Some people have heard that these chips will tie up nitrogen so that the garden plants won't grow as well. If wood chips are used as a mulch, there is no cause for concern. However, if the chips are mixed with the soil, there can be a problem during the breakdown process. The microorganisms that break down the chips need a certain amount of nitrogen during the process. With most green material, there is enough nitrogen in the material itself to meet the needs of the microorganisms. However, nitrogen levels in wood chips are so low, the microorganisms must borrow it from the surrounding soil. This results in less nitrogen being available to the plants. However, when the raw organic material has been digested, the microorganisms die and release the nitrogen. Therefore, the nitrogen is not lost but is simply unavailable for plant use for a period of time. Again, this is only a concern if the wood chips are mixed into the soil. There is no problem with nitrogen tie-up if the chips are used as a mulch.
However, one point should be kept in mind. These chips can be used by foraging termites as a bridge to homes and other structures. Termites are light and heat sensitive and will not bother the chips themselves if they are 3 inches deep or less. Therefore, watch the depth of these chips near the house or other buildings. Also leave a bare area several inches wide next to the house so that any termite activity is noticeable.
When applying mulch around trees, do not mound the mulch so it looks like a volcano. Remember that roots need oxygen as well as moisture and the movement of both can be hindered by a deep layer of mulch. A depth of about 3 inches is about right. (Ward Upham)