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 for
more 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