Peace Valley Oriented Strand Board is applying to the Ministry of Environment to use methylene diphenyl diisocyanate, or MDI, at its factory in Baldonnel, near Fort St. John.
The company says MDI will allow it to make a higher quality product at a lower price.
The U.S. Environmental Protection Agency says short-term exposure to high concentrations of the chemical can result in asthma and skin irritation.
Sandra Cushway, who lives about 1.5 kilometres from the mill, says Peace Valley OSB assured residents the chemical wouldn’t be used when the factory first opened.
"They're going back on their word that they gave 10 years ago, saying they wouldn't use it,” she told CBC News.
Cushway and others who live near the factory are concerned about the potential health impacts.
But Ian Coote, the company’s general manager, says there are safe thresholds for using MDI.
He says the company needs to use the chemical to be competitive.
"In order to put this plant in a position that it is best suited to survive in a competitive industry, we need to utilize the same technology that our competitors are using,” he said.
"We need to do so in a manner that is safe, and will not jeopardize the health of workers or the community."
More than 1,000 people have signed a petition opposing the plan.
Peace Valley OSB plans to submit its application to the ministry by the end of the month.