OAKLAND, Calif. (CN) — An Oakland developer will resume construction of a new bulk terminal on California’s third largest port during the next three years, following a six-month, two-phase bench trial.
Alameda County Superior Court Judge Noël Wise ruled Tuesday that Oakland Global Rail Enterprise will not receive the nearly $160 million it claimed in lost profits. The decision came after Wise found the city of Oakland violated the ground lease on a parcel of public land adjacent to the Port of Oakland and the San Francisco Bay Bridge.
The judge gave the developer a choice between restoring the ground lease with a new construction deadline to complete the terminal, or receiving $318,000 to walk away from the project.
Oakland Global Rail Enterprise chose to restore its lease on the land. This means work on the new bulk terminal can resume at the Port of Oakland.
The legal proceedings have centered on developer Phil Tagami’s intention to allow transport of coal ash at the terminal, which Oakland leaders opposed in support of more climate-friendly energy sources. The city subsequently lost a federal court battle over a citywide ban on coal shipments.
Tagami claimed his company missed out on massive profits when Oakland officials terminated a ground lease on the land in 2018 because his company did not meet initial construction deadlines. The city, which countersued for breach of contract in 2020, said the developers hurt the project by missing construction milestones while scheming to close a lucrative coal export deal.
Wise said in a three-page order released Tuesday that since the developer chose to move forward on the terminal, her final ruling finds that the developer is not in default of the Army Base Gateway Redevelopment Project Ground Lease for West Gateway for failure to meet the initial deadline of Aug. 14, 2018.
That also finalizes her ruling in which she found the city had violated the ground lease on the property, making its termination of the lease void. That gives the developers 2 1/2 years to complete initial work on the land as previously agreed.
The developer and attorneys associated with the project did not immediately respond to requests for comment.
No Coal in Oakland, which has vehemently opposed the bulk terminal for nearly a decade due to the developer’s intent to ship coal through it, said in a statement Tuesday that activists will continue fighting any plan for coal at the terminal.
“We applaud the court’s refusal to reward the would-be coal terminal developers with the massive payoff they sought by suing the city,” the organization said. “The proposed coal terminal is extraordinarily unpopular in Oakland. Coal is the dirtiest fossil fuel. Building new coal transport infrastructure in Oakland would endanger the health of the Oakland community, particularly residents and workers in historically Black West Oakland."
Jacob Klein, Sierra Club San Francisco Bay Chapter organizing manager, said, “The developers have to make their way through a gauntlet of permits, complex administrative and regulatory steps and unrelenting community opposition before they can even start construction on this thing. We will support the city in doing whatever it takes to shut down any possibility of coal storage and handling in Oakland.”
Ben Eichenberg, San Francisco Baykeper staff attorney, said, “For over a decade, frontline communities have demonstrated their resolve to keep this poisonous project out of West Oakland, and the Oakland city council and city attorney’s office have remained steadfast in opposing it every step of the way. The next legal move is for the city of Oakland to appeal the court's decision and stop this polluting project once and for all, which will help the residents of Oakland breathe a little easier."
City Attorney Barbara Parker said that the city can now appeal the state court's ruling.
"Although we appreciate that the trial court ultimately correctly rejected OBOT’s attempts to obtain hundreds of millions of dollars in damages that it is not entitled to under the contract or law, the city’s position remains that the court erred in making its initial finding in favor of OBOT on the city’s and OBOT’s dueling breach of contract claims," Parker said.
On Dec. 26, the judge said she found the calculation of lost profits flawed as it was based on an expert testimony from a witness with no expertise in development of bulk commodities terminals, the rail industry or commodity markets for coal and soda ash. The expert also did not conduct a comparative market analysis of any other bulk commodities terminals.
Wise also removed from the extension of deadlines a provision in the lease requiring the city to seek third-party funding of certain improvements, relieving the city of obligations to join the effort if the developer chooses to resume construction.
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