Last fall, natural gas prices around the country started to climb and last winter, they hit record highs—a trend that's not about to reverse anytime soon. In fact, many analysts expect natural gas prices, which are now double last year's average, to stay high for at least two more years. And exacerbating the upward pressure on prices, a natural gas shortage appears imminent as the gas industry faces an uphill battle just to maintain production levels from traditional supply sources.

Fortunately, facilities managers can do something to lessen the impact of rising gas prices. As industry makes efforts to increase gas supplies, managers can take measures to moderate their gas usage. In fact, they can find opportunities to boost energy efficiency in nearly every corner of their facilities. Additionally, local electric companies can help, providing guidance and even incentives to increase a facility's total energy efficiency.

Another bright spot is the Clear Skies initiative—environmental legislation that's now before Congress. While current regulations tend to push power generators to use natural gas almost exclusively, this new act would simplify laws controlling power plant emissions and thus encourage power generators to utilize other fuels in their new plants. The demand for gas could thus be eased, and prices could moderate.

The Burgeoning Natural Gas Shortage

While natural gas produces about a fifth of the electricity in the U.S., 88% of all new electric capacity constructed in the last 10 years was designed to use natural gas as its chief fuel. In fact, demand for gas is expected to swell by 50% by 2015-2020. And supply will be hard-pressed to keep up.

After 20 to 30 years of extensive development, production from some of the biggest gas fields in North America is now falling, evidence shows. Despite escalating development activities—for instance, the number of new wells drilled between mid-2000 and mid-2001 more than doubled the total of just two years ago, with almost every working rig in North America in action—natural gas production never managed to go up by more than 1.4 billion cubic feet per day or 2.7%.

Onshore production in Texas, Louisiana and Oklahoma—the three most prolific gas-producing states—has leveled off, even falling rapidly in parts of Texas and Oklahoma. Moreover, new wells often deteriorate more quickly than older resources—a tendency that was once largely counteracted by rising production levels in the Gulf of Mexico. But production there has also started to diminish. And while deepwater drilling farther out in the Gulf and the swift increase in Canadian imports have offset losses in production from these traditional sources, there's growing evidence that the rate of supply growth from both these developments has reached a plateau. It's become apparent that the drilling of new wells only helps to counteract the decline in production from current wells. Additionally, in the near term, U.S. production levels will be impeded by increasingly stringent environmental restrictions and limits on gas drilling activity. In short, the gas industry will have a hard time maintaining—what more, increasing—production levels from conventional supply areas.

The Role of the Facilities Manager

The extent to which a facilities manager is affected by rising natural gas prices generally depends on what type of facility he or she oversees. A recent survey by the U.S. Energy Information Administration found that natural gas accounts for about 20% of total energy usage in office buildings and about 35% in educational facilities. For hospitals and warehouses, that figure goes up, reaching nearly 50%.

In the short term, facilities managers can take many steps to rein in their building's gas usage. For starters, they can look at no- to low-cost measures that can reduce gas expenditures. For example, something as simple as making the most of daylight hours or maximizing the natural light in interior spaces can make a dent on the gas bill. Moreover, facilities managers can do the following during winter to increase efficiency—decrease thermostat settings, fine-tune heating systems, regularly clean air filters and inspect automated controls.

In addition, facilities managers should not overlook an important resource—the local electric company. The electric company can give advice for free on how to boost a building's overall energy efficiency. And the steps it recommends will not only lessen a facility's natural gas expenditures but its entire electric bill as well.

Finally, facilities managers can also undertake a thorough energy audit. This can reveal where and how a facility is consuming energy. It will also expose the areas where changes need to be made in order to improve overall energy efficiency. Many electric companies can perform this service or can refer a facility to a contractor. Indeed, facilities managers have many options and do not have to bear the full brunt of high natural gas prices.

Source:

Clear Skies Act
Quin Shea
Today's Facility Manager, Oct. 2003
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