Energy crisis darkens S.J. paper mills to temporarily shut due to natural-gas prices By Liz Benston

Record Staff Writer

San Joaquin County's two major paper manufacturers will shut down for a limited period due to spiking natural-gas prices.

Officials for Newark Sierra Paperboard Corp. in Stockton and Fox River Paper Co. in Ripon said they could no longer afford to pay for natural gas, which the mills primarily use to power paper-drying equipment.

Most of Newark Sierra's 135 or so employees will be laid off next week, when most of the plant will be offline, general manager Mark Vincent said. But some of the plant will be up again the week of Dec. 18, and he expects it to be fully operational again Jan. 2.

Fox River mill manager Pat Mickelson said a "significant" number of the plant's roughly 160 workers will be let go through the end of the year.

It will shut down its giant paper machine, but other services, such as maintenance, shipping and distribution services, will remain open, he said.

Last week, Shasta Paper Co., one of Shasta County's largest employers, announced it would close Monday for at least a week because of soaring gas prices. Almost all of the plant's 460 workers would be laid off until gas prices drop, the company said.

Officials at both San Joaquin County facilities say the shutdowns will be curtailed because they are hopeful prices will fall over the next few weeks.

"We can't walk away from our customers for extended periods and expect them to be there," Vincent added. "We need to take care of our key customers."

Limited pipeline capacity, a decline in natural-gas reserves and soaring demand has pushed natural-gas prices into the stratosphere, experts say.

Paper mills are large natural-gas users in winter months, a time when other industries are less active. And many buy gas on what's known as the daily spot market, a free-for-all where prices have risen from about $3 per million British thermal units to more than $8. In futures trading Thursday, January contracts settled down 11.2 cents, to $8.373, on the NYMEX.

"We were flabbergasted at $6 for (natural gas)," Vincent said. "This is not the end of this. This is just the beginning."

Vincent and Mickelson declined to reveal what they currently pay for natural gas.

Newark Sierra, which uses recycled materials to make paperboard products, gets its natural gas from a third party, out-of-state marketer. Fox River, which makes writing and printing paper, obtains power from a nearby co-generation plant owned by another company.

"It's an energy crisis is what it boils down to," added Gene Hain, vice president of the Association of Western Pulp & Paper Workers union in Portland, Ore.

Hain said the union is trying to gather a coalition of other unions and industries to try and meet with regulators and other agencies to address the problem.

Representatives of the union's Local 320 in Stockton, which represents Newark Sierra employees, could not be reached for comment Thursday.

The gas-price spike, combined with an increase in electricity costs, will affect a broader segment of industrial users than just paper mills, Hain said.

"You're going to see it affecting a lot of food processing that uses considerable amounts of energy. You're going to see them realize that they're going to have to raise the price of their products considerably or shut down until this energy crisis is over."

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-- Martin Thompson (mthom1927@aol.com), December 08, 2000