The Time is Now for Natural Gas Heaters and EPAct Tax Incentives

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An abundance of natural gas has recently been uncovered in the U.S. The increase in natural gas supply will help drive costs down, making natural gas heaters an attractive investment opportunity for commercial buildings. When combined with energy-efficient lighting, heaters become even more economical in that they are likely to qualify for Section 179D tax incentives.

The EPAct Section 179D Tax Opportunities

Pursuant to Energy Policy Act (EPAct) Section 179D, commercial property owners making qualifying energy-reducing investments in their new or existing locations can obtain immediate tax deductions of up to $1.80 per square foot.

If the building project doesn't qualify for the maximum EPAct Section 179D $1.80 per square foot immediate tax deduction, there are tax deductions of up to $0.60 per square foot for each of the three major building subsystems: lighting, HVAC (heating, ventilating, and air conditioning), and the building envelope. The building envelope is every item on the building’s exterior perimeter that touches the outside world including roof, walls, insulation, doors, windows and foundation.

Gas, Gas, Gas!

Three of the largest U.S. natural gas finds are the Marcellus, the Barnett and the Utica. The huge Marcellus Shale find, encompassing Pennsylvania, New York, Ohio and West Virginia, is one of many intriguing natural gas “plays” across the U.S. In Texas, the Barnett play continues to yield more and more wells as exploration continues. While the concrete shale there gives up its gas stingily, Barnett’s ever-growing count of wells make the aggregate production numbers significant. Meanwhile, the proximity of Marcellus to high energy cost northeast customers makes it especially important to buyers of natural gas heaters.

Eastern Ohio’s Utica Shale has rapidly become the state’s natural gas reserve for the ages, with millions of acres for drilling and billions of dollars being pumped into the state’s economy by energy companies looking to capitalize on the find. The size of the Utica find is vast; in fact it is geographically twice the size of the large Marcellus find. Further, Ohio benefits from its close access to the western portions of the Marcellus shale as well, making Ohio one of the leading natural gas sources in the country.

The four largest natural gas fields and their prime state locations are:

Four Largest Shale Gas Fields

Field Name State
Barnett Texas
Utica Ohio
Marcellus Pennsylvania
Haynesville Louisiana

Investment Follows Suit

Kinder Morgan, a large pipeline company, recently agreed to purchase El Paso Corp, an almost equally large firm, thereby doubling the Kinder’s supply of natural gas pipeline. If the merge is approved, the companies will combine to form the largest natural gas pipeline operator in the U.S., stretching over 80,000 miles from the Rocky Mountains to New England. Worldwide, energy and utility deals accounted for roughly a third of all mergers and acquisitions in the last quarter of 2011, suggesting that many investors believe natural gas will play an integral part in the future of energy use.

Time to Buy a Natural Gas Heater

Most new natural gas heaters are sufficiently superior to previous generations to make EPAct savings a possibility. This is especially true for non-conditioned warehouses. Regardless, contemporary heaters, when combined with modern day energy-efficient lighting, frequently qualify for at least $1.20 per square foot in EPAct tax savings. Often, the lighting alone is so efficient compared to the EPAct baseline that leftover EPAct deductions exist (in excess of project cost) which can be applied to the purchase of a new heater or building envelope measure including a roof. Depending on the state of domicile and on usage, all such factors combined can reduce payback periods to as little as one to three years in length. Therefore, companies which can reasonably expect to keep operations in a given facility for more than a few years have every reason to consider buying an energy-efficient heater as part of their next retrofit.

Five Leading Natural Gas Heater Manufacturers

The five leading U.S. natural gas heater manufacturers are presented below:

The Five Largest U.S. Heater Manufacturers

Cambridge Engineering
Hastings HVAC
Modine Manufacturing Company
Reznor HVAC Solutions
Sterling HVAC

Whenever a facility is considering purchasing a natural gas heater including any of the manufacturers listed above, they should consider monetizing an EPAct tax incentive.

Natural Gas & EPAct Example

When combined with energy-efficient lighting, warehouses are particularly likely to qualify for EPAct tax deductions. With the EPAct tax calculations it is crucial to reduce the lighting wattage per square foot to prescribe levels, or less, to secure an EPAct tax deduction since lighting is the largest overall energy user in a non-conditioned building. A simple example illustrates how EPAct helps purchasers of natural gas heaters obtain sizable tax deductions.

Warehouse & Manufacturing Heater EPAct Example

Lighting LPD (watts/sq. ft.)

EPAct deduction level (per sq. ft)

Potential Deduction


Size - 200,000 sq.ft.

≤ 0.75



≤ 0.45



Manufacturing Facility Size - 200,000 sq.ft.

≤ 1.375



≤ 0.825




The time is now for taking advantage of the huge new U.S. natural gas finds. Warehouse and industrial buildings can substantially reduce their heating related operating costs and obtain large tax incentives to assist in the conversion process.

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