Arizona is canceling leases that allow Saudi-owned farm unlimited access to state's groundwater

Arizona Gov. Katie Hobbs said this week her administration is terminating state land leases that for years have given a Saudi-owned farm nearly unfettered access to pump groundwater in the dry southwestern state.

On Monday, Hobbs, a Democrat, said the state had canceled Fondomonte Arizona's lease in western Arizona's Butler Valley and would not renew three other leases up for renewal there next year. 

An investigation by the governor's office found that the foreign-owned farm had violated some of its lease terms. Hobbs called it unacceptable that the farm "continued to pump unchecked amounts of groundwater out of our state while in clear default on their lease."

Fondomonte Arizona, a subsidiary of Saudi dairy giant Almarai Co., grows alfalfa in Arizona that feeds livestock in the water-stressed Gulf kingdom. CBS News previously reported that alfalfa is illegal to grow in Saudi Arabia because of how much water it takes to grow the crop. 

Through a spokesperson, Fondomonte said it would appeal the governor's decision to terminate its 640-acre lease in Butler Valley. Altogether, Fondomonte farmed about 3,500 acres in the rugged desert area west of Phoenix.

Fondomonte raised eyebrows when in 2014 it purchased nearly 10,000 acres of land for $47.5 million about 20 miles away from Butler Valley in Vicksburg, Arizona. Since then, worsening drought in Arizona has brought renewed attention to the company's water use and the broader issues of foreign-owned farms and groundwater pumping.

 The violations the governor's office detailed relate to the company's storage of hazardous materials, among other issues. On Monday, Hobbs' office said that Fondomonte was notified of the violations in 2016, but an investigation in August found the company had not fixed the problem seven years later. That gave Arizona's State Land Department grounds to terminate the lease.

The Arizona governor's office said the State Land Department decided not to renew three other leases the company had in Butler Valley due to the "excessive amounts of water being pumped from the land — free of charge."

Arizona cattle rancher Brad Mead told CBS News in August that the company's water use has depleted his own neighboring well. 

The department manages land owned by the state, which in Fondomonte's case, had been leased to the company by Arizona's State Land Department. Some land is rented to the company for just $25 an acre. In April, CBS News obtained copies of several land leases, dating back to 2014, giving the company rights to more than 6,000 acres of state-owned land and the accompanying groundwater. At the time CBS News reported the leases, the department did not respond to requests for comment about why it granted them. Many of the state officials in charge when the leases were signed are no longer in office. 

Butler Valley's groundwater is especially important because of state law that in theory allows for it to be pumped elsewhere. That makes its water of interest to cities like Phoenix, also dealing with water supply-related stress and a fast-growing population.

In Arizona, cities such as Phoenix and Tucson have restrictions on how much groundwater they can pump under a 1980 state law aimed at protecting the state's aquifers. But in rural areas, little is required of water users to pump from underground aquifers besides registering wells with the state and using the water for activities, including farming, that are deemed a "beneficial use."

Fondomonte also farms in Southern California's Palo Verde Valley, an area that gets its water from the shrinking Colorado River. Those operations have attracted less scrutiny. Not all of Fondomonte's farms in Arizona are affected by the governor's decision. And it's not the only foreign company farming in the Southwest. The United Arab Emirates-owned Al Dahra ACX Global Inc. grows forage crops in Arizona and California, and is a major North American exporter of hay.

Almarai's holdings in the Southwest are just one example of the farmland the company and its subsidiaries operate outside Saudi Arabia. It farms tens of thousands of acres in Argentina, which has also faced severe drought conditions in recent years.

Foreign entities and individuals control roughly 3% of U.S. farmland, according to the U.S. Department of Agriculture. Canada is the largest holder — mainly of forestland.

Kris Mayes, Arizona's Democratic attorney general, praised the governor for cracking down on the foreign-owned farm.

In April, Mayes announced that the state had rescinded permits that would've allowed Fondomonte to drill new water wells after inconsistencies were found in its applications. On Monday, Mayes called the governor's actions a "step in the right direction," adding that the state should have acted sooner.

"The decision by the prior administration to allow foreign corporations to stick straws in the ground and pump unlimited amounts of groundwater to export alfalfa is scandalous," Mayes said.

In:
• Arizona
• Saudi Arabia
• Katie Hobbs