## PFI Standards Program Proposed Revisions February 2010

Solicitations for feedback on PFI’s Sta ndards and QA/QC program have revealed numerous reasons why individual producers have not registered. PFI’s Standards Committee has compiled a list of what is beli eved to be the most pressing concerns regarding the Standards Program. It is the Committee’s intent to gain feedback on these key components from all PFI manufacturer members to identify if there is enough support to modify the program in a manne r which increases acceptance within the industry, while at the same time does not co mpromise the underlying program objectives.

Please review the issues described below and provide your preferences and/or comments. Any feedback you can provide is greatly appreciated.

1. Enforcement – One of the main concerns expr essed regarding this program is that it is one way to “cheat the system” a nd not sufficiently enforceable (i.e. lacks teeth). Original discussions rega rding external/una nnounced auditing was excluded in the final program due to concerns of program cost (anticipated to cost several thousand dollars per f acility per year). Enfor cement measures included in the program are the Certification of Co mpliance document, date coding, the Data Review Board, and a caveat on page 4 of the QA/QC Program document, which reads “PFI also retains the right to pe rform unannounced audits on participating mills or labs that had received complain ts, that appear to be selling product that had been improperly labeled or falsely re gistered, or just as a periodic spot check.”

A possible option has recently been identifie d that allows for an external auditing component that could cost in the hundreds of dollars as compared to the thousands. The concept is that we ca n use an inspection company that has auditors/inspectors throughout North America already providing inspections for other related industries. If audits ar e performed unannounced at the convenience of the inspector, they can be incorporated into other inspection efforts and cost can be minimized. Audits could of cour se also be pre-planned and specially coordinated. However, costs would be e xpected to increase and the aspect of surprise is lost. Please identify your preference below, or provide an alternate option:

A. _______ Leave enforcement as it is. B. _______ Include external unannounced auditing. C. _______ Include scheduled auditing. D. _______ Other, Please specify below.2 _______________________________________________________________

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2. Cost – It has always been understood that the Standards Program needs to incorporate key components, but still be affordable. Program components that affect bag printing certainly affect cost . However, these are addressed below. Otherwise, components that affect cost include purchasing equipment for an internal QC lab, personnel time in c onducting tests and maintaining the quality program, third party QA analysis, and the registration fees. Please provide your opinions regarding the various costs associated with this program (a list of fees can be found on page 7 of this document).

Registration Fees (Used to pay for regi stration review cost s, quarterly data evaluation costs and staff time associated with program maintenance): A. _______ Are acceptable, leave as is. B. _______ Are too high. C. _______ Should be increased to pay for an external auditing component. D. _______ Other, Please Specify

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__________________________________________________________________ Third Party QA Analysis (Samples are s ubmitted at a rate of 1 sample per 1000 tons of product produced): A. _______ Current frequency is acceptable, leave as is. B. _______ Current frequency is too high or too low (please specify alternate rate below and provide any justification you can for the rate provided). C. _______ Current frequency is acceptable as an initial submittal rate, however a schedule should be developed for reducing the frequency based on the quality of the data set provided by the producer. D. _______ Current frequency is acceptable as an initial submittal rate,3 however a schedule should be developed for reducing the frequenc y based on having full in-hous e laboratory capabilities (capable of testing all PFI parameters in accordance with PFI accepted test methods). E. _______ Other, Please Specify:

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Other Program Costs (Please provide a ny additional concerns you may have regarding other associated program costs):

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3. Logistical Issues – As various producers have in itiated the implementation of PFI’s Standards Program various program components have been identified that logistically make the program difficult to comply with. Here are a few of them:

Bar Graphs – The bar graphs for ash and BTU we re developed to provide a visual reference within the stove manual so that the consumer can match the picture on the bag with the picture in their stove manual to assure that they are burning the fuel specified by the stove manufacturer , to provide more information to the consumer as to the actual ash and BTU values, and to allow producers that could not produce a particular grade of fuel (m ost notably Super Premium) an option for demonstrating that their fuel quality may be close to the grade. This component, however does create some logistical difficulties. Producers with multiple plants may not be able to use the same bag for th eir various plants, increasing cost. Data compliance becomes more difficult in th at you can pass the grade requirements, but fall outside of the limits on the bar gr aph. Finally, the bar graph can create a marketing advantage or disadvantage as c onsumers will likely look for bags that4 have as low and as narrow of an ash bar graph as possible. Here are some options:

A. _______ Leave both bar graphs as they are. B. _______ Keep the ash bar graph so that it can be used for the visual purpose originally intended for the stove manufacturers, however limit the bar graph by having the graph extend the full range of the registered grade (e.g. a bar graph for a premium fuel would show the bar span from 0 – 1.0%, 0 – 0.5% for super premium, etc.) C. _______ Remove the ash bar graph. D. _______ Keep the BTU bar graph as is. E. _______ Remove the BTU bar graph. (would require some other measure for making sure producers report As-Received BTU values representative of their product and not ju st the best value ever seen or Dry Basis BTU values). F. _______ Other, Please Specify;

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_______________________________________________________________ Grading Requirements – There are certainly cases where producers are having a hard time making the grade they intend to produce as it is currently defined. Grade requirements are primarily what was going to be reviewed after the year of data collection, however if in the shor t term there are enough issues raised regarding specific parameter requirements modifications can be made. Are there any grade requirements that you feel are inappropriate, please specify:

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Standard Deviations – PFI’s QA/QC program currently specifies that grade compliance is based on calculating the mean +/- 2 Standard Deviations, in which5 if these values meet the grade requirements then the fuel is in compliance with the PFI Standards. By definition, +/- 1 SD , +/- 2 SD, and +/- 3 SD, incorporates 68.2%, 95.4%, and 99.6% of the data set resp ectively. Most industries use +/- 3 SD in assessing quality compliance with QA/QC metrics. PFI’s program has incorporated +/- 2 SD to ease the burde n of grade compliance and allow some forgiveness in the program considering the na ture of variability in biomass. Some have indicated that +/- 2 SD is too strict and others have indicated it is not strict enough. What do you consider to be the ap propriate metric for establishing grade compliance?

A. _______ +/- 3 Standard Deviations B. _______ +/- 2 Standard Deviations C. _______ +/- 1 Standard Deviation D. _______ Other, Please Specify;

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4. Program Promotion – There have been numerous efforts to get the word out regarding PFI’s Standards Program, wh ich includes write ups in several newsletters and publications, however it will take time for PFI’s Certification Marks to become recognized as the indus try symbol of quality. If there is anything you feel PFI should be doing, in addition to its current efforts, to promote this program please advise:

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5. Legal Authority – Some producers have expresse d dissatisfaction in that they feel PFI should have a greater degree of legal authority to prosecute fraudulent activities in the pellet industry (primarily in the form of confronting producers that have mislabeled product). Currently the only legal authority that the PFI has6 is to enforce PFI logo and Certification Mark use and misuse. PFI is currently developing a licensing agreement to accompa ny the use of the Certification Marks so that they can be provided to a producer and revoked if necessar y. In time, if an external auditing component is accept ed, manufacturers provide warranty restrictions, and regulatory agencies requi re the use of PFI’s Standards Program, the Certification Marks and licensing agreement should pr ovide a significant level of legal authority. Please provide any additional thought or feedback you have regarding this issue:

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6. Other – If there are any othe r issues or have ideas that you feel are cr itical to the industry acceptance of the PFI Standard s Program please share them with us:

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###7 Mill Participation/Registration Fees

First Year:

Members: $1,000 Non-members: $2,500

Additionally, if you operate more than one produ ction location you can re gister each additional production location for $750 if you are a PFI member and $1,500 for non-members, provided that they are registered at the same time.

Second year and beyond:

Members: $400 Non-members: $1,200

Additionally, if you operate more than one produ ction location you can regi ster each additional production location for $300 if you are a PFI me mber or for $600 if you are a non-member, provided that they are regi stered at the same time.

Testing Lab Participation/Registration Fees

(In order to participate in the standards program, all testing labs must be registered with PFI. Participating mills must send pellets fo r testing to a registered lab only. )

PFI Suppliers Membership level PFI Membership Fees Lab Registration Fees Total Fees

Non-member $0 $1,750 $1,750 HPBA member* $0 $1,000 $1,00 0 Bronze $1,500 $1,000 $2,500 Silver $3,000 $500 $3,500 Gold $5,000 Free $5,000

*Note : The HPBA membership fees are accepted as the e quivalent to the baseline PFI membership fees and as such, the HPBA member lab would enjoy the same lab registration fees as the Bronze PFI member.