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No, it can't. This method relies on an environment map (aka skybox), this mean that object must be small compared to the environment. Water itself is a part of environment, how would you render a skybox for it? Water reflections are implemented by other methods (a second pass with a mirrored camera, or a screen-space reflections).
I see, that does make sense, thanks for answering that question. I guess it would have to be a separate shader then, which makes more sense anyway considering they're two very different things.
Also, I agree with Canleskis - so great to have these frequent updates (three in a week is pretty awesome), thanks SpaceEngineer!