Deep in the Heart of Texas, a Chinese Wind Farm Raises Eyebrows
The Trump administration will not block a Chinese-owned company from building a wind farm in Texas near the Air Force’s largest pilot training base, a person familiar with the decision told Foreign Policy, allowing a project to move forward that lawmakers fear could be used to spy on American troops, disrupt flight routes, and give Beijing a foothold in the U.S. electrical grid.
The decision comes after an analysis from the Committee on Foreign Investment in the United States (CFIUS), a panel of different federal agencies that examines the impact of foreign investments in the United States, found that the wind farm does not currently pose a national security concern. But GH America Energy, the U.S. unit of a Chinese firm, must still mitigate the impact of wind turbines that could interfere with low-level flight training routes at Laughlin Air Force Base. Those plans are currently under review in a separate process led by the Air Force and the Defense Department’s Military Aviation and Installation Assurance Siting Clearinghouse.
For years the Trump administration has been on a collision course with China over trade, geopolitics, and, now, the coronavirus pandemic. Amid a groundswell of anti-China sentiment in Washington, top administration officials have begun hammering other countries, including close allies, for allowing Chinese investment in their critical infrastructure and other industries relevant to national security.
Now, the prospect of turbines cropping up at the Blue Hills Wind development, just a few dozen miles from the U.S.-Mexico border and the limestone bedrock of the Edwards Plateau, has brought the U.S. competition with China to an unlikely place: the small town of Del Rio, Texas, home to Laughlin and a dryland paradise for nature lovers and hunters that boasts ancient rock art dating back before the days of the Egyptian pharaohs.
The developer, GH America Energy, a subsidiary of Guanghui Energy Company, a firm owned by a former Chinese army officer and the richest person in China’s embattled Xinjiang province, declined requests to comment for this story. A Treasury Department spokeswoman declined to comment, citing policy preventing the agency from talking publicly about individual CFIUS cases.
Under CFIUS law, the United States can put the project under review at any time if there are new developments at the site, or if the Chinese-owned company does not notify it of changes. In the meantime, members of Congress and local officials fear the foreign company could interfere with the air base, sully the pristine wilderness, burrow into the electrical grid, or even use the project as a platform for Chinese government-directed espionage.
“Why this location and why this project?” Rep. Will Hurd, a Republican who represents a district that stretches westward across Texas from San Antonio toward El Paso and includes the project, told Foreign Policy. “Why are we allowing a Chinese company to do that in the U.S.? A former U.S. general would not be able to do this kind of project in China.”
That is a question that’s bedeviled military officials, local leaders, activists, and lawmakers who have tracked this case for two years. The problem of wind farms popping up near military flight routes isn’t new: Then-Lt. Gen. Steven Kwast had been dealing with the issue for more than a decade when in November 2017 he took over the Air Force’s San Antonio-based Education and Training Command, which oversees Laughlin. But while Kwast believed the military’s improving technology could prevent wind-powered turbines from messing with radar signals, when he learned that a Chinese company was buying up acreage near Laughlin Air Force Base just a year into his tenure, it alerted him to a potential national security risk.
“It triggered alarms the first time that we got evidence of Chinese money,” said Kwast, who is now retired. “If the electricity stops or the water stops flowing, those bases stop operating.”
Even more puzzling, the business case for the new venture didn’t make much sense to Kwast and local officials. How would the property—which lawmakers and county advocates say is in the middle of nowhere and did not have significant road access at the time—be able to turn a profit?
The Del Rio community also began to get worried. Local leaders were intent on salvaging Air Force training routes that could be jeopardized by the construction of large wind turbines. Laughlin graduates more than 350 student pilots each year, according to a 2018 release, and its flight routes are critical to the area’s economy. The base contributed $2 billion to the state’s economy last year, and it indirectly or directly provides more than 10,000 jobs, estimates from the Texas comptroller’s office show.
But the forces that let Guanghui buy up the acreage near Laughlin and Del Rio have been brewing for more than two decades. Project developers love the lack of red tape; foreign buyers have come to love the Texas’s deregulatory swagger and loose rules on property purchases. (The state’s land is about 95 percent privately owned.) The federal government has some legal authorities in place to review and block foreign investments over national security concerns, such as the CFIUS process.
In Texas, however, there’s a high bar for authorities to step in and stop development on wind farms. Ever since the Texas legislature put in place a 1999 mandate calling on the state’s utilities to get more power from renewable sources, it’s been hard to stop these ventures from going forward.
“On the state and federal level there are no regulations regarding the development of these wind farms,” said Jack Hession, a senior vice president at Madison Government Affairs, a Washington lobbying shop that is representing the Del Rio community, told Foreign Policy. “There’s no way to deny it as it was purchased. The proposal to do a wind farm was a viable option for the owner.”
The issue first came to the attention of local officials in early 2018, after Guanghui purchased properties including nine ranches under the name of Brazos Highland Properties LP, environmentalists say, a holding company controlled by the firm. The company proposed building 50 to 130 wind turbines that could reach up to 700 feet above ground level, according to estimates that local officials provided to the Trump administration.
Beyond the geopolitics and national security concerns, the project has also riled up local environmentalists who worry that the wind farm could despoil prime clear waters cherished by boaters, nature lovers, and hunters from across the state.
“Hunters from Houston, Dallas, they don’t want to be looking at tall turbines and watching red lights blinking on the horizon all night,” said Randy Nunns, a landowner and the president of the board of the Devils River Conservancy, a local environmental advocacy group that has opposed the wind farm.
For now, Guanghui appears to have assuaged—just barely—concerns that were its biggest potential hurdle other than CFIUS, the Air Force’s requirement to clear turbines from the proposed low-level training route, Hession said, though he cautioned there is no deal or agreement in place. An Air Force spokesperson told Foreign Policy that an agreement has not been finalized but is currently under review by both the service and the Pentagon’s Military Aviation and Installation Assurance Siting Clearinghouse.
That hasn’t fully satisfied local officials or Congress, though, who fear that the worst is yet to come as Guanghui eyes further development of wind and solar projects in the area that could encroach upon flight routes.
Letters obtained by Foreign Policy show that by February, a Val Verde County judge and Del Rio’s mayor had told Treasury Secretary Steven Mnuchin, Secretary of State Mike Pompeo, and Secretary of the Air Force Barbara Barrett that the project posed long-term challenges to flight training operations at Laughlin.
“Our greatest concern is the long-term implications this will have on the Air Force’s mission of pilot training not with a single application, but rather a cumulative strategy that cannot be evaluated in the first filing,” County Judge Lewis G. Owens Jr. and Del Rio Mayor Bruno Lozano wrote to Mnuchin in February. “We believe that this project and all future projects of a similar nature will result in unacceptable risk to national security of the United States.”
Lawmakers who might normally welcome foreign investment with open arms are also looking askance at the project. Leading the charge has been Sen. Ted Cruz, a Texas Republican, who traveled to Laughlin Air Force Base in February and raised concerns that the project poses a potential threat of Chinese espionage.
“Sen. Cruz is particularly concerned by the threat of a Chinese-owned company erecting wind farms near Laughlin. China has demonstrated a willingness to invest billions of dollars in specific, targeted economic initiatives through private companies to expand the global reach of their security and espionage capabilities,” a spokesperson for Cruz told Foreign Policy. “Not only will these wind farms near Laughlin affect training routes, they could also risk our national security.”
In recent years, Chinese companies have jumped headlong into the Texas energy market, despite worsening political relations between Washington and Beijing. Chinese turbine-makers sparked a political row a decade ago when they sought to use Obama-era recovery funds to build a wind farm there. Another Chinese company began constructing Rattlesnake Wind Farm in Brady, Texas, in 2017, and one Chinese firm snapped up shale assets in the oil-rich Permian Basin, a trend experts figure could continue with plunging oil prices amid the coronavirus pandemic.
But it’s not just any company buying up land at the Carma, Palmer, and Morningstar ranches, among the nine ranches Guanghui has purchased in Val Verde County. When Rep. Hurd’s staff began looking into Sun Guangxin, the founder of the Guanghui Energy Company, they quickly learned he was a former People’s Liberation Army officer and one of the largest landowners in China’s Xinjiang province, the current site of a sweeping campaign by Beijing to intern around 1 million ethnic Uighur minorities under the guise of a counterterrorism operation.
Sun first made his mark buying up swaths of formerly state-owned real estate in Xinjiang after leaving the Chinese military, through which he participated in the 1979 invasion of Vietnam, according to the South China Morning Post. The firm outwardly advertises its connections to the Chinese Communist Party on its website.
President Donald Trump told Axios this week that he had held out on enacting Treasury sanctions against Chinese officials involved in the internment camps in order to secure a trade deal with Beijing, but under a law signed this month, the White House could impose penalties on Chinese Communist Party members involved in the camps. Daniel Hoffman, a former high-ranking CIA official, urged Congress in an op-ed for Fox News to determine whether Sun or his associates should face sanctions for possible abuses of Uighurs.
The Trump administration had already raised questions about Guanghui’s investors engaging in a pattern of double-dealing in American business. In 2018, the U.S. Trade Representative published a report that accused Evergrande Group, the largest minority shareholder in Guanghui and run by one of the richest people in China, of attempting to steal intellectual property from a California-based startup.
Just as Congress, fretful that China could use telecommunications companies as a Trojan horse in the development of 5G mobile networks, is pushing to ban companies like Huawei, there are concerns that Chinese firms with government and military connections could pose a threat to the electricity grid.
“We don’t want to have that same concern when it comes to our grid, right?” Hurd told Foreign Policy. “So should another foreign-owned entity be able to put power on the grid which means they’re controlling some of that power right now? I think the answer is no.”
U.S. intelligence agencies have harbored concerns about China breaking into the grid with backdoor hacks for the better part of a decade. Then-National Security Agency Director Mike Rogers told Congress in November 2014 that malicious hackers could potentially target the grid by breaking into industrial control systems undergirding power networks and critical infrastructure, instructing turbines to go offline.
In May, Trump took a step to curtail possible manipulation of the power grid, signing an executive order that would ban acquisitions of electrical equipment built by “foreign adversaries.” The Energy Department has until the end of September to determine which countries the United States will designate as adversaries under the order.
But lawmakers are still worried that Chinese companies like Guanghui buying up wind farms, giving them inroads into Texas’s electrical grid, could allow them another lever to manipulate and overload the system.
“Would they be able to manipulate the industrial control systems on their side? Obviously, because they would they would own that,” said Hurd. “Is there a way that by being connected to [the] electrical grid, that you would be able to overload that grid?”
Asked if he was worried that foreign companies controlling swaths of the electrical grid could be capable of triggering statewide outages, Hurd, a former CIA officer, did not hesitate to answer. “100 percent,” he said.
Top U.S. officials have also raised alarm bells about Chinese energy investments in the past if the projects were too close to U.S. military installations, for fear of exposing the bases to electronic surveillance or other forms of espionage. President Barack Obama in 2012 blocked a Chinese-owned firm from pursuing a wind farm close to a naval test facility in Oregon, citing national security concerns.
The Obama administration had a ready-made authority to intervene in that case, nearly a decade ago, under long-standing CFIUS rules that give the president the ability to block foreign acquisitions of U.S. businesses, known as “brownfield investments,” on national security grounds. The U.S. military trains pilots for electronic warfare aircraft and tests drones at the site, in Eastern Oregon near the Columbia River.
U.S. presidents have only used CFIUS six times to stop foreign transactions since the body was founded in 1975, but Obama and Trump have combined to stop five of those purchases in the past decade, with Trump most recently using a presidential order in March to force a Chinese company to divest interests in the cloud-based hotel management firm StayNTouch.
Since then, Congress has given the Trump administration stronger powers to protect American companies from foreign acquisitions, especially in the tech sector, as the White House has pledged to crack down on foreign investment—particularly from China. In 2018, Trump signed the Foreign Investment Risk Review Modernization Act as part of the Pentagon’s annual authorizing bill. That law gives CFIUS new authority to probe foreign investments in undeveloped land near U.S. government buildings and military bases, such as the Chinese-owned wind farm development near Laughlin Air Force Base.
“We’re putting a lot of safeguards in, and we’re doing a lot of things against foreign acquisition of property, and especially where they’re near sensitive military installations,” Trump said during a roundtable to roll out the law in August 2018.
The new law has chagrined free-traders, who say that the reforms give CFIUS too much power to squash private foreign investments without stopping takeovers in larger sectors of the U.S. economy. The number of yearly CFIUS notices had already more than tripled between 2009 and 2017.
What’s more, any decision CFIUS makes is extremely difficult for companies to try to overturn, said David Mortlock, a former White House and State Department sanctions official and now a senior fellow at the Atlantic Council, a Washington-based think tank. “There really is very little ability to challenge CFIUS’s national security determinations,” he said.
“The statute itself protects CFIUS’s decisions from judicial intervention,” he added. “But also the fact that they’re based on national security risks of foreign investments, the administration’s discretion is at its zenith and courts are very unlikely to intervene in such a decision.”
But even with the beefed-up protections, veteran national security experts are worried that there’s not enough being done to stop powerful Chinese companies like Guanghui from passing along information about U.S. utilities to the nation’s army.
“Something as large as this project down in Del Rio and particularly given the fact that it’s linked to the power grid in the U.S. could not be going on without PLA involvement,” said James Olson, a former CIA chief of counterintelligence and now a professor at Texas A&M University.
“Disrupting electronic activities of all kinds giving them a potential platform in the vicinity of the military base is not something the PLA would overlook,” he said.
It took more than a year of lobbying from local officials and environmental advocates and to get a meeting with Sun, the Guanghui chief. Local conservationists had been blindsided when the French-owned Rocksprings Val Verde wind farm popped up in the county without warning in March 2017. They were determined not to be dealt another blow that could harm the area’s pristine aquifers and migratory routes for eagles, bats, and butterflies.
In fact, it took a lot of digging to find out that the Chinese-owned company was involved at all. When Brazos Highland Properties LP began buying up 140,000 acres of land in the county, the only reporting that advocates from the nearby Devils River Conservancy could find on it was through Val Verde County’s property appraisal search.
“It was very cloak and dagger-esque,” said Julie Lewey, the executive director of the Devils River Conservancy. “We didn’t know it was Chinese, we didn’t know anything. We just knew they were planning to build wind farms.”
Lewey and her team only knew that a wind farm was in the works because another company had registered turbines on one Brazos-owned ranch with the Electric Reliability Council of Texas, a nonprofit that manages most of the state’s power grid.
It was only when the conservancy backed a bill in the Texas legislature that would have given the state’s Parks and Wildlife Department authority oversight on wind farm siting that representatives from GH America Energy—the U.S. subsidiary—showed up in Austin to oppose it. The bill died in committee.
Lewey, the Laughlin base commander, and county commissioners were finally invited to meet Sun, introduced to the group as “Chairman Sun,” at his ranch in July 2019. But after they were escorted past the gates to his home in a large caravan, they found that the conversation didn’t get to the big issues.
“It was about 95 percent a social meeting,” Lewey said. “Not a whole lot of business concerns were brought up there.”
Conservationists have had several follow-up meetings with company representatives, but they aren’t convinced they are being heard. “They have listened to us,” she said. “I don’t know if they’ve heard us. But they’ve listened to us.”
Questions over Guanghui exemplify broader concerns about Chinese investment in foreign countries. Given how centralized China’s entire governing model is, it’s difficult to tell in a Chinese business venture where purely business interests end, and geopolitical interests begin.
“This gets to a larger debate about China’s economic system itself, about the division between the state and private sector,” said Ashley Feng, an expert on China’s economy at the Center for a New American Security. “Are Chinese private firms that are going abroad and acquiring technology and companies and land, are they actually acting independently from the state? That’s a blurred line.”
Others place China’s U.S. acquisitions alongside their stated plans to attain dominance in emerging high-tech industries by 2025, setting up a much more zero-sum competition.
“This is an economic war,” Kwast, the former Air Force commander, said of Chinese thinking driving investments in the United States. “China is looking to invest in anything that can give them a competitive advantage on anything. They want to win this economic war without firing a shot.”