An improved fire retardant cellulose insulation with reduced density and reduced settling. A method consists of adding a material, the fibers of which have a positive electrostatic charge, is added onto a shredded newspaper base either before or after the addition of a pre-coat, consisting of a mixture of an inorganic, non-hygroscopic powder and an antistat. A fire retardant agent is then added and the materials are ground in a finish mill. The newspaper fibers become positioned at an angle to the paper pieces, increasing the distance between the paper pieces, thereby lowering the density of the cellulose. Increasing the amount of antistat will decrease settling at the expense of increasing density. Adding water to the insulation system will neutralize static electricity and minimize settling. Fibers such as ground cardboard, wood mulch, sawdust, and fiberglass fibers are examples of materials with electrostatically positively charged fibers.