Arizona moves to end Saudi farm's controversial groundwater deals to grow, export alfalfa

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Gov. Katie Hobbs' administration on Monday announced two steps to stop a controversial Saudi Arabian company from using groundwater beneath state land in western Arizona to grow and export alfalfa.

Hobbs said in a statement that the Arizona State Land Department had canceled one of its leases to Fondomonte Arizona, and would not renew three others that are set to expire in February.

Those four account for all of Fondomonte's leases in the Butler Valley near Bouse, though the company leases other state land elsewhere, according to the Governor's Office.

The company farmed about 3,500 acres of state land in Butler Valley to grow feed for dairy cows in Saudi Arabia and is allowed to pump groundwater for that purpose entirely unchecked and unpaid for.

The issue was brought to light last year by The Arizona Republic, which highlighted Fondomonte as an example of companies that get below-market-rate leases on Arizona's vast stretches of state land. Fondomonte was unique in that its leases allowed it to draw water from a groundwater supply earmarked as a possible future source for Phoenix and other metro areas.

Fondomonte's presence in western Arizona became a political lightning rod as policymakers grappled with a megadrought, a decreasing supply from the Colorado River and increasing demand for water in the form of a growing population.

“I’m not afraid to do what my predecessors refused to do — hold people accountable, maximize value for the state land trust, and protect Arizona’s water future,” Hobbs said in a statement. “It’s unacceptable that Fondomonte has continued to pump unchecked amounts of groundwater out of our state while in clear default on their lease."

While leases of state land carry penalties for early termination, the Governor's Office said the first Fondomonte lease was canceled because the company was in default on "numerous items," including failing to properly store fuel and diesel exhaust fluid. Fondomonte was given notice of those issues in November 2016, and nearly seven years later, a mid-August inspection showed the company had not fixed those problems, according to Hobbs' office.

Ground water is pumped into a canal to irrigate a field, February 25, 2022, at Fondomonte's Butler Valley Ranch near Bouse.
Ground water is pumped into a canal to irrigate a field, February 25, 2022, at Fondomonte's Butler Valley Ranch near Bouse.

The other leases would not be renewed because of Fondomonte's draw on "excessive amounts of water" in the Butler Valley, one of five water transportation basins that allow water to be moved around the state and that has been earmarked as a possible future water supply for Phoenix and other metro areas.

Fondomonte said through a spokesperson it was reviewing the notifications from Hobbs and the State Land Department but that it believed "the state is mistaken that the company is in breach of its lease."

"Fondomonte will work with the Governor’s Office to highlight these factual errors," spokesperson Barrett Marson said. "Fondomonte is adhering to all the conditions of the lease, and thus we have done everything required of us under these conditions.

"As for the other leases the state intends to not renew, this would set a dangerous precedent for all farmers on state land leases, including being extremely costly to the state and Arizona taxpayers. Fondomonte will explore all avenues to ensure there is no discrimination or unfair treatment."

The original story: Arizona provides sweet deal to Saudi farm to pump water from Phoenix's backup supply

Hobbs began criticizing the sweetheart deals to Fondomonte on the campaign trail last year during her run for governor. Her administration has this year revoked well permits for the company and paused renewals and applications to lease state-owned lands in groundwater transportation basins.

Arizona leases vast stretches of its publicly owned land to private companies, turning a profit that funds the State Land Trust and its various beneficiaries, the largest of which is K-12 education. In 2021, the state received $4.3 million for its about 160,000 acres of leased land for agriculture, according to the department.

The Republic's reporting highlighted other shortcomings of those leases, including agricultural rental rates that haven't changed in more than 15 years.

Republican La Paz County Supervisor Holly Irwin has been raising concerns for eight years about such leases and their toll on the state's water supply.

"I'm just so glad we have leadership in this current administration that listened to La Paz County's voice," she told The Republic. "For the first time, I feel like there's real hope in dealing with the water issues here."

Irwin commended Hobbs, as well as Democratic Attorney General Kris Mayes and U.S. Rep. Ruben Gallego, D-Ariz., for their work on the state's water issues.

Mayes has taken aim at well drilling permits given to Fondomonte and criticized the state Department of Water Resources, which she has said is not following groundwater management laws.

Gallego, who is running for U.S. Senate next year, introduced a bill in Congress that would levy a 300% tax on the sale and export of any water-intensive crop by a foreign company or government.

“For all of our leaders to come together to take a look at this issue and realize it’s wrong, it shouldn’t matter what side of the aisle you’re on," Irwin said. "It demonstrates how government should work.”

Mayes, however, suggested the government's response didn't happen fast enough or reach to systemic issues with state land leases.

"This decision to protect Arizona's precious groundwater resources and uphold the integrity of our state land trust is a good step in the right direction for the future of Arizona," Mayes said in a statement. She said while the announcement was "commendable, it should have been taken by state government much earlier."

"The failure to act sooner underscores the need for greater oversight and accountability in the management of our state's most vital resource. ... 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."

Hobbs was sworn in as governor on Jan. 2, following former Gov. Doug Ducey, a Republican, who served two four-year terms in office.

Reach reporter Stacey Barchenger at or 480-416-5669. 

This article originally appeared on Arizona Republic: Arizona moves to end Saudi farm's groundwater deal to grow alfalfa