Utah’s hopes of moving coal through Oakland still exist, but depend on the lawsuit going to court
Remember the proposed coal export terminal in Oakland, California, which has long been mired in litigation and bankruptcy?
It’s not dead yet, and a case set to be heard this summer could revive the possibility that millions of tons of Utah coal are being shipped through the city by the bay en route to Asian power plants. The outcome of the lawsuit could have significant implications for the future of Utah’s ailing coal industry.
Oakland residents and elected leaders have been fighting the proposal since 2015, when they learned of developer Phil Tagami’s secret deal with Utah coal producers to lease up to 10 million tons per year through the proposed Oakland Bulk and Oversized Terminal (OBOT). are to be transported City-owned property right on the water.
$53 million was earmarked by the Utah Legislature to support this project. But that money sits in a special account, accruing interest, waiting to be invested in the “throughput infrastructure” to move the minerals produced in Utah to market.
The project is now in the hands of a Los Angeles company, Autumn Wind Lending, which has taken over the terminal’s original proponent, a company called Insight Terminal Solution (ITS), run by John Siegel, a former Utah coal manager. Autumn Wind is suing the City of Oakland for $135 million in damages, alleging that ITS was created by the city’s wrongful actions that prevented it from developing OBOT.
The city last year announced a deal with the new owner that would have allowed the terminal to be built without coal in the mix of commodities it would handle. However, the deal fell through as both sides blamed each other.
“Although they [Oakland] announced they had won, they kept trying to ask for more and my client finally said take the deal or leave it,” Greg McConnell, the ITS lobbyist, said in an interview on Wednesday . “The customer’s position now is that we can pursue all of our options, whatever they may be, and that could include coal. The only way to completely stop the threat of coal being shipped through Oakland would be through settlement. But if you don’t want to be satisfied, it’s up to you whether the coal will be shipped.”
The Oakland County Attorney’s Office declined to comment.
While the case is in court, Autumn Wind recently published his settlement offer in an “Open Letter to the Citizens of Oakland,” urging the city to accept the deal or risk both losing the court and going bankrupt.
“We’ve been trying to achieve what they say they want for the past two and a half years, and we fear they’re more interested in jeopardizing the city’s solvency to keep the issue alive for campaign and fundraising purposes than they are.” to deliver to their constituents,” the Missive states.
Anti-coal activists condemned the post as empty “propaganda” designed to drive a wedge between Oakland residents and their elected officials, likening the “loophole-filled” offer to blackmail.
It is “a last-ditch effort to salvage Oakland’s share of the coal waterfront or use the coal threat to squeeze millions of dollars out of the city,” Oakland-based group No Coal said in a post Tuesday . “Autumn Wind hopes to revitalize the ITS lease by rallying public support for a settlement that is unfair to all of us who live and work in Oakland.”
For coal producers in Utah, the stakes in this battle 800 miles away couldn’t be higher.
Without access to foreign markets, they may soon have to close mines due to the threat of shutdowns of the state’s four coal-fired power plants. Under a separate legal regime, coal producers will soon lose access to a deepwater port in Richmond, a few miles north of Oakland, cutting off a vital link to Japan.
The industry’s greatest hope is the proposed export terminal on the site of the former Oakland Army Base, now owned by the City of East Bay, whose officials want the regeneration of this distressed area at the foot of the Bay Bridge.
However, after being told the terminal would transport California’s agricultural produce, they were stunned to learn from news reports that the terminal would be largely geared towards coal, the dirty fossil fuel contributing to the global climate crisis and local pollution where it is transhipped.
But Oakland’s efforts to ban the coal have been rejected by the courts and the project’s new owners are suing to force the city to restore ITS’ 66-year lease, which was terminated in 2018, and seek damages. The city had cited ITS’ failure to meet construction deadlines as the reason for terminating the lease, but Autumn Wind argues it was the city itself that prevented ITS from building.
According to McConnell, the ITS has now established the right to transport coal through various court victories.
“The federal courts said that the federal government, and not the city of Oakland or any other local community, controls what can and cannot go by rail,” he said. “That settles the question of whether the city has the authority to regulate coal transportation.”
In its bid, ITS agreed never to ship coal and stipulated that should coal ever arrive at the terminal, the city could terminate the lease immediately and charge a $5 million fee for each car unloaded. This promise would be binding on any future owner of the terminal.
“That makes it almost impossible for anyone to have any commercial interest in moving coal,” McConnell said. In exchange, ITS wants a rent cut, but would still pay nearly $1 million a year in ground rent.
But anti-coal activists claim the pledge is meaningless unless the terminal’s supporters deny the right to ship coal, arguing that the terms of that agreement could be overturned in future litigation.
“If that were to happen, ITS could benefit from drastically reduced rents for decades to come while also operating a toxic coal terminal on the West Oakland coast,” Oakland-based No Coal said. “ITS tries to achieve both. The ITS wants to make a ‘no coal promise’ for public relations purposes while maintaining a legal way out to get the coal back in the game.”
Without a settlement, the case would go before Judge Noel Wise in Alameda County Superior Court on July 10.
Unlike the project’s previous owner, Autumn Wind has no connection to the coal industry. But shipping coal may make the most economic sense, which is why McConnell says the owner wants to protect this valuable right.
“Right now, coal is probably one of the most valuable commodities to ship to China, India and Africa,” he said. “Japan and these places are currently building coal-fired power plants.”
McConnell called the settlement proposed by ITS a “win-win” because it would guarantee no coal flow through Oakland while allowing an important cleanup project to move forward.
“They need to build a terminal that will bring resources and jobs to the city. Why they play this game only God knows. It’s a dangerous game. The No Coal folks, the environmentalists and the Sierra Club can bitch all they want, but the reality is that there is a surefire way to stop coal being shipped, and that is to strike a deal. If you don’t and lose in court, which we think is likely, who knows what might happen. It might make some miners happy.”
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