In 2003 the Pacific Northwest Direct Seed Association (PNDSA) was the first group in North America to compile and register a listing of direct seed acres available for a Carbon Offset Trade. These acres were committed to be direct seeded for 10 years and the stored carbon was then marketed, the form of a lease, to an energy company willing to pay the listed growers for this CO2 offset to their emissions.

What is PNDSA’s role in the marketplace?
PNDSA continuously monitors events and participates in discussions as the carbon credit trading market evolves.  The Association is assessing what role will best serve its membership.  Environmental organizations, conservation districts, and various other private and government entities are actively pursuing roles and opportunities in the carbon credit-trading arena as brokers, aggregators or carbon banks.  PNDSA is in a unique position to aggregate carbon credits to the benefit of the buyer and the seller.  It has unique access to a large grower pool that is directly involved in practices that could generate a large portion of the carbon storage benefit agriculture is anticipated to provide.  Further, as an aggregator, potential purchasers could gain access to a constant, reliable supply of carbon credits.  A grower group, such as PNDSA, could represent grower interests while providing efficient access to prospective purchasers, making it cost-effective for individual farmers to quantify their sequestration and sell offsets.

A Synopsis of the PNDSA Soil Carbon Sequestration Lease Contract 2002
On April 15, 2002 a contract was signed between the Pacific Northwest Direct Seed Association [PNDSA], a producer based organization, and Entergy, an energy producing company based in New Orleans Louisiana serving costumers in Louisiana, Texas and Arkansas.  The contract is for a ten [10] year lease of CO2 credits generated through the practice of direct seeding crop land in the Pacific Northwest [PNW].  An annual trade of 3,000 tons CO2 is contracted between PNDSA and Entergy for the next ten years for a total of 30,000 tons CO2. PNDSA was paid $75,000 to aggregate a base of growers for this sequestration project. PNDSA then contracted with 77 grower members representing 6,470 production acres to meet its obligation with Entergy.  The grower is being paid to direct seed a designated acreage for the next ten years, which will sequester 55/100ths [.55] tons of CO2 per acre per year.  The acreage will be monitored and verified as direct seeded by local NRCS Conservation Districts, which have contracted growers participating. The contract meets the Kyoto protocols involving additionality, duration, permanence and leakage. The PNDSA was started in January 2000 by a group of producers and university researchers from the three-state region known as the PNW (Oregon, Idaho and Washington). The PNDSA is a grower driven organization whose mission is to facilitate the development and adoption of direct seed cropping systems through research coordination, funding and information exchange. The board of directors is made up of four directors from each state.  The three state land grant universities are represented on the board of directors as ex-officio members.  Within the framework of our mission we developed a working relationship with Environmental Defense Fund [now called Environmental Defense].  That relationship resulted in a one-page offer sheet being solicited from PNDSA to lease CO2 credits to emitters.  Environmental Defense [ED] took the one page offer and circulated it among a consortium of energy companies that had made a commitment to ED to reduce their emissions. Entergy submitted a counter offer to PNDSA and the negotiations began. The negotiations focused on creating a contract that would be verifiable under the Kyoto protocol if and when it became ratified.  Those articles are now stated as Article 3.3 and 3.4 and include additionality, permanence, duration and leakage.  Additionality means that credits generated must be additional to any changes in carbon that would have occurred under a "business as usual" scenario.  Permanence refers to the length of time carbon is sequestered and maintained in a sink such as agricultural soil.  Duration refers to the length of the contract. Leakage concerns the issue of project activities causing economic agents to take actions that would increase Green House Gas [GHG] emissions elsewhere. These negotiation issues were resolved with input from ED and other resources.After considerable research and interaction with other global partners also studying this issue, the PNDSA elected to pursue leasing versus selling of carbon credits.  The lease allows temporary control of the management of the land by the energy company. The sale of a C-credit would allow control in perpetuity, and the sale raises a number of legal issues concerning obligations, measurement and performance that are not clearly understood by either potential sellers or buyers. The lease allows the grower to retain ownership of the C-credits at the end of the contract.  The lease in the opinion of PNDSA is a win-win for the environment and the contract parties.  The emitter is forced to reduce emissions, create an internal sequestration system or renegotiate to continue leasing sequestration systems from the contracted growers.  The ultimate goal of PNDSA in this contract is to stimulate research to develop a whole-farm accounting of carbon and carbon equivalent changes occurring as a result of direct seed cropping systems.  Our vision is to have a yield of carbon equivalents for each farm based on the many environmental and management decisions that the farmer employs.  That farmer could then market C-credits they earn or sequester. After completing and signing an agreement with Entergy, the PNDSA developed an agreement with its grower members to meet the obligations stated within the Entergy contract. That agreement contained the definition of direct seed that would be used to verify sequestration per our agreement.  The contract also included other necessary requirements and penalties to protect PNDSA. The PNDSA has the ability to solicit additional acres if existing producer contracts go into default.  We restricted our growers to a maximum of 100 acres to spread the risk of default and to protect the producers from committing too many acres too early in the development of the carbon sink market.  It is widely accepted that the price paid per ton of CO2 sequestered will be impacted upward with any regulated emission controls.  Grower contracts were completed in November 2002 and money was transferred to the producers. PNDSA is presently developing a verification agreement with local Conservation Districts who have grower contracts within their districts (The average number of producers per district is four).This project highlights the ability of the private sector to manage an environmental change without federal mandates.  The United States is involved in political debate, industry discussion and market formation to deal with GHG reductions.  The PNDSA is very proud to be an early innovator in the implementation of a leasing strategy to aggregate agricultural producers in the development of a market for C-credits.  Our relationship with Entergy and Environmental Defense is unprecedented in the U.S. agriculture.  We commend each of those entities for their willingness and commitment to assist us in developing an agriculture production system that benefits society, the environment and producers.  Environmental marketing of direct seed benefits can play a major role in economic sustainability of American Agriculture.