Trump’s Pipeline Order to Test Limits of Cold War-Era Authority

President Donald Trump‘s emergency order reopening Sable Offshore Corp.'s dormant pipeline sets the stage for courts to determine the extent to which the federal government can rely on a pronouncement of an energy crisis to preempt states’ sovereign authority to regulate companies within their boundaries.

The March 13 executive order and accompanying directive from Energy Secretary Chris Wright rely on broad interpretations of the Defense Production Act and a domestic energy emergency that Trump declared in an earlier order.

Ryan Regula, a partner at Snell & Wilmer, said anticipated litigation over the move will be a “linchpin type of action” for developing Administrative Procedure Act jurisprudence surrounding energy regulations. That’s especially true after the US Supreme Court in Loper Bright Enterprises v. Raimondo overhauled the 40-year-old doctrine of deferring to agency interpretations of ambiguous statutes, he said.

“The Trump administration’s current proposal to use the DPA to override state environmental safety and permitting laws to force the specific company to restart oil production—that’s unprecedented,” he said.

The Cold War-era law explicitly allows the president to bolster national defense capabilities by directing private-sector companies to expand production of critical materials for national defense and during emergencies.

Both Democratic and Republican presidents have invoked the law, including former President Joe Biden, who signed a DPA order to ramp up Covid-19 vaccine and test production as well as to increase raw material output for renewable energy sources.

Historically, the orders classified specific products as nationwide priorities and directed entire industries to increase manufacturing capabilities for emergency needs.

By contrast, Trump’s order delegates his authority to the energy secretary to direct Sable to pump oil through the controversial Las Flores pipeline system in Santa Barbara, Calif., preempting state law. It was prompted by a single oil company that appealed directly to top administration officials under Trump’s energy emergency declaration after being battered by state and local regulatory scrutiny.

‘Critical Energy Source’

Sable’s efforts to restart the Las Flores pipeline system were stalled by California and local officials, who questioned whether the infrastructure was adequately repaired following a 2015 oil spill.

They also required new a permitting process after Exxon Mobil Corp. handed off the asset to Sable in the wake of the disaster. As part of the transaction, Sable assumed responsibility for implementing a settlement with the federal government governing the repairs and potential restart of the pipeline system, including a requirement that California regulators inspect and sign off on any repairs before oil flows again.

Interior Secretary Doug Burgum said in February that the National Energy Dominance Council was “working with” the company.

Weeks later, the Justice Department issued a memorandum opinion for the US Department of Energy stating that Sable’s assets were a “critical energy source” on the West Cost, and that the DPA authorized the president to preempt state laws and federal settlements for pipeline repairs to maximize domestic energy “even in the absence of a national-defense finding.”

The memo, issued before the president signed the order, offered several interpretations of how the president could invoke the DPA to preempt state pushback—an unusual sequence of events for an executive action, said Ella Foley Gannon, a partner at Morgan, Lewis & Bockius LLP.

It suggested that the president could waive federal settlements and use the US Constitution’s supremacy clause to preempt state action in overseeing the pipeline.

“They’re really laying the stage out to give as many tools in the toolkit to the executive branch as possible,” Gannon said.

State Sovereignty

Environmental groups challenging Sable’s restart plans call the federal government’s move an abuse of executive power that undermines state sovereignty to regulate their own coastlines and land developments.

“Overriding state law to let an oil company restart pipelines set a radically dangerous precedent,” said Talia Nimmer, an attorney at the Center for Biological Diversity.

Sable has already sued the California Department of Parks and Recreation in the wake of the federal directive, alleging March 13 that the agency is “barred and estopped from demanding any regulatory and environmental conditions to resume the flow of petroleum.”

The state parks department responded in a letter denying the company’s easement request and demanding that Sable “immediately remove the pipeline.”

California separately mounted an APA case against the Pipeline and Hazardous Materials Safety Administration for federalizing the Las Flores system last year, arguing the agency issued a “sham emergency permit” to usurp state control. The case is pending in federal appeals court.

But Trump’s order adds a new angle to California’s sovereignty fight: the question of how badly the country needs domestic oil production amid a tumultuous Iran conflict that has shocked oil prices and cut off a large portion of foreign crude oil supply.

Courts are “reluctant to provide more permissive powers to the federal government than what is traditional,” Regula said. He added that California’s 10th Amendment claims remain strong, as the federal entities involved in the Sable dispute offered no notice-and-comment period for the decision to preempt the state’s pipeline regulation before ordering the restart of operations.

However, international conflicts tend to shake up typical court scrutiny over a president’s authority, Gannon said.

These situations historically are “where courts will be more deferential to the executive branch,” she said. “It is much easier to argue a true national emergency when we are at war.”