>La Grande Observer | Union and Wallowa Counties' News Leader

Soaring natural gas rates force Boise to cut a shift

Bill Rautenstrauch

The Observer

Some of the worst news Union County could have gotten came last week when Boise Cascade announced it was curtailing a shift at its La Grande sawmill.

But it wasn't news as usual.

The curtailment, characterized by human resources officer Steve Lyon as "temporary and indefinite," had little to do with a shortage of logs — the reason that is so often given for such curtailments.

Boise, Union County's largest employer, said it would be laying off 70 workers because of the cost of the natural gas the mill uses to dry

lumber.

"Anybody using natural gas for their business is going to find out things are changing," Lyon said.

There's little doubt Northeast Oregon businesses are struggling with high energy costs — and those costs aren't by any means limited to natural gas.

But just how serious the problem is at this point is open to debate.

Jason Yohannan, regional economist for the Oregon Employment Department, said little information is available on ways energy costs might be affecting local employment and the economy.

But he added that a look at national figures might help reveal some local trends.

Yohannan was able to supply some figures on energy price increases across the nation, and how they have affected consumers.

Between August 2004 and August 2005, the consumer price index for all items rose 3.6 percent.

The price of energy-related items including gasoline, utility (piped) gas service, fuel oil and electricity rose 20.2 percent nationwide.

Breaking it down, the cost of gasoline nationally rose 31 percent. Piped utility gas service went up 11.9 percent, fuel oil 41.5 percent, and electricity 5.7 percent.

If the energy cost increases are taken out of the equation, the consumer price index inflation rate rose only 2.2 percent.

But the energy costs have a firm hold in the equation, and they're giving businesses plenty to think about.

At Barreto Manufacturing, natural gas prices haven't affected operations drastically — but they may factor in later.

Greg Barreto, owner of the local company that makes rototillers and markets them them worldwide, said that propane, not natural gas, is used to cure the powder coat paint for his product.

Cost of propane is increasing, but has not yet forced a crisis. But Barreto said he is keeping a close eye on the situation.

"We don't use much natural gas, but propane has gone up by about half. At the end of the year, we'll be doing some evaluating."

Barreto said a few employees were laid off this year, but not because of energy costs.

"It was because our growth wasn't quite what we expected it to be," he said.

Nonetheless, rising energy costs are a cause for worry.

"No telling what the situation will be next year," he said.

Another local, energy-dependent business keeping a close tab on energy prices is Mid-Columbia Bus Company, transportation provider for six school districts in Union County, including La Grande.

The company keeps uppermost in its mind the fact that higher costs are passed on to the school districts, which don't have that much money to play with in the first place.

"We always do as much as we can to be as economical as possible," said Manager Bruce Flatt.

Flatt said there are two basic kinds of runs for Mid-Columbia: home-to-school runs and activity trips.

Home-to-school runs are the routine, day-to-day trips that get kids to and from school.

For the school districts, costs for those runs go up or down depending on the cost of fuel. Mid-Columbia charges accordingly.

On the other hand, charges for the activity runs to sporting and other events are set at the end of each school year, for the next school year.

The prices stay fixed until the next contract is negotiated.

"We take that on the chin," said Flatt, who noted that diesel prices have gone up 60 percent recently.

In any case, conservation has become an important issue at Mid-Columbia. Flatt said particular attention is paid to vehicle maintenance, right down to being sure that tires are inflated to the proper pressure.

Lower speeds and reduced idling time also are important to the conservation efforts.

Flatt said high energy costs are at least indirectly responsible for staffing problems the company has seen recently.

School districts from Union, Baker and Grant counties are served from the La Grande location.

Many of the part-time drivers living in outlying communities are having trouble justifying the expense of the drive from home to the bus terminal in

La Grande.

"They only work for four hours a day, and some are having trouble with the fact they have to spend so much money on gas to get to and from work," Flatt said.

The Boise Cascade sawmill uses gas-fired boilers to generate steam to dry lumber. When the company announced the layoff, it said it is exploring alternative energy sources.

At the same time, Boise said it couldn't tell how long the curtailment will last.

Union County Commissioner Colleen MacLeod, along with everybody else, hopes it doesn't last too long.

"Hopefully, this will be short term," she said. "I have looked at other communities that have had layoffs of about the same number of people, and I know it can hurt."

Though at this early stage it's hard to predict the effect the Boise layoffs will have on the economy, MacLeod said a long- term curtailment could be

devastating.

"If it's long-term, you lose people. They move out. That in turn has bad effects. It guts the schools and it guts retail."

She said she thinks the whole question of high energy costs for wood products producers is tied to environmental regulations and concerns.

"It's interesting that most of the turmoil in the timber industry has come from head butting between the industry and environmentalists," she said. "A layoff caused by energy shortages is something new, but I think a lot of it comes from that same head-butting.

"I'm afraid it's going to come to a point where we can't grow and sell our own products."

In La Grande, the cost of a gallon of gas reached the $3 plateau toward the end of the summer; currently the average price is $2.86.

On average, Union County workers earn $27,883 a year, well below the national average salary of $39,348 and the state average of $35,621.

For many, keeping up with the transportation and heating costs will be a struggle.