Exchange Agreements and Participating Property Ownership

Transcription

1 Habitat Exchange Agreement for the Lesser Prairie-Chicken (Tympanuchus pallidicinctus) May 2015

2 HABITAT EXCHANGE AGREEMENT for the LESSER PRAIRIE-CHICKEN This Habitat Exchange Agreement (the Agreement ), dated this day of, 2014, is made by and among Habitat Exchange Administrator TBD ( Exchange Administrator ) and the Region 2 and Region 6 Offices of the U.S. Fish and Wildlife Service (collectively, FWS ). The Exchange Administrator and FWS are hereafter referred to jointly as the Parties. This Agreement sets forth the intent of the Parties regarding the establishment, use, funding, operation, and maintenance of the Habitat Exchange (the Exchange ). RECITALS WHEREAS, the Endangered Species Act ( ESA ) was enacted in 1973 to provide a regulatory framework for the conservation of endangered and threatened species in the United States; WHEREAS, FWS, an agency within the U.S. Department of the Interior, has jurisdiction over the conservation, protection, restoration, and management of fish, wildlife, native plants, and the habitat necessary for biologically sustainable populations of these species within the United States pursuant to the Endangered Species Act, as well as other provisions of federal law; WHEREAS, FWS is constantly seeking new and innovative ways to carry out its mission and responsibilities; WHEREAS, FWS has expressed its approval of programs that provide an economically effective process that provides options to property owners to offset the adverse effects of proposed projects to listed and candidate species; WHEREAS, the Parties to this Agreement desire to provide consistent and standardized means for determining Credit values for qualifying covered species habitat addressed in this document; WHEREAS, the Parties wish to streamline the process for securing habitat conservation credits, as well as associated permanent and term conservation of high priority Covered Species habitats; WHEREAS, the establishment of a centralized management and monitoring capability, so as to maximize efficiencies and economies of scale, is essential to achieve the aforementioned objectives; and WHEREAS, the Lesser Prairie-Chicken became listed as a threatened species on May 12, NOW, THEREFORE, in consideration of the foregoing Recitals and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows: HABITAT EXCHANGE AGREEMENT 2

3 ARTICLE 1: INTENT AND STRUCTURE HABITAT EXCHANGE AGREEMENT

4 AGREEMENT Article 1: Intent and Structure Section Definitions. A. Adaptive Management means a formal, structured approach to dealing with uncertainty in natural resources management, using the experience of management and the results of research as an ongoing feedback loop for continuous improvement. See Adaptive Management: The U.S. Department of Interior Technical Guide, 2009 and The U.S. Department of the Interior Applications Guide Adaptive Management Working Group, B. Biological Monitoring means observing and recording the quantity and quality of Credit-producing activities, as well as the biological response of the Covered Species and the Habitat Performance of the Covered Habitat. Biological Monitoring is further described in Appendix J. C. Buyer means a person or entity that purchases Credits for mitigation. D. Compliance Monitoring includes verifying that Participants have met the requirements of the applicable Customized Management Plan. E. Conservation Bank means a unit of land that has been approved as a bank by FWS, external to the Exchange, through a conservation banking agreement and that is permanently protected and permanently managed for the Covered Species and Covered Habitat. F. Conservation Easement means the non-possessory interest in real property, held by a FWS-approved governmental or 501(c)(3) organization, that imposes limitations or affirmative obligations designed to retain or protect natural, scenic, or open-space values of real property or assure the property s availability for use as habitat for Covered Species. G. Conservation Project means a project in which appropriate practices are implemented to generate Credits to be sold on the Exchange. H. Contract Performance means the minimum standards defining the actions and terms to be implemented or completed to achieve compliance with the Participant Agreement and the Customized Management Plan. I. Covered Habitat means habitat upon which the Covered Species depends for its continued viability that is enrolled in the Exchange. The Covered Habitat is further described in Covered Species (Appendix A), the Habitat Quantification Tool ( HQT ; Appendix E) and the Stakeholder Conservation Plan. HABITAT EXCHANGE AGREEMENT 3

5 J. Covered Species means the lesser prairie-chicken (Tympanuchus pallidicinctus). The Covered Species is further described in Appendix A. K. Credit means a quantifiable unit of a species or habitat s conservation value and serves as the currency in the Exchange. L. Credit Release or release of Credits means an action by FWS to make specified Credits available for Transfer through the Exchange. M. Customized Management Plan means the specific management prescription developed for each Participating Property in accordance with requirements of the General Management Plan. N. Debit means a quantifiable unit of a species or habitat s loss of conservation value. O. Dynamic Permanent Conservation (with or without capitalization) means mitigation or conservation achieved by the use of Credits produced in a series of term agreements such that the quantity and quality of the mitigation or conservation is permanent in duration. P. Endowment Deposit means the deposit made or required to be made by the Participant or Buyer as appropriate to fully fund the costs associated with the perpetual management, maintenance, and monitoring of the Participating Property; administrative costs related to procuring and administering additional contracts for Dynamic Permanent Conservation; and the costs of other activities required by the applicable Participant Agreement. Endowment Deposits collectively constitute the Endowment Principal of the Endowment Fund. Q. Endowment Fund means the sum of money managed by the Fund Manager, the purpose of which is to provide income to fund the perpetual management, maintenance, monitoring, and other activities on Participating Properties consistent with each property s Participant Agreement. The term Endowment Fund includes the Endowment Principal and all interest, dividends, other earnings, additions, and appreciation thereon. R. Endowment Principal means that portion of the Endowment Fund that is nonwasting and that is to be maintained and managed in perpetuity to generate earnings and appreciation in value for use in funding the perpetual management, maintenance, and monitoring of Participating Properties; administrative costs related to procuring and administering additional contracts for Dynamic Permanent Conservation; and other activities required by Customized Management Plans. Endowment Principal shall consist of the sum of all Endowment Deposits and any additions to the principal that are made from earnings, appreciation in value or subsequent deposits for the purpose of HABITAT EXCHANGE AGREEMENT 4

6 compensating for inflation and ensuring the real value of the principal does not decline over time. S. Enhancement (with or without capitalization) means activities conducted in existing species habitat or other resources that increase the value of one or more ecosystem functions for the Covered Species as measured by the HQT. T. Exchange Area means the portions of Colorado, Kansas, Nebraska, New Mexico, Oklahoma, and Texas that contain Covered Habitat. A map of the Exchange Area is attached as Appendix D. U. Exchange Establishment Date is the date determined pursuant to Section 1.05, when the Exchange is considered established and Transfer of Credits released by FWS may begin. V. Fund Manager means a third-party person or entity selected by the Exchange Administrator and approved by FWS to manage the Endowment Funds and other investment type funds. W. General Management Plan means the document attached as Exhibit A of the Participant Agreement (Appendix B) that governs habitat preservation, restoration, and enhancement activities required to be conducted on Participating Properties in order to establish Credits. The Customized Management Plan developed for each Participating Property is based on the General Management Plan. X. Habitat Performance means the preservation, restoration, and enhancement of Covered Habitat as indicated by the quantification of the actual conditions of a Participating Property as measured by the HQT. Y. Habitat Quantification Tool ( HQT ) means a set of science-based metrics and calculations used to quantify the value or quality of existing habitat conditions for a species, and to quantify changes to these conditions due to conservation actions and impacts to the Covered Species and Covered Habitat. The HQT is attached as Appendix E. Z. Impact Project means a project that causes a direct or indirect adverse effect to the Covered Species or Covered Habitat. The extent of the impact of an Impact Project is measured in Debits. AA. BB. Monitor (or any form thereof, with or without capitalization) means to observe and record current conditions and changes in conditions indicative of habitat quality and quantity over space and time. Operating Account means the account holding funds collected through the imposition of a Transaction Fee on each Transfer of Credits that may be used by HABITAT EXCHANGE AGREEMENT 5

7 the Exchange Administrator to pay expenditures and costs (including labor, salaries, contracts, verification and monitoring costs, and equipment) of administering the Exchange. CC. DD. EE. FF. GG. HH. II. JJ. KK. LL. Oversight Committee means the entity composed of stakeholders, including representatives from non-profit conservation interests, industry, and agriculture, that provides oversight of the Exchange. Participant means a person with a fee simple, leasehold, or other property interest (including owners of water or other natural resources), or any other entity that may have a property interest, sufficient to carry out the proposed management activities, subject to applicable State law, on non-federal land, who produces, registers, or sells Credits in the Exchange. A Participant may include a Conservation Bank or other entity serving as an aggregator. The term is equivalent to Credit Developer as used in other documents related to this Agreement, including the HQT. Participant Agreement means the contract between the Exchange Administrator and the Participant for the generation and sale of Credits. A template of a Participant Agreement is attached to this Agreement as Appendix B. Participant Payment Account means the account holding funds collected through the sale of Credits for Term Conservation that may be used to provide sufficient funding for annual payments to Participants as dictated by the Participant Agreements. Participating Property means a tract of land that is enrolled in the Exchange. Permanent means in perpetuity. Permit Administrator means the holder of a permit under the ESA that allows for incidental take of the Covered Species or Covered Habitat. Policy Committee means the Lesser Prairie Chicken Stakeholder Conservation Strategy Policy Committee. Preservation (with or without capitalization) means the protection of ecologically important habitat or other ecosystem resources through the implementation of appropriate legal and physical mechanisms. Registry means the managed database of Credits described by Section 2.02(B). MM. Remedial Action means any corrective measure which the Exchange Administrator or a Participant is required to take to ameliorate any injury or adverse impact to a Participating Property as preserved, restored, or enhanced, or as a result of a failure to achieve the Contract or Habitat Performance. HABITAT EXCHANGE AGREEMENT 6

8 NN. OO. PP. QQ. RR. SS. TT. UU. VV. Remedial Action Plan means the specific document outlining the corrective measures which the Exchange Administrator or a Participant is required to take to ameliorate any injury or adverse impact to a Participating Property as preserved, restored, or enhanced, or as a result of a failure to achieve the Contract or Habitat Performance. A Remedial Action Plan must also include an estimated schedule within which actions will be implemented. Reserve Account means the account of Credits, funded by a percentage of the Credits transferred in each transaction, which is held by the Exchange Administrator for the benefit the Covered Species and Covered Habitat, which may not be used for mitigation except in situations specifically authorized by this Agreement as outlined in Section Resolution Committee means the group of six Policy Committee members tasked with resolving issues arising during the development of the Exchange and that are unable to be resolved by the Policy Committee as a whole. Restoration (with or without capitalization) means the reestablishment of ecologically important habitat or other ecosystem resource characteristics and function(s) at a site where there is no functionality for the Covered Species or where functionality exists in a substantially degraded state, and that renders a positive biological response by the Covered Species or Habitat Performance by the Covered Habitat. Restoration Fund means a dedicated fund managed by the Exchange Administrator to support Conservation Projects for the restoration of Covered Habitat. Science Committee means the group of experts described by Section 1.04(A)(3). Service Area means a prescribed portion of the Exchange Area within which Credits may be used to offset Impact Projects that occur within that same Service Area. Service Areas are described in Section 1.04(B) and a map is provided in Appendix D. Static Permanent Conservation (with or without capitalization) means mitigation or conservation achieved by the use of Credits produced in perpetuity on a Participating Property. Term Conservation (with or without capitalization) means mitigation or conservation achieved by the use of Credits produced for a specific duration on a Participating Property. HABITAT EXCHANGE AGREEMENT 7

9 WW. Transaction Fee means the fee imposed on each Transfer of Credits that supports the operating expenses of the Exchange. XX. YY. Transfer (or any form thereof, with or without capitalization) means the sale and conveyance of Credits from one person or entity to another. Verify (or any form thereof, with or without capitalization) means to confirm that a site meets the criteria defined by the HQT for the production of a Credit or to confirm the assessed impact of a Project. Section Purpose, Authorities, and Disclaimer. A. Purpose. The purpose of this Agreement is to set forth the intent of the Parties regarding the establishment, use, operation, and maintenance of the Exchange and Participating Properties to conserve, protect, and compensate for unavoidable impacts to the Covered Species and Covered Habitat. The intent of the Exchange is to combine biological metrics with market incentives to achieve a benefit to the species and to drive conservation efforts (including avoidance, minimization, and mitigation) toward the locations and strategies that will best benefit the Covered Species and Covered Habitat. B. Authorities. The establishment and use of the Exchange for compensatory mitigation or conservation is governed by one or more of the following statutes, regulations, policies, and guidelines: 1. Endangered Species Act (16 U.S.C et seq.); 2. National Environmental Policy Act (42 U.S.C et seq.) ( NEPA ); 3. Final General Conservation Plan Policy (U.S. Department of Interior Memorandum, dated October 5, 2007); 4. Habitat Conservation Planning and Incidental Take Permit Processing Handbook (U.S. Department of Interior Fish and Wildlife Service, published November 4, 1996); 5. Guidance for the Establishment, Use and Operation of Conservation Banks (U.S. Department of Interior Memorandum, dated May 2, 2003); and 6. Guidance on Recovery Crediting for the Conservation of Threatened and Endangered Species (U.S. Department of Interior Fish and Wildlife Service, published July 2008). C. Disclaimer. Nothing contained in this Agreement shall be deemed to limit the jurisdiction of FWS over impacts and applicable mitigation of endangered, threatened, and candidate species, or to restrict the ability of FWS to discharge HABITAT EXCHANGE AGREEMENT 8

10 fully its responsibilities under applicable law, including, without limitation, the ESA. Section Guiding Principles and Regulatory Instruments. A. Guiding Principles. The Exchange is intended to operate in conjunction with any FWS-approved regulatory mechanism that uses the HQT to quantify the effect of an Impact Project in Debits. In order to achieve effective mitigation, the Exchange Administrator is authorized to transfer Credits to any party participating in a FWS-approved regulatory mechanism that allows for Credits to be used as mitigation. Conversely, the Exchange Administrator may refuse to transfer Credits to a party that is not participating in an approved program or that is participating in a program that does not share the Exchange s guiding principles. The guiding principles of the Exchange are as follows: 1. Credits and Debits are to be measured and calculated using the HQT. 2. Consistent verification of Credit and Debit values is essential. At a minimum, consistent verification requires verification of the condition of a site prior to the implementation of the Conservation or Impact Project, verification of the site once the Conservation or Impact Project is in place, and verification of site conditions after an Impact Project has been removed or reduced. 3. Compliance Monitoring must be performed as required by the applicable FWS-approved regulatory mechanism. 4. Conservation will be prioritized through the enrollment of conservation agreements in or near targeted-conservation areas as approved by the Oversight Committee. B. Exchange Supports Preservation and Restoration of Habitat. The Exchange is intended to achieve the conservation needs and facilitate the recovery of the Covered Species by balancing the preservation and restoration of Covered Habitat. The Policy Committee recognizes that (1) the restoration of Covered Habitat will incur higher costs than the preservation of such habitat, (2) Credits from sites that are being restored may not be available for mitigation immediately, and (3) Credits generated by the restoration of Covered Habitat contribute greatly to the recovery of the Covered Species. The Exchange supports and encourages this activity via the Restoration Fund, which will be used to fund the development or purchase of Credits from restoration sites in areas targeted toward recovery of the Covered Species. C. Regulatory Instruments. Participants and Buyers of Credits are responsible for ensuring they are governed or covered by any regulatory instruments required under the ESA or other applicable federal, state, or local law. The Exchange HABITAT EXCHANGE AGREEMENT 9

11 Administrator is not liable for the failure of any party to comply with any legal requirements. D. Exchange Supports Focused Efforts for Conservation. The Policy Committee acknowledges that FWS has identified several criteria by which conservation efforts may be focused that will further the intention of the Exchange to meet the conservation needs and facilitate the recovery of the Covered Species. The Policy Committee supports and encourages the use of these criteria in the following ways: 1. By encouraging the Oversight Committee to incorporate these principles as appropriate when establishing criteria for selection of Conservation Projects that may receive funds from the Restoration Fund; and 2. By encouraging the Exchange Administrator to target outreach and enrollment in those areas identified by FWS as a priority for conservation, with specific emphasis placed towards expiring contracts from Farm Bill programs (e.g., CRP) that may otherwise be converted to cropland. Section Exchange Structure. The following elements together constitute the Exchange: A. Exchange Roles and Responsibilities. 1. Oversight Committee. The Oversight Committee oversees the Exchange and is responsible for incorporating adaptive management decisions into Exchange operations. Upon establishment of the Oversight Committee, the Exchange Administrator and the Oversight Committee will execute a Memorandum of Understanding to implement the terms of this Agreement. a. Composition. The Oversight Committee is composed of twelve (12) members. Three (3) representatives are to be appointed by the Resolution Committee from each of the following stakeholder groups: non-profit conservation interests, industry, and agricultural interests. One (1) representative is to be appointed by the Resolution Committee to represent state agencies. FWS shall appoint one (1) representative to the committee. The Science Committee shall also appoint one (1) non-voting representative to the Oversight Committee. b. Member Terms. Except for the representative from FWS and the representative from the Science Committee, members serve fouryear terms and may serve no more than two subsequent terms. At the first meeting of the Oversight Committee, members shall draw lots to determine which portion of the members will serve an initial term of two years and which portion of the members will serve an HABITAT EXCHANGE AGREEMENT 10

12 initial term of four years. All subsequent terms shall be for four years. The members who serve initial terms of two years may then serve two four-year terms. As members terms expire or the member no longer represents the stakeholder interest for which the member was appointed, new members shall be nominated and approved by the existing Oversight Committee members. c. Frequency of Meetings. The Oversight Committee shall meet as needed but no less than quarterly for the first year the Exchange is operating and twice yearly thereafter. d. Procedures and Decision-Making. The Oversight Committee may meet, in person or via electronic means, if a quorum of the membership is present. Nine of the members must be present (in person or teleconference) to constitute a quorum. The committee shall attempt to operate by consensus, but decisions that cannot be agreed upon shall be determined by a vote of those present at the meeting. The committee will reach a final decision when consensus is obtained by two-thirds of the members present at the time of the vote. A quorum must be present for a formal vote to take place. The chairperson and vice-chair of the committee shall be elected by the members of the Oversight Committee annually. The chairperson shall provide reasonable prior notice of the meeting to committee members as well as a proposed agenda. e. Responsibilities. The responsibilities of the Oversight Committee are as follows: i. To receive and evaluate reports from the Exchange Administrator and the Permit Administrator(s) regarding Exchange transaction and exchange activity, and to provide such reports to FWS; ii. To audit annually, or contract for the auditing of, the Exchange Administrator s finances and operations and determine if corrective actions are needed to ensure finances and operations are sufficiently in order for the ongoing, consistent operations of the Exchange; iii. To make recommendations regarding the overall effectiveness of the Exchange to FWS, the Exchange Administrator, and the Permit Administrator; iv. To make recommendations to FWS regarding whether changes to the Exchange Area are needed based on recommendations from the Science Committee; HABITAT EXCHANGE AGREEMENT 11

13 v. To establish criteria for selection of Conservation Projects that may receive funds from the Restoration Fund; vi. vii. viii. ix. To establish criteria for accrediting assessors and verifiers of Credits and Debits and make recommendations for FWS approval; To appoint the Science Committee and resolve any objections to membership on such committee; To convene the Science Committee to meet when necessary, but no less than annually; To act on recommendations from the Science Committee regarding Adaptive Management; x. To act on recommendations from the Exchange Administrator regarding the need for revisions to any new performance contracts; xi. xiii. To charge the Science Committee on other matters and act on recommendations from the Science Committee on such charges; To participate in negotiations regarding, and to ultimately approve, any amendment to this Agreement; and xiv. To adopt rules necessary for carrying out these responsibilities. f. Outside Experts Authorized. The Oversight Committee may invite outside experts and other people to participate as observers in the committee s meetings. 2. Exchange Administrator. The Exchange Administrator is responsible for ensuring the following responsibilities, either directly or through the use of qualified contractors that meet criteria developed by the Oversight Committee and approved by FWS: a. Coordinating outreach efforts to encourage participation by landowners, conservation banks, and other potential Participants within the Exchange Area; b. Ensuring the currently accepted quantification tools and forms are available to Participants; HABITAT EXCHANGE AGREEMENT 12

14 c. Facilitating the enrollment of land in the Exchange through the execution of performance contracts and conservation easements; d. Reviewing the performance contracts, conservation easements, and other legal documentation of Participants not directly contracting with the Exchange for enrollment to ensure that those contracts and the Participating Properties to which they pertain meet all Exchange criteria; e. Training and accrediting assessors and verifiers of Credits and Debits in accordance with the criteria set by the Oversight Committee; f. Selecting Conservation Projects, in accordance with the criteria established by the Oversight Committee, to receive funds from the Restoration Fund; g. Performing quality-control checks on information submitted by accredited assessors and verifiers of Credits and Debits; h. Certifying Credit scores and award Credits to those who generate them; i. Facilitating the Transfer of Credits via requests for proposals, bid rounds, reverse auctions, or other means; j. Tracking Credits that are credited or debited, via a Transfer facilitated by the Exchange Administrator or between independent private parties, using a qualified Credit registry; k. To manage the Reserve Account; l. To prepare annual reports regarding Exchange transaction and exchange activity, including Credit transfers and availability, for the Oversight Committee; m. To ensure that the proper financial assurances and performance guarantees are in place to guarantee the Contract and Habitat Performance by Participants, including, if necessary, by auditing Participants; n. To monitor properties for compliance with the Contract and Habitat Performance requirements and conduct any associated biological monitoring; HABITAT EXCHANGE AGREEMENT 13

15 o. To enforce performance contract compliance when necessary; p. To make recommendations to the Oversight Committee regarding the need for revisions to any new performance contracts; and q. To make recommendations to the Oversight Committee regarding operational improvement of the Exchange or other issues as requested by the Oversight Committee. 3. Science Committee. The Science Committee develops and manages biological standards for the Covered Species and Covered Habitat within the Exchange. a. Membership. The Science Committee is appointed by the Oversight Committee and is composed of a minimum of nine (9) and a maximum of twelve (12) members. These members shall be biologists or other qualified scientists with recognized knowledge and expertise on the Covered Species and Covered Habitat. The Science Committee shall include one (1) representative from FWS to be appointed by FWS. Membership shall include the appropriate level of expertise and, to the extent possible, represent a variety of institutions to provide an unbiased assessment of the science regarding the Covered Species. b. Frequency of Meetings. The Science Committee shall meet no less than annually or as necessary to fulfill its responsibilities and meet the needs of the Exchange. c. Procedures and Decision-Making. The Science Committee may meet, in person or via electronic means, if a quorum of the membership is present. Two-thirds of the members must be present (in person or teleconference) to constitute a quorum. The committee shall attempt to operate by consensus, but decisions that cannot be agreed upon shall be determined by a vote of those present at the meeting. The committee will reach a final decision when consensus is obtained by two-thirds of the members present at the time of the vote. A quorum must be present for a formal vote to take place. The chairperson and vice-chair of the committee shall be elected by the members of the Science Committee annually. The representative from FWS may not serve in either of these positions. The chairperson shall provide reasonable prior notice of a meeting to committee members as well as a proposed agenda. The chairperson shall also serve as a member of the Oversight Committee; however, should the chairperson, by virtue of a previous appointment, already be a HABITAT EXCHANGE AGREEMENT 14

16 voting member of the Oversight Committee, then the vice-chair of the Science Committee shall serve on the Oversight Committee. d. Responsibilities. The responsibilities of the Science Committee are as follows: i. To receive and analyze the latest and best-available science regarding the Covered Species and Covered Habitat, and make recommendations regarding research studies that may benefit the Covered Species, Covered Habitat, and the Exchange; ii. iii. iv. To make recommendations to the Oversight Committee regarding adaptive management for the Covered Species and Covered Habitat; To evaluate and make recommendations to the Oversight Committee regarding whether changes to the Exchange Area are needed; To share information or otherwise communicate directly with the Oversight Committee, the Exchange Administrator, and the Permit Administrator; and v. To receive charges from the Oversight Committee and make recommendations to the Oversight Committee on such charges. B. Service Area. A Service Area is a prescribed portion of the Exchange Area within which Credits may be used to offset impacts resulting from an Impact Project. Designation of the Service Areas is based on the conservation needs of the Covered Species and Covered Habitat. 1. A Buyer should purchase Credits that are generated in the same Service Area in which an Impact Project is located; however, the following exceptional cases will justify the purchase of Credits generated in a Service Area other than the one in which the Impact Project is located: a. An Impact Project located in a Service Area that is undertaken after the recovery objectives in that Service Area have been achieved, such that mitigation elsewhere produces an equivalent or preferable benefit to the Covered Species; and b. Impact Projects for which FWS and the Exchange Administrator agree the purchase of Credits in other Service Areas is appropriate. HABITAT EXCHANGE AGREEMENT 15

17 2. With FWS approval, on a case-by-case basis, Credits may also be generated, assessed, and verified on a property located outside of a Service Area if the property is known to be occupied by the Covered Species at the time the property enrolls in a Participant Agreement. 3. Descriptions and a map of the Service Areas for the Covered Species are included in Appendix D. Section Exchange Establishment Date and Pilot Transactions. A. Exchange Establishment Date. The Exchange Establishment Date will occur when this Agreement has been fully executed by the Parties. Transfer of Credits may begin after Credits have been released by FWS as described in Section 2.02(D). B. Pilot Transactions. FWS will conduct a one-time review of Credits generated within any pilot project prior to the Exchange Establishment Date. No pilot projects are permitted after the one-time review. Credits generated within a pilot operation will remain valid and available for Transfer and use for mitigation after the Exchange Establishment Date. HABITAT EXCHANGE AGREEMENT 16

18 ARTICLE 2: CREATION AND ADMINISTRATION OF CREDITS HABITAT EXCHANGE AGREEMENT

19 Article 2: Creation and Administration of Credits. Section Biological Standards and HQT. The biological standards for the creation and maintenance of Credits are described in the HQT (Appendix E). Section Credit Accounting and Administration. A. Credit Accounting. 1. Habitat Quantification Tool. Credits are calculated in accordance with the HQT. Scores determined using the HQT for a Participating Property are equivalent to the amount of Credits for that property. 2. Verification of Credits and Debits. The Exchange Administrator and the applicable Permit Administrator share responsibility for ensuring that Credits and Debits are verified by a qualified, independent third party. The purpose of verification is to guarantee the quantity and quality of Credits and that Debits are accurately measured using the HQT. a. Debit Verification. Verification of a Debit shall be conducted in accordance with a FWS-approved HCP or other regulatory permit that uses the HQT. b. Credit Verification. Verification of Credits must be performed at the following points in the generation process: i. Before the first release of Credits on a Participating Property; ii. iii. iv. Before additional Credits may be released; Within five years of the most recent verification; and At the request of FWS. c. Random Verification of Credits for Quality Control. At any time, the Exchange Administrator may select a representative sample of Participating Properties for periodic, random verification to ensure consistency of verification of Credit sites. d. Limitation on Periodic Random Verification. In conducting periodic, random verifications under Section 2.02 (A)(2)(d), the Exchange Administrator or its designee may review approximately ten percent (10%) of Credit sites. In selecting a site for periodic, random verification, the Exchange Administrator must consider HABITAT EXCHANGE AGREEMENT 17

20 how recently a Participating Property was verified, so as not to unreasonably burden the Participant. e. Confidentiality. Information provided for verification or gathered in a site inspection is subject to Section 6.01 (Confidentiality). f. Conflict of Interest. Verifiers must demonstrate their ability to assess Credit and Debit sites without conflicts of interest. This includes disclosing any pre-existing relationships between the Credit Developer and the verifier to the Exchange Administrator prior to the assessment of a site. B. Credit Registry. The Exchange Administrator or a qualified contractor shall use a Registry to manage the accounting and transfer of Credits in the Exchange. Credits will be listed, serialized, and tracked on the Registry. The Registry will also include information regarding Conservation Projects, the effects of those projects, and supporting documentation for the projects. Any information from the Registry that is available to external audiences shall comply with the confidentiality provisions of this document. C. Schedule of Payment to Participants. The Exchange Administrator may work with the Participant to determine a schedule to pay Participants for the generation of Credits in accordance with the Credit Release schedule. D. Release of Credits. Approval of Credits by FWS is required before Credits may be transferred. 1. Review by FWS. FWS shall review the following information to determine the number of Credits that may be available for release: a. the verification report for the Credits from which confidential information has been redacted; b. a satellite or aerial image that excludes information that would allow identification of the geographic location of the property and site photographs of the Participating Property; c. a map of the Participating Property at a scale that obscures the geographic location of the property; d. information regarding the relevant financial assurances that have been provided; and e. real estate protections (easement documents, etc.) as appropriate. HABITAT EXCHANGE AGREEMENT 18

21 2. FWS Review Required for Subsequent Releases. Each release of additional Credits on a Participating Property requires review by FWS under this section. 3. Approval Target. FWS shall use best efforts to approve Credits for release not later than the fifth business day after the Exchange Administrator submits all required information for Credits for approval. 4. Release of Credits Generated By Preservation of Participating Property. a. When Credits have been assessed and verified as existing on a Participating Property and any required financial assurances and performance guarantees have been provided, and the Credits have been released by FWS, then the Credits are immediately available for Transfer upon the execution of the Participant Agreement and Customized Management Plan. b. Additional Credits subsequently created on a Participating Property are available for Transfer when all of the following criteria are met: i. Pre-established conservation actions, as described in the applicable Customized Management Plan, are implemented or completed, depending upon the action; ii. Any required financial assurances and performance guarantees are secured; iii. Additional Habitat Performance, as calculated in accordance with the HQT, has been verified; and iv. Release of the Credits has been approved by FWS. 5. Release of Credits Generated By Restoration of Participating Property. Credits generated through the restoration of a Participating Property shall be made available for Transfer when the criteria described below are met. a. Five percent (5%) of the total Credits anticipated to be available on a Participating Property shall be made available when the property is secured under a Participant Agreement; b. An additional five percent (5%) of the total Credits anticipated to be available on a Participating Property shall be made available when pre-established conservation actions, as described in the applicable Customized HABITAT EXCHANGE AGREEMENT 19

22 Management Plan, are implemented or completed, depending upon the action; c. An additional fifteen percent (15%) of the total Credits anticipated to be available on a Participating Property shall be made available when 25 percent (25%) of the anticipated Habitat Performance, as calculated in accordance with the HQT, has been verified on the Participating Property and 25 percent (25%) of any required financial assurances and performance guarantees are secured; and d. Additional Credits subsequently created on a Participating Property are available for Transfer when the following criteria are met: i. Pre-established conservation actions, as described in the applicable Customized Management Plan, are implemented or completed, depending upon the action; ii. iii. iv. Any required financial assurances and performance guarantees are secured; Additional Habitat Performance, as calculated in accordance with the HQT, has been verified; and Release of the Credits has been approved by FWS. 6. Reserve Account Access. If the Exchange Administrator determines that a Participating Property has not generated the number of Credits released in accordance with Sections 2.02(D)(5)(a) and (b) by a date specified in the property s Customized Management Plan, the Exchange Administrator shall use Credits in the Reserve Account to replace the missing Credits. 7. Verification shall be conducted in accordance with Section 2.02 (A)(2) and the schedule specified in the Participant Agreement attached as Appendix B. 8. The Participant or Exchange Administrator may at any time request an additional verification at the requesting party s own cost and petition for subsequent release of any Credits verified on a Participating Property. 9. Before each Transfer of Credits to a Buyer is completed, the Exchange Administrator shall deposit the appropriate number of Credits into the Reserve Account as required by Section HABITAT EXCHANGE AGREEMENT 20

23 E. Production and Release of Surplus Credits. If a subsequent analysis of a Participating Property reveals that more Credits have been produced on the property than have been previously verified, the Exchange Administrator may agree to adjust upwards the number of Credits available for release on the property as applicable and appropriate, based on such new analysis and the HQT. Participants may request, at their own expense, reevaluation of a Participating Property at any time. The additional Credits shall be made available for Transfer after the Exchange Administrator receives notice that the additional Credits have been verified, all necessary documents and performance contracts are in place and the Credits have been released by the FWS. Credit shortfalls will be addressed in Section 2.05 (Reserve Account) and Section 2.09 (Remedial Plan) of this Agreement. F. Modification of the Habitat Quantification Tool. The HQT may be modified as deemed necessary by the Oversight Committee and FWS, in accordance with the recommendation of the Science Committee, using Adaptive Management principles, as described in Section 2.06 of this Agreement. The modified HQT may not be applied retroactively. A Participating Property that enrolls in the Exchange or renews a Participant Agreement on or after the date the modified HQT is approved is subject to the modified HQT. A Participant whose Participant Agreement is not up for renewal may also choose to have the modified HQT apply to a Participating Property. Section Transaction and Monitoring Procedures. A. Transfer of Credits. 1. When Transfers May Occur. The Transfer of Credits may occur after FWS has released the Credits as provided by Section 2.02(D). The Exchange Administrator may not sell or Transfer Credits before they are released by FWS. 2. Credits Transferred or Obligated May Not Exceed Credits Available for Transfer. The number of Credits transferred or obligated may not exceed the total number of Credits released by FWS for Transfer. 3. Purchase Agreement. Each Transfer of Credits shall be made pursuant to a Credit Purchase Agreement, attached as Appendix G. B. Retirement of Credits. The Exchange Administrator shall mark a Credit that is transferred and used for mitigation as retired in the Registry. C. Tracking of Credits. The Exchange Administrator is responsible for tracking the generation and use of Credits in the Registry. The Exchange Administrator shall track: HABITAT EXCHANGE AGREEMENT 21

24 1. The number of Credits that are used for mitigation, deposited into the Reserve Account, or retired for non-mitigation purposes for the benefit of the Covered Species as a contribution to recovery; 2. The purpose for which Credits were purchased and, if purchased for mitigation, the permit under the ESA that allows for incidental take of the Covered Species or Covered Habitat; and 3. Additional data the Exchange Administrator deems necessary to meet the mitigation transaction criteria and the reporting requirements of Section 2.03(G). D. Biological and Compliance Monitoring. The Exchange Administrator shall ensure that adequate monitoring of Participating Properties is completed to ensure compliance with the Exchange requirements and observe the biological response of the Covered Species and the Habitat Performance of the Covered Habitat. Further detail is provided in Appendix J and K. E. Verification of Compliance by FWS. Exchange Administrator acknowledges that FWS may verify compliance by Participants upon request. Verification of compliance may be obtained by various means but physical access to Participating Properties by FWS is governed by Section 2.03(F). In verifying compliance, FWS may inspect Participants compliance with obligations incurred through Participants participation in the Exchange only. F. Site Access by FWS. If FWS finds it necessary, FWS may request to visit a Participating Property but may not inspect the Property unless the Participant, or the owner of the surface estate as appropriate, consents to the inspection in writing. If the Participant or surface estate owner declines to give consent, the Exchange Administrator may contract with an accredited verifier for an inspection or additional verification of Credits on the Participating Property which will be conducted within 30 days of receiving the request from FWS. The Participant or surface estate owner shall pay the costs of the inspection or additional verification by the third-party. FWS will review the additional information and provide notice to the Exchange Administrator within two weeks that the issue has been resolved or that further action is necessary. If further action is necessary, Participant must either: (1) allow FWS access to the Participating Property to conduct their own verification so long as the FWS representative is accompanied by the Exchange Administrator or its agent; or (2) comply with the buy-out terms as specified in the Participant Agreement. G. Annual Reporting Requirements. The Exchange Administrator shall file a report with FWS, in portable document format (PDF) and hard copy, on or before September 1 of each year following the establishment of the Exchange. The Exchange Administrator shall provide a copy of the report to the Oversight Committee. Each annual report shall cover the most recently completed calendar HABITAT EXCHANGE AGREEMENT 22

25 year. Coupled with any FWS-required annual report received from permits serviced by the Exchange in a given year, the information provided to the Oversight Committee must ultimately be able to track a Credit purchased for the purpose of mitigation back to the particular Impact Project being offset. The Exchange Administrator shall be responsible for the reporting tasks described below. The annual report shall include: 1. the number of Participants; 2. the amount of enrolled acreage by Service Area, management unit and type of conservation; 3. accountings of Credits that have been registered but have not been Transferred, Credits transferred, Credits retired for non-mitigation purposes for the benefit of the Covered Species and Covered Habitat as a contribution to recovery, and Credits in the Reserve Account; 4. an accounting of Credits and funds from the Restoration Fund used in Remedial Actions; 5. recommendations developed by the Science Committee; 6. financial operations of the Exchange, including an itemized accounting of any and all activity regarding the accounts dedicated to the management of Participating Properties as well as any funds managed under the Exchange for the purposes of future Credit purchases as a result of any agreement between the Exchange Administrator and another party; 7. a report of financial guarantees held by third parties; 8. results of Compliance Monitoring; 9. results of Biological Monitoring; 10. results of verification activities and reports; 11. conservation easement documentation reports; 12. modifications to management plans; and 13. an evaluation of the overall effectiveness of the Exchange. HABITAT EXCHANGE AGREEMENT 23

26 Section Use of Credits. A. Credit Resale. 1. Required Resale After Three Years; Authorized Exception. Except as provided by Section 2.04(B), if a Buyer does not use Credits for mitigation within three (3) years of the date of purchase, the Buyer must offer those Credits for resale in the Exchange. A Buyer may secure one three-year extension on the requirement to offer Credits for resale if the Buyer submits a written statement to the Exchange Administrator attesting that the Buyer intends to use the Credits for mitigation not later than six (6) years from the original purchase date. The Exchange Administrator shall notify the Buyer of any initial or extended use deadline not less than 120 days and not more than 150 days prior to the deadline. If Buyer does not offer Credits up for resale as required, the Exchange Administrator will reacquire the Credits in accordance with the Credit Purchase Agreement and offer them up for sale in the Exchange. A Buyer who fails to comply with this section will not receive the proceeds from the resale of the Credits. 2. Resale Price Limitation. A Credit resold to or through the Exchange, including a Credit required to be resold under Section 2.04(A)(1), must be offered at market or a price not to exceed one hundred ten percent (110%) of the original purchase price, whichever is less. 3. Transfer of Credits to Third Party. A Buyer may transfer Credits to a third party at any time, including by private sale or by transfer of assets if the Buyer is acquired by another party. The Buyer shall notify Exchange Administrator of any Transfer of Credits. Credits transferred under this section remain subject to the terms and requirements of the original purchase agreement, including deadlines for use for mitigation or resale and other requirements described in Section 2.04(B). Exchange Administrator shall notify FWS of the Transfer and record it in the registry, including information regarding the identity of the third party and the intended use of the Credits. B. Credits Retired For Non-Mitigation Purposes for Species Benefit. A limited number of Credits may be retired for non-mitigation purposes for the benefit of the Covered Species as a contribution to recovery. The retirement of Credits for species benefit for non-mitigation purposes serves the management goals, including the establishment and growth of strongholds, outlined in FWS s July 2012 Technical White Paper titled Conservation Needs of the Lesser Prairie- Chicken. In addition, Credits retired for non-mitigation purposes are intended to achieve the conservation needs and facilitate the recovery of the Covered Species by balancing the preservation and restoration of Covered Habitat. HABITAT EXCHANGE AGREEMENT 24