if you want to delete it without getting rid of a bunch of terrain it turns out (and this is really really silly on the game's part, but) the control for deleting water happens to be the same as the control to cancel object placement and pan the camera. if you rebind one of these controls (in a keyboard/mouse configuration anyway), it changes all of them.
I encountered this problem because i swapped pan camera to middle click and turn camera to right click, because those are more intuitive for me. Figured it out by checking the controls and looking very, very carefully and just. A hunch, i guess. Anyway hopefully that works, if that doesn't solve the problem for someone else i can't help further