California has filed a lawsuit against the Trump administration and Golden State Wind over a federal agreement that ended an offshore wind lease near Morro Bay. It was filed on Aug. 28 in the US District Court for the Northern District of California, challenges the legality of the $120 million payment linked to the lease cancellation.

Why The Morro Bay Wind Lease Matters

Golden State Wind won the Morro Bay lease in a 2022 federal auction. The company paid about $120 million for the lease. The site could support an offshore wind project with up to 2 gigawatts of capacity.

The Department of the Interior announced the cancellation in April. Under the agreement, Golden State Wind can recover about $120 million after making an equivalent investment in US oil, gas or liquefied natural gas projects along the Gulf Coast. Interior said the agreement would support energy security and conventional energy production.

California argues that the arrangement violates federal law, including the Outer Continental Shelf Lands Act. The state also disputes the use of federal funds for the payment.

California Cites Major Offshore Wind Investments

California says it has invested more than $100 million in ports, transmission planning and other infrastructure linked to offshore wind development.

The state has a planning target of 25 gigawatts of offshore wind capacity by 2045. That could represent about 13% of projected electricity supply, according to the California Energy Commission.

The state says the canceled lease could affect planned workforce, infrastructure and supply-chain investments.

Lawsuit Could Shape Future US Offshore Wind Projects

The dispute comes as the Trump administration has negotiated several offshore wind lease cancellations. California has also challenged a separate agreement involving Invenergy and another Morro Bay lease.

The federal government has defended the buyout approach as a way to redirect investment toward conventional energy.

California is asking the court to invalidate the Golden State Wind agreement. The case could clarify federal authority over offshore wind leases and the use of federal funds for lease cancellations.