Concerns about the negative impacts of crop biomass removal on soil ecological functions have led to questioning the long-term sustainability of bioenergy production. To offset this potential negative impact, use of organic C rich by-products from the bioenergy industries have been proposed as a means to replenish soil C in degraded soils. However, the impact of these by-products application on soil carbon dynamics is not fully understood. We measured biogeochemical changes in soil organic C following a three-year field application of two by-products, biochar (BC) and fermentation-by product (FBP), of bioenergy industry processes in an elephant grass [Pennisetum purpureum (L.) Schum.] field. There was a significant increase in overall soil organic C (SOC) observed in BC (270%) treated plots, however the higher labile SOC (51%) content was present in FBP treated plots. Solid-state 13C NMR spectroscopy further revealed increased aromatic and alkyl groups in BC amended soils which lend to its significantly higher hydrophobicity index, HI (2.13) compared with FBP amended soils (HI = 0.8). Initial biogeochemical responses of amended soils to drought conditions were also investigated during a short-term experiment with drying and rewetting of soils. Increased concentrations of extractable C and higher stimulation of microbial activities (respiration and enzyme activities) in FBP amended soils were measured. Overall, our results reveal different impacts of the two soil amendments, where FBP soil application can affect the labile SOC availability, and stimulate rapid microbial response in drought affected soils, and biochar soil application lowers the labile SOC and microbial stimulation facilitating C sequestration over time.