Port Cancels Lease With Chinese Firm

The Long Beach Harbor Commission voted to cancel its lease with a Chinese state-run shipping company Monday, even as two commissioners were calling on officials of the company in Beijing.

The vote was made necessary by a string of courtroom setbacks, and it throws plans for a new cargo terminal on the site of the city’s former Naval Station into a state of uncertainty.

By eliminating the lease, port officials hope to comply with an order from a Los Angeles judge who ruled earlier this month that the commission must consider the terminal project “free and clear” of any preexisting commitments, such as the lease, which was signed in October.

But not even the commissioners seemed clear on the implications of their vote. Cancellation of a legal agreement such as the lease will expose the port to a breach-of-contract claim from China Ocean Shipping Co., or Cosco, the firm that had planned to open a 145-acre terminal on the Naval Station land. Port officials advised the Beijing-based line that the commission would vacate the deal Monday, but Cosco has not indicated whether it will take legal action.

Company officials could not be reached Monday, but they have reportedly said they would reserve their right to seek compensation for delays resulting from the legal dispute.

Absent from Monday’s 3-0 vote were commission President George M. Murchison and member Roy E. Hearrean, who are both in China with other city officials. The 10-day trip was to include a meeting with Cosco officials, described by a port spokeswoman as “a courtesy call.”

Representatives from the Port of Los Angeles, which has repeatedly tried to lure Cosco to its terminals, were in China to meet with the company as well.

Long Beach Port planners had expected construction of the $200-million terminal to be well underway by now. The facility was slated to open by July 1, 1998. But the project has come under heavy fire.

Environmentalists warn that the demolition of the Naval Station will displace a colony of black-crowned night herons and that dredging will release tons of contaminated silt from the port basin.

Two conservative congressmen are pushing a bill to halt the project for fear that the terminal would be used for Beijing-sponsored arms smuggling.

But the biggest stumbling block has come in court, where the port faces a lawsuit from preservationists who want to save the 50-year-old buildings on the land.

Ruling on a claim filed by the group Long Beach Heritage, Los Angeles Superior Court Judge Robert H. O’Brien told the port commission in February to reconsider the terminal and its environmental impact without any prior commitments to build the facility.

To comply, the commission withdrew its formal approval of the terminal, conducted an additional public hearing, then voted again to proceed. But the commission never invalidated its lease with Cosco, signed in October, and O’Brien ruled April 11 that the port had to try again--without a lease on the table. Lawyers for the port are to return to O’Brien’s court by May 13 to explain their effort to comply with his latest order.

“I’ve learned to expect anything,” said port Executive Director Steven R. Dillenbeck.

Port commissioners huddled with their lawyers behind closed doors Monday to discuss whether to take any additional action before appearing before O’Brien again. Jan Chatten-Brown, the lawyer for Long Beach Heritage, said she will argue that the city must conduct a new analysis of potential uses for the land, which has yet to be released to the city by the Navy. But Dillenbeck said the commission is unlikely to ask for any new studies.

Although the lease has been canceled, it will come under attack again Wednesday. Chatten-Brown is expected to argue in court that if the commission decides to move forward with the terminal, the new lease must explicitly limit its boundaries, and the city must conduct a separate environmental impact analysis on another section of land promised to Cosco.

The lease vacated by the commission Monday actually calls for the terminal to be built on 130 acres of the former Naval Station, and reserves another 140 acres of the adjacent Naval Shipyard for Cosco. Both sites have been ordered closed by the federal government, but the city has not formally set aside the shipyard property for port development. Chatten-Brown contends that promising the land to Cosco is premature.

At Monday’s commission meeting, the panel also approved spending an additional $300,000 for legal fees relating to the terminal.

“We’re the easiest target,” Dillenbeck said.