How a major terminal to ship Utah coal to the Far East sneaked into Oakland

By Brittany Patterson | 09/22/2015 08:15 AM EDT

OAKLAND, Calif. — A contentious battle over the shipping of coal by rail through this city came to a head last night as hundreds of people lined up to share their opinions on its effects on health and safety.

OAKLAND, Calif. — A contentious battle over the shipping of coal by rail through this city came to a head last night as hundreds of people lined up to share their opinions on its effects on health and safety.

More than 500 people submitted requests to speak at the special public meeting, which ran more than six hours. The meeting was convened after it was revealed earlier this spring that four counties in Utah had tentatively pledged a $53 million loan to a multi-commodity bulk terminal currently under the first phase of construction. When completed, the terminal will be capable of receiving an estimated 9 million tons of coal per year.

When originally proposed, developer Phil Tagami, an Oakland native, assured the City Council and the public that coal was not a commodity on the shortlist to come through Oakland.


"This has never been about whether we’re going to do the bulk import station or not; it is about what was promised to the community," said former Oakland Mayor Jean Quan, speaking at the hearing. Quan was in office when the deal was approved. "And quite frankly, the approval process would have been quite different if Phil Tagami had said, ‘We’re going to do coal.’"

The shipping center is being built on the decommissioned site of the old Oakland Army Base. Proposed is a 360-acre facility called the Oakland Global Trade and Logistics Center. Part of that would be a commodity export terminal known as Oakland Bulk and Oversized Terminal (OBOT).

In 2012, the city, which owns the land, awarded California Capital & Investment Group (CCIG), a commercial real estate group headed by developer Tagami, the right to develop the Oakland Army Base. CCIG awarded a 66-year lease for building and operating OBOT to an Oakland-based company called Terminal Logistics Solutions (TLS), headed up by Jerry Bridges, former executive director of the Port of Oakland.

Speaking at the meeting, Bridges said TLS is currently reviewing all of its options to ship commodities including coal, but a final decision has not been made. He added that the company is "doing our best to raise the bar" to show the world that coal can be shipped safely.

Environmental and local health groups say the dust from the coal as it both travels through the city and when it’s offloaded at the terminal poses a health risk to air quality in a community that already suffers disproportionately from health problems. According to a University of California, Berkeley, study, in 2009, residents in West Oakland had a higher rate of asthma hospitalization than any other San Francisco Bay Area community, with 45 asthma hospitalizations per 1,000.

Concerns over the health and safety of West Oakland residents was voiced by more than health advocates.

Derrick Muhammad, business agent for International Longshore and Warehouse Union Local 10, a union that represents waterfront workers in multiple Bay Area ports, told the council his union wanted no part of coal at the terminal.

"We welcome the terminal. We oppose the coal," he said. "This black neighborhood already suffers from the highest levels of asthma in Northern California. I think they’ve had enough. So no to coal."

Many critics of the proposal cited climate change as a reason to say no to coal. Laura Wisland, a senior energy analyst with the Union of Concerned Scientists, testified that if Oakland were to allow coal to be shipped from its terminal, it would contradict where California is heading on climate policy as well as goals the city has set for itself. Last June, the Oakland City Council passed a resolution banning coal shipments from going through the facility.

"Oakland must consider the impacts of burning coal on global climate change and how it impacts its residents," she said. "Those most susceptible to the risks related to climate change such as extreme heat are those who are already ill, the elderly and the poor."

Deal takes mayor by surprise

When it was first proposed, coal was not on the menu. In a December 2013 newsletter, Tagami said coal was not in the plans.

"It has come to my attention that there are community concerns about a purported plan to develop a coal plant or coal distribution facility as part of the Oakland Global project," Tagami was quoted as saying. "This is simply untrue. The individuals spreading this notion are misinformed. CCIG is publicly on record as having no interest or involvement in the pursuit of coal-related operations at the former Oakland Army Base."

A little more than two years later, things had changed drastically.

On April 2, members of Utah’s Permanent Community Impact Fund Board were presented with a funding request from four coal-rich counties: Carbon, Sevier, Emery and Sanpete. A program of the state, the 11-member Community Impact Board operates a program that provides loans or grants to state agencies and subdivisions of the state that are socially or economically affected by mineral resource development on federal lands. The money they provide is collected from mineral lease royalties returned to the state by the federal government.

The request was for a 30-year, $53 million loan with 2 percent interest for "an infrastructure project for the purpose of through-put capacity in Oakland, California consisting of the construction of a 330 acre multi-commodity deep draft marine terminal for the export of Utah goods to the Pacific Rim economies."

The board questioned the legality of the project and voiced concerns over its size but ultimately voted to approve the loan, contingent on legal authorization, according to a transcript of the meeting.

Mark McClure, a principal partner at CCIG, told the board after the vote that the group had been working on the project for about eight years, collecting public and private partners as well as the necessary permits. The shipping center comes with a $500 million price tag and has multiple public and private funders. He said the Union Pacific and Burlington Northern railroads both had routes that could carry coal to Oakland and had room for more train traffic.

After news broke about the Utah deal, the controversy grew. A public records request by the Sierra Club unearthed a heated email exchange between current Oakland Mayor Libby Schaaf and Tagami.

On May 11, Schaaf attended a breakfast where Bridges, CEO of TLS, mentioned coal coming to the terminal.

"Stop it immediately," Schaaf wrote to Tagami after the breakfast. "You have been awarded the privilege and opportunity of a lifetime to develop this unique piece of land. You must respect the owner and public’s decree that we will not have coal shipped through our city. I cannot believe this restriction will ruin the viability of your project. Please declare definitively that you will respect the policy of the City of Oakland and you will not allow coal to come through Oakland."

Two days later, in a letter, Tagami told Schaaf that the city could not restrict what commodities travel through the bulk terminal. He said that because his company now contracts with Terminal Logistics Solutions, he and the city had agreed to "a complete transfer of our rights and obligations with respect to the terminal operations under the ground lease."

Tagami added that in order to ensure the terminal’s legal and financial stability, it was essential that it have "the ability to accommodate the full universe of bulk goods."

Environmental groups rally; EPA raises questions

"There’s almost unanimous opposition to coal in the city of Oakland," said Brian Beveridge, co-director of the West Oakland Environmental Indicators Project, a community-based environmental justice organization. "Really, you have the master developer Phil Tagami and his subtenant, Terminal Logistics Solutions, standing alone in defiance of everybody else."

The city might still have the ability to halt the shipment of coal under the army base contract’s "Regulation for Health and Safety" clause. The city has the power to apply regulations to a project for health-related reasons, Beveridge said in an interview.

Richard Grow, a project officer for U.S. EPA’s Region 9, told the City Council that both the 2002 and 2012 California Environmental Quality Act assessments did not take into consideration the transportation or storage of coal.

Under CEQA, state and local agencies must evaluate the significant environmental impacts of proposed projects and adopt all feasible mitigation measures to reduce or eliminate those impacts.

Speaking in an official capacity during the hearing, Grow questioned the rights of the port’s developers and the city to permit coal transportation.

"The kinds of environmental issues you’re hearing about haven’t been subject to any federal environmental review since 2001," he said. "In our view, the kinds of impacts associated with coal haven’t been subject to state or federal environmental review."

Beveridge said that in his opinion, the city dropped the ball on a variety of oversight measures that could have been taken earlier.

"Phil Tagami was very vocal and very upfront in saying, ‘I won’t take this project on and make you money as your tenant unless I have unilateral control,’" Beveridge cited as an example. "The council was handed a 3,000-page lease document, and everyone was in a hurry because state money was on the line."

He said the West Oakland Environmental Indicators Project recently met with representatives from the California attorney general’s office to discuss if a CEQA challenge could be filed. A spokeswoman with the attorney general said she could not comment on potential legal action.

TLS has proposed covering the rail cars or spray wetting agents on the coal to mitigate dust; however, multiple speakers said there was no good scientific evidence to show that wetting agents mitigate dust.

Debbie Niemeier, a professor in the department of civil and environmental engineering at the University of California, Davis, who was asked to review public plans for the project, said she was unable to find any railway that uses covers on rail cars, nor any company that manufactures them.

Questions were raised as to whether, even if the terminal were to engage in "voluntary mitigation," the city would have any ability to hold it to a commitment under federal law. Kathryn Floyd, a lawyer hired by CCIG, argued that federal laws pertaining to railroads pre-empt local laws and that any moratorium passed by the City Council could interfere with the federal government’s power to regulate interstate commerce.