Obama blocks Chinese-owned wind farms, citing security threat

Source: Nick Juliano, E&E reporter • Posted: Monday, October 1, 2012

President Obama today blocked construction of wind farms a Chinese-owned developer planned to build near a naval facility in Oregon, citing national security concerns.

In his order mandating that Ralls Corp. abandon plans for four wind farms, Obama cited “credible evidence that leads me to believe” the company and its affiliates “might take action that threatens to impair the national security of the United States.”

Obama had until today to issue the decision, which arose in a dispute between Ralls and the interagency Committee on Foreign Investment in the United States. It’s rare for the president to get involved in such disputes, and some observers pinned the move on animosity toward China that has grown heated ahead of the November elections.

CFIUS, chaired by Treasury Secretary Timothy Geithner, reviews business deals that could result in foreign nationals owning U.S. firms. Ralls is incorporated in Delaware but is owned by executives of the Chinese firm Sany Group. Ralls recently purchased four sites in Oregon, all within or in the vicinity of restricted airspace used by the Naval Weapons Systems Training Facility Boardman, according to the Treasury Department.

Obama’s order requires Ralls to divest its interests in the four wind projects, which would have installed Chinese-manufactured turbines, and to remove any equipment and material from the project sites, among other actions.

Through the order, Obama exercised his authority to block foreign transactions under Section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment and National Security Act of 2007. The law allows the president to block acquisition of U.S. firms by foreign owners if such actions could threaten national security and existing law provides no other means to protect national security, according to a Treasury Department statement.

The order didn’t specify the “credible evidence” of a national security threat that led to the order. CFIUS previously rejected the wind farms after analyzing potential national security threats, and Ralls had challenged that decision in court.

A federal district judge hearing Ralls’ challenge to the CFIUS decision said earlier this month that she would have to defer to Obama if he blocked the project because of the deference afforded the president on national security issues, Bloomberg reported at the time.

The Treasury Department said blocking the project was done to protect national security and doesn’t undercut the United States’ broader support for open investment in U.S. markets.

“The President’s decision is specific to this transaction and is not a precedent with regard to any other foreign direct investment from China or any other country,” Treasury said in its statement.

Josh Zive, a Washington-based lawyer and lobbyist with Bracewell & Giuliani who is an expert on CIFUS issues, said today’s decision likely will be closely watched by foreign investors, especially those in China who feel they have faced undue scrutiny for years. He also noted that the decision will allow Obama to deliver a tough-on-China message on the campaign trail, whatever the underlying reason for the decision.

“Even if it didn’t have political motivation, it certainly has a political utility,” he said.

In a statement, Ralls’ counsel Tim Xia lamented that the president’s decision would block “a jobs-creating wind farm” and said the company would continue to press its case in court.

“The project poses no national security threat whatsoever, and the President’s order offers no explanation otherwise,” Xia said. “The President’s order is without justification, as scores of other wind turbines already operate in the area where Ralls’ project is located. The selective and arbitrary singling out of Ralls’ project drives our effort to seek redress in U.S. courts.”