Texas Can Bar Chinese-Owned Firms From Energy Grid
A Chinese-owned energy company spent years trying to connect a Texas solar project to the state's electric grid — and lost, twice: first at ERCOT, then in federal court. The Fifth Circuit ruled in October 2026 that Texas's ban on Chinese-owned firms accessing critical infrastructure does not violate federal law, even when CFIUS has already reviewed the same company's investments. The decision sets a precedent that states can go further than federal foreign-investment rules.
What if a federal review process already approved your company's investment — can a state still block you? That is exactly what happened to GH America Energy, and in October 2026 the Fifth Circuit Court of Appeals answered clearly: yes, Texas can.
The court ruled on October 16, 2026, that the Texas Lone Star Infrastructure Protection Act of 2021 (LSIPA) is not overridden by the federal Committee on Foreign Investment in the United States (CFIUS) — the interagency body that reviews foreign deals for national security risks. LSIPA bans companies majority-owned or controlled by citizens of China, Russia, Iran, or North Korea from gaining access to Texas critical infrastructure, including the state's electric grid managed by ERCOT (the Electric Reliability Council of Texas). The Fifth Circuit found no conflict between LSIPA and federal law, and said the state law actually adds a layer of protection on top of what CFIUS already does.
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The case started when GH America Energy (GHAE) — a Texas LLC and subsidiary of Xinjiang Guanghui Industry Investment Group, a Chinese company — tried to connect a solar project called Blue Star to the Texas grid. ERCOT canceled the application in October 2022 because GHAE was majority-owned by a Chinese parent company, which put it in violation of LSIPA. GHAE argued that because CFIUS had already reviewed its transactions and entered into mitigation agreements, the federal process should take precedence over the state ban. The Fifth Circuit disagreed. Writing for the panel, Judge Jerry E. Smith said GHAE failed to show any real conflict between LSIPA and the federal statutes behind CFIUS, and that Congress never created such an all-encompassing regulatory regime that states are locked out entirely.
The ruling has direct consequences for any foreign-owned business — especially those with ties to China — that wants to participate in Texas energy markets. The 2023 Texas Legislature went further, requiring ERCOT to verify that any business seeking grid registration or interconnection certifies it complies with LSIPA. That means the barrier is now written into ERCOT's own operating rules, not just state law.
What this means for investors and immigrants
- If you own or work for a company majority-owned by Chinese nationals or the Chinese government, LSIPA bars that company from connecting to the Texas grid — even if CFIUS has reviewed and approved related transactions.
- Selling or restructuring ownership to comply with LSIPA may be an option, but lawyers who handle both corporate and immigration law warn that ownership changes can trigger new CFIUS review obligations.
- If your company was denied an ERCOT interconnection under LSIPA, the Fifth Circuit's ruling closes the federal preemption argument — other legal theories would need to be explored with an attorney.
- Watch for similar laws in other states: the Fifth Circuit's reasoning could encourage other legislatures to pass their own foreign-ownership restrictions on critical infrastructure.
Related: our step-by-step guide — “Appealing to the BIA”.
Fishkin Law Firm, New York
This ruling confirms that CFIUS clearance does not immunize a foreign-linked company from state-level restrictions on critical infrastructure. If a client's business is majority-owned by nationals of a LSIPA-listed country, restructuring ownership before applying to ERCOT is the only realistic path — but any ownership transfer may itself require a new CFIUS notification under FIRRMA. Do not assume a prior mitigation agreement with the Department of Defense resolves state-law compliance. Consult an attorney who handles both CFIUS filings and Texas energy regulatory matters before making any structural changes.
Frequently Asked Questions
Does a CFIUS approval or mitigation agreement protect a Chinese-owned company from Texas's LSIPA ban?
No. The Fifth Circuit ruled in October 2026 that CFIUS and LSIPA operate independently. A federal mitigation agreement does not override the state ban. Texas can still block your company from connecting to the grid.
Which countries does LSIPA target?
LSIPA covers companies majority-owned or controlled by citizens or governments of China, Russia, Iran, and North Korea. If your company falls into any of those categories, it cannot gain access to Texas critical infrastructure, including the ERCOT grid.
Can a company restructure its ownership to comply with LSIPA?
Possibly — but it is complicated. Changing ownership to remove a Chinese majority stake may bring the company into LSIPA compliance, but that same ownership transfer could trigger a new mandatory CFIUS review under federal law. You need an attorney to evaluate both sides before making any changes.
Does this ruling affect immigrants personally, or only businesses?
The ruling directly affects businesses, not individual immigrants' visa or green card status. However, if you are an investor or entrepreneur whose business model depends on Texas energy projects and your company has Chinese ownership ties, this ruling blocks that path under current Texas law.