From Populous Wiki

Water in populous the beginning is certain death for any unit which falls into it. It is possible to over come this obstacle by by using spells such as Landbridge or Flatten which if casted properly will create a patch of land over the water through which units can safely pass through. Water could also be crossed with the help of Balloons and Boats. Water could also be used to the players advantage by throwing units into it's deadly depths with spells like Blast and Tornado. Also, the lava will create land when in contact with water (eg.: casting a volcano in water will create land around the casting point). Water is usually blue but in some levels it's orange or red, but it still acts as water and not lava (only the colour changes). The best spell to sink land is using flatten on water or erode on terrain nearby water. Damaged land (ex.: by lava) is not sinkable until the terrain gets fertile again.