Biomass is a geographically dependent renewable resource which can be used for production of fuels and chemicals. This study develops a methodology for determining the suitable locations, optimal sizes and number of biomass-based facilities for a particular region through transport cost optimization which is applied for locating pellet plants in the Province of Alberta. The methodology also includes computation of local optimal size and cost of pellet production considering road network and spatially varied biomass. Different constraints and environmental factors for siting biomass-based facilities are analyzed to derive a land suitability model. Based on location-allocation model, 13 plants could be built in the Province of Alberta with transportation costs in the range of $21-33 per tonne. The locally determined unit costs of pellet plants vary within $108-121 with optimal plant capacities of 150,000-250,000 tonnes per year. (c) 2012 Elsevier Ltd. All rights reserved.