Allowing large industrial water users “piggyback” onto municipal permits instead of getting their own decreases transparency and can shift liability to local communities. Hyperscale data centers are the latest industry to try this maneuver. As Elko New Market shows, the impacts don’t go away—someone else just gets stuck paying the price.
A Cautionary Tale from Elko New Market
In 2021, the City of Elko New Market was approached with a proposal for a new industrial facility: a Niagara Bottling plant that would draw roughly 310 million gallons of water per year from the Prairie du Chien-Jordan aquifer. The project would more than double the city’s previous groundwater extraction rate.
Residents pushed back. The Prairie du Chien-Jordan aquifer supplies not only Elko New Market but many nearby households that rely on private wells. Concerned about the effects on groundwater, residents petitioned for an Environmental Assessment Worksheet (EAW) in December 2022.
The Minnesota Department of Natural Resources (DNR) denied the request in February 2023, determining that environmental review was not required. Part of the agency’s reasoning was that it would “look closely” at the impacts of the project during its review of Elko New Market’s amended water appropriation permit.
That permit amendment was substantial. In 2022, the city asked DNR to increase its groundwater appropriation authorization from 135 million gallons to 365 million gallons per year—primarily to meet Niagara’s water needs.
As part of that review, DNR required a pump test of the aquifer. Soon after testing began, residents in Elko New Market and Eureka Township reported “dirty gray water, thick with sediment” coming from their taps. Some homeowners had to install expensive filtration systems to make their water usable.
In response, DNR added conditions to the city’s amended permit, requiring a response plan and ongoing monitoring of water quality impacts.
Today, the Niagara facility is operating. But many residents are still asking a simple question: Why wasn’t Niagara itself required to hold the permit for the water it uses?
The answer lies in a practice known as permit piggybacking.
Permit Piggybacking = Liability Loophole
Instead of applying for its own water appropriation permit, an industrial facility, like Niagara, can use a city’s existing permit. The city requests an amendment to increase water withdrawals, and the facility receives the water it needs through the city’s authorization.
DNR still reviews the permit amendment, but the permit belongs to the city—not the company. That means the city is responsible for complying with permit conditions and addressing any problems that arise.
When impacts occur, local governments and taxpayers can end up carrying the burden, while the industrial facility that created the demand avoids direct responsibility.
In Elko New Market, the city—not Niagara—was responsible for responding to well issues and monitoring groundwater impacts. Meanwhile, many residents received little or no compensation for the filtration systems they needed to install. Some continue to pursue legal remedies.
Hyperscale Data Centers looking for Piggyback Rides
This isn’t just about a bottling plant.
Across Minnesota, communities are being asked to consider hyperscale data centers, facilities that can require enormous volumes of water, often drawn from local water resources. In other states, residents living near data centers have reported problems similar to those seen in Elko New Market, including sediment-filled water and, in some cases, dry taps.
Minnesota lawmakers took a modest step forward in 2025 by allowing DNR to request preapplication information about data center water use. But broader efforts—including proposals to end permit piggybacking—did not pass.
The lesson from Elko New Market is straightforward. If a company needs vast amounts of water for its operations, it should be directly accountable for the impacts of that use.
Requiring industrial facilities—including hyperscale data centers—to obtain their own water appropriation permits would close the piggybacking loophole, make responsibility clear, and help ensure that residents and local governments aren’t left holding the bill when something goes wrong. Minnesota’s water is too important to manage any other way.
Based on “No More Piggyback Rides: The Loophole Allowing Industrial Facilities to Avoid State Review of Extractive Water Use Activities“ by Alexander Anthony, Legal Intern, CURE
