The Fifth Circuit has confirmed that Texas's Lone Star Infrastructure Protection Act (LSIPA) survives federal preemption challenges, giving states a significant legal green light to exclude Chinese-owned companies from critical energy infrastructure. For businesses operating in or seeking access to regulated energy markets, the October 2026 ruling carries immediate strategic weight.

GH America Energy (GHAE), a Texas subsidiary of a Chinese-owned conglomerate, was denied permission to connect a solar project to the Texas grid managed by the Electric Reliability Council of Texas, Inc. The denial came under LSIPA, which bars, among other countries, Chinese-owned or Chinese-government-affiliated entities from accessing Texas's critical infrastructure. GHAE argued that the federal Committee on Foreign Investment in the United States (CFIUS) regime, which reviews foreign investments for national security risks, impliedly preempted LSIPA by occupying the field of foreign-investment screening and conflicting with Congress's choice of a flexible, case-by-case mitigation framework.

The Fifth Circuit disagreed on both grounds. The court held that CFIUS covers a narrow category of corporate control transactions, not energy grid interconnection agreements. Because LSIPA and CFIUS operate in separate lanes, no conflict exists. And because CFIUS does not reflect a congressional intent to comprehensively displace all state regulations touching on foreign investment, LSIPA is not field preempted either.

This ruling clarifies that states can enact categorical restrictions on foreign-owned entities in critical infrastructure sectors without those laws being swept aside by the federal CFIUS framework. Texas did not need to mirror or defer to CFIUS's individualized review process. A state law that goes beyond CFIUS's requirements or adopts a different regulatory approach is not automatically preempted by the federal framework. 

That said, the decision leaves open questions. The court expressly noted that CFIUS's jurisdiction may not even reach a company building a new power plant rather than acquiring an existing U.S. business. Companies and states relying on this ruling should not assume it resolves every intersection between state infrastructure laws and the federal foreign-investment regime. Context, transaction structure, and the specific state law involved will all matter.

Key Takeaways

• State infrastructure restrictions are on firmer ground. Other states modeled on LSIPA, or considering similar legislation, can point to this ruling as persuasive authority that such laws survive preemption challenges so long as they target infrastructure access rather than corporate control transactions.

• CFIUS clearance does not guarantee access to state-regulated markets. Companies that have navigated the CFIUS process, including through mitigation agreements, should not assume federal clearance insulates them from separate state-law restrictions. The two regimes are independent.

• Litigation framing matters. The court rejected GHAE's effort to characterize LSIPA as a foreign-investment gatekeeping statute. Companies challenging similar laws should expect courts to scrutinize how a state law is categorized and whether it genuinely conflicts with specific federal statutory text, not just with perceived federal policy preferences.

• A sister circuit reached the same result. The Eleventh Circuit recently rejected a nearly identical preemption challenge to Florida's alien land-ownership restrictions in Shen v. Commissioner. A consistent multi-circuit consensus is forming around the durability of state infrastructure and land restrictions affecting Chinese nationals and entities.

Going forward, businesses with Chinese ownership or affiliations seeking access to U.S. energy markets, especially in Texas and other states with LSIPA-style laws, should assess their exposure now rather than at the point of a denied interconnection application. At the same time, companies evaluating or contesting such state laws should monitor whether Congress moves to expressly address the boundary between CFIUS and state-level restrictions. Absent congressional action, courts will continue to read CFIUS narrowly and apply the presumption against preemption, particularly where state utility regulation is involved.