Biomass is nearly carbon neutral and can be used for the production of various liquid fuels and chemicals. Decisions on biomass utilization should be based on the most economical and mature route. This study analyzes mountain pine beetle (MPB) killed wood as the feedstock for production of bio-ethanol and bio-oil and compares it with the direct combustion route to produce electricity. The MPB infestation of British Columbia's (BC), a western province of Canada, forest has reached an epidemic proportion and is spread over an area of 10 million ha. According to the current estimates of BC's Ministry of Forests and Range, about 1 billion m(3) of trees would be killed by MPB by 2013. This infestation would result in large scale loss of jobs and the standing dead trees are a fire hazard and if left unharvested will decay and release carbon back to the atmosphere. The cost of bio-ethanot production from a 2100 dry tonne/day plant using the infested wood for two locations (one remote and other near the industry) in BC is in the range of C$0.37-C$0.40/1 (C$1.40-C$1.51/gallon). Similarly, cost of bio-oil production from a 220 dry tonne/day plant using the infested wood for same two locations in BC is in the range of C$0.27-C$0.29/1 (C$1.02-C$1.09/gallon). The cost of producing electricity using this bio-oil is above C$100/MWh which is higher than the current power price in BC. This cost is also higher than the cost of production of electricity by direct combustion of infested wood in a boiler (C$68-C$74/MWh). (C) 2008 Elsevier Ltd. All rights reserved.