NDL Hearth Blog

A roadmap to avoiding economic disaster in Maine and the other regional states.

Maine, USA -- Maine, New Hampshire, and Vermont have a unique and overwhelming dependence on home heating oil for heat. Dependence on heating oil drains money and jobs and tax revenues from Maine and its sister states. Their dependence on heating oil has already eroded their economies; and that dependence has the potential to destroy the foundations for growth and prosperity as they export more and more of their disposable income to places that are far away.

Maine Depends on Oil to its Economic Detriment

Recent data from the U.S. Census shows that 75.61% of Maine’s homes use #2 heating oil. This is by far the highest proportion of heating oil dependency of any state. The table below shows this fact and also shows that Maine has very limited access to natural gas (3.68% of homes).

Because of these states’ heavy reliance on heating oil, these states are the most petroleum dependent states in the United States (with the exception of Hawaii). See Figure 2, below.

Maine “exports” about $720,000,000 per year in what I call our “oil tax” because Maine homes use about 300 million gallons per year of heating oil and, according to the EIA’s Home Heating Oil Report for 2010, 78% of every dollar spent on heating oil leaves the Maine economy. If that money were to stay in the Maine economy it would produce about 41,000 new jobs that do not currently exist.

(Note: 41,000 jobs is based on an average annual pay and benefits of $37,000 and multiplier effects estimated by FutureMetrics. Job multipliers are based on detailed multiplier tables, by state, from the National Renewable Energy Laboratory, The Jobs and Economic Development Impact (JEDI) Model, revised in 2009. The multipliers’ aggregate increase in final demand is also modified by an assumed 35% tax rate. The median income of $37,000 is from the US Census, 2008. The 35% tax rate is an assumption that includes all taxes that reduce consumption (including but not limited to real estate, sales, income, and excise taxes. This job number does not include any new jobs created by the production of regionally produced fuel such as wood pellets.)

It’s important to consider where heating oil prices will be in 3 to 5 years so that Maine and its neighboring states can plan to mitigate the current and potential negative economic impacts that accrue from this addiction to heating oil.

Will Heating Oil Prices Increase?

Forecasting energy prices with any precision is impossible. However, trends in price movements over time can be estimated.

Heating oil is distilled from crude oil and therefore crude prices, along with domestic demand characteristics for distillate fuels (which include heating oil, diesel fuel, and jet fuel), strongly affect heating oil prices.

The relationship between economic growth and oil prices can be used to estimate future price trends. Based on expected growth rates for global gross economic product, FutureMetrics has estimated the expected crude oil price from 1999 to 2015. The chart below, which is difficult to read on this site, shows that expected prices will increase to at least $175 per barrel by November 2014.

Overall, while heating oil prices may fluctuate over time, the trend will be for increases. The expected price of crude suggests that Maine could see heating oil prices of $4.50/gallon over the winter of 2012-13.

What is the Effect of Higher Heating Oil Prices on Maine and the Region?

What would happen if heating oil reaches the price seen in 2008 (about $4.50/gallon)? A $1.50/gallon increase in heating oil prices from $3.00/gallon adds another $358,000,000 to Maine’s “oil tax.” That loss of disposable income will destroy another 20,700 jobs and would raise the current unemployment rate of 7.29% to 10.26%. (Note: my employment data is from the Maine Department of Labor, November 2010. The increase in the unemployment rate assumes that the civilian labor force remains at the November 2010 level of 696,360. Maine’s labor force has been falling slightly since 2007 (2008 average was 705,258, 2009 average was 704,134, and the 2010 average through November was 699,596.)

Jobs and businesses will suffer; but so will the governments of these states. The loss of more than 20,000 jobs in Maine will lower tax revenues. The state of Maine averages about $5,200 in total tax income per employed resident, according to the Maine Department of Labor and the Maine Budget Office.

The loss of 20,700 jobs would lower tax revenues and that loss would reduce state tax revenue by almost $106 million annually. That is a 3.21% drop in annual tax revenues. At the same time, the demand for services would increase as the increase in heating oil costs disproportionally burdens the poor.

Can the Region Transition off of Heating Oil?

There is a solution to the problem that can not only lower heating costs dramatically but can also eliminate the dependence on heating oil; and that solution can also keep the money spent on fuel in the local economy and stop our exporting hundreds of millions of dollars and destroying tens of thousands of jobs. The solution is to use fuel from our own forests and from dedicated energy crops grown on fallow land.

Maine is the most forested state in the United States and Maine sustainably harvests more than 16 million tons per year of wood from its forests (PDF). New Hampshire and Vermont have less forested land but Vermont has enough non-cultivated cropland that is idle from the decline of the dairy farm sector to grow more than 1.5 million tons per year of woody biomass from dedicated fuel crops. For more on the topic of land availability, see the sidebar at the bottom of this article.

The residential wood pellet fueled boiler experience in Europe can guide Maine and its sister states away from their dependence on heating oil. Pellet fueled boilers are different than pellet stoves. They are fully automatic (fuel and ash handling) and comparable to any modern home heating system for emissions. Whereas most homes in the U.S. that use pellets have stoves, most homes in Europe that use pellets have boilers.

Pellet fuel is also much cheaper than heating oil and propane.

The potential advantages of harnessing the region’s woody biomass fuel potential for heating homes and businesses are many; but job creation tops the list. Tens of thousands of jobs will be created by making the fuel locally, using cheaper fuel, and by eliminating the heating “oil tax.”

The net effect of converting 75% of homes that use heating oil to modern European style pellet boilers would be to create or sustain 79,000 jobs in Maine and almost 147,000 jobs in the three states most addicted to heating oil (based on heating oil at $4.50 per gallon).

Conclusion

We are facing a crisis in our region due to our addiction to heating oil. We saw a preview of this crisis in 2008 but, as with most addictions, pain is quickly forgotten and denial immediately takes over.

The benefits of converting a significant number of homes from heating with oil to heating with pellets are significant. The risks to our economy if we do not convert are also significant. Can we afford to sit on our hands and hope that oil prices won’t rise?

Inaction can only be a product of denial. Prices will rise.

Sidebar: Is there Enough Land?

While an important share of the non-cultivated cropland in the northern New England region produces hay that is necessary for livestock agriculture, and some of the pasture supports pasture-based beef and dairy production, as well as the equine industry, a significant part of both these land categories is used only lightly, frequently only mowed every year or two to keep it open. Assuming that 25% the non-cultivated cropland and pasture is converted to energy crops, and assuming that the average yield per acre is 4 dry tons per year, the table below shows the potential for additional feedstock (assuming 50% moisture to convert from green to dry tons).

Data is from the National Resources Inventory, managed by USDA's Natural Resource Conservation Service. Data is derived from a statistical sample of plots of land, based on observation of land cover from satellite and ground data.)

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Spruce up your hearth with fireplace screens and glass doors. If you have small children or pets you may be looking for a fireplace screen for safety. Or perhaps you want a screen to protect your home from shifting logs and embers. However, fireplace screens can be decorative as well.

Are you looking for a way for your hearth to be a focal point rather than a hole in the wall? Minuteman fireplace screens are a decorative, safe and cost effective solution that will add personality and style to your fireplace.

If you have a working traditional fireplace, take a look at decorative fireplace screens. With decorative flat or three-fold screens you can turn your old fireplace into a conversation piece. Made from wrought iron, brass or brushed aluminum fireplace screens can change the entire look and effect of your fireplace in any season.

If you want to use your fireplace safely, increase the ambience of your room, and heighten the attractiveness of your hearth. Let NDL help you find the fireplace screens and doors of your choice.

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For 23 years, Julie Gore has heated her Ada, Ohio, home with a wood-burning stove. When the old one wore out, she didn't hesitate to buy another for her family room.

"It's warm and toasty," said Gore, an administrative assistant at Ohio Northern University. "I wouldn't trade it. If you get a chill you can stand by it and warm up."

Stoves as secondary heating sources are growing in popularity, and come in two basic varieties: wood stoves and pellet stoves.

Some proponents say the stoves can be more environmentally friendly and help cut energy costs; other experts say that can vary from household to household.

Traditional wood-burning stoves like Gore's enjoy stronger sales, but pellet stoves, which burn compressed sawdust, may be gaining, according to the Hearth, Patio and Barbecue Association, a manufacturers trade group. Wood stoves and wood fireplace inserts saw an 81 percent increase in shipments in 2008, the association said. Pellet stoves and pellet fireplace inserts increased 161 percent that year.

Both kinds of stoves are meant mostly to heat specific rooms or groups of rooms, not entire houses. They cost between $3,000 and $4,500 including installation.

The federal government is offering a 30 percent tax rebate in 2009 and 2010 for purchases of wood or pellet stoves that meet a 75 percent efficiency requirement.

Here are some of the ways wood and pellet stoves compare:

Effort

Wood stoves must be fed with logs, while pellet stoves use 40-pound bags of pellets poured into a hopper.

Most pellet stove hoppers hold an entire bag of pellets, which will last about 24 hours before needing to be reloaded, said Leslie Wheeler, spokeswoman for the trade association.

With pellet stoves, look for a model with a large hopper opening to make it easier to load pellets, and check for an easily removable ash pan to make cleanup quick, suggested Bob Markovich, the home and yard editor at Consumer Reports magazine, which recently profiled heating stoves.

A safety precaution: Homeowners should place carbon monoxide and smoke detectors near the stoves, Markovich advised.

Efficiency

Pellet stoves produce very little smoke, giving them a reputation as more environmentally friendly, Wheeler said.

"There's very, very little moisture in that pellet," she said. "It burns very cleanly, very efficiently and leaves very little ash."

Ken Hellevang, an engineer with the extension service at North Dakota State University, noted of pellet stoves: "Even the most efficient burning units, there's still ash that needs to be discarded. There's some labor involved on a daily basis."

Pellet stoves also require electricity, since fans circulate the heat, so it's a good idea to purchase a backup battery, Wheeler said. Wood-burning stoves don't need electricity.

Markovich of Consumer Reports described all heating stoves as "a large version of an electric, $30 space heater."

"People have this sort of rising desire to be off the grid and control more of their own expenditures," he said. "People are looking for any way they can to save."

But if you're trying to lower home heating bills, Markovich said, you'll need to turn down the heat in the rest of the home when using a wood or pellet stove. "To really save money, you have to keep the rest of your house colder," he said.

Another tip: Make sure the square footage you want to heat matches the square footage the stove can warm, Markovich said.

Cost

About half of all households nationwide depend on natural gas for heating, according to the federal Energy Information Administration. The agency recently forecast that costs for heating fuels this winter -- including natural gas, propane, oil and electric -- should all be down.

Based on today's costs, Markovich said, burning pellets costs about 15 percent less than oil and 40 percent less than electric heat, but about 25 percent more than natural gas.

"If you're in fact burning natural gas now, buying a pellet stove is a mistake because it costs more," he said.

Wood stoves can be a bargain for some. "A lot of people are near rural areas where wood is cheap or free," Markovich said. "If that's you, that makes financial sense."

Article by Caryn Rousseau Associated Press, Click Here for Original Article

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Arlington, VA – (December 21, 2010) On Friday, December 17, President Obama signed into law the $858 billion tax package that keeps current tax rates in place and extends a series of tax credits geared toward boosting the sluggish economy. Included in this package was the extension of a tax credit for biomass heating appliances that was set to expire on December 31st. The extension of the tax credit – which was never certain – is good news for the hearth industry. However, Congress did decrease the benefit to consumers that was in place from 2009-2010 under the American Recovery and Reinvestment Act and added further restrictions. The new tax credit as outlined provides:

• 10% credit for the purchase of biomass heating appliance in 2011, capped at $300
• Removal of the lower heating value level (LHV) efficiency measurement
• Credit applies to purchase price only and is not extended to installation In the weeks leading up to Congress' vote on the tax package, HPBA reached out to congressional leaders to remind them of the importance of this tax credit not only to the hearth industry but to consumers interested in purchasing biomass heating systems. HPBA has been working closely with Senator Susan Collins (R-ME) to ensure that a tax credit was contained in the bill, and we are appreciative of the efforts she put forth in achieving its inclusion. Of particular note, Sen. Collins has included language in the Congressional Record (the official transcript of the United States Congress) that directs the IRS to continue to use the lower heating value as the operative efficiency methodology in determining which appliance qualifies for the tax credit. A portion of her remarks stated:

"The IRS has issued guidance directing that the 'lower heating value' methodology should be used, which is consistent with industry practices and with our intent to ensure that the credit is available for efficient and clean-burning wood and wood-pellet stoves. Removing the reference to the 'lower heating value' from the Code serves little purpose. Certainly, however, it does not mean that this common-sense methodology is precluded, nor does it require the IRS to revisit its methodology. I hope that my comments today will help avoid confusion about the use of the 'lower heating value' methodology with respect to this tax credit." (Congressional Record, December 15, 2010; Statement by Senator Susan M. Collins; H.R. 4853, Middle Class Tax Relief Act of 2010) By extending this tax credit, Congress signals its support of the renewable fuel industry. We will continue to work with Congress to achieve recognition for the hearth industry and benefits for Americans who seek to heat with biomass fuel. Finally, we would like to thank you for responding to our call to contact your Representatives and Senators in Congress emphasizing the importance and need of a tax credit for the hearth industry.

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More and more Americans are buying vent free gas fireplaces. In fact, there are over eight million who prefer vent free gas fireplaces to any other supplemental gas-heating device. This is because of the ease and convenience provided by a vent free gas fireplace. At the touch of a button, you can be relaxing in front of a roaring fire with friends and family.

When it comes to convenience in hearth products, vent free gas fireplaces are at the top of the list. With remote controls, no venting, and thermostat controlled heating, vent free gas fireplaces are easy to use and install. These gas fireplaces are very efficient, and are mess and stress free, with no wood to cut or haul. There are many models, styles and brands to choose from. But many agree, the most excellent feature of the vent free gas fireplace here in the Northeast is the warmth they continue to provide even during a nor’easter power outage.

Vent free gas fireplaces are easy to install and have low operating costs. Because they do not need a chimney, there is no heat loss so the efficiency of the vent free gas fireplace is almost 100 percent. With winter upon us, why not choose a vent free gas fireplace

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Northeast Distribution is the leading distributor of hearth accessories and products in New England, NY, NJ, and PA. We know stocking stuffers; after all we have been specializing in winter warmth for over ten years. Keep the family warm this holiday season, and let us connect you with the finest hearth retailers in your area.

If you are looking for stocking stuffers for men, look no further. Zippo lighters, fire starters, stove fans, grill utensils, and log totes all make great gifts. Are you looking for unique stocking stuffers? We have them in beautifully handcrafted stove top steamers and kettles, wrought iron fireplace screens and firewood storage racks.

Contact us today for stocking stuffer ideas and the locations of the hearth retailer nearest you.

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This winter, if you are having trouble keeping the cold at bay, consider adding a fireplace or fireplace insert to your home. Not only will you add comfort and atmosphere, you will add value to your home as well. A working hearth is considered a plus to home buyers, thus increasing the value of your home. Fireplaces and inserts can be fueled by natural gas, electricity, pellets, or wood and all these fuel sources have their advantages. Pellets and wood are considered renewable energy sources and are economical. But that is not all. Many fireplace inserts have a tax credit as well!

Gas and electric fireplaces and fireplace inserts are generally easier to use with less mess and effort. They are also very efficient and can be hooked up to a thermostat and remote. This way, you have constant heat which you can enjoy with the touch of a button. Whichever fuel source you choose to run your fireplace or insert, one thing is certain; working fireplaces add atmosphere and ambiance to any home. New home buyers love the idea of a working hearth and they make your home more enticing. If you are remodeling for your own enjoyment, a room with a burning fire adds a whole new dimension to entertaining.

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