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Tesla 'gigafactory': Will California waive environmental laws to get it?

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Ng Han Guan/AP/File

(Read caption) A worker cleans a Tesla Model S sedan before a event to deliver the first set of cars to customers in Beijing. According to reports, California is trying to work out a deal that would waive environmental laws and put the state back in contention as a site for Tesla's new gigafactory.

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When Tesla Motors announced the short list of possible locations for its lithium-ion cell "Gigafactory," California wasn't on it.

The Silicon Valley electric-car maker is headquartered in Palo Alto and builds the Model S in Fremont, about 30 miles away.

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But it chose Arizona, Nevada, New Mexico, and Texas as the finalists for the Gigafactory site.

Quickly, however, California tried to lure Tesla back and get back into contention--despite a reputation for onerous regulation that discourages large manufacturing enterprises.

Now, the state may waive environmental rules that would normally make construction of such a large manufacturing facility more difficult, according to a report in The Los Angeles Times.

State Senator Ted Gaines told the Times that Governor Jerry Brown's office is negotiating an incentive package for Tesla that would include waiving certain parts of the nearly half-century-old California Environmental Quality Act (CEQA).

The statute requires state and local government agencies to conduct reviews of new development projects, to address potential threats to the environment.

Under the proposed incentive program, this time-consuming review process would be curtailed, which should appeal to Tesla as the company works toward its goal of full battery-cell production by 2017.

That's when production of its smaller and less expensive Model III electric sedan is scheduled to begin--but, CEO Elon Musk has said, the car can't go into production if the gigafactory isn't producing battery packs for it by then.

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State officials are also reportedly considering letting Tesla begin construction, and perform damage mitigation later, as well as limiting lawsuits that could slow down the project.

In addition to the regulatory shortcuts, the California government could well offer Tesla tax breaks that add up to around $500 million--about 10 percent of the gigafactory's anticipated cost.

Tesla acknowledged in its recent quarterly-earnings call that excavation work at a site in Reno, Nevada, had been completed.

It is doing initial site-preparation work in at least two sites, so that it can proceed immediately to construction once it makes the final decision on where to put the gigafactory.