NEFI Calls on DOE to Support Heating Oil

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Heating oil is an important part of New England’s energy mix that is increasingly abundant, clean, efficient and renewable and deserves the support of the U.S. Department of Energy. That is the theme sounded by New England Fuel Institute in recent testimony before the U.S. Department of Energy.

NEFI President and CEO Michael C. Trunzo delivered NEFI’s testimony during a hearing in Providence, R.I., hosted by U.S. Energy Secretary Ernest Moniz. DOE recently created a Quadrennial Energy Review (QER) Task Force to evaluate the nation’s energy infrastructure, and Moniz launched the process with hearings in Providence and Hartford, CT.

Smart Policy Choices

While the hearings were largely focused on plans for a natural gas-fueled future, Trunzo called on DOE to solidify heating oil’s place in New England. “There are some unique opportunities to assist New England in addressing its energy future,” he testified. “They include, to name a few, implementing a consistent sulfur content specification for diesel and heating oil to maximize refinery capacity, fuel supply and regional storage infrastructure; enhancing and incentivizing national and regional biodiesel production; and promoting the more efficient transportation of crude oil to East Coast refineries via rail, pipeline, and more Jones Act eligible shipping vessels.”

He explained that the heating oil industry employs a large and highly skilled workforce that includes trained home energy professionals. “Our industry has already invested billions of dollars to develop a downstream fuel distribution network that includes terminals, bulk storage facilities, modern delivery vehicles, high-tech fleet management systems and millions of gallons in aggregate residential and commercial storage capacity. This infrastructure was developed without the support of taxpayer money and none is needed to maintain it. It is fully operable and is already delivering the newest generation of clean, efficient and renewable heating oil to millions of homes around the region.”

Heating oil blended can be blended with biodiesel to produce a fuel that is environmentally cleaner than natural gas, and the sulfur content will be at 15 parts per million in most states by July 1, 2018, he said. At that point, “heating oil becomes the same product as diesel fuel. This means an abundant and reliable fuel and the merging into one of what federal law currently requires to be separate storage and distribution infrastructures.”

Ultra low sulfur (ULS) heating oil could deliver considerable savings to customers, Trunzo said. “[The National Oilheat Research Alliance] estimates that consumers could enjoy considerable cost savings, as ULS heating oil can save customers up to 12 cents per gallon thanks to an increased efficiency in existing systems, the reduced need for system maintenance, and increased system longevity. As the specification for highway diesel fuel and home heating oil converge at 15ppm, reduced storage and delivery costs for fuel oil dealers may provide additional savings.” The switch to ULS will also allow the introduction of inexpensive condensing technologies that can enable a wide variety of competitively priced appliances with ratings in some cases well above 90 AFUE.

Given heating oil’s strengths, the Obama Administration “should be active and vocal in support of the industry-wide transition to an ultra-low sulfur heating oil product throughout the entire Northeast,” Trunzo said. “NEFI encourages the Task Force to explore ways to increase the production of biofuels that are ready for introduction into the region’s heating oil supply and encourage their use. The Administration should support the industry’s application to amend the ASTM D-6751 specification of Bioheat® fuel to a 20 percent biodiesel blend or higher.”

Backing Up the Utilities

Trunzo also addressed the vital support that oil suppliers provide for interruptible natural gas customers. “When low supply increases the cost of natural gas, energy users return to more reliable heating oil as their energy source. Building additional gas infrastructure to meet this temporary peak demand is not only costly but also bad public policy. Most natural gas pipelines run under city streets that are already under stress and would require public investment in addition to the cost of the pipeline. Adequate planning by utilities and their customers would allow for increased regional supplies of heating oil. Such planning would eliminate or reduce any economic price spikes caused by sudden and temporary changes in demand. The short-term price spikes in natural gas are far greater in percentage than the price movements in liquid fuels.

“If public policy shifts electric generation to rely on natural gas in even larger percentages of capacity to replace coal and nuclear generators, then the more reliable, abundant, and renewable Bioheat® fuel should be used for space-heating demand. Natural gas is not easily stored in New England in large volumes, and is easily overwhelmed by sudden changes in demand. Large increases in pipeline capacity to meet peak demands will create other economic stresses when they operate below rated capacity.

“The recent 2013-2014 winter weather provided a perfect example of the stresses caused by simultaneous demands from industry, electric generators and space heating needs. The heating oil industry has a proven track record to bridge the gap without costly public investment,” he added.

The DOE and national policymakers must also consider issues with the natural gas infrastructure, according to Trunzo. “Before investing in new natural gas infrastructure or expanded pipeline capacity, state and federal governments should require that existing lines are repaired or replaced at the expense of for-profit utilities themselves, not taxpayers or ratepayers,” he testified. “Power generators, large-scale consumers, heating dealers and supply should coordinate to plan properly and hedge for supply situations prior to each heating season to ensure adequate access to all heating sources. While liquid fuels continue to be the backstop for energy consumption, its suppliers must be an integral part of the public policy planning.”

Improving the Oil Infrastructure

The NEFI CEO also called on DOE to help more crude oil reach East Coast refineries. “We need more American ‘Jones Act’ ships, built with American workers in American shipyards and manned by American crews to go to American refiners to make liquid products for American homes.”

DOE should also support increases in oil pipeline capacity, including reversing the flow of the Portland-Montreal Pipeline to allow the transport of oil to Maine’s South Portland marine terminal facilities. “Proponents argue that doing so would allow the transport of Canadian oil through the Portland terminal and then on to East Coast refineries and the Irving Oil refinery in New Brunswick, Canada. These refineries provide a significant portion of home heating oil and other refined petroleum products to the New England region. Therefore, the possibility of a Portland pipeline reversal should be a part of any comprehensive plan to improve the integrity of the energy supply in the six-state region,” he said.

In conclusion, he added, “NEFI hopes that as the QER Task Force vigorously examines the energy infrastructure needs of the United States and especially New England, that the ‘all-of-the-above’ energy policy proclaimed by this Administration truly includes an ‘all fuels’ strategy that will help to bring the United States true energy independence within our lifetime. Heating oil, and the small businesses that provide it to American homes, remain a vital part of the region’s energy supply and future.”

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