Much practically orientated environmental research is marked by a polarity between functionalist abstraction and ahistorical normative discourse. This paper seeks to bridge the divide between theoretical and empirical research through a case study of New York City's water supply. Current processes of socio-economic restructuring are leading to negative environmental consequences obscured by a failure to extend analysis beyond limited temporal, spatial or sectoral scales. Insights from regulationist theory show that a combination of fiscal, political and other developments are bringing about a wide-ranging reformulation of existing patterns of environmental regulation and service provision in the city. The power of the state is being radically diminished in relation to the power of capital and a plethora of different interest groups. A relatively simple centralized model of environmental regulation is being transformed into a complex decentralized pattern involving the emergence of new approaches to urban governance. Further research is needed on the contradictions between capitalist accumulation and environmental regulation at different spatial scales in order to link New York's changing role within the global economy to the declining political legitimacy and fiscal capability of the state to play an extensive role in environmental management.