AUGUSTA – Burning more wood for heat could save money in the nation’s most forested but oil-dependent state. But a Maine government panel says care is needed in shifting from oil to wood to avoid health problems, damage to the wood products industry and heightened threats to the environment.

Gov. John Baldacci’s Wood-to-Energy task force issued its report Friday. The panel’s chairman, Les Otten, suggested that a 10 percent shift from oil to wood would be significantly beneficial.

“Before we do anything else, we have to look at conservation and efficiency,” said Otten, who has launched a business, Maine Energy Systems, that’s promoting and selling high-efficiency European pellet boilers.

According to officials, Maine has about 17 million acres of woodlands that could be harvested commercially. It is also the state with the highest dependence on No. 2 heating oil with more than 80 percent of Maine homes using oil-based heating systems, the task force reported.

“Approximately 440,000 households in Maine use on average 900 gallons per year of No. 2 oil,” the report said.

“At the current average Maine heating oil costs of $4.64 per gallon, the expected heating bill for this upcoming winter will be on average in excess of $4,100 per household. This extreme reliance on heating oil makes Maine vulnerable to magnified negative economic effects from high oil costs.”

In the near term, said Baldacci, “conservation and looking out for each other could be vital this winter.”

For the longer term, the governor said, the task force report could lead the state toward “more reliance on wood energy and away from fossil fuel.”

Proposing that the state encourage the conversion of old polluting oil-fired and wood-fueled systems, the task force said options could include tax incentives or a direct “buy-back” program to help homeowners and small businesses replace older furnaces, boilers or stoves with cleaner-burning equipment.

“As heating oil costs remain high, there is expected to be a significant increase in the use of wood stoves as a secondary source of heating for some homes,” the report said.

“They are a viable wood-to-energy solution if they are modern, efficient, and clean-burning, and there is already a developed market for wood stoves and cordwood delivery in Maine.”

At the same time, the report warned, “This situation presents potential serious public health concerns. The amount of air pollution emitted by wood stoves this winter could approach record levels.”

As part of a shift toward more wood use for heating, “the dwindling number of loggers in Maine needs focused attention,” according to the task force. The report said the forest products industry and the state should “educate youth on the benefits of a career [in] wood harvesting.”

Additionally, if demand for wood increases more rapidly than supply, the report noted, wood prices will rise.

“Thus the government must act to facilitate the sustainable supply of wood and wood fuels to meet demands for all stakeholders that depend on Maine’s most valuable renewable resource” – including pulp and paper and lumber production.

“Any solutions,” the report also said, “should provide a net benefit to Maine’s air and water quality and should not have a negative impact on the healthy forest ecosystem.”