BLM Moves to Terminate 2012 Agreement with CalGEM, Opening the Door to New Drilling Opportunities

In a significant development for California’s energy producers, the Bureau of Land Management (BLM) has officially notified the California Geologic Energy Management Division (CalGEM) of its intent to terminate the 2012 Memorandum of Understanding (MOU) between the two agencies. The termination takes effect in 45 days, on June 29, 2025. BLM and CalGEM first entered an MOU in 2008 to ensure the state did not maintain a duplicative and extra-legal permitting process on federal land. The 2008 MOU ran 25 pages long with a high level of detail to definitively differentiate the two agencies’ roles and responsibilities.

However, in 2012 CalGEM canceled that MOU and entered into a new, very vague less-than-two-page MOU that subsequently led to murky the waters on responsibilities. In 2017, for the first time in its 102-year history, CalGEM asserted operators needed an NOI to drill on federal land. No such authority exists in any federal law. Of course, federal law supersedes contradictory state laws according to the Supremacy Clause as established in Article VI, Clause 2 of the US Constitution. 

The BLM has sole statutory authority for regulation and permitting of all oilfield operations on BLM-administered lands under the Mineral Leasing Act of 1920, the National Environmental Policy Act of 1970, the Federal Land Policy and Management Act of 1976, and the Federal Oil and Gas Royalty Management Act of 1982, among others. Because of CalGEM’s illegal permitting process, drilling new wells on federal land has ground to a halt in California leading to record foreign imports, lost jobs, lower federal royalty payments, and higher gas prices. The termination of the 2012 MOU signals a potential shift in permitting dynamics that could reduce bureaucratic gridlock, accelerate project approvals, and give independent producers more room to operate on BLM-managed lands.

This would mark a critical step toward enhancing domestic energy production. BLM is also working closely with its headquarters to address ongoing challenges related to issuing of API numbers for wells. This key hurdle has hindered new well development on federal lands. Resolving this issue would streamline the path for producers to resume drilling activities, potentially unlocking new supply to help stabilize gas prices and retain jobs. 

For operators, this move could not come at a more important time. With California’s regulatory environment growing increasingly hostile to energy production and state permit approvals stagnating under CalGEM, federal lands may offer a more viable path forward.

More importantly, increasing domestic production on BLM land can help offset California’s rising dependence on imported oil and bring much-needed relief at the pump. While some uncertainty remains around how quickly API number coordination can be resolved, this notice from BLM marks the beginning of a new chapter. Industry stakeholders should prepare to engage actively in the coming weeks to ensure the transition away from the 2012 MOU creates meaningful opportunities for production, investment, and job preservation in California’s energy sector.