Obama Blocks Chinese-Owned Wind Project

President Obama issued an order on Friday blocking the construction and ownership of a wind project by Ralls Corporation (“Ralls”), due to national security concerns including “credible evidence” that Ralls or its affiliates, including the Sany Group (“Sany”), “might take action that threatens to impair the national security of the United States.”  Ralls was in the process of developing a proposed 40-megawatt wind project in Oregon, through its acquisition of four Oregon limited liability companies (the "Oregon Projects"). The President’s order imposes numerous requirements on Ralls, its two owners, both of whom are Chinese nationals, and Sany, including:

  • within 90 days, Ralls must divest of all interests in the Oregon Projects and the assets of the Oregon Projects;
  • within 14 days, Ralls and Sany must remove all structures and installations of any kind (including concrete foundations) on the Oregon Projects’ property, and the owners of Ralls must provide CFIUS with a signed statement certifying that such requirements have been met;
  • Ralls, Sany and any of their affiliates and representatives may not access the site, except for U.S. citizens contracted by Ralls or Sany and approved by CFIUS, who may access the site solely for the purpose disassembling the facility;
  • Sany, Ralls, and the owners of Ralls may not sell or facilitate the sale of any Sany equipment for use at the Oregon Projects’ sites, and
  • a sale of the Oregon Projects or their assets may not be completed until all structures and installations have been removed, Ralls notifies the Committee on Foreign Investment in the United States  (“CFIUS”) in writing of the intended buyer or recipient, and CFIUS does not object. 

Although the order does not specify the basis of the concern, it is likely due to the proximity of the Oregon Projects to a U.S. Navy facility that conducts training missions with unmanned drones and electronic-warfare planes.   In response, Sany has accused the President of electioneering, according to a report in WindPower Monthly, and Sany may continue to pursue a legal challenge to the order.  This may prove to be an uphill battle for Sany, given that the Defense Production Act bars judicial review of presidential orders issued upon recommendation by CFIUS.  In light of the presidential order, foreign investors should consider making CFIUS approval a condition to closing under any agreement by which they acquire US energy assets, particularly if the acquisition involves a project located near military facilities and regardless of whether the project or company has defense-related contracts or owns sensitive information. 

For more background, see our prior post regarding Ralls’s lawsuit in response to the initial CFIUS mitigation measures: http://www.lawofrenewableenergy.com/2012/09/articles/wind-energy/cfius-intervenes-in-chineseowned-wind-project/.

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