CLIMATE CONTROL

Elon Musk should refuse California’s offer to waive environmental rules for Tesla

August 13, 2014
August 13, 2014

This post has been updated. 

It looked like it was over, but the interstate battle to secure Tesla’s $5 billion “gigafactory” battery plant rolls on.

Last month,  Tesla confirmed that the facility, which is being designed so Tesla can produce more lithium-ion batteries—and, ultimately, more cars—was basically Nevada’s to lose. But officially, Arizona, New Mexico, Texas (whose governor, Rick Perry, has been lobbying hard for the facility), and the electric automaker’s home state of California are still in the running. Founder Elon Musk has said the company will break ground on a second site in one of those states as a hedge. The approach is clever, from a shareholder perspective, because it also means Tesla can secure more concessions and inducements from the states in contention.

And that’s already happening. The LA Times reported yesterday that California governor Jerry Brown is negotiating with the automaker to exempt it from aspects of the California Environmental Quality Act, which has been in place for nearly 50 years and was signed into law by Ronald Reagan, when he was governor of the state. The law, which the New York Times says  is credited with “preserving lush wetlands and keeping condominiums off the slopes of the Sierra Nevada,” is bitterly contested in California state politics. Brown, a Democrat, has long wanted to overhaul the law, arguing that it stifles development, costs jobs and perhaps even pushes up real estate costs.

The gigafactory is  absolutely crucial for Tesla’s future. Shares in the company hit another record high today, amid rising optimism about the automaker’s ability to dramatically ramp up production, which in turn depends on near-flawless execution of the massive infrastructure project. So the company is right to explore all options as far as location are concerned.

But the potential regulatory waiver has upset environmental activists. Kathryn Phillips, director of the Sierra Club in California, told the LA Times it would be “unacceptable.”

“It sounds like you’re taking away environmental review and taking away citizen enforcement … for a single project.”

Elon Musk arguably is going to do more to combat climate change than any other entrepreneur on the planet at the moment. He could be the person who takes electric cars to the mainstream (and by freeing up Tesla’s patents, could even foster the growth of his rivals). “If Tesla succeeds, but the climate is destroyed, then I’m not sure whether that actually really helps Tesla,” he explained in a recent video interview. But agreeing to sidestep environmental rules that other companies are forced to comply with would not be a good look, and would expose Musk and the company to accusations to hypocrisy.

California’s offer might be moot, anyway. Nevada’s legislators just needs to approve an incentive package for the facility and the contest will be over. The problem is that the state legislature is not scheduled to convene again until February next year, so doing so might require a special session. The plot could thicken yet.

Update, August 13: A Tesla spokesman provided the following comment. “It would be incompatible with the mission of the company to request a waiver from this legislation. We want to make sure the integrity of CEQA [the California Environmental Quality Act] is preserved.  It’s not about a waiver it’s about timing, that’s the critical issue here, what we are asking for is an expedited process that is fair for all stakeholders and that would allow California to be a viable candidate for the gigafactory.”

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