Court battle over contentious coal transport terminal goes before 9th Circuit judges

Attorneys representing the City of Oakland and developer Phil Tagami faced off in a packed San Francisco courtroom last Tuesday morning over whether or not Tagami’s company can transport coal by train into a new terminal they have proposed building at Oakland’s former Army base.

“Courtroom’s full. Courtroom’s full,” the security guard repeated to people in the hallway who came early, but not quite early enough. Outside, a few members of the environmental activist and performance art group Red Rebel Brigade stood together like statues to protest.

The hearing before the Ninth Circuit Court of Appeals was before a panel of three judges, and it was the latest step in the legal battle that has been brewing since 2016. Attorneys from the two sides—Robert Feldman representing Tagami’s company Oakland Bulk and Oversized Terminal (OBOT), and Stacey Leyton representing Oakland—each had 20 minutes to present oral arguments and respond to sometimes teasing questions from the judges.

The dispute’s origins stretch all the the way back to 2012, when Tagami, a life-long Oakland resident and real estate developer known for projects like renovating the Fox Theater and the Rotunda building, signed a lease with city officials. The lease was to redevelop the former Army base in West Oakland to become a rail-to-ship terminal. In 2013, both sides signed a development agreement stating that the terminal would be used for “non-containerized bulk goods.” Coal was not specifically mentioned as one of those goods.

But rumors began to circulate that Tagami planned for the proposed terminal to be used for the transport of coal. To quell them, he wrote in a 2013 newsletter that “[OBOT] is publicly on record as having no interest or involvement in the pursuit of coal-related operations.” But by 2014, Tagami had agreed to lease the property to Terminal Logistics Solutions (TLS) which is owned by coal producer Bowie Resource Partners. Based on the proposed design by TLS, the terminal could transport up to 5 million metric tons of coal each year.

At that point, Oakland city councilmembers began to look deeper into the environmental and health risks associated with transporting coal, commissioning five expert reports. One report, commissioned by District 1 Councilmember Dan Kalb, was authored by Dr. Zoë Chafe, an energy and resources expert who is a post-doctoral associate in the Department of Biological and Environmental Engineering at Cornell University. In the report, she stated: “Communities surrounding the proposed terminal site already suffer from exposure to elevated levels of pollution” from nearby highways and the port, and that the terminal would exacerbate that.

Another report by the Public Health Advisory Panel—made up of nine physicians, scientists, and public health professionals—pointed out that coal handling could cause a “catastrophic explosion.” According to this report, coal can spontaneously combust, and if there was a coal fire, toxic chemicals would be released into the air, including mercury, hydrogen cyanide and uranium.

During this time, OBOT officials did not submit contradictory evidence nor argue against this expert testimony.

Several public hearings addressed the transportation of coal, including one in September, 2015, that hundreds of Oaklanders attended, splitting over the issue. Wearing yellow shirts that read “I support Oakland jobs,” members of Laborers’ Union Local 304 were among the biggest supporters of the coal terminal because they said it would be good for local economy. Meanwhile, opponents sitting in the other half of the room wore red shirts with the words “Beyond Coal Exports” and voiced concerns that the terminal would endanger the environment and residents’ health.  

(Click on these Oakland North stories for earlier coverage of the coal transport plan and some of the public debate that followed.)

In June, 2016, the city councilmembers voted unanimously for an ordinance that banned coal storage and handling in the city, citing health and safety concerns related to inhaling coal dust and the potential future effects of climate change. The ordinance banned the transportation of coal by any company—not just OBOT. Tagami’s company was still expected to uphold the development agreement and build the terminal to ship other goods, like eucalyptus trees or wood pellets. But the ordinance put Tagami in a bad position with TLS, the coal company hired to design and manage the terminal, because TLS would no longer be able to do their primary business in Oakland.  

The fight wasn’t over. That December, Tagami sued the city in the U.S. District Court of Northern California in an attempt to overturn the ordinance.

Attorneys on both sides agreed that the development agreement included an exception, that regulations could be imposed if there was “substantial evidence” of health and safety dangers to the community.

But Tagami’s lawyers contended that the evidence of danger was not substantial. They pointed out that the designs for the terminal had barely begun, and argued that any assessment or report based on the initial designs would be too preliminary to be used in making a judgment.

For almost 18 months, both sides prepared for trial and submitted legal arguments to District Court Judge Vince Chhabria. This would be a bench trial at which the judge, not a jury, makes the final determination about which side will prevail.  

By this time, OBOT’s lawyers had collected expert testimony to refute the reports commissioned by councilmembers. They argued that new designs for the terminal would mitigate the spread of coal dust—like putting covers on the railway cars and transferring the coal underground from railway to boat.

They also argued that the reports themselves were flawed, because they did not include certain kinds of analysis. OBOT’s team included testimony from Lyle Chinkin, a chief scientist at Sonoma Technology, an environmental consulting firm, who stated that air-quality modeling is necessary “to understand where emissions go.” 

Attorneys representing Oakland asked the judge to dismiss this new evidence, but Chhabria denied the motion. Chhabria later wrote that “This type of evidence is relevant … because it sheds light on the adequacy of the evidence that was actually before the City Council.”

After three days, the judge ruled in favor of Tagami and OBOT, writing that the councilmembers did not have sufficient evidence to claim health and safety risks when they banned the terminal from being built.

In June, 2018, Oakland City Attorney Barbara Parker filed to appeal that decision. Now, three years after city councilmembers voted to ban coal, in this court in San Francisco, the two sides would go head to head over whether to save—or kill—the terminal.

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This time, the facts would be argued before the Ninth Circuit Court of Appeals, in front of three judges.

Judge Carlos Bea of the Ninth Circuit was the most senior judge, along with fellow Ninth Circuit Judge Kenneth Lee, who was appointed to the bench earlier this year. Visiting Judge Lawrence Piersol comes from South Dakota’s U.S. District Court. Judges Bea and Lee were randomly selected to preside over the case; a visiting judge like Piersol can be selected to preside in an appellate court for a number of reasons, including if a local judge is unavailable.

Stacey Leyton, representing Oakland, stood at the podium before the judges first, ready to tell them that Judge Chhabria had gotten it wrong. Leyton is a partner at Altshuler Berzon LLP, a firm hired to represent the city.

Leyton defended the Oakland city councilmembers’ decision to ban the transportation of coal. Summarizing the findings from the five expert reports, she said, “The evidence showed that hundreds of tons of coal dust emissions containing heavy metals would be released” if the terminal was allowed to handle coal. “We know that [coal] dust … leads to cardiovascular disease adverse birth outcomes, respiratory disease, emergency room visits and cancer,” she said.

She contested Judge Chhabria’s decision to allow OBOT’s lawyers to submit new environmental reports and updates on design. Since councilmembers didn’t have access to that information before, she said, it would be unfair to judge them for it.  

Further, she argued, “if the city council determines that a substantial danger is presented,” then the district court should have respected that decision, rather than second-guessing the quality of the experts’ reports.

Leyton also addressed the OBOT lawyers’ previous claims that the company did not have enough time to prepare expert reports before the 2015 and 2016 public hearings, which was why they submitted them during the 2018 lawsuit instead. “This was a ten-month-long process,” said Leyton. “OBOT did not request additional time. OBOT did not seek to present additional evidence. … And then, at that point, OBOT pretty much sat out the process, except to raise that it would be challenging this legally.”

Leyton yielded five of her 20 minutes before the judge to attorney Colin O’Brien, her colleague from the environmental law non-profit Earthjustice, who was also representing the Sierra Club. Earthjustice and the Sierra Club are some of the many organizations that have submitted arguments on behalf of the city.

O’Brien had been scribbling notes during Leyton’s argument, preparing to fill in any gaps. Referring to the expert testimony OBOT’s expert witnesses presented before the court in 2018, rather than to city councilmembers in 2016, O’Brien said, “The courts should be reluctant to create duplicative fact-finding scenarios, because not only does this waste the resources of the parties and the courts, but it also undermines finality and decision making.”

Then, it was the other side’s turn.

Attorney Robert Feldman, representing OBOT, took his full 20 minutes to argue that the court should uphold Judge Chhabria’s decision. Feldman rebutted the contention that the judge had admitted too much new evidence into his court, arguing that this evidence was “admitted to shed light and explain” the environmental and health risk conclusions made by the previous reports.

“Private parties cannot tell a district court how to go about doing its business. They can’t tell the district court what evidence it can and cannot look at,” Feldman said. He argued that the judge had “pointed out the flaws in their reasoning and in their logic, and in their analysis.”

But Judge Piersol picked at Feldman’s argument. “The thing that bothers me about this whole proceeding is that there were public hearings,” said Piersol, who then pointed out that Feldman’s client hadn’t made an effort at that time to submit evidence for councilmembers to consider.

“I’ve tried a lot of administrative proceeding cases. And usually the other side puts their evidence in so that the city commission could consider it. Instead you sat in the weeds and then came to trial,” said Piersol.

“That’s one hundred percent incorrect,” Feldman interrupted. He argued that back in 2016, the design for the proposed terminal was not complete enough to do an environmental review. “My clients said that this entire process was premature,” said Feldman. “The terminal was only 8 to 10 percent designed.”

But Piersol looked unconvinced, and continued to press Feldman several times on the same point. He eventually accused OBOT of “sandbagging,” a term used to describe legal disputes in which one side withholds evidence.

After a tight 40 minutes inside the courtroom, the result of years of preparation for attorneys on both sides, the judges recessed.

Attendees, many of them lawyers, businesspeople or activists, quickly sprang up to discuss the hearing in the marble-lined hallways. Half a dozen men crowded around Feldman. Feldman declined an interview with Oakland North to comment on the proceedings.

Leyton stood surrounded by about 20 supporters, and spoke briefly to them before the small crowd began clapping and smiling. On her way out of the courthouse, she said, “I’m hopeful, based on their questions, that they understand that the district court overstepped its authority here.”

After the crowd dispersed, Oakland’s City Attorney Barbara Parker, who had watched the arguments from the court’s gallery, said, “We were very pleased with the presentations made by the city’s attorneys and responses to the questions that the justices raised.”

But it’s still too early for either side to predict a victory. The judges’ ruling is expected in 2020.

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Although it may be months before the panel reaches a final decision, supporters of both sides are trying to rally support behind their cause.

A week before the hearing, dozens of kids and teens from Youth vs. Apocalypse, a climate change activist group, protested outside of Tagami’s office at Frank Ogawa Plaza. They painted two large circles on the sidewalk, surrounded with the phrases “The Youth are Watching” and “No Coal in Oakland.”

As chants continued in the background, Mariah Lazalde, a sophomore at Met West High School, said she has been concerned about coal in Oakland for three years. She said that coal dust is “just going to go into the air and people, especially in West Oakland already have bad cases of asthma. And it can also cause lung cancer.”

Meanwhile, members of the activist group No Coal in Oakland have been advocating against the terminal since 2015. They keep a detailed log on their website of the business and legal matters associated with the proposed terminal. No Coal in Oakland activist Ted Franklin, who attended the court hearing last week, wrote in an email that he felt uncertain about how the judges will rule. “Judge Piersol was clearly unconvinced by the developers’ arguments.  The other two judges held their cards closer to the chest,” he said.

At the same time, Oakland-based consultant Greg McConnell, who represents Terminal Logistics Solutions, the coal company OBOT has hired to design and manage the terminal, has been advocating for the proposed terminal for years. He said he remains optimistic that the Ninth Circuit judges will rule in his clients’ favor. 

He has long argued that the terminal is good for Oakland’s economy because it will create jobs. “We anticipate the construction employment will be in excess of 400 people,” McConnell wrote in an email. He also mentioned that once operating, approximately 135 people would work there. “We also anticipate thousands of secondary jobs,” he wrote.

Although he didn’t attend the hearing, “We thought it went well,” McConnell wrote in the email. “But it will likely be several months before we will see [the judges’] decision.”