The purpose of this study was to use a nitrogen (N) budget calculation approach to estimate the effect of agricultural production in the Lower Fraser Valley, British Columbia, Canada, on N loss to the environment under 1991 crop and animal management practices, the change in N loss to the environment between 1981 and 1991, and the extent to which these losses could be reduced through improved management practices, Ammonia losses to the atmosphere from animal production were substantial, in excess of 7250 (t N) year(-1), but could be reduced by up to 30% through improved manure management and animal diets. Root-zone N losses to surface and groundwater were estimated as the N surplus (the excess of N additions from inorganic fertilizer, manure, and atmospheric deposition over N removals by the crop and denitrification) for the root zone of land in agricultural production. The N surplus for the study area as a whole was 68 (kg N) ha(-1) land in agricultural production, whereas an N surplus of < 50 (kg N) ha(-1) would be expected under optimal N management. Calculation of N surplus values on the basis of individual districts as compared to the entire study area predicted a greater effect of agricultural production on water quality because of a non-optimal distribution of nutrients. High N surplus values within individual districts, up to 238 (kg N) ha(-1), were attributed to animal intensification, particularly poultry and swine production which does not require a local land base for feed production. Root-zone N losses increased between 1981 and 1991, primarily because of the concentration of animal production in specific geographical areas and on a diminished agricultural land base. Improved fertilizer and manure management was predicted to reduce the N surplus of the study area from 68 to 5 (kg N) ha(-1'); however, less than one-half of this reduction could be practically realized at this time. Improved animal diets were predicted to reduce the N surplus from 68 to 45 (kg N) ha(-1), with most of the reduction occurring in areas with high root-zone N losses. The results demonstrate the value of using an N balance approach to evaluate the environmental effect of agricultural production on air and water quality, and to assess how this effect could be reduced through improved management practices. (C) 1999 Elsevier Science B.V. All rights reserved.