Developer Phil Tagami and the Bowie Resource Partners coal company have prevailed in their efforts to overturn the city of Oakland’s coal ban as it was applied to their project.
US District Court Judge Vince Chhabria issued a decision today, finding that the city breached its contract with Tagami’s company, the Oakland Bulk and Oversized Terminal (OBOT), which has the right to build a bulk commodity export terminal in West Oakland near the foot of the Bay Bridge.
“We can’t give up,” said Oakland City Councilmember Dan Kalb in reaction to today’s ruling. “This coal is still in the ground in Utah.” Kalb said the city still has options and the council will consider them with advice from their attorneys.
“Oakland’s most vulnerable communities have unfairly suffered the burden of pollutants and foul air for too long,” said Oakland Mayor Libby Schaaf in response to the judge’s decision. “We will continue to fight this battle on all fronts; not just today, but every day.”
Schaaf famously quarreled with Tagami over the project, writing to him in a 2015 email, “You have been awarded the privilege and opportunity of a lifetime to develop this unique piece of land. You must respect the owner and public’s decree that we will not have coal shipped through our city.”
OBOT and the city signed a development agreement in 2013 to redevelop a portion of the old Oakland Army Base that the city owns. In 2015, news broke that Tagami and business partners, including former Port of Oakland executive Jerry Bridges and his company Terminal Logistics Solutions, were planning to turn the bulk terminal into a dedicated coal export hub. Coal from Utah mines owned by the Bowie Resource Partners company would be transported by rail to the terminal and exported to overseas markets.
Bowie largely paid for Tagami’s lawsuit against the city. The company’s ability to export coal from the West Coast is a lifeline to an otherwise flagging industry due to the fact that other coal export projects on the West Coast have been canceled or blocked by local communities, and the domestic market for coal is declining.
The Oakland City Council sought to block Tagami’s plan for the marine terminal by enacting a coal ban ordinance in June of 2016. The council relied on a clause in its contract with OBOT, which states that Oakland may enact new regulations on the project if there is “substantial evidence” that these regulations are necessary to protect public health and safety.
Typically though, development agreements lock in the land use regulations that were in place at the time the contract was signed. OBOT sued the city in 2017 to overturn the coal ban. The essence of OBOT’s claim against the city is that it created new rules after the fact, which harmed OBOT and its business partners.
Chhabria ruled that the Oakland City Council didn’t have “substantial evidence” before it indicating that shipping millions of tons of coal through the city would endanger public health, and therefore the contract was breached.
In fact, Chhabria criticized the expert report commissioned by the city as inadequate and containing errors. That report, drafted by Environmental Science Associates (ESA), described as much as 21 tons of coal dust blowing off trains and the coal terminal each year. But the report never compared this pollution to other sources.
“The City was not required to compile a perfect evidentiary record; far from it. But the gaps and errors in this record are so numerous and serious that they render it virtually useless,” Chhabria wrote.
Kalb, who independently hired a second expert, Dr. Zoe Chafe, to study the possible health impacts of the coal project, said he was disappointed the judge didn’t appear to consider Chafe’s report when making his decision. “I believe there’s more than substantial evidence in the record,” said Kalb.
Furthermore, Chhabria said that ESA’s methods of calculating this level of pollution were flawed and didn’t account for mitigation measures promised by the coal terminal developers.
“The first major problem with the emissions estimates for the transport and staging phases is that ESA assumed OBOT would take no mitigation measures during those parts of the operations,” wrote Chhabria, referring to promises from Tagami’s company and TLS that they would use rail car covers and chemical spray-on surfactants to prevent coal dust from blowing off trains into surrounding neighborhoods. “This mistake tainted the record before the City Council,” Chhabria concluded bluntly.
The city’s attorneys and environmental groups argued that covers have never been used for train cars carrying coal, so no information is available about whether or not they’re effective. They made similar arguments against other claims by OBOT that the coal terminal can be made safe.
But Chhabria was unconvinced. “The lack of existing data about the effectiveness of a new technology like rail car covers is not enough of a reason to assume them away, particularly when the developers have committed to using them,” he wrote.
“[G]iven the record before it, the City Council was not even equipped to meaningfully guess how well these controls would mitigate emissions,” concluded Chhabria. “This created a sizable gap in the record, and a major flaw in the City Council’s ultimate conclusion that OBOT’s emissions would pose a substantial health or safety danger.”
The judge also criticized the city and its consultant’s omission of any consideration of how the Bay Area Air Quality Management District would regulate the coal terminal, saying they only made “fleeting reference” to its powers. OBOT’s attorneys had argued during the trial that the air district will be sufficient to regulate and permit the coal terminal’s activities to ensure it doesn’t emit pollution at harmful levels.
As a result, Chhabria wrote that the city couldn’t say whether or not the coal dust that will blow off trains and the terminal will further harm Oakland residents, including low-income Black, Latino, and Asian communities concentrated near the rail lines and near the Port of Oakland.
“[I]t is not enough to simply intone that the facility will operate near a child care center and low-income neighborhoods,” Chhabria wrote in response to the city’s argument that the coal terminal will disproportionately harm Black and Latino children in West Oakland. “If the City wanted to point to these residents to justify the ordinance, it should have compiled a record with credible evidence that would allow the City to assess whether the proposed coal operations would actually present a substantial health danger to these people.”
Chhabria reached his decision after reading thousands of pages of briefs and evidence and holding a week-long bench trial earlier this year.
“The City of Oakland banned the handling and storage of coal and coke at OBOT’s proposed shipping terminal pursuant to its police powers to regulate threats to health and safety,” said Alex Katz, spokesperson for the Oakland City Attorney’s Office. “The City takes its responsibility to protect the health and safety of residents very seriously, particularly children whose health will be directly impacted by storage, handling and shipping of coal and coke through our neighborhoods.” Katz called the ruling disappointing and said the city attorney will discuss options with the city council.
Tagami did not immediately respond to a request for comment.
But Kalb said the city could appeal Chhabria’s ruling, or, it’s possible the city could hold new hearings and build up the record on possible health and safety impacts of the coal project in order to re-apply the city’s coal ban ordinance to the proposed terminal.
“He’s not invalidating the ordinance,” said Kalb about the judge’s decision. “He’s invalidating the resolution that applied the ordinance to the project.”