Blue Heron Paper Company Acquires Pomona Mill

Oregon City, OR (July 12, 2005) -- Blue Heron Paper Company (“Blue Heron”) has acquired the Pomona, California assets of the former Smurfit Newsprint Corporation of California. The new company will be named Blue Heron Paper Company of California, LLC. The Pomona Mill produces 140,000 metric tons per year of newsprint type grades from 100% recycled paper and is the only operating facility of its kind in the state. “We are delighted to have the opportunity to own such a strategically located asset,” said Mike Siebers, President of Blue Heron. “We know this mill and the customer base well and are planning to make improvements to both product quality and the competitiveness of the operations. We look forward to working with the employees at Pomona on the integration of the two companies.” The mill has 120 employees with approximately 95 of them represented by the United Steel Workers Union local 1979 (formally known as “PACE”). A key part of the transaction was the successful negotiation of a four-year extension to the current labor agreement, which was to expire in March of 2006. The combined companies will have gross annual revenue of $220 million and production capacity of over 360,000 tons. Financing for the acquisition was provided by Wells Fargo Business Credit.

About Blue Heron Paper Company

Blue Heron Paper Company (www.BlueHeronPaper.com) was formed in 2000 and produces newsprint and other specialty paper products from a predominantly recycled fiber base. The Company is majority-owned by KPS Special Situations Fund, L.P., and the employees hold a minority stake through an ESOP (Employee Stock Ownership Plan).