Since you asked, yes you probably are crazy. But, then again most of us who mess with waste oil probably are at least a little off-center.

I worry when you say you have a garage near the house for your plan. I don't think I would want it too near the house or the constant rumble may get to be too much to take. You never realize how aggrivating a sound is until you listen to it 24 hours a day, 7 days a week. As far as the heat given off by the engine is concerned, why not use it as well. If you don't want to mess with the cooling system too much, set up liquid/liquid heat exchangers and use the heated water to heat another building or even the house.

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Keep everything as simple as possible-but no simpler--Albert Einstein