Apparatus (10) for drying particles derived from wood such as sawdust, wafers, flakes, paper sludge, and strands. The wood particles are introduced into a first drying stage (12) and conveyed through a dryer (16) in which the wood particles are heated to an elevated temperature (900 F.) to drive off moisture and VOC's from the particles. The wood particles are then delivered to a second drying stage (14) through which they are also conveyed. The particles are now heated to a second elevated temperature (600 F.) to substantially eliminate any moisture in the particles so the particles can now be used to make wood products. A heating system includes a combustion chamber (22) to combust fuel to commonly heat the wood particles in both drying stages. The heating system includes a separator (28) for collecting the VOC's driven off from the particles in the first drying stage so the VOC's can be heated in the combustion chamber to a temperature at which they breakdown into shorter chain hydrocarbons which are readily combusted. This substantially eliminates any VOC's which might otherwise be exhausted to the atmosphere.