Judge Advances Oakland Coal Ban Lawsuit

SAN FRANCISCO (CN) – A federal judge on Tuesday advanced a lawsuit challenging Oakland’s attempt to use its recent coal ban to block a new shipping facility’s plans to export the product.

U.S. District Judge Vince Chhabria of the Northern District of California denied the city of Oakland’s motion to dismiss a lawsuit filed by developers of the facility, known as the Oakland Bulk and Oversized Terminal (OBOT), after the city banned the storage and handling of coal and petroleum coke within its borders. Chhabria found that the developers have the right to pursue construction of a coal terminal under a 2013 agreement they signed with the city.

“If the city wanted to restrict the developer to an approved list of commodities – or to foreclose the handling of a particular commodity such as coal – it should have included language to that effect in the development agreement,” Chhabria wrote in his three-page order.

OBOT’s developers had planned to haul coal by train from nearly 1,000 miles away in Utah and ship it to Asia through the new facility, which is being built on an old army base. But in June 2016, the Oakland City Council passed the coal ban after multiple studies found that coal dust blowing off trains into nearby neighborhoods could cause asthma or cancer.

In response, the facility’s developers – including Phil Tagami, a close friend of environment hawk Gov. Jerry Brown, sued the city in December, claiming it breached their development agreement.

At an April hearing, Oakland’s attorney Kevin Siegel insisted that OBOT’s developers never acquired a vested right to store or handle coal or petroleum coke at the terminal when they signed the agreement with the city, because the agreement didn’t expressly provide that right. Under the agreement, OBOT merely acquired a vested right to develop and operate the terminal, he said.

Chhabria chided the city in Tuesday’s order for using that argument in its effort to dismiss the case.

“The city sets up a strawman in arguing that the developer … never acquired a vested right to develop a coal-handling terminal. Of course it didn’t,” he wrote. “The parties’ development agreement didn’t purport to enshrine affirmative development rights linked to an approved list of commodities. It purported to enshrine the regulatory regime to which the developer’s plans would be subject.”

“Accordingly, although the developer may have no vested right to develop a coal terminal, it still has a contractual right to pursue development of a coal terminal to the extent allowed under the municipal code as it existed when the development agreement was signed,” he added.

Oakland can still ban coal under the development agreement if the ban is classified as a health-and-safety regulation – meaning that shipping coal through OBOT would endanger nearby residents, the order says. It can also impose the ban if it is classified as a zoning regulation, because the developers’ lawsuit could then be ruled untimely.

However, Chhabria, noting that even the city doesn’t know how the ban should be classified, said dismissing the case without developing the facts surrounding regulation type would be premature.

Chhabria’s order also allowed environmental groups the Sierra Club and San Francisco Baykeeper to intervene as defendants, but denied their own motion to dismiss the lawsuit. As intervenors, the two organizations will be allowed to defend against the developers’ claims, but will not be able to bring counterclaims or cross-claims, or to prevent the suit from being dismissed if Oakland and the developers decide to settle.

“San Francisco Baykeeper, Sierra Club and many other community groups have been engaged at every step of the way to help the people of Oakland defend their right to clean air and water, and we will continue to be deeply engaged as the court dives into the legal issues with handling dirty coal at the terminal,” Jessica Yarnall Loarie, a Sierra Club attorney who is also representing San Francisco Baykeeper, said in an email Tuesday.

Siegel is with Burke, Williams & Sorensen in Oakland. OBOT is represented by Meredith Shaw with Quinn Emanuel Urquhart & Sullivan in San Francisco. They did not return requests for comment Tuesday.

City Councilwoman Lynette Gibson McElhaney, who voted for the ban and in whose district the shipping facility will be located, also could not be reached for comment on the decision.