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US city tries to avoid legal battle after cancelling Chinese corn mill project in North Dakota

South China Morning Post 17/03/2023 Khushboo Razdan

Fufeng USA and the city of Grand Forks have 90 days to come to terms on details stemming from the termination of the proposed US$700 million plant
The company has not commented about possibly selling the land to an American firm or transferring the development agreement to a third party

A month after a multimillion-dollar agriculture project near Grand Forks, North Dakota, was ordered halted over suspicions about its ownership's ties to China, the city is grappling with the prospect of a legal battle against the company.

This week, the city of Grand Forks approved entering into a "standstill agreement" on the termination of the proposed US$700 million corn milling plant by Fufeng USA, a subsidiary of the China-based Fufeng Group.

City Council President Dana Sande said the move, which council members agreed to unanimously, would provide the "opportunity to negotiate without going to court" and would "saving our community a considerable amount of money".

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"We are talking about going to court with a multibillion-dollar company that probably isn't super happy with our community right now. So I would prefer our city attorney has the opportunity to go and have some friendly discussions rather than going into an unfriendly situation," he said.

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The council voted last month, also unanimously, to cancel the 370-acre (150-hectare) facility after the US Air Force raised national security concerns about its proximity to Grand Forks Air Force Base.

Under the standstill agreement, the two sides have 90 days to come to terms and forestall what would likely be a long and costly legal fight.

But despite the vote, some city officials are questioning the move and demanding that Fufeng USA return the costs the city incurred on the project.

City Council member Rebecca Osowski was one of those expressing her frustration. "I guess I just don't understand what we're trying to come to an agreement on," she said during a recent council meeting.

"Fufeng was deemed a national security threat so we terminate the agreement; we get our money back."

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City Attorney Dan Gaustad said the 90-day window for negotiations would including a discussion about what Fufeng USA planned to do with the land, which it bought from a private individual in 2021. "It's more than getting money back ... they still own property," Gaustad said.

Fufeng USA has not spoken publicly about possibly selling the land to an American company or transferring the development agreement to a third party. A company representative did not respond to a request for a comment.

The Fufeng project secured a preliminary approval by the city administration in November 2021 and was hailed as an economic boon for the local community.

In the ensuing months, the local authorities defended the decision in the face of mounting public opposition over the company's Chinese ownership.

Fufeng's corn milling plant would have been about 12 miles east of Grand Forks Air Force Base. Map: SMCP

In December last year, the city administration welcomed a federal clearance of Fufeng's investment in Grand Forks as "positive feedback". But in a surprising reversal last month, the officials claimed they had been "long unaware" of Fufeng's Chinese origins.

Some beleaguered local officials have dodged calls to resign for initially approving what some residents suspect would have been a "nest of spies" acting at the behest of "Communist China", and residents' displeasure has not abated in the aftermath of the failed project.

Speaking at a City Council meeting last month, Dennis Kadlec urged the city mayor to "do the right thing".

"Be a leader," he said. "Fire the people you need to fire."