Fed foreign investment review committee abusing its power?

by Eric Shierman

A terribly counterproductive and arbitrarily political ruling of the Obama administration to shut down the development of a startup Oregon energy company presents a remarkable abuse of power that has so far gone completely unreported here locally. Ironically, I’m not referring to a coal company either. Obama is shutting down a wind energy company.

Ralls Corporation, named after the Texan town it originates from, has purchased four small Oregon startup wind farms that were unable to tap into the green energy gravy train. These Oregon startups had acquired wind farm development rights, power distribution agreements, and all the required regulatory approval, but they lacked the capital to purchase the wind turbines.

Ralls intends to risk its own capital building this business here in Oregon to develop the capacity to produce and sell 40 megawatts in our state’s electricity market. So what’s not to love? I have been critical of wind energy projects that risk public money, but if a firm wants to have at it on its own dime I say best of luck to them. So why were they shut down by Mr. “all the above” energy strategy? Could it be that Ralls will be competing with subsidized firms in Obama’s patronage support network? Could it be that Ralls will not be purchasing GE turbines?

We don’t know. The Obama administration refuses to say. The Committee on Foreign Investment in the United States (CFIUS) has simply vetoed the project, declaring this investment in the Oregon economy a threat to national security. Made up of the heads of Treasury, DOJ, State, DHS, Commerce, Energy, and a few others, this high level committee is the most powerful government organ you have never heard of. It is not required to sign off on every business deal, but when they choose to review one, their veto is final. There is no process of appeal.

This incredibly strong executive power of the Presidency can be exercised any time there is some foreign element to a domestic business transaction. Given the integrated nature of our global economy that finds a non US actor in nearly every major aspect of our domestic commerce, this has some potential to become an almost dictatorial power if left unchecked.

In the case of Ralls, the jurisdiction is certainly clear, this investment is being made by two Chinese private investors, Dawei Duan and Jialiang Wu, but the CFIUS only issued a veto. It failed to give any reasons for its actions or even offer any conditions by which the committee’s concerns, whatever they are, could be resolved. The CFIUS simply prohibited the transaction outright while even going so far as to prohibit Ralls’ Oregon assets from being sold to a US buyer to cut their losses. It’s as if the Obama administration’s goal is simply to condemn the project itself, using the nationality of the investors as a mere jurisdictional fig leaf.

In this election cycle, the ridiculous and ill informed China bashing from both sides has gotten out of control, but I don’t think that is really what is at issue in this matter. This is about who benefits from the push for green energy and who doesn’t. This is about defending the interests of the insiders at the expense of newcomers.

The law suit filed last week in US circuit court by Paul Clement on behalf of Ralls Corporation has now become an extremely important case. The suit challenges this CFIUS ruling as a violation of the Administrative Procedures Act and the 5th Amendment’s protection from the taking of property without due process. This will be a case to watch closely, because it will be challenging the ability of CFIUS decisions to stand without review by courts. That is to say, it is the first big expansion of the precedent set by this year’s monumental ruling in Sackett v. EPA. Perhaps the Obama administration’s own arrogance on this matter has given us a great case to curtail an extremely dangerous, but growing executive power.

UPDATE (9/28) – Fox News story: Obama blocks Chinese company from owning Oregon wind farm

Eric Shierman lives in southwest Portland and is the author of A Brief History of Political Cultural Change. He also writes for the Oregonian’s My Oregon blog.