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Developer sues Oakland over ban on coal shipments

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Developer sues Oakland over ban on coal shipments

The developer of a proposed export terminal in Oakland, Calif., sued the city Dec. 7, saying its ban on shipping coal from the terminal is an "unconstitutional abuse of its power."

The Oakland City Council voted unanimously in June to prohibit the storage and handling of coal at the Oakland Bulk and Oversized Terminal, a multicommodity port planned for the site of the former Oakland Army Base. Council members and Oakland Mayor Libby Schaaf had expressed concerns over the environmental impacts of transporting and burning coal.

OBOT's lawsuit claims the ban violates the Commerce Clause of the U.S. Constitution as well as federal laws that grant the power to regulate rail transportation to federal agencies, not state or local governments. It also says the ban has hurt its ability to attract partners and investors for the project and asks for the ban to be overturned.

"It is truly regrettable that the City has left us no alternative but to take this action," said Phil Tagami, president and CEO of California Capital and Investment Group, which is leading the development of the port and is a corporate member of OBOT, in a statement. "We applied for and the City approved and vested exactly what the market demands: a terminal capable of being fully responsive to market demands for global transport of legal commodities over its 66-year useful life. Restricting any commodity on political grounds puts a cloud of uncertainty over the entire project going forward."

The original plan to turn the closed military base into an international bulk marine terminal included a proposal to ship millions of tons of Utah-produced coal by rail to the port for export to overseas markets. That proposal faced stiff opposition from Oakland politicians and environmental groups, leading to a series of setbacks on the state and local levels.

In addition to the city council ban, the project lost $53 million in Utah state funds after the counties applying for the money withdrew their application, and California passed legislation limiting state funds for new coal projects.

Irene Gutierrez, an attorney for EarthJustice, told S&P Global Market Intelligence in August that the council ordinance was legally sound and would likely withstand any court challenges, including the claim that the city lacked the standing to forbid coal traffic.

"I don't think that there's merit to the developers' argument that the city was not authorized to do what it did in restricting coal shipments and coal transportation," said Gutierrez.

The city did not respond to a request for comment.