Woody biomass—small-diameter trees, branches, and the like—is generated as a result of timber-related activities in forests or on rangelands. Small-diameter trees may be removed to reduce the risk of wildland fire or to improve forest health, while treetops, branches, and limbs, collectively known as “slash,” are often the byproduct of traditional logging activities or thinning projects. Slash is generally removed from trees on site, before the logs are hauled for processing. It may be scattered on the ground and left to decay or to burn in a subsequent prescribed fire, or piled and either burned or hauled away for use or disposal. Woody biomass can be put to various uses. Among other uses, small- diameter logs can be sawed into structural lumber or can be chipped and processed to make pulp, the raw material from which paper, cardboard, and other products are made. Woody biomass also can be used for fuel. Various entities, including power plants, schools, pulp and paper mills, and others, burn woody biomass in boilers to turn water into steam, which can be used to make electricity, heat buildings, or provide heat for industrial processes. Federal, state, and local governments, as well as private organizations, are working to expand the use of woody biomass. Recent federal legislation contains provisions for woody biomass research and financial assistance. For example, the Consolidated Appropriations Act for Fiscal Year 2005 made up to $5 million in appropriations available for grants to create incentives for increased use of woody biomass from national forest lands. In response, the Forest Service awarded $4.4 million in such grants in fiscal year 2005. State and local governments also are encouraging the material’s use through grants, research, and technical assistance, while private corporations are researching new ways to use woody biomass, often in partnership with government and universities. The users in our review cited several factors contributing to their use of woody biomass. The primary factors they cited were financial incentives and benefits associated with its use, while other factors included having access to an affordable supply of woody biomass and environmental considerations. Financial incentives for, and benefits from, using woody biomass were the primary factors for its use among several users we reviewed. Three public entities—a state college in Nebraska, a state hospital in Georgia, and a rural school district in Montana—received financial grants covering the initial cost of the equipment that they needed to begin using woody biomass. The state college received a state grant of about $1 million in 1989, the Georgia hospital received about $2.5 million in state funds in the early 1980s, and the Montana school district received about $900,000 in federal funds in 2003 for the same purpose. A fourth user—a wood-fired power plant in California—received financial assistance in the form of tax- exempt state bonds to finance a portion of the plant’s construction. Three users in our review also received additional financial assistance, including subsidies and other payments that helped them continue their use of woody biomass. For example, the California power plant benefited from an artificially high price received for electricity during its first 10 years of operation, a result of California’s implementation of the federal Public Utility Regulatory Policies Act of 1978. Under the act, state regulators established rates for electricity from certain facilities producing it from renewable sources, including woody biomass. However, the initial prices set by California substantially exceeded market prices in some years, benefiting this user by increasing its profit margin. The Montana school district also received ongoing financial assistance from a nearby nonprofit organization. The nonprofit organization paid for the installation of a 1,000-ton wood fuel storage facility (capable of storing over a year’s supply of fuel) and financed the purchase of a year’s supply of fuel for the district, which the district repays as it uses the fuel. The third user, a Colorado power plant generating electricity by firing woody biomass with coal, realized ongoing financial benefits by selling renewable energy certificates associated with the electricity it generated from woody biomass. Energy cost savings also were a major incentive for using woody biomass among six users we reviewed. Two users—rural school districts in Pennsylvania and Montana—told us that they individually had saved about $50,000 and $60,000 in annual fuel costs by using wood instead of natural gas or fuel oil. Similarly, the state college in Nebraska typically saves about $120,000 to $150,000 annually, while the Georgia state hospital reported saving at least $150,000 in 1999, the last year for which information was available. And the two pulp and paper mills we reviewed each reported saving several million dollars annually by using wood rather than natural gas or fuel oil to generate steam heat for their processes. An affordable supply of woody biomass also facilitated its use, especially in areas where commercial activities such as logging or land clearing generated woody biomass as a byproduct. For example, the Nebraska state college was able to purchase woody biomass for an affordable price because logging companies harvested timber in the vicinity of the college, hauling the logs to sawmills and leaving their slash; the college paid only the cost to collect, chip, and transport the slash to the college for burning. Similarly, a Pennsylvania power plant obtains a portion of its wood fuel from land-clearing operations in which, according to a plant official, the developers clearing the land are required to dispose of the cleared material but are not allowed to burn or bury it. The plant official told us developers often are willing to partially subsidize removal and transportation costs in order to have an outlet for it. Thinning activities by area landowners also contributed to an affordable supply for a large pulp and paper mill in Mississippi. In this area, as in much of the southeastern United States, small-diameter trees are periodically thinned from forests to promote the growth of other trees, and traditionally have been sold for use in making pulp and paper. Further, according to mill officials, the level terrain and extensive road access typical of southeastern forests keep harvesting and hauling costs affordable—particularly in contrast to other parts of the country where steep terrain and limited road access may result in high harvesting and hauling costs. Three users cited potential environmental benefits, such as improved forest health and air quality, as prompting their use of woody biomass; other users told us about additional factors that increased their use of woody biomass. Two users—the Montana school district and the coal- fired power plant in Colorado—started using woody biomass in part because of concerns about forest health and the need to reduce hazardous fuels in forest land. They hoped that by providing a market for woody biomass, they could help stimulate thinning efforts. Another user, a Vermont power plant, began using woody biomass because of air-quality concerns. According to plant officials, the utilities that funded it were concerned about air quality and as a result chose to build a plant fired by wood instead of coal because wood emits lower amounts of pollutants. Other factors and business arrangements specific to individual users also made using woody biomass advantageous. For example, one user, which chips woody biomass for use as fuel in a nearby power plant, has an arrangement under which the plant purchases the user’s product at a price slightly higher than the cost the user incurred in obtaining and processing woody biomass, as long as the product is competitively priced and meets fuel-quality standards. Three users whose operations include chipping of woody biomass and other activities, such as commercial logging or sawmilling, also told us that having the operations within the same business is important because equipment and personnel costs can be shared between the chipping operation and the other activities. And some users helped offset the cost of obtaining and using woody biomass by selling byproducts resulting from its use. One pulp and paper mill in our review sold turpentine and other byproducts from the production of pulp and paper, while a wood-fired power plant sold steam extracted from its turbine to a nearby food-canning factory. Other byproducts sold by users in our review included ash used as a fertilizer and sawdust used by particle board plants. Users in our review experienced several factors that limited their use of woody biomass or made it more difficult or expensive to use. These factors included an insufficient supply of the material and increased costs related to equipment and maintenance. Seven users in our review told us they had difficulty obtaining a sufficient supply of woody biomass, echoing a concern raised by federal officials in our previous report. Two power plants reported to us that they were operating at about 60 percent of their capacity because they were unable to obtain sufficient woody biomass or other fuel for their plants. Officials at both plants told us that their shortages of wood were due at least in part to a shortage of nearby logging contractors, which prevented nearby landowners from carrying out all of the projects they wished to undertake. While officials at one plant attributed the plant’s shortage entirely to the lack of sufficient logging contractors, an official at the other plant stated that the lack of woody biomass from federal lands—particularly Forest Service lands—also was a significant problem. The lack of supply from federal lands was a commonly expressed concern among woody biomass users on the West Coast and in the Rocky Mountain region, with five of the seven users we reviewed in these regions telling us they had difficulty obtaining supply from federal lands. Users with problems obtaining supply from federal lands generally expressed concern about the Forest Service’s ability to conduct projects generating woody biomass; in fact, two users expressed skepticism that the large amounts of woody biomass expected to result from widespread thinning activities will ever materialize. One official stated, “We keep hearing about this coming ‘wall of wood,’ but we haven’t seen any of it yet.” In response to these concerns, officials from both the Department of the Interior and the Forest Service told us that their agencies are seeking to increase the availability of woody biomass from federal lands.