### The Honorable Gina McCarthy

Assistant Administrator for Air and Radiation United States Environmental Protection Agency Ariel Rios Building 12th and Pennsylvania Avenue, NW Washington, DC 20460

Dear Assistant Administrator McCarthy:

I have enclosed a letter from three of our biodiesel clients concerning a very troubling EPA action in regard to palm fatty acid distillates (PFADs). As three of the largest independent biodiesel producers in the United States, our clients, along with the entire domestic biodiesel industry, stand to be adversely affected by the proposed final rule by the EPA. I sincerely hope that you will give this matter your utmost consideration. Please do not hesitate to contact me if you have any questions regarding the letter or this important issue. Thank you for your time.

Robert Van Heuvelen

VAN HEUVELEN STRATEGIES 300 New Jersey Avenue NW, Suite 601 Washington, DC 20001

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The Honorable Gina McCarthy Assistant Administrator for Air and Radiation United States Environmental Protection Agency Ariel Rios Building 12th and Pennsylvania Avenue, NW Washington, DC 20460

Dear Assistant Administrator McCarthy:

As the three largest independent biodiesel producers in the United States, we are writing to express our concern about a pending rulemaking concerning palm fatty acid distillates (PFADs) that could have devastating impacts on the environment and the domestic biodiesel industry. Our three companies alone have a combined annual name-plate production capacity of approximately 370 million gallons, with 180 million gallons-per-year of capacity at the Renewable Biofuels facility in Port Neches, Texas, 100 million gallons-per-year of capacity at Imperium Grays Harbor in Washington, and 90 million gallons-per-year of capacity at the Green Earth Fuels of Houston facility in Galena Park, Texas.

The Environmental Protection Agency (EPA) has a proposed final rule that would qualify a wide range of 'free fatty acids" (FFAs) as eligible feedstock under the Renewable Fuels Program (RFS2). While it was not apparent to the domestic industry at the time this direct final rule was published for comment in March 2012, it is our understanding that EPA has subsequently indicated that this rule could cover PFADs, which are a by-product of palm oil production. This approval, when coupled with the anticipated approval of esterification as a production process, could result in the overseas production of 400 million to I billion gallons of biodiesel from palm sources in Malaysia and Indonesia, which currently account for almost 90 percent of the world's palm oil production. We are basing these production numbers on the current production of palm oil for 2011-12, which is 7.3 billion gallons for Indonesia and 5.2 billion gallons for Malaysia,
from which 5-1 1 percent is separated as fatty acid distillate depending on the processing equipment. This equates to 400 million to one billion gallons of biodiesel based on current production.
PFADs have a significant price advantage over domestically grown feedstocks, and imported biodiesel made with PFADs will crowd out much of the domestic biodiesel production. This imported biodiesel would qualify for both a Renewable Identification Number (RIN) under the RFS2 program, as well as the blenders' tax credit if reinstated. With RINs currently trading around $1.00, the RIN/tax credit combination would provide a huge windfall for foreign biodiesel producers.We do not believe that a heavy reliance on foreign biodiesel is the intended result of the RFS2

program. Rather, the RFS2 was enacted to allow domestically produced renewable fuels to replace foreign sources of oil. We ask that the EPA examine this issue in much greater detail. PFADs should not be covered by this direct final rule, and any subsequent effort by PFAD producers to qualify for the program should be subject to a full lifecycle greenhouse gas emissions avoidance assessment, as well as notice and comment. We have summarized our major concerns on the PFAD issue as they relate to the U.S. biodiesel market, PFADs designation as a waste product, the environment, and the integrity of RIN generation.

Impact on the US Market and Energy Independence

• The domestic biodiesel industry estimates that between 400 million to one billion gallons of biodiesel could be produced overseas using PFAD, effectively displacing half to all of the current domestic biodiesel production.

• The 2013 U.S. biodiesel volumetric requirement was set recently by the EPA at 1.28 billion gallons. A 400-million-gallon infusion of inexpensive PFAD-based biodiesel will drive a third of today's domestic production out of the market, permanently. A billion-gallon infusion will wipe out the domestic market, both producers and domestic cultivation, with significant negative economic impact across rural America.

• One of the key goals of the RFS2 was to enhance energy security, not to trade one type of import dependency for another. Replacing a significant volume of domestic production and cultivation with imported product will increase our dependency.

• Pending changes by the European Commission concerning the use of biofuels within the European Union are likely to restrict or eliminate access to the European market for palm biodiesel. Calculations by the EC apparently place the greenhouse gas emissions from palm oil-based biodiesel among the highest of major biofuels. The loss of the European market means that PFAD producers will be looking to the U.S. if PFADs become an eligible feedstock under the RFS2.

• While the Biogenic Waste Oil qualification may be appropriate for many waste products, we believe it is inappropriate for PFADs. Notably, PFAD does not meet this threshold requirement as it has significant current value. It is used in the soap industry, for animal feed, and as a raw material for oleochemical industries. PFAD also contains squalene, vitamin E, and phytosterols all of which have significant value for the nutraceutical and cosmetic industries. PFAD trades at a modest discount to RBD palm oil with the price spread ranging from less than $100 per MT to around $200 per MT, according to The Jacobsen. This means PFAD is not that much cheaper than refined, bleached and deodorized palm oil, and is by no means a low-value waste product.

• Biodiesel production using PFAD as a feed stock has a higher economic value than the other uses, so logically the industry will shift to using virtually all PFAD volumes for biodiesel. PFAD's added economic return in the palm oil process can be an additional incentive formore palm oil production, with the accompanying serious negative impact on land use and

the accompanying GHG emissions.

Environmental Issues

• Palm oil failed to qualify as a feedstock under the RFS2 because of its poor greenhouse gas emission avoidance ratings of 17 percent for biodiesel and 11 percent for renewable diesel. Under this proposed rule, EPA is not fully accounting for the greenhouse gas impacts of the feedstocks from which these FFAs are derived.

• Indonesia emits more greenhouse gases than any country besides China and the United States, in large part because the peatland forests being destroyed there for palm plantations emit almost seven times as much carbon dioxide as tropical forests without peat bogs.

• Again, it is these negative environmental impacts that are driving action by the European Union to restrict the use of palm-based biodiesel in member nations.

Source and RIN integrity and Policing

• The EPA already has experienced serious challenges in ensuring that domestic production and generation of RlNs are all legitimate, and has worked for months with industry to resolve these RIN integrity issues.

• EPA certainly does not have the resources to adequately police production, nor to preclude or even identify fraud through mixing palm products from such an offshore source. Verification that PFADs -- rather than palm oil -- were used as the feedstock will be difficult to verify for overseas biodiesel production. Nor does the EPA have the resources to police land use integrity to ensure that further deforestation does not occur, particularly in Indonesia.

For all of these reasons, we urge the EPA not to include palm fatty acid distillates in the final rule concerning the eligibility of free fatty acids. If you have any questions regarding our concerns, please be sure to contact us or Bob Van 1-leuvelen of Van 1-leuvelen Strategies at 202- 534-4920.

John Plaza CEO, Imperm Renewables Jonathan Phillips COO, Renewable Biofuels Martin D. Beirne, III CEO, Green Earth Fuels of Houston

### VAN HETJVELEN STRATEGIES

300 New Jersey Avenue, NW Suite 601 Washington, DC 20001
Main Phone: (202) 534-4920 Robert Van Heuvelen Direct: (202) 534-4954 Fax: (202) 534-4975 Principal Cell: (202) 384-2400 bob@vhstrategies.com www.vhstrategies.com