The Forest Protocol & Project Case Study Alligator River Avoided Conversion Project California Cap-and-Trade Workshop Climate Action Reserve June 14, 2011

CONFIDENTIAL - Subject to NDA 2 | 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 NDA 3 | Blue Source | A Leading Climate Change Portfolio About Blue Source Carbon Credit Portfolio  Leading domestic project development and marketing for over 10 years  M 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 NDA 9 | 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 NDA 11 | 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 Townsend Chief Commercial Officer Blue Source P: E: