California’s Exit From Oil Permitting to Create Legal Tug-of-War

Eliminating California’s Geologic Energy Management Division’s role in permitting oil fields on federal land creates an opportunity to expand oil production in California, but it won’t be without resistance.

CalGEM had a long-standing role in approving new oil well permits on federal land in the state through a memorandum of understanding with the Bureau of Land Management. The Trump administration rescinded that memorandum on June 29. On July 22, the US Interior Department announced plans for several changes to promote domestic energy production.

With California regulators no longer able to block new permits, opponents of oil operations may file lawsuits challenging approvals to drill new wells. Those in favor of and opposed to oil production in California will be monitoring what follows this decision.

The Bureau of Land Management is responsible for much of the state’s land and minerals, and administers approximately 15 million acres of public land in California. The bureau oversees nearly 50 million acres of subsurface mineral estate land in the state, equating to some 15% of California’s entire land mass.

Oil production on federal land in California has been steadily and significantly declining. According to bureau statistics, only eight new leases, affecting just more than 5,000 acres, were issued since 2014, and only 13 new drilling permits were approved for federal land in California in 2023 and 2024.

More than 100 permit applications remained pending from October 2023 through the end of November 2024. Perhaps foreshadowing the recission of the memorandum, 34 of those pending applications were approved between December 2024 and January 2025.

The federal government faults California regulators for the drastic reduction in approved oil wells. The state’s role in this area arose from the memorandum between the land bureau and CalGEM that began in 2008 and was replaced in 2012.

The purpose of the memorandum was to “delineate procedures for regulating oilfield operations” where both the federal and state government “have jurisdictional authority, to streamline operations, and to minimize duplication.” It was geared specifically for oilfields on federal land administered by the land bureau in California, whether the federal government owned all or part of the land.

At the same time, the memorandum emphasized each agency’s separate jurisdictional authority, with the land bureau responsible for regulating all oilfield operations on the land it administered. CalGEM’s responsibility was to regulate the state’s oilfield operations.

The Interior Department provided the required 45 days’ written notice to CalGEM that it was terminating the memorandum. Four members of Congress from California applauded the decision, claiming the memorandum had “acted as a significant barrier to oil production in California.”

Neither the Bureau of Land Management nor CalGEM issued a statement about the rescission. But with CalGEM out of the picture, the land bureau may begin issuing more permits to drill new oil wells on federal land in California.

That action would be consistent with provisions in H.R. 1 encouraging onshore oil and gas development, as well as the Trump administration’s “Unleashing American Energy” executive order. But new approvals may not mean permit holders will be free to proceed with drilling for oil on federal land.

Public-interest groups will likely file lawsuits challenging the approvals as alleged violations of the National Environmental Policy Act, which requires federal agencies “to assess the environmental effects of their proposed actions prior to making decisions,” such as “making decisions on permit applications.”

Multiple lawsuits are already pending that claim the land bureau failed to adequately analyze the effects of approvals on nearby communities and the environment in California, allegedly resulting in violations of multiple federal environmental laws, including the National Environmental Policy Act, the Clean Air Act, the Federal Land Policy and Management Act, and the Mineral Leasing Act.

New approvals by the land bureau may prompt new or amended lawsuits raising similar challenges. What happens next may not be clear until Aug. 13, which is 45 days after the June 29 effective date for rescinding the memorandum. Those interested in whether oil operations in California expand or remain constrained are advised to closely follow how the land bureau and the federal courts address this new opportunity for oil production in California.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Jeffrey Dintzer is a partner with Alston & Bird in Los Angeles representing companies in the energy, manufacturing, and defense industries.

Brett Oberst is counsel with Alston & Bird in Los Angeles focused on complex environmental litigation.

Clayton Kinsey is an associate with Alston & Bird in Los Angeles.

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