Industrial sustainability of the ethanol industry depends on several factors.  Key among the factors is the increasing importance of feedstock type and availability. Most of Canada’s ethanol production is obtained from food based feedstock.  However, growing concerns on net energy and carbon balances, land use and land use change, water, soil nutrients and biodiversity have led to renewed interest in other feedstock including forest biomass.  Although 998 million hectares of Canada is forested, the amount of feedstock available to the ethanol industry is however unclear.   In addition to maintaining ecological health and to satisfying societal needs aesthetically, there is additional competition for Canada’s forest to supply the raw material for traditional forest industries and the nascent bioenergy sector including lignocellulosic ethanol. Supply of feedstock for the industry is currently achieved through sawmill residues which are highly unpredictable and affected by factors as lumber markets, sawmill closures and competition with the pellet and other industries.  This paper employs the material flow analysis methodology to determine the amount of sawmill residue available to the ethanol industry per annum, using input-output modeling. Results obtained indicate that an estimated 1.2 million bone dry tonnes of mill residues are potentially available each year for the forest based ethanol industry. Sustaining the industry from a feedstock perspective will therefore require an effective tracking system of raw materials from sawmill residues and other sustainable-derived additional sources.  Suggestions for policy aimed at sustaining the industry without compromising on the ecological health of Canada’s forest resources are provided.