drew,
in ASCE 7-98, section 6.5.6.1 it says: "..... For any ginven wind direction, the exposure in which a specific building or other structure is sited shall be assessed as being one of the following categories:"
What the phrase 'exposure in which the buliding is sited' means is, the terrain features upwind of the site, for the distances noted in the definition for each exposure category. In the case of exposure D, this means, open water fo ra distance of atleast 1 mi upwind of the site.
The effects of that water are not limited to just heights near the sea level, rather they extend up to relatively large heights. This is best explained by an example of exposure B. Note that the Code says that it is to be used when the upwind terrain for exposure B (e.g. obstructions the size of single-family dwellings) prevails for at least 1500' upwind of the site. The rationale for this requirement is that wind, blowing over a smoother terrain than expoure B suddenly reaches a place where the (rougher) surface of exposure B prevails, then the wind velocity at the ground level is reduced. As the wind continues farther, over more terrain with the exposure B roughness characteristic, then the wind at the surface keeps slowing down more and more, and at the same time, wind at higher levels continues to be slowed down as well. Eventually, the velocity profile reaches an equilibrium, and does not change anymore. (that is, as long as no other terrain changes occur.) The 1500' upwind min specified was deemed to be enough for this equilibrium condition to be achieved. There is some disagreement on whether this 1500' limit is correct, look at ASCE 7-02, you'll find these have changed a little. But since you have ASCE 7-98 to use, that issue is moot.
For your case, if there is at least 1 mile of open water, then the effects of that water on the wind profile have reached this equilibrium, and have already reached the top of the windspeed profile. So if you use Exposure D, you will be using the code-defined wind profile that corresponds to this condition.
A similar description could be used for wind over water, that suddenly encounters a change to a rougher, Exposure C type terrain. But the 98 code does not indicate a limit in feet, so I tried to use the C-B terrain change as my example.
Is this clear, or have I just confused everyone?