Regulatory arbitrage and Arizona’s growing nuts

“Regulatory arbitrage” is the business practice of shifting one’s operations to exploit differences in regulatory regimes. This often involves a geographical change, such as moving a factory to a place where environmental regulations are less stringent.

That seems to be what’s going on in southeastern Arizona, where California nut farmers are moving into the San Simon Valley, planting pistachios and pecans, and pumping groundwater. From a great Tony Davis story discussing the trend:

Chima and Barton Heuler are California transplants who sit on opposite sides of the issue. They both moved their farming operations here because they were tired of seeing water transferred away from crops due to the drought. Chima says he was tired of excessive regulation in his former state.


  1. I wrote that nut growers were treating California like a colony: taking advantage of weak local laws to extract resources and provide the home base with cheap goods. What’s interesting to me is that a law as weak as California’s Sustainable Groundwater Act is still sending growers looking for weaker laws to exploit.

  2. OtPR – That surprised me to. Maybe they’re coming from places without groundwater options, and it’s the surface water allocations that bug ’em?

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