Arizona terminates lease of Saudi-owned Fondomonte after investigation

PHOENIX — Arizona Gov. Katie Hobbs announced Monday the state land department terminated one of Saudi-owned dairy company Fondomonte Arizona’s four Butler Valley leases. The department also gave a notice that the company’s other three leases will not be renewed after its February expiration.

In April, a pair of permits were rescinded after an investigation by state attorney general Kris Mayes. The permits would have allowed Fondomonte Arizona, a subsidiary of Almarai Co. to drill more than 1,000 feet into the water table to pump up to 3,000 gallons. The company grows alfalfa, a water-intensive crop, which they ship to Saudia Arabia to feed livestock.

The state, following inspections of major state trust land leases, uncovered Fonomonte’s substantial default on its 2016 lease.

Fondomonte was given notice and opportunity in November 2016 to correct numerous defaults under its Butler Valley leases. The company failed to include secondary containment structures on its fuel and diesel exhaust fluid storage units. During an inspection in August, it was found that Fondomonte had not corrected the default after nearly seven years. The status gave the department grounds to terminate the lease, the press release stated.

“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. It’s unacceptable that Fondomonte has continued to pump unchecked amounts of groundwater out of our state while in clear default on their lease,” Hobbs said in a press release.

“I’m proud my administration has taken swift action to hold defaulting high-volume water users accountable and bring an end to these leases. And moving forward, I will continue to do everything in my power to protect Arizona’s water so we can continue to sustainably grow for generations to come.”

Protecting Arizona water

Renewing the three remaining Butler Valley leases is not in the best interest of the Trust’s beneficiaries, the department determined. They said it was due to excessive amounts of water being pumped from the land for free of charge.

Butler Valley holds value to the Trust as one of Arizona’s five water “transportation basins.” Groundwater is allowed under state law to be conveyed to other parts of the state.

It is the only groundwater transportation basin that is predominantly controlled by state or federal land managers.

“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. However, we must take additional steps to urgently protect Arizona’s water resources – especially in rural Arizona,” Mayes said in a statement.