Oakland’s Ban on Coal Exports Headed for Federal Trial

SAN FRANCISCO (CN) — A federal judge Wednesday refused to dismiss a challenge to Oakland, California’s ban on coal exports, clearing the way for trial between the city and developers.

U.S. District Judge Vince Chhabria said neither party had sufficiently explained the evidence, making it difficult to rule on whether the ban violated the city’s contract with developers of a West Oakland shipping terminal fighting to export coal to Asia. He set a bench trial for Jan. 16.

“I feel I have not been given enough understanding of the evidence that was in the record that was before the City Council,” Chhabria said in the four-hour hearing.

“Was the City Council given the ability to judge whether the amount of emissions from the facility would pose not merely a danger but a substantial danger? That’s what the trial is going to be about.”

Developers of the Oakland Bulk & Oversized Terminal (OBOT), including Phil Tagami, a friend of Governor Jerry Brown, want to haul coal by train from nearly 1,000 miles away in Utah and ship it to Asia through the $250 million facility, which is being built on an old Army base.

But in June 2016, the Oakland City Council passed two measures prohibiting the storage and handling of coal and petroleum coke at any bulk materials facility in the city. Multiple studies found that coal dust blowing off trains into nearby neighborhoods could cause asthma or cancer.

The new regulations brought the project to a halt.

Tagami sued, claiming the regulations on what would have been one of the largest coal-export terminals on the West Coast violate a 2013 development agreement and the Constitution, and are preempted by federal rail and shipping laws.

The facility would be capable of exporting up to 10 million tons of coal annually. California today exports less than 3 million tons annually.

Oakland says it has the right to enact health and safety regulations, such as the coal ban, when there is “substantial evidence of a substantial danger” to public health. At the June 2016 meeting, city officials cited multiple expert reports on which they based the substantial-danger finding, all of which concluded that storing and handling coal at the terminal would hurt air quality and health in West Oakland.

West Oakland is primarily composed of poor people of color. Due to their proximity to major freeways and industry at the Port of Oakland, residents are exposed to heavy pollution and suffer from elevated cancer rates, according to the city and the California Air Resources Board. Oakland does not want to exacerbate neighborhood pollution with coal dust.

Attorney General Xavier Becerra reiterated the city’s arguments in an amicus brief.

But Tagami attorney Robert Feldman told Chhabria on Wednesday that the coal ban violates the development agreement. Feldman, with Quinn Emanuel Urquhart & Sullivan, called the conclusions by one of the city’s experts, Environmental Science Associates “speculative nonsense” based on math that was “completely screwed up.”

Feldman said the environmental planning firm used the wrong standard to estimate the amount of emissions the terminal would create, leading it to conclude it would create 6 tons of emissions a year, 17 times more than it actually would.

“The report isn’t worth the paper it was written on,” Feldman said.

Oakland’s attorney Kevin Siegel, with Burke, Williams & Sorensen, countered that the 6-ton estimate was “reliable substantial evidence” from an expert.

But when Chhabria asked him to justify the number, Siegel said he “cannot point to the underlying data.”

“That’s your job at trial,” Chhabria said. “If the numbers are wrong, they can’t be relied upon as substantial evidence.”

In his motion for summary judgment, Tagami, whose Oakland-based real estate firm California Capital and Investment Group owns the terminal, said the city knew before signing the development agreement that the terminal might handle coal, then bowed to political pressure against coal.

Hundreds of speakers implored the City Council at its June 2016 meeting to pass the ban, after four Utah counties said they planned to invest $53 million in the terminal in exchange for reserving roughly 50 percent of it for their coal.

Councilmember-at-large Rebecca Kaplan said in the meeting that California local, state and federal agencies had indicated they would pull funding if the project proceeded with coal included.

Two months later, Gov. Brown signed legislation banning state transportation funding for new bulk coal-shipping terminals. But the law left funding intact for existing coal projects, such as Tagami’s.

Tagami declined to comment after the Wednesday hearing.

Oakland claimed in its summary judgment motion that Tagami “surreptitiously” sought to include coal in the project while denying his intent to do so.

The city says Tagami discussed handling coal there with potential business partners as far back as 2011, but dismissed rumors that he intended to do so as “simply untrue.” Meanwhile, he struck a secret deal with Terminal and Logistics Solutions to sublease the Army property for $1.2 million and operate the facility, according to the city. That company is owned by Bowie Resources Partners, a Kentucky-based coal producer that operates mines in Utah and planned to ship its coal by rail to the Oakland terminal for export, according to both motions for summary judgment.

Oakland claims that Bowie is funding the lawsuit.

“OBOT secretly pursued plans to bring millions of tons of unhealthy, dust-generating, spontaneously combustible substances to the Terminal,” Siegel wrote in the city’s brief to the court. “OBOT communicated with the City about plans for other products at the Terminal, but was silent as to any plans regarding coal.”

Chhabria said he would defer ruling on the summary judgment arguments regarding the Constitution’s dormant Commerce Clause, which bars local governments from passing laws restraining interstate commerce.

However, he indicated he would rule for Oakland, saying cities can ban the export of a certain product if it endangers their citizens.

He declined to hear arguments on the federal preemption claims.

Attorney General Becerra’s amicus brief accuses the terminal’s developers of “attempting to expand the reach of federal preemption and the dormant Commerce Clause doctrine to prevent Oakland from exercising its police power to protect some of its most vulnerable residents from dangerous pollution.”

West Oakland residents die 12.4 years sooner than residents in richer Oakland neighborhoods, Becerra wrote, and the estimated lifetime potential cancer risk in West Oakland from emissions from the nearby port is about seven times that of the region as a whole. He cited reports by the California Air Resources Board and the Alameda County Public Health Department.

“Breathing clean air should not be a privilege for the few, but a right for all,” Becerra tweeted on Monday. “Unfortunately, in Oakland, people of color would have to bear the brunt of the pollution emitted by the handling of coal and petroleum coke at the Bulk Oversized Terminal.”

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