I thought I should give a little update. The shop has made some progress in the last few months. I have the waste oil heater installed and running, plus I got the air compressor installed and have some air line run.
For the air line I went with 3/4" "Rapid Air" from northern tool. Its seemed the easiest, cheapest, and most expandable. I have enough line to run a solid loop around the entire shop, although so far I only have it run across half the shop. I am happy with the ease of installation and it seems to work well. I have a fairly large air compressor, and a few tools that can consume a lot of air (tire machine, sand blaster, etc) so I wanted to make sure I have a lot of capacity in my air lines. I just attached the air line to the bottom of the conduit for the power, which is about 4' off the ground.
The heater was a bit more difficult. I didn't hang it from the ceiling, as most people do, but instead built a stand to support it from the ground. That worked well and placed it exactly where I wanted it (on top of my compressor room). I used my 120 gallon tank and mounted the remote pump on it, and then ran a flexible copper fuel line to the heater. That was pretty straight forward. The chimney was a little more difficult. it is a tin pole barn with a tin ceiling... I needed to figure out where to shoot straight up that wouldn't hit any boards. I then went to the roof and started cutting a hole in my perfect roof. That was difficult emotionally. One of the more difficult parts was staying on the roof. The chimney is close to the corner, but that actually made it more difficult because if you started to slide, you didn't have much time before you fell off. All in all, we were able to get the chimney up and complete in a day with two guys working on it. The really hard part was paying for it. The chimney isn't all that big but because I had to use the stainless insulated stuff, it cost over $800, and that was buying it at the local home store (menards). The heating place where I bought my heater would have sold me similar materials for double.
I had a lot of issues with the heater right away, it wouldn't run smoothly and would kick off and need to be manually reset. Turns out that barrel of oil I was using had a lot of gas in it which was boiling and putting air in the system. Otherwise it has worked fairly well. I have been a bit concerned that I am burning more fuel than I expected. My shop is 42x45x14 and is fairly well insulated. When I first got it running I set it at 65 degrees and it was sub zero outside. I was burning about 10 gallons A DAY! That is over a million BTU/Hours to heat it for a day. Wowsers. Fuel is free, but that required me to fill the tank way too often. I temporarily covered some windows with insulation (which actually makes it brighter in there because I am only in there after dark anyway) and caulked the tin walls to the floor. I also turned the heat down to 50 degrees. That has helped a lot. I now am burning half that fuel when it is cold out, and even less when it is closer to the freezing mark.
A few thoughts about waste oil, for those of you thinking about it. I really like the fact that I can get the fuel for free. I have 4 small shops and a few local farmers that give me their waste oil for free. My shop is for fun, so if I was paying $1000-2000 a season to heat it (remember, I'm in MN) I wouldn't be heating it continuously. And if it wasn't warm, I wouldn't be out there daily. It is a lot more work though. I spent quite a bit of time hauling in barrels of oil. Letting them sit 24 hours to warm up, pumping the water out of them (almost every 55 gallon drum I have gotten has had at least 10 gallons of water in it), pumping the oil into the tank, etc. I have had a few issues with my heater as well, and that may be partially because I bought a used (dealer rebuilt) heater... but I think that is the nature of the beast. I can see a lot of people saying it isn't worth their time.
You need to have the ability to pick up this oil as well. I modified a 2 wheel dolly so that I can move a 55 gallon drum by myself, and can wheel it over and put it on the tommy lift on my truck. Without that, I don't know how I would move 400lb oil barrels around. I have a car trailer that I use to haul totes full, but then the only way to move those is with my skidsteer with pallet forks. Without tools similar to those, I am not sure how I would deal with it. Burning 5 gallons a day, you really don't want to deal with it in quantities smaller than 55 gallons.