Title
Public Hearing to Consider Adoption of Resolution Approving a 24-Month Exclusive Negotiating Agreement with Pacific Fusion, with Options to Extend for a Total of 33 Months, for Potential Development of a 12- to 18-Acre Property along Orion Street between West Pacific Avenue and West Ticonderoga Avenue at Alameda Point, for a Research and Development Facility.
This action is not subject to further environmental review pursuant to California Environmental Quality Act (CEQA) Guidelines Section 15378, and on a separate and independent basis, CEQA Guidelines Section 15183. (Base Reuse and Economic Development 29061810)
Body
To: Honorable Mayor and Members of the City Council
From: Jennifer Ott, City Manager
EXECUTIVE SUMMARY
The recommended Exclusive Negotiating Agreement (ENA) establishes a twenty-four (24) month initial period, with additional extensions for a possible total of 33 months, during which time the City of Alameda (City) will work exclusively with Pacific Fusion to advance planning, community engagement, entitlements, and a Land Transfer Agreement for a research and development facility proposed for 12 to 15 acres of property located near the corner of West Pacific Avenue and Orion Street in Alameda Point, with a potential second phase encompassing additional City-owned property in the block bounded by Orion Street, West Pacific Avenue, Central Avenue and West Ticonderoga Avenue (see Exhibit 1 for a map).
This action would not approve a project or Land Transfer Agreement. This ENA period would require certain activities to be completed by Pacific Fusion and the City in order to conduct community engagement, establish the details of a proposed development, advance entitlements, and reach mutually agreeable terms prior to review and approval by the Planning Board and City Council.
BACKGROUND
In 2014, City Council adopted the Alameda Point zoning ordinance and Alameda Point Environmental Impact Report, which established zoning designations for future uses in the former Naval Air Station Alameda. The zoning ordinance contemplates job-generating new development for the area south of West Atlantic Avenue and west of Main Street/Central Avenue - which is an area commonly referred to as the “Enterprise District” - by establishing four Enterprise District zoning designations (AP-E1, AP-E2, AP-E3, AP-E4). Only AP-E3 allows for residential development and is envisioned to provide a 100-foot buffer between future job-generating land uses and the neighborhood to the east of Central Avenue and Main Street.
In the 10 years since the zoning ordinance was adopted, the City made numerous attempts to seek a developer to catalyze new development in the Enterprise District. The most significant recent attempt to find a developer occurred in 2018 and 2019, when the City issued a request for proposals. The City received eight proposals, and narrowed the pool of developers to four, but the process was halted because the State adopted a new Surplus Land Act law that restricted the use of public property. It was also determined that the site in question would require environmental remediation to address the presence of tarry refinery waste from its former pre-Navy use as an oil refinery. Since 2019, the state has passed an amendment allowing Alameda Point to be exempted from the Surplus Land Act, and Chevron has completed a Remediation Alternatives Analysis for the tarry refinery waste and expects to commence remediation work in 2025.
Most recently, City Council held a study session in October 2024 to discuss parameters for development and to study approaches to attracting developers and businesses to the area. Staff proposed commencing development in a 23.9-acre area including the property in Pacific Fusion’s proposal. City Council provided feedback, and the parameters as discussed and refined during this study session are attached as Exhibit 2. City Council directed staff to commence a new marketing process in early 2025, and to work opportunistically, exploring all potential development opportunities, given the difficult real estate development climate and high office and life sciences vacancy rates in the East Bay.
In December, staff received a letter of intent (LOI) from Pacific Fusion, proposing development of a first phase demonstration facility on a roughly 12-acre site bounded by West Pacific Avenue, Orion Street, and Ticonderoga Avenue (Exhibit 1), and an option to purchase roughly 5.5 acres to the east for a second phase of development. Staff met with City Council in closed session on January 21, 2025, to discuss the price and terms included in this LOI and seek authorization to proceed with an ENA. Staff is returning, following direction from City Council, to seek authorization to enter into the ENA.
DISCUSSION
About Pacific Fusion
Pacific Fusion is a company founded in 2023 with the objective of creating abundant, affordable, clean energy through construction of a high-gain pulsed magnetic fusion system. With facilities in Livermore and Fremont, Pacific Fusion is interested in constructing a one-of-a-kind, state-of-the-art headquarters facility, which would include office, laboratory, and research and development space in which approximately 200 people would be permanently employed. The company is considering Alameda and one other East Bay location as finalists for this facility, and is simultaneously advancing efforts in both locations. It is expected to select its preferred location in mid-2025 based on its ENA efforts in both locations. In Alameda, Pacific Fusion has selected Hines Interest Limited Partnership (Hines) as its development partner; however the ENA is proposed to be solely with Pacific Fusion at this time.
Pacific Fusion utilizes an approach known as pulsed magnetic inertial fusion which combines atoms from two substances, deuterium and tritium, to release energy, with helium as a byproduct.
Whereas nuclear fission is the reaction commonly used in today’s nuclear power plants, nuclear fusion is fundamentally different. It does not release greenhouse gases, does not produce long-lived radioactive waste, and is not susceptible to meltdowns because the reaction is not self-sustaining and requires very precise reactions to continue. Additionally, Pacific Fusion’s process uses deuterium and tritium, two isotopes of hydrogen, which can be extracted from seawater or produced from lithium. Tritium is a substance commonly used in standard commercial exit signs.
The proposed facility in Alameda Point would be a demonstration facility used to prove how to attain the conditions required to consistently produce more energy out of the system than is required to run the system. It is not a power plant, will not produce electricity, and will only be “pulsed” roughly once per day (a power plant would require activity closer to one pulse per second). The facility would be regulated by the California Department of Public Health, for which Pacific Fusion is preparing a detailed Health and Safety Plan, and would meet CalOSHA requirements. More information on Pacific Fusion can be found at www.pacificfusion.com <http://www.pacificfusion.com>, and in the Frequently Asked Questions attached as Exhibit 4.
Development Proposal
Pacific Fusion has tentatively proposed a first phase of development with a single building on a 12- to 15-acre site. The exact footprint and design of the building and surrounding areas would be further developed and explored during this ENA phase, and it is possible that the 12-acre property will need to be larger or smaller to accommodate the ultimate design. They have proposed to negotiate an option to purchase an additional approximate 5.5 acres to the east of the first phase along West Pacific Avenue. The ENA would provide additional time to pursue this second phase, if the first phase is successful.
In exchange for development of this roughly 12-acre phase 1 site, Pacific Fusion has proposed to construct on-site and off-site backbone infrastructure improvements, roughly valued at $26.6 million. The City’s Master Infrastructure Plan (MIP) calls for replacement of most backbone infrastructure throughout Alameda Point with a roughly $700 million cost, including new streets, stormwater and sanitary sewer facilities, replacement of the Navy water system with East Bay Municipal Utility District water, electric, gas, and other dry utilities, as well as levies and other infrastructure to mitigate the effects of sea level rise. Alameda Point’s unusually large infrastructure needs make most development cost prohibitive, and as a result the City has negotiated its past development deals (the Site A and West Midway/RESHAP projects) to replace infrastructure in exchange for the value of the land.
For phase 1, Pacific Fusion has proposed to build the first new backbone infrastructure loop around the 23.9-acre area in the Enterprise District, which would help catalyze future development in surrounding areas by providing infrastructure that other developers could utilize for their developments. The terms for the second phase are yet to be negotiated. The exact scope of work and requirements for infrastructure delivery would be negotiated during the ENA phase as part of the terms of a future Land Transfer Agreement.
Exclusive Negotiating Agreement Terms
An ENA is a legal document that is commonly used in the real estate development industry to explore the possibility of a future development and an associated real estate transaction. The landowner (in this case the City) agrees not to pursue any other development deals for a specific property for a certain period of time, while both parties (landowner and developer) conduct any due diligence needed to ensure that the proposed development is viable, and price and terms are mutually agreeable. If both parties successfully reach this conclusion, an ENA is typically followed by a property sale.
This specific ENA would grant Pacific Fusion exclusive rights to two phases of development for the following periods of time:
• An initial twelve-month phase for the property in Exhibit 1, to explore development in the area marked Phase 1.
• Twelve additional months to explore a second phase of development in the area marked Phase 2.
• The agreement would allow the City Manager to administratively extend the ENA time for an additional three, three-month periods, for a total possible time of 21 months for the first phase, or 33 months for both phases.
During the ENA time, Pacific Fusion and Hines would have certain obligations and milestones including:
• Negotiation of a Land Transfer Agreement for consideration by the City Council;
• Negotiation of an Option Agreement for the phase 2 parcel;
• Negotiation of a development agreement, development plan, and/or other documents required for entitlement of the project;
• Completion of a City-approved Community Engagement Plan, as well as implementation;
• Provide evidence of financial capability to deliver the project;
The City obligations and milestones in the ENA include:
• Review and approval of the Community Engagement Plan and participation in meetings;
• Timely review of development and tentative map applications;
• Timely review and response to infrastructure scope of work;
• Timely CEQA review in the City’s role as lead agency;
• Advancing all necessary aspects of the entitlement process;
• Coordination with Chevron on their completion of a remediation action plan for the tarry refinery waste on site, plan review and approval by the Regional Water Quality Control Board, and timely completion of remediation;
• Negotiation of a Land Transfer Agreement for phase 1;
• Negotiation of an Option Agreement for phase 2; and
• Facilitation of Planning Board and City Council hearings, as required to advance the development and as recommended by City staff.
Additionally, Pacific Fusion would be expected to compensate the City for Public Works and Planning review staff time per City Council adopted fee schedule, and to compensate the City for outside counsel and Base Reuse consultant expenses.
Next Steps
If the ENA is approved by City Council, the City and Pacific Fusion will simultaneously commence the development review and entitlements process, and negotiation of the terms of a Land Transfer Agreement.
This process would include community meetings to educate and collect feedback on the development, preparation of maps and site plans, CEQA review, development design review, and real estate negotiations.
It is expected that a successful development would be publicly reviewed by the Planning Board at least once, and would be the subject of multiple public meetings to be identified through the development of a Community Engagement Plan.
Prior to approval of any Land Transfer Agreement by City Council or other critical approval, Pacific Fusion will be required to complete CEQA review, including a determination by the City Council.
ALTERNATIVES
• Approve the ENA as recommended. This will allow the process described above to begin.
• Approve the ENA with changes. If City Council requests any changes or revisions to the ENA, staff would meet with Pacific Fusion to determine if they are still willing to move forward with the amended document. If they agree to the changes, the process would begin. If Pacific Fusion does not agree, the ENA would not be executed and the City and Pacific Fusion would not pursue development on City property at this time.
• Deny the ENA. City Council may deny or delay action on the agreement. In this scenario, City Council should identify the reasons they do not want to move forward with Pacific Fusion and how City Council would like staff to proceed with the future development of the property. It is unlikely that Pacific Fusion would agree to pursue this site in the future.
FINANCIAL IMPACT
There is no anticipated financial impact to the City at this time. Base Reuse and Economic Development staff intended to advance development of the Enterprise District as part of the 2024-25 work plan, and Pacific Fusion agreed to compensate staff and consultant time in exchange for acceleration of the development. It will be important for the City to consider the fiscal impact of the development transaction if the City pursues a Land Transfer Agreement as a next step.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
Alameda Point Zoning Ordinance
Alameda Point EIR
Alameda Point Master Infrastructure Plan and Amendment
City General Plan
City Strategic Plan - Strategic Priority to Invest in Transportation, Infrastructure, Economic Opportunities & Historic Resources
ENVIRONMENTAL REVIEW
The proposed ENA and associated Council resolution, which merely establish a basis for future negotiations and do not commit the City to any definite course of action, do not constitute a “project” as defined in CEQA Guidelines Section 15378 and therefore no further CEQA analysis is required at this stage.
On a separate and independent basis, pursuant to the streamlining provision of Section 15183 of the CEQA Guidelines, no further environmental review is required because the project is consistent with the General Plan and Zoning Regulations for the land. The environmental impacts of the development of the area were considered in the Alameda Point Project (APP) Final Environmental Impact Report (FEIR) adopted by the City Council on February 4, 2014, in compliance with CEQA and in the General Plan Update EIR adopted by the City Council on November 30, 2021. Approval of any future entitlement or Land Transfer Agreement or related transactional document will be subject to additional environmental review, once the specifics of the project are more fully known.
CLIMATE IMPACT
There are no identifiable climate impacts or climate action opportunities associated with the execution of the ENA with Pacific Fusion. However, if the City decides to advance the development, supporting the technological advancement of fusion energy will help create a new zero emission, renewable energy source for the world. Additionally, the development of the Enterprise District and its associated infrastructure will support climate adaptation measures as identified in the MIP.
RECOMMENDATION
Adopt a resolution approving a 24-month ENA with Pacific Fusion, with options to extend for a total of 33 months, for potential development of a 12- to 18-acre property along Orion Street between West Pacific Avenue and West Ticonderoga Avenue at Alameda Point, for a research and development facility.
Respectfully submitted,
Abigail Thorne-Lyman, Director of Base Reuse and Economic Development
Financial Impact section reviewed,
Margaret O’Brien, Finance Director
Exhibits:
1. Description of Property
2. Enterprise District Development Parameters
3. Exclusive Negotiating Agreement
4. Frequently Asked Questions Provided by Pacific Fusion