Coal port embroiled in second lawsuit
By Robert Stevens
OAKLAND—The developer of a controversial shipping terminal being built to export Utah coal is suing Oakland City for a second time after the city revoked the terminal’s 66-year lease last month.
In a 50-page complaint filed in Alameda County Superior Court on Tuesday, Dec. 4, Phil Tagami, developer of the Oakland Bulk & Oversized Terminal (OBOT), claimed the city is redoubling efforts to halt construction of the coal port.
Tagami ducked the city’s first attempt to shut down the port in May after a federal judge overturned Oakland City’s attempt to ban on the storage and handling of bulk coal in the city.
The complaint in the current lawsuit states the city is now attacking the project by claiming OBOT defaulted on its lease at the former Oakland Army Base, which is now owned by the city. The city gave Tagami 72 hours to vacate the property.
“In one egregious omission or act after another, the city has failed to perform its material obligations under the lease and development agreement, and has aggressively taken steps to prevent OBOT’s performance under the lease, and receipt of its benefit…thereunder,” Tagami’s complaint states.
The plan for the $250 million port, supported by the Utah Legislature, and county commissions in Sanpete, Sevier, Carbon and Emery counties, is to transport up to 10 million tons of coal mined in central Utah per year by train to Oakland. From there, the coal would be exported to Asia.
In the first court battle, the Oakland City Council claimed multiple studies had found that trains carrying coal give off dust that can cause asthma or cancer. The city claimed emissions from OBOT would reduce air quality in West Oakland.
Tagami’s counter argument was that the ban on transport and handling of coal violated a 2013 development agreement between OBOT and the city. He argued the city was aware the terminal might handle coal before signing the development agreement.
Tagami claimed the city succumbed to political pressure after Sanpete, Emery, Carbon and Sevier counties announced they would invest $53 million in the project to export Central Utah coal, and the plan drew opposition from environmental groups.
In court, Tagami claimed the city pressured the environmental science firm Environmental Science Associates (ESA) to produce a report that would “support a coal ban.”
His lawyers successfully argued that the report was based on incorrect estimates of the port’s potential emissions.
U.S. District Judge Vince Chhabria overturned the ban, and found Oakland in breach of the development agreement by adopting the ban without “substantial evidence” that exporting coal was a “substantial danger” to people in Oakland.
“As a practical matter, this renders the coal ordinance a nullity, because the only reason the city adopted it was to restrict OBOT’s operations, and OBOT is the only facility in Oakland to which it could conceivably apply,” Chhabria ruled.
In the new complaint against the city, OBOT lawyers claim the city has tried to obstruct the port’s completion over the last four years by implementing “inappropriate and unwarranted additional layers of legal review,” blocking OBOT’s funding and permitting efforts with outside regulatory agencies. Tagami’s side also claims the city has refused to turn over possession of the army-base property where the port is to be located.
A couple of months ago, OBOT was served with a three-day notice to cure an alleged lease default or vacate the property.
The city claimed OBOT had defaulted on the 66-year lease by failing to start construction by a date set forth in the lease.
Tagami denied the city’s claim based on the argument that the city had hampered him from fulfilling the lease obligations.
“The city’s latest tactic—falsely asserting that its lease with OBOT has automatically terminated as the result of a claimed default that did not occur—speaks volumes about the city’s misguided attempts to eliminate this project in violation of its long-standing contractual commitments,” the complaint in Tagami’s lawsuit states.
OBOT’s developers are requesting a court order forbidding the City of Oakland from sabotaging the project any further, saying they’ve invested more than $30 million in the export terminal so far and will lose more than $100 million in damages if they can’t complete it.
Meanwhile, six Oakland community and environmental groups took legal action on Monday, Dec. 17 in the U.S. Court of Appeals, 9th Circuit, to defend the city’s original ban measures against coal storage and handling in bulk-goods facilities.