We examine the potential rural development impacts of a highly decentralized system of feedstock production, biorefining, and consumption of locally-produced lignocellulosic biofuels in Alabama, a heavily forested state in the southeastern United States. Primary data based on in-depth interviews and public presentations by experts were used to establish a realistic scenario for development of a lignocellulosic biofuels industry in Alabama. Based on these data, we applied an input output model to illustrate economic impacts of establishing six biorefineries, each with an annual capacity of 189 dam(3). We applied this same model to analyze the impact of one biorefinery of that size on a set of rural counties in west Alabama, a region characterized both by abundant timber resources and persistent rural poverty. Research findings reveal a high potential for economic development and job growth, especially in the logging sector and in rural regions of the state. The trajectory of this development and distribution of benefits from this incipient industry will depend on federal, state and local policies. We identify types of policies that would simultaneously encourage growth of this industry and ensure that those who live in areas where production and refining operations take place benefit from this development. (C) 2010 Elsevier Ltd. All rights reserved.