Oakland is a step closer to revolving litigation over a stalled project to develop a bulk commodity terminal on the site of the former Oakland Army Base.
City Attorney Barbara J. Parker said the settlement “framework” is subject to the drafting of a definitive settlement agreement and approval of the Oakland City Council.
If the settlement becomes effective, it would resolve more than six years of litigation in state and federal courts.
The saga began in 1999 when the Oakland Army Base closed and the city obtained rights to 370 acres at the West Gateway to the old base. The city spent years planning for development and in 2012 signed a lease and development agreement with Oakland Bulk & Oversized Terminal, LLC and affiliates (OBOT) to develop the site as a bulk commodity terminal.
The idea was that large shipments of commodities like cement, iron ore, coal or coke would be brought to terminal by rail where they would be loaded onto ships for export.
As the project progressed, concerns were raised in the community about coal products being shipped into Oakland. In 2014, the City Council passed a resolution expressing opposition to coal being shipped into the city.
In 2015 and 2016, Oakland held public hearings on the safety implications of coal being transported into and out of Oakland. The city retained an environmental consultant who prepared a report. Comments were also submitted by environmental advocates and members of the public.
Coal ban challenged
In July 2016, the City Council adopted an ordinance effectively prohibiting bulk commodity facilities from processing coal.
OBOT filed suit in federal court and the case was assigned to U.S. District Judge Vince Chhabria in San Francisco. Chhabria allowed the Sierra Club and San Francisco Baykeeper to intervene in the case in a limited capacity to support the city’s position.
OBOT’s primary argument was that under the development agreement, Oakland’s ability to regulate use of the leased land was limited to the rules and regulations existing at the time of signing.
Oakland relied on an exception to that rule. Under the development agreement, if “substantial evidence” showed that operation of the land would pose a “substantial danger” to the health and safety of the people of Oakland, the city was free to adopt new regulations impacting the project.
The case was tried and in May 2018, Chhabria ruled against Oakland, finding evidence that the anticipated coal operations that would cause harm to the public was thin. He also found many defects in the process by which the city determined it would cause substantial danger. He said the determination was “riddled with inaccuracies, major evidentiary gaps, erroneous assumptions, and faulty analyses.”
Oakland appealed to the U. S. 9th Circuit Court of Appeals, which affirmed the ruling in May 2020.
Chhabria’s ruling did not end the conflict between the parties. The development agreement contained certain milestones for OBOT’s work which OBOT had not met. OBOT claimed it was the city’s fault, both as a result of its attempt to prohibit coal handling and other actions that it alleged interfered with its performance.
Beach of contract lawsuit
Facing the possibility that its lease would be terminated, OBOT sued the city in Alameda County Superior Court in December 2018, alleging breach of contract and a number of other claims. It claimed that it had invested more than $30 million and would incur in excess of $100 million in damages if the city prevented the project from being completed. The city filed its own suit seeking to terminate the lease.
The parties have continued to litigate against each other in state court for the last four years. Oakland’s attempt to strike the OBOT’s suit failed and it appealed that adverse decision unsuccessfully. Thereafter it sought summary judgment but was again unsuccessful. The parties were preparing for trial when the settlement framework was announced.
City Attorney Parker’s announcement of the framework did not include the terms of the potential settlement and the Oakland City Attorney’s Office declined repeated requests for further details.
The only information the announcement provides about the nature of the expected settlement is the general statement that: “The settlement of these lawsuits, once finalized, will allow development options to realize the West Gateway’s economic potential and, importantly, preclude transferring or handling coal and other commodities that are harmful to City residents.”
There are unanswered questions to be addressed, including whether OBOT will continue to develop the site and whether the city will compensate OBOT based on its claims, along with how much has the city spent in litigation and what would the timeline be for creating a viable commercial project at the site.