Tuesday, September 29, 2009

The End of Oil?

September 27, 2009

By MICHAEL HIRSH, New York Times

Oil is the curse of the modern world; it is “the devil’s excrement,” in the words of the former Venezuelan oil minister Juan Pablo Pérez Alfonzo, who is considered to be the father of OPECand should know. Our insatiable need for oil has brought us global warming, Islamic fundamentalism and environmental depredation. It has turned the United States and China, the world’s biggest consumers of petroleum, into greedy, irresponsible addicts that can’t see beyond their next fix. With a few exceptions, like Norway and the United Arab Emirates, oil doesn’t even benefit the nations from which it is extracted. On the contrary: Most oil-rich states have been doomed to a seemingly permanent condition of kleptocracy by a few, poverty for the rest, chronic backwardness and, worst of all, the loss of a national soul.

We can’t be rid of the stuff soon enough.

Such is the message of Peter Maass’s slender but powerfully written new book, “Crude World: The Violent Twilight of Oil.” Unquestionably, by fueling better and faster transportation and powering cities and factories, oil has been critical to modern economies. But oil has also made possible the most destructive wars in history, and it has left human society in a historical cul-de-sac. Despite much hue and cry today, Maass argues, we seem unable to move beyond an oil-based global economy, and we are going to hit a wall soon.

Maass, a contributing writer for The New York Times Magazine, tends to endorse the predictions of industry skeptics like Matthew Simmons, who argues the earth is about to surpass “peak oil” supplies. Even with the recent fallback in prices, the petroleum that’s left to discover will be harder and more expensive to extract. Last year’s $147-a-barrel oil was just a “foretaste of what awaits us,” Maass writes.

Maass is less interested in crunching oil-supply numbers, however, than in exposing the cruelty and soullessness of human kind’s lust for this “violence- inducing intoxicant,” as he calls it. His book teaches us an old lesson anew: that the true wealth of nations is not discovered in the ground, but created by the ingenuity and sweat of citizens. It’s the same lesson the Spanish learned centuries ago when they discovered gold, the oil of their time, in the New World. They piled up bullion but squandered it on imperial fantasies and failed to build enduring prosperity, while destroying the civilizations from which they seized it.

Destruction, or at least a lack of progress, has been the fate of most of the nations unlucky enough to sit on top of large pools of “black gold” today. They have grown corrupted by it, their leaders relieved of the need to show accountability as long as they can buy off well-connected foreigners and pay for the security and protection they need from their own angry, disenfranchised citizens. In starkly titled chapters — “Fear,” “Greed,” “Empire,” “Alienation” and so on — Maass shows how each oil state has found its own way to failure. “Just as every un happy family is unhappy in its own way, every dysfunctional oil country is dysfunctional in its own way,” he writes.

Equatorial Guinea’s savage leader, Teodoro Obiang, plunders virtually every cent of his nation’s wealth, aided by Riggs Bank of Washington, which sometimes sent employees to the embassy to pick up bulging suitcases of cash. Locals don’t even get the benefit of jobs because the manual labor is supplied by Indians and Filipinos brought in by Marathon Oil. Walking around the capital, Malabo, one night, Maass does manage to find a booming source of local employment: young Guinean girls called “night fighters” because they jostle for a chance to sell their bodies to the oilmen from Texas or Oklahoma. “The men in Malabo might not find jobs in the oil industry, but it is clearly possible for their desperate sisters to earn a few dollars,” he writes. Traveling to Ecuador, Maass discovers graffiti on one of the pipelines that cut through what was once pristine Amazonian rain forest: “Más Petróleo = Más Pobreza.” More oil equals more poverty. For him, it sums up the confiscatory approach that Texaco took to that country, leaving it a stripped land oozing with toxic pollutants.

The major oil producing nations have fared little better. Seventy years after the discovery of its first great reservoir, Saudi Arabia remains a medieval principality with a bare patina of modernity. The country’s long reign as the world’s No. 1 oil supplier has been good for the Saudi princes but a Faustian bargain for the rest of us, having led to the petrodollar-funded spread of extremism and the rise of Osama bin Laden. Post-Soviet Russia has become a kind of petro-fascist state where the head of Lukoil slavishly keeps a picture of Vladimir Putin on his desk rather than photos of his family. Venezuela is resurrecting socialism, this time as farce, under the buffoonish Hugo Chávez, who hosts a TV talk show called “Aló Presidente” while turning his national oil company into a “development agency with oil wells” that furthers his hold on power. Iran’s whole modern history has been twisted out of shape by its oil riches, starting with the American-British coup that toppled Prime Minister Mohammed Mossadegh in 1953 and restored Shah Mohammed Reza Pahlavi.

The unhappiest countries are those where oil has led to war, none more so than Iraq, even if no one will acknowledge the truth about America’s 2003 invasion. “The refining process transforms this black swill into a clear fluid without which our civilization would collapse,” Maass writes. “Quite often a corollary process of political refining occurs to sanitize the truth of what’s done to keep oil in the hands of friendly governments. Just as cars cannot run on unrefined crude, political systems choke at the unfiltered mention of war for oil.” He citesGeorge W. Bush’s claims that the invasion of Iraq had nothing to do with oil. Still, the question hangs out there: Why was the Oil Ministry one of the only places guarded by United States troops in the early days of looting?

By the end of Maass’s long indictment, one wants the horror to end. Let’s all move on from oil already. Indeed, it is tempting to imagine what sort of globalization we might have today if Max Steineke and his exploratory team from Standard Oil of California hadn’t discovered quite so much petroleum when they pierced Saudi Arabia’s first great reservoir in 1938. If less human ingenuity had been applied to finding oil over the last 70 years, and more to developing other sources of energy, the world economy — and the environment — might be far healthier. The World Trade Center might even still be standing.

But Maass doesn’t fully deliver on the promise of his subtitle. Is this really the twilight of the oil economy? We still seem utterly drenched in the gunk, and the author’s occasional hints at the alternative history that might have been — if only Ronald Reagan hadn’t dismantled those solar panels that Jimmy Carter put on the White House roof! — are not terribly satisfying. He says that the combined technologies exist to move beyond oil, but he doesn’t go into any real detail. In his final chapter, Maass gives us an evocative glimpse of one future alternative he would prefer — a giant wind farm he discovers along Interstate 10 in California. “Set against the blue sky and the brown desert, in rows of rotating white arms that glint in the sun, the turbines have the appearance of futuristic totems waving at us, luring us forward,” Maass observes, before driving on in his car.

Michael Hirsh is Newsweek’s national economics correspondent. He is working on a book about the rise and fall of the free-market ideal.

CRUDE WORLD
The Violent Twilight of Oil
By Peter Maass
Illustrated. 276 pp. Alfred A. Knopf. $27

Thursday, September 24, 2009

Oil Industry Sets a Brisk Pace of New Discoveries

September 24, 2009

By JAD MOUAWAD, New York Times

The oil industry has been on a hot streak this year, thanks to a series of major discoveries that have rekindled a sense of excitement across the petroleum sector, despite falling prices and a tough economy.

These discoveries, spanning five continents, are the result of hefty investments that began earlier in the decade when oil prices rose, and of new technologies that allow explorers to drill at greater depths and break tougher rocks.

“That’s the wonderful thing about price signals in a free market — it puts people in a better position to take more exploration risk,” said James T. Hackett, chairman and chief executive of Anadarko Petroleum.

More than 200 discoveries have been reported so far this year in dozens of countries, including northern Iraq’s Kurdish region, Australia, Israel, Iran, Brazil, Norway, Ghana and Russia. They have been made by international giants, like Exxon Mobil, but also by industry minnows, like Tullow Oil.

Just this month, BP said that it found a giant deepwater field that might turn out to be the biggest oil discovery ever in the Gulf of Mexico, while Anadarko announced a large find in an “exciting and highly prospective” region off Sierra Leone.

It is normal for companies to discover billions of barrels of new oil every year, but this year’s pace is unusually brisk. New oil discoveries have totaled about 10 billion barrels in the first half of the year, according to IHS Cambridge Energy Research Associates. If discoveries continue at that pace through year-end, they are likely to reach the highest level since 2000.

While recent years have featured speculation about a coming peak and subsequent decline in oil production, people in the industry say there is still plenty of oil in the ground, especially beneath the ocean floor, even if finding and extracting it is becoming harder. They say that prices and the pace of technological improvement remain the principal factors governing oil production capacity.

While the industry is celebrating the recent discoveries, many executives are anxious about the immediate future, fearing that lower prices might jeopardize their exploration drive. The world economy is weak, oil prices have tumbled from last year’s records, corporate profits have shrunk, and global demand for oil remains low. After falling to $34 in December, oil prices have doubled, stabilizing near $70 a barrel. But if the world economy does not pick up, some analysts believe the price could fall again.

Oil companies contend that is not a prospect they can afford. Despite reaping record profits in recent years, many executives have warned that they need prices above $60 a barrel to develop the world’s more challenging reserves. In fact, some exploration activity has already slowed this year, as producers seek better terms from service companies and contractors.

It is not just oil that is benefiting from the exploration boom. Repsol, Spain’s biggest oil company, said this month that it had discovered what could turn out to be Venezuela’s biggest natural gas field. In recent years, companies have found substantial natural gas reserves in the United States, from shale rocks once believed to be impossible to drill.

“The No. 1 question that exploration teams have right now is, Where do we go next?” said Robert Fryklund, who ran the operations of ConocoPhillips in Libya and Brazil, and is a vice president in Houston at Cambridge Energy Research Associates.

Exploration spending swelled in recent years, partly to offset a doubling of costs throughout the industry — from steel prices to the cost of renting deepwater drilling rigs. A big issue confronting the industry now is how to drive down costs while maintaining a high level of exploration. On average, costs have fallen by 15 to 20 percent from their peak, according to petroleum executives.

Exploration remains a risky, and costly, business, where some deepwater wells can cost up to $100 million. From 30 to 50 percent of exploration wells find oil.

Some executives are also worried the world might face a shortfall in supplies in coming years if another decline in oil prices causes exploration to falter.

The chief executive of the French oil giant Total, Christophe de Margerie, has warned that such a supply crunch is possible by the middle of the next decade. “There could be a shortage of capacity,” he said.

His concerns echoed those of Abdullah al-Badri, the secretary general of the Organization of the Petroleum Exporting Countries, who said that lower oil prices also threatened investments by OPEC nations.

Saudi Arabia is also unlikely to expand its production in coming years because of the uncertainty clouding future oil demand, Ali al-Naimi, the kingdom’s oil minister, signaled earlier this month. Saudi Arabia is just completing a $100 billion program to increase its capacity to 12.5 million barrels a day, from around 9 million barrels a day just a few years ago.

Although they are substantial, the new finds do not match the giant fields discovered in the 1970s, like Alaska’s Prudhoe Bay, Ekofisk in the North Sea, or Cantarell in Mexico. They are also dwarfed by the last enormous discovery, the Kashagan field in the Caspian Sea, discovered in 2000 and estimated to hold over 20 billion barrels of oil.

“We have not seen another Kashagan, but still these finds are very material,” said Alan Murray, the exploration service manager at Wood Mackenzie, a consulting firm in Edinburgh.

Since the early 1980s, discoveries have failed to keep up with the global rate of oil consumption, which last year reached 31 billion barrels of oil. Instead, companies have managed to expand production by finding new ways of getting more oil out of existing fields, or producing oil through unconventional sources, like Canada’s tar sands or heavy oil in Venezuela.

Reserve estimates typically rise over the life of a field, which can often be productive for decades, as companies find new ways of getting more oil out of the ground.

The industry’s record has improved in recent years, thanks to high prices. According to Cambridge Energy Research Associates, oil companies have found more oil than they produced for the last two years through a combination of exploration and field expansions.

“The appetite for opening new frontiers when prices were low in the 1990s was very small,” said Paolo Scaroni, the chief executive of Italy’s oil giant Eni. “Today, the biggest discovery of all is technology.”

One of the largest finds this year was made by a small producer, Heritage Oil, at the Miran West One field in the Kurdistan region of northern Iraq. It found nearly two billion barrels of oil and plans to drill a second well before the end of the year. While the central government of Iraq has had a hard time attracting investors to develop its huge fields, local authorities in Kurdistan have been successfully wooing foreign producers.

Meanwhile, in the Gulf of Mexico, BP’s discovery proves that the area remains one of the most promising oil regions in the United States. BP has estimated that the Tiber field holds four billion to six billion barrels of oil and gas, which would be enough, in theory, to meet domestic consumption for more than a year.

“In 30 years I’ve been in the business, the Gulf of Mexico has been called the Dead Sea countless times,” said Bobby Ryan, the vice president of global exploration at Chevron. “And yet it continues to revitalize itself.”

Wednesday, September 23, 2009

Emphasis on Growth Is Called Misguided

September 23, 2009

By PETER S. GOODMAN

Among the possible casualties of the Great Recession are the gauges that economists have traditionally relied upon to assess societal well-being. So many jobs have disappeared so quickly and so much life savings has been surrendered that some argue the economic indicators themselves have been exposed as inadequate.

In a provocative new study, a pair of Nobel prize-winning economists, Joseph E. Stiglitz and Amartya Sen, urge the adoption of new assessment tools that incorporate a broader concern for human welfare than just economic growth. By their reckoning, much of the contemporary economic disaster owes to the misbegotten assumption that policy makers simply had to focus on nurturing growth, trusting that this would maximize prosperity for all.

“What you measure affects what you do,” Mr. Stiglitz said Tuesday as he discussed the study before a gathering of journalists in New York. “If you don’t measure the right thing, you don’t do the right thing.”

According to the report, much of the world has long been ruled by an unhealthy fixation on swelling the gross domestic product, or the quantity of goods and services the economy produces. With a singular obsession on making G.D.P. bigger, many societies — not least, the United States — failed to factor in the social costs of joblessness and the public health impacts of environmental degradation. They allowed banks to borrow and bet unfathomable amounts of money, juicing the present by mortgaging the future, thus laying the ground for the worst financial crisis since the 1930s.

The report is more critique than prescription. It elucidates in general terms why leaning exclusively on growth as an economic philosophy may yield unhappiness, and it suggests that the incomes of typical people should be weighed more heavily than the gross production of whole societies. But it sidesteps the thorny details of slapping a cost on a ton of pollution or a waylaid career, leaving a great mass of policy choices for others to resolve.

Some Americans may reflexively reject the report and its recommendations, given its provenance: it was ordered up last year by President Nicolas Sarkozy of France, whose dissatisfaction with the available tools of economic assessment prompted him to create the Commission on the Measurement of Economic Performance and Social Progress. Tuesday’s briefing was held in an ornate room at the French consulate. The official French statistics agency is already working to adopt the report’s recommendations. Mr. Sarkozy plans to bring it with him to the G-20 summit meeting in Pittsburgh this week, where the leaders of major countries will discuss a range of policy issues.

But whatever one’s views on the merits of European economy policy, and wherever one sits on the ideological spectrum, these appear fitting days to re-examine how economists measure vital signs — particularly in the United States.

By most assessments, the American economy is now growing again, perhaps even vigorously. Many experts expect a 3 percent annualized rate of expansion from July through September. As a technical matter, the recession appears to be over. Yet the unemployment rate sits at 9.7 percent and will probably climb higher and remain elevated for many months. In millions of households still grappling with joblessness and the tyranny of bills, signs of health served up by the traditional economic indicators seem disconnected from daily life.

This was precisely the sort of contradiction Mr. Sarkozy sought to unravel when he created the commission, tasking it with pursuing alternate ways of measuring economic health.

To head the panel, he picked Mr. Stiglitz, a former World Bank chief economist whose best-selling books amount to an indictment of the Washington-led model of global economic integration. Mr. Sarkozy also selected Mr. Sen, a Harvard economist and an authority on poverty.

The resulting report amounts to a treatise on the inadequacy of G.D.P. growth as an indication of overall economic health. It cites the example of increased driving, which weighs in as a positive within the framework of economic growth, as it requires greater production of gasoline and cars, yet fails to account for the hours of leisure and work time squandered in traffic jams, and the environmental costs of pollutants unleashed on the atmosphere.

During the real estate bubble that preceded the financial crisis, the focus on economic growth helped encourage overbuilding and investment in real estate. Mr. Stiglitz argues that the single-minded focus on growth gave American policy makers a false sense of assurance that their policies were virtuous, as they allowed financial institutions to direct virtually unlimited sums of money into real estate and as consumer debt levels built with unrestrained momentum.

Credit enabled spending, and spending translated into faster growth — an outcome that was intrinsically good, and never mind how long it might last or the convulsions that would accompany the end of easy money.

A growth-oriented policy encouraged homeowners to borrow as if money need never be repaid, and industry to produce products as if the real cost of pollution were zero, Mr. Stiglitz added.

“We looked to G.D.P. as a measure of how well we were doing, and that doesn’t tell us whether it’s sustainable,” he said at the briefing. “Your measure of output is grossly distorted by the failure of our accounting system. What began as a measure of market performance has increasingly become a measure of social performance, and that’s wrong.”

Instead of centering assessments on the goods and services an economy produces, policy makers would do better to focus on the material well-being of typical people by measuring income and consumption, along with the availability of health care and education, the report concludes.

Many of these prescriptions will no doubt resonate with policy makers and ordinary people.

Indeed, the difficulty comes in turning these general principles into new means of measurement. The report notes that its authors concur on the big picture, but diverge on the methodologies to be employed when it comes to factoring in the value of a better education and cleaner skies.

The old mode of measurement has taken a beating, and yet the new one, it seems, is still a work in progress.

Tuesday, September 22, 2009

Will investors show an appetite for local food?

Green venture capitalists are sought to back organic growers, independent food merchants, farmers markets and restaurateurs

By Cyndia Zwahlen, The Los Angeles Times

September 22, 2009

The Let's Be Frank food trailer parked most days outside the old Helms Bakery complex in Culver City is no ordinary lunch wagon.

The San Francisco company that operates the hot-dog vendor serves franks and sausages made from cows that ate only grass or pigs that were raised humanely. Customers also can choose turkey or soy dogs, all on buns from L.A. Breadworks.

The small business was funded in part by venture capitalist Peter Rogers and his Dry Creek Ventures, which targets clean energy, water and food businesses.

Such small local food outfits, especially those that are gentle on the environment, are key to the long-term health of the economy but need formal access to local investors to succeed, says social venture-capitalist and entrepreneur Woody Tasch.

Shifting capital to organic farmers, independent food entrepreneurs, farmers markets and restaurateurs will pay off in stronger local economies, a healthier environment and improved supplies of affordable, healthful food, Tasch said.

He founded Slow Money Alliance last year to spearhead the creation of regional networks of local investors that want to put their money into local enterprises.

"We've had the life sucked out of our society and economy by financial markets run amok and globalism run to extremes," Tasch said. Slow Money is "part of a network emerging of people who want to repair the damage."

The Brookline, Mass., nonprofit, which was inspired by the Slow Food International local-food movement, had its first national meeting in Santa Fe, N.M., two weeks ago. Investors, investment bankers, entrepreneurs, farmers and others from around the world debated how best to build the networks. A team of five Southern California members, including chef and entrepreneur Gordon Smith of San Diego, will lead the efforts to build a regional network in the Southland.

Tasch says he feels a sense of urgency in shifting capital to local food businesses. He believes that the agriculture and food industry is ultimately as unstable and vulnerable to collapse as the global credit markets turned out to be.


Supermarkets full of cheap food have blinded people to the risk much as the 10%-plus annual returns on their stock portfolios lured people into a false sense of financial security before the recent global financial markets collapsed, he said.

"We have an industrial food system that is as imbalanced as the credit markets are, in terms of loss of biodiversity and aquifer depletion and soil depletion, leading to food systems as vulnerable to a massive correction as the credit markets are," said Tasch, author of "Inquiries Into the Nature of Slow Money: Investing as if Food, Farms, and Fertility Mattered."

What is slow money?

A network of investors, donors, entrepreneurs and others committed to building and steering major new sources of capital to local food systems. More broadly, it's part of a larger questioning in the wake of the financial craziness of the last X number of years, part of an emerging dialogue of fundamentally rethinking how to repair some of the problems of globalization and, including, markets gone crazy.

How can slow money help small local businesses?

Local food systems are just one pillar of local economies. Small businesses that have more direct, strong connections to their local customers and investors from the region are going to be more resilient and stronger businesses. This is all about building relations on local and regional levels of enterprises on one side and investors on the other.

Are you creating these networks from the ground up?

It's a big job, and it needs to happen relatively quickly for our health and security in face of future shocks of various kinds. Depending on how much money starts coming through Slow Money, we would be seeking to put that network in collaboration with existing networks and intermediaries to the extent possible. Where needed, we are also very willing to create new ones.

You want to create new capital markets to invest in sustainable, local, food-related businesses?

That's the beauty and challenge of what we are doing with Slow Money. It's not a typical fund structure. We didn't go to market to raise a $100-million fund. We are actually gathering a lot of people with us and looking at how can we do this on a mass scale.

How can we take it forward and have maximum impact in the shortest amount of time? Because I feel a real sense of urgency. There is a chance we can actually get organized around this and then move as fast as we can in other sectors.

Many small-business owners are struggling in the recession. Why should they take the time and possible risk to find more local places to invest their money?

This is a transition. This is not one-size-fits-all. But it's a direction people know deep down we need to go in, so people just need encouragement and to take whatever small steps they can.

People shouldn't feel like they have to jump overboard, but let's realize as a society and economy that we are very imbalanced right now, dependent on distant sources of supplies from people we don't know. It sounds like I am an isolationist, and I don't mean it that way. But an element to this is we are not in control; we are not creating what we need.

Where can a small-business owner or entrepreneur find slow-money investors?

Well, individual investors around the United States are just starting to, let's say, recognize the need to do this and are already expressing the desire to. There is no organized structure for doing this, and that is exactly what we are trying to figure out how to set up.

We have had five regional workshops around the country, including in Point Reyes, Calif., and that's just the beginning of the process, to sort of support the desire that is already being expressed around the country for people to come together in regions and begin to create a slow-money marketplace or fund or exchange, whatever you want to call it.

It's a lot easier to raise a single fund and invest in a portfolio and go home. But we have this desire, the intention, to try to support the evolution of this quickly. We need slow money, quickly.

smallbiz@latimes.com

Copyright © 2009, The Los Angeles Times

Monday, September 21, 2009

Forget Conventional 401(k)s; Think Goat Cheese and Fennel

SEPTEMBER 16, 2009

By STEPHANIE SIMON, Wall Street Journal

SANTA FE, N.M. -- Woody Tasch wants to rewrite the gospel of financial growth.

A former venture capitalist, Mr. Tasch now travels the country warning that money moves too fast. Billions zip through global markets each day, bundled into financial packages so complex that it is hard to know what you own.

His antidote: A fundamental shift in our attitude toward investing. Taking a page from the Slow Food movement, which calls on consumers to take the time to savor home-cooked meals, Mr. Tasch dubbed his philosophy Slow Money.

The crux of the movement is persuading investors to put some of their assets into businesses they can see, smell and even taste -- to measure growth not by the flashing numbers on a stock ticker, but by the slow ripening of a tomato.

That isn't dramatic. But Mr. Tasch argues that investing in sustainable local agriculture will yield an enviable return -- just not the type of return many are used to.

If all goes well, investors will see a modest 3% profit, maybe 6% over many years. But Mr. Tasch has a broader balance sheet in mind. The real dividend, he says, is diversity: In an era of industrial agriculture, where millions of acres are planted with the same variety of corn and millions of pigs are bred to be genetically similar, small local farms are the ultimate hedge fund. They preserve heirloom seeds and quirky breeds; strengthen the soil with organic nutrients; create local markets that connect producer directly to consumer.

Mr. Tasch is thinking about farmers like Martin Ping of upstate New York, who invites customers to invest in projects like a cheese processing plant. Investors can expect only about a 3% return. But they also get a ready source of fresh-made cheese and the knowledge that they help preserve an agrarian landscape. "They have to redefine what return is," Mr. Ping said. "I tell them, come out in the pasture and you can watch your money grow."

The Slow Money movement piggybacks on the "locavore" fad for eating only food grown within a 100-mile radius. But that trend has attracted some skepticism of late. In his new book, "Just Food," historian James McWilliams argues that too many "locavores" romanticize the power of small farms, blinding them to the need for industrial agriculture. "We have to be wary of thinking small-scale is the answer," he said.

Even some of the most gung-ho advocates of small farms are uneasy about the Slow Money philosophy. They will gladly spend more for organic, but investing their retirement in a fennel farm is a whole different matter.

A national Slow Money convention last week drew 400 people to Santa Fe, and while there was idealism to spare, there was also trepidation.

"I won't lie -- it's a scary thing," said Christopher Lindstrom. An heir to the Rockefeller fortune, Mr. Lindstrom says he is committed to investing his entire portfolio in small-scale local enterprise, especially farming.

Or at least, he thinks he's committed. He has been a traditional stocks-and-bonds guy all his life, so putting his financial future in the hands of a goat farmer feels "like I'm jumping off a cliff," Mr. Lindstrom said.

Some farmers are just as anxious. Ed and Michael Lobaugh make artisan cheeses from Nubian goat milk on their New Mexico farm, the Old Windmill Dairy. In the past year, they have taken three small loans from local investors, totaling about $15,000, to build cellars for aging the cheese. But they now need $50,000 for a pasteurizer and other equipment.

They like the Slow Money concept but worry that it may be more cumbersome than a traditional bank loan. Specifically, they fear deep-pocketed local investors will demand a say in management decisions. Equally perilous: small-sum investors swamping the Lobaughs with requests for tours and samples, and interminable inquiries about the goats.

"We're still weighing out" whether it's worth the trouble, Ed Lobaugh said.

The Slow Money movement aims to address these concerns by creating regional funds to broker interaction between investors and farmers. Such funds exist in many communities for investment in affordable housing and mom-and-pop entrepreneurs. Just a few have cropped up to invest in local farms, such as the Carrot Project in New England.

Mr. Tasch has spent years in the field of socially responsible investing, managing foundation funds and distributing tens of millions in venture capital. He came to the Slow Money philosophy several years ago, he said, but it all crystallized for him after the financial crash of last fall. The author of the recent book, "Inquiries into the Nature of Slow Money," he has posted a statement of his principles online and hopes to get a million people to endorse them.

"We must bring money back down to earth," he says. He knows it won't be easy, he says. But slow money is nothing if not patient.

Write to Stephanie Simon at stephanie.simon@wsj.com

Saturday, September 12, 2009

Weather Worsens Mexico City's Water Shortage

SEPTEMBER 12, 2009

With El Niño Paring Precipitation, Officials Resort to Rationing, Fines and Warnings to Accustom Residents to Using Less


By NICHOLAS CASEY, The Wall Street Journal

MEXICO CITY -- This megacity -- which was built on the bed of a lake -- may be close to running out of water.

One of the principal reservoirs that feeds Mexico City, the Cutzamala dam system, is nearly half-empty and continuing to drop. Water shutoffs have become routine in some of the city's poorest neighborhoods.

A respite came this week with a few days of heavy rain. But with the country facing what could be one of its driest years in nearly seven decades, the government is running ads with a dire prediction: "February 2010: The City May Run Out of Water."

"If we can't get control of water demand here, the difference between what's offered and what's needed is going to leave parts of this city without any water," says Ramón Aguirre, head of Mexico City's water system.

Mexico's capital, with its 19 million residents, is confronting a crisis that also is a threat elsewhere. Los Angeles, Beijing and Singapore are just a few of the world's urban centers struggling to accommodate growing populations with dwindling supplies of drinkable water.

"For people on the edge of water sustainability, changes in climate can knock them right off," says Meena Palaniappan, of the International Water and Communities Initiative, a California think tank that focuses on sanitation and sustainable water supplies.

Scientists blame the far-flung dry spell on a raft of warm water off the Pacific Coast known as El Niño, a cyclical event that occurs about every three to five years and raises rain levels in some regions while drastically reducing precipitation in others.

Florida and Peru, for example, have received more rain this summer, while parts of Central America, Mexico, Texas and Australia saw below-average amounts. Guatemala's president recently declared a "public calamity" after drought and famine claimed more than 460 lives so far this year.

Mexico City, which endured a much drier summer rainy season this year, is also an extreme case. The city lies on a high plateau where water must be pumped up to more than 7,000 feet before it reaches the tap. While many cities -- New York, for example -- lie near rivers or drainage areas that head to the sea, Mexico City receives relatively little runoff.

"We're an exception among exceptions," said Mr. Aguirre, the water chief.

City officials have been using soft pressure to bring down water use. Marcelo Ebrard, Mexico City's mayor, went on television to urge residents to limit showers to four minutes. The city also plans to fine residents caught watering their gardens during the day.

In some areas, the city is taking a more stringent approach: cutting off water completely.

Iztapalapa, the city's largest and poorest borough, has endured sporadic cuts this year, including one in April when water was shut off for 36 hours. On a recent afternoon, some local mom-and-pop shops moved jugs of water up to the entrance, selling them for 28 pesos, or about $2. The price is high for many in Mexico, where roughly one in two people earns less than $4 a day.

"I turned on the faucet last week and it was the color of coffee, then there was no water at all," said Damian Rosas Granados, a 79-year-old who has been seeking work in Iztapalapa. Mr. Rosas says he has diabetes and needs fresh water to take his medication.

During recent cuts, Mr. Rosas said, the city sent a water truck that was empty shortly after it was swarmed by residents. "It's because we're the poorest," he says. "Why are other neighborhoods getting water?"

The city said it isn't targeting poorer neighborhoods, but that Iztapalapa and others are affected more because of their disproportionate dependence on the evaporating Cutzamala network. Underlining the class division here, many buildings in wealthier neighborhoods have water tanks with emergency supplies. In Colonia Roma, one such area where supplies have remained steady, residents have traveled from poorer neighborhoods to collect water in buckets and take it back to their homes.

Mexico City was built on the foundations of the Aztec capital that once sat in the middle of a shallow lake. But Lake Texcoco was drained by later generations and the remaining aquifer is sinking nearly six feet a year, according to the water department.

Mr. Aguirre blames much of the crisis on the city's voracious consumption of water -- what he calls a "culture of thinking water is an unlimited resource."

Residents of the capital use on average more than 75 gallons of water a day, the city estimates, far more than their counterparts in most European and American cities whose daily rates are closer to 40 and 50 gallons a day, respectively.

It doesn't help that city planners entered the year with a list of unfinished repair projects for the aging infrastructure. One project being pushed now is a $70 million renovation of the Cutzamala system. Mexico City also is rushing to replace a 310-mile stretch of water pipes.

Some experts say the drought may not last much longer. Steve Zebiak, a climatologist at Columbia University's International Research Institute for Climate and Society, says weather models indicate the worst may be over for southern Mexico, with weather patterns returning to normal this fall.

Write to Nicholas Casey at nicholas.casey@wsj.com
Printed in The Wall Street Journal, page A12

Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved

Thursday, September 10, 2009

Big Food vs. Big Insurance

September 10, 2009

Op-Ed Contributor, New York Times

By MICHAEL POLLAN,

Berkeley, California

TO listen to President Obama’s speech on Wednesday night, or to just about anyone else in the health care debate, you would think that the biggest problem with health care in America is the system itself — perverse incentives, inefficiencies, unnecessary tests and procedures, lack of competition, and greed.

No one disputes that the $2.3 trillion we devote to the health care industry is often spent unwisely, but the fact that the United States spends twice as much per person as most European countries on health care can be substantially explained, as a study released last month says, by our being fatter. Even the most efficient health care system that the administration could hope to devise would still confront a rising tide of chronic disease linked to diet.

That’s why our success in bringing health care costs under control ultimately depends on whether Washington can summon the political will to take on and reform a second, even more powerful industry: the food industry.

According to the Centers for Disease Control and Prevention, three-quarters of health care spending now goes to treat “preventable chronic diseases.” Not all of these diseases are linked to diet — there’s smoking, for instance — but many, if not most, of them are.

We’re spending $147 billion to treat obesity, $116 billion to treat diabetes, and hundreds of billions more to treat cardiovascular disease and the many types of cancer that have been linked to the so-called Western diet. One recent study estimated that 30 percent of the increase in health care spending over the past 20 years could be attributed to the soaring rate of obesity, a condition that now accounts for nearly a tenth of all spending on health care.

The American way of eating has become the elephant in the room in the debate over health care. The president has made a few notable allusions to it, and, by planting her vegetable garden on the South Lawn, Michelle Obama has tried to focus our attention on it. Just last month, Mr. Obama talked about putting a farmers’ market in front of the White House, and building new distribution networks to connect local farmers to public schools so that student lunches might offer more fresh produce and fewer Tater Tots. He’s even floated the idea of taxing soda.

But so far, food system reform has not figured in the national conversation about health care reform. And so the government is poised to go on encouraging America’s fast-food diet with its farm policies even as it takes on added responsibilities for covering the medical costs of that diet. To put it more bluntly, the government is putting itself in the uncomfortable position of subsidizing both the costs of treating Type 2 diabetes and the consumption of high-fructose corn syrup.

Why the disconnect? Probably because reforming the food system is politically even more difficult than reforming the health care system. At least in the health care battle, the administration can count some powerful corporate interests on its side — like the large segment of the Fortune 500 that has concluded the current system is unsustainable.

That is hardly the case when it comes to challenging agribusiness. Cheap food is going to be popular as long as the social and environmental costs of that food are charged to the future. There’s lots of money to be made selling fast food and then treating the diseases that fast food causes. One of the leading products of the American food industry has become patients for the American health care industry.

The market for prescription drugs and medical devices to manage Type 2 diabetes, which the Centers for Disease Control estimates will afflict one in three Americans born after 2000, is one of the brighter spots in the American economy. As things stand, the health care industry finds it more profitable to treat chronic diseases than to prevent them. There’s more money in amputating the limbs of diabetics than in counseling them on diet and exercise.

As for the insurers, you would think preventing chronic diseases would be good business, but, at least under the current rules, it’s much better business simply to keep patients at risk for chronic disease out of your pool of customers, whether through lifetime caps on coverage or rules against pre-existing conditions or by figuring out ways to toss patients overboard when they become ill.

But these rules may well be about to change — and, when it comes to reforming the American diet and food system, that step alone could be a game changer. Even under the weaker versions of health care reform now on offer, health insurers would be required to take everyone at the same rates, provide a standard level of coverage and keep people on their rolls regardless of their health. Terms like “pre-existing conditions” and “underwriting” would vanish from the health insurance rulebook — and, when they do, the relationship between the health insurance industry and the food industry will undergo a sea change.

The moment these new rules take effect, health insurance companies will promptly discover they have a powerful interest in reducing rates of obesity and chronic diseases linked to diet. A patient with Type 2 diabetes incurs additional health care costs of more than $6,600 a year; over a lifetime, that can come to more than $400,000. Insurers will quickly figure out that every case of Type 2 diabetes they can prevent adds $400,000 to their bottom line. Suddenly, every can of soda or Happy Meal or chicken nugget on a school lunch menu will look like a threat to future profits.

When health insurers can no longer evade much of the cost of treating the collateral damage of the American diet, the movement to reform the food system — everything from farm policy to food marketing and school lunches — will acquire a powerful and wealthy ally, something it hasn’t really ever had before.

AGRIBUSINESS dominates the agriculture committees of Congress, and has swatted away most efforts at reform. But what happens when the health insurance industry realizes that our system of farm subsidies makes junk food cheap, and fresh produce dear, and thus contributes to obesity and Type 2 diabetes? It will promptly get involved in the fight over the farm bill — which is to say, the industry will begin buying seats on those agriculture committees and demanding that the next bill be written with the interests of the public health more firmly in mind.

In the same way much of the health insurance industry threw its weight behind the campaign against smoking, we can expect it to support, and perhaps even help pay for, public education efforts like New York City’s bold new ad campaign against drinking soda. At the moment, a federal campaign to discourage the consumption of sweetened soft drinks is a political nonstarter, but few things could do more to slow the rise of Type 2 diabetes among adolescents than to reduce their soda consumption, which represents 15 percent of their caloric intake.

That’s why it’s easy to imagine the industry throwing its weight behind a soda tax. School lunch reform would become its cause, too, and in time the industry would come to see that the development of regional food systems, which make fresh produce more available and reduce dependence on heavily processed food from far away, could help prevent chronic disease and reduce their costs.

Recently a team of designers from M.I.T. and Columbia was asked by the foundation of the insurer UnitedHealthcare to develop an innovative systems approach to tackling childhood obesity in America. Their conclusion surprised the designers as much as their sponsor: they determined that promoting the concept of a “foodshed” — a diversified, regional food economy — could be the key to improving the American diet.

All of which suggests that passing a health care reform bill, no matter how ambitious, is only the first step in solving our health care crisis. To keep from bankrupting ourselves, we will then have to get to work on improving our health — which means going to work on the American way of eating.

But even if we get a health care bill that does little more than require insurers to cover everyone on the same basis, it could put us on that course.

For it will force the industry, and the government, to take a good hard look at the elephant in the room and galvanize a movement to slim it down.

Michael Pollan, a contributing writer for The Times Magazine and a professor of journalism at the University of California, Berkeley, is the author of “In Defense of Food: An Eater’s Manifesto.”

Wednesday, September 9, 2009

California's water reform legislation is all wet

Opinion

The package of bills relies on the out-of-date ideas and voluntary measures that helped create the crisis. Lawmakers should instead be focused on conservation, recycling and rainwater capture.

By Mark Gold, Los Angeles Times

September 8, 2009

The Sacramento-San Joaquin River Delta, one of the biggest sources of Southern California's water, is the largest estuary on the West Coast. By all accounts, the delta, which feeds into San Francisco Bay, is also one of the most endangered ecosystems in the United States. Water quality standards are routinely violated, and several of its fisheries, including the once prolific run of chinook salmon, are hovering on the brink of extinction.

Scientists have conclusively identified diversion of freshwater away from this estuary as one of the major causes of its collapse. In fact, the state of California recently admitted that it has granted rights to divert more than eight times as much water as actually exists.

Now the Legislature is saying it will "reform" the California water system and cure all of its ills with a package of bills that is expected to be up for a vote soon. The package of solutions -- supported by the governor, Sen. Dianne Feinstein, legislative leaders including state Senate President Pro Tem Darrell Steinberg, and numerous water districts, including our own Metropolitan Water District -- looks remarkably similar to a water plan offered in the late 1970s. That plan was rejected by the public in the early '80s.

Back then, the main feature of the proposal was the peripheral canal -- in the new plan that is termed an "alternative conveyance device" -- but the bottom line is that California's elected leaders are looking to replumb California to solve an ongoing water scarcity crisis, while largely paying lip service to what should be done: conservation, rainwater capture and use and water recycling. Though well-intentioned, what they have proposed so far falls far short of a fix, not only for the delta ecosystem but for Southern California. The state needs to realize that there are faster and more cost-effective, more job-producing and more environmentally beneficial ways to meet California's current and future water needs.

Replumbing the state is not a short-term solution -- it will take at least a decade to complete. On top of that, in the long term, importing water to Southern California will become less and less sustainable. As the climate changes and the population grows, we must identify and implement cost-effective, climate-resilient, energy-efficient and sustainable techniques to supply and manage our water. Instead, the delta legislation package is setting us up to invest in new infrastructure that only commits us further to an antiquated water system.

Although the package includes water conservation, its measures would not require agriculture, which uses over 70% of all developed water, to conserve a drop, let alone move away from growing such water-intensive crops as cotton, barley and rice. Even urban areas would only be required to prepare plans to meet a 20% conservation goal.

Real reform would include mandating conservation and the statewide water metering required to enforce it. Successful reform would also include water-recycling and rainwater-use targets tied to overall use in the urban and agricultural sectors and per capita use. On a per capita basis, Californians currently use about 175 gallons of potable water per day (about 135 gallons in the city of Los Angeles), and with increased use of recycled water and captured rainwater, we should be able to reach a per capita use of 100 gallons of potable water per day by 2020: a volume far above the per capita use in nearly the entire developed world.

California is the only state that does not have some form of statewide groundwater management and regulation, even though groundwater supplies over a third of all the water used here. In some regions of the state, 90% of potable water comes from groundwater. Despite the valiant efforts of state Sen. Fran Pavley (D-Agoura Hills), the delta legislation package does not even require groundwater use to be accurately reported, much less managed or monitored for quality.

As important as the delta estuary is ecologically, you would think that the proposed legislation would require enforceable standards to ensure that it received sufficient freshwater to support its complex food chains. But instead this package calls only for "determinations" -- goals -- that would have no force or effect under law. Nor are there guarantees that the salmon would be protected. Unenforceable goals and voluntary measures helped get California into a water crisis in the first place.

As to the fundamental issue of over-allocation, the bills reportedly will "look" at the dysfunctional water-rights system, but again, that doesn't guarantee real reform.

Increased water recycling, enforced water-quality standards, groundwater cleanup and management, state-of-the-art water conservation and local storm-water capture are the solutions for sustainable and equitable water management in the 21st century.

These are the best ways to provide water supply relief and stability to the state. Asking Californians to support yet another multibillion-dollar plan, driven by an engineered solution to our water crisis, is disingenuous at best and destructive to California's economic and environmental future at worst. The sooner the Legislature and the governor realize this, the sooner we will solve the problems of the delta and California's antiquated water system.

Mark Gold is the president of Heal the Bay.

Monday, September 7, 2009

China, green? In the case of solar water heating, yes

In a nation known more for its belching smokestacks, solar water heaters are on nearly every roof in some cities. Manufacturers are eyeing foreign markets, including Southern California.

By David Pierson, Los Angeles Times

September 6, 2009

Reporting from Rizhao, China

Before her family bought a solar water heater, Liu Yan would bathe the way many working-class Chinese have for generations: boil water, dampen a rag and wipe away the dirt.

Today, the 40-year-old mother and her family shower every day and wash their dishes with hot water. The stainless steel heater affixed to her red-tiled roof cost about $220.

The device has become a symbol of China's rising standard of living and its leap into the era of clean energy.

In the seaside city of 2.8 million where Liu lives in Shandong province, 99% of households use solar water heaters. The mattress-sized contraptions dominate Rizhao's skyline, resting haphazardly on almost every residential rooftop.

In the global race to develop green technology and stem climate change, China has quickly become a leading producer of solar panels and wind turbines. It also dominates the lesser-known technology of solar water heaters.

Using principles of solar heating more than a century old, the humble, low-cost devices consist of an angled row of cola-colored glass tubes that absorb heat from the sun. The most common models fill the tubes with cold water. As it heats, the water rises into an insulated tank where it can remain hot for days.

The devices have improved so much over the years that some don't need direct sunlight -- all the more valuable in China's often hazy and smoggy cities. Newer models have electrical heaters inside the water tanks that switch on if the water gets too cold on frigid days.

Popular in some parts of the United States around the turn of the 20th century before being made obsolete by cheap natural gas, solar heaters are now hailed as one of China's greatest environmental success stories. More than 30 million homes have the devices, accounting for two-thirds of the world's solar water heating energy.

Manufacturers are eyeing foreign markets, including customers in Southern California.

"China absolutely dominates the global market and they've done it relatively quietly and without a lot of fanfare," said Christopher Flavin, president of the Washington-based Worldwatch Institute. "It's an interesting example of their ability to take technology that was developed elsewhere and adapt it to their market on a scale no one had conceived of."

The widespread development of solar heaters in China can appear paradoxical in a country that leads the world in carbon dioxide emissions and where two-thirds of the rivers and lakes are contaminated.

Such is the nature of China's push to tackle climate change. In this rapidly developing economy, some of the nation's biggest polluters reside alongside the biggest renewable energy projects.

Scenes like Rizhao's crowded, energy-efficient rooftops are repeated all over China, often in the shadows of carbon spewing smokestacks and noxious chemical plants. Rizhao is one of a small but growing number of Chinese cities requiring solar heaters to be installed or subsidized.

"There are two different stories in China," said Barbara Finamore, director of the Natural Resources Defense Council's China Program. "There's dramatic progress. There's no denying that. At the same time, they're still building, on average, a new coal-fired [power] plant every week."

The heating of water accounts for a quarter of a typical building's energy usage. The Chinese solar heaters are estimated to have prevented more than 20 million tons of carbon dioxide that would have been emitted annually using electrical units.

The heaters will be much needed if Beijing is to meet its goal of reducing its reliance on coal, which supplies 80% of the country's energy. The central government aims to meet 15% of its energy needs through renewable sources by 2020. Beijing hopes to triple its solar heater capacity by the same year, according to Greenpeace China.

The technology's gains here lie in its affordability, the dearth of residential natural gas service and the modest expectations of consumers, many of whom had never enjoyed hot water at home before. The starting price for one of the clunky devices is around $220, about the same as an electric heater in China. In the United States, where labor costs are higher and systems tend to be larger and more elaborate, solar water heaters can easily cost $1,500 or more.

"The key to the success in China is that the low price enables people to have an instantaneous payback," said John Perlin, a solar energy historian and author of "From Space to Earth: The Story of Solar Electricity."

A thriving, hyper-competitive industry of 5,000 manufacturers has grown up in the last decade or more, driving costs down and widening the range of quality.

"The market is huge, but the competition is fearsome," said Bi Bangquan, president of Ri- zhao Gold Giant Solar Power, one of 150 manufacturers based in the city.

To find new customers, he's turned to rural areas. That can mean sending sales teams to villages, where stages are erected for singing and dancing performers to promote the virtues of his solar heaters.

Each manufacturer touts its product's ability to heat water within hours and insulate that heat for days.

"I guarantee my water's hot enough to take the feathers off a chicken," said one of Bi's rivals, Zhang Shouqin, founder of Rizhao Qin Naier Solar Power.

Some Chinese companies hoping to boost sales are looking to other countries, including the United States. Only about 1% of the world's solar water heating energy is produced in the U.S., but climate change is spurring interest in the technology. The California Public Utilities Commission has recommended the establishment of a $300-million incentive program to encourage homeowners to install units.

Bi dreams of exporting, but he's concerned that his heaters would be no match for Western habits. A typical American uses 100 gallons of water daily, both hot and cold, according to the U.S. Environmental Protection Agency. In China, an urban resident uses half that, and a rural dweller about a fifth.

Many of the older or cheaper Chinese models are far from perfect, lacking auxiliary heating elements to warm the water on cloudy days.

"I have to look outside and make sure it's been sunny before I decide to take a shower," said a 53-year-old retiree in Rizhao who gave only his surname, Xiao. "Otherwise you'll get a cold surprise."

About 225 miles northwest of Rizhao is the headquarters of Himin Solar Energy Group, China's largest and most advanced solar water heater maker, which recently garnered a $50-million investment from Goldman Sachs.

Himin's influence runs deep in its hometown, Dezhou. The streets of the city of 5.5 million are illuminated with solar-powered lights; 90% of its households have solar water heaters.

Company founder Huang Ming is building an expansive residential development in Dezhou called Utopia Garden to showcase the potential of solar technology. Scheduled for completion in 2013, the row of high-rise buildings will be crowned with a ribbon of solar thermal tubing and photovoltaic panels that will supply much of the complex's energy needs.

"We're only at the bottom of a big mountain," Huang said. Solar "can push a change in lifestyle."

david.pierson@latimes.com

Nicole Liu in The Times' Beijing Bureau contributed to this report.

Copyright © 2009, The Los Angeles Times

Thursday, September 3, 2009

One Man’s Trash ...

September 3, 2009

By KATE MURPHY, New York Times

HUNTSVILLE, Tex.

AMONG the traditional brick and clapboard structures that line the streets of this sleepy East Texas town, 70 miles north of Houston, a few houses stand out: their roofs are made of license plates, and their windows of crystal platters.

They are the creations of Dan Phillips, 64, who has had an astonishingly varied life, working as an intelligence officer in the Army, a college dance instructor, an antiques dealer and a syndicated cryptogram puzzle maker. About 12 years ago, Mr. Phillips began his latest career: building low-income housing out of trash.

In 1997 Mr. Phillips mortgaged his house to start his construction company, Phoenix Commotion. “Look at kids playing with blocks,” he said. “I think it’s in everyone’s DNA to want to be a builder.” Moreover, he said, he was disturbed by the irony of landfills choked with building materials and yet a lack of affordable housing.

To him, almost anything discarded and durable is potential building material. Standing in one of his houses and pointing to a colorful, zigzag-patterned ceiling he made out of thousands of picture frame corners, Mr. Phillips said, “A frame shop was getting rid of old samples, and I was there waiting.”

So far, he has built 14 homes in Huntsville, which is his hometown, on lots either purchased or received as a donation. A self-taught carpenter, electrician and plumber, Mr. Phillips said 80 percent of the materials are salvaged from other construction projects, hauled out of trash heaps or just picked up from the side of the road. “You can’t defy the laws of physics or building codes,” he said, “but beyond that, the possibilities are endless.”

While the homes are intended for low-income individuals, some of the original buyers could not hold on to them. To Mr. Phillips’s disappointment, half of the homes he has built have been lost to foreclosure — the payments ranged from $99 to $300 a month.

Some of those people simply disappeared, leaving the properties distressingly dirty and in disrepair. “You can put someone in a new home but you can’t give them a new mindset,” Mr. Phillips said.

Although the homes have resold quickly to more-affluent buyers, Mr. Phillips remains fervently committed to his vision of building for low-income people. “I think mobile homes are a blight on the planet,” he said. “Attractive, affordable housing is possible and I’m out to prove it.”

Freed by necessity from what he calls the “tyranny of the two-by-four and four-by-eight,” common sizes for studs and sheets of plywood, respectively, Mr. Phillips makes use of end cuts discarded by other builders — he nails them together into sturdy and visually interesting grids. He also makes use of mismatched bricks, shards of ceramic tiles, shattered mirrors, bottle butts, wine corks, old DVDs and even bones from nearby cattle yards.

“It doesn’t matter if you don’t have a complete set of anything because repetition creates pattern, repetition creates pattern, repetition creates pattern,” said Mr. Phillips, who is slight and sinewy with a long gray ponytail and bushy mustache. He grips the armrests of his chair when he talks as if his latent energy might otherwise catapult him out of his seat.

Phoenix Commotion homes meet local building codes and Mr. Phillips frequently consults with professional engineers, electricians and plumbers to make sure his designs, layouts and workmanship are sound. Marsha Phillips, his wife of 40 years and a former high school art teacher, vets his plans for aesthetics.

“He doesn’t have to redo things often,” said Robert McCaffety, a local master electrician who occasionally inspects Mr. Phillips’s wiring. “He does everything in a very neat and well thought-out manner.” Describing Huntsville as a “fairly conservative town,” Mr. McCaffety said, “There are people who think his houses are pretty whacked out but, by and large, people support what he does and think it’s beneficial to the community.”

Indeed, city officials worked closely with Mr. Phillips in 2004 to set up a recycled building materials warehouse where builders, demolition crews and building product manufacturers can drop off items rather than throwing them in a landfill. There’s no dumping fee and donations are tax deductible because the materials are used exclusively by charitable groups or for low-income housing.

“I’ve been recycling all my life, and it never occurred to me to recycle a door,” said Esther Herklotz, Huntsville’s superintendent of solid waste. “Dan has changed the way we do things around here.”

Officials in Houston also consulted with Mr. Phillips before opening a similar warehouse this summer, and other cities, including Bryan, Tex.; Denham Springs, La.; and Indianapolis have contacted him to inquire how to do the same.

Phoenix Commotion employs five minimum-wage construction workers but Mr. Phillips also requires the labor of the home’s eventual resident — he tends to favor a poor, single mother because his own father walked out on him and his mother when he was 17, which left them in a tough financial situation. “My only requirement is that they have good credit or no credit but not bad credit,” he said.

One of his houses belongs to Gloria Rivera, a cashier at a doughnut shop, who built the home with Mr. Phillips and her teenage son in 2004. Before then, she lived in a rented mobile home. Constructed almost entirely out of salvaged and donated materials, the 600-square-foot wooden house is painted royal blue with various squares of red, maroon and fuchsia tile glued to the mismatched gingerbread trim.

Inside, there is imported Tuscan marble on the floor, though the tiles are not of uniform size, and bright yellow stucco walls that Ms. Rivera said she textured using her thumb. “It’s not perfect but it’s mine,” Ms. Rivera said, touching the stucco, which looks like very thick and very messy butter cream frosting. “I call it my doll house.”

Phoenix Commotion homes lost to foreclosure have resold to middle-class buyers who appreciate not only their individuality but also their energy efficiency, which is also part of Mr. Phillips’s construction philosophy.

Susan Lowery and Alfredo Cerda, who both work for the United States Department of Homeland Security, bought a Phoenix Commotion house after the intended low-income owner couldn’t manage the mortgage. It has mosaics on the walls and counters made of shards of broken tile and cushy flooring made out of wine corks. “My wife likes the house because it doesn’t look like everyone else’s, but, being a guy, what I like is that it has a galvanized metal roof that I’ll never have to replace,” Mr. Cerda said.

Mr. Phillips said it bothered him when his low-income housing became “gentrified.” But if it leads to an acceptance of recycled building materials and a shift away from cookie-cutter standardized construction, he said, “I’m O.K. with it.”

Although it has a social agenda, Phoenix Commotion is not a nonprofit. “I want to show that you can make money doing this,” Mr. Phillips said.

He said he earned enough to live on but he was not getting rich. While he declined to be more specific, he allowed that the business has become more profitable as he has gained construction experience. It now takes six months to build a home rather than the 18 months it took when he started.

But Mr. Phillips said his biggest reward was giving less-fortunate people the opportunity to own a home and watching them develop a sense of satisfaction and self-determination in the course of building it.

An example is Kristie Stevens, a single mother of two school-age sons who earned a college degree last spring while working part time as a restaurant and catering manager. She has spent the months since graduation hammering away on what will be her home.

“If something goes wrong with this house, I won’t have to call someone to fix it because I know where all the wires and pipes are — I can do it myself,” she said. “And if the walls are wonky, it will be my fault but also my pride.”

Wednesday, September 2, 2009

Food Aid Grows in California's Agricultural Heart

SEPTEMBER 2, 2009

Central Valley Residents Struggle as Recession, Limited Water Supplies Hit Farms; 'This Is the Worst I've Ever Seen It'

By JIM CARLTON, Wall Street Journal

SELMA, Calif. -- The combined punch of drought, water restrictions and recession has created an ironic situation in California's Central Valley: Officials are handing out tons of food in the heart of one of the nation's most productive agricultural regions.

Volunteer Gabriel Martinez of Fresno, Calif., waits for people to pick up boxes of cereal during a food giveaway in Selma Aug. 27.

At a dusty flea market in this Fresno County town last week, more than 800 people -- many farmworkers -- lined up for two weeks' supply of cereal, rice, canned tomatoes and other basics. They waited in 99-degree heat as the food was distributed from 6 a.m. until late afternoon.

"We either have money for gas and medicine, or food -- not both," Helen Hernandez, a 51-year-old mother of four, said after collecting a pallet of food from the relief drive. Ms. Hernandez said her husband, David, 49, has been out of work since losing his $1,200-a-month job at a tomato-packing house last year.

For the 12-month period ended June 30, the Fresno Community Food Bank distributed a record 14.5 million pounds of food to residents of a three-county area -- double the previous year. So many people mobbed one food-distribution center two weeks ago that some who had waited in triple-digit heat for hours were turned away empty-handed after the food ran out. Unemployment in the counties in July ranged from 13.9% to 15%, compared with 11.9% for California as a whole, state officials say.

California's Central Valley normally serves as the nation's food basket. But amid a severe drought in the region, so many farmers have lost their jobs, they are being forced to line up for food handouts and other assistance.

"There's never been this kind of need in the Central Valley, ever," said Dana Wilkie, chief executive of the Fresno food bank. "In some communities, we're serving 80% of the residents."

The Central Valley, a 400-mile-long, 18-county inland area that relies heavily on agriculture, has suffered in the recession amid low demand for products like milk and almonds as well as a collapse in its once-booming housing market. At the same time, the region is grappling with drought and federal environmental rulings that have reduced water shipments to local farmers to as little as 10% of their normal allotments.

Some farmers have sidelined much of their acreage, throwing packers and field pickers out of work. In the Westlands Irrigation District, which serves about 700 farmers in the western part of the valley, more than 260,000 of the 600,000 acres that are typically home to tomatoes, lettuce and other crops have been taken out of production this year, officials say.

In all, farmers in the valley stand to lose between $1.2 billion and $1.6 billion in revenue this year, with 60,000 to 80,000 people thrown out of work, projects a study by the University of California, Davis.

"This is the worst I've ever seen it in the valley," said John Harris, chairman and chief executive of Harris Farms in Coalinga, Calif., which is farming about 4,500 acres compared with a normal total of about 14,000.

In June, Gov. Arnold Schwarzenegger proclaimed a state of emergency for nine Central Valley counties and asked President Barack Obama to declare Fresno County a federal disaster area. The designation was intended, in part, to help finance food shipments to the county.

But officials at the Federal Emergency Management Agency rejected the request, saying state and local entities had adequate resources. Mr. Schwarzenegger last week appealed the denial, which FEMA officials say they are reviewing. In the meantime, Mr. Schwarzenegger's office allotted about $4 million for five weeks' worth of food shipments, which began about a month ago.

At the recent food distribution in Selma, 46-year-old Leticia Reyes waited to load food in her car. Laid off a few weeks ago from her $1,200-a-month job at a fruit-packing plant, the mother of four said the family is left to pay its $600 monthly rent and other bills on her husband's $900-a-month pay as an auto mechanic and her $600 in monthly unemployment benefits.

"We're really struggling, so this food helps a lot," said Mrs. Reyes.

Write to Jim Carlton at jim.carlton@wsj.com