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Explainer: What is behind the Arizona-Saudi groundwater controversy?

The US state canceled the lease for one of Saudi dairy giant Almarai’s subsidiaries, saying it has been improperly pumping groundwater out of the desert.

The US state of Arizona terminated land leases with a subsidiary of Saudi Arabia's dairy giant Almarai this week, constituting the latest chapter in a battle over groundwater that could affect how the company and others from the Gulf operate.

The Riyadh-based Almarai is one of the largest food companies in the Middle East and reported a net profit of $453 million in 2022. 

What happened: Gov. Katie Hobbs announced the decision on Monday. She said that Arizona has canceled one of Fondomonte’s leases of state land in the Butler Valley and will not renew the other three that expire in February 2024, according to local media.

Hobbs said in a statement that Fondomonte has been violating the terms of its lease since 2016 by pumping “unchecked amounts of groundwater out of our state while in clear default on their lease.” 

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