Five Years Out, Oakland Coal Battle Rages On
By Ted Franklin
January 15, 2020
As the new year begins, Oakland anti-coal activists are hoping for the best and preparing to continue the ongoing fight. The coming year in the coal struggle promises renewed conflict between irreconcilable forces. Developer Phil Tagami proudly declares he is “not backing down” on his plan to make Oakland the largest coal exporting city on the U.S. West Coast. No Coal in Oakland and its many allies are equally determined that coal trains from Utah will never unload in West Oakland.
But as Oakland’s resistance to coal enters its sixth year, new parties to the conflict may play major roles in shaping the battlefield.
In 2020, a three-judge panel of the Ninth Circuit Court of Appeals could deliver a crushing, if not fatal, blow to Tagami’s dreams of getting rich off coal. The Ninth Circuit is currently reviewing Oakland’s 2016 ban on storage and handling of coal at the proposed Oakland Bulk and Oversized Terminal. If the Ninth Circuit rules that the ban did not violate Tagami’s rights under contracts with the City, residents and City officials may breathe a big sigh of relief.
On the other hand, if the Ninth Circuit rules against the City, Sumitomo Mitsui Bank Corporation (SMBC), a Japanese investment bank with a nasty penchant for funding new coal infrastructure, may be ready to shore up the terminal project’s shaky finances, filling in for the Bank of Montreal — which appears to have walked away from the project.
Then again, in a Kentucky courtroom, hedge fund manager Vikas Tandon of JMB Capital is challenging former coal industry executive and CEO of Insight Terminal Solutions (ITS) John Siegel for control of the sublease from Tagami that grants ITS the rights to build and operate the terminal if the project ever emerges from limbo. Tandon’s long range goals are unknown, but presumably Tandon and his hedge fund buddies are just as committed to coal as Siegel.
Recently, Oaklanders got a surprise peek behind the scenes at coal proponents’ latest machinations in the 5-year effort to bring Utah coal to international markets through Oakland. In 2015, a century-old newspaper based in rural Utah revealed what had been a secret plan to build a coal export terminal on a 19-acre spit of Oakland waterfront that once was part of the 310-acre Oakland Army Base.[i] This time, the surprise revelations of what is happening in Oakland come from filings in a Louisville, Kentucky bankruptcy proceeding.
Based on court filings, the Guardian and the East Bay Express published detailed articles about the continued efforts of coal proponents to push the terminal forward despite the fierce opposition of the City’s elected officials, a broad swath of the faith community, numerous unions and community organizations, youth leaders organized as Youth vs. Apocalypse, thousands of residents, and every environmental group in Oakland.
John J. Siegel is head of Insight Terminal Solutions (“ITS”), a four-employee company that aspires to build and run the coal export terminal. For the past year, Siegel has been lobbying Black leaders, local politicians, environmental justice activists, and even Raiders icon Marshawn Lynch in an effort to rescue the widely reviled project from legal limbo and financial collapse.
Siegel is a new face in town, but not a newcomer to the coal project. He is the former CEO of Bowie Resource Partners, the coal company that hopes to ship millions of tons of Utah coal through Oakland each year. In 2014, Bowie created a wholly owned subsidiary, Terminal Logistics Solutions (TLS) to run the Oakland terminal and hired two former Port of Oakland executive directors as its frontmen. In 2018, Bowie’s financial backers decide to replace Siegel and his executives with a new team, change Bowie’s name to Wolverine Fuels, dump TLS, and spin off whatever might be made of the Oakland coal terminal project to ITS (owned entirely by Siegel’s wife).
Siegel Launches Extensive Lobbying and PR Efforts
Since his departure from Bowie, Siegel has been a man on a mission. Siegel and his sidekick, ITS executive vice president Jim Wolff, have spent over 45 days on the road, most often in Oakland but as far away from Oakland as Tokyo, Washington, Chicago, Salt Lake City, Savannah, Georgia, and West Palm Beach, Florida, trying to get the project back on track.
Siegel is hoping to sell City officials on a plan that would allow the coal terminal to be built and operated with coal as its anchor commodity, shipping up to 50 million tons of coal from Oakland in the first decade, and implementing an eventual phase out of coal that would end coal shipments 20 years from the start of operations. For public relations purposes, ITS has dubbed its plan “the Oakland Protocol.” (See “So-Called ‘Oakland Protocol’: A Coal Industry Falsehood and Farce.”)
ITS has targeted the City Council in its effort to change the political climate towards a compromise with coal. A January 29, 2019 memo from John Siegel to various potential investors described friendly encounters with City Council members at a reception for newly elected City Councilpersons Nikki Bas, Sheng Thao, and Loren Taylor staged by Tagami’s business partner Mark McClure, in his capacity as president of the Oakland Builders Alliance.
Given that Siegel’s memo was trying to encourage financiers to support the project, there is no reason to take his upbeat report at face value. Siegel claimed in his memo that staunchly anti-coal Council Member Nikki Bas was surprisingly “receptive” to having a conversation about the project “as she had been characterized as one who would align herself with the Mayor.” Bas does not recall any conversation with Siegel. Mayor Libby Schaff expressed pride recently that Siegel’s memo cast her as ITS’s key opponent.
A more explosive although no more trustworthy memo also appears in the court records,. On January 23, 2019, six days before the gala reception at the Rotunda Building, Vikas Tandon of JMB Capital, then allied with Siegel, sent an email to Jon Brooks (the “JMB” in “JMB Capital”) reporting on the situation in Oakland. A closed door meeting of the City Council was scheduled for that evening between the City Attorney and the Council. Tandon reported that “we don’t have much color on the city attorney’s agenda, so our allies are going to try and hijack/take over the meeting.” Tandon went on:
According to Tagami, we have armed our four main allies ([Rebecca] Kaplan, [Nikki] Fortuna-Bas, [Sheng] Thao, and [Noel] Gallo) with pointed questions for the City Attorney regarding the city’s actions, lack of disclosure to councilmembers and obfuscation of reality regarding safety and environmental compliance.
As a reminder, we have the 4 aforementioned solid yes votes, 2 likely yes and at worst abstentions ([Lynette Gibson] McElhaney and [Larry] Reid) and the Mayor has 2 solid votes ([Dan] Kalb and [Loren] Taylor.
According to the memo, “[t]he plan is to propose that a committee be formed to settle the dispute,” consisting of “Kaplan (City Council President), McElhaney (port being built in her district), Ces Butner from the Port Commission and someone from the City Administrator’s office.”
There may be a grain of truth in this narrative. According to a travel log filed with the bankruptcy court, John Siegel’s lobbying efforts through last summer included four separate meetings with Council President Rebecca Kaplan. Although a Council-sponsored “settlement committee” would appear to usurp the Mayor’s and City administration’s executive roles under the City Charter, Rebecca Kaplan has made no secret of her desire to participate in negotiations to settle Tagami’s lawsuits against the City. However, sources close to the other three councilmembers consider it bizarre to see them referred to as “allies” by the coal proponents.
In addition to meeting with City officials, Siegel and Wolff’s itinerary shows they have visited, among others, Assemblyman Rob Bonta, Bishop Bob Jackson of the Acts Full Gospel Church and candidate for City Council, Barbara Leslie of the Oakland Metropolitan Chamber of Commerce, Captain John Carlier of the San Francisco Bar Pilots Association, political director Doug Bloch of Teamsters Joint Council 7, Secretary-Treasurer Andreas Cluver of Alameda County Building Trades, President of the Port of Oakland Board of Commissioners Ces Butner, Scott Blake of Community and Youth Outreach, former Oakland Mayor Elihu Harris, Fire Chief Darrin White, David Muhammad of the Neighborhood Opportunity and Accountability Board, District 7 School Board Trustee James Harris, and Joshua Johnson of the West Oakland Youth Center.
ITS has also hired Gregory McConnell, a well-connected lobbyist and CEO of The McConnell Group, Inc., as a consultant to handle public relations with Oakland’s political class, as well as blogger Zennie Abraham to generate online propaganda. The January 31, 2019 agreement with McConnell provides for a $7,500 per month consulting fee and a “Success Fee” of $150,000 if ITS obtains approval to operate a bulk marine terminal at the West Gateway. Zennie Abraham’s contract allots him $10,000 per month in the first two months and $5,000 per month thereafter for “Media Services.”
ITS has particularly focused on building support for coal in the Black community. There are warning signs that ITS’s campaign may be making headway. ITS succeeded in getting a favorable article published in the Oakland Post to promote “the Oakland protocol.” A couple of No Coal in Oakland members responded; ITS answered back; and Ms. Margaret Gordon of the West Oakland Environmental Indicators Project has responded here.
ITS’s Financial Woes Mount
ITS’s only significant asset is its sublease on the West Gateway site of the proposed coal export terminal. In September 2018, ITS signed a sublease with Phil Tagami’s Oakland Bulk and Oversized Terminal LLC (OBOT). At the time OBOT held a 66-year lease on the West Gateway that the City cancelled two months after ITS signed its sublease.
The value of ITS’s sublease is entirely dependent on whether Tagami can win several major legal battles with the City and get his lease reinstated. The City cancelled Tagami’s lease after he failed to meet critical deadlines set forth in OBOT’s lease. Tagami then sued the City for monetary damages and reinstatement of his lease, blaming his failure to meet deadlines on the City’s actions in opposition to coal. This lawsuit is currently on hold as a state appeals court considers whether Tagami’s lawsuit should be dismissed under California’s anti-SLAPP law.
Another earlier Tagami lawsuit is likely to be resolved first. In July 2016, the City Council adopted a ban on coal storage and handling in Oakland and, based on three expert reports citing health and safety risks, applied the ban to OBOT. In a federal court action, Tagami successfully challenged the application of the ban to OBOT as a violation of his contractual rights under an agreement signed by the City in 2014, but the case is now on appeal in the Ninth Circuit.
If Tagami wins both pending lawsuits, the ITS sublease may have a future. If not, the ITS sublease is likely worthless. ITS is in no position to wait for years to find out.
Cut loose from Wolverine, Siegel’s firm is currently in bankruptcy after failing to comply with terms of a short-term $6.8 million operating loan from Autumn Wind Lending, LLC. In early 2019, Autumn Wind threatened to foreclose on the loan. ITS filed for protection under Chapter 11[ii]. Without explaining why, Siegel says in one of the bankruptcy court paper that it paid over most of the money it received from Autumn Wind to Tagami’s OBOT.
Hedge Fund Manager Vies for Control of Terminal
As if John Siegel’s chances of running a coal terminal in Oakland were not already fading, they may soon vanish if he cannot fend off Autumn Wind’s revenge. Autumn Wind hopes to oust Siegel and take over management of ITS itself. Autumn Wind wants the bankruptcy court to appoint Vikas Tandon, the 40-year-old Los Angeles hedge fund operator and manager of Autumn Wind, to take over atf ITS.
Tandon’s qualifications to run the coal export terminal include a business administration degree from Wharton School of the University of Pennsylvania, alma mater of such luminaries as Donald J. Trump, Warren Buffett, and Elon Musk. His biography in Institutional Investor 2013 Rising Stars describes his early career in hedge fund firms. Today, in addition to managing Autumn Wind, Tandon is the chief investment officer for JMB Capital Master Fund, L.P. and Ridgedale Partners, LLC. All three businesses share the same suite on the 20th floor of the SunAmerica tower in Los Angeles.
Under the bankruptcy law, after filing under Chapter 11 in July, ITS had a 120 day exclusive right to present a reorganization plan that would outline how much would be paid out to each of ITS’s creditors and how the company would survive after bankruptcy. ITS’s time has expired and Autumn Wind is eager to file its own reorganization plan and has attached its plan as an exhibit to one of its filings protesting that ITS has blown its chance and is unlikely to come up with a reorganization plan.
According to Autumn Wind, ITS has abused the bankruptcy process and is “only using chapter 11 to stall [Autumn Wind’s] state law foreclosure remedies, using it as a tool for blocking and evading their obligations rather than for reorganizing a business, for which chapter 11 is intended.” Autumn Wind says that under its plan all of ITS’s creditors would receive 100% of their claims against ITS and the newly emerged ITS will be a viable operation.
Will a Japanese Coal Company Revive OBOT?
Whoever winds up with control of ITS, the big question is who will put up the quarter billion dollars to build the terminal. The State of Utah has $50 million waiting if the project gets underway. But it will take another $200 million or so to complete the project. The Bank of Montreal originally planned to raise this money from pension funds by offering the “opportunity” to invest in risky unrated private debt instruments.
While the City was tied up in litigation over its stance against coal, No Coal in Oakland organized a three-year campaign to shame the Bank of Montreal for its role in brokering the original deal to bring coal to Oakland and to demand a pledge not to arrange financing for the terminal. The Bank of Montreal refused to take the pledge, but there is no mention in the Kentucky bankruptcy court filings of the Bank of Montreal as a potential source of funding for ITS to build the terminal: it appears that the bank has abandoned the project.
Coal proponents are now scrambling to find other sources of funding.
An August 6, 2019 email from John Siegel to Oguz Erkan makes clear that Siegel has pursued investors, even small ones, in the hopes of steering his way out of bankruptcy. Erkan is CEO of a Wyoming producer of soda ash owned by a major conglomerate based in Turkey. In his pitch to Erkan, Siegel states that “the reason I have been so insistent on meeting with you about the Port of Oakland is that we are in a position where we can offer you, for very little money, a significant ownership stake and a resultant seat at the head of the table…. We have access to a [Cessna] Citation 650 so Charlie [McNeil, CEO of Colorado energy firm NexGen Resources] and I can meet you literally anywhere.”
Jetting “anywhere” for “very little money” may help fend off Tandon and the Los Angeles hedge funds, however, it will not get a terminal built. With the Bank of Montreal out of the picture, ITS’s hopes for a life after bankruptcy may rest on finding a major sugar daddy to bankroll the Oakland coal project.
The most ominous candidate mentioned in the court papers is JERA Co., the post-Fukushima successor to Tokyo Electric and Japan’s largest power producer. JERA controls roughly half of Japan’s total power generation facilities, including half of its thermal coal power plants, and is one of the largest participants in the international coal trade. According to Siegel, JERA dangled a possible guarantee to purchase up to 4 million metric tons annually of coal to be shipped through West Oakland.
A representative of JERA’s bank, Sumitomo Mitsui Bank Corporation (SMBC), reportedly discussed providing approximately $240 million to build the terminal. Siegel and Wolff also met with Mitsubishi, another major Japanese bank, while they were in Tokyo calling on JERA.
According to a report released at the recent COP25 conference in Spain, Japan’s three biggest commercial banks Mizuho Financial Group (Mizuho), Mitsubishi UFJ Financial Group (MUFG), and Sumitomo Mitsui Financial Group (SMBC Group) rank as the first, second, and third top lenders in the world to major coal plant developer companies. Although Japanese banks are beginning to respond to public pressure to curtail investment in new coal-fired power plants, an investment in a coal supply from the U.S. could be couched as a hedge against disruption of other supply chains for existing plants.
Whether or not JERA is serious about cutting a deal with ITS, JERA is building new coal-fired power plants in two Japanese prefectures and plans additional units in a third. Under pressure from groups like No Coal Japan, JERA plans to address cutbacks in coal consumption as part of its “mid- to long-term” vision, but an energy behemoth the size of JERA could have a major impact on the balance of power between pro- and anti-coal forces in Oakland.
Of course, building a terminal in Oakland would make financial sense only if Oakland resistance to the coal terminal were to collapse. Anti-coal activists vow that will never happen, but the danger is that JERA and its bankers will underestimate the opposition and join the attempt to build a coal export terminal in West Oakland. Certainly, Phil Tagami has not yet realized that this community will never tolerate his efforts to profit by turning a prime piece of public land over to a polluting industry that must be shut down within a few short years to prevent catastrophic climate change.[i] In 2015, the project had been flying under the radar for a year when a century old rural Utah newspaper known as the Richfield Reaper reported on an effort to divert $50 million from Utah’s public coffers to fund construction of the privately owned Oakland coal terminal. [ii] Unlike Chapter 7 bankruptcy which provides for orderly liquidation of a business, Chapter 11 bankruptcy is designed to allow struggling businesses to restructure their finances and maximize the return to their creditors and owners as they emerge from bankruptcy. Within the first 120 days of filing under Chapter 11, the debtor company has the exclusive right to propose a plan of reorganization. A plan of reorganization explains how the claims for each class of creditors will be treated, ranging from secured creditors that have debt backed by collateral at one end of the spectrum to shareholders at the other. If the court confirms the reorganization plan, the company may emerge from Chapter 11 with its debts forgiven, provided it makes all payments called for in the plan. After the first 120 days, creditors and other parties with an interest in the outcome can submit their own reorganization plans for approval.
Ted Franklin is a retired union attorney and member of the No Coal in Oakland coordinating committee.