President’s power to block foreign investment at issue in wind-farm dispute

Source: Nick Juliano, E&E reporter • Posted: Tuesday, May 6, 2014

Must a president do more than invoke “national security” to block plans by Chinese businessmen to build dozens of wind turbines in the United States?

That was the question faced by a panel of appellate judges this morning that considered a long-running dispute involving several proposed wind farms near a military installation in Oregon, an obscure government agency tasked with monitoring foreign business activity and President Obama, who personally intervened to block the projects.The case before the U.S. Court of Appeals for the District of Columbia Circuit stems from the president’s 2012 decision to block Ralls Corp., a U.S.-based firm owned by two Chinese executives, to erect turbines in or near restricted air space used by a Naval weapons training facility. Obama’s order blocking the projects cited unspecified national security concerns.

Ralls’ attorney, Paul Clement, argued that the president denied the company due process rights by refusing to detail his justifications for blocking the project. The decision could have been based on factors that may have been able to be mitigated, or it could stem from a mistaken factual premise, he said. But without more detail on what actions the government feared the company would take, it is unable to fully make its case.

“If we had those things, we’d at least have a target to shoot at,” argued Clement, who served as solicitor general from 2005 to 2008.

Later, he stressed the company is “not asking for the stars and the moon here” in seeking additional information.

The circuit court panel warned the government before today’s arguments that it should be prepared to discuss whether its evidence against Ralls’ was classified or unclassified or both.

Department of Justice attorney Douglas Letter, however, argued that the stars and the moon were precisely what Clement and his clients were seeking.

Letter acknowledged that the president’s decision was made based on a mix of classified and unclassified material, but he said even the unclassified material may be inappropriate to share in the case because of executive privilege concerns. He also argued the company wasn’t denied any property rights because it was aware when purchasing the company that had been developing the wind farms that a presidential intervention was possible.

“At all times when Ralls moved forward with their transaction, they knew the president could invoke national security,” Letter said.

Although it is based in Delaware, Ralls is owned by two executives of the Chinese manufacturing firm Sany Group, which was to construct turbines to be installed at the wind farms.

Obama got involved in the case after Ralls challenged an earlier decision from the interagency Committee on Foreign Investment in the United States, which reviews business deals that would result in foreign nationals owning U.S. companies. Obama’s order was only the second issued under the authority granted by the 1950 Defense Production Act.

Ralls claims the president’s decision to block the project denied it property it already had acquired and was illegally enforced because no explanation ever was given beyond the general national security concerns. The government says Ralls’ Chinese owners essentially chose to “gamble” with the wind farm acquisition by not seeking pre-approval from CFIUS, which has broad authority to block such transactions.

U.S. District Court for the District of Columbia Judge Amy Berman Jackson found that the merits of President Obama’s decision could not be challenged but that the company could pursue relief for its claim that the decision violated its due process rights.

Berman granted the government’s motion to dismiss the district court case after determining that the company’s rights were not violated, essentially because it and the other parties to the Oregon transaction should have known of the risk that the sale would have been blocked on national security grounds.

Ralls’ property rights were not violated because it could have cleared the transaction with CFIUS before finalizing the sale but chose not to, and sufficient due process was accorded in any case, the district court ruled.