Nature-Based Solutions

However, with hard-to-mitigate emissions, we have invested in high-quality, reliable nature-based carbon credits that advance biodiversity and provide social benefits. Protecting natural carbon sinks like forests and grasslands is one of the most cost-effective forms of carbon mitigation as we work to limit global temperature rise to 1.5°C. These double gold certified carbon offsets are applied against less than 1.5% of our Scope 1 emissions (see Five-Year Performance table).

In the rainforest of the Congo Basin, we have committed to a five-year partnership designed to protect forests that would otherwise be at risk of deforestation from logging and secondary deforestation, thereby avoiding the release of carbon emissions and maintaining a critical ecosystem. The project protects 740,000 acres of critical bonobo, pangolin and forest elephant habitat within the world’s second largest tropical rainforest.

The project team has invested in building and renovating schools, providing healthcare services (such as access to immunizations), supporting food security and nutrition through agricultural diversification, and implementing enterprise capacity-building activities that empower local communities and reduce their need to clear trees to grow food or hunt bushmeat to eat. The conservation success of this project is founded on the direct investments that carbon revenues deliver to more than 30,000 local and Indigenous people spanning 23 villages within the project area. The certified carbon offset investments are creating a new pathway for community prosperity with investments being used to address local needs essential to their well-being and the permanence of the surrounding environment.

As of the project’s most recent verification, 11 schools have been completed of 28 planned over the project’s lifetime. In addition, the project has funded the completion of one hospital, renovated two others and is in the process of constructing an additional hospital. The project has also established 11 water wells in villages to help reduce the occurrence of waterborne diseases. Through these and other community focused investments, the project has avoided the emission of over 22 million tCO₂e.

We have teamed up with Grassroots Carbon (GRC, previously known as Soil Value Exchange), a soil carbon credit company that connects American ranchers with companies looking to reduce their carbon footprint. To deliver high-quality soil carbon storage credits, GRC uses an internationally recognized soil measurement methodology and the Regen standard for independent verification and certification requirements.

The carbon credits incentivize sustainable land management techniques, enabling ranchers and farmers to practice regenerative grazing techniques that draw carbon from the atmosphere and store it in a deep grass root structure. Higher carbon soil content is critical to reestablishing soil and watershed health and improving biodiversity. It also reduces the need for fertilizers and pesticides. In addition, the deep root structure of the healthy grasses filters water before it hits streams and rivers, reducing contaminates in the water.

In the switch from continuous grazing (the traditional practice) to adaptive multi-paddock grazing (the regenerative practice), some land managers see a shift from water infiltration of less than one inch per hour to greater than eight inches per hour. This improved water infiltration has massive impacts for downstream flooding and runoff, while also allowing the land and grasses to retain the water they need to remain healthy. This innovative approach has the capacity to capture and store 1 billion tonnes, or 25%, of all U.S. atmospheric CO₂ emissions each year.

To date, GRC has distributed more than $2 million to ranchers representing 200,000 acres. Nearly 150,000 tons of carbon have been removed from the atmosphere as a result of this pioneering grazing practice. In early 2023, we extended our partnership with GRC to a five-year commitment.

Putting Sustainable Grazing Techniques into Practice

“Carbon credits are a win-win for everyone. The companies purchasing these credits get to offset their carbon emissions. The payments to ranchers incentivize positive land management practices focused on building natural capital — soil health, water infiltration, biodiversity and so much more. Watching the land, livestock and wildlife flourish has been the most rewarding part of practicing regenerative agriculture.” – Travis Krause, seventh-generation Texas rancher and graduate of Texas A&M University, Wildlife and Fisheries Sciences

“Due to past land practices, restoration work can be a financial challenge. Carbon credits provide landowners with additional capital to make the necessary management decisions to improve the land and natural habitat.” – Frates Seeligson, rancher and graduate of Duke University, TCU Ranch Management and SMU Cox School of Business MBA

Since January 2020, we received a Notice of Violation (NOV) from the EPA alleging Clean Air Act violations associated with our North Dakota operations. Enforcement action is expected to result in monetary sanctions and injunctive requirements. We maintain an accrual for estimated future costs related to this matter regarding actions required to retrofit or replace existing equipment, which we expect to incur over multiple years. Our accrual does not include possible monetary sanctions or costs associated with mitigation projects, as we are currently unable to estimate those amounts. There exists substantial uncertainty as to the ultimate result of this matter and it is reasonably possible the result could be materially different from our expectations and our accrual.

The company has also received NOVs from the EPA relating to alleged Clean Air Act violations following flyovers conducted in 2020 and 2022 over certain of the company’s oil and gas facilities in New Mexico. The notices involve alleged emissions and permitting violations. We initiated discussions with the EPA to resolve these matters. As we are still investigating these allegations, we are unable to estimate the potential loss associated with these matters.

We’re cooperating fully with associated federal agencies and are aggressively working in a transparent manner to confirm ongoing compliance with applicable requirements. Specifically, we’re reviewing and enhancing how we design closed-vent systems and calculate air emissions. We take such allegations and issues very seriously and are focused on enhancing our systems and programs.

For more information on environmental proceedings, please see our Aug. 3, 2023 10-Q Quarterly Report and 2022 Annual Report on Form 10-K.