Takeaways
- In a March 3, 2026 opinion, the U.S. Department of Justice’s (DOJ) Office of Legal Counsel (OLC) concluded that an order issued under the Defense Production Act (DPA) will preempt contrary state law. The opinion finds the federal government may direct an energy company to operate notwithstanding state permitting, environmental, or similar compliance requirements.
- Although the opinion arose from a dispute involving offshore oil production and pipeline operations in California, its potential scope is much broader. Per the OLC opinino, the DPA can serve as a tool for displacing state-law or contractual impediments to energy production, siting, transportation, refining, and related infrastructure, where the federal government can identify a linkage to national defense or domestic energy supplies.
- The OLC opinion also finds that a DPA order can excuse noncompliance with a consent decree by barring liability for noncompliance and triggering the application of force majeure or a consent decree modification, creating a path to avoid obligations under legacy environmental settlements.
- The scope of preemption depends on the precise wording of a DPA order.
- Because of the novelty of this issue, litigation over the use of this DPA authority is likely.
Background and Analysis
On March 3, 2026, OLC issued an opinion addressing a question raised by the Department of Energy involving an energy company that leases and operates a large oilfield in federal waters off the coast of Santa Barbara, California, and asserts that California laws are preventing it from transporting oil and gas through offshore and onshore pipelines. The opinion finds that a DPA order would operate to preempt those California laws. OLC reasons that presidential orders issued pursuant to valid constitutional or statutory authority have the force of federal law under the Supremacy Clause, and that a DPA order therefore displaces contrary state law.
The opinion cites to Executive Order 14156, issued January 20, 2025, in which President Trump declared a national energy emergency and directed agencies to use available authorities, including the DPA, to support domestic energy production, transportation, refining, and generation. Section 101 of the DPA, codified at 50 U.S.C. § 4511, has provisions that (1) allow the President to require priority performance of certain contracts or orders over others, § 4511(a)(1); (2) allow the President to allocate “materials, services, and facilities” as needed to promote the national defense, § 4511(a)(2); and (3) allow the President to make allocation or prioritization decisions “in order to maximize domestic energy supplies.” § 4511(c)(1). OLC’s opinion states that the broad language of these provisions allows the President (or the Department of Energy, to which these authorities are delegated) to issue an order directing production and transportation of energy even where state law would otherwise impede that conduct. The opinion also finds that Section 4557 of the DPA, which provides that no person shall be held liable for damages or penalties for acts or omissions resulting directly or indirectly from compliance with a DPA order, displaces any penalties under conflicting state laws.
The opinion treats the DPA as granting broad authority, including the power to issue orders expressly identifying particular state environmental regulations, permitting requirements, and the like as preempted for the covered project or facility. This will facilitate the use of DPA orders to expedite energy projects without waiting for state authorizations or approvals. OLC explains that a finding of necessity under the DPA is “likely immune from judicial review” under the Administrative Procedure Act, concluding that decisions to issue such orders are “committed to agency discretion by law” and therefore unreviewable.
The OLC opinion also notes that the facility at issue is subject to the requirements of an existing consent decree entered in federal district court. The opinion concludes that a DPA order would “displace [applicable] provisions of the Consent Decree” in three ways: by immunizing the company from penalties for violating the decree; by triggering the decree’s force majeure provision; and by constituting changed circumstances requiring modification of the decree. Businesses subject to legacy consent decrees should be aware that a DPA order may supersede obligations under those decrees.
The OLC opinion is careful to note that “the precise preemptive scope” of a DPA order “would depend on the language employed in relation to the obligations imposed by state law” and that it “cannot opine on the preemptive reach of an order not yet drafted.” Thus, the opinion’s practical effect will turn on the language of future DPA orders and how courts react when (as seems inevitable) these orders are challenged in court. The opinion is also primarily focused on requirements arising under state law and does not address the effects of a DPA order on federal environmental laws, aside from its discussion of the consent decree.
The federal government may invoke the newly recognized DPA preemption authority in situations involving pipelines, terminals, refining assets, fuel transportation systems, generation resources, or other infrastructure that the federal government determines are important to energy reliability, national defense, or domestic supply adequacy. This authority will be another tool available to the federal government to streamline and expedite review of energy projects, joining the list of other such measures adopted by the executive branch. Moreover, only one of the three DPA provisions OLC analyzed is limited to the energy context, so the Administration may exercise this authority in other circumstances implicating national security.
Next Steps
- Stakeholders should consider whether a DPA order may be available to expedite or facilitate energy or defense-related projects, including where state requirements or an existing consent decree restrict a project or site, subject to a legal risk assessment.
- Be aware of the risk that a DPA order could affect the obligations of other parties to a transaction or litigation matter.
- Monitor whether the Administration begins issuing sector-specific or project-specific DPA orders in the energy space. The Administration’s practice in invoking the DPA will develop and define the scope of these new authorities.
