Oakland loses coal battle with shipping terminal

Oakland lost its battle to ban coal from its shipyard Tuesday, although the ruling won’t have the kind of scope supporters of the coal industry were seeking.

U.S. District Judge Vince Chhabria ruled the city’s ban on coal violated its contract with the developer that created a bulk cargo shipping terminal.

The Oakland City Council passed an ordinance in 2016 banning coal from “bulk material facilities” in the city in an effort to prevent the terminal from being used to transport coal to China.

The coal originates in Wyoming and Utah, and there are only a few ports on the West Coast that can be used to export it. The ordinance created fear among the Western coal states that they would be blockaded by their coastal neighbors and unable to export their minerals.

The shipyard has yet to open because construction work was essentially put on hold while the case was litigated.

Chhabria was able to resolve the issue through examining the contract, meaning he didn’t answer the larger question of whether a city has the constitutional right to ban coal in instances where it wouldn’t present a conflict with a preexisting contract provision. Oakland Bulk & Oversized Terminal LLC v. City of Oakland, 16-CV07014 (N.D. Cal., filed Dec. 7, 2016).

The judge wrote that Oakland made good points about its duty to protect vulnerable members of the community who are exposed to pollution. “But on the primary question presented by this lawsuit, Oakland is wrong,” he added.

Chhabria reasoned the city failed to adequately demonstrate the negative health effects of the terminal transporting coal.

“The record is riddled with inaccuracies, major evidentiary gaps, erroneous assumptions, and faulty analyses, to the point that no reliable conclusion about health or safety dangers could be drawn from it.” Chhabria wrote. “Perhaps a more thorough investigation could result in a lawful determination that coal operations may be restricted at the facility, but in this case, the record was inadequate.”

The judge explained the contract dispute was all a matter of timing.

“The development agreement froze in place the local regulations that existed at the time the agreement was signed,” he said. “This means, generally speaking, that any regulations adopted by Oakland thereafter would not apply to the shipping terminal.”

Chhabria wrote the ordinance itself wouldn’t actually be overturned by his ruling, but it would become effectively useless because it didn’t apply to any other entities outside of the shipping terminal.

The judge wrote the development agreement set a very high bar for making modifications and the city failed to prove eliminating the ordinance would provide “substantial evidence” of “substantial danger” to the health and safety of people in Oakland.

“We’re respectful of the prompt and thorough ruling from the court,” said Robert P. Feldman, a partner with Quinn Emanuel Urquhart & Sullivan LLP who represents the shipping terminal.

Kevin D. Siegel, a partner with Burke, Williams & Sorensen LLP who represented the city, declined to comment. Alex Katz, the city attorney’s chief of staff, did not respond to a request for comment.