Game starts lagging like crazy when using 2 chunks render distance

By exploring the debug system I found that what is causing the lag is something called "Terrain_setup" in root.gameRenderer.level

I usually get around 50-60 FPS with 10 render distance, but when I change to 2 render distance it just starts lagging like crazy.

Steps to Reproduce:
1. Set your render distance to 2 chunks
2. FPS starts dropping.
3. KAPOW, it's done!

I attached 2 screenshots, the first one with 2 chunks render distance and the second one with 10 chunks render distance.