If the government "owns" a bunch of lakes and rivers, and someone else is polluting those lakes and rivers, then the government should sue them for damages (cost of cleanup) in addition to ordering them to stop doing it. After all, that's exactly what I would demand if I owned a swimming pool and someone kept dumping trash into it. Simply telling them to stop is not enough. They should pay for the cleanup as well.

So yes, I agree that this is a failure of government. The government should be a lot more zealous in protecting the value of all the natural resources that it claims for itself, perhaps even more so than private landowners.