Farms in western Arizona are growing alfalfa – one of the most water-intensive crops – in an area where there's a shortage of water. Some farms are foreign-owned and are shipping the crop to Saudi Arabia, where it's illegal to grow because it takes too much water.
It's a growing controversy that could lead to a reckoning over scarce water supplies. Amid a backlash, the state legislature is considering a ban on most foreign-owned farms.
"Pumps are pumping water out of the ground that belongs to the State of Arizona, and essentially it's being exported to Saudi Arabia," said Kris Mayes, Arizona's newly elected attorney general.
Fondomonte, which is owned by one of the largest dairy companies in Saudi Arabia, bought vast tracts of desert in western Arizona on top of a massive groundwater aquifer in part because there are no regulations on how much water can be pumped out of the ground. Anyone who buys or leases land there can put in a well and draw water.
It's a challenge for the state. As climate change fuels devastating droughts, Arizona and its rapidly growing cities are facing drastic cuts to their surface water supply from the critically low Colorado River system.
"We cannot afford to give our water away frankly to anyone, let alone the Saudis, for free," said Mayes.
La Paz County supervisor Holly Irwin, who has been sounding the alarm about foreign-owned farms since they began operating there in 2015, said Fondomonte is growing alfalfa in the Arizona desert "because they've depleted their natural resource" back home.
Fondomonte trucks haul dried alfalfa off the property it uses and ships it back to the Middle East to feed cattle. According to Mayes, cows in Saudi Arabia are essentially drinking Arizona water.
Fondomonte declined CBS News' request for an interview or statement. But what it's doing in Arizona is not illegal. In fact, the state rents some land to Fondomonte for $25 an acre. The company can then pump unlimited amounts of groundwater for essentially no cost.
"There's nothing to say except, that's insane," said Mayes.
For some, the question is: how did this happen?
CBS News obtained copies of several land leases dating back to 2014 that give Fondomonte rights to more than 6,000 acres of state-owned land and the groundwater that comes with it. The leases are signed by Arizona's State Land Department.
CBS News asked the department why it granted the leases, but it did not respond to our multiple requests for comment. Most state officials in charge when the leases were signed are no longer in office.
"It is a scandal that the State of Arizona allowed this to happen," said Mayes, a Democrat, who made canceling these leases a centerpiece of her recent campaign.
She said canceling the leases is an urgent concern because groundwater in the valley is supposed to be the state's emergency water supply during a water crisis. The state doesn't even know exactly how much water the foreign farms are using.
"We are on the cusp of a potential water disaster in the state of Arizona," Mayes said.
Just outside of a western Arizona town called Hope, cattle rancher Brad Mead is finding it hard not to lose his. He claims his neighbors, Fondomonte, used so much water that his well went dry.
He said that when he looks onto his neighbor's property, he sees money leaving America.
"I see water getting depleted," he said.
