finding a healthy balance with society and the environment

Society has an interest in how our products and operations affect their lives. In addition to the stakeholders already mentioned, we interact with governments, non-governmental organizations and industry associations. Finally, we affect populations that cannot represent themselves as stakeholders — future generations, and the plants and animals that populate our environment. Maintaining a healthy environmental balance is one of our top priorities.

our commitment to society and the environment

Agrium is committed to ensuring appropriate environmental management systems are in place to minimize our environmental impacts. In addition, we work with governments, non-governmental organizations (NGOs) and other stakeholders to pursue mutual sustainability objectives.

We had less than one non-accident release per 1,000 anhydrous ammonia railcar movements in 2005.

actions

Environmental Management
Invariably, our operations affect the environment. We work collaboratively with communities, regulators, suppliers and employees to minimize negative impacts and maximize positive impacts. Although in reality they are complex, our environmental impacts from production can be simply summed up. We remove resources from the environment (i.e., potash rock, phosphate rock, natural gas) and convert them into valuable products (i.e., nutrients) and in the process we produce waste products. In short, much of our environmental impact can be related to:

• our processes — mining, manufacturing, distribution, retailing;
• our resource use — energy, water, nutrient feedstocks; and
• our wastes — air emissions, solid waste, water effluents.

We employ environmental management systems (EMS) to make our operations as eco-efficient as possible. Similar to the best management practices we promote with customers (pp. 7 and 26), our EMS require our operations to employ consistent, tested practices. We regularly audit our programs to assess compliance with regulatory and internal requirements. In 2005, an external consultant reviewed our audit program and offered suggestions. We will continue to enhance our audit program to identify areas for operational improvement.

One of our key environmental issues is limiting GHG emissions. We have adopted a four-pronged approach to reduce our GHGs:

• optimize production energy consumption;
• pursue co-generation opportunities where practicable. We are currently using natural gas at our Carseland, Alberta facility not only as a feedstock for nitrogen fertilizer production, but also for generation of power for use at the facility. In this case, the natural gas-generated power replaced coal-fired generation from the province’s grid;
• pursue carbon sequestration opportunities; and
• develop new technologies to reduce nitrous oxide emissions from fertilizers (i.e., controlled-release nitrogen fertilizer — ESN).

Safety of Products During Transport and Use
Other sections of this report address the safety of our production processes and the safe use of fertilizers. We also take the safe transport of our products seriously. With a distribution network that includes 3,000 leased railcars, we move a lot of product. For 2005, we had a target of no more than one non-accident release (NAR) per 1,000 anhydrous ammonia railcar movements. We were able to better that target by 20 percent.

In early 2006, we became a certified partner in the U.S. Department of Homeland Security’s “Customs-Trade Partnership Against Terrorism.” The program requires us to maintain a high level of security around the transport of our goods, including thorough documentation on how we select our business partners, and the use of a periodic assessment tool. Benefits of our participation include access to training and reduced cargo exams.

Industry Association Communication
In addition to the activities regarding product safety and security mentioned in the customer section of this report, we are working with industry associations on better communicating the fertilizer industry’s contributions to sustainability.

Agrium helped the CFI develop “The Path to Sustainability” publication. We have also been busy in the U.S. with TFI. Since 2003, we have made major contributions to the development and publication of materials in the “Sharing Common Ground” series. These publications help counter myths about fertilizers and provide facts about responsible nutrient use.

Wastewater Not Wasted

Agrium has implemented a project to utilize treated wastewater generated by the City of Borger’s wastewater treatment plant. The wastewater is used in the cooling water system at its Borger, Texas nitrogen facility. Agrium paid for the cost of construction of a City-owned pipeline which runs from the City’s wastewater treatment plant to Agrium’s facility. The project makes use of the treated wastewater that would otherwise be discharged and it reduces Agrium’s cooling water costs.

Moving a Lake While Safeguarding the Environment

Exploration at the Kapuskasing, Ontario phosphate mine site identified supplementary ore reserves immediately adjacent to and beneath Cargill Lake that will extend the long-term viability of the mine site. However, the 25-hectare lake needed to be relocated to recover the ore. This process not only required Federal Fisheries Act approval and public consultation, but also extreme attention to the delicate balance maintained in the lake. Following federal approval in late 2004, we have been constructing the new lake immediately upstream of Cargill Lake. We removed all the existing vegetation from the area to avoid future decomposition and methyl mercury production. The new lake will be of similar size and depth, and designed to provide habitat for northern pike, yellow perch and other indigenous fish. The new lake will also have sufficient volume to provide fresh water for the mill. In 2006, we will fill the new lake, and begin transplanting the foundations of the food chain (i.e., benthos, zooplankton) and then fish. We have conducted annual monitoring of the lake and fish since 1999, and have expanded our monitoring during the project.

performance

Greenhouse Gas Emissions and Intensity

Our GHG emissions have increased five percent since 2003 because of increased production but are lower than in 2001. Our GHG intensity (tonnes CO2 equivalent/tonne of production) has risen slightly since 2003 but is down 27 percent since 2001, in part due to the optimization of our production operations. Our GHG emissions are reduced through the consumption of CO2 in the production of urea fertilizer and at some locations we sell CO2 to other industries.

Air Emissions

We report emissions to the Canadian National Pollutant Release Inventory (NPRI) and U.S. Toxic Release Inventory (TRI). Air emissions, excluding criteria air contaminants (CACs), have risen 16 percent since 2003. CACs, added to NPRI in 2002, include emissions such as nitrogen oxides, sulfur dioxide, and particulates. CACs have decreased seven percent since 2003.

Energy Use and Intensity

Our energy use has increased four percent since 2003 due to production volume increases and product mix changes. Energy intensity (units of energy required to produce a unit of product) has increased 3.5 percent during the same period, however, is 24.1 percent lower than in 2001.

Energy Sources

The majority of our energy use is from natural gas.

* CO2 equivalent (CO2e) — because some GHG emissions have greater warming potentials, emissions are converted to the equivalent amount of CO2 required to produce a similar warming effect.

Environmental Events

Environmental events (i.e., spills, upset air releases, non-compliances and enforcement actions) decreased 15 percent since 2003. When patterns emerge, we work with the appropriate facilities to identify root causes and share learnings to prevent recurrence.

Non-accident

Release Rate We anticipate that our training programs, shipping checklists and preventive maintenance will translate into continued NAR reductions of anhydrous ammonia releases from railcars.

Hazardous and Non-hazardous Waste

Our waste data collection systems are still being developed, so the quality of data will continue to improve. One-time facility turn-arounds can have a significant impact on waste figures for any single year. In 2005, approximately 50 percent of our nonhazardous waste and 16 percent of our hazardous waste, was recycled. Hazardous and non-hazardous waste from our retail centers and our South America operation are not included in the figures.

Water Use

Our water use data collection system is still being developed, so the quality of data will continue to improve. Our water withdrawals have decreased since 2004, however, so has the proportion of water returned to the environment (69 percent in 2005, compared with 67 percent in 2003). Water use by our retail centers and our South America operation is not included in the figures.

Discharges to Water

Pollutants discharged from our operations to water are reported to the NPRI and TRI, and have decreased 65 percent since 2003.

Fines and Penalties

In 2005, Agrium Retail received fines and penalties, or reached settlements, for violations totalling $297,887. The violations are related to recordkeeping and reporting, licensing, and improper pesticide sales or application, among others. It is difficult to make comparisons on fines since regulators in different jurisdictions have varying approaches to achieving compliance. Fines for non-compliance may not be levied in the same year in which the infraction occurred.