Removing submerchantable size trees and forest residues as well as sawlogs is preferred in fuel reduction thinning because it improves treatment effectiveness and avoids slash burning. Fuel reduction thinning was investigated to describe integrated harvesting machine processes and productivity and to characterize stump-to-truck costs for sawlogs and biomass for energy production. This system was studied in mixed-conifer forest on land owned by the US Forest Service in northern California and southern Oregon. Detailed time-study methods were paired with standard machine rate calculation methods to evaluate productivity and costs for the system. Sensitivity analysis and a standardized comparison were performed to evaluate costs and productivity under varying operation parameters. Treatment costs (stump-to-truck; without mobilization, overhead, or profit) were US$0.42/ft³ for sawlogs and US$52.41 per bone dry ton (BDT) for biomass. Standardized unit production costs for sawlog skidding varied little, but the smaller skidder was clearly preferable for biomass tree skidding when external skidding distances exceeded 200 feet. The grinder had the highest hourly cost of any machine in the system and its unit production cost (US$/BDT) was sensitive to changes in utilization rate. Evaluations on system balance showed that improved utilization of the grinder could be accomplished as the grinder and loader often waited for a chip van. Integrated harvesting was a cost-effective way of implementing fuel reduction thinning method because of the potential for sawlog revenues to offset some of the biomass extraction cost.