8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

July 26, 2006

Date of Report (Date of earliest event reported)

NORTHWEST NATURAL GAS COMPANY

(Exact name of registrant as specified in its charter)

Commission File No. 1-15973

Oregon	93-0256722
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
220 N.W. Second Avenue, Portland, Oregon	97209
(Address of principal executive offices)	(Zip Code)

Registrant’s Telephone Number, including area code: (503) 226-4211

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement

Executive Compensation

On July 28, 2006, the Company announced that its executive vice president, Michael S. McCoy, intends to retire from NW Natural effective December 31, 2006 after 37 years of service with the Company. On July 26, 2006, the Company entered into a Restricted Stock Bonus Agreement with Mr. McCoy that provides a grant of 6,500 shares of Common Stock of the Company (the “Restricted Shares”). The Restricted Shares will vest incrementally over three years on March 1, 2007, March 1, 2008 and March 1, 2009. In addition, all Restricted Shares would immediately vest if (a) Mr. McCoy dies or becomes physically disabled, or (b) a Change in Control (as defined) occurs.

A copy of the Restricted Stock Bonus Agreement is attached to this report as Exhibit 10.1. See also Item 8.01, “Other Events,” below.

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Item 5.05 Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics

On July 27, 2006, the Board of Directors approved amendments to the Company’s Code of Ethics to include a description of the Company’s core values, clarify the level of care to be used in drafting and sending electronic communications and clarify that reports from the Company’s ethics hotline are summarized and reported to the Audit Committee of the Board. The Board also approved other technical, non-substantive amendments to the Code of Ethics. The amended Code of Ethics is available on the Company’s website at www.nwnatural.com.

Item 8.01 Other Events

Retirement Announcement

On July 28, 2006, the Company issued a press release announcing the retirement of Michael S. McCoy, executive vice president of the Company, effective December 31, 2006. A copy of the press release is attached to this report as Exhibit 99.1.

Changes in Operational Model

On June 28, 2006, the Company initiated a company-wide restructuring of operations with the goal of significantly improving work processes, reducing operating expenses and capital costs, and continuing to strive for excellence in customer service. The changes are designed to create a more integrated and centralized operations model, and are expected to take place over the next several years. Implementation of the new business model is expected to result in workforce reductions primarily as a result of both attrition and voluntary severance packages. In addition, implementation of the redesigned operations model will involve:

• developing a more integrated operations model;

• further enhancing the Company’s ability to add customers profitably;

• implementing more standardization in all work processes;

• centralizing resource planning, scheduling, quality assurance and performance management;

• outsourcing work that is not core to the Company’s safety, reliability, regulatory compliance or customer service activities;

• increasing the integration and efficiency of information technology systems; and,

• maintaining a strong community presence while reorganizing district operations.

As a result, the Company expects to incur severance costs in the fourth quarter of 2006 of approximately $1.5 million to $2.0 million related to workforce reductions of approximately 50 to 100 personnel.

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Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

10.1	Restricted Stock Bonus Agreement with executive officer dated July 26, 2006.
99.1	Press release issued July 28, 2006 announcing retirement of executive vice president.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	NORTHWEST NATURAL GAS COMPANY (Registrant)
Dated: July 28, 2006	/s/ DAVID H. ANDERSON
	David H. Anderson
	Senior Vice President and Chief Financial Officer

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EX-10.1

Exhibit 10.1

RESTRICTED STOCK BONUS AGREEMENT

This Agreement is entered into as of July 26, 2006, between Northwest Natural Gas Company, an Oregon corporation (the “Company”), and Michael S. McCoy (“Recipient”).

The Company has awarded a restricted stock bonus to Recipient pursuant to Section 6 of the Company’s Long Term Incentive Plan (the “Plan”) and Recipient desires to accept the award subject to the terms and conditions of this Agreement. This award is being granted in anticipation of the Recipient’s retirement on December 31, 2006.

NOW, THEREFORE, the parties agree as follows:

1. Award of Restricted Stock Bonus. Subject to the terms and conditions of this Agreement, the Company hereby grants to Recipient 6,500 shares of Common Stock of the Company (the “Restricted Shares”). The Restricted Shares are subject to forfeiture to the Company as set forth in Section 3.

2. Shares Purchased on Open Market; Stock Certificate.

2.1 As soon as practicable after execution of this Agreement by the Company and Recipient, the Company shall pay to a securities broker or other third party an amount equal to the market price of the Restricted Shares, with instructions to purchase the Restricted Shares on the open market in Recipient’s name and to deliver the certificates in Recipient’s name representing the Restricted Shares to the Company to hold pursuant to Section 2.2.

2.2 To secure the rights of the Company under Sections 3 and 5, the Company will retain the certificate or certificates representing the Restricted Shares. Upon any forfeiture of Restricted Shares covered by this Agreement, the Company shall have the right to cancel such Restricted Shares in accordance with this Agreement without any further action by Recipient. After Restricted Shares have vested and all required withholding has been paid to the Company in connection with such vesting, the Company shall deliver a certificate for the vested Restricted Shares to Recipient (unless Recipient shall have made a deferral election as provided for in Section 5.3).

3. Vesting; Forfeiture Restriction.

3.1 All of the Restricted Shares shall initially be unvested. The Restricted Shares shall vest in accordance with the following schedule:

One-third of the Restricted Shares or 2,167 shares shall vest on March 1, 2007

An additional one-third of the Restricted Shares or 2,167 shares shall vest on March 1, 2008

The remaining one-third of the Restricted Shares or 2,166 shall vest on March 1, 2009

In addition, all Restricted Shares shall immediately vest if (a) Recipient dies or becomes physically disabled (within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986 (the “Code”)), or (b) a Change in Control (as defined below) shall occur.

3.2 If, at any time after Recipient’s retirement, the Chief Executive Officer of the Company determines, in his or her sole discretion and after such notice to Recipient as he or she deems appropriate, that Recipient is not making himself reasonably available to assist the Company by, for example, responding to questions, attending meetings or testifying in appropriate proceedings, any unvested Restricted Shares shall be forfeited to the Company.

3.3 For purposes of this Agreement, a “Change in Control” of the Company shall mean the occurrence of any of the following events:

(a) The consummation of:

(1) any consolidation, merger or plan of share exchange involving the Company (a “Merger”) as a result of which the holders of outstanding securities of the Company ordinarily having the right to vote for the election of directors (“Voting Securities”) immediately prior to the Merger do not continue to hold at least 50% of the combined voting power of the outstanding Voting Securities of the surviving corporation or a parent corporation of the surviving corporation immediately after the Merger, disregarding any Voting Securities issued to or retained by such holders in respect of securities of any other party to the Merger; or

(2) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company;

(b) At any time during a period of two consecutive years, individuals who at the beginning of such period constituted the Company’s Board of Directors (“Incumbent Directors”) shall cease for any reason to constitute at least a majority thereof; provided, however, that the term “Incumbent Director” shall also include each new director elected during such two-year period whose nomination or election was approved by two-thirds of the Incumbent Directors then in office; or

(c) Any person (as such term is used in Section 14(d) of the Securities Exchange Act of 1934, other than the Company or any employee benefit plan sponsored by the Company) shall, as a result of a tender or exchange offer, open market purchases or privately negotiated purchases from anyone other than the Company, have become the beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of Voting Securities representing twenty percent (20%) or more of the combined voting power of the then outstanding Voting Securities.

4. Restriction on Transfer. Recipient shall not sell, assign, pledge, or in any manner transfer unvested Restricted Shares, or any right or interest in unvested Restricted Shares, whether voluntarily or by operation of law, or by gift, bequest or otherwise. Any sale or transfer, or purported sale or transfer, of unvested Restricted Shares, or any right or interest in unvested Restricted Shares, in violation of this Section 4 shall be null and void.

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5. Tax Withholding; Deferral Election.

5.1 Except as otherwise provided in Section 5.2 or 5.3, Recipient acknowledges that, on the date (the “Vesting Date”) any portion of the Restricted Shares vests, the Value (as defined below) on that date of such vested Restricted Shares will be treated as ordinary compensation income for federal and state income and FICA tax purposes, and that the Company will be required to withhold taxes on this income amount. To satisfy the required withholding amount, Recipient shall surrender to the Company the number of vested Restricted Shares having a Value equal to the required withholding amount, and the Company shall have the right to cancel such number of vested Restricted Shares without any further action by Recipient before delivering the balance of the vested Restricted Shares to Recipient in accordance with Section 2.2. For purposes of this Section 5, the “Value” of a Restricted Share shall be equal to the closing market price for Company Common Stock on the last trading day preceding the Vesting Date. Notwithstanding the foregoing, Recipient may elect not to have Restricted Shares withheld to cover taxes by giving notice to the Company in writing prior to the Vesting Date, in which case no certificates for vested Restricted Shares shall be delivered to Recipient until Recipient shall have paid to the Company in cash any required tax withholding.

5.2 If Recipient timely files an election under Section 83(b) of the Code with respect to the Restricted Shares, Recipient acknowledges that the Value of the Restricted Shares as of the date of this Agreement will be treated as ordinary compensation income for federal and state income and FICA tax purposes, and that the Company will be required to withhold taxes on this income amount. Promptly following Recipient’s filing of a timely election under Section 83(b) of the Code, the Company will notify Recipient of the required withholding amount. Within 10 days of such notice, Recipient shall pay to the Company the required withholding amount in cash or, at the election of Recipient, by surrendering to the Company for cancellation other fully vested shares of Common Stock of the Company valued at the closing market price for Company Common Stock on the last trading day preceding the date of Recipient’s election to surrender such shares.

5.3 Recipient may elect to defer receipt of Restricted Shares pursuant to the terms of the Company’s Deferred Compensation Plan for Directors and Executives (the “DCP”), in which case the deferral shall be credited only to Recipient’s Company Stock Account under the DCP. If Recipient makes a valid election to defer receipt of Restricted Shares pursuant to the DCP, promptly after the deferral election becomes irrevocable the Company shall cause the Common Stock subject to such irrevocable deferral to be transferred to the trustee of the Northwest Natural Gas Company Supplemental Trust. The Common Stock so transferred (and the related credit to Recipient’s stock account under the DCP) shall nevertheless remain subject to forfeiture under Section 3.2 until vested as provided in Section 3.1. In the case of a valid deferral under the DCP, withholding of taxes shall be governed by the terms of the DCP.

6. Rights as Shareholder; Dividends. Upon the execution and delivery of this Agreement and the purchase of the Restricted Shares in the market as provided in Section 2.1, the award of the Restricted Shares shall be completed and, except as limited by this Agreement, Recipient shall be the owner of the Restricted Shares with all rights of a shareholder, including the right to vote the Restricted Shares and to receive dividends payable with respect to the Restricted Shares; provided, however, that Recipient shall not be treated as the owner of any

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shares that have been transferred to and are held by the trustee of the Northwest Natural Gas Company Supplemental Trust pursuant to Section 5.3. Until the Restricted Shares become vested, the Restricted Shares will not be treated as issued shares for tax purposes and dividends paid to Recipient with respect to unvested Restricted Shares will be treated for federal and state income and FICA tax purposes as ordinary compensation income subject to applicable withholding.

7. Additional Shares of Company Common Stock. If, prior to vesting of Restricted Shares, the outstanding Common Stock is increased as a result of a stock dividend or stock split, the restrictions and other provisions of this Agreement shall apply to any such additional shares of Common Stock which are issued in respect of the Restricted Shares to the same extent as such restrictions and other provisions apply to the Restricted Shares.

8. Restrictive Legends. Stock certificates for shares granted under this Agreement may bear the following legends:

The shares represented by this certificate are subject to a Restricted Stock Bonus Agreement between the registered owner and Northwest Natural Gas Company which restricts the transferability of the shares. A copy of the agreement is on file with the Secretary of Northwest Natural Gas Company.

9. No Right to Employment. Nothing contained in this Agreement shall confer upon Recipient any right to be employed by the Company or to continue to provide services to the Company or to interfere in any way with the right of the Company to terminate Recipient’s services at any time for any reason, with or without cause.

10. Miscellaneous.

10.1 Entire Agreement; Amendment. This Agreement constitutes the entire agreement of the parties with regard to the subjects hereof and may be amended only by written agreement between the Company and Recipient.

10.2 Notices. Any notice required or permitted under this Agreement shall be in writing and shall be deemed sufficient when delivered personally to the party to whom it is addressed or when deposited into the United States Mail as registered or certified mail, return receipt requested, postage prepaid, addressed to the Company, Attention: Corporate Secretary, at its principal executive offices or to Recipient at the address of Recipient in the Company’s records, or at such other address as such party may designate by ten (10) days’ advance written notice to the other party.

10.3 Assignment; Rights and Benefits. Recipient shall not assign this Agreement or any rights hereunder to any other party or parties without the prior written consent of the Company. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company’s successors and assigns and, subject to the foregoing restriction on assignment, be binding upon Recipient’s heirs, executors, administrators, successors and assigns.

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10.4 Further Action. The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.

10.5 Applicable Law; Attorneys’ Fees. The terms and conditions of this Agreement shall be governed by the laws of the State of Oregon. In the event either party institutes litigation hereunder, the prevailing party shall be entitled to reasonable attorneys’ fees to be set by the trial court and, upon any appeal, the appellate court.

10.6 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

NORTHWEST NATURAL GAS COMPANY
By	/s/ MARK S. DODSON
Title	President and Chief Executive Officer
RECIPIENT
/s/ MICHAEL S. MCCOY

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EX-99.1

Exhibit 99.1

For Immediate Release July 28, 2006

Executive Vice President Michael McCoy to Retire at Year End

PORTLAND, Ore. JULY 28, 2006 —Northwest Natural Gas Company (NYSE:NWN), dba NW Natural, announced today the planned retirement of Executive Vice President Michael McCoy, effective Dec. 31, 2006.

McCoy, 63, began with NW Natural in 1969 as a network design engineer and has overseen all customer and utility operations since 1999.

“Mike is that special leader who has worked his way up from an entry level position to be a top executive,” said Mark Dodson, CEO and President. “We have always been able to rely on Mike’s intimate knowledge of every level of NW Natural’s operations. At no time has this knowledge been better employed than in the past year as the company worked to realign its operations to become more efficient and responsive.”

Three managers who reported to McCoy will report directly to Dodson on an interim basis. There are no immediate plans to fill the Executive Vice President position, Dodson said.

“NW Natural will always be like family to me,” said McCoy. “There have been challenges over the years, but we have met them together and I am confident NW Natural will go on meeting them and providing top notch service to our customers.”

“We will miss working with Mike on a daily basis, but I’m pleased that he has agreed to continue providing me his valuable advice and counsel in the months and years ahead,” said Dodson.

After graduating from Seattle University with a degree in Civil Engineering, McCoy worked at The Boeing Co. and the Design Analysis Co. before coming to NW Natural in 1969. His career has marked the growth of the utility from only 170,000 customers in 1969 to 624,000 today. He advanced from network design engineer to station maintenance supervisor. Then came stints in construction, LNG, district management and customer service. He became Vice President, Services & Industrial Relations in 1983.

More responsibilities followed and he became Senior Vice President, Customer Service in 1992 and Executive Vice President, Customer and Utility Operations in 2000.

McCoy co-chaired the Western Energy Institute, a leading utility trade organization. Over the years, he has served in a variety of leadership positions at the American Gas Association, the Pacific Coast Gas Association and the Industrial Gas Technology Commercialization Center. He was also a trustee of the Western States Health & Welfare Fund of the Office and Professional Employees International Union, Local 11.

Besides his industry leadership, he has also been active in community affairs. He has held leadership positions in the Eagle Scout Association—Columbia-Willamette, the United Way, Identity Clark County, and the Vancouver National Historic Trust Reserve.

About NW Natural

NW Natural is headquartered in Portland, Ore., and serves over 624,000 residential and business customers in Oregon and southwest Washington. It is the largest independent natural gas utility in the Pacific Northwest. With customer growth on pace for a 20^th consecutive year of more than 3 percent annual increase, it is also one of the fastest-growing local distribution companies in the nation. NW Natural has approximately $1.8 billion in total assets, which includes nearly 14 bcf of underground gas storage capacity within its service territory at Mist, Ore. The company has in place rate mechanisms that help to protect revenues from warmer than average weather and declining consumption. NW Natural has increased its dividends paid on common stock for 50 consecutive years.

Investor Contact:

Bob Hess, 503-220-2388

Bob.Hess@nwnatural.com

or

Press Contact:

Steve Sechrist, 503-220-2594

sms@nwnatural.com