ENVIRONMENTAL PROTECTION IN THE FEDERALIST SYSTEM: THE POLITICAL ECONOMY OF NPDES INSPECTIONS

I. INTRODUCTION Federal regulatory programs, from occupational safety to protection of the environment, are implemented jointly by national and state agencies. More broadly, almost all regulatory programs involve some delegation to branch offices (meat inspections) or regional districts (tax collection). Given the pervasiveness of regulatory federalism, surprisingly little research has been done on the political consequences of delegating national policy to local actors. In particular, the small but growing literature on the politics of regulation has almost completely ignored the role of federalism in implementing regulatory policy.(1) Perhaps the most widely accepted model of bureaucratic decision making, Peltzman's [1976] model of support maximization implies that delegation can have a profound impact on the implementation of regulatory policy. Peltzman's model posits that regulators maximize support while minimizing opposition. In the context of environmental protection, a rational regulator would calculate the marginal support from pollution abatement generated by inspecting a given plant and equate that to the marginal opposition, arising from job loss, generated by that action. Pashigian [1985] points out that in environmental legislation local and national interests are unlikely to be identical because industry, the primary target of pollution control measures, has an uneven geographic distribution. Thus a local regulator, performing Peltzman's calculation, is quite likely to reach a very different decision than a national regulator. This paper examines the extent to which local regulators are able to respond to local interests when enforcement of a national policy has been delegated to them. There are three possibilities. One is that delegation of enforcement to local government represents a complete abdication of control by the federal government. At the other extreme is the possibility the federal government can delegate with no loss of control because of its ability to enforce its goals through the use of threats (loss of authority over the program) and incentives (additional grant money). The third possibility is that both local and national interests can influence a delegated program. The federal government will lose some control when it delegates, but the loss will not be total. The Clean Water Act of 1972 is one of the largest federal regulatory programs ever delegated to the states. Under the Act, the federal government took over the previously state level responsibility for regulating water pollution.(2) Under the Clean Water Act, industrial polluters are issued permits, which specify types and amounts of pollutants allowed in effluent discharged during a given time period. These limits are set by state or regional authorities but must conform to minimum national standards. Permit writers may consider the desires of the local community if those desires demand more stringent standards than the federal minimums, but may not respond to community demands for lower standards. Local communities with considerable employment in the industry, for example, might want a lower standard than the federal mandate. Although a politically-minded regulator does not have the ability to actually grant a permit with a lower standard, a second source of discretion is available in the form of selective enforcement. While permits are difficult enough to issue, they are meaningless without some method of verifying compliance.(3) The state or regional Environmental Protection Agency (EPA) conducts regular on-site inspection of polluters. Although the EPA requests that delegated states inspect polluters at least once a year, it is not required. In practice, states have considerable discretion on how and when to inspect polluters. This should not come as a surprise. There are 7,500 NPDES facilities in the country. Variation in state performance could be due to location alone? This study, using data from the EPA's Permit Compliance Database, which tracks compliance with the Clean Water Act, analyses plant level inspection, violation and effluent discharge data. …