Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a) The conflict of interest provisions of
this section shall apply to verification bodies, lead verifiers, and offset
verifiers accredited by ARB to perform offset verification services for Offset
Project Operators, and Authorized Project Designees, if applicable, as well as
any other member of the offset verification team and any technical
consultant(s) used by the Offset Project Operator or Authorized Project
Designee, if applicable.
(b)
"Member" for the purposes of this section means any employee or subcontractor
of the verification body or related entities of the verification body. "Member"
also includes any individual with majority equity share in the verification
body or its related entities. "Related entity" for the purposes of this section
means any direct parent company, direct subsidiary, or sister company.
"Non-offset verification services" for purposes of this section do not include
independent, third-party certification or verification services which have been
provided for ARB or any other voluntary or mandatory program; such
certification and verification services may be counted as offset verification
services for the purposes of this section. The potential for a conflict of
interest must be deemed to be high where:
(1)
The verification body and Offset Project Operator, Authorized Project Designee,
if applicable, and their technical consultant(s) share any senior management
staff or board of directors membership, or any of the senior management staff
of the Offset Project Operator, Authorized Project Designee, if applicable, and
their technical consultant(s) have been employed by the verification body, or
vice versa, within the previous three years; or
(2) Within the previous five years, any staff
member of the verification body or any related entity or any member of the
offset verification team has provided to the Offset Project Operator,
Authorized Project Designee, if applicable, and their technical consultant(s)
any of the following non-offset verification services:
(A) Designing, developing, implementing,
reviewing, or maintaining an inventory or offset project information or data
management system for air emissions or development of a forest management plan,
or timber harvest plan, unless the review was part of providing GHG offset
verification services;
(B)
Developing GHG emission factors or other GHG-related engineering analysis,
including developing or reviewing a California Environmental Quality Act (CEQA)
GHG analysis that includes offset project specific information;
(C) Designing energy efficiency, renewable
power, or other projects which explicitly identify GHG reductions and GHG
removal enhancements as a benefit;
(D) Designing, developing, implementing,
internally auditing, consulting, or maintaining an offset project resulting in
GHG emission reductions and GHG removal enhancements;
(E) Owning, buying, selling, trading, or
retiring shares, stocks, or ARB offset credits or registry offset credits from
the offset project;
(F) Dealing in
or being a promoter of ARB offset credits or registry offset credits on behalf
of an Offset Project Operator, Authorized Project Designee, if applicable, and
their technical consultant(s);
(G)
Preparing or producing GHG-related manuals, handbooks, or procedures
specifically for the Offset Project Operator, Authorized Project Designee, if
applicable, and their technical consultant(s);
(H) Appraisal services of carbon or GHG
liabilities or assets;
(I)
Brokering in, advising on, or assisting in any way in carbon or GHG-related
markets;
(J) Directly responsible
for developing any health, environment or safety policies for the Offset
Project Operator, Authorized Project Designee, if applicable, and their
technical consultant(s);
(K)
Bookkeeping or other services related to the accounting records or financial
statements;
(L) Any service related
to information systems, including International Organization for
Standardization 14001 Certification for Environmental Management (ISO 14001
Certification), unless those systems will not be reviewed as part of the offset
verification process;
(M) Appraisal
and valuation services, both tangible and intangible;
(N) Fairness opinions and
contribution-in-kind reports in which the verification body has provided its
opinion on the adequacy of consideration in a transaction, unless the
information reviewed in formulating the Offset Verification Statement will not
be reviewed as part of the offset verification services;
(O) Any actuarially oriented advisory service
involving the determination of amounts recorded in financial statements and
related accounts;
(P) Any internal
audit service that has been outsourced by the Offset Project Operator,
Authorized Project Designee, if applicable, and their technical consultant(s)
that relates to the Offset Project Operator's, Authorized Project Designee's,
if applicable, and their technical consultant(s) internal accounting controls,
financial systems, or financial statements, unless the systems and data
reviewed during those services, as well as the result of those services will
not be part of the offset verification process;
(Q) Acting as a broker-dealer (registered or
unregistered), promoter, or underwriter on behalf of the Offset Project
Operator, Authorized Project Designee, if applicable, and their technical
consultant(s);
(R) Any legal
services; and
(S) Expert services
to the Offset Project Operator, Authorized Project Designee, if applicable, and
their technical consultant(s) or a legal representative for the purpose of
advocating the Offset Project Operator's, Authorized Project Designee's, if
applicable, and their technical consultant(s) interests in litigation or in a
regulatory or administrative proceeding or investigation, unless providing
factual testimony.
(3)
Within the previous three years, any staff member of the verification body or
any related entity or any member of the offset verification team has provided
to the ozone depleting substances destruction facility a third-party
certification of a facility to meet the requirements set forth by the United
Nations Environment Programme Ozone Secretariat's Technology and Assessment
Panel (TEAP) for ozone depleting substances destruction.
(4) The potential for conflict of interest
will be deemed to be high when any member of the verification body provides any
type of incentive to an Offset Project Operator, Authorized Project Designee,
if applicable, and their technical consultant(s) to secure an offset
verification services contract.
(5)
The potential for a conflict of interest will also be deemed to be high where
any member of the verification body has provided offset verification services
for the Offset Project Operator, Authorized Project Designee, if applicable,
and their technical consultant(s) except within the time periods in which the
Offset Project Operator, Authorized Project Designee, if applicable, and their
technical consultant(s) is allowed to use the same verification body as
specified in section
95977.1(a).
(c) The potential for a conflict of interest
must be deemed to be low where no potential for a conflict of interest is found
under section
95979(b) and any
non-offset verification services provided by any member of the verification
body to the Offset Project Operator, Authorized Project Designee, if
applicable, and any technical consultant(s) used by the Offset Project Operator
or Authorized Project Designee within the last five years are valued at less
than 20 percent of the fee for the proposed offset verification, except where
medium conflict of interest related to personal, employment, or family
relationships is identified pursuant to section
95979(d).
(d) The potential for a conflict of interest
must be deemed to be medium where the potential for a conflict of interest is
not deemed to be either high or low as specified in sections
95979(b) and
95979(c), or
where there are any instances of personal, employment, or familial
relationships between the verification body and management or employees of the
Offset Project Operator or Authorized Project Designee, if applicable, and any
technical consultant(s) used by the Offset Project Operator or Authorized
Project Designee and when a conflict of interest self-evaluation is submitted
pursuant to section
95979(g). For
purposes of section
95979 only, "employment" means the
condition of having paid work documented in a W-2 form. If a verification body
identifies a medium potential for conflict of interest and intends to provide
offset verification services for the Offset Project Operator, Authorized
Project Designee, if applicable, and any technical consultant(s) used by the
Offset Project Operator or Authorized Project Designee for an offset project
listed with ARB or an Offset Project Registry, the verification body must
submit, in addition to the submittal requirements specified in section
95979(e), a plan
to avoid, neutralize, or mitigate the potential conflict of interest situation.
At a minimum, the conflict of interest mitigation plan must include:
(1) A demonstration that any members with
potential conflicts have been removed and insulated from the project;
(2) An explanation of any changes to the
organizational structure or verification body to remove the potential conflict
of interest. A demonstration that any unit with potential conflicts has been
divested or moved into an independent entity or any subcontractor with
potential conflicts has been removed; and
(3) Any other circumstance that specifically
addresses other sources for potential conflict of interest.
(e) Conflict of Interest Submittal
Requirements for Accredited Verification Bodies. Before providing any offset
verification services, the verification body must submit to the Offset Project
Operator, and Authorized Project Designee, if applicable, ARB and the Offset
Project Registry, a self-evaluation of the potential for any conflict of
interest that the verification body, its staff, its related entities, or any
subcontractors performing offset verification services may have with the Offset
Project Operator, Authorized Project Designee, if applicable, and their
technical consultant(s) for which it will perform offset verification services.
Offset verification services shall not commence prior to approval of the
conflict of interest self-evaluation by ARB or the Offset Project Registry
pursuant to section
95979(f). The
submittal must include the following:
(1)
Identification of whether the potential for conflict of interest is high, low,
or medium based on factors specified in sections
95979(b), (c), and
(d);
(2) Identification of whether any member of
the offset verification team has previously provided offset verification
services for the Offset Project Operator, Authorized Project Designee, if
applicable, and their technical consultant(s), and, if so, the years in which
such offset verification services were provided; and
(3) Identification of whether any member of
the offset verification team or related entity has engaged in any non-offset
verification services of any nature with the Offset Project Operator,
Authorized Project Designee, if applicable, and their technical consultant(s)
either within or outside California during the previous five years. If
non-offset verification services have previously been provided, the following
information must also be submitted:
(A)
Identification of the nature and location of the work performed for the Offset
Project Operator, Authorized Project Designee, if applicable, and their
technical consultant(s) and whether the work is similar to the type of work to
be performed during offset verification;
(B) The nature of past, present, or future
relationships with the Offset Project Operator, Authorized Project Designee, if
applicable, and their technical consultant(s), including:
1. Instances when any member of the offset
verification team has performed or intends to perform work for the Offset
Project Operator, Authorized Project Designee, if applicable, and their
technical consultant(s);
2.
Identification of whether work is currently being performed for the Offset
Project Operator, Authorized Project Designee, if applicable, and their
technical consultant(s), and if so, the nature of the work;
3. How much work was performed for the Offset
Project Operator, Authorized Project Designee, if applicable, and their
technical consultant(s) in the last five years, in dollars;
4. Whether any member of the offset
verification team has any contracts or other arrangements to perform work for
the Offset Project Operator, Authorized Project Designee, if applicable, and
their technical consultant(s) or a related entity; and
5. How much work related to GHG reductions
and GHG removal enhancements the offset verification team has performed for the
Offset Project Operator, Authorized Project Designee, if applicable, and their
technical consultant(s) or related entities in the last five years, in
dollars;
(C) Explanation
of how the amount and nature of work previously performed is such that any
member of the offset verification team's credibility and lack of bias should
not be under question;
(D) A list
of names of the staff that would perform offset verification services for the
Offset Project Operator, and Authorized Project Designee, if applicable, and a
description of any instances of personal, employment, or family relationships
with management or employees of the Offset Project Operator, Authorized Project
Designee, if applicable, and their technical consultant(s) that potentially
represent a conflict of interest;
(E) Identification of any other circumstances
known to the verification body, or Offset Project Operator, Authorized Project
Designee, if applicable, and their technical consultant(s) that could result in
a conflict of interest; and
(F)
Attest, in writing, to ARB as follows:
"I certify under penalty of perjury of the laws of the
State of California the information provided in the Conflict of Interest
submittal is true, accurate, and
complete."
(f) Approval of Conflict of Interest
Submittals. ARB or the Offset Project Registry must review the self-evaluation
submitted by the verification body and determine whether the verification body
is authorized to perform the offset verification services for the Offset
Project Operator and Authorized Project Designee, if applicable.
(1) ARB or the Offset Project Registry has 30
calendar days to make a determination whether to accept or deny the conflict of
interest submittal and notify the verification body whether it may proceed with
the offset verification services for the Offset Project Operator and Authorized
Project Designee, if applicable.
(A) If ARB or
an Offset Project Registry requests revisions to the conflict of interest self
evaluation prior to approval, the verification body must resubmit the revised
conflict of interest self evaluation within 10 working days of such request, or
if there is a reason the verification body cannot submit the revisions within
10 working days, the verification body must communicate to ARB and the Offset
Project Registry, in writing, as to the reasons why and get approval from ARB
or the Offset Project Registry for an extension.
(B) If ARB or the Offset Project Registry
determines that the verification body or any member of the offset verification
team meets the criteria in section
95979(b), ARB or
the Offset Project Registry shall find a high potential conflict of interest
and offset verification services may not proceed.
(C) If ARB or the Offset Project Registry
determines that there is a low potential conflict of interest, offset
verification services may proceed.
(D) If ARB or the Offset Project Registry
determines that the verification body or any member of the offset verification
team have a medium potential for conflict of interest, ARB or the Offset
Project Registry shall evaluate the conflict of interest mitigation plan
submitted by the verification body pursuant to section
95979(d), and may
request additional information from the applicant to complete the
determination. In determining whether offset verification services may proceed,
ARB or the Offset Project Registry may consider factors including, but not
limited to, the nature of previous work performed, the current and past
relationships between the verification body, related entities, and its
subcontractors with the Offset Project Operator and Authorized Project
Designee, if applicable, and any technical consultant(s) used by the Offset
Project Operator or Authorized Project Designee, and related entities, and the
cost of the offset verification services to be performed. If ARB or the Offset
Project Registry determines that these factors when considered in combination
demonstrate an acceptable level of potential conflict of interest, ARB or the
Offset Project Registry will authorize the verification body to provide offset
verification services.
(2) If the offset project was listed with an
Offset Project Registry, the conflict of interest self-evaluation acceptance or
denial notification will be given by the Offset Project Registry. Within 15
calendar days of approving a conflict of interest self-evaluation, the Offset
Project Registry must notify ARB in writing of the date on which it approved
the self-evaluation.
(3) When a
conflict of interest self-evaluation is updated before or during offset
verification services to add a verification team member, ARB or the Offset
Project Registry must approve the updated self-evaluation before any new team
member participates in offset verification services. Within 15 calendar days of
approving an updated self-evaluation, the Offset Project Registry must notify
ARB in writing of the date on which it approved the updated
self-evaluation.
(g)
Monitoring Conflict of Interest Situations.
(1) After commencement of offset verification
services, the verification body must monitor and immediately make full
disclosure, in writing, to ARB and the Offset Project Registry regarding any
potential for a conflict of interest situation that arises for an offset
project using a Compliance Offset Protocol. This disclosure must include a
description of actions that the verification body has taken or proposes to take
to avoid, neutralize, or mitigate the potential for a conflict of
interest.
(2) The verification body
must continue to monitor arrangements or relationships that may be present for
a period of one year after the completion of offset verification services for
an offset project using a Compliance Offset Protocol. During that period,
within 30 days of the verification body or any verification team member
entering into any contract with the Offset Project Operator, and Authorized
Project Designee, if applicable, for which the verification body has provided
offset verification services, the verification body must notify ARB and the
Offset Project Registry of the contract and the nature of the work to be
performed. ARB or the Offset Project Registry, within 30 working days, will
determine the level of conflict using the criteria in sections
95979(a) through
(d), if the Offset Project Operator, and
Authorized Project Designee, if applicable, must re-verify their Offset Project
Data Report, and if accreditation revocation is warranted by ARB.
(3) The verification body must notify ARB and
the Offset Project Registry within 30 calendar days, of any emerging conflicts
of interest during the time offset verification services are being provided for
an offset project using a Compliance Offset Protocol.
(A) If ARB or the Offset Project Registry
determines that an emerging potential conflict disclosed by the verification
body is medium risk, and this risk can be mitigated, then the verification body
meets the conflict of interest requirements to continue to provide offset
verification services for the Offset Project Operator, and Authorized Project
Designee, if applicable, and will not be subject to suspension or revocation of
accreditation as specified in section
95132(d) of
MRR.
(B) If ARB or the Offset
Project Registry determines that an emerging potential conflict disclosed by
the verification body is medium or high risk, and this risk cannot be
mitigated, then the verification body will not be able to continue to provide
offset verification services for the Offset Project Operator, and Authorized
Project Designee, if applicable, and may be subject to the suspension or
revocation of accreditation by ARB under section
95132(d) of
MRR.
(4) The verification
body must report to ARB and the Offset Project Registry, if applicable, any
changes in its organizational structure, including mergers, acquisitions, or
divestitures, for one year after completion of offset verification
services.
(5) ARB may void a
Positive Offset or Qualified Positive Offset Verification Statement received in
section 95981 if it discovers a potential
conflict of interest has arisen for any member of the offset verification team.
In such a case, the Offset Project Operator, and Authorized Project Designee,
if applicable, shall be provided 90 calendar days to complete
re-verification.
(6) If the
verification body or its subcontractor(s) are found to have violated the
conflict of interest requirements of this article, the Executive Officer may
rescind accreditation of the body, its verifier staff, or its subcontractor(s)
for any appropriate period of time as provided in section
95132(d) of
MRR.
(h) Specific
Requirements for Air Quality Management Districts and Air Pollution Control
Districts.
(1) If an air district has provided
or is providing any services listed in section
95979(b)(2) as
part of its regulatory duties, those services do not constitute
non-verification services or a potential for high conflict of interest for
purposes of this article;
(2)
Before providing offset verification services, an air district must submit a
conflict of interest self-evaluation pursuant to 95979(e) for each Offset
Project Operator, and Authorized Project Designee, if applicable, for which it
intends to provide offset verification services. As part of its conflict of
interest self-evaluation submittal under section
95979(e), the air
district shall certify that it will prevent conflicts of interests and resolve
potential conflict of interest situations pursuant to its policies and
mechanisms submitted under section
95132(b)(1)(G) of
MRR;
(3) If an air district hires a
subcontractor who is not an air district employee to provide offset
verification services, the air district shall be subject to all of the
requirements of section
95979.
1. New
section filed 12-13-2011; operative 1-1-2012 pursuant to Government Code
section
11343.4
(Register 2011, No. 50).
2. Change without regulatory effect
amending subsection (b)(2)(L) filed 2-15-2012 pursuant to section
100, title 1, California Code of
Regulations (Register 2012, No. 7).
3. Amendment of section heading
and section filed 6-26-2014; operative 7-1-2014 pursuant to Government Code
section
11343.4(b)(3)
(Register 2014, No. 26).
4. Amendment of subsections (b) and
(b)(2)(R)-(S), repealer of subsection (b)(2)(T), new subsection (b)(3),
subsection renumbering and amendment of subsections (c), (d) and (e)(3)(D)
filed 9-18-2017; operative 10-1-2017 pursuant to Government Code section
11343.4(b)(3)
(Register 2017, No. 38).
5. Amendment of subsections (b), (b)(2)(A),
(b)(2)(J) and (f)(2) and new subsection (f)(3) filed 3-29-2019; operative
3-29-2019 pursuant to Government Code section
11343.4(b)(3)
(Register 2019, No. 13).
Note: Authority cited: Sections
38510,
38560,
38562,
38570,
38571,
38580,
39600
and
39601,
Health and Safety Code. Reference: Sections
38530,
38560.5,
38564,
38565,
38570
and
39600,
Health and Safety Code.
