Interior is using tax dollars to pay firms to ditch offshore wind leases and invest in fossil fuels instead. California just became the eighth state to sue to stop it.
The Trump administration has agreed to fork over nearly $4 billion since the spring to get major energy firms to abandon a dozen leases for U.S. offshore wind projects.
The controversial maneuver to return lease payments to developers — often in exchange for their investing in fossil fuels — is part of President Donald Trump’s broader strategy to stymie the clean energy resource, which coastal states have been depending on to meet their growing need for reliable and affordable electricity. The buyouts began as Trump’s earlier efforts to halt in-progress offshore wind farms largely failed under scrutiny from federal judges.
Now the unprecedented lease-refund approach is increasingly facing legal blowback of its own. Late last week, California became the eighth state to challenge the practice, arguing that it jeopardizes the state’s investments and resulting jobs in offshore wind.
The U.S. offshore wind industry had already been struggling before Trump began issuing stop-work orders, freezing permitting, and rolling back tax credits. High inflation, rising interest rates, and supply-chain constraints in recent years threatened to derail a handful of projects along America’s coastlines.
That’s why it’s all the more bizarre that the federal government is proactively paying developers to walk away from beleaguered, undeveloped projects, James Sallee, a business professor at the University of California, Berkeley, recently argued in the Energy Institute Blog. He likened the buyouts to spending billions in taxpayer dollars “to shoot a corpse.”
But for states that were banking on gigawatts of offshore wind power to shore up their grids and hoping the industry could rebound after Trump leaves office in 2029, the agreements are like salt in their wounds — particularly given the deals’ legally questionable nature. Here’s the latest on states’ legal challenges and congressional pushback.
California calls buyout “blatantly unlawful”
California’s new lawsuit focuses on the agreement between the U.S. Department of the Interior and the company Golden State Wind, which paid $120 million in 2022 to lease waters along California’s Central Coast through a competitive bidding process.
Golden State Wind had planned to develop a 2-gigawatt offshore wind farm using floating turbine technologies in a large swath near Morro Bay. The company is owned by Ocean Winds North America — a joint venture of the European firms Engie and EDP Renewables — and the U.K. offshore wind developer Reventus Power.
In late April, Interior said it would return the $120 million to Golden State Wind. In exchange, the developer agreed to invest the same amount of money in U.S. liquified natural gas facilities and other fossil-fuel projects. Ocean Winds also struck a similar deal that month to get back the $765 million it paid to lease water for Bluepoint Wind, a fixed-bottom project near New York and New Jersey.
California’s challenge — filed by state Attorney General Rob Bonta (D) and the California Energy Commission — asks a federal court to strike down the agreement with Golden State Wind, saying the deal is “blatantly unlawful.”
Offshore wind experts and former Interior officials have previously questioned whether Interior’s Bureau of Ocean Energy Management has the legal authority to return the funds it collects from leasing federally controlled waters. They noted that when oil major Royal Dutch Shell relinquished its offshore leases near Alaska in 2022, the company simply ate the $2.1 billion loss.
California raises the same concerns in its lawsuit and claims Interior improperly tapped the federal Judgment Fund, which Congress intended to be used to settle lawsuits, not to pay for voluntary agreements like this one.
“Offshore wind presents an opportunity for our state to scale up an innovative new clean energy industry that reduces pollution while providing new jobs and investment for the people of our state,” David Hochschild, chair of the California Energy Commission, said in an Aug. 28 news release. “We will not let the Trump administration’s reckless actions turn back the clock.”
Interior has separately moved to cancel and refund two other offshore wind leases in California, with the developers Invenergy and RWE, though neither were named in the lawsuit.
Democrats in Congress probe deals
In announcing the legal challenge last week, California Attorney General Bonta accused the Trump administration of using the buyouts to “line the pockets of their Big Oil donors.”
A day earlier, The Washington Post broke the news that another offshore-wind deal with German energy firm RWE will generate a giant payday for one of Trump’s neighbors near Mar-a-Lago.
In early August, Interior agreed to hand over $1.22 billion to RWE to give up its leases off the coasts of California, Louisiana, and New York. As part of the deal, RWE said it would spend $900 million on a stake in a huge Louisiana liquefied natural gas terminal — a stake it’s buying from a private equity fund run by Michael Dorrell, one of Trump’s million-dollar donors, who owns a mansion near the president’s Florida estate.
The administration told the newspaper that it had no involvement in the decision to pick the Louisiana gas project, and RWE said it made its investment plans independently. But for critics of the lease agreements, the revelation only solidified their suspicions. California Rep. Jared Huffman, the top Democrat on the House Natural Resources Committee, said he would expand an ongoing probe of the deals to include the ties to Dorrell’s firm.
“In writing and to their faces when I meet with these energy company CEOs, I am telling them, ‘You better tell your shareholders we are coming for that money,’” he told The Washington Post. “I would not even cash the check.”
East Coast states push ahead with lawsuit
As the legal fight heats up in California, an ongoing challenge on the East Coast continues to play out in court.
Earlier this summer, New York and six other Democratic-led states sued Interior over its $795 million agreement with the French energy giant TotalEnergies. In March, the company became the first developer to reach such an arrangement with the government — creating a “blueprint” for other offshore wind leaseholders to follow, according to the lawsuit.
Under the deal, TotalEnergies agreed to forfeit its lease for a large area near New York and New Jersey, where it had aimed to develop over 3 GW of offshore wind power to provide clean electricity for more than a million homes across the two states. Five New England states were also slated to benefit from the wind farm, since they regularly import energy from New York.
In exchange for ditching the project, Interior said it would “reimburse” the developer for the $795 million it paid in a 2022 auction, funds that TotalEnergies promised to invest in fossil fuel projects. At the same time, the company signed a similar, separate deal to cancel the $133 million lease for its planned 1-GW Carolina Long Bay project near North Carolina.
Similar to California, the seven East Coast states argued the New York–New Jersey lease cancellation was “arbitrary and capricious,” since the administration didn’t follow proper procedures or provide a clear reason for striking the agreement, along with violating the Judgment Fund Act. The challenge is still moving through the early procedural stages in a D.C. federal court.
While the eastern states are hoping for a much larger expansion of offshore wind, the few projects they do have are already benefiting the region’s grid — including during recent heat waves and brutal cold snaps. Even with the Trump administration’s attacks, at least a few more gigawatts are slated to come online in the coming years.
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