State Pension Fund Is Invested in Deal to Drain Arizona’s Dwindling Groundwater

As rural Arizonans face the prospect of wells operating dry, international companies are sucking up huge quantities of the state’s groundwater to develop hay for Saudi Arabia and different rich nations. Now it seems {that a} key investor on this water switch scheme is Arizona’s personal worker retirement fund.

In La Paz County, a rural group about 100 miles west of Phoenix, Al Dahra Farms USA has been operating a 3,000-acre farming operation within the Sonoran desert, draining down the identical groundwater that the county’s residents depend on to fill their wells. The Emirati-owned farming firm tapped right into a former public water provide in 2013 to develop hay that will get shipped to international locations in Asia and the Center East.

The state of Arizona helped fund the land deal that allowed Al Dahra to faucet into the groundwater in La Paz County, in response to data obtained by Reveal from The Middle for Investigative Reporting. The state’s retirement system invested $175 million in 2012 into an East Coast firm that purchased about 20 sq. miles of land that had beforehand been put aside as a public water supply. The corporate, Worldwide Farming Corp., then leased among the land to Al Dahra.

Al Dahra is now a key participant within the booming enterprise of tapping into Arizona’s restricted water to develop hay that will get shipped abroad, which economists say is the equal of exporting the state’s scarce water. A Saudi-owned farm, which can be in La Paz County, has made worldwide information for rising hay within the parched Sonoran Desert whilst Saudi Arabia has severely restricted its personal hay manufacturing because of its water shortage. However in Arizona, hay exports have elevated almost 100-fold within the final 10 years. The water used to develop the exported hay final yr was equal to the water utilized by about 1 million individuals within the state, in response to a latest paper from researchers on the College of Arizona.

The state’s funding into exporting its personal water comes because the area faces ongoing water shortages. Arizona Gov. Katie Hobbs introduced this yr that components of the metro Phoenix space don’t have sufficient water to proceed constructing new homes amid ongoing groundwater depletion. The state additionally faces the probability of additional reductions in water equipped from the dwindling Colorado River.

Because the state-funded funding firm purchased the land in La Paz County, it has drilled new, deeper wells. Folks residing close by say they’re now shedding entry to their solely supply of water, their groundwater, because the water desk drops on account of the intensive farming. As their wells go dry, they face powerful decisions. Some owners spend tens of hundreds of {dollars} to drill their wells deeper or have water trucked in. Others simply depart.

“The stakes are our future,” stated Holly Irwin, certainly one of three elected supervisors in La Paz County, who has been pushing again towards the increasing hay farm. “We’ve got a proper to be right here, too, and never simply these with the massive bucks.”

Irwin stated the state-funded undertaking is threatening to destroy the agricultural lifestyle on this a part of the Sonoran Desert. She was outraged when introduced with paperwork from the Reveal investigation exhibiting her personal retirement cash was invested within the very scheme she was combating to cease.

“It makes me indignant, . It’s unbelievable that the state can try this with our retirement fund,” Irwin stated. “I’ve been combating for years to maintain the water right here, and it’s simply irritating – in every single place you go searching, that this water is being depleted and alfalfa hay is being shipped abroad.”

Regardless of Water Impression, State Prioritized “Maximizing Returns”

La Paz County is a largely low-income a part of the state, however it has a really beneficial asset: an aquifer with water that has been focused by rich cities, billion-dollar funding and farm firms, and the state’s personal $49 billion retirement fund.

Many communities within the county rely solely on the aquifer to provide their properties with water for consuming, showering and all their different wants. Arizona legislation permits owners, companies and farms to drill wells on their very own properties and pump up as a lot water as they need. The unregulated aquifer has attracted buyers and farmers from far and large.

In 1986, the roughly 20 sq. miles of land in La Paz County was bought by town of Phoenix to function a backup for its personal municipal water provide. The town estimated it might use the land to faucet into the groundwater, pump it to a canal and ship water for as much as about 150,000 properties. However Phoenix by no means tapped the useful resource and as an alternative leased the land to a neighborhood Arizona farmer who grew much less water-intensive crops.

The town assessed the aquifer in 2011 and located that the desert monsoon rains recharged the aquifer sufficient every year to permit the present owners in La Paz County to dwell there indefinitely, however that on account of agricultural use, the water desk was dropping as much as 5 toes per yr. Ultimately, it might run out and owners would lose entry to the important water supply.

In 2012, town determined to promote the land atop this public water provide for $30 million to the North Carolina-based Worldwide Farming Corp., which manages about $2.2 billion in agricultural investments. That very same yr, the Arizona State Retirement System invested $175 million with the agency.

Managers on the state retirement system knew that a part of their funding was going immediately into the land deal in La Paz County. The retirement system – as a key investor within the deal – was given the primary proper to make a proposal on the farmland and the underlying water rights if Worldwide Farming Corp. determined to promote.

The state’s retirement system has about 600,000 members, equivalent to lecturers and different state and county authorities staff, and is likely one of the largest buyers within the La Paz County land deal orchestrated by Worldwide Farming Corp., or IFC. The state offered almost half of the $430 million that the IFC-controlled fund aimed to lift for investments in farmland and related water rights, in response to state and federal data.

The state’s $175 million funding was commingled with cash from different buyers right into a restricted partnership fund managed by IFC known as U.S. Farming Realty Belief II. The fund then bought farmland throughout the nation, together with the land in La Paz. Retirement cash for the IFC-controlled fund additionally got here from New York Metropolis lecturers, union employees in California and Michigan, and even Carnegie Corridor, the storied live performance venue in New York Metropolis. All had been invested immediately or not directly within the Arizona land deal, a part of a rising pattern by retirement funds and different institutional buyers to fund large-scale farm offers that management water provides at a time when shortage of each meals and water is predicted to worsen.

Specifically, buyers are more and more concentrating on water rights in arid areas of the USA. In a 2022 prospectus shared with potential buyers, IFC wrote that the water rights related to land offers are a key element of the worth of any potential funding and that “water rights in Southern California and Arizona are anticipated to extend in worth.”

Worldwide Farming Corp. executives declined to be interviewed by Reveal. In an announcement, they wrote that IFC complies with state water legal guidelines, makes use of superior irrigation techniques and is dedicated to the long-term success of the native agricultural communities that it’s a part of.

The corporate listed the 14,000-acre property in La Paz County on the market in 2020 for $100 million, greater than thrice what it paid for it lower than a decade earlier. The state-funded funding property stays on the market right this moment, in response to IFC, although it declined to offer the present checklist value.

State Workers’ Cash Used to Worsen Disaster

After Reveal broke the story in 2015 about the nearly 10,000-acre Saudi-owned farm growing and exporting hay in La Paz County, it grew to become a central marketing campaign situation in Arizona for each Republican and Democratic candidates, who criticized the farm and its use of the state’s scarce water. Now, via the Al Dahra farm, politicians discover themselves invested in the identical use of water they’ve campaigned towards.

Legal professional Normal Kris Mayes known as the Saudi land deal “one of many biggest scandals within the historical past of Arizona” in a latest interview with Reveal. She now expects Arizonans will probably be simply as outraged that she and different public staff’ retirement funds are invested in a deal that additional drains the state’s valuable water.

“It simply exacerbates an already horrible scenario and reveals once more the abject failure of our authorities to guard our individuals and to guard our future,” Mayes stated. “Our very survival as a state will depend on our doing higher in the case of water.”

Mayes, who was elected in 2022 and took workplace this yr, stated she deliberate to look into the investments made by the state’s retirement fund.

Sarcastically, in making the funding within the land deal, the state of Arizona is capitalizing by itself lax water legal guidelines in rural communities, which permits landowners to pump limitless quantities of groundwater.

Kathy Ferris is the previous head of the state’s water division and helped craft the state’s 1980 Groundwater Administration Act that protected aquifers in city areas equivalent to Phoenix, however not in rural areas equivalent to La Paz County – a compromise between those that noticed the necessity to regulate water throughout your entire state and people who didn’t need any regulation. Now with the elevated funding into pumping out Arizona’s rural water, Ferris stated lawmakers must replace the state legislation to guard the agricultural aquifers.

“I’m upset. I’m upset within the lack of motion,” Ferris stated. “Folks will proceed to return right here and sink deep wells in these unregulated areas and do what they need with that groundwater as a result of they will. Or till the groundwater runs out. After which they are going to depart.”

Senior reporter and producer Michael Montgomery contributed to this story. It was edited by Kate Howard and replica edited by Kim Freda.

This story was produced by Reveal from The Middle for Investigative Reporting, a nonprofit information group. Study extra at and subscribe to the Reveal podcast, produced with PRX, at

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