An Unprecedented Loss for the Obama Administration in Court
Policy + Politics

An Unprecedented Loss for the Obama Administration in Court


The Federal Appeals Court for the District of Columbia on Tuesday struck down the Obama administration’s effort to protect the nation from four sets of wind turbines deployed on the semi-arid plains of Northeast Oregon.

These aren’t just any wind turbines. They’re terrorist turbines. Or maybe they’re some sort of espionage-enabled windmills capable of sucking up our national secrets as they blow past. Or maybe they’re weaponized turbines, their spinning blades poised to wreak havoc across the sparsely populated Columbia River Valley.

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The truth is, we don’t actually know why, or really even if, the turbines are dangerous. All we know is that the Obama administration says they are a national security threat and wants them gone. But it won’t say why.

The administration’s reticence apparently didn’t sit well with the appeals court, and as a result, Tuesday’s ruling promises to change the way one of the more secretive elements of the U.S. government does business.

The Committee on Foreign Investment in the United States (CFIUS) is an executive branch body created by Congress in the 1970s to police potential national security threats from foreign investors in U.S. firms or foreign control of U.S. businesses. CFIUS (pronounced “Siffyus” by attorneys who deal with it on a regular basis) advised the president in 2012 that the four electricity-generating wind farms owned by Delaware-based Ralls Corp. constitute just such a national security threat.

President Obama agreed, finding that “there is credible evidence that leads [the president] to believe that Ralls…might take action that threatens to impair the national security of the United States.” As a result, the administration determined that Ralls ought to be required to strip all its equipment from the four sites, down to and including the concrete pads, and sell off its remaining interests in the land.

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The company was informed of that decision, but only after the fact, and never got the chance to defend itself. It never even got to hear the charges it was supposed to be defending itself against.

According to lawyers who represent companies reviewed by CFIUS  this is standard practice, or at least it was before Tuesday.

What apparently attracted attention to Ralls Corp. at CFIUS is that its two owners are Chinese nationals. Both men are connected to the Sany Group, a Chinese manufacturing concern that, among other things, builds wind turbines. The aim of Ralls Corp. is pretty straightforward: it wants to acquire windfarms in the U.S., install Sany’s equipment on them, and use them as demonstration projects to drive sales of their products.

In March of 2012, Ralls purchased a handful of existing wind farms along Butter Creek, outside the small Oregon town of Hermiston. The four properties, Mule Hollow Windfarm, Pine City Windfarm, High Plateau Windfarm, and Lower Ridge Windfarm, were already permitted and had standing arrangements with the local power company to connect to and sell power back into the electrical grid. The region around Hermiston, in fact, is dotted with windfarms owned by both U.S. and foreign companies.

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However, when CFIUS was alerted to Ralls’ acquisition of the four sites in 2012, something about the acquisition raised a red flag, and after a short review process, the company was informed that it would need to completely divest itself of the property.

Unlike many firms that have been investigated by CFIUS in recent years, though, Ralls decided to push back.

The legislation that created the CFIUS specifically says that the committee’s determinations of what constitutes a threat to national security are not subject to judicial review. But in its appeal, Ralls Corp. took a slightly different tack. The company didn’t challenge the finding, but the process. It claimed that the administration’s refusal to share any details about why it views Ralls as a national security threat — thereby preventing the company from rebutting its arguments — was a violation of the company’s constitutional right to due process.

The court agreed, remanding the case to the lower court and instructing it to direct the government to share non-classified information with the company so that it can at least make an effort to rebut or remedy the government’s concerns.

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The number of attorneys in the U.S. who represent companies facing CFIUS investigations is relatively small, and several contacted for this story were uncomfortable going on the record discussing the implications of the ruling. The general sense among them, though, was that while the committee’s intentions are good, there are many cases where legitimate business deals are scuttled not because there is an actual security problem, but because there is a lack of communication between the participating companies and the executive branch.

The hope —regardless of the fate of the Ralls Corp. challenge — is that companies that fall under the purview of CFIUS in the future have a little more information about the government’s concerns.

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