Inland Empire Paper Co. says it's seeing an encouraging uptick in demand this year after experiencing a comparatively shallow decline in orders at the depth of the recession and enduring the still-lingering economic upheaval without having to lay off any employees.

The maker of newsprint and specialty paper products has been producing close to 510 tons of paper per day so far this year, which is down from 530 tons a day in 2008, but up from a low of around 480 tons a day last year, says Kevin D. Rasler, its president and general manager.

"We have the orders to get it all back. We're oversold for this year," Rasler says.

The company, which has been operating its paper mill in Millwood since 1911, has managed to pull off that rebound despite a continuing decline in the newsprint market and the distractions of ongoing plant upgrades on which it says it already has spent close to a couple of hundred million dollars over about the last 10 years. It says it expects to spend another $10 million to $20 million to meet, or attempt to meet, tough new water quality standards for the Spokane River and Lake Spokane that the Washington state Department of Ecology plans to implement in 2020.

"Newsprint overall was down 24 percent last year, and we were down 10 percent," Rasler says, adding that demand is down another 11 percent so far this year. He says, "Specialty products are what have allowed us to grow in a declining market."

Being a "problem fixer," capable of delivering special orders to customers quickly, also has been—and will continue to be—crucial to the company's survival and growth, Rasler says. "We need to provide something value-added that our competitors don't provide," he says.

Inland Empire Paper is one of the smallest manufacturers in the newsprint industry, yet it operates what it claims is one of the most modern paper-making facilities in the world and the newest newsprint machine in North America. The company is owned by the Cowles Co., a subsidiary of which owns the Journal of Business.

Using entirely recycled or waste materials, it says it makes 32 kinds of paper, including a number of different weights and colors—even a peach color on which the Financial Times global business newspaper is printed. Its competitors, by comparison, offer only a few types of paper, Rasler says, adding, "We might be the last mill making colored newsprint."

Inland Empire Paper, which employs 137 people, including 87 in union positions that it believes are among the highest-paying blue-collar jobs in the Spokane area, doesn't disclose revenues. It says, though, that its annual payroll, including benefits, is about $13.5 million, and that it is Spokane County's third-largest taxpayer and Spokane-based Avista Corp.'s largest utility customer.

It ships paper to more than 160 domestic customers, as distant as Lakeland, Fla., and it collects the raw materials that it uses to make the paper from as far as 1,500 miles away. It says it can process up to 400 tons of waste wood and 335 tons of waste paper per day. It buys the waste wood, or wood chips, from Northwest sawmills, and gets the waste paper from a much wider geographical area.

Wood fiber, mostly hemlock, pine, and fir, makes up about 60 percent of the mix the company uses to make paper, and recycled municipal paper fiber makes up the rest. The paper is put through cleaning and screening processes to remove "tramp" materials, such as plastics and aluminum, and then mixed with the longer fibers from the wood chips to come up with the blend used to make the paper.

The company says it sells 96 percent of the paper it produces outside of the Spokane area and more than 80 percent of it outside of the state. Only a tiny percentage of it goes to the Spokesman-Review, the Cowles Co.'s daily newspaper here.

The paper mill consists of a number of large, mostly interconnected structures located on a long shard of land along the south bank of the Spokane River just east of Argonne Road. Inland Empire Paper also owns and manages about 116,000 acres of timberland in Washington and Idaho, which it keeps open for public recreation, and it plants more than 500,000 tree seedlings a year.

Its operation here, along with the paper mill, includes Fiber Reclaim, a trucking subsidiary established about 10 years ago that has grown into a profitable enterprise, Rasler says.

Sweeping modernization

The phased modernization program the company launched a decade ago has resulted in improvements to nearly every process within the mill, say Rasler and Doug P. Krapas, the company's environmental manager.

In 2001, it installed a massive new paper machine capable of producing close to 700 tons of paper a day, and since 2004, it has undertaken a string of projects aimed at reducing or reusing the large amount of water that the paper-making process requires. Those upgrades, it says, have allowed it to reduce its fresh-water usage by 1 million gallons a day.

In 2006, the company installed a new chip-handling system that included a truck and railcar unloading station and an enclosed mechanical conveyance system that has substantially reduced sawdust emissions compared with the forced-air conveyance system it previously had used, Krapas says.

Last year, it completed a $46 million project that included installing a new thermo-mechanical pulping system designed to reduce greatly the amount of natural gas it uses to dry its paper products. The pulping system is what breaks down the wood chips, which are 50 percent water, into fine wood fiber.

Through heat-recovery technology that's incorporated into the new pulping system, the company says it has reduced its natural-gas use by 77 percent and reduced its overall greenhouse gas emissions by 45 percent. Whereas the mill's old '60s-vintage pulping system had nine stacks emitting dirty steam, the new system has a single stack, about the diameter of a car exhaust pipe, Krapas says.

"We've taken a very aggressive, proactive approach on this" in a continuing effort to reduce the mill's carbon footprint, he says.

Installation of the system came after the company already had received the 2008 Clean Air Award from the Spokane Regional Clean Air Agency for its pollution-reduction efforts.

Another area of the plant devoted to reducing waste is what's called a fluidized bed combustion system, installed in the early 1990s, that burns sludge produced during the process of de-inking old newspapers and thereby produces steam that's used in the paper-making process. That ash had been going to concrete companies for use as a concrete additive, but a lot of it now is being sent to landfills due to the construction industry slowdown, so the company is exploring other uses for it, such as for enriching compost, Krapas says. It has been discussing the latter possibility recently with Barr-Tech LLC, which is developing a $14 million organic-processing facility 22 miles southwest of Spokane, he says.

Rasler says, "We want to close the loop so we don't have any by-product. That ultimately is our goal."

Expressing that philosophy in a different way, Krapas says, "If you call something waste, that just means you haven't found a beneficial use for it yet."

The company's most intensive current environmental focus, the two men say, is exploring different methods for meeting the phosphorus-reduction standards that Ecology plans to impose in 10 years. The plan calls for reducing phosphorus pollution from industrial and municipal pipes by about 90 percent, or 80,000 pounds of phosphorus a year.

Phosphorus encourages algae growth, which then depletes oxygen from the water required by aquatic life. Due to the sensitivity of the Spokane River system, the phosphorous limits for industrial and municipal discharges are among the most stringent in the country.

Critics contend, though, that the technology doesn't exist to meet the new standards, and they might not be possible to achieve. Inland Empire Paper so far has done pilot-scale testing of 10 technologies for phosphorus removal, investing several million dollars in the process, without finding a clearly preferable method for doing so on the scale it would need to employ, but is continuing its research, Krapas says.

As part of that effort, it hopes to eventually be putting about 1 million gallons of its 3 million gallon daily discharge through a tertiary treatment system that would produce clean, filtered water it could re-use within the mill, thus reducing its treated-water discharge into the river, he says.

Through those upgrades, he predicts, "We're going to have the most advanced wastewater treatment in the pulp-and-paper industry."

Looking ahead at the various hurdles the paper mill faces, Rasler says, "Regulatory change is our biggest challenge without a doubt."

The industrywide decline in the demand for newsprint certainly is a concern, he says, but asserts, "There's always going to be a demand for newsprint." The company should be able to continue to prosper, he says, if it keeps its quality and efficiency standards high and stays focused on serving needs that its larger competitors can't.

Last month, Inland Empire Paper was named 2010 Manufacturer of the Year, among medium-sized businesses, by the Association of Washington Business.