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By TUX TURKEL, Staff Writer Sunday, February 25, 2007

Biofuels have come a long way in Maine over the past six years. Collecting vats of used fish-frying grease to blend with home-heating oil and diesel fuel has evolved into multimillion-dollar terminal investments by major petroleum distributors, aimed at mainstream markets.

Biofuels can reduce air pollution and cut dependence on imported oil. The heating oil industry hopes biofuels can help usher in a new era for its product.

But there's a missing piece -- customers.

Suppliers first must get more Maine oil dealers to carry the fuel and promote it. Customers need to decide that it's worth another nickel a gallon or more to heat their homes and businesses with a cleaner, greener product.

Both dealers and customers need to feel secure about the quality and performance of biofuels, which are a blend of petroleum and vegetable oil, typically from soybeans. Pure biofuel becomes waxy in cold temperatures and can clog filters; it also can eat away at gaskets. Nobody wants a fuel that might clog furnaces on a winter night or leave trucks stranded on the side of the highway.

"If we can get fuel oil dealers comfortable with it, that's when we'll see substantial growth," said Tim Keaveney, a fuel marketing manager at Sprague Energy in Portsmouth, N.H.

Keaveney organized an informational forum for oil dealers and truck fleet operators last month in South Portland. A couple dozen companies from York to Bangor showed up. Their questions centered on how biofuels perform in cold weather and the long-term impact on machinery. Ultimately, they wanted to know if they could make money and grow business by selling biofuels.

Sprague isn't the first Maine distributor to offer biofuels. Frontier Energy in China has been supplying truck fleets and homes since 2001.

But now big players including Sprague and Irving Oil are making a commitment to biofuel blending and distribution. Their investments are designed to push biofuel beyond a boutique energy source for the environmentally aware.

"It's that old chicken-and-egg theory," Keaveney said. "Should you build the infrastructure or wait for the market to develop?"

Sprague owns 20 oil terminals on the East Coast. Early last month, the company opened a special tank at its South Portland facility that can hold 40,000 gallons of pure biofuel. The fuel is blended with petroleum in concentrations ranging from 5 percent to 20 percent, using equipment designed to meet strict industry standards.

BRANDING 'BIOHEAT'

Biofuels have a huge potential market in Maine. Eighty percent of homes heat with oil, and dealers sell 400 million gallons a year. If every burner was firing on a 5 percent concentration of biofuel -- a basic mix known as B-5 -- that would create demand for 20 million gallons of domestic, soybean-derived energy.

What's happening in Maine is a reflection of a movement across New England and the mid-Atlantic states, where oil heat is common.

To help promote the product, the National Oilheat Research Alliance and National Biodiesel Board have trademarked the term "Bioheat" for blended home heating oil. They've developed strict quality standards and a Bioheat marketing logo, too, to help customers identify the product.

Bioheat gives oil dealers the ability to market a cleaner fuel that can help reduce the country's reliance on imported energy, said Steve Giroux, general manager at Giroux Oil Service Co. in Portland. The company bought a 3,000-gallon delivery truck for biofuels, featuring a painting on the side of a farmfield that reads: "Giroux Biofuel. Clean renewable energy." Sales represent only a small fraction of total revenue, he said, but are growing daily.

"I'm confident that we'll need more than one or two trucks," he said.

Giroux was selling B-5 recently for $2.35 a gallon. Standard home heating oil was $2.30.

"I'm hoping customers think the benefits outweigh the extra five cents," he said.

One customer who's willing to spend more is Bill Karl of Portland.

Karl burns roughly 600 gallons a year to heat his Cape-style house. He likes the idea of a fuel that's better for the environment, and he's aware of research that shows the cleaner combustion may make his furnace last longer.

Biofuel was selling for a dime more than regular heating oil last fall, when Karl signed up for Giroux's price cap program. So he figures it will cost him an additional $60. He sees it as a worthwhile investment.

"I'm willing to buy local meat and produce when I can," he said. "Most of the time, I can afford to do that."

But price remains a stumbling block to widescale use, according to one of Maine's largest oil dealers.

Downeast Energy began offering B-5 last fall. It was charging $2.47 a gallon last week in Portland, seven cents more than standard heating oil.

"It's off to a slow start," said John Peters, the company's president. "Heating oil is expensive. For people on tight budgets, if they don't see an immediate benefit, it's a tough sell."

NOTE OF CAUTION

Uncertainty about market demand is holding some oil dealers back from taking the plunge into biofuels.

Mark Lacasse, president of Augusta Fuel Co., said he'll wait until the heating season is over to gauge customer interest. He attended Sprague's seminar and sees the potential for biofuels, but he still needs to calculate whether it would be a profitable investment at this time.

At Sprague, Tim Keaveney said he expects dealer acceptance to take time. His company is figuring it might take 10 years before 10 percent of gross revenue comes from biofuels.

Peters also is predicting a slow transformation in Maine to biofuels. It's too big an opportunity to ignore, he said, to reduce the nation's dependence on imported oil.

He and other dealers are starting with a 5 percent mix. They're being conservative, to make sure the fuel doesn't cause any long-term problems. But he's also aware that oil burners in Maine are firing today on a 20 percent blend -- B-20 -- with no apparent harm.

"It's going to replace No. 2 fuel oil over time," Peters said. "I don't think we have much choice."

Staff writer Tux Turkel can be contacted at 791-6462 or