The water mystery unfolding in the western U.S.

0:01NPR.

0:11This is The Indicator from Planet Money. I'm Darian Woods. In December, Arizona's Attorney General Chris Mays held a press conference announcing a lawsuit against Fondamonte, a company that grows alfalfa in the state. She called its pumping of underground water excessive. Excessive is dewatering nearby wells. Excessive is causing subsidence in a way that potentially damages infrastructure. Excessive is pumping so much water that it damages the quality of the water that remains. And where this lawsuit may stand out is Fondamonte's ties to the royal family of Saudi Arabia. Zach Ziegler has been following the story for NPR member station AZPM in Tucson and water in general in the southwest for the podcast Tapped.

1:05Welcome, Zach. Hey, thanks for having me, Darian. As you know, this is all playing out in La Paz County. It's a rural area, like fewer than five people per square mile rural, with massive groundwater basins underneath it. Right, so given that, you'd think the community would be flush with water. But residents there have been complaining about their wells going dry for some time now, and that is leaving them with the choice to spend tens of thousands to dig deeper for their water or find a new home. Yeah, and the issue goes deeper than alfalfa farming. A New York-based private equity firm may also be part of it.

1:43So today on The Indicator, what is behind these water tensions in rural Arizona? We've got foreign farms, we have New York private equity firms, or could the problem be something else? That's after the break.

2:03This message comes from NPR sponsor Zendesk. Introducing the next generation of AI agents built to deliver resolutions for everyone. With an easy setup that can be completed in minutes, not months, Zendesk AI agents resolve 30 % of interactions instantly, quickly giving your customers what they need. Loved by over 10 ,000 companies, Zendesk AI makes service teams more efficient, Businesses run better and your customers happier. That's the Zendesk AI effect. Find out more at Zendesk.com. Holly Irwin is the longest tenured member of the La Paz County Board of Supervisors. She's been worried about water for almost a decade.

2:42It's around that time that a news article tied Saudi Arabia to her community. There was a reporter down and he broke the story about the foreign companies and, you know, coming and purchasing land for water resources and stuff. That reporter Holly's talking about was from the Center for Investigative Reporting. That outlet was the first to tell the story of Fondamonte, a company with major ties to the Saudi royal family. Fondamonte has been growing a kind of hay called alfalfa in this area for years, and most of what it grows gets shipped back to Saudi Arabia to feed its dairy cows. The company started farming in the Arizona desert because the kingdom was burning through its own underground water supply at an unsustainable rate.

3:25They're growing hay because they can do it all year long here. They can ship it, you know, they're shipping it back to their country. And not only were they doing it on the land that they own, but they were also doing it on land that was leased by the state land department, for crying out loud. Yeah, until late 2023, Fondamonte was leasing around 6 ,500 acres from the state. More than half of those leases have gone away, either because they expired or were cancelled by the state's governor, Katie Hobbs. But the bigger concern is what's going on on the 45 ,000 acres Fondamante owns. Arizona's water laws get really lax when you get outside the big cities and a few other areas.

4:06Sharon Megdahl is the director of the Water Resources Research Center at the University of Arizona. There's basically no regulation on how much you can pump, provided that it's being put to reasonable use. And most of it is. I mean, agriculture is a reasonable use. industries are reasonable use, municipalities are reasonable use. But while farming alfalfa meets that reasonable use standard as regulators see it, many locals would disagree. They take issue with a foreign-owned company using their water to grow a crop that's mainly for export. And Fondamante has about 30 wells. The biggest can pump about 3 ,000 gallons of water a minute.

4:49And Holly says pumping all of that water is causing issues for plenty of people who rely on their own wells because there's no water utility in their area. I started getting phone calls from residents that were having issues with their wells. And one specifically was right up the road from where Fondamante is at, a little church. They've been out of water now for about four or five years. Saudi Arabia is not the only country that's doing this either. Local water utility managers told me that a United Arab Emirates company leases land to the northeast of Fondamante to grow alfalfa as well. Interestingly though, Zach, when you were reporting this story, you were told by the local water district manager that those operations have been slowing lately, and you might have found out why.

5:34Yeah, it's a twist that could be the future of water issues in La Paz County. In early July, that farmland leased by the UAE was sold to a New York-based private equity firm called Water Asset Management. The firm paid about$100 million for 13 ,000 acres of farmland. OK, this is a twist. And what are the locals making of this development? Well, they're seeing it as a sign that nearby big cities in Arizona are thirsty for water, too. They fear the private equity firm plans to pump their underground water, then sell it to growing cities like Phoenix and Tucson. Sharon says that's not a new idea.

6:13Back in the 1980s, Arizona's big cities were trying to do something similar. Cities were buying what some would call water farms. They were buying land in rural Arizona with the intention or expectation at some time in the future, they would pump groundwater from those areas and pump that water into the cities. State lawmakers did outlaw that practice, though, before it happened. But they left some loopholes in the law that exempted certain rural basins, including much of La Paz County. Either way, all of this minutiae about water regulation and basins being set aside for transfer in rural Arizona has left Holly Irwin's head spinning.

6:56It's definitely been an eye-opener. I wasn't aware of it. But, you know, like this job, you learn something new every day. And once I found that out, it made me sick. I really thought, who on earth would ever, what were the lawmakers thinking at that time? Holly and other lawmakers have pushed for new laws, but a bill they backed in last year's legislature didn't make it out of committee. And by the way, we reached out to Fondamante and Water Asset Management several times over the span of four months of reporting on this for an interview or comment, and we didn't receive a reply from either until the lawsuit we heard about at the start of the show.

7:34Fondamante issued a statement through a spokesperson saying, Fondamante remains committed to progressive, efficient agricultural practices on all its operations. It added that Fondamante is not in violation of any state law. It then ended with, we find the allegations of the attorney general totally unfounded and we will defend any potential action against Fondamante and our rights vigorously before the competent authorities. That note about not violating state law is something that bothers Hawley, who was the other speaker at the Arizona Attorney General's press conference. She says the fact that the state's water laws haven't been updated in more than 40 years is a big part of the issue.

8:13You know, the laws that were created in 1980 just frankly don't work anymore and we need an alternative, but we need the legislature to work with us and allow us to create something for the betterment of the people that we all serve.

8:29If you want a deeper dive into this topic, check out Tapped, AZPM's podcast about water in the Southwest. They did four episodes on this, going all the way back to before the U.S. Civil War. Thank you, Zach. Hey, thanks for having me, Darian.

8:47This episode was produced by Cooper Katzmackim with engineering by Gilly Moon and Neil Tivolt. It was fact-checked by Sierra Juarez. Kate Kincannon edits the show, and The Indicator is a production of NPR.