The president and CEO of NW Natural told a crowd of mid-valley political and business leaders Friday that the recession has triggered a decline in natural gas prices, but he warned that the price break won't last and pointed to energy challenges looming in the next decade.

Gregg Kantor spoke at a lunch event sponsored by NW Natural and held at the Linn County Fair and Expo Center. About 30 people attended.

Kantor said that natural gas rates will drop 16 percent for residential customers and 19 percent for commercial customers, effective Nov. 1. That price likely will hold until next Nov. 1, he said. But Kantor pointed to trends that could make the supply of natural gas more volatile after that - and also could trigger a spike in prices.

He noted a worldwide surge in energy demand, driven in large part by developing counties. As states and nations work to reduce the emission of greenhouse gases, he said pressure will mount to curtail the amount of electricity created from burning coal. He said half of the electricity generated in the United States comes from coal-burning plants; Oregon gets 40 percent of its electricity from coal.

Wind and solar energy are not yet at the point where they can fill in the coal gap, he said, hydroelectric sources in the Northwest are tapped out, and "politically, we can't build nuclear (plants) in the West." In addition, because of the intermittent nature of wind and solar energy, power companies are planning to back up those sources with new plants that burn natural gas, he said.

All of that likely will create an increased demand for natural gas, and that, he said, could drive prices up.

In response to a question from an audience member, Kantor also said that conservation is the most cost-effective way to reduce greenhouse gases and noted that because the company's rate structure isn't tied to increasing the amount of gas it sells to customers, and it has launched a variety of conservation programs.

Kantor also talked about a pipeline project, called Palomar, which will connect the company's distribution system to an interstate pipeline. Kantor said the company believes the project, which is pending before federal regulators and has attracted criticism, is important to ensure gas-supply reliability for the state.

"We will not run out of natural gas," Kantor said. "But we'll pay a lot more money for it ... unless we build new ways to get it to Oregon."