No Coal in Oakland Issues Open Letter Correcting Developers’ Misleading Narrative
No Coal in Oakland Issues Open Letter to the People of Oakland, California
Hedge Fund Operator Sows Disinformation Ahead of Trial That Could End Coal Industry’s Designs on Oakland Waterfront
Autumn Wind Lending Conceals Plans for West Oakland While Attacking Oakland’s Leaders for Turning Down Loophole-Laden Settlement Offer
If you read the recent “Open Letter to the Citizens of Oakland” from Insight Terminal Solutions (ITS), you were probably mystified. Why would the City reject a settlement offer that provides everything they want? ITS has patched together a misleading narrative intended to pit Oaklanders against elected officials who have faithfully resisted the coal industry’s efforts to establish Oakland as a major coal export city.
The truth is, a looming July trial threatens to extinguish the coal industry’s hopes for a West Oakland coal export terminal. The would-be developers are desperate.
Autumn Wind Lending, the hedge fund that owns ITS, is engaged in a last ditch effort to salvage coal’s stake in Oakland’s waterfront or leverage the threat of coal to extract millions of dollars from the City. Through their mouthpiece, business lobbyist Greg McConnell, they have unleashed an intense public relations campaign attacking the City’s elected officials for not accepting a loophole-laden offer to settle a meritless $130 million lawsuit against the City.
For the past eight years, a coalition of Oakland neighbors, labor unions, faith-based groups, health advocates, and environmentalists has fought a parade of opportunists – a coal company, an investment bank, and an assortment of shell corporations, law firms, lobbyists, and PR consultants seeking to build the coal terminal.
The Los Angeles-based hedge fund Autumn Wind is just the latest grifter on the scene. Autumn Wind acquired ITS after foolishly lending ITS’s previous owners $10 million shortly before ITS descended into bankruptcy.
In 2018, ITS and corporate allies forfeited their rights to build and operate an export terminal in West Oakland by failing to meet construction deadlines set forth in their lease. The City terminated the 66-year lease under the contract’s terms, which provided for early termination in the event of failure to meet construction deadlines.
Now Autumn Wind is hoping to revive ITS’s lease by rallying public support for a settlement that is unfair to all of us who live and work in Oakland.
Here are a few of the reasons we reject the hedge fund’s propaganda:
1. The Hedge Fund Seeks a Drastic Cut in Rent for Use of the City’s Land
In exchange for ostensibly giving up coal, ITS wants to pay only base rent. This is a massive reduction from what the developer agreed to in the ground lease. Both the Oakland Global Master Plan sold to the city council in 2012 and the ground lease signed in 2016 promised the City “participation rent” – a share of revenue earned on goods shipped through the terminal – on top of base rent. Participation rent was more than 60% of the revenue the City was projected to receive in return for renting out prime waterfront property, according to the developers’ own Master Plan. The monetary terms developers are offering show the depth of their greed and self-interest, Oakland be damned.
2. The Hedge Fund’s “Guarantee” of No Coal Is Illusory
ITS’s open letter claims that ITS has “continuously offered a no-coal solution which would ensure that coal would never be shipped out of Oakland.” Legal experts say that ITS’s offer has a giant loophole.
ITS says it will promise not to ship coal and accept severe penalties if they break their promise. At the same time, ITS says rail is subject to exclusive federal regulation, implying that the no-coal provision and penalties might be swept away in future litigation. If that were to occur, ITS could enjoy drastically reduced rent while operating a toxic coal terminal on the West Oakland waterfront for decades to come.
ITS is trying to have it both ways. ITS wants to have a “no-coal pledge” for public relations purposes while preserving a legal escape route to allow coal back into the picture. We support the City’s steadfast demand for an ironclad assurance of a coal-free future with no ifs, ands, or buts.
3. The Developers Have a Track Record of Deception
Developers originally won the West Gateway lease with promises to build a multi-commodity terminal. The Oakland Global Master Plan approved by the City in 2012 depicted a multi-commodity terminal that would ship grains, corn, iron ore, lumber, cotton, and oversized goods.
Despite public protestations that Oakland Global had no interest in coal, the developers entered into a secret agreement to sublet the West Gateway to a newly created, wholly owned subsidiary of a Utah coal company. This was a classic bait-and-switch: the promised multi-commodity terminal devolved into a dedicated transfer station for the dirtiest fossil fuel on Earth.
When the coal deal became public knowledge in 2015, there was an electric reaction in Oakland. The No Coal in Oakland campaign was born. In 2016 the City Council barred storage and handling of coal at the West Gateway.
The ITS letter lies about what happened next. The courts did not rule that “the matter is closed and the city is powerless to ban coal shipments.” A federal judge decided that the City needed more evidence of substantial health risks in order to apply its coal ban to the proposed coal terminal. The judge actually said the City was free to gather more evidence and pass a new ban with more scientific support. The City can also pursue further environmental review under the California Environmental Quality Act.
4. The Developers’ Massive Damage Claims Are Meritless
ITS’s threat that the City “may have to seek bankruptcy protection like Detroit and cut back on basic services for residents” is a hollow scare tactic.
The developers claim damages of $130 million for “lost profits.” Courts routinely reject lost profit claims by startups because their consequential future losses are too speculative. They cannot meet the requisite burden of proof.
What’s more, in the lease, the parties explicitly agreed to waive any claims for consequential damages arising out of a default by the other party. The massive damages claims should be tossed by the judge before the case goes to trial.
5. The Hedge Fund Operators Have Nothing to Offer the People of Oakland
The hedge fund operators who took over ITS in 2020 have never put out a vision of what they would actually do if they were allowed to develop the site.
Autumn Wind’s only known asset is its claim to development rights in West Oakland. But Autumn Wind has no expertise in building or operating a marine export terminal. Autumn Wind’s only profitable alternatives are to sell ITS to the highest bidder (a coal company?) or squeeze as much money as possible out of the City in a settlement.
In their effort to overcome daunting odds, the developers ask the people of Oakland to pressure our elected officials into accepting a bad offer without revealing what they intend to do with the property. We say the developers are either bluffing and have no plan, or have a plan so odious that they need to conceal it. Every reporter and every elected official who has contact with the developers should ask these questions:
Who is going to build the terminal? Where is the money going to come from? What is the business plan that will keep this project afloat for the 66-year term of the lease? What guarantees that the project won’t collapse five years down the road, leaving the City with a white elephant? What bond will be posted to ensure that whatever is built at the West Gateway will be cleaned up after its useful life is over?