Regulations called for stricter rules on Nevada's battery sector. Tesla objected, and won.

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Tesla successfully fended off proposed environmental regulations in Nevada late last year that would have applied more stringent rules on its battery production operations, according to records obtained by The Nevada Independent.

As the Nevada Division of Environmental Protection (NDEP) sought to create a new regulatory framework governing an array of hazardous materials, the company pushed back — and quickly got its way.

Tesla, which builds battery packs and energy-storage products at its massive Gigafactory east of Reno, argued that regulations proposed by NDEP staff would threaten Nevada’s leading position in a nascent industry that is crucial to diversifying the state’s economy beyond gaming and tourism. The proposed rules would put Nevada “at a disadvantage when competing with other states to grow the lithium-ion battery recycling industry,” a Tesla executive wrote to NDEP in a late October letter.

The proposals would have required companies including Tesla to obtain more onerous permits (which require ongoing compliance reports and could lead to federally mandated spill cleanups but are generally not required for recycling facilities) for certain operations. It also would have required companies to continue following more stringent federal waste regulations related to the handling of hazardous materials, which include scrap metals or sludges that can be ignitable, corrosive, reactive or toxic.

Two days after Tesla wrote NDEP, the company’s lobbyist sent the same letter to Gov. Joe Lombardo’s office, which four days later participated in a meeting with officials from NDEP, Tesla and Redwood Materials, a Northern Nevada battery recycling company started by a co-founder of Tesla. One day after the meeting, held in the governor’s chief of staff’s office and on Microsoft Teams, an updated version of the regulation was sent by NDEP to participants with everything Tesla had asked for in the letter.

“Thank you very much for actioning the industry feedback so swiftly,” a Tesla official emailed the day after receiving the updated regulation.

A panel of state lawmakers later adopted the new rules without controversy.

The previously unreported series of events, revealed in documents obtained from the governor’s office through a public records request, brings into question the role battery companies should have in developing environmental regulations that are designed to keep workers, the public and the environment safe.

Tesla did not respond to multiple requests for comment. Its Nevada lobbyist told The Indy in an email that the company does not comment on media inquiries “as a general rule.”

The governor’s office said in a statement that it “has focused on streamlining regulations and implementing regulations that simultaneously support industry safety standards and pro-business policies,” and that it “regularly works” with industry associations and state agencies to shape regulations.

In an interview with The Indy, NDEP officials said that the governor’s office has no defined role in the regulatory process, but it sometimes is involved.

“Because of the growth of this economic sector, they’re interested in what’s going on,” NDEP Administrator Jennifer Carr said. “The governor’s office did not get involved in our process. … We never feel pressure to do anything from the governor’s office.”

The governor’s office declined to make Lombardo’s chief of staff or its liaison to NDEP available for an interview, but it did respond to The Indy’s written request for comment.

NDEP received almost 70 comments regarding the proposed regulations, which the agency replied to as part of the normal regulation process. Agency officials told The Indy that it did not intend to make its rules more stringent than federal ones, but realized it had done so after meeting with industry officials.

Similar to many other businesses, Tesla has contracted with a lobbying firm in Nevada (Rowe Law Group) and has also engaged in lobbying efforts in other states, such as when CEO Elon Musk hired a dozen lobbyists in Texas this year to pass legislation advantageous to Tesla and another one of his companies, SpaceX.

Nevada officials across the political spectrum have embraced Tesla and the broader battery industry as a surefire way to expand the state’s tourism-dependent economy. State legislators approved a $1.25 billion tax incentive package for Tesla in 2014 — an unprecedented deal in the Silver State — and in 2023, state officials approved $330 million in additional tax breaks for a corporation valued at more than $1 trillion.

These investments are part of the state’s efforts to create a “lithium loop,” with the goal of encompassing all aspects of the process, from lithium extraction to its processing and eventual recycling.

“Our state has the components to be world leaders in battery development,” Lombardo said last year.

The newly crafted regulation will likely lead to a system where fewer types of hazardous materials in Nevada are designated as waste, meaning there will be fewer requirements for certain companies that deal with hazardous materials.

The regulation was part of a broader effort to create a new framework in Nevada governing “hazardous secondary materials,” which are manufacturing byproducts that are not subject to certain federal waste regulations if they are legitimately recycled and meet other federal criteria. The state must validate that a company is meeting this criteria.

Corrado DeGasperis, CEO at Comstock Inc., a Northern Nevada-based company that was involved in the battery recycling industry but has since pivoted to solar panel recycling, said under the new framework, companies will be incentivized to recycle their products. Disposing them as waste triggers more government oversight.

“Nevada’s way, way, way better off with these materials being recycled,” DeGasperis said.

In an interview, NDEP Deputy Administrator Jeffrey Kinder said the agency did not intend for the state’s hazardous secondary materials rules to be more stringent than the federal ones. It was only after input from industry officials that the agency recognized its proposed regulation would have been overly restrictive.

“We do sometimes ask for more stringent regulations through our own state process if we think there’s a gap in what the federal program does,” he said. “But … that didn’t exist. (It) is a fairly robust federal program that’s been operating for a number of years in a number of states.”

Six facilities, including Redwood and Tesla, have notified the state they have applied to handle these secondary materials, according to NDEP.

Discarded lithium batteries are typically designated as hazardous waste because of their ignitability and reactivity, according to the U.S. Environmental Protection Agency (EPA). But because the industry is still in its infancy, the recycling chain for lithium ion batteries is still being developed, according to Nevada lithium experts.

Top NDEP officials said, during their tenure, they have never been tasked with drafting regulations for a sector as large and rapidly evolving as the lithium recycling industry.

Tesla objected to permit requirements that it said would have cost millions of dollars across a facility’s lifespan. These permits require ongoing compliance reports, and the EPA is able to issue orders or file lawsuits to these permitted facilities to require cleanups of spills.

These requirements, according to Tesla’s letter last year to state environmental regulators, could lead some lithium recyclers to “be forced to choose between losing ground to competitors in other states” or “ceasing business altogether.” Battery facilities have long eyed Nevada for its business-friendly environment, particularly the lack of state income tax.

Additionally, under the initial regulation, some materials would have still been classified as hazardous waste — and subject to stricter oversight — because the state did not intend to adopt certain federal rules. However, Tesla said in its letter to regulators that the decision to not adopt these rules “effectively advantages select recyclers, while disadvantaging others.”

Under the revised regulations, NDEP will now be solely responsible for validating whether battery facilities are meeting the requirements for legitimate recycling.

The agency has seven employees overseeing all hazardous waste compliance and enforcement for the entire state — not just for the battery factories.

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Carson Now reporter Kelsey Penrose contributed reporting.

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This story was originally published in The Nevada Independent and distributed through a partnership with The Associated Press.