Chinese firm sues Obama for blocking wind farm near drone site

WASHINGTON Tue Oct 2, 2012 8:42pm EDT

1 of 2. U.S. President Barack Obama walks with Jeff and Richard Heil (R) on the Heil Family Wind Farm while in Haverhill, Iowa, in this August 14, 2012, file photo.

Credit: Reuters/Larry Downing/Files

WASHINGTON (Reuters) - A small Chinese firm has sued President Barack Obama for squashing its bid to build wind farms close to a naval training site, but experts say the suit is long shot for a firm that greatly underestimated U.S. suspicions about Chinese intentions.

Ralls Corp, which is owned by two Chinese nationals, was installing wind turbines close to the training site in Oregon, which, according to the facility's web site, is used to test unmanned drones - a highly sensitive and prized U.S. technology.

The U.S. Navy says the training site's airspace is also the only restricted area in western United States where fighter jets conduct training maneuvers at high speed and very low altitudes.

Obama put the brakes on the project last week and ordered Ralls to sell off the four planned wind farms due to national security risks, the first time since 1990 that a U.S. president has formally blocked a business transaction or required a sale on such grounds. Ralls Corp has until December 27 to comply.

In its suit, made public on Tuesday, Ralls Corp alleges Obama exceeded his power by dictating the terms of the sale, by allowing the government to inspect all aspects of its operations, and by not treating the firm equally as required by law.

The lawsuit comes in the final weeks of the U.S. presidential campaign, during which Obama's Republican rival, Mitt Romney, has accused the president of not pushing back against China's trade and investment practices.

Obama's order followed a recommendation from the Committee on Foreign Investment in the United States (CFIUS), an inter-agency group headed up by the Treasury secretary that evaluates the national security risks of foreign investments in U.S. companies or operations.

Ralls Corp initially sued CFIUS in September for ordering the company to halt operations temporarily while the committee completed its probe and made its recommendation to Obama.

Its chances of winning the suit are slim given the president's broad authority on national security matters and the fact that courts do not often second guess the executive branch on security issues, experts say.

"It's a very, very difficult case," said Ivan Schlager, a partner with Skadden, Arps, Slate, Meagher & Flom, who is in charge of the firm's CFIUS practice.

"The statute was crafted to give the president a great deal of discretion and authority to act to protect the national security interests of the United States."

A Treasury spokeswoman said the administration believes the lawsuit has no merit and would defend its case vigorously.

In issuing the rare presidential order, Obama said there was credible evidence that led him to believe that Ralls Corp and the Chinese Sany Group executives who own the company might take actions that posed a risk to U.S. security.

The statement did not get into the specifics of the risk, but experts have said that the government was likely to have been wary of any potential for espionage.

Ralls Corp said the government had not provided any evidence or explanation.

MISSTEPS

CFIUS experts said the deal was likely doomed from the start. They said Ralls Corp miscalculated by not asking CFIUS to review its plans to acquire wind-farm projects before closing the deal and embarking on plans to install turbines made in China by the closely held Sany Group.

It is unclear whether Ralls Corp studied previous cases in which CFIUS forced other Chinese companies to kill development plans because of their location or for failing to get CFIUS approval before closing a deal.

Benjamin Powell, a former general counsel to the director of national intelligence and now a partner at the WilmerHale law firm, said companies could face a more difficult review process if they did not notify CFIUS of a transaction that might raise national security issues.

In 2009, CFIUS forced the Chinese-owned Nonferrous International Investment Company to backtrack on a proposal to buy Nevada-based Firstgold, whose properties were close to a naval air station.

And in 2011, Chinese telecom maker Huawei had to relinquish plans to buy some assets from U.S. server technology firm 3Leaf after CFIUS ordered Huawei to give up some parts of the deal.

Huawei did not file paperwork with CFIUS on the deal, even though a few years earlier the panel had rejected another of its proposed deals because of national security concerns.

Ralls Corp has also been slow to bring in U.S. firepower.

It hired two high-profile lawyers - the George W. Bush administration's top lawyer Paul Clement and former U.S. assistant attorney general Viet Dinh - only after CFIUS ordered the company to cease activity in August and months after the Navy expressed concerns that one of Ralls Corp's wind-farm projects was located within restricted airspace.

The company's three other wind-farm projects are located close to the training facility.

According to court documents, the Navy said the company should be obliged to move the wind farm located in the restricted airspace to another spot, even though it had no authority to require the move.

Hundreds of wind turbines are already located close to the Oregon training site, according to maps included in the court documents filed by Ralls Corp. The maps also show that a handful of turbines are already operating within the restricted airspace.

(Reporting By Rachelle Younglai; Editing by Doina Chiacu and David Brunnstrom)

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Comments (11)
neahkahnie wrote:
Do the Chinese think we are that stupid? The article indicates several instances where the Chinese tried to develop land next to naval air stations. Hello! Near a drone and fighter testing station in Oregon? And they are suing? No, they are SO arrogant. Right decision every time. They want to steal everything we have, including all military secrets. No different than the Japanese or Germans in the 1930s. We may be trade partners but they are definitely our adversaries.

Oct 02, 2012 8:52pm EDT  --  Report as abuse
net7859932 wrote:
@neahkahnie I completely agree with your comment about the Chinese being your adversaries and the adversaries of mostly any developed nation because they always steal technology from everyone not just the USA. They are obviously too dumb to develop anything on their own. However me being German I take fact that you said we Germans stole US tech during ww2 as it was the opposite; you guys stole all our tech and scientists who developed such things as jet engines and modern rocket technology internal combustion engines more specifically diesel engine. But yes watch out for the Chinese never trust them, they smile in front of you while they stab you as soon as you turn around.

Oct 02, 2012 9:26pm EDT  --  Report as abuse
Kailim wrote:
This is a classic example of cold war mentality exacerbating the US trade balance with China.

During 1980s, Japan began investing substantially in the US with her trade surplus dollars at the US request. It was a way of balancing trade payment account at least when the US had found no solution for the chronic trade deficit with Japan.

Therefore the US should encourage Chinese investments now by the same token. But it is national security, ie cold war mentality again. I don’t believe there are nobody within the US government to help seeking alternative sites for Sany Group if national security really matters as a gesture of promoting Chinese investment, and that is any rationally functioning government would have done.

Furthermore prohibiting sale of high tech products and services, which the US have production advantages and are competitive worldwide, to China has been causing fundamentally the chronic trade deficits with China.

For over two decades the US has been carrying on such cold war policy resulting in increasing her sovereign debts and unemployment. And she is still marching on to the brink of cliff doing nothing but blame China’s unfair competition and currency manipulation.

I also don’t believe the majority of American don’t aware the fact that imposing levy on or stoping import of Chinese products hurt only the livelihood of low income group of American. And that cannot bring jobs back to America.

As it is closing to presidential election in America, I do hope she can have change as Obama told American 4 years ago.

By the way Sany Group is not a small firm in China.

Oct 02, 2012 9:53pm EDT  --  Report as abuse
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