President Obama Blocks Chinese-Owned Wind-Farm Development

As anticipated in yesterday’s post, today President Obama acted on the pending CFIUS report regarding the Chinese-owned wind-farm developer (Ralls Corp.) and its  four wind-farm projects in Oregon.  The President’s order is noteworthy for being even broader than the two CFIUS orders it supersedes (which are described in my first post).

Such presidential orders are quite rare; a colleague of mine thinks this may be only the second or third such order since 1988.

The President first finds–without additional detail–that Ralls and its affliates and subsidiaries, through their control of the wind-farm projects, “might take action that threatens to impair the national security of the United States.”  The President does not specify how, but the Department of the Treasury issued a press release that provides one possibility, stating that “The wind farm sites are all within or in the vicinity of restricted air space at Naval Weapons Systems Training Facility Boardman.” (As noted here, Ralls relocated one project  at the Navy’s request to avoid that airspace, and Ralls’ lawsuit alleges that after it did so, the Navy recommended that Oregon regulators issue the necessary approvals–although they did emphasize that even the new location “may have negative national security implications”.)  In light of some of the order’s restrictions, I don’t think the proximity of the Naval base is a full explanation of the government’s concerns.

The President’s order then prohibits Ralls’ already-completed acquisition of the four projects and their assets and orders Ralls to divest them within 90 days (with a possible  three-month extension on such terms as CFIUS may require).  Ralls is even required to divest all interests in the projects’ “intellectual property[ and] technology.”  Ralls is given just 14 days to  remove “all items, structures, or other physical objects . . . (including concrete foundations),” from the four sites, and aside from CFIUS-cleared U.S.-citizen contractors removing those items, Ralls and its employees “shall cease all access” to them.  Ralls cannot sell the four projects if CFIUS objects.

One of the most noteworthy aspects of the President’s order that is lacking from CFIUS’s orders is its authorization of inspections.  “[O]n reasonable notice,” government employees “shall be permitted access, for purposes of verifying compliance with this order, to all premises and facilities” of the four project companies, as well as those Ralls, its subsidiaries, and even those of Sany Group–the very large Chinese manufacturer that is affiliated with Ralls (two Sany executives own Ralls):

(i) to inspect and copy any books, ledgers, accounts, correspondence, memoranda, and other records and documents . . . that concern any matter relating to this order;

(ii) to inspect any equipment and technical data (including software) in the possession or under the control of the Companies . . . .

Perhaps significantly, the inspection of equipment and technical data is not limited to those “that concern any matter relating to this order”– although it would appear to be subject to the general provision that the inspections would be “for purposes of verifying compliance with this order.”