Star Royalties Ltd (TSX-V:STRR) said it has inked a unique new agreement with Blue Source LLC (Bluesource) to create verified carbon offset credits for North American farmers.
The agreement – signed by Star’s subsidiary Green Star Royalties – is the start of a pilot program that will see Bluesource and Locus Agricultural Solutions partner to incentivize regenerative agriculture practices on 320,000 acres of farmland by maximizing soil health and carbon sequestration capacity.
Toronto-based Star Royalties told investors that Green Star expects the pilot phase to result in over 500,000 carbon offset credits per year, which will be available for sale in the voluntary carbon market.
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Green Star will provide the financing and Bluesource will execute the carbon offset development and sales, according to the companies.
The program aims to finance and boost the transition to sustainable farming practices and provide carbon finance to farmers across the midwestern US.
Bluesource has developed and sold carbon credits that represent over 150 million tonnes of carbon dioxide equivalent emissions removed from or avoided being released into the atmosphere, with the goal of reducing 500 million tonnes by 2025, according to Star Royalties CEO Alex Pernin.
“Our teams are jointly passionate about financing a greener future. We view the application of Star’s royalty investment model as an innovative solution to financing the transition of US farmers to regenerative agriculture, and in turn, to originating premium carbon offset credits,” Pernin said in a statement.
Jamie MacKinnon, Executive Vice President of Bluesource, added: “The potential for climate action in the agricultural sector is significant and critical to enact if we are to achieve necessary global emission reductions. The power and capacity for change resides with small and large-scale farms alike, but the level of complexity, cost, and mechanisms required to get involved have all presented formidable barriers until now.”
Deal terms
Under the terms of the deal, Green Star will finance a regenerative agriculture carbon offset program developed and managed by Bluesource for an initial capital contribution of up to $5 million in cash, which will be made available to growers in this initial program through Locus AG's CarbonNOW program. Locus AG will also be actively recruiting growers under this pilot project until a total of 320,000 acres of farmland across the midwestern US are adopted into the program.
Green Star Royalties expects initial funding of the investment to begin in the first quarter of 2022, with further quarterly tranches drawn by Bluesource, as required, until the entire $5 million is invested.
The pilot project investment has a term of 11.5 years and the future financial benefits derived from the monetization of the pilot project’s carbon offset credits will be split between the growers, Bluesource, and Green Star Royalties.
The program expects to generate revenues from over 500,000 carbon offset credits per annum under a voluntary regime starting in 2023.
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