the remaining budget, it would be given the opportunity to adjust its bid (price/volume/term) to match the remaining budget.
Q: How is the levelized bid price determined?
A: Bid prices will be levelized for evaluation purposes. Proponents will bid in any initial application costs as well as annual prices and volumes. This information will be used to calculate a levelized price, which is the NPV of costs divided by the NPV of volumes, using a 4% real discount rate and assuming a 2% inflation rate.
Q: Do project co-benefits contribute to PCT’s project review criteria?
A: No; however, projects are expected to create no net environmental harm.
Q: What price is PCT willing to pay for offsets?
A: Bid price is one of the competitive factors of this RFQ. PCT has not published any price signals.
Q: For the land based forest offsets in the call. you will not see a significant sequestration of carbon for a number of years. How does this call address PCT’s immediate need for offsets?
A: PCT is developing a portfolio that will include both short- and long-term offsets. In addition, once the Western Climate Initiative cap-and-trade program is enacted, it is expected that the generation of offsets will be substantially limited to certain sectors, including land-based forests. This targeted RFQ recognizes the long-term nature of forest offsets, and the need for early action to include them in PCT’s portfolio.
Q: Could PCT buy Forest Offsets that do not meet the specific project types under this RFQ, under the open call for offsets?
A: Yes, the Open Call for Offsets Projects (PCT-2379) does not restrict project types. Please note that the Open Call for Offsets does not have a dedicated budget for forest offset projects and does not have a provision for payment of initial application costs. Projects accepted under our Open Call for Offsets must meet our portfolio criteria.
Q: Have you done any work on what the potential magnitude of forest offsets is in BC?
A: Yes, there has been some preliminary work done on this, and it indicates there are significant opportunities available.