California sued the Trump administration and Golden State Wind on August 28 to block a Trump administration agreement that would terminate a potentially 2-gigawatt offshore wind project near Morro Bay and reimburse the developer up to $120 million after investments in fossil-fuel projects.
The complaint, filed in the U.S. District Court for the Northern District of California, alleges that the Department of the Interior and Bureau of Ocean Energy Management exceeded their authority under federal offshore-energy law and improperly committed money from the federal Judgment Fund.
California is asking the court to invalidate the agreement and prevent federal officials from implementing the lease cancellation and payment.
What California’s offshore wind lawsuit challenges
Golden State Wind acquired wind lease OCS-P 0564 in the federal government’s December 2022 California offshore wind auction. The lease covers 80,418 acres approximately 22 miles northwest of Morro Bay. The lease area could support approximately 1.5 to 2 gigawatts of floating offshore wind generation, according to the complaint.
The lease is one of three awarded in the Morro Bay Wind Energy Area. Golden State Wind’s winning bid totaled $150.3 million. That included $120.24 million in cash and approximately $30.1 million in commitments for workforce training, supply-chain development and community benefits.
California argues that canceling the lease would jeopardize those commitments and hinder development of the state’s offshore wind market. California’s strategic plan calls for offshore wind capacity of up to 25 gigawatts by 2045.
How the Golden State Wind buyout would work
The Interior Department announced the agreement with Golden State Wind on April 27, 2026. Under its terms, Golden State Wind would relinquish the Morro Bay lease after its corporate affiliates make up to $120.24 million in qualifying U.S. energy investments. According to the complaint, those investments may include oil and gas assets, energy infrastructure and liquefied natural gas projects along the Gulf Coast.
The federal government would then reimburse Golden State Wind by paying an equivalent amount from the Judgment Fund, a permanent federal appropriation used to pay certain judgments and settlements against the United States.
The agreement also restricts Golden State Wind and certain affiliated entities from pursuing other U.S. offshore wind projects.
BOEM’s Golden State Wind lease page states that the Interior Department will cancel and rescind the lease after the investments in U.S. oil and gas development have been made.
California challenges the use of the Judgment Fund
The complaint alleges violations of the Judgment Fund Act and the Antideficiency Act, which restrict federal agencies from spending or committing funds without legal authority.
California argues that the agreement does not resolve actual or imminent litigation because the Interior Department had not issued the contemplated order suspending the lease and Golden State Wind had not filed a lawsuit challenging such an order.
The state contends that the agreement is not a settlement eligible for payment from the Judgment Fund.
California alleges Interior Department bypassed offshore lease procedures
California also argues that the Interior Department and BOEM failed to follow the procedures governing the suspension, cancellation or relinquishment of an offshore wind lease under the Outer Continental Shelf Lands Act. The complaint alleges that the federal government bypassed requirements involving lease suspension, consultation, hearings and consideration of state interests.
The lawsuit also alleges violations of the Administrative Procedure Act. California argues that the agreement was arbitrary and capricious because the federal government did not adequately explain its decision or consider the state’s reliance on the lease.
Lawsuit includes coastal and environmental-review claims
The lawsuit also raises claims under the Coastal Zone Management Act and National Environmental Policy Act.
California argues that canceling the lease could affect the state’s coastal resources, ports, transmission plans and energy policies. It alleges that federal agencies did not complete the consultation and environmental-review procedures applicable to decisions affecting offshore development and the coastal zone.
The state is asking the court to vacate the federal actions approving the agreement and prevent the government from canceling the lease or making the proposed payment.
California cites more than $100 million in offshore wind investment
California says it has invested more than $100 million in offshore wind planning and infrastructure, including port preparation, transmission development, workforce programs and environmental review.
The state argues that cancellation of the Golden State Wind lease could reduce the value of those investments and delay development of the broader California offshore wind market.
Lawsuit follows state investigation
The California Energy Commission opened an investigation into the agreement in May and served Golden State Wind with an administrative subpoena seeking information about the proposed buyout.
The Attorney General and CEC sent the federal government a notice of intent to sue in June. The August 28 complaint moves the dispute into federal court. The case is California v. U.S. Department of the Interior, No. 3:26-cv-09123.
Interior Department has pursued other offshore wind lease settlements
The Golden State Wind agreement is part of a broader federal effort to terminate offshore wind leases through negotiated settlements.
BOEM’s California offshore wind activities page identifies additional settlements affecting California leases formerly held by Invenergy and RWE-related entities. Some cancellations have been completed, while the Golden State Wind cancellation remains contingent on satisfaction of the investment provisions in its agreement.
Ruling could affect California’s remaining offshore wind market
The lawsuit could determine whether the Interior Department may use negotiated settlements and Judgment Fund payments to terminate offshore wind leases before projects reach construction.
A ruling for California could prevent the Golden State Wind cancellation and limit similar federal agreements. A ruling upholding the agreement could allow the Interior Department to complete the buyout and further reduce the federal offshore acreage available for development off California.