GRANTS PASS (AP) - The Bush administration said Thursday it hopes turning small trees and brush into ethanol, methanol and other energy products will eventually help pay for thinning national forests to reduce the danger of wildfire.

Paying for thinning 28 million acres of Western forests considered at high risk for wildfire has been a problem, because the small trees and brush that need to be removed aren't big enough for traditional lumber.

Thinning costs between $250 and $1,000 an acre. Many of the forests are too overstocked to use the cheapest method, prescribed fire, without removing small trees and brush first. Harvesting larger trees to pay for the work leads to lawsuits from conservationists.

"Our hope is the advances in research into the utilization of small diameter and other woody biomass combined with the stability provided by longer-term contracts will allow a blossoming of new infrastructure, creation of new facilities, new economic opportunities and new jobs as we restore healthy forests," Agriculture Undersecretary Mark Rey said from Washington.

Potential products include laminated lumber, wood chips for structural panels, ethanol and methanol, and fuel for wood-fired power plants, Rey said.

At least one ethanol project has already been proposed. Western Biomass Fuels of South Dakota wants to build a $30 million plant in Wyoming to produce ethanol from wood thinned from the nearby Black Hills National Forest.

Generally made from corn, ethanol is added to gasoline to make it burn more cleanly. Methanol is used in fuel cells and as a substitute for gasoline. It is made most economically from natural gas, though it can be extracted from wood and coal.

Rey's remarks came in a teleconference call with reporters on new guidelines for stewardship contracts the U.S. Forest Service and U.S. Bureau of Land Management are offering.

Bidders, which could include conservation groups and local governments as well as timber companies, would be able to keep material removed from the land to meet Forest Service and BLM prescriptions for improving forest and range health and reducing fire danger. Contracts would last for 10 years.

"We realize that Congress hasn't provided any funding for this, so if this is going to work, it's going to need to be economically viable as well," said Stephen Anderson, a spokesman for the Nature Conservancy, which is evaluating the potential of stewardship contracts.

Rey said he hoped within a few years the stewardship contracts would be used as frequently as traditional timber sales and service contracts to maintain healthy forests.

Fifty-six stewardship contracts let over the past two years as a pilot project have produced little of economic value, Rey acknowledged.

How much the administration is willing to pay for stewardship contracts won't be released until the 2005 budget comes out, he added.

The Agriculture and Interior departments are holding a conference in Denver next week on new uses for material thinned from forests, said Assistant Interior Secretary Rebecca Watson.

A report from the Oregon Department of Energy last November said technology is nearing commercialization for turning cellulose from trees and brush into ethanol, but development can't get rolling until a reliable supply of wood is available.

Forests may not be enough, and developers may have to get material from agricultural and municipal sources as well.

A Department of Agriculture report last April said 28 million acres of forests need thinning in the 15 western states, with treatment costs running $350 to $1,000 per acre.

The report estimated forest thinning could yield 576 million bone dry tons of material, with 62 percent of that on national forests.