Sable Offshore (SOC) shares climbed about 12% in early trading Thursday after a legal opinion from the Department of Justice's Office of Legal Counsel (OLC) stated that presidential directives under the Defense Production Act (DPA) can supersede state laws that stand in the way of federal energy production orders.
The OLC memorandum, dated March 3, 2026, responded to a request from the Department of Energy that centered on Sable Offshore's operations at the Santa Ynez Unit - an oil and gas facility located in federal waters off the coast of California. According to the memorandum, California state statutes and related enforcement actions have previously prevented Sable from operating the offshore facility and from moving production through the pipeline infrastructure associated with the project.
Assistant Attorney General T. Elliot Gaiser authored the opinion, arguing that presidential commands issued under authority delegated by Congress carry the force of federal law under the Supremacy Clause. The OLC concluded that orders made pursuant to the DPA can displace state regulations if those regulations conflict with federal energy production directives, including state rules derived from federal consent decrees.
The memorandum explains that preemption may occur either through an express conflict or by implication, and that a presidential directive will have the same preemptive effect whether it appears as an executive order or takes some other form of presidential instruction.
Sable Offshore holds the lease for and operates the Santa Ynez Unit and has been coordinating with the Department of the Interior to revise a Development and Production Plan intended to support continuous production at the facility. Both the company and federal agencies have cited vulnerabilities in West Coast energy supplies as a rationale for moving forward with operations.
Market and analyst reaction
The OLC opinion prompted an immediate market reaction for Sable Offshore shares. Michael Gordon, an analyst at CFRA, reacted strongly to the memo, saying:
"We are shocked by the DOJ Office of Legal Counsel’s (OLC) memo released Wednesday night indicating the agency’s view that an order under the Defense Production Act (DPA) would override all California laws as well as the consent decree and immunize Sable Offshore (SOC) from any penalties for running its pipeline."
Gordon also emphasized that the memorandum does not carry binding authority for the courts and expressed skepticism about whether the President's DPA powers extend to the degree suggested by the OLC opinion.
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The OLC memorandum and the ensuing market response leave open legal and operational questions about whether federal directives under the DPA will be sufficient to overcome state-level restrictions that have so far blocked activity at the Santa Ynez Unit.