Are all wood pellets formed with water and pressure wi/o additives? I guess that would be my main question. Also I would wonder how far the pellets had to be transported from its source to my garden.[energy cost,etc].

Do you have a free/cheap/local supply of pellets? My idea of a good mulch is one that is free or VERY cheap,near-at-hand, as well as fairly good looking -- and of course, being a natural material.