Tesla IMG: Katherine Welles / Shutterstock.com

Elon Musk and Tesla are in the planning phases for establishing a Gigafactory, which has ensued a bidding war. The factory was originally set to be near Reno, Nevada, but now several other states have joined the bidding war for the honor, including California, Arizona, Texas and New Mexico.

California really is pursuing the factory, trying to win favor with offerings such as a $500 million incentives package, which would waive Tesla from some of the strictest environmental regulations in the state and allow them to build faster. Currently, the electric-car maker is headquartered in Palo Alto, CA (Silicon Valley), and makes the Model S in Fremont, which is about 30 minutes away.

Tesla plans to have the new Gigafactory up and running with full battery-cell production by 2017.

“It would help them speed the process,” California Sen. Ted Gaines said after a meeting earlier this month with Tesla officials at the company’s headquarters and assembly line in Fremont.

Musk, however, stated before that California is a “long shot” from winning the bidding war for the proposed plant. The plant is expected to cost around $5 billion and employ 6,500 employees.

“Timing for the Gigafactory is very important,” Tesla spokesman Simon Sproule said. “So all five states in the running for the Gigafactory need to demonstrate, among other factors, that they can help us deliver the factory on time.”

Environmentalists are stunned by the tax break for Tesla and environmental laws that would be waived. The statute that they are trying to move for Tesla requires state and local government agencies to conduct reviews of new development projects and to address potential threats to the environment.

Frustrated environmental activists such as Kathryn Phillips of the Sierra Club say that waiving what are some of California’s toughest environmental regulations, even for a “green” company such as Tesla is “unacceptable.”

“It sounds like you’re taking away environmental review and taking away citizen enforcement… for a single project,” she said.