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The name "Espanola" has been attributed to a story which dates back to the mid 18th century. The story goes that the area's Ojibwa tribe sent a raiding party a long distance to the south and brought back with them a white woman who spoke Spanish. The woman married a local brave of a family living near the mouth of the river and taught her children to speak Spanish. Later, when the French Voyageurs came upon the settlement and heard fragments of Spanish spoken by the local natives, they remarked "Espagnole", which had been later anglicized to "Espanola", and the river was named the Spanish River.
Other versions have the kidnapped woman was a young Spanish boy married into the tribe. Or a Spanish trapper. Either way, there is evidence of First Nations people living there with some sort of Spanish ancestry, with the last name Spaniel (originally "L'Espaniel) for generations. The true story may be lost to the sands of time, but the romantic tale of a young brave and his Spanish wife seems to be the local favorite.
The town was founded in the early 1900s as a company town for the employees of the Spanish River Pulp and Paper company, which opened a paper mill there. The town expaned quickly, with a hotel, school, theatre and a bustling company town. In 1929, due to the Great Depression, the mill was closed, and Espanola became a ghost town until the Second World War, when in 1940, the mill site became a camp for German prisoners of war.
In 1946, the paper mill was reopened by the Kalamazoo Vegetable Parchment Company (KVP), producing specialty kraft paper. In 1969, the KVP operation was sold to E.B Eddy, who operated (and greatly expanded) the mill until 1999. Now owned by Domtar, it continues to be one of the town's largest employers.
- On January 17, 1910, a passenger train derailed off a trestle, crashing into the Spanish river just outside of the township of Espanola. Seventy people died on that cold and frigid night, many from the railcar's 27-foot plunge into the icy water. It was the one of the CPR's worst accidents.
- The town was incorporated on March 1, 1958. Before that, the town was almost wholly owned by KVP, aside from the small community of "Frenchtown", which was a small farming community "across the tracks" from the townsite proper.
- The 1960s series "Adventures in Rainbow Country" was filmed not far from the town in the small native community of Birch Island. The woman who played the "mom" in the show was none other than Lois Maxwell, the actress who played "Ms. Moneypenny" in Bond films such as "Dr. No" and "Goldfinger". She lived in Espanola for some 18 years.
- Espanola got some bad press in the early 1980s when the mill accidentally discharged toxic effluent into the Spanish River and fish, by the thousands, died. The shoreline of the river was littered by them. An interesting result - the spill acted like a "flush", and when the fish came back a few years later, they were untainted and thriving. Now the mill has one of the most stringent "zero-emissions" pulp bleaching processes in the world, and the area below the Spanish River Dam is an excellent spot for pickerel (walleye) fishing.
-Again, in 1987, Espanola was in the press when the company who owned the Espanola Hotel (Exechotel) sued E.B. Eddy for damages caused by "wood chip dust". In truth, the hotel had fallen into hard times as the mill had expanded right to its doorstep, which unfortunately didn't provide for a comfortable night's sleep for its guests. The seedy stripper bar, known as "The Pit" was one of the few remaining sources of income for the once-classy hotel, which was one of Espanola's first and finest buildings. The long litigation resulted in the mill paying $122,000 in damages. The Exechotel immediately sold the property to E.B. Eddy for $175,000. The historic, but delapitated hotel was demolished in 1989.
- It is the largest shopping centre between Sudbury and Sault Ste. MarieSault Ste. Marie means the Rapids of St. Mary in French. There are several places that share this name, all centered around the rapids in the river that drains Lake Superior. Marys River describes the site and the lock system. Sault Ste. Marie, Ontario is. It boasts a large Canadian Tire, Your Independent Grocer, Price Chopper, Giant Tiger, McDonalds, Dairy Queen, Tim Horton's, and most of the large bank outlets (TD, Royal, Scotia, etc.), which is suprising for such a small town.