Well, can't say that I am suprised by this scenario - just didn't even think about it happening!
Makes sense though!
These testers use the Capacitive charge that is established on any circuit when the conductors are charged.
Normally, there's an equal level of Potential between the conductors and grounded components, so the Capacitive charges are built up to that level. Since they exist between an insulated conductor and air, these two things become the Dielectric between them.
Even an open circuit [one that's connected to the power supply, but has no connected loads] will have this preliminary charge created on it.
Since the water contains metallic particles within it, they act as conductive paths, which draw charged currents better than the original setups through the Dielectrics, so the Capacitive Charge Potentials exist highest across these points of current flows.
Have you tried this test with a certain level of current flowing through the extension cord also?? The results might be different - you might get a reading real close to the ungrounded conductor with some level of current flowing through it.
Glad that you posted this message to the group!! It could very well save someone's life!!!
I personally do not rely on any other testing than direct contact meters for voltage. Even then I judge the circuit in question as if it was still live.
Have seen many others in the trade use and even rely on these proximity effect type circuit testers. They're great for troubleshooting, but they should not be the only means used for testing the state of circuits.
Keep us informed to the final outcome!!