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Column: Exxon Mobil is suing its shareholders to silence them about global warming

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Column: Exxon Mobil is suing its shareholders to silence them about global warming

You wouldn’t think that Exxon Mobil has to worry much about being harried by a couple of shareholder groups owning a few thousand dollars worth of shares between them — not with its $529-billion market value and its stature as the world’s biggest oil company.

But then you might not have factored in the company’s stature as the world’s biggest corporate bully.

In February, Exxon Mobil sued the U.S. investment firm Arjuna Capital and Netherlands-based green shareholder firm Follow This to keep a shareholder resolution they sponsored from appearing on the agenda of its May 29 annual meeting. The resolution urged Exxon Mobil to work harder to reduce the greenhouse gas emissions of its products.

Exxon has more resources than just about anybody; ‘overkill’ doesn’t begin to describe the imbalance of power.

— Shareholder advocate Nell Minow

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The company’s legal threat worked: Days after the lawsuit was filed, the shareholder groups, weighing their relative strength against an oil behemoth, withdrew the proposal and pledged not to refile it in the future.

Yet even though the proposal no longer exists, the company is still pursuing the lawsuit, running up its own and its adversaries’ legal bills. Its goal isn’t hard to fathom.

“What purpose does this have other than sending a chill down the spines of other investors to keep them from speaking up and filing resolutions?” asks Illinois State Treasurer Michael W. Frerichs, who oversees public investment portfolios, including the state’s retirement and college savings funds, worth more than $35 billion.

In response to the lawsuit, Frerichs has urged Exxon Mobil shareholders to vote against the reelection to the board of Chairman and Chief Executive Darren W. Woods and lead independent director Joseph L. Hooley at the annual meeting.

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He’s not alone. The $496-billion California Public Employees’ Retirement System, or CalPERS, the nation’s largest public pension fund, is considering a vote against Woods, according to the fund’s chief operating investment officer, Michael Cohen.

“Exxon has gone well beyond any other company that we’re aware of in terms of suing shareholders for trying to bring forward a proposal,” Cohen told the Financial Times. “There doesn’t seem to be anything other than an agenda of sending a message of shutting down shareholders’ ability to speak their mind.”

California Treasurer Fiona Ma, a CalPERS board member, backs a vote against Woods. “As the largest public pension fund in the country, we have a responsibility to lead on issues that threaten to undermine shareowners,” she says.

The proxy advisory firm Glass Lewis & Co., which helps institutional investors decide how to vote on shareholder proposals and board elections, has counseled a vote against Hooley, citing Exxon Mobil’s “unusual and aggressive tactics” in fighting activist investors.

Exxon Mobil’s action against Arjuna and Follow This opens a new chapter in the long battle between corporate managements and shareholder gadflies.

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Fossil fuel companies have been especially touchy about shareholder resolutions calling on them to take firmer action on global warming and to be more transparent about the effects their products have on climate.

In part that may be the result of some significant victories by activist shareholders. In 2021, nearly 61% of Chevron shareholders voted for the company to “substantially” reduce its greenhouse gas emissions — a shockingly large majority for a shareholder vote on any issue. That same year, the activist hedge fund Engine No. 1 led a campaign that unseated three Exxon Mobil board members and replaced them with directors more sensitive to climate risk.

Exxon Mobil also subjected the San Diego County community of Imperial Beach to a campaign of legal harassment over the city’s participation in a lawsuit aimed at forcing the company and others in the oil industry to pay compensation for the cost of global warming, which stems from the burning of the companies’ products.

Even in that context, Exxon Mobil’s campaign against Arjuna and Follow This represents a high-water mark in corporate cynicism.

The lawsuit asserts that the investment funds’ proposed resolution violated standards set forth by the Securities and Exchange Commission governing the propriety of such resolutions — it was related to “the company’s ordinary business operations” and closely resembled resolutions on similar topics that had failed to exceed threshold votes at the company’s 2022 and 2023 annual meetings. Both standards allow a company to block a resolution from the meeting agenda, or proxy.

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That may be so, but the conventional practice is for managements to seek approval from the SEC to exclude such resolutions through the issuance of what’s known as an agency “no action” letter.

Exxon Mobil hasn’t taken that step. Instead, it filed its lawsuit in federal court in Forth Worth, where the case was certain to be heard by one of the only two judges in that courthouse, both conservatives appointed by Republican presidents — a crystalline example of partisan “judge shopping.” The case came before Trump appointee Mark T. Pittman, who has allowed it to proceed.

The company hasn’t said why it followed that course. “The U.S. system for shareholder access is the best in the world,” company spokeswoman Elise Otten told me by email. “To make sure it stays that way, the rules must be enforced or the abuse by activists masquerading as shareholders will continue threatening the system.”

In practice, however, the SEC has been quite strict about requiring that shareholder proposals meet its standards. “There can only be one reason” for the lawsuit, says shareholder advocate Nell Minow — “it’s to crush the shareholder. Exxon has more resources than just about anybody; ‘overkill’ doesn’t begin to describe the imbalance of power.”

The company accused Arjuna and Follow This of aiming not “to improve ExxonMobil’s business performance or increase shareholder value,” but of pursuing the goal of “disrupting ExxonMobil’s investments and development of fossil fuel assets and causing ExxonMobil to change its business model, regardless of the benefits, costs, or the world’s needs.”

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The company maintained that the shareholder groups aimed to “force ExxonMobil to change the nature of its ordinary business or to go out of business entirely.”

That’s flatly untrue. The resolution observed that the company’s “cost of capital may substantially increase if it fails to control transition risks by significantly reducing absolute emissions.”

That judgment is shared by many institutional investors and government regulators, and points to a path for preserving Exxon Mobil’s business prospects, not destroying them.

In any case, what Exxon Mobil failed to note is that shareholder resolutions are always advisory — they can’t require management to do anything.

In its lawsuit, the company whined about the sheer burden of handling an increase in shareholder resolutions, especially those on fraught topics such as the environment and social issues. Using what it described as an SEC estimate that it costs corporations $150,000 to deal with every submitted resolution, its annual meeting statement calculated that it has spent $21 million to manage 140 submitted resolutions.

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A couple of points about that. First, the SEC didn’t estimate that every resolution costs $150,000 to manage. The SEC actually cites a range of $20,000 to $150,000 each.

Second, a quick look at the company’s financial statements gives the lie to its claim that shareholder resolutions are some sort of cataclysmic burden. Its statistics applied to the entire 10-year period from 2014 through 2023, not just a single year.

Over that decade, Exxon Mobil reported total profits of $204.3 billion. In other words, processing those 140 proposals — using the SEC’s highest estimate to arrive at $21 million — cost Exxon Mobil one one-hundredth of a percent of its profits, at most, to deal with shareholder proposals.

And it’s not as if those proposals clog up the annual meeting proxy — for this year’s meeting, only four proposals will be submitted to shareholder votes. Management opposes all four, big surprise.

As for whether companies such as Exxon Mobil have better uses for their money, the proxy statement doesn’t make a great case for every expenditure.

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Last year, for instance, the company paid nearly $1.5 million in relocation expenses for its top executives, including about $500,000 for Woods, in connection with the move of its headquarters from the Dallas suburbs to the Houston suburbs, about a three-hour drive away. Over the last three years, Woods collected more than $81 million in compensation, so one can see why moving house would leave him strapped.

“As a shareholder, the one thing you ask for is to look at every expenditure in terms of its return on investment,” Minow told me. “It’s unfathomable that the return on investment of this lawsuit is in any way beneficial to the company.” She’s right: It’s certain that Exxon’s legal fees on this case already exceed the putative $150,000 expense it incurred dealing with the withdrawn proposal.

Exxon Mobil’s punitive lawsuit only hints at the lengths that the fossil fuel industry will go to preserve a business model facing an inexorable decline. The companies haven’t been shy about enlisting politicians to rid them of their turbulent shareholders (to paraphrase the medieval King Henry II).

In February, Sen. Bill Hagerty (R-Tenn.) introduced a measure dubbed the “Rejecting Extremist Shareholder Proposals that Inhibit and Thwart Enterprise for Businesses Act, or “RESPITE.” The act would overturn an SEC rule stating that resolutions dealing with “significant social policy issues” can’t be excluded from the annual proxy under the traditional “ordinary business” limitation.

Don’t expect them to be shy about demanding more latitude from a reelected President Trump. The Washington Post reported last week that Trump pledged to roll back Biden administration environmental policies if the oil executives meeting with him at Mar-a-Lago would raise $1 billion for his campaign. An Exxon Mobil executive was present, the Post reported.

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OpenAI forms safety and security committee as concerns mount about AI

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OpenAI forms safety and security committee as concerns mount about AI

ChatGPT creator OpenAI on Tuesday said it formed a safety and security committee to evaluate the company’s processes and safeguards as concerns mount over the use of rapidly developing artificial intelligence technology.

The committee is expected to take 90 days to finish its evaluation. After that, it will present the company’s full board with recommendations on critical safety and security decisions for OpenAI projects and operations, the firm said in a blog post.

The announcement comes after two high-level leaders, co-founder Ilya Sutskever and fellow executive Jan Leike, resigned from the company. Their departures raised concerns about the company’s priorities, because both had been focused on the importance of ensuring a safe future for humanity amid the rise of AI.

Sutskever and Leike led OpenAI’s so-called superalignment team, which was meant to create systems to curb the tech’s longterm risks. The group was tasked with “scientific and technical breakthroughs to steer and control AI systems much smarter than us.” Upon his departure, Leike said OpenAI’s “safety culture and processes have taken a backseat to shiny products.”

OpenAI’s new safety and security committee is led by board chair Bret Taylor, directors Adam D’Angelo and Nicole Seligman and Chief Executive Sam Altman. Multiple OpenAI technical and policy leaders are on the committee as well. OpenAI said that it will “retain and consult with other safety, security and technical experts to support this work.”

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The committee’s formation arrives as the company begins work on training what it calls its “next frontier model” for artificial intelligence.

“While we are proud to build and release models that are industry-leading on both capabilities and safety, we welcome a robust debate at this important moment,” OpenAI said in its blog post.

Controversies about use of AI have dogged the San Francisco-based company, including in the entertainment business, which is worried about the technology’s implications for intellectual property and the potential displacement of jobs.

Actor Scarlett Johansson criticized the company last week over its handling of a ChatGPT voice feature that she and others said sounded eerily like her. Johansson, who voiced an AI program in the Oscar-winning Spike Jonze movie “Her,” said she was approached by Altman with a request to provide her voice, but she declined, only to later hear what sounded like her voice in an OpenAI demo.

OpenAI said that the voice featured in the demo was not Johansson’s, but another actor’s. After Johansson raised the alarm, OpenAI put a pause on its voice option, “Sky,” one of many human voices available on the app. An OpenAI spokesperson said the formation of the safety committee was not related to the issues involving Johansson.

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OpenAI is best known for ChatGPT and Sora, a text to video tool that has major potential ramifications for filmmakers and studios.

OpenAI and other tech companies have been holding discussions with Hollywood, as the entertainment industry grapples with the long-term effects of AI on employment and creativity.

Some film and TV directors have said AI allows them to think more boldly, testing ideas without having the constraints of limited visual effects and travel budgets. Others worry that increased efficiency through AI tools could whittle away jobs in areas like makeup, production and animation.

As it faced safety questions, OpenAI’s business, which is backed by Microsoft, also must deal with competition from other companies that are building their own artificial intelligence tools and funding.

San Francisco-based Anthropic has received billions of dollars from Amazon and Google. On Sunday, xAI, which is led by Elon Musk, announced it closed on a $6-billion funding round that goes toward research and development, building its infrastructure and bringing its first products to market.

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California is making restaurants tell the truth about prices. Will it give you sticker shock?

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California is making restaurants tell the truth about prices. Will it give you sticker shock?

California restaurants finally have their answer: They, too, must comply with a new state law that bans unadvertised fees, surcharges and other costs tacked onto the end of the bill.

Starting July 1, restaurants will join thousands of other California businesses, including event ticket sellers, short-term rental apps, hotels and food delivery services, that are required to include all mandatory fees and charges in the prices they display or advertise.

The state attorney general’s office gave conflicting statements in the weeks after Gov. Gavin Newsom signed the measure into law last year, telling some news outlets that restaurants could continue to keep their current prices while listing any surcharges on their menus, and others that the surcharges had to be included in the prices themselves.

On Wednesday Atty. Gen. Rob Bonta’s office released a set of guidelines to clarify that issue and answer other questions about how businesses must comply with the new law. Bonta sponsored the measure, Senate Bill 478, along with its co-authors, state Sens. Bill Dodd (D-Napa) and Nancy Skinner (D-Berkeley).

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For restaurants, that means it will no longer be enough to just list service charges and surcharges on a bill or a menu’s fine print. Instead, these charges must be included in the prices printed on the menu.

For example, a $20 mole enchilada at a restaurant that levies a 5% fee to cover employee health costs will have to be listed on the menu as a $21 mole enchilada. And a flier advertising a $10 lunch buffet at a restaurant that adds a mandatory 10% “service charge” will have to refer to the offer as an $11 lunch buffet.

In a statement, the Golden Gate Restaurant Assn. said Bonta’s guidelines “will create significant challenges for the restaurant industry moving forward.”

The association, which advocates for the restaurant industry, argues that by prohibiting the longtime practice of using service charges to increase staff pay or cover the cost of local ordinances — such as San Francisco’s requirement that businesses spend at least a minimum amount on healthcare services — the law will compound the problems faced by an already struggling industry.

“Diners will not pay less, instead they will see significant menu price increases, which we believe will further cause them to pull back on dining out,” the statement said. “Not only will restaurants struggle, but workers will lose hours and jobs.”

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With few exceptions, businesses of all sorts across California will not be able to advertise, display or offer a price for their goods or services that does not include all of the “mandatory fees or charges” other than government-imposed taxes or fees or reasonable shipping costs, according to the measure’s authors.

“Put simply, the price a Californian sees should be the price they pay,” Bonta’s office said in a news release.

The new law doesn’t dictate what companies charge for their goods or services. Businesses will still be able to set prices, but the posted price will need to match the full amount a customer will see on their final bill.

Though businesses can exclude taxes and shipping charges, handling fees must be included. In other words, actual postage or delivery charges can be excluded, while the cost of pulling an item off a shelf and taking it to a shipping company has to be included in its advertised price.

Separate fees for optional services or features do not need to be advertised. This could extend to a bevy of industries and services — for example, the amount an airline charges for a seat upgrade or checked bags.

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What about late fees or extra charges for customers who smoke in a hotel room? Because those charges can be avoided, they do not have to be advertised, according to the guidelines from Bonta’s office.

Businesses will not be allowed to skirt the law by advertising one price and then letting customers know that additional fees might be added later. A business can, however, list the full price of its product and provide customers a breakdown of all the fees that are included.

Bonta also offered some guidance for businesses that say they do not know up front what the final cost will be once their work is done. Such businesses “should wait to display a price until they know how much they will charge,” the guidelines say.

This could affect how live music fans interact with ticket sellers for concerts and other live events. The nonprofit watchdog Consumer Reports noted that hidden fees can increase the price of live-event tickets by 30% to 40%.

Live Nation Entertainment, parent company of ticketing giant Ticketmaster, said in a statement that it supported SB 478 and has already offered all-in pricing at some venues and festivals across the country. “Unfortunately, we routinely see resellers defy state laws requiring all-in pricing which confuses and harms fans, so we strongly encourage regulatory scrutiny to ensure compliance across the industry,” the company said.

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The Virginia-based Travel Technology Assn., a global network of online travel agents, said it views transparency as a top priority but opposed SB 478 and would rather see a uniform national standard for regulations on lodging prices.

“We take this position to create uniformity and certainty for lodging operators, travel technology companies, and most of all, travelers, who will have a better understanding of what is included in advertised prices for trips both in and out of their home state,” President and Chief Executive Laura Chadwick said in a statement.

The online travel company Expedia opposed the bill for similar reasons.

In response to the argument, Bonta said that California does not need to wait for federal action to ensure transparency for consumers. The practice of hiding mandatory charges, he said in a statement, “is deceptive and unfair to consumers wherever it occurs — not just in certain industries.”

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Ocean technology hub AltaSea blooms on San Pedro waterfront

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Ocean technology hub AltaSea blooms on San Pedro waterfront

A moon shot to make Southern California an international leader in the “blue economy” is taking shape in San Pedro as a $30-million renovation of three historic waterfront warehouses nears completion.

AltaSea at the Port of Los Angeles, as the complex is known, is home to sea-centered businesses such as the headquarters of explorer Robert Ballard, who located the wrecks of the Titanic and the German battleship Bismarck. His research vessel the Nautilus docks there, as does Pacific Alliance, a vessel for farming mussels far out at sea.

On barges docked on AltaSea’s wharf, scientists from USC, UCLA and Caltech are developing methods of reducing ocean carbon dioxide and technology to scrub ships’ exhaust stacks. Other tenants in the former warehouses include startup firms that are building a new generation of remote undersea cameras and 3-D printers to build parts for offshore wind, wave and solar farms.

Jenny Cornuelle Krusoe, executive vice president and COO of AltaSea at the Port of Los Angeles.

(Allen J. Schaben / Los Angeles Times)

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An aerial view of the Captura barge, where crews monitor equipment used for pulling carbon dioxide from seawater.

An aerial view of the Captura, a barge at AltaSea where crews monitor equipment used for pulling carbon dioxide from seawater.

(Allen J. Schaben / Los Angeles Times)

“AltaSea is education, research and business all working together,” said Jenny Krusoe, executive vice president and chief operating officer. The size and waterfront location, she added, make AltaSea “a unicorn piece of property that is basically made to be the mother ship for the blue economy.”

Mayor Karen Bass and others who played a part in AltaSea, including City Councilman Tim McOsker and Port of Los Angeles Executive Director Gene Seroka, are expected to officially open the facilities at a ceremony Wednesday.

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AltaSea is bringing new purpose to a previously moribund wharf that once played a rich part in the evolution of Southern California.

In the early 20th century, Los Angeles merchants and city leaders set out to capture a share of the increased global shipping trade expected to pass through the Panama Canal, a link between the Atlantic and Pacific oceans that opened in 1914. They created a municipal wharf on the waterfront of what has become the sprawling Port of Los Angeles, with a long stretch of warehouses where ships were loaded and unloaded into trains, carts and trucks by burly longshoremen.

The growth of containerized shipping after World War II gradually rendered City Dock No. 1 obsolete for moving goods, and the wharf was little used for decades. By 2011, advocates, including port officials, saw it for what it was: a choice 35-acre site for a research center and tech companies focused on sustainable uses of the world’s oceans.

A key part of the mission of the nonprofit enterprise is to create jobs with pioneering companies. Among them is the nonprofit AltaSeads Conservancy, the largest aquaculture seed bank in the United States. Like their terrestrial counterparts, aquaculture seed banks are meant to preserve genetic diversity in plant life for the future. AltaSeads is also advancing the use of kelp as an easily grown resource.

“It’s a super versatile crop,” said scientist Emily Aguirre of AltaSeads, that can provide food for humans and livestock while removing carbon from the atmosphere. “It can be also be used to fertilize terrestrial agriculture, and it’s fantastic because if you grow it out in the ocean, you’re not taking up any land.”

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Michael Marty Rivera and Emily Aguirre monitor varieties of kelp in storage tanks at AltaSeads

Michael Marty Rivera and Emily Aguirre of AltaSeads Conservancy monitor varieties of kelp in storage tanks.

(Allen J. Schaben / Los Angeles Times)

Kelp is also a source of algae that cuts methane emissions from cows, Aguirre said, and has many other food applications, including reducing freezer burn in ice cream.

Eco Wave Power, an Israel-based company, is set to install the first U.S. onshore wave energy pilot station in the coming months on the port’s Main Channel, next to AltaSea. The system of floaters attaches directly to preexisting structures — like breakwaters, wharfs and jetties — and produces energy from the constant motion of the waves. Another AltaSea business, CorPower Ocean, uses buoys and hydraulic pressure for energy production.

 Rustom Jehangir, founder and CEO at Blue Robotics, demonstrates his BlueROV2

Rustom Jehangir, founder and CEO at Blue Robotics, demonstrates his BlueROV2, a high-performance remotely operated vehicle that can be used for inspections, research and adventuring.

(Allen J. Schaben / Los Angeles Times)

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The figurative whale for AltaSea so far is Ballard, who set up shop at the aged docks several years ago and has captured public interest as a deep-sea explorer and scientific researcher. It’s his headquarters and home to his research and development.

AltaSea has an array of solar panels on the roof bigger than three football fields that generates 2.2 megawatts, enough to power 700 homes annually and more energy than the entire campus will need when it reaches full capacity.

BlueROV2, a high-performance remotely operated vehicle (ROV) that can be used for inspections, research, and adventuring,

The BlueROV2 vehicle.

(Allen J. Schaben / Los Angeles Times)

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To fund the wharf’s redevelopment, AltaSea received $29 million from the state, Port of Los Angeles and private donors. The funds paid for construction, installation of the solar panels and the future creation of a park.

AltaSea is one of multiple projects that are part of a two-decade process to clean up the air and water at the port and turn unused docks, wharves and warehouses into places where more people will want to work or visit, port officials said.

“Bringing people to our waterfront has been a hallmark of the Port of Los Angeles for decades,” Seroka said in 2020, and recent investments “will really bring us to the next level.”

Before the pandemic, about 3 million people came to L.A.’s waterfront annually for recreation, a tally port leaders hope to see double in the years ahead. To smooth the path of new development catering to visitors, the Port of Los Angeles is investing about $1 billion in infrastructure improvements over 10 years, Seroka said. Private developers building AltaSea and other projects will invest an estimated $500 million.

Taylor Marchment shows off 3D concrete printing for offshore renewable energy

Taylor Marchment, the manufacturing R&D lead at RCAM Technologies, shows off 3-D concrete printing for offshore renewable energy.

(Allen J. Schaben / Los Angeles Times)

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One of those projects, West Harbor, is a long-planned redevelopment of a 42-acre site that used to be home to Ports O’ Call, a kitschy imitation of a New England fishing village, built in the 1960s, that fell out of favor years ago and was razed in 2018.

Restaurants anchoring the dining, shopping and entertainment center will include Yamashiro, the second branch of a Japanese-themed Hollywood destination for locals and tourists. Another large restaurant will be Mexican-themed, with an over-water bar. There will also be a food hall and Bark Social, a membership off-leash dog park, bar and cafe. The complex is slated to open next year.

The waterfront developments represent improvements that San Pedro residents have been waiting decades to see, said Dustin Trani, whose family has been in the local restaurant business for nearly a century. Last year the chef opened Trani’s Dockside Station, a seafood restaurant situated between AltaSea and West Harbor, in part to capitalize on the expected influx of visitors.

“We’re on the cusp of a very big economic boom in this area that has not yet been seen,” Trani said.

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