Faced with a threat of a lawsuit, Palo Alto administrators have reversed their earlier decision and will now allow the new restaurant that chef José Andrés plans to open at Stanford Shopping Center to use natural gas.

The restaurant, Zaytinya, is one of three buildings that the mall operator, Simon Property Group (SPG), is planning to build at the location of the shuttered Macy's men's store. Simon applied for the project in 2019 and received approvals from the city's Architectural Review Board and from planning staff. All of these approved plans included a gas line, which the developer installed in 2021.

The situation got thornier earlier this year when planning staff informed Simon that the new restaurant building, known as Building EE, would have to be all-electric. The determination was based on the City Council's revision to the building code last year, which included a provision requiring all new buildings to be all-electric. The new law kicked in on Jan. 1, 2023, and city staff had determined that because Simon had not submitted a building permit application by that date, the restaurant building would have to comply with the new "reach code."

Simon respectfully disagreed and responded in April with a letter threatening litigation if the city insists on enforcing the rule.

"SPG is confident that the enforcement of the new Reach Code in this context is legally defective and unconstitutional, and SPG is thus prepared to take all actions necessary to enforce its legal rights to employ gas facilities within Building EE," Anna Shimko, an attorney for SPG Group, LLC, wrote to the city.

She also noted that Zaytinya relies on "traditional cooking methods that require gas appliances to achieve its signature, complex flavors."

"Without a gas connection and appliances, Zaytinya would be forced to alter its signature five-star menu, which it is unwilling to do," Shimko wrote. "Zaytinya cannot compromise the caliber of its cuisine and reputation, and if SPG cannot provide gas in Building EE, Zaytinya will likely choose not to locate within the City. This would be an unfortunate loss for the residents of Palo Alto, as well as a compensable loss for which SPG would be forced to seek redress."

The developer followed suit on May 3 by submitting an application for a building permit for Building EE that included natural gas.

Now, it looks like Zaytinya will be able to use gas after all. The council discussed the city's dispute with the shopping center in a May 8 closed session, and on May 15, the city staff backtracked and entered into a settlement that will allow Building EE to use natural gas.

In a statement issued Tuesday, May 16, city staff said that the building is "in a unique situation, where parts of the project were built or under construction when the City's all-electric new construction rule went into effect.

"Due to the yearslong planning effort which started in 2019, three years before the city adopted the all-electric requirement, the city and the mall have agreed that this one project should be able to proceed with gas service consistent with the long-established project plans," the city's statement reads.

The settlement agreement signed by City Manager Ed Shikada and Steven Fivel, general counsel and secretary for SPG Group, LLC, specifies that the all-electric agreement would only be waived for Building EE and not any of the other structures that are being constructed as part of the redevelopment. In addition to Zaytinya, the building is slated to house the restaurant Dumpling City.

"In all other respects, Developer shall be subject to the 2022 California Building Codes with the city's local amendments," the settlement states.

The agreement states that the both parties seek to "resolve the dispute without the need for further legal proceedings and believe this Agreement is fair, reasonable, and in the best interests of the Parties and the public."

"Developer and City understand that liability for the matters encompassed in Developer's April 28, 2023, letter is disputed by the parties and that this agreement is a compromise and shall not be construed as an admission of any fact, claim or allegation of liability or responsibility on the part of the parties, or any of them," the settlement states.