For more than two years, the mayor of this city near the Minnesota border backed a Chinese company’s plans to build a $700 million corn mill on the outskirts of town, citing the prospect of new jobs, added tax revenue and another place for farmers to sell their corn.
Then last week Brandon Bochenski reversed course, hours after the release of a letter from an Air Force official declaring the corn-mill project a security risk because of its proximity to the Grand Forks Air Force Base 12 miles away.
"When it comes to national security, I don’t think the economics matter," said Mr. Bochenski, a former professional hockey player who previously played in Russia and was elected mayor in 2020. "You’ve got to draw a hard line there."
Mr. Bochenski said he and other officials who had supported the project would now block the development by the U.S. branch of Fufeng Group Ltd., which still owns the 370 acres of land. Fufeng didn’t respond to a request for comment on what steps it may take.
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The episode reflects intensifying concerns over whether the U.S. should be restricting the ability of foreigners, particularly from China, to buy American farmland or agricultural businesses.
Lawmakers and others say they want to make sure the U.S. food-supply chain is protected and that China and other foreign adversaries aren’t able to use U.S. land as a perch for spying. Worries about China’s espionage deepened after a suspected Chinese spy balloon was identified in U.S. airspace and later shot down over the Atlantic on Saturday.
"Grand Forks and Fufeng became a flashpoint for a much broader discussion," said Sen. Kevin Cramer (R., N.D.), who had raised concerns for months over the project. "The country collectively realized we had not been keeping our eye on the ball," he said.
Some also worry that wealthy foreign owners could price domestic farmers out of the market or seek to skirt U.S. environmental standards.
After this article was published, the Chinese Embassy said the U.S. stands to benefit from overseas investments.
"We oppose the malicious generalization of the concept of national security and the obstruction and sabotage of normal exchanges and mutually beneficial cooperation between the two countries," said Liu Pengyu, a spokesman for the embassy.
The rhetoric around the debate has started to unsettle some lawmakers, who worry these proposals stoke anti-Asian sentiment.
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"I think our country goes through these waves of looking for communities and groups to make into a scapegoat," said Texas state Rep. Gene Wu, a Democrat. "This is the same sentiment that had people putting up signs saying ‘Irish Need Not Apply.’"
Mr. Wu opposes, and has helped lead protests against, proposed legislation that would bar Texas land purchases by governments, businesses or citizens of China, Iran, North Korea and Russia.
Chinese holdings of U.S. agricultural land have increased significantly in recent years, and nearly half of the Chinese-held acres of agricultural land at the end of 2020 were in Texas, according to a U.S. Agriculture Department database obtained by The Wall Street Journal under a Freedom of Information Act request.
Overall, the data shows that Chinese investors—individuals, foreign entities or U.S. corporations with foreign shareholders—held more than 338,000 acres at the end of 2020, according to the USDA data, excluding nonagricultural land.
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That is up from more than 75,000 acres at the end of 2010.
Still, China owns slightly less than 1% of all U.S. farmland held by foreigners, who in total owned around 3% of all privately held agricultural land at the end of 2021, according to the USDA.
That doesn’t represent a substantial enough portion of U.S. food production to threaten the country’s ability to feed itself, according to an analysis co-written by Caitlin Welsh, director of the Global Food Security Program at the Center for Strategic and International Studies.
But other causes have prompted concern. For example, wealthy foreigners may be willing to pay far more for U.S. farmland, potentially pricing out U.S. farmers, Ms. Welsh said. And they may "not have the same level of concern over stewardship of land and water as the state itself," she said.
The widening geopolitical conflict between the U.S. and China has fueled interest in shielding U.S. farmland, even while the two countries’ agricultural economies are intertwined. China remains the biggest market for U.S. agricultural exports, buying almost $36 billion worth of agricultural goods in 2021, according to the USDA.
In Congress, lawmakers have introduced bipartisan bills to tighten federal oversight of foreigners’ proposed purchases or outright block the ability of buyers from China, Russia, North Korea and Iran to buy U.S. farmland or agricultural businesses.
The new GOP leadership of the House has established a select committee on China, which is expected to review the question of foreign ownership of U.S. farmland.
But the most significant changes could arrive at the state level, where interest in measures limiting or prohibiting foreign investment in U.S. farmland has surged. Currently 22 states are considering measures aimed at restricting or tightening existing limits around foreign ownership of U.S. farmland, according to the National Agricultural Law Center.
By contrast, only eight states debated similar measures between 2021 and 2022. Fourteen states already have some restrictions in place.
In South Dakota, GOP Gov. Kristi Noem and state legislators have introduced legislation to create a state committee to review foreign purchases or long-term leases of agricultural land for national security concerns.
"With this new process, we will be able to prevent nations who hate us—like Communist China—from buying up our state’s agriculture land," Ms. Noem said.
In Grand Forks, residents’ concerns ranged from whether there would be an adequate supply of water to worries about whether the proposed corn mill would pose a national security threat to the Grand Forks Air Force Base.
"China is a huge concern of mine. There is absolutely nobody advocating for Chinese business except for Grand Forks, North Dakota," said Ben Grzadzielewski, a general contractor in the city who became one of the leading opponents to the project.
In December, the Committee on Foreign Investment in the U.S., or Cfius, a federal panel led by the Treasury Department that scrutinizes foreign investments for national security concerns, concluded it didn’t have jurisdiction to conduct a review.
Then last week, the state’s two U.S. senators released a letter from the Air Force saying its view was "unambiguous: the proposed project presents a significant threat to national security with both near- and long-term risks of significant impacts to our operations in the area."
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A spokeswoman for the Air Force said that it deferred to the Treasury Department during the Cfius review, but when the panel "determined it did not have jurisdiction, the Department [of the Air Force] made clear its views on the proposed project’s significant threat."
Federal government officials haven’t detailed the nature of the threat in Grand Forks. Former officials said foreign adversaries could seek to take advantage of being on the ground near military operations, potentially to track U.S. activities or try to get information out of local personnel.
"There are reasons why the national security community is concerned," said John Carlin, a former acting deputy U.S. attorney general who now co-leads the cybersecurity practice at Paul Weiss. "We know adversaries want to get close to our military bases. They want line-of-sight access, they want to be able to intercept radio frequencies," among other things, he said.
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In Grand Forks, the City Council is set to vote Monday to block building permits and infrastructure for the Fufeng project. Mr. Bochenski and other officials are now turning their attention to alternative developments for the site.
Mr. Bochenski said this time he would look for a company based in the U.S. or one of its allies. "That’d be ideal," he said.
