Oakland Bulk & Oversized Terminal, LLC v. City of Oakland

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The federal district court for the Northern District of California ruled that the City of Oakland’s adoption of an ordinance that barred coal operations at a bulk cargo shipping terminal breached the City’s agreement with a developer for the conversion of an old army base into the terminal. The development agreement provided that regulations adopted after the agreement’s signing would not apply to the terminal unless the City determined, based on “substantial evidence,” that the failure to apply the new regulation would pose a “substantial danger” to the health or safety of the people of Oakland. The court found that the record before the City Council did not contain sufficient evidence to support a determination that coal operations would pose a substantial danger. The court rejected the City’s primary argument that particulate matter from coal operations posed such a danger, and also found that the record did not support a determination that fire hazards, worker safety, or greenhouse gases would pose a substantial danger. The court noted that “[t]he hostility toward coal operations in Oakland appears to stem largely from concern about global warming.” The court said the argument that global warming allowed it to invoke the development agreement’s “substantial danger” exception “barely merits a response.” The court stated: “It is facially ridiculous to suggest that this one operation resulting in the consumption of coal in other countries will, in the grand scheme of things, pose a substantial global warming-related danger to people in Oakland.”

During the week of January 15, the federal district court for the Northern District of California held a three-day bench trial in an action challenging the City of Oakland’s prohibition on the transportation and export of coal and petroleum coke to and through a rail and marine terminal for bulk and oversized cargo under development on land owned by the City. The bench trial concerned the terminal developer’s claim that the prohibition breached a development agreement that granted the developer the right and obligation to develop the land. The City argued that the development agreement allowed it to impose regulations on the development based on “substantial evidence” that regulation was necessary to avoid placing occupants, users, or neighbors of the project “in a condition substantially dangerous to their health or safety.” While the developer argued that the City could not rely on concerns regarding the potential for terminal operations to contribute to climate change because climate change is an issue of global scale, the City argued that “the unique, global nature of climate change doesn’t mean communities cannot or should not consider local, incremental contributions to climate change.” The City also cited other public health and safety concerns, including coal dust emissions. Prior to the trial, the court heard oral arguments on whether the City’s prohibition violated the dormant Commerce Clause because it interfered with or discriminated against interstate or foreign commerce. Also at issue in the case is whether the Interstate Commerce Commission Termination Act, the Hazardous Materials Transportation Act, or the Shipping Act of 1984 preempt the City’s action.

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Motion for summary judgment filed by defendant-intervenors Sierra Club and San Francisco Baykeeper.

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