LOWVILLE, N.Y.—When the Philadelphia Cream Cheese factory here started making string cheese, too, in the summer of 2017, it brought scores of new jobs to town.

It also boosted the facility’s water usage by hundreds of thousands of gallons on some days—eventually bringing its overall demand to more than 80% of the town’s typical daily supply. The draw sucked the municipality’s reservoir to dangerously low levels. Town officials, caught off guard, banned the village’s 3,500 residents from washing cars and watering lawns.

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