Edgar Filing: NORTHWEST NATURAL GAS CO

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )

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Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement

[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))

[X] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to Rule 14(a)-12

Northwest Natural Gas Company
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Fling Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.

(1) Title of each class of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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(5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(4) Date Filed:

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[LOGO] NW NATURAL
220 N.W. SECOND AVENUE
PORTLAND, OR 97209

April 18, 2003

To the Shareholders of Northwest Natural Gas Company:

We cordially invite you to attend the 2003 Annual Meeting of Shareholders of
Northwest Natural Gas Company (the Company), which will be held in the Grand
Ballroom of the Hilton Portland, 921 SW 6th Avenue, Portland, Oregon, on
Thursday, May 22, 2003, commencing at 2:00 p.m., Pacific Daylight Time. We look
forward to greeting as many of our shareholders as are able to join us.

At the meeting you will be asked to consider and vote upon the election of seven
directors. Your Board of Directors unanimously recommends that you vote FOR the
directors nominated in Proposal 1.

In connection with the meeting, we enclose a notice of the meeting, a proxy
statement and a proxy card. Detailed information relating to the Company's
activities and operating performance is contained in our 2002 Annual Report,
which is also enclosed.

Whether or not you plan to attend, please vote your shares in one of three ways:
via Internet, telephone or mail. Instructions regarding Internet and telephone
voting are included on the proxy card. If you elect to vote by mail, please
sign, date and return the proxy card in the enclosed postage-paid envelope. Your
proxy may be revoked at any time before it is exercised in the manner set forth
in the proxy statement.

Sincerely,

Richard G. Reiten
Chairman of the Board

NORTHWEST NATURAL GAS COMPANY
ONE PACIFIC SQUARE
220 N.W. SECOND AVENUE
PORTLAND, OREGON 97209
(503) 226-4211

NOTICE OF 2003 ANNUAL MEETING OF SHAREHOLDERS

Portland, Oregon, April 18, 2003

To the Shareholders:

The 2003 Annual Meeting of Shareholders of Northwest Natural Gas Company
will be held in the Grand Ballroom, Hilton Portland, 921 SW 6th Avenue,
Portland, Oregon, on Thursday, May 22, 2003, at 2:00 p.m., Pacific Daylight
Time, for the following purposes:

(1) to elect four Class I directors to a term of three years; to elect one
Class II director to a term of one year; and to elect two Class III
directors to a term of two years; and

(2) to transact such other business as may properly come before the meeting or
any adjournment thereof.

Holders of Common Stock of record at the close of business on April 3, 2003
are entitled to vote upon all matters properly submitted to shareholder vote at
the meeting.

The Board of Directors of the Company is soliciting the proxies of all
holders of the Common Stock who may be unable to attend the meeting in person.
These proxies also will instruct the relevant fiduciary under the Company's
Dividend Reinvestment and Stock Purchase Plan, its Retirement K Savings Plan or
its Employee Stock Purchase Plan to vote any shares held for shareholders'
benefit under those Plans, as indicated on the proxies. A proxy and a stamped
return envelope are enclosed herewith for your use. No postage is needed if
mailed in the United States.

YOUR VOTE IS VERY IMPORTANT TO US.

WE URGE YOU TO VOTE BY PROMPTLY MARKING, SIGNING, DATING AND RETURNING THE
ENCLOSED PROXY CARD, OR BY GRANTING A PROXY BY TELEPHONE OR THE INTERNET IN
ACCORDANCE WITH THE INSTRUCTIONS ON THE ENCLOSED PROXY CARD, AS SOON AS
POSSIBLE. YOUR PROMPT VOTE WILL SAVE THE COMPANY THE ADDITIONAL EXPENSE OF
FURTHER REQUESTS TO ENSURE THE PRESENCE OF A QUORUM. YOU MAY VOTE IN PERSON AT
THE MEETING WHETHER OR NOT YOU PREVIOUSLY HAVE RETURNED YOUR PROXY.

By Order of the Board of Directors,

Secretary

NORTHWEST NATURAL GAS COMPANY
ONE PACIFIC SQUARE
220 N.W. SECOND AVENUE
PORTLAND, OREGON 97209
(503) 226-4211

2003 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 22, 2003

PROXY STATEMENT

The Board of Directors of Northwest Natural Gas Company is soliciting the
proxies of all holders of the Common Stock who may be unable to attend in person
the Annual Meeting of Shareholders to be held in the Grand Ballroom, Hilton
Portland, 921 SW 6th Avenue, Portland, Oregon, on Thursday, May 22, 2003, at
2:00 p.m., Pacific Daylight Time. The Company requests that you sign and return
the enclosed proxy promptly. Alternatively, you may grant your proxy by
telephone or the Internet.

The Company's Annual Report for the fiscal year ended December 31, 2002,
including audited financial statements, has been mailed to all shareholders.
This proxy statement and the accompanying proxy card are being mailed to
shareholders commencing April 18, 2003.

The close of business on April 3, 2003 has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
meeting.

VOTING BY PROXY AND HOW TO REVOKE YOUR PROXY

You may vote your shares either in person or by duly authorized proxy. You
may use the proxy card accompanying this proxy statement if you are unable to
attend the meeting in person or you wish to have your shares voted by proxy even
if you do attend the meeting. If you are a registered shareholder, you may vote
by telephone, Internet or mail, or you may vote your shares in person at the
meeting. To vote:

BY TELEPHONE (DO NOT RETURN YOUR PROXY CARD)

o On a touch-tone telephone, call the toll-free number indicated on
your proxy card. Telephone voting is available 24 hours a day, 7
days a week, until 11:59 p.m. Eastern Daylight Time on May 21,
2003.

o Enter your control number indicated on your proxy card.

o Follow the simple recorded instructions.

BY INTERNET (DO NOT RETURN YOUR PROXY CARD)

o Go to the Web site indicated on your proxy card. Internet voting
is available 24 hours a day, 7 days a week, until 11:59 p.m.
Eastern Daylight Time on May 21, 2003.

o Enter your control number indicated on your proxy card.

o Follow the simple instructions.

BY MAIL

o Mark your choice on your proxy card. If you properly execute your
proxy card but do not specify your choice, your shares will be
voted "FOR" Proposal 1, as recommended by the Company's Board of
Directors.

o Date and sign your proxy card.

o Mail your proxy card in the enclosed postage-paid envelope. If
your envelope is misplaced, send your proxy card to Northwest
Natural Gas Company, One Pacific Square, 220 N.W. Second Avenue,
Portland, Oregon 97209, Attention: Shareholder Services.

You may revoke your proxy at any time before the proxy is exercised (1) by
delivering a written notice of revocation, (2) by filing with the corporate
secretary a subsequently dated, properly executed proxy, (3) by voting after the
date of the proxy by telephone or Internet, or (4) by attending the meeting and
voting in person. Your attendance at the meeting, by itself, will not constitute
a revocation of a proxy. You should address any written notices of proxy
revocation to:

Northwest Natural Gas Company
220 NW Second Ave.
Portland, OR 97209
Attention: Corporate Secretary

If your shares are held in nominee or street name by a bank or broker, you
should follow the directions on the instruction form you receive from your bank
or broker as to how to vote, change your vote, or revoke your proxy.

If an adjournment of the meeting occurs, it will have no effect on the
ability of shareholders of record as of the record date to exercise their voting
rights or to revoke any previously delivered proxies.

VOTING SECURITIES OF THE COMPANY

The 25,637,624 shares of Common Stock outstanding on March 14, 2003 were
held by 9,959 shareholders residing in 50 states, the District of Columbia and a
number of foreign countries.

Each holder of Common Stock of record at the close of business on April 3,
2003 will be entitled to one vote for each share of Common Stock so held on all
matters properly submitted at the meeting. Such holder will be entitled to
cumulative voting for directors; that is, to cast as many votes for one
candidate as shall equal the number of shares held of record multiplied by the
number of directors to be elected, or to distribute such number of votes among
any number of the candidates.

A majority of the shares of Common Stock outstanding at the close of
business on April 3, 2003 must be represented at the meeting, in person or by
proxy, to constitute a quorum for the transaction of business.

The holders of Preferred Stock do not participate in the election of
directors unless Preferred dividends are in arrears (none are in arrears).

IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. YOU ARE
URGED, REGARDLESS OF THE NUMBER OF SHARES HELD, TO SIGN AND RETURN YOUR PROXY.
ALTERNATIVELY, YOU MAY GRANT YOUR PROXY BY TELEPHONE OR THE INTERNET AS
DESCRIBED ABOVE.

PROPOSAL 1 - ELECTION OF DIRECTORS

The Company's Restated Articles of Incorporation provide that the Board of
Directors be comprised of not less than nine nor more than 13 directors, with
the exact number of directors to be determined by the Board. The Board has fixed
the number of directors at 13. However, the number of directors will be reduced
to 11 upon the retirement, at the opening of this year's Annual Meeting, of
Messrs. Thomas E. Dewey, Jr. and Wayne D. Kuni, who have each reached the
mandatory retirement age for Board service. Messrs. Dewey and Kuni have served
as directors since 1986 and 1980, respectively. In addition, Mr. Dwight A.
Sangrey, who has served as a director since 1992, will not stand for re-election
to the Board. The Restated Articles also provide that the Board of Directors be
divided into three classes and that the number of directors in each class be as
nearly equal in number as possible.

Members of each class are elected to serve a three-year term with the terms
of office of each class ending in successive years. The term of Class I
directors expires with this year's Annual Meeting. Messrs. Randall C. Pape,
Richard L. Woolworth, Timothy P. Boyle and Mark S. Dodson are nominees for
election to the Board as Class I directors to serve until the 2006 Annual

Meeting or until their successors have been duly elected and qualified. Mr. Pape
was elected by the shareholders at the 2000 Annual Meeting and Mr. Woolworth was
elected by the shareholders at the 2001 Annual Meeting. Mr. Dodson was appointed
to the Board of Directors as a Class I director in September 2002, effective
January 1, 2003, with a term expiring at the 2003 Annual Meeting. Mr. Boyle is
nominated for his initial term on the Board. Although Mr. Robert L. Ridgley's
term as a Class I director expires with this year's Annual Meeting, he has been
nominated for election as a Class II director to serve until the 2004 Annual
Meeting or until his successor has been duly elected and qualified. Mr.
Ridgley's nomination as a Class II director is recommended so that his term will
expire concurrently with his reaching the mandatory retirement age for Board
service. Messrs. John D. Carter and C. Scott Gibson were appointed to the Board
of Directors as Class III directors in July 2002, with terms expiring at the
2003 Annual Meeting, to fill vacancies and each is a nominee for election to the
Board as a Class III director to serve until the 2005 Annual Meeting or until
his successor has been duly elected and qualified. In case any of the nominees
should become unavailable for election for any reason, the persons named in the
proxy will have discretionary authority to vote for a substitute. Management
knows of no reason why any of the nominees would be unable to serve if elected.

VOTE REQUIRED

Under Oregon law, if a quorum of shareholders is present at the Annual
Meeting, the seven nominees who receive the greatest number of votes cast at the
meeting shall be elected directors. Abstentions and broker non-votes are counted
for purposes of determining whether a quorum exists at the Annual Meeting but
are not counted and have no effect on the results of the vote for directors.

THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF THE NOMINEES LISTED BELOW.

INFORMATION CONCERNING NOMINEES AND CONTINUING DIRECTORS

NOMINEES FOR ELECTION TO BOARD OF DIRECTORS

CLASS I

(FOR A THREE-YEAR TERM ENDING 2006)

[Picture] TIMOTHY P. BOYLE
[omitted]
President and Chief Executive Officer of Columbia
Sportswear Company, Portland, Oregon
Age: 53
Director since: Nominated 2003
Board Committees: None

Since 1989, Mr. Boyle has served as President and Chief Executive Officer
of Columbia Sportswear Company, an active outdoor apparel and footwear company
headquartered in Portland, Oregon. He began working with the Columbia Sportswear
Company in 1970. Mr. Boyle is a board member for Pacific Crest Outward Bound
School and Jesuit High School. He is also a member of the Board of Directors of
Widmer Brothers Brewing and the University of Oregon Foundation Board and is a
trustee of Reed College and a past member of the Young Presidents' Organization.
He earned a Bachelor of Science degree in Journalism from the University of
Oregon.

[Picture] MARK S. DODSON
[omitted]
President and Chief Executive Officer of the Company,
Portland, Oregon
Age: 58
Director since: 2003
Board Committees: None

Mr. Dodson became Chief Executive Officer of the Company on January 1,
2003, where he previously served as President, Chief Operating Officer and
General Counsel since 2001. He joined the Company in 1997 as Senior Vice
President of Public Affairs and General Counsel, following a 17-year career with
the Portland law firm Ater Wynne Hewitt Dodson & Skerritt. Mr. Dodson serves on
the executive committees of the Portland Business Alliance and Associated Oregon
Industries and is a member of the Board of Directors of the Oregon Business
Council. He also has worked on affordable housing issues as a board member and
chairman of the Neighborhood Partnership Fund. Mr. Dodson has provided advice
and counsel to government and elected officials, including service on transition
committees for three Oregon governors. In 1979, he worked in the General
Counsel's office of the United States Department of Transportation and later
served as special counsel to the Federal Aviation Administrator in Washington,
D.C. Mr. Dodson served as an appointee to the State Board of Higher Education
from 1987-1994 as a board member and president. He currently serves as a Trustee
of Linfield College and as a member of the Board of Directors of Waseda
University USA. He recently headed the Governor's Task Force on Scholarship and
Student Aid. He earned an undergraduate degree from Harvard University and a law
degree from Boalt College of Law at the University of California, Berkeley, in
1973.

[Picture] RANDALL C. PAPE
[omitted]
President and Chief Executive Officer, The Pape Group, Inc.,
Eugene, Oregon
Age: 52
Director since: 1996
Board Committees: Governance, Finance (Chair), Organization
and Executive Compensation

Since 1981, Mr. Pape has served as President, Chief Executive Officer and a
director of The Pape Group, Inc., a holding company for Pape Machinery, Inc.,
Pape Bros., Inc., Flightcraft, Inc., Hyster Sales Company, Ditch Witch
Northwest, Industrial Finance Co. and Pape Properties, Inc. He also is
President, CEO and a director of Liberty Financial Group, a holding company for
LibertyBank, and its subsidiary, Commercial Equipment Lease Corporation. He is
an owner and director of Sanipac, Inc. and its subsidiary, Eco Sort LLC, and a
partner in Pape Investment Company. Since 1996, Mr. Pape has served as a
director of Obie Media Corporation and is a former director and past president
of Mt. Bachelor, Inc. He serves as a Commissioner to the Oregon Department of
Transportation, is a trustee and past president of the University of Oregon
Foundation, and also serves on the Oregon Business Council and is a former
trustee for The Nature Conservancy of Oregon. He earned a Bachelor of Science
degree in Finance from the University of Oregon.

[Picture] RICHARD L. WOOLWORTH
[omitted]
Chairman and Chief Executive Officer, The Regence Group,
Portland, Oregon
Age: 61
Director since: 2000
Board Committees: Governance, Finance and Public Affairs

Mr. Woolworth has served since 1995 as Chairman and CEO of The Regence
Group, the largest affiliation of Blue Cross and/or Blue Shield companies in the
western United States. He is also board chairman of Regence BlueCross BlueShield
of Oregon and Regence HMO Oregon, a director of the Columbia Mutual Funds, and
chairman of the Oregon Business Council. He is immediate past chair of the
National Blue Cross and Blue Shield Association, and past chairman of the
Portland Chamber of Commerce and regional fund drives for the United Way and the
Juvenile Diabetes Foundation. Mr. Woolworth is a certified public accountant and
a graduate of Lewis and Clark College in Portland.

CLASS II

(FOR A ONE-YEAR TERM ENDING 2004)

[Picture] ROBERT L. RIDGLEY
[omitted]
Retired Chairman of the Board of the Company, Portland, Oregon
Age: 69
Director since: 1984
Board Committees: Environmental Policy, Finance and Public
Affairs

Mr. Ridgley served as President and Chief Executive Officer of the Company
from 1985 until 1996 when he became Chairman of the Board and CEO. He retired as
CEO in 1996 and as Chairman of the Board in 1999. He is a director of Kaiser
Foundation Hospitals and the Kaiser Foundation Health Plan, and is a past
Chairman of the Oregon Business Council, the American Gas Association, the
Pacific Coast Gas Association and the Portland Area Chamber of Commerce. Mr.
Ridgley serves as an officer of the New Mexico Chapter of The Nature
Conservancy, as a trustee of the Oregon Health Sciences Foundation, and chairs
the Development Council for the Casey Eye Institute. He is a graduate of Cornell
University and the Harvard Law School.

CLASS III

(FOR A TWO-YEAR TERM ENDING 2005)

[Picture] JOHN D. CARTER
[omitted]
Principal of Goldschmidt, Imeson, Carter, Portland, Oregon
Age: 57
Director since: 2002
Board Committees: Audit, Finance

In 2002, Mr. Carter joined the consulting firm of Goldschmidt, Imeson,
Carter as a principal. Prior to January 1, 2002, he was an executive vice
president of Bechtel Group, Inc. From December 1998 to December 2000, Mr. Carter
provided senior executive oversight of Bechtel's telecommunications, industrial,
civil and information systems and technology and water businesses. From
September 1997 to December 1998, he served as president of Bechtel's Europe,
Africa, Middle East, Southwest Asia (EAMS) region. Previously he served as
president of Bechtel's North American region and government companies, and was
president of Bechtel Enterprises, Inc. from 1992-1997, as well as a director of
U.S. Generating Company and other Bechtel Group and Bechtel Enterprises
ventures. Mr. Carter retired as a director of Bechtel Group, Inc. and several
Bechtel subsidiaries, including Bechtel Enterprises, Inc., in 2002. He served on
the boards of InterGen (formerly International Generating Company) and
International Water Ltd. He continues to serve as a director of London &
Continental Railways Ltd. in the United Kingdom, and on an advisory board to the
government of the Netherlands on privatization. Mr. Carter also chaired the
Bechtel 401(K) retirement plan and Bechtel Foundation. He is a graduate of
Stanford University and the Harvard Law School.

[Picture] C. SCOTT GIBSON
[omitted]
President, Gibson Enterprises, Portland, Oregon
Age: 50
Director since: 2002
Board Committees: Environmental Policy, Public Affairs
and Organization and Executive Compensation

Mr. Gibson has been President of Gibson Enterprises, a venture capital
firm, since its formation in 1992. In 1983, Mr. Gibson co-founded Sequent
Computer Systems and served as its President from 1988 until March 1992. Before
his tenure at Sequent, Mr. Gibson served as General Manager for the Memory
Components Division of Intel Corporation. Mr. Gibson serves as Chairman of the
Board of Radisys Corporation, and as a director of TriQuint Semiconductor,
Pixelworks and Livebridge. He also serves as a member of the Board of Trustees
of the Oregon Community Foundation, the OHSU Foundation and the Oregon Health
and Science University governing board. Mr. Gibson earned a Bachelor of Science
degree in electrical engineering and a Masters in Business degree from the
University of Illinois.

MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE

CLASS II

(TERM ENDING IN 2004)

[Picture] TOD R. HAMACHEK
[omitted]
Chairman and Chief Executive Officer, Penwest Pharmaceuticals
Company
Danbury, Connecticut
Age: 57
Director since: 1986
Board Committees: Audit (Chair), Governance and Organization
and Executive Compensation

Mr. Hamachek has served as Chairman and Chief Executive Officer of Penwest
Pharmaceuticals Company since October 1997. Penwest, which was spun off from
Penford Corporation in 1998, is engaged in the research, development and
commercialization of novel drug delivery products and technologies. From 1985
until 1998, Mr. Hamachek served as President and Chief Executive Officer of
Penford Corporation, a diversified producer of specialty paper, food starches
and pharmaceutical ingredients. He is a director of Penwest, The Seattle Times
Company and The Blethen Corporation (the majority owner of The Seattle Times
Company). He is a graduate of Williams College and the Harvard Business School.

[Picture] MELODY C. TEPPOLA
[omitted]
Managing Partner, National Builders Hardware Company,
Portland, Oregon
Age: 60
Director since: 1987
Board Committees: Environmental Policy, Governance and
Public Affairs (Chair)

Ms. Teppola has been associated with National Builders Hardware Company, a
regional and national distributor of builders hardware, woodworking machinery
and decorative plumbing, since 1965, and a managing partner since 1975. Her
community activities have focused on art, education and advocacy for women and
children. She is a member of the Public Art Advisory Committee of the Regional
Arts and Culture Council, the Advisory Board of the Port of Portland Mentor
Program and the Portland Metro Leadership Council of The Oregon Community
Foundation. She also serves as a director of the Bonnie Bronson Fund and the
Portland Business Alliance. Ms. Teppola is a Mills College graduate.

[Picture] RUSSELL F. TROMLEY
[omitted]
President and Chief Executive Officer, Tromley Industrial
Holdings, Inc., Tualatin, Oregon
Age: 63
Director since: 1994
Board Committees: Audit, Governance and Organization and
Executive Compensation (Chair)

Mr. Tromley has served as President and Chief Executive Officer of Tromley
Industrial Holdings, Inc., since its formation in 1990. Tromley Industrial
Holdings is involved in nonferrous metals alloying and distribution, the
manufacture and sale of equipment for the foundry and steel industry, industrial
equipment leasing and industrial and retail business property investments. Mr.
Tromley is a past President of the Casting Industry Suppliers Association and of
the Arlington Club, and is a non-lawyer arbitrator for, and a member of the
House of Delegates of, the Oregon State Bar Association. He was a founding
director of The Bank of the Northwest, serves on the advisory board of Pacific
Northwest Bank of Oregon, and also serves as a director emeritus of the Evans
Scholars Foundation and the Western Golf Association. Mr. Tromley attended the
University of Washington and the Harvard Business School.

CLASS III

(TERM ENDING 2005)

[Picture] RICHARD G. REITEN
[omitted]
Chairman of the Board of the Company, Portland, Oregon
Age: 63
Director since: 1996
Board Committee: None

Mr. Reiten served as Chief Executive Officer of the Company until December
31, 2002. He joined the Company as President and Chief Operating Officer and was
elected to the Board effective March 1, 1996. He was elected President and Chief
Executive Officer effective January 1, 1997, was appointed to the additional
position of Chairman of the Board in September 2000 and relinquished the
position of President in May 2001. Prior to joining the Company, from 1992
through 1995, Mr. Reiten served as President and Chief Operating Officer of
Portland General Electric Company (PGE) after serving as President of PGE's
parent company, Portland General Corporation (PGC), from 1989 through 1992. He
also served as a director of PGC from 1983 to 1987 and from 1990 to 1995 when he
retired from PGE. He is a director of U.S. Bancorp, Building Materials Holding
Corporation, The Regence Group and ESCO Corporation. He currently serves as
chairman of the board of the American Gas Association, on the board of
Associated Electric and Gas Insurance Services Ltd., as vice chairman of The
Nature Conservancy of Oregon and on the board of the United Way. He is a past
General Chairman of the United Way campaign for Portland and a past Chairman of
both the Portland Metropolitan Chamber of Commerce and the Association for
Portland Progress. Mr. Reiten is a graduate of the University of Washington and
the executive and board of directors programs at the Stanford Business School.

INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES:

There are six standing committees of the Board: the Audit, Organization and
Executive Compensation, Environmental Policy, Public Affairs, Finance and
Governance Committees.

The Audit Committee is comprised of directors Carter, Dewey, Hamachek,
Kuni, Sangrey and Tromley, each of whom is an independent director as defined
under current New York Stock Exchange listing standards. The Audit Committee is
responsible for overseeing matters relating to accounting, financial reporting,
internal control, auditing and regulatory compliance. The Committee is also
responsible for selecting and establishing the fees for the independent auditor
and it reviews the corporate audit and other internal accounting control matters
with the independent auditor. During 2002, the Audit Committee expanded its
meeting schedule and established new procedures to ensure the integrity of the
Company's financial reports and the Company's compliance with new corporate
governance mandates. In February 2003, the Board amended the Committee's charter
to be consistent with proposed New York Stock Exchange rules. See Appendix A.
The amended charter specifies, among other things, that the Committee (i) is
solely responsible for engaging and terminating the independent auditor, (ii)
establishes fees paid to the independent auditor, including pre-approval of any
fees for non-audit services, (iii) has the ability to retain outside advisors,
(iv) will review quarterly and annual reports of the Company, disclosure
controls and procedures, internal controls, earnings press releases and analyst
presentations and (v) will annually conduct a self-assessment, including a
review of the independence of each of its members and make a determination as to
whether a member of the Committee qualifies as a financial expert. The Committee
reports regularly to the Board. The Committee held six meetings during 2002. The
Chair of the Committee, Mr. Hamachek, presides at all executive sessions of the
Committee.

The Organization and Executive Compensation Committee, which is comprised
of directors Gibson, Hamachek, Kuni, Pape and Tromley, each of whom is a
non-employee director under applicable rules of the Securities and Exchange
Commission, reviews the performance of executive officers, considers executive
compensation survey data in making recommendations to the Board relating to the
Company's executive compensation program and benefit plans and administers the
Restated Stock Option Plan, the Long-Term Incentive Plan, the Executive Deferred
Compensation Plan and the Executive Annual Incentive Plan. This Committee also
makes recommendations to the Board on organization and executive succession
matters. Five meetings of this Committee were held during 2002. The Chair of the
Committee, Mr. Tromley, presides at all executive sessions of the Committee.

The Environmental Policy Committee develops and recommends to the Board
appropriate environmental policies and advises the Board concerning the status
of the Company's compliance with environmental regulations. The Committee is
comprised of directors Sangrey, Gibson, Ridgley and Teppola. Mr. Sangrey chairs
the Committee. This Committee held two meetings in 2002, including one joint
meeting with the Public Affairs Committee.

The Public Affairs Committee, established in 2002, is responsible for
reviewing the Company's policies and practices relating to significant public
and political issues that may have an impact on the Company's business
operations, financial performance or public image. It oversees the Company's
programs and policies relating to civic, charitable and community affairs,
safety and health, and equal employment opportunity. The Committee makes
recommendations to the Board to ensure that the Company fulfills its objectives
in a manner consistent with the responsibilities of good corporate citizenship.
The Committee is comprised of directors Gibson, Ridgley, Sangrey, Teppola and
Woolworth. Ms. Teppola chairs the Committee. This Committee held two meetings in
2002, including one joint meeting with the Environmental Policy Committee.

The Finance Committee is responsible for reviewing strategies and making
recommendations to the Board with respect to the Company's financing programs,
financial policy matters and material regulatory issues. The Committee consists

of directors Carter, Dewey, Pape, Ridgley and Woolworth. Mr. Pape chairs the
Committee. The Committee held three meetings in 2002.

The Governance Committee, formerly known as the Executive Committee, is
empowered, during intervals between Board meetings, to exercise all of the
authority of the Board in the management of the Company, except as otherwise may
be provided by law. The Committee establishes criteria for Board and committee
membership, establishes policies that govern the Board's activities including
meeting structure and content, and evaluates Board and individual director
performance. It also reviews annually the performance of the CEO and considers
any questions of possible conflicts of interest of Board members and senior
executives. This Committee, which is comprised of directors Hamachek, Kuni,
Pape, Teppola, Tromley and Woolworth, held six meetings in 2002. The Chair of
the Committee, Mr. Kuni, presides at all executive sessions of the Committee.

The Governance Committee has been assigned the responsibility of
recommending to the Board of Directors nominees for election as directors.
Shareholders' suggestions for director-nominees may be submitted to the
Secretary of the Company for consideration by the Governance Committee. The
Company's Restated Articles of Incorporation provide that no person, except
those nominated by the Board, shall be eligible for election as a director at
any annual or special meeting of shareholders unless a written request that his
or her name be placed in nomination, together with the written consent of the
nominee, shall be received from a shareholder of record entitled to vote at such
election by the Secretary of the Company on or before the later of (a) the
thirtieth day prior to the date fixed for the meeting, or (b) the tenth day
after the mailing of the notice of that meeting.

In 2002, the Board eliminated the Retirement Committee and the Pension
Committee as standing committees of the Board. An internal committee of the
Company assumed the responsibilities of these committees. Also in 2002, the
Board eliminated the position of Lead Director whose primary responsibilities
included consulting with the Chief Executive Officer on Board organization
matters, including the selection of committee members and chairs and
coordinating the periodic evaluation by outside directors of the Board's
performance. The Chair of the Governance Committee has assumed these
responsibilities.

Directors who are not employees of the Company receive an annual cash
retainer of $10,000, an annual stock retainer of $20,000 (see "Non-Employee
Directors Stock Compensation Plan," below), a fee of $1,000 for each Board
meeting attended and a fee of $800 for each Committee meeting attended. In
addition, a $3,000 annual retainer is paid to each Committee chair.

During 2002, there were six meetings of the Company's Board. Except Mr.
Gibson, no director attended fewer than 75 percent of the total meetings of the
Company's Board or committees on which he or she served. Mr. Gibson, who joined
the Board in July, was unable to attend the Environmental Policy, Organization
and Executive Compensation and Public Affairs Committee meetings held in
September due to other business commitments made prior to becoming a director.

NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN

Non-employee directors of the Company are awarded approximately $100,000
worth of the Company's Common Stock upon joining the Board pursuant to the
Company's Non-Employee Directors Stock Compensation Plan. These initial awards
vest in monthly installments over the five calendar years following the award.
On January 1 of each year thereafter, non-employee directors are awarded an
additional $20,000 of Common Stock which vests in monthly installments in the
fifth year following the award (after the previous award has fully vested). All
awards vest immediately upon a change in control of the Company. Unvested shares
are forfeited if the recipient ceases to be a director. The shares awarded are
purchased in the open market by the Company at the time of award. Directors may
elect to defer unvested shares into their stock accounts under the Directors
Deferred Compensation Plan. Certificates representing a director's vested shares
are not delivered to the director until after the director leaves the Board.

DIRECTORS DEFERRED COMPENSATION PLAN

Directors may elect to defer the receipt of all or a part of their
directors' fees under the Company's Directors Deferred Compensation Plan. At the
director's election, deferred amounts may be credited to either a "cash account"
or a Company "stock account." If deferred amounts are credited to stock
accounts, such accounts are credited with a number of shares based on the
purchase price of the Common Stock on the next purchase date under the Company's
Dividend Reinvestment and Stock Purchase Plan, and such accounts are credited
with additional shares based on the deemed reinvestment of dividends. Cash
accounts are credited quarterly with interest at a rate equal to Moody's Average
Corporate Bond Yield plus two percentage points. The crediting rate is subject
to a six percent minimum rate. The rate is adjusted quarterly. At the election
of the participant, deferred balances in the stock and/or cash accounts are
payable after termination of Board service in a lump sum, in installments over a
period not to exceed 10 years, or in a combination of lump sum and installments.

The Company's obligations under the Plan are unfunded and benefits will be
paid either from the general funds of the Company or from the Umbrella Trust for
Directors which has been established for this Plan. With respect to the cash
accounts, the Company has purchased life insurance policies on the lives of the
participants, the proceeds from which will be used to reimburse the Company for
the payment of cash benefits from the Plan. This insurance is designed so that,
if the assumptions made as to mortality experience, policy dividends and other
factors are realized, insurance policy proceeds paid to the Company will be at
least equal to all the premium payments and cash benefits paid under the Plan.
The cost of any one individual participant cannot be properly allocated or
determined because of overall Plan assumptions. In addition, the Company has
contributed cash and Common Stock to the trustee of the Umbrella Trust such that
the Umbrella Trust holds the number of shares of Common Stock equal to the
number of shares credited to all directors' stock accounts. Shares so held will
be used to fund the Company's obligation to pay out the stock accounts.

The Company may from time to time transfer other assets to the trustee of
the Umbrella Trust to hold in trust for the benefit of Plan participants. The
Company's obligations under the Plan are not limited to trust assets, and Plan
participants will have a claim against the Company for any payments not made by
the trustee. The Company instructs the trustee as to the investment of the
trust's assets and the trustee's fees and expenses are paid by the Company.

Upon the occurrence of certain events, such as a change in control of the
Company, termination of the Plan or the failure by the Company to provide the
trust with adequate funds to pay current benefits, the Company may be required
under the terms of the trust to contribute to the trust annually the amount by
which the present value of all benefits payable under the Plan exceeds the value
of the trust's assets.

DIRECTORS RETIREMENT BENEFIT

On January 1, 1998, in connection with the termination of a prior
retirement benefit for directors and in lieu of that benefit, the Company
credited a number of shares of Company Common Stock to a stock account under the
Directors Deferred Compensation Plan for each then current director. If such a
director retires from the Board at age 70 or older with 10 or more years of
service as a director or if the director earlier dies or becomes disabled or if
there is an earlier change in control of the Company, the Company is obligated
to deliver to the director (or to his or her beneficiary) the number of shares
credited to the account, plus an additional number of shares based on reinvested
dividends credited to the account over time. Concurrently with the creation of
the stock accounts, the Company contributed to the Umbrella Trust for Directors
a number of shares of the Company's Common Stock equal to the number of shares
credited to directors' accounts. Such stock is held in the Umbrella Trust and
will be used to fund the Company's obligation to pay out the stock accounts. The
number of shares of Common Stock in the retirement benefit stock account of each

such director at December 31, 2002 was: Thomas E. Dewey, 1,975; Tod R. Hamachek,
758; Wayne D. Kuni, 2,316; Randall C. Pape, 572; Richard G. Reiten, 1,255;
Robert L. Ridgley, 1,827; Dwight A. Sangrey, 1,166; Melody C. Teppola, 938; and
Russell F. Tromley, 1,166.

CORPORATE GOVERNANCE STANDARDS

The Board of Directors has adopted corporate governance standards that are
intended to provide the Company and its Board of Directors with policies and
procedures designed to ensure that business is conducted to serve stakeholders
with the highest level of integrity. These corporate governance standards are
reviewed periodically by the Governance Committee to determine if changes should
be recommended to the Board of Directors. Among other matters, the corporate
governance standards include the following:

o The Board annually evaluates the performance of the Chief Executive
Officer in meetings of non-management directors.

o The Board conducts an annual self-evaluation. In addition, the
Governance Committee periodically assesses committee effectiveness and
conducts peer reviews of individual directors prior to the end of
their term of office.

o Annually the Board reviews and approves the strategic plan and
one-year operating plan for the Company.

o The Governance Committee, the Audit Committee and the Organization and
Executive Compensation Committee will consist entirely of independent
directors, as that term will be defined by rules to be adopted by the
New York Stock Exchange. In addition, the Board will maintain a
majority of such independent directors.

o Appointments of new directors are recommended by the Governance
Committee in accordance with the "Director Selection Criteria"
established by the Board.

o Committee members are recommended by the Governance Committee for
appointment by the Board and committee membership is rotated from time
to time.

o The Board provides for an executive session of non-management
directors at the end of each Board meeting. The chair of the
Governance Committee presides at these executive sessions.

o Directors must retire from the Board at the first annual meeting of
shareholders after reaching age 70.

o Succession planning and management development are reported at least
annually by the Chief Executive Officer to the Board. The Governance
Committee is responsible for submitting its recommendations to the
Board of Directors with respect to Chief Executive Officer selection.

o Directors are expected to develop, over time, a meaningful position in
Company stock.

o Incentive compensation plans link pay directly and objectively to
measured financial and other goals set in advance by the Board.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers to file reports of ownership and changes in
ownership of Company Common Stock with the Securities and Exchange Commission.
The Company is required to disclose in this proxy statement any late or missed
filings of those reports made by its directors and executive officers during

2002. Based solely upon a review of the copies of such reports furnished to it
and written representations that no other such reports were required, the
Company believes that during 2002 all directors and executive officers, other
than Richard G. Reiten, Michael S. McCoy and Lea Anne Doolittle, timely filed
all such required reports. Messrs. Reiten and McCoy and Ms. Doolittle each filed
a late report relating, respectively, to the purchase of 596, 155 and 4 shares
of Company stock in December 2002 representing matching contributions under the
Executive Deferred Compensation Plan.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In January 2003, the Company contributed $125,000 to establish the Richard
G. Reiten Leadership Fund with the Oregon Community Foundation in honor of
retiring Chief Executive Officer, Richard G. Reiten. The fund is for general
charitable purposes and Mr. Reiten and his family members will advise the Oregon
Community Foundation on the fund's use. Mr. Gibson, a director, is a member of
the Board of Trustees of the Oregon Community Foundation and serves on the
Company's Environmental Policy, Public Affairs and Organization and Executive
Compensation Committees. The Board approved this transaction in December 2002.

SECURITY OWNERSHIP OF COMMON STOCK OF CERTAIN BENEFICIAL OWNERS

The following table shows ownership of Common Stock of the Company on
February 28, 2003 by each person who, to the knowledge of the Company, owned
beneficially more than 5% of the Common Stock of the Company:

AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------------------------ -------------------- --------

Barclays Global Investors, NA 1,339,180(1) 5.16%
45 Fremont St.
San Francisco, CA 94105

----------
(1) Based on information set forth on Form 13G dated February 12, 2003, filed
with the Securities and Exchange Commission by Barclays Global Investors,
NA. These shares are held as follows: Barclays Global Investors, NA, holds
sole voting and dispositive power as to 918,588 shares and Barclays Global
Fund Advisors holds sole voting and dispositive power as to 420,592 shares.

BENEFICIAL OWNERSHIP OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS

Set forth below is certain information with respect to beneficial ownership
of the Company's Common Stock as of February 28, 2003 by all directors and
nominees, each of the executive officers named in the Summary Compensation Table
on page 16 and all directors and executive officers as a group.

PERCENT OF OUTSTANDING
NAME OF BENEFICIAL OWNER NUMBER OF SHARES(1) COMMON STOCK
------------------------ ----------------- ----------------------

Timothy P. Boyle 0 *
John D. Carter 9,344 (2) *
C. Scott Gibson 3,715 (3) *
Bruce R. DeBolt 42,816 (4) *
Mark S. Dodson 30,665 (5) *
Lea Anne Doolittle 7,278 (6) *
Tod R. Hamachek 16,670 (7) *
Michael S. McCoy 47,986 (8) *
Randall C. Pape 14,332 (9) *
Richard G. Reiten 125,706 (10) *
Robert L. Ridgley 22,917 (11) *
Melody C. Teppola 10,797 (12) *
Russell F. Tromley 12,299 (13) *
Richard L. Woolworth 7,711 (14) *
All directors and officers as 398,355 (15) 1.5
a group (19 in number)

----------

* The total for each individual is less than 1.0 percent.

(1) Unless otherwise indicated, beneficial ownership includes both sole voting
power and sole investment power.

(2) Includes 3,355 shares subject to forfeiture under the Non-Employee Directors
Stock Compensation Plan (NEDSCP), of which 573 shares are included in 1,493
shares credited to a stock account under the Directors Deferred Compensation
Plan (DDCP).

(3) Includes 3,355 shares subject to forfeiture under the NEDSCP, of which 573
shares are included in 933 shares credited to a stock account under the DDCP.

(4) Includes 11,758 shares held jointly with his wife, 23,191 shares which Mr.
DeBolt has the right to acquire within 60 days through the exercise of options
under the Restated Stock Option Plan (Restated SOP), 4,500 shares of restricted
stock which will vest over the period 2005 through 2007 and 250 shares held
indirectly under the Retirement K Savings Plan (RKSP).

(5) Includes 14,573 shares which Mr. Dodson has the right to acquire within 60
days through the exercise of options under the Restated SOP and 166 shares held
indirectly under the RKSP.

(6) Includes 182 shares credited to a stock account under the Executive Deferred
Compensation Plan (EDCP), 147 shares held indirectly under the RKSP and 6,700
shares which Ms. Doolittle has the right to acquire within 60 days through the
exercise of options under the Restated SOP.

(7) Includes 3,543 shares subject to forfeiture under the NEDSCP, of which 589
shares are included in 10,092 shares credited to a stock account under the DDCP.

(8) Consists of 1,000 shares credited to a stock account under the EDCP, 12,235
shares held indirectly by Mr. McCoy under the RKSP, 10,350 shares held jointly
with his wife and 24,400 shares which Mr. McCoy has the right to acquire within
60 days through the exercise of options under the Restated SOP.

(9) Includes 3,542 shares subject to forfeiture under the NEDSCP and 6,887
shares credited to a stock account under the DDCP.

(10) Includes 19,554 shares held indirectly by Mr. Reiten under the RKSP, 84,200
shares which Mr. Reiten has the right to acquire within 60 days through the
exercise of options under the Restated SOP and 8,667 shares credited to stock
accounts under the DDCP and the EDCP.

(11) Includes 1,488 shares subject to forfeiture under the NEDSCP, of which
1,096 shares are included in 5,666 shares credited to a stock account under the
DDCP.

(12) Includes 3,543 shares subject to forfeiture under the NEDSCP, of which 589
shares are included in 3,834 shares credited to a stock account under the DDCP,
and 2,472 shares held in trust.

(13) Includes 3,543 shares subject to forfeiture under the NEDSCP, of which 589
shares are included in 4,065 shares credited to a stock account under the DDCP,
24 shares held by Mr. Tromley's wife in an Individual Retirement Account and 4
shares held directly by Mr. Tromley's wife.

(14) Includes 3,560 shares subject to forfeiture under the NEDSCP, of which 638
shares are included in 4,541 shares credited to a stock account under the DDCP.

(15) Includes 46,112 shares, of which 8,666 shares are held jointly with spouse
or other relative, 461 shares are held as custodian for minor children, 6,083
shares are held indirectly under the RKSP and 28,200 shares which the executive
officers not named above have the right to acquire within 60 days through the
exercise of options under the Restated SOP.

EXECUTIVE COMPENSATION

Shown below is information concerning the annual and other compensation for
services in all capacities to the Company for the years ended December 31, 2002,
2001, and 2000, of those persons who were, during 2002 and at December 31, 2002
(i) the chief executive officer and (ii) the other four most highly compensated
executive officers of the Company (the Named Executive Officers):

SUMMARY COMPENSATION TABLE

ANNUAL LONG-TERM COMPENSATION
COMPENSATION
------------------------------------- -----------------------------------
NAME AND OTHER SECURITIES
PRINCIPAL ANNUAL RESTRICTED UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(1) STOCK AWARD(2) OPTIONS COMPENSATION(3)
--------------------------------------------------------------------------------------------------------------------------------

Richard G. Reiten(4) 2002 $475,000 $250,000 $ 0 $ 0 20,000 $57,631
Chairman and Chief 2001 446,668 250,000 5,538 0 0 53,625
Executive Officer 2000 426,174 236,500 2,520 0 15,000 12,533

Mark S. Dodson(5) 2002 252,409 85,600 720 0 12,500 10,447
President, Chief 2001 222,745 106,700 0 0 0 13,136
Operating Officer 2000 188,340 72,100 0 0 7,500 5,106
and General
Counsel

Michael S. McCoy 2002 231,500 68,400 894 0 13,000 23,651
Executive Vice 2001 222,501 87,800 322 0 0 22,145
President 2000 212,540 79,000 0 0 7,500 5,625

Bruce R. DeBolt 2002 228,665 66,900 321 0 8,000 32,615
Senior Vice 2001 222,501 83,400 0 108,305 0 31,141
President and 2000 213,838 79,900 0 0 7,500 5,803
Chief Financial
Officer

Lea Anne Doolittle 2002 151,000 31,400 0 0 5,000 6,473
Vice President 2001 145,000 40,800 0 0 0 5,432
(became an officer 2000 24,410 0 0 0 5,000 27,200
on 10/30/00)

(1) All amounts shown for the Named Executive Officers represent the employee
portion of the Medicare Hospital Insurance Tax liability paid by the
Company on the present value increase in those years of their benefits
under the Executive Supplemental Retirement Income Plan, together with an
additional payment relating to income tax payable by such officers in
respect of the payments made by the Company.

(2) The aggregate number of shares of restricted stock at December 31, 2002 was
4,500 shares with a market value of $121,770. Dividends are paid on all
shares of restricted stock.

(3) Amounts for the year 2002 include Company matching amounts contributed or
accrued for the year 2002 for the Named Executive Officers under the
Company's Executive Deferred Compensation Plan ($16,250 for Mr. Reiten, $0
for Mr. Dodson, $9,579 for Mr. McCoy, $3,947 for Mr. DeBolt and $517 for
Ms. Doolittle) and its Retirement K Savings Plan ($5,500 each for Messrs.
Reiten, Dodson and DeBolt, $0 for Mr. McCoy and $5,317 for Ms. Doolittle).
Amounts for 2002 also include above-market interest credited to the
Executive Deferred Compensation Plan accounts of the Named Executive
Officers ($35,881 for Mr. Reiten, $4,947 for Mr. Dodson, $14,072 for Mr.
McCoy, $23,168 for Mr. DeBolt, and $639 for Ms. Doolittle).

(4) Mr. Reiten retired as Chief Executive Officer on December 31, 2002.

(5) Mr. Dodson became President and Chief Executive Officer on January 1, 2003
and relinquished his title as Chief Operating Officer and General Counsel
on December 31, 2002.

OPTION GRANTS IN LAST FISCAL YEAR

The following table provides information on stock options awarded to the
Named Executive Officers listed in the Summary Compensation Table in 2002:

INDIVIDUAL GRANTS
----------------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES
SECURITIES TOTAL OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(3)
OPTIONS EMPLOYEES BASE PRICE EXPIRATION ---------------------------
NAME GRANTED(1) IN FISCAL YEAR(2) ($/SH) DATE 5 Percent 10 Percent
-------------------- ---------- ----------------- ----------- ------------- --------- ----------

Richard G. Reiten 20,000 12.2% $26.30 March 5, 2012 $330,800 $838,400

Mark S. Dodson 12,500 7.6% $26.30 March 5, 2012 206,750 524,000

Michael S. McCoy 13,000 7.9% $26.30 March 5, 2012 215,020 544,960

Bruce R. DeBolt 8,000 4.9% $26.30 March 5, 2012 132,320 335,360

Lea Anne Doolittle 5,000 3.1% $26.30 March 5, 2012 82,700 209,600

(1) Approximately one-third of the options became exercisable on February 27,
2003, one-third will become exercisable on January 1, 2004 and the
remainder on January 1, 2005.

(2) The indicated percentages represent the options to purchase the Company's
Common Stock granted to each Named Executive Officer expressed as a
percentage of the aggregate number of options to purchase the Company's
Common Stock granted to employees of the Company in 2002.

(3) The 5 and 10 percent growth rates for the period ending March 5, 2012,
which were determined in accordance with the rules of the Securities and
Exchange Commission, illustrate that the potential future value of the
granted options is linked to future increases in growth of the price of the
Company's Common Stock. Because the exercise price for options equals the
market price of the Company's Common Stock on the date of grant, no gain to
the Named Executive Officers is possible without an increase in the stock
price. The 5 and 10 percent growth rates are intended for illustration only
and are not intended to be predictive of future growth; the actual value,
if any, that may be realized by any Named Executive Officer will depend on
the market price of the Company's Common Stock on the date of exercise.

LONG-TERM INCENTIVE PLAN - AWARDS IN 2002

The following table provides information on performance-based Long-Term
Incentive Plan awards granted to the Named Executive Officers listed in the
Summary Compensation Table in 2002.

LONG-TERM INCENTIVE PLAN(1)
------------------------------------------------------
NUMBER OF SHARES
PERFORMANCE ---------------------------------------
NAME PERIOD AWARD THRESHOLD TARGET MAXIMUM
---- ----------- ----- --------- ------ -------

Richard G. Reiten 2002-2004 8,000 1,600 8,000 16,000

Mark S. Dodson 2002-2004 5,000 1,000 5,000 10,000

Michael S. McCoy 2002-2004 4,000 800 4,000 8,000

Bruce R. DeBolt 2002-2004 4,000 800 4,000 8,000

Lea Anne Doolittle 2002-2004 2,000 400 2,000 4,000

(1) Each executive officer received an award based on a three year performance
period (2002-2004). The Organization and Executive Compensation Committee
established a series of performance targets based on the Company's average
annual return on equity (ROE) for the performance period corresponding to
award opportunities ranging from 0% to 200% of the target awards. No awards
are payable unless the threshold annual average ROE level of 10 1/4 % is
achieved during the award period. The maximum awards are payable only upon
the achievement of an average annual ROE of 12 1/4%. A participant
generally must be employed by the Company at the end of the performance
period to receive an award payout, although pro-rated awards will be paid
if employment terminates earlier on account of death, disability or
retirement, or for other reasons within six months of the end of the
performance period. Awards will be paid in Common Stock as soon as
practicable after the end of the performance period. Participants will also
receive dividend equivalent cash payments equal to the number of shares of
Common Stock received on the award payout multiplied by the aggregate cash
dividends paid per share by the Company during the performance period. Upon
a change in control of the Company (as defined in the plan), all
outstanding awards will be paid at the target award level.

AGGREGATED OPTION EXERCISES IN 2002 AND YEAR-END OPTION VALUES

Shown below is information with respect to options to purchase shares of
the Company's Common Stock exercised in 2002 and unexercised options granted
under the Restated Stock Option Plan to the Named Executive Officers and held by
them at December 31, 2002.

NO. OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NO. OF OPTIONS AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 2002 AT DECEMBER 31, 2002
ACQUIRED ON VALUE ----------------- --------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE(1) EXERCISABLE(2) UNEXERCISABLE(1,2)
------------------- ----------- -------- ----------- ------------- ----------- -------------

Richard G. Reiten 0 $ 0 72,500 25,000 $390,450 $49,250

Mark S. Dodson 1,127 10,774 8,873 15,000 26,375 26,525

Michael S. McCoy 0 0 17,500 15,500 80,100 26,905

Bruce R. DeBolt 0 0 17,991 10,500 81,602 23,105

Lea Anne Doolittle 0 0 3,400 6,600 14,229 10,496

(1) Unexercisable options are those options that have not vested. Of the
options shown, a portion became exercisable on January 1, 2003 and the
remainder will become exercisable over the period from February 27, 2003 to
January 1, 2005.

(2) Represents the difference between the option exercise prices for
in-the-money options and the closing price of $27.06 for the Company's
Common Stock as quoted on the New York Stock Exchange on December 31, 2002
times the number of options. Options granted to Named Executive Officers in
1998 were not in-the-money at year-end 2002.

PENSION PLANS

The following table shows the estimated annual retirement benefit payable
upon retirement at age 65 as a straight life annuity (net of Social Security
offset) to the Company's executive officers under the Company's defined benefit
plans: the qualified Retirement Plan for Non-Bargaining Unit Employees, the
non-qualified Executive Deferred Compensation Plan supplemental benefit and the
non-qualified Executive Supplemental Retirement Income Plan (ESRIP). Optional
forms of payment, including joint and survivor forms, are available, subject to
an actuarial adjustment in the amount of payment.

PENSION PLAN TABLE

COMPENSATION YEARS OF SERVICE
---------------- ----------------------------------------------------------
10 15 20 25 or more
-- -- -- ----------

$ 150,000 $ 44,300 $ 76,800 $ 80,600 $ 84,300
200,000 65,900 109,300 114,300 119,300
250,000 87,600 141,800 148,100 154,300
300,000 109,200 174,300 181,800 189,300
350,000 130,900 206,800 215,600 224,300
400,000 152,500 239,300 249,300 259,300
450,000 174,200 271,800 283,100 294,300
500,000 195,800 304,300 316,800 329,300
550,000 217,500 336,800 350,600 364,300
600,000 239,100 369,300 384,300 399,300
650,000 260,800 401,800 418,100 434,300
700,000 282,400 434,300 451,800 469,300
750,000 304,100 466,800 485,600 504,300
800,000 325,700 499,300 519,300 539,300
850,000 347,400 531,800 553,100 574,300
900,000 369,000 564,300 586,800 609,300

For purposes of the ESRIP, "compensation" consists of the average of the
annual salary and Executive Annual Incentive Plan bonus awarded to a plan
participant by the Company for the highest three compensation years in the last
10 years prior to retirement.

The credited years of service under the ESRIP for Messrs. Reiten, Dodson,
McCoy, DeBolt, and Ms. Doolittle are 15 years, 5 years, 33 years, 23 years and 2
years, respectively. For purposes of the ESRIP, Mr. Reiten was granted an
additional 8 years of past service credit which are included in years of service
shown. See "Employment Agreements," below. A participant who becomes entitled to
severance benefits under his or her executive severance agreement in connection
with a change in control of the Company will receive three additional years of
service credit for ESRIP purposes. See "Executive Severance Agreements," below.

ESRIP benefits are 50% vested after five years of service and become vested
for an additional 10% for each additional year of service until fully vested
after 10 years of service. A participant who becomes entitled to severance
benefits under his or her executive severance agreement in connection with a
change in control of the Company will be fully vested regardless of years of
service.

EXECUTIVE SEVERANCE AGREEMENTS

The Board of Directors has approved the Company's entry into severance
agreements with each executive officer of the Company, including all of the
Named Executive Officers. These agreements generally provide for the payment,
upon the termination of the employee's employment by the Company without cause

or by the employee for "good reason" (as defined in the severance agreement)
within two years following a change in control of the Company, of an amount
equal to two or three times the sum of the employee's annual salary and average
bonus for the last three years, and also provide for the three-year continuation
of life and health insurance benefits. In addition, if any payments to the
employee are subject to the excise tax on "parachute payments," the Company will
make an additional payment to the employee such that the employee will receive
net benefits as if no excise tax were payable. If such additional payments are
required, the Company will not be able to deduct such additional payments for
federal income tax purposes and also will be denied such a deduction for some or
all of the other payments made pursuant to the agreement and its other plans and
policies. Each employee is obligated under the severance agreement to remain in
the employ of the Company for a period of 270 days following a "potential change
in control" (as defined in the severance agreements). All but one of the
executive officers have executed the severance agreements.

EMPLOYMENT AGREEMENTS

On November 2, 1995, the Company entered into an employment agreement with
Mr. Reiten for a term that extended through February 28, 2003. Under this
agreement, the Company recognized eight years of past service for purposes of
the ESRIP. Accordingly, Mr. Reiten is treated under the ESRIP as if he had
commenced employment with the Company on February 28, 1988 and was vested and
began receiving retirement benefits at 65% of final annual compensation upon his
retirement on March 1, 2003. On September 26, 2002, the Board approved an
arrangement for Mr. Reiten whereby he will serve as non-employee Chairman of the
Board for two years following his retirement. According to the terms of the
arrangement, Mr. Reiten will be paid a monthly fee of $5,000 per month through
February 2004 and thereafter a reduced monthly fee of $2,500 per month through
February 2005. In addition, he will be entitled to standard Board-approved cash
and stock retainers and meeting fees, as well as office space, secretarial
support and a Company vehicle or vehicle allowance.

On July 2, 1997, the Company entered into an employment agreement with Mr.
Dodson for a term extending until December 31, 2002, with an option for Mr.
Dodson to renew for an additional term through December 31, 2007. Effective
January 1, 2003, the agreement was extended to December 31, 2007 and modified to
reflect his appointment as President and Chief Executive Officer. Under these
agreements, the Company modified the service requirements applicable to Mr.
Dodson for purposes of the ESRIP. Accordingly, Mr. Dodson became vested and
eligible under the ESRIP for supplemental retirement benefits at 32.5% of final
annual compensation upon retirement on or after December 31, 2002, and will be
vested and eligible under the ESRIP for supplemental benefits at 65% of final
annual compensation upon retirement on or after December 31, 2007. The agreement
also provides that Mr. Dodson will be vested and eligible under the ESRIP for
supplemental retirement benefits at 65% of final annual compensation with no
reduction in benefits based on early retirement if he (a) becomes disabled, (b)
dies after December 31, 2002, (c) is terminated other than for cause, or (d)
becomes entitled to severance benefits under his executive severance agreement
in connection with a change in control of the Company.

REPORT OF THE ORGANIZATION AND EXECUTIVE COMPENSATION COMMITTEE
ON
EXECUTIVE MANAGEMENT COMPENSATION

EXECUTIVE COMPENSATION PRINCIPLES

The Company's executive compensation program is administered by the
Organization and Executive Compensation Committee of the Board of Directors (the
Committee) which is comprised of directors Gibson, Hamachek, Kuni, Pape and
Tromley, each of whom is a non-employee director under applicable rules of the
Securities and Exchange Commission. The program is designed to attract, motivate
and retain talented executives critical to the achievement of the Company's
long-term business strategy, its annual goals and objectives, the enhancement of
shareholder value, and the implementation of corporate values. The program seeks
to do this by:

o Tying a portion of each executive's total compensation opportunity to the
achievement of previously-established annual and long-term performance
goals.

o Aligning executives' long-term interests with those of the Company's
shareholders by encouraging ownership of the Company's Common Stock.

o Providing total compensation, including base salary and incentive
compensation, which is competitive with that of other energy service and
industrial companies of comparable size and circumstances.

The Committee took action in 2002 to revise the Committee charter and
develop a self-assessment form to ensure compliance with the Sarbanes-Oxley Act
and New York Stock Exchange requirements.

EXECUTIVE COMPENSATION COMPONENTS

There are three primary components of the Company's executive compensation
program: annual base salary, annual incentive cash bonuses and long-term stock
incentives.

BASE SALARIES

Base salaries paid to executives are established by the Board of Directors
upon the recommendation of the Committee based, in part, on market salary
analyses prepared by the Company's independent compensation consultant. These
analyses include salary data for comparable executive positions of energy
service and industrial companies of approximately the same size in terms of
total revenues located throughout the United States. The energy services portion
of the analysis includes data from the American Gas Association executive
compensation survey, which includes gas distribution companies comparable to the
Company.

The Committee uses this information as a guide to establish base salaries
that are competitive with those paid to executives in similar positions in
comparable companies. Generally, it is the Committee's policy to target
executives' base salaries at a level equivalent to the 50th percentile for base
salaries for comparable positions included in the consultant's analyses. Each
executive's targeted salary level may be adjusted, at the discretion of the
Committee, on the basis of such executive's performance and potential, as well
as changes in duties and responsibilities. Executives' salaries are reviewed by
the Committee annually.

EXECUTIVE ANNUAL INCENTIVE PLAN

The Company's Executive Annual Incentive Plan is intended to advance the
interests of the Company and its shareholders by means of an incentive cash
bonus program which will motivate key executives to achieve previously-
established annual performance goals. The amounts to be paid if these goals

should be achieved or exceeded, when added to base salaries, are intended to
place the Company's executives' compensation at between the 50th and 75th
percentiles of total cash compensation for comparable positions included in the
consultant's analyses.

Participation in the Executive Annual Incentive Plan currently is limited
to nine executive officers and three top managers selected by the Board. The
payment of awards under this Plan is contingent upon meeting predetermined
individual and Company performance goals.

At the beginning of each year, weighted performance goals are established.
At year-end, performance is measured against these goals. The results are
considered by the Committee in determining the amounts, if any, to be awarded.

The amounts of these awards are based on a formula which reflects an
allocation between Company and individual performance criteria. The allocation
depends upon each executive's ability to influence corporate performance.
Depending upon position, performance and the other factors considered by the
Committee, an executive can earn from 20% to 50% of base salary if the
prescribed Company and individual performance goals are met, or up to 30% to 75%
of base salary if these goals are exceeded.

Performance goals established for 2002 focused on strengthening the
Company's financial position. These included the achievement of: (1) net income
in an amount which the Committee determined would demonstrate above average
performance; (2) a weighted average ranking for return on equity over a two-year
period which would exceed a base level among a peer group of other gas
utilities; and (3) several operating goals related to return on new residential
customers, customer satisfaction improvement, market share and productivity in
serving customers. In combination, these goals measured the Company's
performance in terms of its overall profitability, return on new residential
customers, customer satisfaction, market share, the reduction of costs and the
achievement of greater efficiency. In determining the awards, the Committee used
a performance matrix which accorded 50% to net income and 25% to each of the
other two goals. The grant of any award for 2002 was conditioned upon the
Company's 2002 net income exceeding a percentage of the target designated in
advance by the Board and being sufficient to cover the payment of all dividends.

LONG-TERM INCENTIVES

The long-term portion of the Company's executive compensation program
consists of two components: stock options and performance shares. Stock options
incent executives to increase the Company's Common Stock price performance,
thereby aligning their interests with those of the other common shareholders.

The Company typically makes stock option grants under the Restated Stock
Option Plan every two years, rather than annually. Options on 58,500 shares of
the Company's Common Stock were granted to the Named Executive Officers in 2002.
When grants are made, the number of options granted is based upon a combination
of the independent compensation consultant's competitive market analysis of
long-term incentives, including the stock option component, and the Committee's
judgment as to how many options will provide meaningful incentives to
executives. In determining the number of options to be granted, the Committee
takes into consideration the number of shares available for grant under the
Plan, the number of options previously granted and the number of shares then
owned by each Named Executive Officer in relation to a targeted objective for
stock ownership by executives.

The second component of long-term compensation is provided through a
performance share program. This program consists of annual awards payable in
Company stock based on the Company's financial performance over three-year
performance cycles. The initial awards granted by the Committee in late 2000
included both the standard awards based on a three-year performance cycle and
one-time awards based on a two-year performance cycle. Another three-year

performance cycle commenced in 2002. The performance measure used to determine
incentive awards for all three cycles is the Company's average return on equity
during the period covered by the award in relation to pre-established targeted
objectives. The return on equity performance target for the first cycle, which
concluded on December 31, 2002, was not achieved due to the factors relating to
2002 financial results discussed under "CEO Compensation," below, and no awards
will be paid.

CEO COMPENSATION

Compensation paid to Richard G. Reiten for the year 2002, as Chairman and
Chief Executive Officer, consisted of his base salary and an incentive bonus.
Mr. Reiten's 2002 compensation reflects a 6.6% increase in his base salary
effective as of March 1, 2002, which was deemed by the Committee and the Board
to be appropriate to maintain the competitiveness of his base salary. His
compensation also reflects a cash bonus of $250,000 under the Executive Annual
Incentive Plan. The award of the bonus for 2002, which is equal to 52.6% of Mr.
Reiten's 2002 base salary, was based, in part, upon the achievement of the
corporate performance goals as described above under the "Executive Annual
Incentive Plan" and upon the Committee's evaluation of Mr. Reiten's performance
in relation to the achievement of pre-established individual performance goals.
For 2002, the Company reported earnings of $1.62 a diluted share and net income
applicable to common stock of $41.5 million. These 2002 results were lower than
projected due to the impact of the charge associated with the attempted
acquisition of Portland General Electric Company (PGE) from Enron. This
transaction was not consummated due to Enron's bankruptcy and associated
contingent liabilities. For 2002, the Company's return on equity of 8.73% ranked
10th among 16 comparable companies. Combined with the return on equity in 2001,
the Company's weighted two-year ranking for return on equity was 11th within
this group. The Committee determined that the achievements made with respect to
these corporate performance goals, despite the costs associated with the PGE
transaction, together with Mr. Reiten's overall accomplishments for the year,
warranted the bonus awarded to Mr. Reiten for 2002. Considering the competitive
market analysis of long-term incentive opportunities and the Company's 2001
performance, the Committee granted Mr. Reiten 20,000 non-statutory stock options
in early 2002 and 8,000 performance shares for the three-year cycle beginning
January 1, 2002.

DEDUCTIBILITY OF COMPENSATION

Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code),
generally limits to $1 million per person the amount that the Company may deduct
for compensation paid in any year to any individual who, on the last day of the
taxable year, is its chief executive officer or is among its four highest
compensated officers (other than the chief executive officer). Certain
exceptions to this limitation apply to so-called "performance-based
compensation." The Company does not expect the sum of the base salary, annual
cash incentive bonus and other relevant compensation paid to any executive
officer to exceed $1 million in any year. In the event that in the future the
Company determines that an executive's annual compensation may approach or
exceed this limitation, it will consider the use of this exception to the
limitation under Code Section 162(m) as it has in the case of stock options and
long-term incentive awards as described below.

It is the Company's policy generally to grant options that meet the
requirements of the Code and the regulations thereunder so that any such
compensation recognized by an optionee will be fully deductible
performance-based compensation. The shareholders have previously approved the
Restated Stock Option Plan to comply with the performance-based compensation
requirements of Code Section 162(m) so that compensation received on the
exercise of options granted under this Plan would not be subject to the $1
million limitation. In 1996, the Committee determined that option grants would

henceforth generally be Non-Statutory Stock Options for which the Company will
receive a tax deduction upon exercise.

The performance share long-term incentive awards granted by the Company are
also generally intended to meet the "performance-based compensation"
requirements of the Code and regulations so that any compensation paid under
those awards will be fully deductible. However, the long-term incentive awards
granted in 2002 for the 2002-2004 performance cycle did not meet the
"performance-based compensation" requirements because those awards were approved
by the Committee more than 90 days after the commencement of the cycle. The
awards in 2002 were delayed pending resolution of matters related to the
attempted acquisition of PGE.

Respectfully submitted on February 27, 2003 by the Organization and
Executive Compensation Committee of the Board of Directors:

Russell F. Tromley, Chair C. Scott Gibson
Tod R. Hamachek Wayne D. Kuni
Randall C. Pape

SHAREHOLDER RETURN PERFORMANCE PRESENTATION

Set forth below is a line graph comparing the annual percentage change in
the cumulative total shareholder return, assuming reinvestment of dividends, on
the Company's Common Stock against the cumulative total return of the S&P
SmallCap 600 Index (S&P SmallCap 600) and the S&P Utilities Index for the period
of five years commencing December 31, 1997 and ended December 31, 2002. In 2002,
the EdwardJones Natural Gas Distribution Index, previously used by the Company
in its shareholder return performance presentation, ceased to be published. The
Company selected the S&P Utilities Index (the "Utilities Index") as its
replacement for a published index representative of the Company's industry. The
Utilities Index encompasses companies considered electric, gas or water
utilities, or companies that operate as independent producers and/or
distributors of power.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
BASED ON $100 INVESTED ON 12/31/97

[GRAPHIC OMITTED]

1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----

NW Natural $100.00 $87.30 $77.78 $99.25 $100.44 $111.49
S&P SmallCap 600 $100.00 $98.70 $110.94 $124.03 $132.09 $112.81
S&P Utilities Index $100.00 $114.61 $104.19 $163.58 $113.98 $79.85

REPORT OF AUDIT COMMITTEE

The Audit Committee of the Board of Directors (the Committee) is
responsible for providing independent, objective oversight of the Company's
accounting functions, financial reporting and internal controls. The Committee
acts under a written charter first adopted and approved by the Board on May 25,
2000, and amended as of February 27, 2003. See Appendix A. Each of the members
of the Committee is independent as defined by current New York Stock Exchange
listing standards.

The Committee, in accordance with its written charter, oversees the quality
and integrity of the Company's accounting, auditing, and financial reporting
practices. During fiscal 2002, beginning with the Quarterly Report on Form 10-Q
for the period ended June 30, 2002, the Committee discussed the interim
financial information in the Company's quarterly reports to the Securities and
Exchange Commission (SEC) in special meetings with the Chief Executive Officer,
the Chief Financial Officer, the Controller, and PricewaterhouseCoopers LLP, the
Company's independent accountants, prior to filing them with the SEC.
Previously, with respect to the Company's Quarterly Report on Form 10-Q for the
period ended March 31, 2002, the Committee chair, as representative of the
Committee, discussed the interim financial information contained in that report
with the Chief Executive Officer, the Chief Financial Officer, the Controller
and the independent accountants prior to its filing with the SEC.

During 2002, the Committee expanded its meeting schedule and implemented
new disclosure controls and procedures designed to ensure the continuing
integrity of the Company's financial reports and the Company's compliance with
new corporate governance mandates. In addition, the Committee became the sole
authority for hiring, terminating and establishing remuneration for the
Company's independent auditor.

In fulfilling its responsibilities, the Committee has reviewed and
discussed the audited financial statements contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 2002 with the Company's
management and the independent accountants. As part of its review, the Committee
discussed the Company's accounting policies and matters of judgment and
estimates used in the preparation of the financial statements included in the
Company's 2002 Annual Report on Form 10-K. In addition, the Committee discussed
with the independent accountants those matters required to be discussed by
Statement on Auditing Standards No. 61, Communications with Audit Committees.
Management is responsible for the financial statements and the reporting
process, including the system of internal controls. The independent accountants
are responsible for expressing an opinion as to whether the financial statements
are presented fairly, in all material respects, in conformity with accounting
principles generally accepted in the United States.

In discharging its oversight responsibility as to the audit process, the
Committee obtained from the independent accountants a formal written statement
describing all relationships and non-audit services between the independent
accountants and the Company that might bear on the accountants' independence
consistent with Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees. In this regard, the Committee considered
whether or not the provision of non-audit services by the independent
accountants for the year 2002 is compatible with maintaining the independence of
the firm. In September 2002, the Committee pre-approved certain ongoing
non-audit related services performed by the Company's independent accountants
and established a procedure for the pre-approval of any future non-audit related
services performed by its auditor. The Committee determined that the ongoing
non-audit services would be reviewed annually concurrently with the engagement
of the auditor. On February 27, 2003, the Committee reaffirmed the established
procedures and pre-approved the following non-audit services to be performed in
2003:

o Audits of the Company's Retirement Plans, its Retirement K Savings
Plan and its Cafeteria Plan (Plan No. 507) that are required under
provisions of the Employee Retirement Income Security Act of 1974, as
amended, and audits of the Company's transfer agent and registrar
functions that are required by the New York Stock Exchange;

o Tax compliance and other tax services, including technical tax
guidance, assistance and technical support, in an amount not to exceed
$25,000 in any calendar year;

o Services related to the Company's issuance of securities, including
the issuance of comfort letters and consents relating to the issuance
of its Medium-Term Notes; and

o Such other non-audit services, in an amount not to exceed $5,000 for
each such service, as may be deemed necessary by management to support
normal business operations.

The Committee also discussed with the independent accountants any
relationships that may impact their objectivity and independence and satisfied
itself as to the accountants' independence. The Committee also discussed with
management, the internal auditors and the independent accountants the quality
and adequacy of the Company's internal controls, and the organization,
responsibilities, budget and staffing of the internal audit function. The
Committee reviewed with both the independent accountants and the internal
auditors their respective audit plans, audit scopes, and identification of audit
risks.

The Committee, in reliance on the reviews and discussions referred to
above, recommended to the Board of Directors (and the Board has approved and
directed) that the audited financial statements be included in Northwest Natural
Gas Company's Annual Report on Form 10-K for the year ended December 31, 2002,
for filing with the Securities and Exchange Commission.

Respectfully submitted on February 27, 2003 by the Audit Committee of the
Board of Directors:

Tod R. Hamachek, Chair John D. Carter
Thomas E. Dewey Wayne D. Kuni
Dwight A. Sangrey Russell F. Tromley

OTHER MATTERS

Management does not know of any other matters to be presented at the Annual
Meeting. If other matters should be properly presented at the meeting, the
persons named in the accompanying proxy will vote the shares represented by such
proxy with respect to such matters in accordance with their best judgment.

SELECTION OF INDEPENDENT AUDITORS

The Audit Committee of the Board of Directors has appointed
PricewaterhouseCoopers LLP, independent certified public accountants, as
independent auditors of the Company for the year 2003. A representative of
PricewaterhouseCoopers LLP will be present at the Annual Meeting of Shareholders
and will be provided with an opportunity to make a statement and to respond to
appropriate questions. For 2003 audit-related services, the Audit Committee
approved remuneration of up to $140,000. In addition, $16,000 in fees were
approved for guidance related to compliance with the Sarbanes-Oxley Act and
certain non-audit services to be performed in 2003 were pre-approved by the
Audit Committee. See "Report of Audit Committee," above.

AUDIT FEES

PricewaterhouseCoopers' fees and expenses for the fiscal year 2002 audit
and the review of Forms 10-Q totaled $148,200, of which the aggregate amount of
$111,150 had been billed through December 31, 2002.

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES

PricewaterhouseCoopers LLP did not render any services related to financial
information systems design and implementation during the year ended December 31,
2002.

ALL OTHER FEES

The aggregate fees and expenses billed by PricewaterhouseCoopers LLP for
services rendered to the Company, other than services described above under
"Audit Fees," for the fiscal year ended December 31, 2002 were as follows:

Other Audit Related $128,711 (1)
Tax 15,281 (2)
Other Non-Audit Related 67,390 (3)

In September 2002, the Audit Committee pre-approved certain ongoing
non-audit related services performed by the Company's independent auditor. See
"Report of Audit Committee," above.

(1) These fees and expenses included $40,000 for required audits of the
Company's retirement plans, its Retirement K Savings Plan and its cafeteria
plan, $46,701 for services related to the proposed acquisition of PGE,
$10,000 for services related to corporate governance compliance and $32,010
for services related to the Company's issuances of securities, including
the issuance of comfort letters and consents relating to the issuance of
its Medium-Term Notes.

(2) These fees included $4,838 for tax services related to the proposed
acquisition of PGE.

(3) These fees and expenses included amounts paid for merger integration
advisory services related to the proposed acquisition of PGE.

2004 ANNUAL MEETING OF SHAREHOLDERS

The 2004 Annual Meeting of Shareholders is scheduled to be held in
Portland, Oregon on Thursday, May 27, 2004. Securities and Exchange Commission
proxy rules require that any shareholder proposal to be considered for inclusion
in the Company's proxy statement for the 2004 Annual Meeting of Shareholders
must be received at the Company's principal executive office no later than
December 19, 2003.

The Company's bylaws require shareholders to give the Company advance
notice of any proposal to be submitted at any meeting of shareholders. The
bylaws prescribe the information to be contained in any such notice, and a copy
of the relevant provisions of the bylaws will be provided to any shareholder
upon written request to the Secretary of the Company. For any shareholder
proposal to be considered at the 2004 Annual Meeting of Shareholders, the
shareholder's notice must be received by the Company's Secretary no later than
February 23, 2004. The Securities and Exchange Commission's proxy rules allow
the Company to use discretionary voting authority to vote on a matter coming
before an annual meeting of shareholders which is not included in the Company's
proxy statement, if the Company does not have notice of the matter before the
deadline established in its bylaws. In addition, discretionary voting authority
may generally also be used if the Company receives timely notice of such matter
(as described above) and if, in the proxy statement, the Company describes the
nature of such matter and how the Company intends to exercise its discretion to
vote on such matter.

SOLICITATION OF PROXIES

Proxies may be solicited on behalf of the Board of Directors by regular
employees in person or by mail, telephone, the Internet or facsimile
transmission. The Company will reimburse brokers or other persons holding stock
in their names or in the names of their nominees for their reasonable expenses
incurred in forwarding proxies and proxy materials to the beneficial owners of
such shares. All solicitation costs will be borne by the Company. The Company
has retained Georgeson Shareholder Communications Inc. to assist in the
solicitation of proxies from banks, brokers and nominees at a fee of $2,500 plus
reasonable out-of-pocket expenses. Shareholders may assist the Company in
avoiding expenses in this connection by returning their proxies promptly.

If you are unable to be present at the Annual Meeting in person, please
mark, date, sign and mail the enclosed proxy, or, alternatively, grant your
proxy by telephone or the Internet, so that the business of the meeting can be
transacted.

By Order of the Board of Directors,

Portland, Oregon C. J. Rue
April 18, 2003 Secretary

Appendix A

NORTHWEST NATURAL GAS COMPANY
Audit Committee Charter

ORGANIZATION

The Audit Committee ("Committee") and its Chairperson shall be selected by the
Board of Directors ("Board"), based on recommendations of the chair of the
Governance Committee and the CEO, at a meeting following the annual shareholders
meeting. The Committee shall consist of at least three Directors including a
Chairperson. The Committee shall include only independent Directors required by
law or the listing standards of the New York Stock Exchange. Each member of the
Committee shall be financially literate or must become financially literate
within a reasonable period of time after his or her appointment to the
Committee. At least one member of the Committee must have accounting or related
financial management expertise, as the Board, in its business judgment,
interprets the foregoing qualifications in accordance with applicable law. The
Committee shall meet at least four times per year.

PURPOSE

The Committee shall, through regular or special meetings with management, the
Director of Internal Auditing, and the Company's independent auditor, (a)
provide oversight to ensure the integrity of the Company's financial statements,
the Company's compliance with legal and regulatory requirements, the independent
auditor's qualifications and independence, and the performance of the Company's
internal audit function and independent auditors; (b) prepare the report
required by law to be included in the Company's annual proxy statement; and (c)
perform such other duties as the Board or the Committee Chairperson deems
appropriate.

RESPONSIBILITIES

The Committee shall:

o Assist the Board with establishing procedures to ensure the integrity of
the Company's financial statements.

o Have the direct and sole authority and responsibility to select, evaluate
and terminate the firm of independent certified public accountants to serve
as the Company's independent auditor which firm shall report directly to
the Committee.

o Establish audit engagement fees payable to the independent auditor and
other terms of the engagement.

o Establish policies and procedures for the Committee's pre-approval of
permitted non-audit services to be provided by the independent auditor.

o Ensure that the independent auditor provides annually to the Committee a
formal written statement delineating: its internal quality control
procedures; any material issues raised by the most recent internal
quality-control review, peer review or any inquiry or investigation by
governmental or professional authorities within the preceding five years

A-1

with respect to one or more independent audits carried out by the firm and
any steps taken to address such issues; and all relationships between the
independent auditor and the Company.

o Have the authority to retain its own independent counsel and other advisors
and determine and ensure provision for appropriate funding to compensate
the independent auditors, counsel and advisors.

o Actively engage in a dialogue with the independent auditor with respect to
any disclosed relationships or services that may impact the objectivity and
independence of the independent auditor.

o Take appropriate action deemed necessary in response to the independent
auditor's report to satisfy itself of the independent auditor's
independence.

o Approve the appointment and evaluation, in consultation with executive
management, of the Director of Internal Auditing.

o Review the organization, staffing, scope, results, and effectiveness of the
Company's internal audit function.

o Have separate direct lines of communication between itself and the
independent auditor, the Director of Internal Auditing, management and,
with regard to litigation and legal and regulatory compliance, the General
Counsel.

o Establish hiring policies for employees or former employees of the
independent auditor.

o Establish and maintain procedures for the receipt, retention and treatment
of complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters and the confidential, anonymous
submissions by employees of concerns regarding questionable auditing or
accounting practices.

o Conduct an annual performance evaluation of the Committee, including
evaluation of the independence of each member and the qualifications of
members as "financial experts" as defined by the Securities and Exchange
Commission.

The Committee shall review:

o Annual audit plans of the Director of Internal Auditing and the independent
auditor.

o The results of the internal auditor's and the independent auditor's
activities, including major conclusions, findings and recommendations, and
related management responses.

o Any allegations of fraudulently influencing, coercing, manipulating or
misleading the independent auditor for the purpose of rendering the
financial statements materially misleading.

o With the independent auditor, any audit problems or difficulties and
management's response.

o The adequacy and effectiveness of the Company's internal controls,
including computerized information system controls and security.

o The adequacy of the Company's disclosure controls and procedures.

o The performance, qualifications and independence of the independent auditor
on an annual basis, including communicating to the independent auditor that
it is ultimately accountable to the Committee.

o The appointment and replacement not less frequently than every five years
of the lead audit partner of the independent auditor.

A-2

o The Company's accounting and financial reporting practices, policies and
procedures, including its critical accounting policies.

o The Company's annual audited financial statements and quarterly financial
statements, including disclosures under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" to be included
in the Company's annual and quarterly reports on Forms 10-K and 10-Q.

o Material litigation involving the Company and litigation involving officers
and directors.

o An internal audit report regarding the total annual compensation of each
executive officer of the Company for consistency with Board approved
compensation levels and applicable law.

o Transactions with related parties.

o Accounting, legal, tax and other developments of major significance to the
Company, including any alternative treatment of information within GAAP.

o The Company's policies with respect to risk assessment and risk management
as major financial risk exposures and the steps management has taken to
monitor and control such exposures.

o Progress or results relating to major capital projects or contingency
issues, as the Committee considers appropriate.

o Compliance with applicable legal and regulatory requirements.

o The Company's policies relating to delegation of management authority.

o The continued adequacy of this Audit Committee Charter on an annual basis.

o Such other matters as required by law or as the Board or the Committee
considers appropriate.

REPORTING AND OTHER REQUIREMENTS

o Prior to the filing of the Form 10-K and in addition to its assessment of
the independent auditor's independence, the Committee shall review and
discuss the audited financial statements with management, and discuss with
the independent auditors the matters required to be discussed by relevant
auditing standards, including the quality, not just the acceptability, of
the accounting principles and underlying estimates used in the audited
financial statements.

o The Committee shall report to the Board, based on its reviews and
discussions, whether it recommends to the Board that the most recent year's
audited financial statements be included in the Company's Form 10-K to be
filed with the SEC.

o The Committee shall prepare and approve the Audit Committee report to be
included in the Company's proxy statement as required by the relevant
regulations which shall state whether it has reviewed and discussed the
audited financial statements with management; whether it has discussed with
the Company's independent auditor the matters required to be discussed
under relevant auditing standards; whether it has received the written
disclosures and the letter from the Company's independent auditor with
respect to the auditor's independence; and whether it has discussed the
independent auditor's independence with the auditor.

A-3

o With regard to filings on Form 10-Q, the Committee shall review and discuss
the document with management and the independent auditor prior to its
filing.

o The Committee shall discuss generally earnings press releases and other
financial information and earnings guidance provided to analysts and rating
agencies, including the types of information to be disclosed and the types
of presentations to be made.

o The Committee shall receive periodic reports from management, the General
Counsel, the Director of Internal Auditing, and the independent auditor on
matters relating to accounting, financial reporting, internal control,
auditing, litigation and compliance with legal business policies and
regulatory requirements. The Committee shall receive these reports pursuant
to a schedule that the Committee Chairperson develops in consultation with
management.

o The Committee shall meet privately (without members of management present)
and separately with the Director of Internal Auditing and the independent
auditor periodically and, when deemed appropriate, with the Company's
General Counsel.

o The Committee may cause an investigation to be made into any matter within
the scope of its responsibility.

o The Committee Chairperson shall make regular reports to the Board on the
Committee's activities.

As recommended by the Audit Committee and
approved by the Board of Directors on and
effective May 25, 2000, amended May 23, 2002
and February 27, 2003

A-4

[PROXY CARD]

[LOGO] NW NATURAL --------------------------------------------------
220 N.W. SECOND AVENUE VOTE BY TELEPHONE
PORTLAND, OR 97209 --------------------------------------------------
Have your proxy card available when you call the
TOLL-FREE NUMBER 1-800-542-1160 using a touch-tone
telephone. You will be prompted to enter your
Control Number. Please follow the simple prompts
that will be presented to you to record your vote.

--------------------------------------------------
VOTE BY INTERNET
--------------------------------------------------
Have your proxy card available when you access the
website HTTP://WWW.VOTEFAST.COM. You will be
prompted to enter your Control Number. Please
follow the simple prompts that will be presented
to you to record your vote.

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VOTE BY MAIL
--------------------------------------------------
Please mark, sign and date your proxy card and
return it in the postage-paid envelope provided or
return it to: Corporate Election Services, P. O.
Box 1150, Pittsburgh, PA 15230-1150.

---------------------- ----------------------- -------------------
VOTE BY TELEPHONE VOTE BY INTERNET VOTE BY MAIL
Call TOLL-FREE using a Access the WEBSITE and Return your proxy
Touch-Tone phone: Cast your vote: in the POSTAGE-PAID
1-800-542-1160 HTTP://WWW.VOTEFAST.COM envelope provided
---------------------- ----------------------- -------------------

VOTE 24 HOURS A DAY, 7 DAYS A WEEK!
YOUR TELEPHONE OR INTERNET VOTE MUST BE RECEIVED BY
11:59 P.M. EASTERN DAYLIGHT TIME
ON MAY 21, 2003 TO BE COUNTED IN THE FINAL TABULATION.

=============================================================
YOUR CONTROL NUMBER IS:
=============================================================

PROXY MUST BE SIGNED AND DATED BELOW.
PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
--------------------------------------------------------------------------------

[LOGO] NW NATURAL REVOCABLE PROXY

This proxy when properly executed will be voted in the manner directed herein by
the shareholder whose signature appears below. IF NO DIRECTION IS MADE, THE
PROXY WILL BE VOTED FOR PROPOSAL 1.

PROPOSAL 1. Vote on Directors |_| FOR ALL To withhold your vote on an individual
Class I Nominees: (01) Timothy P. Boyle |_| WITHHOLD ALL nominee, mark "FOR All Except" and
(02) Mark S. Dodson |_| FOR ALL EXCEPT write the nominee's name on the line below.
(03) Randall C. Pape
(04) Richard L. Woolworth _____________________________________________________
Class II Nominee: (05) Robert L. Ridgley
Class III Nominees: (06) John D. Carter
(07) C. Scott Gibson

|_| PLEASE MARK THIS BOX IF YOU PLAN TO ATTEND
THE ANNUAL MEETING.

_____________________________________________________________
Signature(s)

When signing as attorney-in-fact, executor, administrator,
trustee, guardian or officer of a corporation, please give
full title as such. On joint accounts, each owner should sign.

Date: ________________________________________________, 2003

PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
--------------------------------------------------------------------------------

[LOGO] NW NATURAL REVOCABLE PROXY

NORTHWEST NATURAL GAS COMPANY
PROXY FOR 2003 ANNUAL MEETING OF SHAREHOLDERS

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Mark S. Dodson, Richard G. Reiten and Tod R.
Hamachek and each or any of them, the proxy or proxies, with power of
substitution and with authorization to vote all of the common shares of the
undersigned at the annual meeting of shareholders of Northwest Natural Gas
Company to be held on Thursday, May 22, 2003, and at all adjournments thereof,
(i) as designated on the reverse of this card and, (ii) at their discretion,
upon any and all other matters which properly may be brought before such meeting
or any adjournment thereof.

If shares of the Company's Common Stock are held for the account of the
undersigned under the Company's Dividend Reinvestment and Stock Purchase Plan,
its Retirement K Savings Plan or its Employee Stock Purchase Plan, then the
undersigned hereby directs the respective fiduciary of each applicable plan to
vote all shares of Northwest Natural Gas Company Common Stock in the
undersigned's name and/or account under such Plan in accordance with the
instructions given herein, at the 2003 Annual Meeting and at any adjournments or
postponements thereof, on all matters properly brought before such meeting or
any adjournment thereof, including but not limited to the matters set forth on
the reverse side.

The Company will provide reasonable accommodation for a disability. If you need
an accommodation, please contact the Company at (503) 226-4211 ext. 3411 at
least 72 hours before the meeting.

PLEASE DATE AND SIGN THIS PROXY ON THE REVERSE SIDE AND MAIL WITHOUT DELAY
IN THE ENCLOSED ENVELOPE.