California sues Interior to undo Morro Bay offshore wind lease buyout

California sued the US Department of the Interior on August 28, 2026, over the agreement that reimburses Golden State Wind up to $120,240,000 from the federal Judgment Fund for abandoning its offshore wind lease in the Morro Bay Wind Energy Area, a project the complaint describes as approximately 1.5 to 2 gigawatts. The ten-count suit, filed in the Northern District of California by Attorney General Rob Bonta and the California Energy Commission, calls the deal one of a series of "collusive settlements" buying out offshore wind developers, and asks the court to strike it down and bar similar agreements with the state's remaining lessees.

Golden State Wind, half-owned by Ocean Winds according to the complaint, won lease OCS-P 0564 at the Bureau of Ocean Energy Management's December 2022 auction with a $150,300,000 bid. Of that, $30,060,000 was bid credits, spending commitments for workforce training, supply chain development, and community benefits rather than cash; the Attorney General's release says the company paid the US $120 million, and the bid minus the credits yields the buyout's $120,240,000.

The deal being challenged

The Interior Department announced the buyout on April 27, 2026, alongside a parallel Bluepoint Wind agreement in the New York Bight. As the complaint describes the deal, the company's affiliates invest up to $120,240,000 in fossil fuel projects; Interior characterized the qualifying investments as US oil and gas assets, energy infrastructure, or LNG projects along the Gulf Coast. The government then repays the same amount from the Judgment Fund, the permanent appropriation for judgments and settlements against the United States. Golden State Wind has also decided not to pursue new US offshore wind projects, as Interior's release puts it.

The agreement is styled as a settlement: it recites that BOEM would have suspended the project indefinitely over national security issues and purports to resolve the breach-of-contract and takings claims Golden State Wind would have brought. The complaint's answer is that BOEM never publicly disclosed any intent to suspend the project, never initiated proceedings to suspend or cancel the lease, and never notified California's governor as the Outer Continental Shelf Lands Act requires. The negotiations, California argues, "do not resemble the settlement of an actual or imminent claim against the United States." The counts span the Administrative Procedure Act, OCSLA, the Coastal Zone Management Act, the National Environmental Policy Act, the Judgment Fund Act, the Antideficiency Act, and the separation of powers, plus two ultra vires counts. The defendants include the Justice Department and Associate Attorney General Stanley Woodward, whom Interior's own release quotes as "proud to have helped facilitate today's historic deals that advance the President's Energy Dominance Agenda."

Twelve projects, nearly $4 billion

The complaint traces the template to TotalEnergies' Attentive Energy, which agreed to invest approximately $795 million in non-renewable energy projects and receive the same from the Judgment Fund; Interior cancelled that lease on April 17, 2026. The model, the complaint says, "operates with the cynical logic of an extortion racket": first make the leases worth less than developers paid, then offer the original bid amount for cancellation. On June 17, 2026, Interior announced a similar agreement with Invenergy covering four leases; on August 6, 2026, RWE announced a $1.22 billion buyout of three. California tallies nearly $4 billion directed from the Judgment Fund toward cancelling twelve offshore wind projects, three of them from BOEM's five-lease 2022 California auction. BOEM's California page lists the state of play: Invenergy's lease is cancelled, Canopy Offshore Wind, holder of the lease RWE won in 2022, signed its agreement on August 4, 2026, and Golden State Wind's lease will be cancelled once its fossil fuel investment is demonstrated.

Interior frames the same facts differently: its release calls the agreements "dollar-for-dollar reimbursement," with Secretary Doug Burgum saying bidders were "basically sold a product in 2022 that was only viable when propped up by massive taxpayer subsidies."

What California says it loses

The state also counts more than $100 million it invested in ports, transmission planning, and offshore wind programs, and a strategic plan targeting 25 gigawatts of offshore wind by 2045. An E2 study from February 2023, cited in the complaint, found that developing the Humboldt and Morro Bay wind energy areas would generate 169,000 construction job-years, around 5,750 annual and maintenance jobs, and over $15 billion in local wages by 2040. The "nearly 174,750 jobs" in the Attorney General's announcement matches the sum of the first two figures, most of which are job-years rather than jobs, for both wind energy areas rather than this lease alone.

The lawsuit adds a judicial front to a federal policy shift The Duck Curve has covered from other angles: NRDC's projection of up to 540 GW in lost renewables and the August 26 bulk-power emergency order.

Outlook

The complaint asks the court to enjoin similar settlements with "any other California offshore wind lessees," which reads as anticipation: of the five 2022 leases, three now have buyout agreements, leaving California North Floating and Atlas Offshore Wind, which holds the lease Equinor Wind US won, per BOEM's list of existing leases. Golden State Wind's lease survives until its Gulf Coast investment is demonstrated, so timing matters: if California wins vacatur first, the lease itself could be intact; the state also asks for an order limiting any payment to the lease's fair value on the date of cancellation, with any excess already paid returned.