July 25, 2010

Oil dealer touts alternative fuel: Propane

The Dead River Co. is hoping to capitalize on new, stronger sentiments against foreign oil.

By Tux Turkel tturkel@pressherald.com
Staff Writer

With heating oil sales flat and with ongoing, negative news about overseas imports and pollution in the Gulf of Mexico, one of northern New England's leading petroleum dealers is promoting an alternative fuel -- propane.

A propane vs. oil comparison

Comparing the costs of propane and fuel oil can be confusing.

Both fuel oil and propane used for heating average roughly $2.60 a gallon in Maine today, but a gallon of oil holds one-third more energy than a gallon of propane.

Dealers offer volume discounts for propane, charging less money per gallon for customers who use more. And they typically tack on some money to cover the cost of providing and maintaining the storage tank.

Bottom line: Accounting for typical burning efficiencies, propane today costs more than fuel oil and kerosene on a heat basis, but much less than baseboard electricity.

The least expensive heating fuel is coal, followed by natural gas, cord wood and wood pellets, according to federal energy department calculations.

Portland-based Dead River Co. wants to entice residents to switch this winter to an abundant energy source that's produced in North America and burns cleaner than oil. The company is running an advertising and direct mail campaign that offers up to 100 free gallons to new home customers. An online promotion says: "Propane is becoming the fuel of choice -- from heating water to cooking meals to heating homes."

In part, the campaign reflects Dead River's assessment of how the public may be reacting to current events.

"The continued drum beat, for better or worse, about our dependence on foreign oil is going to have some traction," said Robert Moore, Dead River's president and chief executive officer.

In Moore's view, recent discoveries of natural gas in North America and federal policies aimed at cutting Middle East oil dependence will make propane less expensive and more available. The so-called BP effect -- the impact of the historic oil spill disaster -- is harder to measure, but may be contributing to increased interest in propane, he said.

"I think that's part of the picture," he said.

Moore's comments come as oil costs and demand are low following the recession, but remain a worry for customers who remember record prices in 2008. His assessment stands apart from the views of some major competitors, who sell propane but say they aren't aggressively promoting it over fuel oil.

"I think most of our members are happy to sell either product," said David Martin, board chair of the Maine Energy Marketers Association, which represents many of the state's oil dealers.

Propane won't replace heating oil in Maine anytime soon. Eight in 10 Maine homes heat with oil or kerosene; propane warms roughly 5 percent of them. But aside from providing service and replacing older equipment, oil heat has virtually no growth in Maine, Moore said, as people look for alternatives.

Propane has grown as an alternative for homes and businesses that are far from natural gas, the country's dominant heating fuel. Recent supplies have boosted natural gas use in Maine, but much of the state is too rural to be served by distribution lines. That makes Maine a logical place for propane to expand.

Propane is produced from both natural gas and crude oil refining. Most of the propane burned in Maine arrives by rail from western Canada. Some comes from overseas and is shipped to Newington, N.H. A Canadian railroad workers strike crippled supplies in Maine a few winters ago, leading some dealers to diversify supplies and upgrade local storage.

Dealers that promote propane like to call it a versatile fuel, useful for heating, cooking, drying and hot water. The equipment is small and takes up little room. The gas burns so cleanly that burners need less maintenance. And the latest heating equipment, which can reach overall efficiencies above 95 percent, qualifies for a federal tax credit of up to $1,500.

Those attributes were selling points for Chanda Turner and her husband, Ryan Woodside, of Windham.

Ready to replace a 25-year-old oil boiler, the couple considered their options before buying a European-made Baxi propane boiler from Dead River. The total cost was around $8,000, before the tax credit.

The unit is small enough to hang on a wall, freeing up space in their tight basement. Propane also offers the flexibility to switch their stove and dryer to gas in the future, the couple said.

(Continued on page 2)

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