Here's a more complicated look at how it works.
http://hyperphysics.phy-astr.gsu.edu...sion/isql.html

Yeah, "at the waters surface" since that's the distance we know. You could do it for a coral though. If he had a coral that was 15" away before he lowered the light 3.5" then...(15/11.5)squared means that light at that coral is 1.3 times as intense.