A MODEL OF ENVIRONMENTAL COMPROMISE BETWEEN REGULATORS AND REGULATED PARTIES

Environmental regulations implemented by administrative agencies have often been met with fierce political resistance from regulated parties. In some instances, regulated parties have turned to legislative and judicial bodies for relief from environmental regulation. As these political and legal battles have escalated, several forms of compromises have evolved. The U.S. Fish and Wildlife Service, in its administration of the Endangered Species Act, has often utilized the tool of "Habitat Conservation Planning" as a means by which some regulatory relief is granted in exchange for an agreement by the regulated party to undertake mitigation measures to aid endangered or threatened species. As a further inducement for regulated parties to enter into the Habitat Conservation Planning process, the Service has also adopted a "No Surprises" policy of guaranteeing regulated parties that if certain additional mitigation measures are taken, then if in the future any further mitigation measures are deemed necessary to protect endangered or threatened species, they will only be undertaken at the expense of the Service. This paper develops simple models of the conditions under which such compromise agreements are offered by a regulator, and the conditions under which the regulated party either accepts such an offer or pursues a strategy of appealing to legislative or judicial bodies for relief from regulation