Up Above: The Geography of Suburban Sprawl in Southern California’s Antelope Valley

Matt Jalbert

Rationalizing Prices and the Hidden Subsidy

BY ALL ACCOUNTS, THE UNITED STATES courts a natural resource addiction second to none in the history of civilization. The single-minded dependence on petroleum has led to horrific acts of violence (the Gulf War) and environmental devastation of unparalleled scale. Weening this country off petroleum should be a national priority, with positive consequences for the national debt, the environment, pollution, individual health, and national security and self-sufficiency. Yet, since the OPEC crises of the early 1970s, virtually nothing has been done to end our reliance on oil or at least to treat it like the non-renewable resource of tremendous value it is.

Bringing America’s petroleum consumption into line with its true cost is most often referred to as the process of internalizing externalities, which I will refer to as rationalization. Externalities are those costs associated with a commodity for which the consumer does not directly pay in the exchange required to buy the commodity. Right now, national energy policy is skewed toward continued reliance on petroleum, a stance that, even in a best-case scenario, can sustain us at best for two generations, with calamitous eventualities. The most effective way of getting the U.S. off its petroleum habit would be to price it out of the market, a move that would necessarily have repercussions through all economies. And the best way to price petroleum is to account for most but not all of the massive external costs not currently born by consumers. Those costs, which amount to a multi-billion dollar subsidy funded on national debt, include the sustenance of a massive military presence in the Middle East, the eighty billion dollar price tag of the Gulf War, and the loss of human life in that war. External costs must also account for the environmental damage due to petroleum use: oil spills and the damage to fisheries and wildlife; atmospheric carbon dioxide buildup and global warming; the effects of acid rain, ozone pollution, and smog; and the degradation of human health. And, rationalization of costs must account for the very finiteness of the petroleum reserve. In short, the price to the consumer for petroleum is only a fraction of its true toll. All of the external costs of that tankful of gas need to be bid into the price so that economic incentives can have their singularly convincing effect on consumption decisions.

How can this be accomplished? Not easily, but it is possible. The gargantuan powers of the petroleum, automobile, and allied industries have a tremendous stake in maintaining a cheap, plentiful oil supply. The present resistance of the automobile industry to California legislation requiring that 2% of new cars sold in 1998 be electric powered points out how resistant the auto makers are to new ways of doing business (and how incapable the present corporations are of providing the solutions society needs). Developers of suburbs also rely on cheap gas to make their product affordable. How, then, can change be effected? Again, it is incumbent on government to create the conditions where alternatives are at least as profitable as the status quo.

California and the nation must continue to impose petroleum taxes, which would have the effect of internalizing petroleum’s costs. These revenues must be dedicated to projects that reduce petroleum consumption, not merely to mitigating the effects of current consumption patterns. Reducing petroleum dependency could be aided by spending on projects such as rail and other mass transit, and retrofitting of existing autos to electric-power. Automobile manufacturers are virulently opposed to electric cars, maintaining that present technologies do not meet consumer’s expectations of price and performance. However, anecdotal evidence suggests that virtually every two-car household would not be at all hampered if at least one of those cars was electric powered, even using currently existing electric battery technology (which researchers cite will soon be vastly improved).

With adequate alternatives—mainly, feasible electric vehicles and extensive mass transit services—incrementally increasing gasoline prices would move many commuters out of their cars and lead them to seek housing alternatives which involve lower traveling costs. The revenues from gas taxes could also be used to provide economic stimuli to businesses developing high-efficiency gasoline and electric vehicles. Revenues could also go toward stimulating development of higher density mixed-use suburbs, though rationalization of petroleum costs in conjunction with municipal zoning changes would produce an adequate net effect.

Petroleum is not the only resource subsidized by society as a whole; so timber, so minerals, so water. Subsidies to the timber industry take the form of undervalued selling of Federal forest products to timber companies. The U.S. Forest Service, comprising 40% of the U.S. Department of Agriculture’s employees, exists in its essence to aid the timber industry. [Footnote #64] Besides allowing timber companies to log at a net loss to the government, the Forest Service actually constructs the thousands of miles of logging roads that are required for logging. In its zeal to help the timber industry reap their harvest, to “get out the cut,” the usfs has subsidized clearcutters to the tune of four billion dollars in the last decade alone.

What this amounts to is a massive subsidy to the price of new homes as that wood comes to the market at well below what it would actually cost an industry to reap. Add to this the huge subsidies effectively granted mining operations thanks to the indefatigable 1872 Mining Law, and it is easy to see that the price of a single-family home in the Antelope Valley is deeply subsidized by national debt taken on in the name of efficient resource extraction. The studs, wiring, and piping of the resource-intensive single-family home have hidden costs of epic proportions; only by rationalizing these, bidding them into the price of the final product, can economic realities shape how that product is consumed.

The allocation of water in the Antelope Valley provides a excellent case study with which we can examine in greater detail the complexities of natural resource issues relating to suburban development. As I have already described, the Valley’s water supply could be one of the pivotal factors affecting its continued viability. Fundamentally, the Antelope Valley would be wise to acknowledge the hydrologic limits of its desert environment rather than rely on State Water Project deliveries; water from the SWP should only be expected to decrease in the long term. Lancaster and Palmdale must create incentives to limit water use, particularly in landscaping, which typically uses the greatest portion of a household’s yearly consumption. That proportion is undoubtedly very high in the desert climes of the Antelope Valley.

It would be particularly useful for the communities of the Antelope Valley to determine what a sustainable groundwater yield is; my suspicion is that, were water only to be used for the most economically beneficial purposes, and used with acknowledgement of the ecological context, the greater portion of all needs could be met by groundwater on a sustained basis. As it is, though, overdraft and reliance on the aqueduct are inevitable because of the profligate use of water for low-value crops and maintaining temperate-climate landscaping.

There are several reasons why the Antelope Valley should be more careful with its groundwater supply. First, the State Water Project has not achieved full build-out and cannot meet contractual obligations. There are countless Southern California municipalities which speak about their “entitlement” as if the water is there waiting for them to ask for it. The reality of the SWP , however, is that customers will probably never see the fulfillment of that entitlement, and especially not when they need it most—in the next drought. Additionally, persistent legal and environmental challenges to the withdrawal of water from the Delta region of northern California promises to limit or even reduce water deliveries to Southern California.

Part of an economic rationalization of water in the Antelope Valley would involve a cessation of agricultural activities. Having declined from its peak in the immediate post-war years, Valley agriculture is at best a livelihood for only a handful of individuals. Most of the local farmers are in fact “hobby” farmers or part-timers who have additional employment. Though a few of the old-timers practice dry farming of grains, varying their acreage depending on the year’s rainfall, most farmers use a considerable amount of groundwater to irrigate crops (onions of late). Gary Mork [Footnote #65] pointed out that nothing is grown in the Antelope Valley that could not be grown cheaper elsewhere; the fact that farming continues merely reflects its initial foothold in the local economy.

The benefits of ending farming in the Antelope Valley would be, then, a less-tapped groundwater reserve. But is this a plausible scenario? In the ever-complex world of California water rights, it is not. Economic efficiency and highest-value use of water is undermined by laws regarding groundwater; those laws allow anyone to pump water from below their property. This makes it impossible for the government to monitor withdrawal for the good of the region as a whole. In this context, as long as energy is cheap, pumping water for agriculture is economically rational and will continue so long as farmers can profit from the latest crop. Furthermore, the multiplicity of private wells and micro-water districts in the Valley makes it impossible to protect or manage groundwater reserves without entirely new laws.

The relative cheapness of groundwater pumping, combined with the recent drought, has led to significant overdraft of the Valley’s aquifers. Land subsidence, which has occurred in many areas of the Valley, has even more disturbing future implications. As aquifers in the desert are drawn down, the north and west Valley’s clayey, brittle soils that compose the aquifers dry out and compress. In the most extreme cases, these soils then collapse underground with severe surface consequences. In 1991, “70 large cracks [were] charted in a 10-square-mile area of undeveloped land in Lancaster that was intended for thousands of homes. And dozens more have surfaced on the dry lake bed at nearby Edwards Air Force Base, where the space shuttle lands, forcing the closure of one runway.” [Footnote #66] These fissures and sinkholes were only the most visible evidence of a serious problem of land subsidence in the Antelope Valley, where the United Nations Educational, Scientific and Cultural Organization (unesco) said in 1984 that “a 463 square mile area around Lancaster had sunk up to 3 feet between 1955 and 1978.” A 1991 investigation found even greater subsidence, of some 5.5 feet between 1961 and 1981 in some parts of Lancaster.

The tragedy of subsidence is that it forever destroys underground water storage capacity. Once an aquifer collapses, there is nothing save an act of the Almighty to raise the earth again and let it fill with water. The loss of aquifer capacity has bleak consequences for regional self-sufficiency, and forces reliance on surface water projects which are invariably more expensive and have far higher evaporation rates. One of the great failures of this arid state is that no body of law was devised to monitor the use of its aquifers and prevent their catastrophic abuse.

NEXT | The Responsibility of Capital

© Matt Jalbert 1995–2002