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State, national columnists

Tesla has state walking a tightrope

By From page A8 | August 16, 2014

California government now walks a tightrope, put in that position by one of the latest in the large corps of successful high-tech startups this state has spawned over the past few decades.

Make a misstep in one direction and the state stands to lose a huge battery plant and 6,500 jobs. Stumble the other way and the state’s most important environmental law could be discredited, tainted by favoritism.

This quandary features Tesla Motors, whose luxury electric cars are made in the former General Motors and Toyota automotive assembly plant in the East Bay city of Fremont. Tesla parlayed a good idea, a derelict factory and a variety of state and federal government subsidies into huge success. Now it’s playing off the state that nurtured it against places like Texas, Arizona, Nevada and New Mexico.

The car company, whose advanced batteries allow its Model S to go farther on a single charge than any other commercially sold electric vehicle, plans a new “giga-factory” to make even better lithium-ion batteries. Company owner Elon Musk will likely decide sometime this fall where to locate his 10-million-square-foot facility.

California wants that plant, likely to be built in or near Stockton, within easy reach of the Fremont factory. But state environmental laws could help send it elsewhere, if only because the required environmental impact reports and other evaluations likely can’t be done in Musk’s time frame.

But Gov. Jerry Brown and state legislators are tired of high-profile companies that start here, then move factories and headquarters out of state. Texas, with its lack of a state income tax and its offers of cheap land, relatively low-wage labor and promises of eight years or more of tax exemptions, has made the most of such inroads. Most recently, it lured Toyota’s national offices from Torrance to the Dallas area.

So negotiations are underway to give Tesla major exemptions from the landmark California Environmental Quality Act, which has often been used to stymie or delay large construction projects.

Among ideas proposed are limits on environmental reviews prior to construction and letting Tesla mitigate any damage from the plant after it’s open. It was probably no coincidence that on the day word of these possible concessions reached Wall Street, Tesla stock jumped about 30 points.

These kinds of concessions are not completely unique, but they have rarely been put into operation. National Football League stadiums proposed for the City of Industry and downtown Los Angeles – the NFL won’t go for both – won similar concessions from the Legislature earlier in this decade.

But such sweetheart deals for large projects upon which elected officials place a high premium anger both environmental groups and some local politicians.

Back in 2011, when concessions were made to the Anschutz Entertainment Group for the proposed Farmers Field in Los Angeles, Beverly Hills Councilman John Mirisch questioned in an online essay whether “we should be granting CEQA exceptions . . . for individual projects.”

“There is no doubt CEQA is sometimes abused,” he said, noting that businesses sometimes employ it to stifle expansion by competitors. “Yet for all its flaws, CEQA serves a fundamental . . . purpose, which is to specify the impacts of a project . . . and to allow policy-makers to require mitigations.”

No one knows what mitigations either Tesla or an NFL stadium might have to make, or how expensive they could be. But once a project is built, it’s a lot easier for the owners to try to fight off added expenses and inconveniences.

Meanwhile, the Sierra Club called a large-scale exemption for Tesla “simply unacceptable.”

But legislators have been known to favor politically potent industries before, just this year passing tax benefits for military airplane makers in an effort to keep high-paying jobs here, with vastly expanded tax breaks for movie and TV producers coming soon.

It’s also true that Brown called in his 2010 campaign for “reform” of CEQA, but hasn’t gotten anything much through the Legislature.

All of which sets up the tightrope walk: Brown and the Democrats who dominate the Legislature can’t afford to lose the support of environmentalists. They don’t want to make CEQA a laughingstock. They also want to keep the ultra-green Tesla, whose cars produce no smog, operating in California. So they’ll compromise, and they still may not keep all of Tesla’s jobs and money here.

Thomas Elias is a California author. Reach him at [email protected]

Thomas Elias


Discussion | 4 comments

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  • JagAugust 16, 2014 - 9:06 am

    HMMM what a dilemma, democrats want their cake and want to eat it to. You have made these strict environmental laws now live by them and continue watch business leave California; maybe the typical drone voter will catch in in a few years

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  • JimboAugust 16, 2014 - 12:59 pm

    So in other words, Tesla's don't pollute at the car, they prefer to do all their polluting at the factory. Yet another car company not concerned with the environment after all.

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  • Mr. PracticalAugust 16, 2014 - 2:08 pm

    Jag, you nailed it. Jimbo, it's just the opposite. Tesla's manufacturing process is extremely clean. The cars themselves produce about the same carbon emissions as a Honda Accord. What concerns me is that Tesla made over $13 million last year selling their Cap & Trade credits. About $35,000 credit per vehicle manufactured.

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  • Dale AmonAugust 16, 2014 - 1:40 pm

    Well... they could level the playing field by repealing the damned thing. (I belong to Yet Another Company that is leaving for Texas... and good riddance to California.)

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