PRAIRIE CITY — Prairie Wood Products suspended operations and laid off the majority of its employees on March 1, with company officials saying a sudden change in the Forest Service interpretation of a grant subsidizing transportation costs has put the mill’s future at risk. Prairie Wood Products officials say they are pursuing expedited negotiations with the Forest Service to resolve the dispute.

“In December 2023, we were awarded a Timber and Biomass Transportation grant with the understanding and representation from the Forest Service that the grant would provide matching funds covering transportation costs on our timber sales on the Malheur National Forest,” said Prairie Wood Products president Jodi Westbrooks.

In February, after submitting reimbursement paperwork, mill officials said they learned that the Washington Office of the Forest Service had decided that costs on their existing timber sales were ineligible for reimbursement under the grant.

The situation was “completely inconsistent with our discussions with Forest Service personnel at the local level, both in John Day and at the regional office in Portland,” mill officials said.

Without the grant’s matching funds, company officials say they’ve been forced to suspend a previously approved pilot transportation program shipping pine logs — which, as a White fir/Douglas fir specialist, Prairie Wood Products doesn’t manufacture — to a pine sawmill in Central Oregon. This program, along with operations at the Prairie City sawmill, are suspended until the transportation program funding is reinstated, officials said.

“I’m very concerned because it’s imperative we have enough timber coming into both our mills because both mills are super important to our economy here,” said Grant County Commissioner and Prairie City resident Jim Hamsher.

Prairie Wood Products officials say the developments imperil a key piece of wood products industry infrastructure owned by Prairie Wood Products. The company is in the process of re-permitting and modernizing its cogeneration electrical plant, which would provide a regional center for processing the large volumes of woody debris and biomass generated by thinning and other forest treatments designed to minimize wildfire risk, officials said.

“The Forest Service is shooting itself in the foot with this decision. Unless our company can be successful in Prairie City, the opportunity to restart our cogeneration facility will be lost,” Westbrooks said.