We're not talking about "100% of the river's flow".

We're talking about 1/2000 of the river's flow.

1/2000 is a meaningless number because you don't know if hypothetically 2000/2000 of the flow is already assigned to other uses then there is zero left over and someone is losing out.

Hydro power for example uses 100% of the flow so removing that water directly reduces power output of downstream power plants.

Water rights aren't terribly contentious in that part of Michigan. The Muskegon is tiny and the sort of river hydro is being removed from.

http://glpf.org/funded-projects/muskegon-river-dam-removal/

The Muskegon feeds into the Lake Michigan which is thus upstream of Niagara Falls and a lot of hydro power generation. Granted we are not talking about a huge amount of energy, but it is one of many costs that are not being compensated.

Compare the amount of water they're taking out per day (576,000 gallons) to amount of water that goes over Niagara Falls in a day (about 54,345,600,000 gallons).

"Not a huge amount of energy", indeed.

In the short term perhaps, but it's not going to take that long to hit 10,000$ worth of energy and again that's just one of many uses of this water which as far as I can tell is uncompensated.