(Updated to reflect that foreign land ownership bill failed to pass Saturday)
A bill banning foreign interests from “countries of concern” from owning or acquiring land within 100 miles of a military base located in Kansas or an adjacent state ran into a roadblock early Saturday morning.
The bill only mustered 19 votes on the Senate floor, two votes short of the 21 needed for passage. The bill was sent to a conference committee. Six Republicans were absent and didn’t vote Saturday morning. A seventh was present and passed.
The future of the bill was unclear early Saturday morning although it could be taken up when the Legislature returns for its wrap up session later this month.
Just a few hours earlier on Friday night, the House voted 84-36 to approve the bill over objections from Democrats who have said the bill is discriminatory and is an overreaction similar to how the United States has responded to perceived threats in the past.
They raised the prospect that the state could be on the hook financially if a company suffers a loss in the purchase of real estate that it bought legally but was forced to divest from under a new law that the state enacts.
Supporters say the bill is about protecting the country’s national security interests against six “countries of concern” that are identified as China, Cuba, Iran, North Korea, Russia, Venezuela or an organization listed on the federal foreign terrorist list.
“This could be the most important bill that we look at this year and probably over the last five years and maybe for the next several,” said Republican state Rep. Sean Tarwater, chair of the House commerce committee.
“If we do nothing, we could be in big trouble,” Tarwater said.
“This is about national security. This is about securing Kansas and protecting our welfare. It’s as simple as that,” Tarwater said.
Democratic state Rep. Jason Probst of Hutchinson warned House members that the bill may very well put the state in court, defending against companies that are forced to divest their holdings under the bill.
Probst noted that the bill was modified at the urging of the attorney general to add a provision that would allow a foreign interest to bring an action against the state if it suffers a loss in the purchase of property because it was forced to divest.
“We will be using Kansas taxpayer dollars to pay for the forced seizure of Chinese national properties,” Probst said.
“We’ve been told that there are operatives in this country right now, then you’re about to vote on a bill that will pay them so we can take their property from them forcibly.”
The bill was backed by House Majority Leader Chris Croft.
He said the nations targeted by the bill have shown that they are invested in harming American interests through tactics such as personal data and intellectual property theft.
“Kansas is home to high-value critical infrastructure and essential military installments, setting us up to be a prime target for foreign adversaries,” Croft said.
“Proactive action must be taken to ensure the safety and security of not only Kansans, but citizens across the nation,” he said in a statement.
Republican U.S. Rep. Jake LaTurner has urged the Legislature to pass the legislation.
LaTurner has been critical of Cnano Technology, a company whose parent is based in China and is now building a $95 million facility in Johnson County at New Century Commerce Center with the help of tax incentives.
The company makes nanotubes, which are used to make a paste that can be used in electric vehicle batteries to help them charge faster and last longer.
LaTurner wrote a letter to Gov. Laura Kelly and Republican leadership in the Legislature expressing concern about the company’s investment in Kansas.
“While we all surely welcome open investment in Kansas, and strive to enact policies that will provide economic benefits to our constituents, I have urgent concerns about the national security implications of this particular investment and its likely ties the Chinese Community Party,” he said.
Shawn Montgomery, president of Cnano Technology USA, appeared before the House commerce committee in early March.
He told lawmakers that claims that the company presented a security risk were “completely incorrect.”
“Contrary to what’s being portrayed, Cnano poses absolutely no threat,” Montgomery told the committee.
“The notion that Cnano USA could be used as a conduit to steal America’s military and intellectual secrets is completely incorrect.”
In a recent interview with the Sunflower State Journal, the company’s outside legal counsel raised the prospect that the Kansas bill could constitute a “taking” if the company was forced to divest from property where it’s already committed about $50 million.
“With the forced divestiture, we believe there is a very real chance that amounts to a regulatory taking,” said Carlton Davis, outside counsel for Cnano who specializes in regulatory and government affairs for the Washington, D.C., law firm DLA Piper.
“The company would have to sell on a very expedited time frame to a marketplace. There’s no marketplace to sell that to,” Davis said.
“The question is, will the state be on the hook for providing fair market value to Cnano if there’s a forced divestiture. You could be talking about $20 million to $30 million that the state would be forced to pay Cnano,” he said.
While the government isn’t necessarily taking the land outright, Davis said the state would be imposing regulations that restrict the company’s ability to use the property.
He said if the company is forced to divest, it would be impossible, based on its buildout so far, to get fair market value for what it has invested given that it will face a deadline.
Officials say the new building is designed for a specific process to make a specific product and the structure might not be in high demand on the open market.
For example, the 330-square-foot building includes a lot of fire proofing because a solvent is used in making the paste.
“You would have to find someone who really would have a similar process and would also need that amount of space,” Montgomery said in an interview.
In an interview, Croft said it was never his intent to have the state start acquiring property.
He said the goal was to create a judicial process where someone could be given their day in court.
“It’s not my preference that the state starts owning all this property,” he said. “It’s not what I wanted.
“It’s not the goal to have us buy a whole bunch of land and take it from people.”
Croft said he still embraces economic development.
“This is the struggle we have,”Croft said. “We’ve all been about promoting business and trying to bring business in and I’m a big fan of that.
“But at some point you also have this balance between that and national security.
“When the scale tips, it’s going to be a little painful, you’re going to have to go through that process.”
The bill passed by the House is retroactive.
It stipulated that any foreign principal from a “country of concern” that owns or acquires an interest in nonresidential property within the 100-mile radius of a base would have to register with the attorney general no later than 90 days after July 1, or the date the interest is acquired, whichever is later.
The bill would permit a foreign principal to enter into an agreement with the attorney general to divest from their property no later than 360 days from entering the agreement.
The attorney general would be required to investigate any suspected violation of the law.
He would be allowed to go to court to enforce the law in which he could seek civil forfeiture of the property or a court order directing divestiture of the property.
The bill would require the company to divest within no more than 180 days from the date that court find a violation of the law.
The property owner would be permitted to file a claim against the state for any reduction in sales price of the real property caused by a court-ordered divestiture.
The bill would include exemptions for foreign principals who have received federal national security clearances.
Croft disputed any suggestion that the state was tackling a federal issue.
“I believe it is all of our issues. I think it’s something for all of us to care about,” Croft said.
“This is not a partisan issue in my mind. This is about an issue of survival.
“We can no longer sit by idly and allow our foreign adversaries to be undermining our state and our security,” he said.
Croft stressed that the bill includes a defined process that gives any landowner their day in court.
“We will still welcome foreign companies that want to be good partners and good corporate partners,” he said.
