As an alternative renewable source for bioenergy, forest biomass has recently drawn more attention from the U.S. government and the general public. Woody biomass policies have been adopted to encourage the new bioenergy industry. A variety of state policy incentives attempt to create a desirable legal climate and lure new firms, imposing two important questions regarding state government policies and the sustainable use of forest resources. This dissertation sheds some light on these questions. The first paper constructs a woody biomass policy index through scoring each statute and weighting different categories of policies from the vantage point of renewable energy investment. It analyzes the disparity in the strength of state government incentives in the woody biomass utilization. The second paper employs a conditional logit model (CLM) to explore the effects of woody biomass policies on the siting decisions of new bioenergy projects. In addition, significant state attributes influencing the births of new bioenergy firms are identified such as resource availability, business tax climate, delivered pulpwood price, and the average wage rate. The third paper uses the Sub-Regional Timber Supply (SRTS) model to examine the regional aggregate forest biomass feedstock potential in Tennessee and to predict the impacts of additional pulpwood demand on the regional roundwood market through 2030. The fourth paper includes the benefits of thinning and logging residues in a dynamic optimization model to analyze how bioenergy policies will impact forest stock, harvest levels, optimal rotation, and silvicultural effort. The results may have substantial implications regarding woody biomass policies, the creation of a new bioenergy industry, and sustainable forest resource management. A lucrative state woody biomass policy support and tax climate can attract new bioenergy businesses. States endowed with abundant forest resources may choose to provide strong tax incentives to spur the birth of new plants. However, overuse of forest biomass can impact roundwood markets and traditional wood processing industries. How government incentives will affect the sustainability of natural resources can be diverse. These findings offer constructive insights in the enactment and implementation of new woody biomass legislation.