SANTA FE, New Mexico — Driving through the thickly forested mountains around New Mexico’s state capital, Mark Sardella doesn’t daydream about his next camping trip. Instead, he thinks about the untapped heat locked up in all those trees.

For Sardella, an engineer who moved to Santa Fe in 1996, finding homegrown heating solutions has been a mission since 2003, when he founded a nonprofit called Local Energy. At the top of his group’s agenda is biomass energy — the conversion of wood fiber and other organic materials into heat.

So far, Local Energy has developed small demonstration biomass-heating projects at Santa Fe Community College and at the nearby Santa Clara Pueblo. But Sardella has bigger plans. With the help of a $1.3 million grant from the U.S. Department of Agriculture, Local Energy did a study showing how downtown Santa Fe could be centrally heated from a clean and efficient biomass plant.

The study concluded that it would take about 20,000 tons of biomass to heat downtown Santa Fe for a year. More than that is currently available in the form of construction debris, waste from small sawmills, and thinning slash from nearby forests — much of it waste that people pay to discard at the landfill, Sardella says.

"By using (millwaste and slash), you put the dollars in low-income rural communities and keep them there. And there’s a 400-year cultural tradition here of working in the forest and using materials from it, so it’s cultural preservation at the same time."

However, heating between 500 and 600 businesses and homes in downtown Santa Fe would require a significant investment in boiler and piping equipment — Sardella estimates the cost at about $23 million. Although natural gas prices are rising, it’s an open question whether businesses or city government can be persuaded to pay that kind of money.

Using wood for energy production is hardly a new idea: Much of downtown Flagstaff, Ariz., was centrally heated in the early 20th century by steam produced from burning a local sawmill’s scrap. The University of Idaho has been centrally heating its Moscow campus for 20 years by burning waste from local mills. A federal program, Fuels for Schools, subsidizes schools that install biomass boilers, mainly in the Northern Rockies; one of the schools, in Darby, Mont., reported saving $90,000 in heating oil costs during the last school year. Modern biomass burners, some of which are designed to generate electricity, can burn as cleanly as those that use natural gas.

Making the process work economically, though, is tricky. Wood is bulky, heavy and expensive to transport, so it generally has to be used near the place it was produced — no easy feat in a rugged, expansive state like New Mexico. It also has to compete with the familiar convenience of natural gas. Finally, using it on a scale larger than a simple home woodstove requires investment in new infrastructure, such as wood chippers, boilers, and piping.

"It’s still more expensive to harvest the stuff than cut it down and leave it in the woods," says Jerry Payne, an Albuquerque-based bioenergy specialist for the Forest Service.

Yet Payne has seen a growing number of projects on the drawing board. Western Water and Power Production recently inked a deal to sell the electricity from a proposed 35-megawatt biomass plant to PNM, New Mexico’s largest electric utility. The plant would be built east of the Manzano Mountains in the central part of the state and begin operation in 2009, consuming about a thousand tons of wood biomass a day to produce enough electricity for about 25,000 homes.

Most of that fuel would come from forest-thinning projects on state and private land, but the company expects to acquire up to a quarter of its supply from Cibola National Forest, which makes some environmentalists nervous. "Creating an entirely new market force on public lands is not something we look forward to," says Bryan Bird of Forest Guardians. "It’s going to be a voracious monster that needs to be fed."

Todd Schulke of the Center for Biological Diversity also has reservations about the proposed plant, largely because it would use primarily piñon and juniper trees. The ecology of piñon-juniper woodlands is not as well understood as ponderosa pine forests, which are generally agreed to be overgrown with small trees. Yet Schulke believes that New Mexico’s biggest forest-health problem — too many trees — could be eased, at least for a few decades, by cutting trees for energy. "We have a big job in front of us — there’s tons of wood available," says Schulke. "But wood isn’t really a renewable resource in the Southwest. I see this as a one-shot deal."

New tools are available to assess wood supply. In northern New Mexico, the ForestERA program, run by biologists from Northern Arizona University, is analyzing conditions across 6 million acres in order to determine restoration priorities. That may help planners figure out what a truly sustainable wood harvest looks like.

For now, though, even apparently simple biomass projects can be hard to carry out. In southwest New Mexico, it has taken three years of pressure and about $750,000 in state funding to near the goal of installing a wood-heating boiler at Fort Bayard, a state hospital outside Silver City. That boiler should provide Gila WoodNet, a nonprofit that conducts forest thinning and economic development work in the area, with a vital new market. Burning an estimated 3,000 tons of wood chips a year instead of natural gas should pay for the installation of the new boiler within about seven years, Payne says.

That’s a nice savings, says Gila WoodNet’s Gordon West, but what’s most important to the community is that "the state will spend that money in Grant County rather than paying it out to some company elsewhere." West says his group’s biggest challenge now is developing the economic infrastructure — from supplying the trees, to drying the wood to financing — to feed a biomass plant. "There are about 10 fronts you have to develop, and you have to work on all of them at once."

In the end, state — and eventually federal — initiatives will likely be needed to make biomass a viable energy source. New Mexico law requires the state’s utilities to produce at least 10 percent of the electricity they sell from renewable sources by 2011, and biomass could be a part of that mix.

Mark Sardella says biomass will eventually compete very well against traditional sources, such as natural gas. "Call your natural gas supplier and ask if you can lock in your current rate for even five years — you can’t do it," Sardella says. "Sure, there is risk in spending millions on new energy infrastructure, but you have to weigh that against the real risk of going bankrupt if you don’t change."

The Forest Service’s Jerry Payne has a useful metaphor for the challenge: "Using wood biomass is almost like the Wal-Mart effect," he says. "No, we’re not going to make a lot of money, but there’s a lot of product out there."