Emails: EPA Rushed to Resolve Tesla’s ‘Million Dollar’ Bureaucratic Snafu

CEO Elon Musk enlisted agency chief to preserve Tesla customers’ federal tax break

Tesla cars
Tesla cars / AP
February 10, 2016

Senior administration officials rushed to the defense of a politically-connected electric vehicle company after its executives discovered they had run afoul of federal environmental regulations, internal emails show.

Luxury electric vehicle manufacturer Tesla Motors realized in December 2009 that it had not obtained a certification from the Environmental Protection Agency that would allow its customers to claim a $7,500 tax credit to buy Teslas and other electric cars.

Tesla chief executive Elon Musk wrote an urgent email to Lisa Jackson, then the head of the EPA, asking her to do something about it.

"It will mean a several million dollar impact to Tesla" if the agency didn’t step in, Musk wrote, "as well as a very difficult public relations issue."

Musk was already a high-dollar political donor and, as a founder of PayPal, a tech industry celebrity. He split his political giving fairly evenly between the two political major parties in 2008, but he also made a high-profile appearance at a 2008 fundraiser featuring then-Senator Barack Obama.

Though Musk has publicly argued against government subsidies, political connections have paid dividends for him. Musk’s companies—Tesla, green energy firm SolarCity, and commercial spaceflight company SpaceX—have enjoyed about $5 billion in government backing.

His email to Jackson concerned an EPA regulation requiring that electric vehicles certify their compliance with the Clean Air Act’s standards for various classes of vehicles. Tesla had obtained a "Certificate of Conformity" for its Roadster model in 2008, but forgot to do so in 2009.

That was a significant problem for Tesla, which relied on federal tax credits to sell its pricey models—particularly the 2009 Roadster, which the company increased in price that year from $93,000 to more than $110,000.

"We have delivered approximately 600 electric Roadsters in the United States this year and customers have assumed that the tax credit applies," Musk wrote. "Only when one of our customers submitted his taxes early and was denied the credit a few days ago, was the issue brought to my attention."

It’s not clear that Jackson received that message, which was sent to her official EPA email account. At the time, she was also using a personal email account under the pseudonym "Richard Windsor." "This went to an incorrect email," Jackson later wrote.

Eight hours after Musk’s email, just before midnight on Dec. 20, the company still had not received a reply. Tesla VP Diarmuid O’Connell forwarded Musk’s note to David McIntosh, Jackson’s political adviser.

"As Elon’s entreaty implies, we have a serious time sensitive issue on our hands and we are doing everything in our power to correct the situation before the year closes," O’Connell wrote. "You can be assured that beyond Elon’s appeal to the top, we have begun working this issue within the appropriate offices at EPA."

McIntosh forwarded the email to Jackson (at her Richard Windsor address), her chief of staff, and her chief counsel. "This does indeed appear to be urgent," he wrote.

Jackson responded a half hour later.

"Please email Mr. Musk and cc Mr. O’Connell and let them know that we are looking into the matter," she instructed. "Done," another EPA staffer wrote. "Elon replied to say thank you."

That email was sent at 4:21 PM on Dec. 21, the date on which Tesla later said it received its Certificate of Conformity. The EPA took less than a day—and less than six hours after Jackson first acknowledged the request—to get Tesla’s compliance issues sorted out.

In a 2010 filing with the Securities and Exchange Commission, Tesla also revealed that it had reached "an Administrative Settlement Agreement and Audit Policy Determination" with the EPA. It paid $275,000 for failing to certify the 2009 Roadster, significantly less than the "several million" Musk estimated the lack of a certificate would cost the company.

It also avoided the public relations problems that Musk said would befall the company if its customers discovered they would not be receiving the promised $7,500 tax break.

Tesla’s "application and associated emissions related information [were] in order," according to EPA spokeswoman Laura Allen, allowing the agency to expedite the process.

"Through prior discussions with the company, EPA staff were familiar with the situation regarding this vehicle’s certification in advance of the administrator’s meeting. EPA did its job and did it quickly. And we held the manufacturer accountable for its failure to obtain certification on time," Allen said in an emailed statement.

The emails between the EPA and Tesla were obtained by the Competitive Enterprise Institute through a Freedom of Information Act request. CEI senior fellow Chris Horner didn’t buy the EPA’s explanation. He suggested that its expeditious handling of the matter showed deference to Tesla that the agency would never show to a less politically fashionable company—or to everyday Americans.

"Don't wait in line at the DMV when you can just ask for the Secretary of Transportation," Horner quipped in an email. "Tell them your license expired and, what with the economy going to hell, you never got around to it. The name's Tesla, maybe Solyndra, and you haven't got all day.​"

"Apparently what really works is being someone who depends on government to keep you going. Then you get what I call service."

Tesla did not respond to a request for comment by press time.

Published under: EPA