Before signing a carbon contract, it’s important to understand terms regarding carbon measurement and data privacy. There are other factors that could weigh on your decision to sign, as Tiffany Lashmet, Texas A&M Extension Agriculture Law specialist, explains.

Consider these four questions before signing a contract with a carbon aggregator or other company such as an input supplier or retailer.

1. How will your sequestered carbon be measured or verified?

2. What methods will be used and when?

3. Who will pay for testing?

4. Does it include a no-reversal clause?

A no-reversal clause is a guarantee by the landowner that whatever amount of carbon is initially measured will not shrink going forward. For example, if there’s 10 tons of carbon in the soil, the next time it’s measured, a no-reversal guarantees there will be at least 10 tons or more of carbon. Is that something you can promise? “I don’t know how I make that guarantee because there’s a lot of things about carbon that I can’t control,” Lashmet says. “Maybe I do all the practices that I’m supposed to – the no-till, the cover crops – and then there’s a drought. What happens then to carbon sequestered? It goes down and I don’t have any control over that. What if there’s a wildfire? What if it’s measured wrong or I have a problem with your model?”

Before signing, determine what it’s asking and if that’s something you are willing to agree to.

Data privacy

Carefully review the contract provisions regarding data creation, storage, and ownership to ensure your interests are protected.

With a carbon contract producers may need to share yields, pesticide volumes and fire history. On the livestock side you may need to share birth weights, weaning weights and conception percentages. Companies want “all of it,” Lashmet says.

Texas A&M AgriLife Extension Agriculture Law Specialist Tiffany Lashmet. (Photo Shelley E. Huguley)

Carbon contractors may also demand rights to enter the property and in some cases take aerial drone imaging.

Determine if the company has the right to sell or make public your data. You should decide if you’re comfortable with that loss of privacy.

What is ‘right to assign’?

Understand the ‘right to assign’ terms. As the landowner, the contract is likely to limit your right to transfer your rights and obligations under the contract, whereas the company likely will not have those same limitations.

“Say I am going with company A, and that's the only company I want to do business with. A week later, company A can assign that contract to company B,” Lashmet explains. “So, pay attention to that.”

Class action lawsuits

Pay attention to the terms regarding class action lawsuits. Lashmet has seen a contract that basically says, “If you’re going to sue the company related to this contract, you agree it’s going to be on an individual basis. You will not be part of any class action lawsuit.”

Also, note any attorney fee provisions, payment for negotiation and/or drafting, dispute resolution and scope of waiver clauses.

Signing an agreement with a private company is a promise to provide something of value in exchange for something of value. There are countless models available, and they are not the same. Seek legal counsel before signing and make sure you know what you are selling or giving up. For more information, visit Lashmet's Texas Agriculture Law Blog and search "carbon contracts," for blogs and links to podcasts.