Trying some decay distance settings and Volumetrics. As you can see, the green line is back, which is due to the still visible edge of the water plane.
It did lead me to an interesting conclusion about depth transparency in water shaded planes:
As long as you have an outside edge and an inside edge (also called double-sided on some objects), the sky is rendered through water no mater what settings. If you have only the outside edge (and thus a virtual endless body of water) the sky is rendered black unless the the decay distance is roughly the same size as the background object (default size: 2e+008). Any value above that will suffice.
So in this case I would have to increase the size of the water plane, or add the sides to the painted mask to displace them down as much as the 'canyon'.
I have to tweak the algae surface layer a lot more, and that ship is still out there somewhere....