As rural Arizona residents face the prospect of their wells running dry, foreign companies are siphoning the state's vast groundwater to grow hay for Saudi Arabia and other wealthy countries. Now it turns out that the primary investor in the water transfer plan is Arizona's own employee retirement fund.

In La Paz County, a rural area about 160 miles west of Phoenix, Al Dara Farms USA operates a 3,000-acre farming operation in the Sonoran Desert that county residents rely on to fill wells. It drains the same groundwater. In 2013, the Emirati-owned agricultural company began using former public water supplies to grow hay and ship it to countries in Asia and the Middle East.

Records obtained by Reveal from the Center for Investigative Reporting show that the state of Arizona financed a land deal that allowed Al Dara to tap groundwater in La Paz County. In 2012, the state's retirement system invested $175 million in an East Coast company to buy about 20 square miles of land that had previously been set aside for public water. Later, a company called International Farming Corporation leased part of the land to Al Dara.

Al Dara is now the centerpiece of a burgeoning business that uses Arizona's scarce water to grow hay to be shipped overseas; Economists say it's the same as exporting. A Saudi-owned farm, also in La Paz County, has made international news for growing hay in the arid Sonoran Desert, even though Saudi Arabia has severely restricted its own hay production due to water shortages. . But in Arizona, hay exports have increased nearly 100 times over the past decade. A recent paper by researchers at the University of Arizona found that the water used to grow exported hay last year was equivalent to the water used by about 1 million people in the state.

The state is investing in exporting its own water as the region faces continued water shortages. Earlier this year, Arizona Governor Katie Hobbs announced that parts of the Phoenix metropolitan area do not have enough water to continue building new homes as groundwater continues to deplete. The state also faces the possibility of even less water coming from the dwindling Colorado River.

The state investment company has been drilling new, deeper wells since purchasing the land in La Paz County. People living nearby say they are losing access to their only source of water, groundwater, as intensive farming has lowered the water table. As the well dries up, they face difficult choices. Some homeowners spend tens of thousands of dollars to dig deep wells or truck water in. Some people just walk away.

“Betting is our future,” said Holly Irwin, one of La Paz County's three elected supervisors. He has opposed expanding hay farms. He said: “We have a right to be here, not just people with a lot of money.”

Irwin said the state-funded project threatens to destroy the rural way of life in this part of the Sonoran Desert. When she was presented with Reveal Inquiry documents showing that her own retirement funds were being invested in the very plan she was fighting to stop, she was furious.

“It makes me angry, I get it. I can't believe the state can do that with our retirement funds,” Irwin said. “I've been fighting for years to keep the water here and it's just frustrating. Everywhere I look, this water is drying up and the alfalfa hay is being shipped overseas. I understand this.”

Despite water impacts, states prioritize 'maximizing profits'

La Paz County is a largely low-income region of the state, but the aquifer contains water targeted by wealthy cities, multibillion-dollar investment and agricultural companies, and the state's own $49 billion retirement fund. We have an extremely valuable asset called layers. .

Many communities in the county rely entirely on aquifers to provide drinking water, showers, and all other water needs to households. Arizona law allows homeowners, businesses and farms to drill wells on their property and pump as much water as they want. Unregulated aquifers attract investors and farmers from around the world.

In 1986, approximately 20 square miles of land in La Paz County was purchased by the City of Phoenix as a backup for the city's own water supply. The city estimates that the land could be used to pump groundwater and pump it into the canal, providing water to up to about 150,000 households. But Phoenix never tapped into that resource, instead leasing the land to local Arizona farmers who grow crops that use less water.

The city assessed the aquifer in 2011 and found that desert monsoon rains recharge the aquifer enough each year to allow current homeowners in La Paz County to live there indefinitely, but not for agriculture. As a result of its use, it was discovered that the groundwater table had dropped to 2,000 meters. 5 feet per year. Eventually, the water will run out and homeowners will lose access to a vital water source.

In 2012, the city decided to sell the land above the public water system for $30 million to North Carolina-based International Farming Corporation, which manages approximately $2.2 billion in agricultural investments. That same year, the Arizona State Retirement System invested his $175 million in the company.

State retirement system administrators knew that some of the investment would go directly to land deals in La Paz County. As the lead investor in the transaction, Retirement System was given the right to make a first offer on the farmland and underlying water rights should International Farming Corporation decide to sell.

The state's retirement system has about 600,000 members, including teachers and other state and county employees, and is one of the largest investors in La Paz County land deals led by the International Farm Corporation. It has become. The state provided nearly half of the $430 million that the IFC Management Fund sought to raise for investments in farmland and related water rights, according to state and federal records.

The state's $175 million investment was combined with money from other investors into a limited partnership fund managed by IFC called US Farming Realty Trust II. The fund then purchased farmland across the country, including land in La Paz. Retirement contributions to the IFC-managed fund came from teachers in New York City, union members in California and Michigan, and even Carnegie Hall, New York City's storied concert venue. All of these investments were made directly or indirectly in land deals in Arizona that would fund large-scale farm deals to manage water supplies in the face of anticipated shortages of both food and water. This is part of a growing trend by retirement funds and other institutional investors to become

In particular, an increasing number of investors are targeting water rights in arid regions of the United States. In its 2022 prospectus shared with potential investors, IFC notes that water rights associated with land transactions are a key component of potential investment value, stating that “the value of water rights in Southern California and Arizona is increasing. It is expected that this will happen.”

International Farming Corporation executives declined to be interviewed by Reveal. They said in a statement that IFC complies with state water laws, uses advanced irrigation systems and is committed to the long-term success of its member local farming communities.

The company put the 14,000-acre property in La Paz County on the market in 2020 for $100 million, more than triple what it paid less than a decade earlier. IFC said government-funded investment properties are still being sold, but it declined to provide current list prices.

State employees' money used to worsen crisis

After Reveal published a story in 2015 about the nearly 10,000 acres of Saudi-owned grass in La Paz County that were grown and exported, the farm and the farm's grass production became a hot topic for both Republican and Democratic candidates in Arizona. It became a central issue in the election, which criticized its use. The state's scarce water. Now, through Al Dara Farms, politicians find themselves investing in the same water use they have been campaigning against.

Attorney General Chris Mays called the Saudi land deal “one of the biggest scandals in Arizona history” in a recent interview with Reveal. She now predicts Arizonans will be just as outraged that her and other public servants' retirement funds are being invested in deals that will further deplete the state's precious water.

“This will only make an already terrible situation worse and demonstrate once again our government's abject failure to protect its people and secure its future,” Mays said. “Our survival as a nation depends on us doing better when it comes to water.”

Mays, who was elected in 2022 and took office this year, said he would consider investing with the state's retirement fund.

Ironically, in investing in land deals, Arizona takes advantage of its own lax water laws in rural areas, which allow landowners to pump groundwater without restriction.

Kathy Ferris is a former state water commissioner who helped write the state's groundwater management law in 1980, which protects aquifers in urban areas like Phoenix but not rural areas like La Paz County. Regulate water for the entire state and for people who don't want it regulated. Ferris said that with increased investment in pumping rural water in Arizona, lawmakers need to change state law to protect rural aquifers.

“I'm disappointed. I'm disappointed in the lack of action,” Ferris said. “People will continue to come here and dig deep wells in unregulated areas and do whatever they want with that groundwater because they can. Or until the groundwater runs out. And they're gone. It’s going to suck.”

Senior reporter and producer Michael Montgomery contributed to this article. Edited by Kate Howard, copy edited by Kim Frieda.

Nathan Halverson can be contacted at: nhalverson@revealnews.org.