By SpaceX's logic any factory would be able to dump toxic water into the ground as long as they sourced the input water from the city's drinking water distribution system.
This is probably the most basic environmental and health and safety law, namely to prevent businesses from dumping toxins into the water; trying to frame this as government overreach and knick-knack regulations is seriously depraved and it would be banana-republic-esque if he actually succeeds in ignoring or removing these rules.