Kansas plan ‘singling out’ foreign firms, citizens could block $95m Johnson County plant

As the Kansas Senate neared a vote after 1 a.m. on a measure that would largely ban companies and many individuals from China and other foreign adversaries from owning commercial real estate, Sen. Mike Thompson made his case for the highly restrictive bill.

Thompson, a Shawnee Republican championing the proposal, invoked national security. He dismissed concerns about discrimination and said his next-door neighbors are from India, his daughter-in-law is from the Philippines and that he has Hispanic grandchildren.

“We are not singling out individual people so much as we are singling out people who have connections to these countries who do have bad intent toward us here in the United States,” Thompson said on the Senate floor.

That singling out could have economic consequences.

The proposal would potentially force the abandonment of a major economic development project underway in Johnson County. Cnano Technology, a U.S. subsidiary of a Chinese firm, is building a $95 million, 333,000-square-foot facility in the business park of New Century AirCenter.

The company makes carbon nanotubes and graphene, which are used in electric car batteries, and its Kansas investment comes after Panasonic announced plans to create a $4 billion electric battery plant in nearby De Soto.

The Senate came within one vote of passing the bill early Saturday morning, after the House passed it with a veto-proof majority. The final Senate tally was 19-14, though one senator changed his yes vote at the last minute to use a procedural maneuver to keep the legislation alive.

The GOP-controlled Legislature has adjourned until late April, but the bill’s near-passage suggests supporters may try again when lawmakers return to Topeka. While Democratic Gov. Laura Kelly might veto the bill if it’s passed, Republican senators would face pressure to support a veto override given the strong support for the measure in the House.

Mike Pirner, a spokesman for Senate President Ty Masterson, an Andover Republican, said on Wednesday that leadership intends to bring the bill up again. He noted that the Senate was missing some members “on the first try.” Six Republican senators missed the vote.

Johnson County Commissioner Shirley Allenbrand, whose western district includes the New Century AirCenter, said “mistruths” about the company have created chaos.

“The misinformation out there is so irritating to me, that it’s gotten this far,” Allenbrand said. “To me, they created a bill over misinformation. I think this is going to put more fear in people, and then somebody is going to get hurt.”

Forced sell offs of property

The legislation, SB 172, would, with limited exceptions, ban citizens and companies – along with subsidiaries – of China, Russia, Iran, North Korea and Venezuela from owning non-residential real estate within 100 miles of any military installation amid fears of foreign interference and espionage.

The radius would effectively apply the restrictions to most areas of the state, given the presence of McConnell Air Force Base in Wichita, Fort Riley near Junction City and Fort Leavenworth.

The bill would require any “foreign principal” – defined as any government official, any political party member, corporation or citizen – of a foreign adversary to divest, in other words sell off, real estate holdings within the 100 mile radius. Property owners could seek permission from the Committee on Foreign Investment in the United States, a federal panel that reviews transactions that could lead to a U.S. business coming under foreign control, to keep their land.

The bill does not apply to U.S. citizens and lawful permanent residents, but would otherwise apply to citizens of foreign adversary countries, even if they are in the United States legally.

“With regard to Johnson County, yes, there is a large company with a parent company that’s China,” Thompson said. “Do we let economic concerns supersede national security concerns?”

Thompson also said “we’re at Sept. 10, 2001.” That day, he said, “nobody would have believed an airplane would have flied into the World Trade Center … everybody’s attitude changed the very next day.”

Critics of the legislation voiced concerns about lawmakers acting out of fear. They warned that if the bill becomes law, it will likely face legal challenges that could prove costly.

“To the extent this bill does anything … I think it will mostly just affect normal, everyday Kansans and immigrants trying to live the American dream,” Rep. Rui Xu, a Westwood Democrat, said.

While some Republicans have been pushing for restrictions on real estate ownership for years, in the past several months they have seized on Cnano’s presence in Johnson County to press their case. They have alleged the company could steal military secrets.

Johnson County commissioners in June approved the issuance of industrial revenue bonds with a 10-year, 75% property tax abatement for Cnano’s facility, which is expected to employ about 120 workers manufacturing battery additives, according to county documents. Prior to the development, the land was owned by the county.

Company officials told lawmakers earlier this year the accusations hold “no semblance of reality.”

Shawn Montgomery, president of Cnano Technology USA, said in a statement on Wednesday that the legislation would immediately shut down an “untold number” of businesses with no recourse other than costly litigation and upend the lives of thousands of Kansas workers. Montgomery said Cnano looks forward to continuing to work with the Senate to ensure the bill is “forward-looking” and passes constitutional muster.

“While we share the same concern as many Kansans that foreign actors could be a threat to our families, our economy, and our security, SB 172 in its current form is not the answer. The bill is unconstitutional, unfair, and unAmerican, labeling all affected actors as guilty until proven innocent with no due process,” Montgomery said.

Restrictions part of national push

Although much of the attention in Kansas has focused on Cnano, the legislation is part of a wave of measures in statehouses across the country aimed at banning or restricting land ownership by foreign entities. At least 15 states enacted restrictions on foreign ownership of real property during the first six months of 2023, according to a July report from the Congressional Research Service.

In Missouri, Republican Gov. Mike Parson issued an executive order in January blocking companies and citizens of China, Russia and other foreign adversaries from buying farmland near military installations. Major Republican and Democratic candidate for governor in 2024 support clawing back a 2013 law that allows foreign entities to own up to 1% of agricultural land in the state.

The Missouri House is poised to debate a Republican-led bill that would reduce that percentage from 1% to .5%. The legislation would also expand Parson’s executive order and ban foreign adversaries from buying any state land.

Members of Congress are also weighing federal legislation. Last March, U.S. Sen. Jerry Moran, a Kansas Republican, cosponsored a bill to prevent China, Russia, Iran and North Korea from owning U.S. agricultural land and companies, though the president would have the ability to allow purchases on a case-by-case basis if vital to national security interests.

The bill would also place the U.S. secretary of agriculture on the Committee for Foreign Investment in the United States to review transactions involving the agricultural industry. It has yet to receive a vote in committee.

Moran on Wednesday said he believes that there needs to be a system that would allow for the evaluation of each purchase by countries like China.

“I don’t know how in today’s world you know the answers to these questions. There is no safety in saying, ‘we’re a Chinese company but we have no connections to the Chinese Communist Party.’ If you don’t have them today, I don’t think you have any defenses of avoiding them in the future. The Chinese Communist Party is all pervasive, can intrude on any Chinese company,” Moran said.

“With the dangers that China poses, that inability to know the answer really is dangerous.”

Opponents of the bill in the Kansas Legislature have voiced concerns about the state involving itself in national security matters they argue should be left to the federal government. Kansas Attorney General Kris Kobach, a Republican known for hard-line stances on illegal immigration, would be in charge of enforcing the divestiture requirements under the proposal.

Foreign principals affected by the legislation would have until the end of September to register their property with the Kansas Attorney General’s Office. The landowners would then enter into agreements with the office to divest their holdings within a year. The measure allows foreign principals who own land prior to July 1, 2024, to file a claim against the state if divestiture leads to a reduction in the sales price.

Kobach would be empowered to investigate violations of the law, and could seek court orders to force companies or individuals to surrender their property.

A Kobach spokesperson didn’t respond to a request for comment on Wednesday.

Constitutional questions

In recent weeks, Kansas senators were invited to a briefing away from the Capitol where staff from the Kansas Bureau of Investigation, which operates under the state attorney general, spoke about issues related to foreign ownership of real estate. Senators from both parties have made comments referring to the briefing.

“It needs to be pointed out the Senate chamber was invited to a ‘briefing,’ a closed door caucus under the auspices of ‘security’ - all for a bill that is unconstitutional on many fronts,” Sen. Cindy Holscher, an Overland Park Democrat, said in an explanation of her “no” vote that appeared in the Senate Journal.

Holscher told The Star on Wednesday that senators initially thought the briefing was about something else. She said the gathering began with questions about the envelopes some lawmakers and other public officials received in June that contained white powder. Within a few minutes, however, it became clear the topic was related to the legislation, she said.

“It really was just PR for this bill, honestly,” Holscher said.

Sen. Rick Kloos, a Berryton Republican, acknowledged the measure would likely include “problematic things” that would lead to legal challenges. “But I also remember being called into a private session by the KBI … and was briefed,” he said.

KBI spokeswoman Melissa Underwood confirmed the briefing took place on March 5 at the request of Masterson, the Senate president. KBI Director Tony Mattivi and Assistant Director Kelly Ralston conducted the briefing, on the “threat of adverse foreign actors.”

“Their presentation included concerns about acquisition of land by foreign adversaries, but this was only one foreign threat discussed, and the briefing was not specifically related to Senate bill 172. The material they presented was also not classified, as it came from an assessment of open source information,” Underwood said in a statement.

Sen. Jeff Longbine, an Emporia Republican, said that if lawmakers are going to pass the bill, they should reallocate $10 million in the budget to the Kansas Attorney General’s Office to pay for efforts to defend the bill in court. He said the proposal is unconstitutional and voted against it.

Without naming Cnano, he said in a floor speech that the company had become the “poster child” for the measure.

“Well, there’s $80 million worth of investment in our state but more importantly, there’s 100 Kansas families that are depending on that income for themselves,” Longbine said.

Johnson County Commissioner Becky Fast said she worries the restrictions could extend to small businesses, potentially harming family-owned companies in rural communities.

“In rural Kansas, you have many Chinese restaurants from people who have permits but are not legal residents yet. But they’re in the process. It takes years to become a legal resident,” Fast said.

“It’s not just these big corporations. It’s these family-owned businesses, from lawn mowing to cafes.”

The Star’s Kacen Bayless contributing reporting