He must prove to Friends of the Earth and Greenpeace that despite a career that took in Vauxhall Motors, Sandoz, Black and Decker and Amersham International, he will be no pushover when it comes to making business behave itself.
But he must also reassure employers that he will not use the agency's tough new legal powers against polluters to make unreasonable demands that cost them the earth.
Mr Gallagher has already received qualified praise from Friends of the Earth as a result of his three-year stint running the National Rivers Authority, the biggest component of the new agency.
This alone is bound to make him an object of suspicion among some harder- nosed industrialists.
Mr Gallagher says: "We have to operate in a highly charged political arena. On the one hand, there are people at the extreme end of business who think all environmental regulation is a disaster for the country's competitiveness."
"At the opposite end are those who believe no price is too high to protect the planet. We have to find some sort of middle way through that spectrum."
New legislation that comes into force soon will give him powers whose full scope is as yet untested. These include a new duty to look for cost- effective ways of tackling environmental problems, rather than what Mr Gallagher calls "gold-plated solutions."
In principle, this should be reassuring to manufacturers, because it puts economics explicitly into the environmental equation.
But some employers are worried that in a number of key areas, such as cleaning contaminated land, they have no clues yet to where the agency will draw the line between protecting the environment and forcing shareholders to pay up huge sums to put right damage caused in the past.
Mr Gallagher concedes that contaminated land is an issue where government guidelines, to be published soon, may not be enough to allay business fears.
He suspects that it will take test cases in the courts to resolve exactly how the balance of costs is shared.
The sensitivity of the issue can be judged by outside estimates that the clean-up costs may reach a national total of pounds 20bn. Even the planned redevelopment of Mr Gallagher's temporary offices in London, in an ageing government complex in Marsham Street, will be hit by unpredictable clean- up costs. It was built on the site of an old gasworks.
The central problem that the new agency faces is that for any given environmental problem there are likely to be a range of technical solutions at widely varying costs.
The choice between them involves political and environmental as well as financial judgement.
"Our job in a lot of cases is a public relations and political fix as opposed to working out immaculate arithmetic" Mr Gallagher says.
He cites the controversy over the dumping at sea of Brent Spar - not part of his environmental remit - as a celebrated case in which the financial arithmetic of the decision was immaculate but Shell and the Government failed to carry public opinion.
So Mr Gallagher is not prepared at this stage to give assurances to industry about the cost of contaminated land clean-up.
The same applies to new rules on reducing the waste from packaging and sharing the cost of recycling through a levy on companies, another area where the Government has not yet set out the detail.
Mr Gallagher makes clear that the gloves will come off when necessary. He says: "I understand business's problems but my job is running an environment agency to protect and improve the environment. I will run my business as effectively as I can. I don't see a conflict. It helps to make business more profitable."
Mr Gallagher is enthusiastic about the extent to which voluntary investment can cut pollution and benefit industry at the same time.
He cites a scheme on the Aire & Calder navigation where pollution was cut 25 per cent through a cooperative waste management project involving 11 firms, which cut their own bills by pounds 3m at the same time.
But he warns that the solutions may not always be so comfortable. " There will be occasions where business and the environment do not get on. If there aren't cheap ways we may have to go the expensive way."
The role of the agency, the largest and most powerful of its kind in Europe, includes helping to implement the Government's deregulation initiative, a brief that should certainly placate business.
A key objective of the new agency is to provide companies with a "first- stop shop" that will make it easier to deal with complex regulations contained in a confusing morass of 29 separate pieces of legislation. There will be special help for small businesses.
Companies will also benefit from better appeal procedures that will allow factory managers to challenge the decisions of inspectors, Mr Gallagher says.
From 1 April, the agency will bring together the NRA, Her Majesty's Inspectorate of Pollution and 83 local government waste management authorities.
Some employers are concerned that the agency's senior management is dominated by the NRA, a body whose environmental mission could be costly for industry if it sets the tone for the whole agency.
Mr Gallagher boasts that the NRA has improved water quality by 25 per cent under his stewardship over the last three years.
In contrast, Her Majesty's Inspectorate of Pollution is staffed by specialist engineers and technicians, experienced in negotiating complex pollution control deals in discussions at senior level in larger companies. Their method of working has always taken cost into account when setting requirements.
The 1,200 local authority waste regulation officers around the country are an entirely different breed from the NRA and HMIP.
Inspectors deal regularly with fly-tippers and scrap merchants, and so potentially dangerous is the job that they have recently been sent on unarmed combat courses.
In London, a fly-tipper who dumped strychnine and caustic soda was jailed for 18 months. Even reputable companies such as Coalite have faced expensive prosecutions. But there is inconsistency between the different local authorities, and industry worries how they will react to national co-ordination from the new agency's headquarters in Bristol.
Mr Gallagher says he is well aware of the problem of merging the three cultures in an organisation with a budget of pounds 550m and 9,300 staff.
Where appropriate, he intends to shift the emphasis from prosecution to prevention. Mr Gallagher says: "I expect the NRA will do a lot more enforcement rather than prosecution."
The difficulty with relying on prosecution is that once an incident gets to court the damage is already done.
One of the most important changes in the new legislation is that powers to enforce pollution controls - to stop abuses while they are happening rather than prosecute after the event - will be extended from HMIP to the activities of the NRA.
Mr Gallagher sees the correct balance for the agency as being to move more slowly than some of the more aggressive environment groups demand but faster than industry would like.