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September 22, 2014

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Nevada no lock for Tesla plant despite groundwork

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Scott Sonner / AP

Security guards stop a car Friday Aug. 1, 2014, at the gate to the site Tahoe Reno Industrial Center about 15 miles east of Reno, where Tesla Motors has broken ground as one of the possible places to build a $5 billion “gigafactory” to make lithium batteries for its electric cars.

SPARKS — A sprawling industrial park near Reno where wild mustangs roam among the sagebrush has become the focus of Tesla's unusually secretive site selection process for its $5 billion battery factory, but the groundwork taking place is no guarantee that the plant and its 6,500 jobs are coming.

Lance Gilman knows the bidding war with Texas, California, New Mexico and Arizona has just begun now that the electric-car maker has confirmed the first stage of preparation for a "gigafactory."

Gilman, principal and director of the Reno Tahoe Industrial Center, still likes the chances that his site east of the high desert suburb of Sparks will land the giant lithium battery plant, in a state still recovering from multiple years of having the nation's highest unemployment rate.

"If you talk about a horse race, no one else I know of has even left the starting gate," he told The Associated Press. "You are looking at a piece of property that is ready to go tomorrow."

Tesla chairman and CEO Elon Musk told investors in a webcast Thursday that the company wants to do similar site work in one or two other states "before we actually go to the next stage of pouring a lot of concrete."

Officials for the other states confirmed Friday that they're still in the running.

"Given Reno's geographic proximity to Tesla's California headquarters, it should be no surprise that it would be identified as one of the possible sites," New Mexico Economic Development Secretary Jon Barela said. "Tesla remains a prized economic development target, and we are still very much in the game."

California Gov. Jerry Brown's administration has refused to detail what incentives or concessions it's offering to lure Tesla Motors Inc. to build the plant in the company's home state, but legislation recently enacted to create a $420 million tax credit for Lockheed Martin also included language to help battery manufacturers, at his request.

Texas Gov. Rick Perry's office confirmed Friday that the Lone Star State is still in the hunt but declined to comment further because of "ongoing negotiations." Perry has made several trips to California and has lobbied Texas lawmakers to address state laws that prohibit Tesla's direct sales model from bypassing car dealerships.

In Arizona, Tucson Mayor Jonathan Rothschild said he doesn't believe Thursday's announcement makes Nevada the front-runner. He said Tesla officials "were very clear that they've chosen no site yet."

"We have a package that Tesla has, and that package is confidential, but what you try to do is roll out the red carpet and make it as economically viable as you can for any company that wants to come in and bring 6,000 employees," he said.

Musk has said the gigafactory will help Tesla reduce its battery costs by 30 percent. It needs cheaper batteries to produce its mass-market Model 3, an electric car that Tesla hopes to have on the road by 2017 and would cost around $30,000. The company's only current vehicle, the Model S sedan, starts at $70,000.

Guards at the sprawling Nevada industrial park that Tesla is preparing wouldn't allow a reporter access to the potential site Friday.

Across from the industrial park's entrance near Interstate 80, Golden Gate truck stop manager David Collier said he's seen trucks coming and going and heard rumors about Tesla but didn't know what to make of it.

"I just know we're busier," Collier said Friday. "I didn't know until last night when they said on the news that they have broken ground. "Anything like that would be good for us. We're the only truck stop out here."

On the Tesla webcast, Musk said, "At this point the ball is in the court of the governor and the state Legislature."

Gov. Brian Sandoval, the mayors of Reno and Sparks, and state and local economic development officials have refused to discuss what incentives, if any, might be offered to make sure the factory is built there.

The site about 200 miles from Tesla's Palo Alto, California, headquarters is near the Union Pacific railroad and significant lithium deposits, in a right-to-work state with no income tax and abundant solar and geothermal power resources.

"The reason we are still being considered is because this area is a wonderful place for manufacturing," said Mike Kazmierski, president and CEO of the Economic Development Authority of Western Nevada. The cost of doing business in the state is 30 to 40 percent lower than the cost in California, he said.

"We are very business friendly," he said. "You can get a permit expedited in days rather than months or, in some cases, years."

Gilman said about 23 square miles of the 167-square-mile industrial park is already equipped with fiber-optic lines, utilities, and roads that pass warehouses for Wal-Mart and PetSmart, among others. That has been key to Tesla, which is determined to minimize "scheduling risk" as it races to get the plant up and running to meet growing demand for its cars.

John Boyd, a principal of Princeton, New Jersey-based site selection firm The Boyd Co., has reviewed the industrial park several times in recent years for distribution and data centers.

"That site is the nation's largest industrial park. It is very appealing with all the infrastructure and an abundance of green power," he said.

But Boyd said he believes Texas and California both still can make strong bids.

"Tesla will be able to leverage this for additional incentives of course from other states," he said. "I think it would be foolish to write Texas off."

Longtime Sparks Mayor Geno Martini said it's hard to imagine how much the plant would benefit the economy of the Reno-Sparks metro area, which is home to about 425,000 people.

"I really don't know that I've got anything to compare it to, really," he said. "It's probably one of the biggest projects I've seen in my lifetime."

But he also remains cautious.

"Nothing is cast in stone until they sign on the dotted line," Martini said.

Associated Press writers Barry Massey in Sante Fe, New Mexico; Juliet Williams in Sacramento, California; Emily Schmall in Fort Worth, Texas; and Astrid Galvan in Tucson, Arizona, contributed to this story.

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