I doubt that is why. The most probable reason why is that it is the simple truth.
If the fence was simply about security and not a land grab it would have been built on Israeli land or right on the border.
As for water the Jordan Valley is highly illustrative. The process of ethnic cleansing has reduced the Arab population from over 3000,000 to less then 60,00.There are many parts to the strategy. The theft and deprivation of water is one of the most effective. There are many examples of water running right under Palestinian houses being diverted to settlements at the point of a tank turret.
Jonathancohen makes an unanswerable point. Even settlements the Israeli govt and courts regard as illegal never see the bucket of a bulldozer. At the same time if an Arab in the jordan valley erects a makeshift sun shelter or a temporary packing shed in his field it is demolished within 24 hours. This harrassment of course is another part of the ethnic cleansing strategy.
Tell me again Israel isn't an apartheid state.