Normally someone doing that is liable for harm if the dam or reservoir brakes no matter how careful the person is. ....So? Sue me.
Well, but that could be a basis for certain, valid restrictions because if a dam breaks, it can cause a lot of harm to others. The city/state has a legitimate interest I think in limiting or licensing in the context of (not just any activity of course, but) the abnormally dangerous activity of having a dam on your property because of it’s inherent danger to others.