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Medply cuts 30 jobs; more likely Mail Tribune / Jim Craven Aaron Schuh of Central Point is one of the laid-off Medply workers. He has been with the company for 10 years. Natural gas price triples, forcing layoffs at mill By Shari Downhill Managers at Medply�s plywood mill in White City blame soaring natural gas prices for employee layoffs announced Thursday. Medply laid off 30 of the company�s 180 mill workers, with more layoffs expected soon, said company controller Ryan Roher. An overnight tripling in the price of natural gas, which Medply uses to power industrial wood dryers, would have increased the company�s monthly gas bill from $100,000 to $300,000 if production levels were maintained at current levels, Roher said. Medply managers instead decided to turn down the boilers, cut back production and lay off workers, Roher said. "I don�t believe there has ever been an increase like this, " he said of the latest natural gas price hike. "We�ve heard ... that plants all up and down the coast will be curtailing (production). This may just be the tip of the iceberg." "For the most part, (workers) took it pretty well," Roher said. "They were bummed. Who wouldn�t be?" Fourply Inc., a plywood manufacturer in Grants Pass, has also felt the financial squeeze of the utility rate hike, said company controller Phil Bush. "We�re dealing with it," Bush said. "We curtailed our drying operation here in early September." Supply and demand dynamics have prompted the drastic overnight rate hike, said Oregon Public Utilities Commission spokeman Bob Valdez. "Demand has increased," Valdez said. "Supply has not." The natural gas industry was deregulated in 1985. California, requiring alternative electrical power generation to replace two temporarily inoperable nuclear power plants, has provided the largest increase in natural gas demand. Colder than normal November temperatures have also increased demand, Valdez said. "Back when (natural gas) prices were low and supply was high, there wasn�t a lot of incentive for natural gas exploration," he said. "It went overseas ... to places like Indonesia." Now, with prices spiking, the incentive for future exploration closer to home will likely help encourage development, eventually resulting in increased supply. That, Valdez said, should result in a more stable natural gas market within 18 months to two years. Still, other factors complicate natural gas rate issues throughout the Northwest, said Paula Pyron, executive director of Northwest Industrial Gas Users, a nonprofit trade association. While California�s increased demand plays a significant role in the rate hike, issues of pipeline capacity are also relevant. Oregon�s natural gas supply comes mainly from Canada, shipped via two lines: Northwest Pipeline, operated by The Williams Company of Salt Lake City, Utah, and PG&E Gas Transmission Northwest. A limited amount of lower priced natural gas flows west from the Rockies, but pipeline constraints limit availability, Pyron said. A newly constructed pipeline has also opened up Canada�s natural gas supplies to the Chicago market, Pyron said."The new pipeline started running (Friday)," Pyron said. "I think there�s a certain amount of psychological effect on the market place. The question is, with having an alternative market for (Canadian) gas, what effect does that have on the market?" Medply, like other industrial companies riding the tide of a widely fluctuating utility market, is paying the price for relying on the open market price for some of the mill�s natural gas requirements. Companies have the opportunity to negotiate a fixed price for anticipated natural gas needs said Rusty Williams, spokesman for IGI Resources, Medply�s natural gas broker. "It�s a difficult time right now," Williams said. "Because of the volatility in the market there is a lot of risk for customers." Any natural gas used over the contract amount is purchased "on the open market," at whatever price the market demands, Roher said. Lately, that�s been a lot. Last summer, spot prices per decatherm rose from $3 to $5 in November for wholesale natural gas. Friday, the price tripled to $15 overnight. (A standard unit of measurement for natural gas, a decatherm equals 1,000 cubic feet.) "It�s not a happy time for us," Williams said. "We�re strictly passing costs through to customers. We have several customers where we suggested they look at alternative fuel sources. In that case, we don�t make any money. But, in their best interest, we still to need to suggest it." Reach reporter Shari Downhill at 776-4463, or e-mail [email protected] . Mail Tribune Home | Ottaway Newspapers, Inc. | Dow Jones & Co., Inc. | Privacy | Contact Us Copyright � 2000 Mail Tribune, Inc.