Albert Montague's specialty at the Environmental Protection Agency's regional headquarters in Philadelphia is researching new techniques of sewage treatment. In his off hours, he tinkers in another area -- fuel-saving devices for residential furnaces.

The classic basement entrepreneur, Montague says he has invented an apparatus that could save billions of dollars annually in home heating bills.

He says the device -- which consists largely of a loop of pipes and a heat exchanger with no moving parts -- cut his own heating bills by 16 per cent last winter.

While Underwriters Laboratories has agreed to test the system on four furnaces, the federal government -- Montague's employer -- told him it-"cannot view your submission as having sufficient promise to warrant government investment of development."

"On modern designs, your system would result in little, if any, energy savings," George P. Lewett, chief of energy-related inventions at the National Bureau of Standards, wrote Montague recently. "Only on old, poorly designed furnaces would your system be useful."

Since Montague has a gas furnace of modern design -- his house here is six years old -- he finds Lewett's contention odd.

To determine how effective his system was, Montague not only compared fuel bills over different winters, but weighted fuel consumption based on the number of degree days in each season. Furthermore, he compared his records with those of neighbors who live in the same style and size house.

In all cases, Montague says, meter readings from Public Service Electric & Gas Co. of Camden, N.J., for his house and his neighbors' show that there have been substantial savings.

Besides using 16 per cent less fuel last winter than he did the two previous ones, Montague was conserving more fuel than his similarly housed neighbors.

For example, last February, he used 303 therms of gas, while one neighbor used 470 therms, another, 463, and a third, 494.

Montague's system is basically a coil of galvanized pipes sprouting from his furnace. It works this way:

Cold air from outside enters one pipe. Its temperature is raised by waste heat extracted from furnace emissions that go up the chimney. The heated outside air is then piped into the furnace's combustion chamber.

Montague said the system saves fuel for several reasons. "It utilizes heat that would ordinarily go up the chimney," he said. "It reduces drafts in the house and it gives the furnace a steady supply of oxygen so it burns more efficiently."

Montague said that when a house is sealed tightly -- by storm windows, caulking and weatherstripping -- forced drafts will occur through the remaining cracks because air has to get to the furnace to supply combustion.

If a house is sealed so tightly that there are no drafts, then the furnace will burn inefficiently, giving off concentrations of odorless carbon monoxide.

According to the U.S. Consumer Product Safety Commission, "carbon monoxide poisoning is a potentially serious and not infrequent hazard associated with gas furnaces... venting problems are the apparent cause of many of the reported incidents."

A 1977 report by the commission said there were 426 poisonings from July 1, 1975, to June 30, 1976.

Montague said his system, because it uses outside air, eliminates this potential hazard. He also said it is safer than vent dampers -- devices that stop heat from escaping out the chimney when the furnace is not operating.

Vent dampers have been slow in winning wide approval from safety officials because a malfunction -- caused by a design defect or poor installation -- could permit poisonous gases to seep into the house.

Montgague, who is research director for EPA's regional headquarters, said his system has a fail-safe device that eliminates any hazard caused when a flue or chimney becomes blocked -- by a fallen brick, for example.

If Montague wins UL approval and decides to market the device, he will have to give up his job at EPA. The odds against any basement entrepreneur -- even a research director at EPA -- are enormous. Only 2 percent of the applications to the Department of Energy are approved for further development.