Rural Arizonans fear their water is being depleted by Saudi Arabian food producers. But state agriculturists laud the $180 million farm investment.

Saudi Arizona

Written by Jimmy Magahern Category: Valley News Issue: September 2016
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From the air, spied from a window seat on any flight from Phoenix to Northern California, they look like mammoth rudimentary crop circles. Luminous pea green orbs, precisely laid out like a monochrome Twister mat for giants on a barren stretch of desert about 100 miles west of Phoenix. Scattered rows of phosphorescent green rectangles linger nearby, giving the landscape the pixelated look of an Atari Breakout game. Are aliens staging a throwback party in Vicksburg, Arizona?

From the road, the fields appear just as otherworldly. “You’re driving for almost an hour and a half through nothing but desert,” says Cassie Ronda, an ASU journalism student who passed the site traveling from Phoenix to Wendon last January to cover a La Paz County community meeting. “And then, all of a sudden – green! It’s suddenly everywhere, and it just seems so unnatural.”

It’s alfalfa: 14,000 acres of the stuff, a few miles north of Interstate 10 and south of Vicksburg in the Ranegras Valley of La Paz County. This patch of western Arizona has always been used for farm land – previously, 4,430 acres of the farm had been irrigated to farm cotton and alfalfa, among other crops. 

But this operation takes desert farming to a whole new level – as if the general store was suddenly replaced by a Walmart Supercenter. Over the last 18 months, the new owners have poured about $180 million into developing this parcel, for a single purpose: All of the alfalfa grown here is immediately baled into hay and shipped overseas to Saudi Arabia, to feed the huge stable of 157,000 dairy cows owned by a company named Almarai, the largest food producer in the Middle East kingdom.

Naturally, the land purchase – finalized in 2014 – has become something of a hot-button issue in La Paz, partly due to the stigma of Arab ownership, and partly due to lax restrictions on water-pumping in this part of the state. Already Almarai is operating at least 23 wells on the La Paz land, each capable of pumping out more than 100,000 gallons of water daily to feed the moisture-gluttonous crop – up to 2.3 million gallons a day. “They’re stealing our water” is a common refrain in the region.

Viewed as unfounded by some Arizona officials, concerns of resource-exploitation are unlikely to diminish in coming years – particularly as the Kingdom of Saudi Arabia embarks on an ambitious campaign to reinvent its global economic holdings in the wake of petroleum’s recent plummet. Like the $3.2 billion the kingdom recently poured into San Francisco-based transportation network Uber, La Paz County’s underground water may be part of that strategy – and so, in the not-too-distant future, might sunny, sandy, Saudi-like Phoenix itself. 

 

Exactly why the Saudis are spending hundreds of millions of dollars and using potentially billions of gallons of water to grow cattle forage in Arizona may seem puzzling, at first. 

The simplest explanation: Alfalfa is a very water-intensive crop. It requires up to four times more irrigation than growing wheat. And Saudi Arabia is running out of water. 

After trying for decades to become a self-sufficient food producer, and using trillions of gallons of water in the process, the Saudi government is coming to terms with a sobering fact: Over the past half-century, farming has depleted roughly four-fifths of the groundwater under the Saudi peninsula, putting a hard expiration date on the country’s capacity to feed those 157,000 heads of cattle. Like oil deposits, the groundwater aquifer is a finite, non-renewing resource in Saudi Arabia. A relic of a different aeon, so ancient it’s mentioned in the Bible. When the water is gone, it’s gone.  

To conserve the kingdom’s dwindling water tables for the probable 77 percent population growth predicted over the next three decades, wheat production was halted this year, and alfalfa is set to be phased out over the next three years. In place of massive domestic farming, the House of Saud implemented a policy of “food security” – described by the Middle East Policy Council as a strategy of “developing farm resources in land-rich, cash-poor countries around the world. In effect, the Saudis plan to explore for and produce food overseas the way American and other Western companies explored for oil in the Arabian peninsula.”

La Paz is not necessarily cash-poor, but it does evince other qualities coveted by Arab-owned companies like Almarai and the United Arab Emirates’ Al Dahra, which operates another alfalfa farm in the county: namely, year-round sunshine and loose water regulations. In fact, La Paz is one of a number of small rural communities in Arizona fully exempted from the water-pumping restrictions imposed on more densely populated cities like Phoenix and Tucson. Essentially that means the Saudi companies – and anyone else who registers a well with the state – can pump as much water as needed in the unrestricted counties, providing they can prove “beneficial use,” a wide legal umbrella that includes farming.

For some of the county’s residents, the very idea of Saudi sheikhs tapping into Arizona’s water supply strikes up long-dormant urges to rock the casbah.

“Over in Saudi Arabia, they have pretty much depleted their water resources, so now they’re here using ours, and taking advantage of areas that do not have restrictions,” says La Paz County Supervisor Holly Irwin, who’s among the most vocal opponents of the Almarai operation. “That affects the people who have been here for generations, whose wells may run dry if the groundwater drops.”

In this part of rural Arizona, locals get water from their own wells, and La Paz’s water supply is composed solely of fossil groundwater deep underground – it doesn’t get replenished by a hard rain or snowfall. Consequently, county residents are worried the mega-farm may suck up so much of the groundwater, their wells may no longer run deep enough to tap it. Currently, there is no definitive information about the depth and capacity of the Ranegras aquifer – the last hydrology study occurred in 2010 – but Irwin believes the anecdotal evidence is compelling. 

“One couple that I spoke with, the water in their well [near the Almarai farm] dropped 59 feet,” Irwin claims. “It cost them between $20,000 to $30,000 to replace their well. And these are retirees, who really weren’t prepared to spend that much just so they could have water. They were just using that well to live, like you or me. It was residential.”

Other sources close to the controversy scoff at the idea of falling water tables and resource banditry. According to Jordan Rose, attorney for the Saudi subsidiary that owns and operates the land, Fondomonte Arizona, the La Paz farm is spectacularly water-efficient – perhaps the most ambitious, state-of-the-art farm Arizona has ever seen.

“[Fondomonte] purchased an existing farm that was growing alfalfa and some other crops, and they put in the most conservation-minded new technology,” she says. “They spent $180 million in the last 18 months to upgrade the farm, and they’re actually using far less water than was being used before.” 

Thomas Buschatzke, director of the Arizona Department of Water Resources, backs that claim up.

“Since they’ve bought up that farm, they’ve increased its efficiency by putting in more efficient delivery systems, drip irrigation and pivot irrigation,” he says. “They’ve been saving between 25 to 50 percent of water use compared to what was going on there before with the traditional flood irrigation method. 

“This is the story,” he continues. “At some wells in the Ranegras [Plain] Basin, we’ve actually seen the water tables rise.”

Be that as it may, other experts in the Arizona water-management community are sympathetic to the concerns of La Paz residents. According to Sarah Porter, a Harvard-educated water policy attorney who now serves as director of the Kyl Center for Water Policy at Arizona State University’s Morrison Institute, Arizona as a whole has a more than adequately self-sustaining water supply – a system of redundancies fed by multiple sources that relies on no single water flow. The city of Phoenix “really was built for drought,” she says.

But La Paz isn’t Phoenix. 

“[Their] situation is different,” she adds, “because they don’t have that imported supply of surface water that we have in Phoenix. They are 100 percent dependent on groundwater. And it’s non-recharging. So there’s a legitimate concern that a big operation like [Almarai’s] will extract the water at a rate that is way beyond the expectations of the people who are living there.” 

 

Just because La Paz has a valid concern about its groundwater doesn’t mean there isn’t an unsightly social bias or two at play. Ironically, it may have been the isolated community’s inherent distrust of outsiders that led to its current predicament. 

In 1980, then-governor Bruce Babbitt signed into law the Groundwater Management Act, which designated the parts of the state where groundwater pumping was heaviest (Phoenix, Tucson, Prescott and Pinal County) as Active Management Areas, or AMAs, and also established some Irrigation Non-Expansion Areas (INAs) in rural farming communities. In those areas, groundwater withdrawal is regulated, so that a company like Almarai would not be permitted to tap into the underground aquifers and withdraw as much water as it wanted.

The don’t-tread-on-me residents in La Paz, however, told the act’s architects they didn’t want government regulation in their backyard. 

“When the commission was working on the act, we held public hearings around the state,” says Kathleen Ferris, a private practice attorney specializing in water regulation who supervised the drafting of the landmark act, recognized as one of the nation’s first laws for managing groundwater. “And most of the rural areas of the state basically told us that they didn’t want their groundwater regulated. So as a result, we didn’t write them into the act.”

Irwin remembers things differently. “We were left unregulated so that the water could be pumped and transferred to Phoenix,” she says – and indeed, records show that the cities of Phoenix, Tucson and Scottsdale all bought land in La Paz County for the purpose of “water farming,” with Scottsdale allocating some of the water for a pair of golf courses.

Whether La Paz intentionally opted out or the act’s writers chose to focus on bigger population centers, the resulting split between Active Management Areas and exempt districts brought about communities throughout the state with very different dependencies on water.

And different anxieties, inflamed by America’s complicated relationship with Saudi Arabia and the Persian Gulf nation’s checkered record of global citizenship. Most of the roughly 20,000 people spread out across La Paz County, where the median age is 54, are old enough to remember the OPEC oil embargo of 1973, when the resource-rich Arab countries and their allies blocked all oil deliveries to the U.S. in response to American aid to Israel during the ongoing Arab-Israeli conflict, creating an unprecedented gas shortage and demonstrating, for the first time, the Arab nations’ formidable economic power. 

“A lot of the people [in La Paz] are like, ‘I can’t believe the Saudis are over here taking our water after what they did to us back then,’” says ASU student Ronda, who attended a packed town hall meeting between Arizona Department of Water Resources officials and community members last year. “There’s a lot of that ‘America first!’ way of thinking.”

As such, many La Paz residents are willing to overlook the manifest economic benefits of Almarai’s $180 million investment. Already, Fondomonte Arizona is the fourth largest employer in La Paz County, just behind the BlueWater Resort and Casino, the Colorado River Indian Tribe and the La Paz Regional Hospital. The farm also provides more than $270,250 per year in tax revenues to the county, according to Fondomonte lawyer Rose.

Rose hints at some lingering anti-Arab prejudice in La Paz. “I’ve never seen anything like this,” she alleges. “There’s hundreds of companies in Arizona that have always been shipping alfalfa and other crops around the globe. What makes this any different?” 

The company appears aware of the optics. Its Fondomonte subsidiary maintains a regional office in Goodyear, and is headed up by Europeans.

“This company is worldwide,” Buschatzke says. “It has some relationships with Saudi Arabia. But when we met with them, it was two Scotsmen and an Irishman. It’s not Saudis coming in headdresses!”

 

It’s true that Saudi Arabia is not the only foreign power heavily invested in Arizona farmland and water rights. China-based companies have been doing the same thing for years, lately out of Mohave County. Since 2009, American alfalfa exports to China have grown by nearly a factor of eight. But China-bound hay is transported back in containers that arrive in the U.S. carrying electronics imports and otherwise return empty, thanks to our high trade deficit. By contrast, few goods are imported from Saudi Arabia to the U.S., making the cost of shipping hay, hardly a high value crop, across the ocean a dubious practice.

So do the Saudis have an ulterior motive beyond feeding their cattle?

“I just can’t see how it’s economical for them to [grow and ship alfalfa],” says Brian Henning, the director of operations and engineering for the Central Arizona Project. “Wouldn’t it make more sense to get the crop from someplace closer than Arizona?” (On that point, Almarai has staked a claim on the Nile River in Ethiopia to grow feed for cows on a dairy farm near Riyadh, just across the Red Sea – a textbook “food security” arrangement.)

But Henning suspects the Saudis’ Arizona operation may actually be more about owning the water used in growing the hay than the hay itself.

“The thing with water is it’s still a public commodity, per se, so it’s never really established its true market value,” he says. “And yet it drives the world’s agriculture. So there may be business merits to exporting water use.”

Indeed, the emerging trend of water-investment was teased in the closing frames of the Oscar-winning movie The Big Short, when the real-life fates of the wily financial traders portrayed in the film were spelled out on the screen, American Graffiti-style. For Michael Burry, the eccentric but visionary hedge fund manager played in the movie by Christian Bale – and who made dirty millions betting against the housing bond market – the post-script was intriguing: “Michael Burry is focusing all of his trading on one commodity: Water.”

In an interview in New York magazine last December, Burry confirmed he is now betting on water, but with a twist. “What became clear to me is that food is the way to invest in water,” he said. “That is, grow food in water-rich areas and transport it for sale in water-poor areas.”

In this context, the Saudi acquisition of La Paz County farmland could be viewed as part of a broader investment scheme as a hedge against falling oil prices – accessing water holdings via alfalfa, where Arizona is undoubtedly a power player. “Because of our soil quality and weather conditions, we’re known for growing the best alfalfa anywhere on the planet,” Rose says. “So companies from around the globe farm here and ship alfalfa all over.” Arizona’s alfalfa crop yield averages 8.4 tons per acre – the highest in the nation. Often criticized by environmentalists as a crop that uses an abundance of water while producing little farm-gate revenue, alfalfa is undoubtedly a sound commodity in the here and now. As more Asians switch to a more American, meat-based diet, global exporting of alfalfa as cattle feed is proving a profitable trade.

And some say it’s not ecologically reckless at all – at least relative to modern industry.

“Southern Arizona and California are the biggest agricultural centers in the United States,” says Ben Ruddell, an associate professor in the Fulton School of Engineering at ASU who also serves as director of the National Water-Economy Project. “They supply a large portion of the winter food and produce for the rest of the country. And yet it seems like we always have to justify their water use. Nobody ever asks questions about the water that Intel is using in Chandler for their $10 billion fabrication facility.”

For the record, Intel’s Ocotillo Campus uses about 9 million gallons of water daily in its semiconductor manufacturing – about 4 times as much as the Almarai farm in La Paz County, to use an example. But it also returns around 5 million gallons to the underground aquifer for eventual reuse, making it a model of sustainable water practices (comparable figures are not yet available for the Almarai operation). Still, Ruddell makes a valid point.

“I don’t see anybody asking questions about the water that’s used at Cubs spring training games, or the water that Bank of America uses in its big building downtown. I rarely hear questions about the water used in the tourism industry. They’re all using water, too, to produce goods and services – many of which are consumed by people outside the state. In the same way, we are benefiting in terms of local jobs and tax dollars and local spending when the Saudis put a farm in our state. That’s a good thing.”

Ruddell does add a caveat. “If it’s not sustainable or there are hidden costs that we’re not accounting for, it might not be as good a deal as we thought. So we should be weighing the benefits of the water use. What would be foolish for us to do would be to compromise our microchip industry because we gave away, for free, a ton of water to grow hay.”

 

The purchase of La Paz farmland is not the first time the Arab world has kicked the tires on Arizona investment. When former Phoenix mayor Phil Gordon returned from a business trip to Saudi Arabia in 2009 and announced long-term plans for an economic development agreement between the City of Phoenix and Dubai – dubbed the International Business Attraction Program – city planners began envisioning towering new Downtown skyscrapers on par with Dubai’s nearly 2,000-foot-tall Burj Khalifa high-rise and enormous shopping malls “10 times the size of all of Desert Ridge,” as Gordon projected. 

Instead of mongo-malls, we got a ginormous alfalfa farm, but the day is young: the Downtown skyscrapers were forecast for the 2020s and 2030s. 

Of course, foreign investors will carefully monitor the backlash over Saudi-owned farms in Arizona, which some pundits say has the potential to drive away international business. 

“Everybody in the world looks at Arizona with skepticism,” Ruddell says. “They know Arizona is one of the hottest and driest places in the world, and they think, ‘Surely this can’t be a great place to invest and do business in, with climate change and drought going on.’ If I’m a global investor, why would I invest someplace where I’m worried about water supply?”

Michael Welland is a U.K. geologist and author of several books on desert environments. Like many learned observers, dating back to legendary Colorado River explorer John Wesley Powell, who believed settlements should only be built around water and watersheds, Welland views Arizona’s arid climate as one that would not support life if not for the visionary work of the early canal builders. “Without this incredible network of monstrous engineering projects, Phoenix really shouldn’t be there,” Welland says, echoing Powell’s own words. “The trouble is, we are using up groundwater at a rate that is not sustainable... and the desert of Arizona is not naturally capable of supporting thousands of acres of alfalfa.”

The problem with that viewpoint, while geologically sound, is that it overlooks the singularly odds-defying magic Arizona water scientists have accomplished here, from the flash-flood-farming Hohokam to the architects of the Central Arizona Project and Salt River Project. “That whole idea that Phoenix shouldn’t be here is one that disregards history,” says the Kyl Center’s Porter. “Phoenix is here because it was a very fertile river valley, and still is.”

Ruddell says it’s important to show the world Arizona is not afraid of sharing its ingeniously-managed water supply with global investors, even if that means playing nice with the sheikhs. “We have to be very careful about our perception around the country and the world,” he says. “If we don’t project a positive image of water management, if we don’t become famous for how progressive and sustainable our water management is, the world is not going to invest in Arizona. We really have to get this right.”

Not surprisingly, many in La Paz County are now calling for regulations – albeit regulations that would spare small-scale farmers. “We need some regulations put in place,” county superviser Irwin says, “at least for the biggest water users.”

Even if the community members can agree to lobby for AMA designation, Ferris is not sure if such a bipartisan initiative could even be amended today. The 1980 act required agreement from the governor, the Secretary of the Interior and various city, mining and agricultural officials.“It really was a special moment in time,” she says. “And one wonders if we’d be able to do anything like that now.”

Hopefully, it’s a moot point. While praising the Saudis’ water management machinery, state official Buschatzke tempers his praise with a knowing assessment of their probable intent. “They may be acting in their own self-interest,” he says. “But the truth is they’re trying to make farming here more sustainable – because, basically, they already know what can happen if they pump themselves dry.”