PHOENIX — The state Land Department on Monday canceled one of the controversial leases of state land to a company that has been growing alfalfa for export to Saudi Arabia.
An aide to Gov. Katie Hobbs said the legal reason for the cancellation has nothing to do with Fondomonte Arizona pumping of the water from beneath the land, an action that nearby landowners have complained is drying up their own wells. Instead, he said, it is based on the failure of the company to correct a violation dealing with how fuel is stored on site.
And Christian Slater said the move is not a pretext to allow his boss to deal with an unpopular situation of having Arizona groundwater pumped to feed cattle in Saudi Arabia, a country that does not allow that crop to be grown there because of its high water use.
"It was clear that we found significant default on their lease," he told Capitol Media Services, a problem he said actually dates back to 2016.
There was no direct mention of the fact that these agricultural leases, unlike many others to other tenants on state lands, involved growing alfalfa for the Middle East kingdom. But the company is suggesting that the alleged default is not the real reason for the action.
"Fondomonte will explore all avenues to ensure there is no discrimination or unfair treatment," it said in a prepared statement.
And Hobbs also made it clear that, whatever the legal reason to yank the lease, much of this is really all about the water.
"It's unacceptable that Fondomonte has continued to pump unchecked amounts of groundwater out of our state while in clear default of their lease," she said in a prepared statement. "I'm proud my administration has taken swift action to hold defaulting high volume water users accountable and bring an end to these leases."
Monday's move to cancel the 640-acre lease was only the first step. Hobbs said the state will not renew three other leases of state land by the company totaling 2,880 acres when they expire this coming February. The governor's office said the Land Department determined that the leases in the Butler Valley are "not in the best interest of the (land) trust's beneficiaries due to excessive amounts of water being pumped from the land -- free of charge."
"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," the governor said.
Hobbs made no mention, though, that the lease of state lands in rural areas comes with the right to pump water from beneath the property to grow crops there.
As to why it has taken until now to deal with the 2016 default, Slater said , "you'd have to ask the Ducey administration about that."
And Hobbs also took a slap at the former governor and his agency chiefs.
"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," she said in a prepared statement.
There was no immediate response from Ducey.
Fondomonte is not likely to give up quietly.
"We believe the state is mistaken that the company is in breach of its lease," the company said in a prepared statement, saying the governor's office has made "factual errors."
"Fondomonte is adhering to all the conditions of the lease, and thus we have done everything required of us under these conditions," the statement says.
The company also was critical of the decision not to renew its other leases.
"This would set a dangerous precedent for all farmers on state land leases, including being extremely costly to the state and Arizona taxpayers," Fondomonte said.
Fondomonte has 30 days to appeal.
The move comes two months after the governor, in an interview with Capitol Media Services, said she was looking at whether changes in state law could give her the authority to decide who can lease state lands and what activities can take place there.
She acknowledged that statutes generally require state trust lands to be managed to obtain their "highest and best use" and maximize the financial return to the state and the beneficiaries of the trust, mainly public education.
It was that requirement that resulted in Fondomonte being able to lease more than 3,500 acres of state land for more than a decade and, as part of that deal, pump the water beneath it to grow alfalfa in western Arizona. That lease generated nationwide publicity and calls for Arizona officials to cancel the leases.
Hobbs said at the time the issue isn't that simple — or that discrete.
"Fondomonte is where all the eyes are," Hobbs said. But she noted the company is not the only one growing crops on state land.
"It would be treating one leaseholder differently than others," Hobbs said.
And then there's the question of whether the state could decide that they don't want to lease land for growing alfalfa just because it's getting exported versus the fact that farmers grow other crops like vegetables which are shipped out of Arizona and, sometimes, out of the country.
"That's a really valid question," the governor said. "We can't just unilaterally yank one lease because we don't like that alfalfa's going to Saudi Arabia."
And none of this deals with the related issue that some of this farming is done on privately owned land where gaps in state laws limit the ability of the state to restrict how much groundwater owners can pump. All that, Hobbs said, makes the questions raised even more complex.
In April, however, the state was able to revoke a pair of well-drilling permits it issued to Fondomonte last year.
That, however, was based on a technicality that the company's approval to make improvements on state land had expired. It did not bar Fondomonte from continuing to pump water from the wells it already has.
What's behind this latest action by the Land Department could fall into the same category.
In the cancellation notice to the company, Robyn Sahid, the executive deputy commissioner, said Fondomonte was notified in 2016 that it was in default of one of the leases, this one for 640 acres, because it had failed to ensure that "motor fuels or regulated substances shall be stored in secondary-contained above ground tanks." She said the company responded days later it would implement the required secondary containment.
Then, in December 2016, the Land Department vacated the default on the condition that the problem would be solved "within one year."
But an inspection conducted two months ago "revealed that fuel storage tanks remained in roughly the same location as was found'' during the 2016 inspection.
"Accordingly, the default relating to secondary containment for fuel storage tanks has not been cured, and the time for during the default has long since expired,'' the notice issued Monday states. And it is effective in 30 days.
This action is separate from a decision by the Arizona State Retirement System to divest itself of ownership of other private land in western Arizona being used to grow alfalfa for export. Attorney General Kris Mayes called the idea of investing in a farm that exports alfalfa "as outrageous as it is stupid given the current state of our water crisis."
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