California Pipeline Ruling Signals Expansive Defense Production Act Preemption Power

On August 19, 2026, Judge Stephen V. Wilson of the U.S. District Court for the Central District of California ruled that a Trump administration order under the Defense Production Act (“DPA”) allows Sable Offshore Corporation to flow oil through its onshore pipeline, despite California’s contention that the pipeline’s operation violates state law.

Key Takeaways

• The decision adopts an expansive view of DPA preemption. The court held that the DPA generally preempts state laws that would prevent compliance with a DPA order, potentially providing a powerful mechanism for addressing state law obstacles to energy infrastructure and operations.
• The ruling could expand the use of the DPA in the energy sector. By concluding that the DPA can require the performance of services that state law would otherwise prohibit, the court signaled that DPA orders may be used to facilitate projects the federal government views as important to domestic energy supply.
• Federal authority could potentially supersede state oversight during a declared energy emergency. The court modified an existing consent decree to place the Pipeline and Hazardous Materials Safety Administration, rather than California regulators, in a supervisory role over the pipeline during the national energy emergency declared by President Donald Trump.
• The decision’s impact remains uncertain. California has appealed to the U.S. Court of Appeals for the Ninth Circuit.
• The DPA contains a sunset provision. Absent action from Congress, the Executive Branch’s authority to issue additional DPA orders will expire on September 30, 2026.

On August 19, 2026, Judge Stephen V. Wilson of the United States District Court for the Central District of California ruled that a Trump administration order under the Defense Production Act (“DPA” or the “Act”) allows Sable Offshore Corporation (“Sable”) to flow oil through its onshore pipeline, despite California’s contention that the pipeline’s operation violates state law. The district court held that the DPA generally preempts state laws that would prevent compliance with an order issued under the Act. Among other things, the court held that the order in this case precluded California from pursuing state law claims to prevent Sable from operating its pipeline under state parkland without an easement.

California has appealed the district court’s order, and it remains to be seen whether the United States Court of Appeals for the Ninth Circuit (the court that will hear the appeal) will agree with the district court’s reasoning. If it stands, however, the district court’s decision could have significant implications in the energy industry and beyond. The decision holds that the DPA authorizes the Executive Branch to require the performance of services or production of materials that cannot be performed or produced under existing state law. Under the district court’s interpretation of the DPA, it can serve as a powerful tool for businesses both in and outside of the energy industry to overcome state law obstacles to their operation, at least where the federal Executive views those operations as sufficiently important to warrant a DPA order.

Under DPA Section 717(a), 50 U.S.C. § 4564(a), the Executive Branch’s authority to issue additional orders will expire on September 30, 2026, unless Congress acts to extend that authority. Congressional action — or inaction — could thus also affect the continued availability of further DPA orders as a mechanism for overcoming state regulation. The coming weeks and months thus promise to be eventful for those interested in the DPA and its scope.  

Background

A segment of the pipeline at issue ruptured in May 2015 and spilled oil along the Santa Barbara coast. As a result of lawsuits arising from the spill, the pipeline’s owner, the United States, and the State of California entered a consent decree that prohibited the restart of the pipeline until California provided regulatory approval. Sable acquired the pipeline in 2024 and attempted to obtain the approvals necessary for a restart. But California declined to provide the approvals. California also refused to renew an easement required under state law for the pipeline to operate under a state park.

Citing President Donald Trump’s Executive Order 14,156, which declared a “National Energy Emergency,” Secretary of Energy Chris Wright issued an order under the DPA on March 13, 2026. As background, Title I of the DPA authorizes the President or his delegee to (1) prioritize the performance of certain contracts over other contracts and (2) allocate materials, services, and facilities to promote the national defense or maximize domestic energy supplies. See 50 U.S.C. § 4511. Historically, this authority under the DPA has most often been used in the federal contracting context pursuant to the Defense Priorities and Allocations System (“DPAS”), 15 C.F.R. Part 700. The Sable order did not involve a federal contract, but it required Sable to prioritize and allocate transportation services through its pipeline. Sable began flowing oil through the pipeline the next day. 

The restart of the pipeline triggered several lawsuits and motions, which were consolidated before Judge Wilson. First, California sought to enforce the federal consent decree, whereas Sable sought to modify it. Second, California sued Secretary Wright for a declaration that the DPA order was invalid and sought a preliminary injunction staying enforcement of the order. Third, Sable sought a declaratory judgment that the DPA order preempted California from bringing legal action to prevent the pipeline from operating under state parkland. And fourth, a California state court had issued an injunction against restarting the pipeline and that suit was removed to federal court pursuant to federal officer removal.  

A. The district court modified its consent decree to provide for exclusive federal jurisdiction over the pipeline, but it penalized Sable for violating the decree.

The district court held that the consent decree was enforceable against Sable but found that it should be modified going forward because of changed circumstances. The court reasoned that the national energy emergency declared by the President constituted a changed circumstance that required modifying the consent decree to shift regulatory authority from the state to the federal level. Accordingly, the court modified the consent decree to substitute the federal Pipeline and Hazardous Materials Safety Administration (PHMSA) in place of California’s Office of the State Fire Marshal as the agency with supervising regulatory authority over the pipeline during the period of national emergency.

Although the district court modified the consent decree prospectively, it found that Sable had violated the original consent decree by restarting the pipeline without the state restart-plan approval required by that decree. The court also held that the DPA did not immunize Sable from penalties for violating the consent decree. Section 707 of the DPA provides that “[n]o person shall be held liable for damages or penalties for any act or failure to act resulting directly or indirectly from compliance with a rule, regulation, or order issued pursuant to [the DPA], notwithstanding that any such rule, regulation, or order shall thereafter be declared . . . invalid.” 50 U.S.C. § 4557. Invoking the “major questions” doctrine, which demands that Congress speak clearly if it intends to delegate authority of vast economic and political significance, the district court concluded that Section 707 does not immunize parties from penalties for violating federal court orders. Accordingly, the district court enforced the stipulated penalties in the consent decree and found Sable liable for a total of $1.449 million in penalties.

B. The DPA order is valid and preempts contrary state law.

Turning to California’s request to declare the DPA order invalid, the district court declined to issue a preliminary injunction staying the DPA order because it concluded that none of California’s challenges to the order were meritorious. Under Section 101(a) of the DPA, the President or his delegee can “allocate materials, services, and facilities in such manner, upon such conditions, and to such extent as he shall deem necessary or appropriate to the national defense.” 50 U.S.C. § 4511(a)(2). Section 101(c) provides similar allocation authority for the purpose of “maximiz[ing] domestic energy supplies.” Id. § 4511(c)(1).  

The district court held that the Sable DPA order qualified as an “allocation order” under DPA Section 101 because it allocated crude oil produced off California’s coast for transfer through Sable’s pipeline. In so ruling, the district court effectively held that the Executive Branch’s authority to “allocate” materials, services, and facilities under the DPA extends to requiring the performance of services (in Sable’s case, pipeline transportation services) that currently are not being conducted because of state law restrictions. The district court, however, did not extensively analyze the meaning of the term “allocate” in the DPA, creating some uncertainty regarding the scope of the district court’s holding and how it might apply in future cases.

The district court also held that the DPA preempts state laws that would prevent compliance with DPA orders. In so holding, the court interpreted DPA Section 707 (the damages-and-penalties shield quoted above) as broadly preempting any common law claims that would impede compliance with DPA orders.

The district court distinguished two circuit court decisions, Hercules Inc. v. United States, 24 F.3d 188 (Fed. Cir. 1994), and United States v. Vertac Chemical Corp., 46 F.3d 803 (8th Cir. 1995), that held that DPA orders did not generally immunize manufacturers of Agent Orange from liability for harm caused by their products. The district court acknowledged that the Federal Circuit’s decision in Hercules contained language suggesting that Section 707 “extends only to shield a contractor from breach of contract liability” for reprioritizing contracts in accordance with a DPA order. 24 F.3d at 204 (emphasis added). The district court dismissed that language as overly broad dicta and also stated that, “to the extent Hercules does hold that Section 707 never applies to tort liability under any circumstances, that holding is inconsistent with the [DPA’s] text.”   

C. The district court declared that the DPA order prevents California from bringing legal actions to prevent the pipeline’s operation under state parkland.

The district court also addressed Sable’s suit seeking a declaratory judgment that the DPA order precludes California from bringing a legal action to prevent the operation of Sable’s pipeline under state parkland without a state easement. The court granted the requested relief, declaring that “the Defense Production Act, through Secretary Wright’s allocation order, bars California’s Department of Parks and Recreation from bringing legal actions to prevent Sable from complying with the DPA Order by operating the Onshore Pipeline.”

D. Federal officer jurisdiction exists if a party is complying with a DPA order, but parties must timely remove or jurisdiction is lost.

Finally, in the California state court injunction action, the district court held that the case must be remanded because the removal to federal court was untimely. The district court held that federal officer jurisdiction existed under 28 U.S.C. § 1442(a)(1) because Sable was acting under the DPA order. But it held that the 30-day period to remove a case under 28 U.S.C. § 1446 began to run when the case first became removable. Here, the district court found, the 30-day clock began running on (or shortly after) the DPA order’s issuance on March 13, 2026. Thus, the May 14, 2026 removal notice was untimely, requiring a remand of the removed preliminary injunction matter to state court. The district court, however, clarified that the doctrine of issue preclusion should prevent the state court on remand from enforcing state laws that the district court had concluded elsewhere in its decision were preempted by the DPA order.

Conclusion

Under the reasoning of the district court’s decision, the DPA provides a powerful tool for the federal Executive to override state laws that, in its view, impede activities that are necessary or appropriate to promote the national defense or maximize domestic energy supplies. California has already filed a notice of appeal, providing an opportunity for the Ninth Circuit to weigh in on the district court’s reasoning. Further, Congress must act by September 30, 2026, to avoid the authority for issuing additional orders under DPA Section 101 from expiring. In short, if you’re interested in the DPA and its scope, stay tuned — the coming weeks and months could be eventful.

If you have questions about the reach of the Defense Production Act or how the district court’s decision could affect your business, please reach out to our team.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.