He was one of seven people who got on to a floating jetty at Burwain Sailing Club, Foulridge, two miles (3.2km) north of Colne.
His body was found at about 05:40 BST following a search of the water by police divers.
Lancashire Police said the alarm had been raised just after 19:30 on Sunday.
The other six people who had been with the teenager managed to scramble to safety with one taken by ambulance to hospital for a check-up.
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When dog walker Melanie Goodship noticed a group of boys on a raft at the opposite side of a reservoir, she could see some sort of drama was unfolding.
Only later did she realise the heartbreaking truth – that she had witnessed the moment her 17-year-old son had drowned.
Yesterday the devastated mother told how she was walking her dogs with her partner on Sunday, one of the hottest days of the year so far, when she spotted the boys in the distance.
The 40-year-old civil servant said she hoped his death would act as a warning to youngsters who think they are ‘invincible’ not to cool off in open water.
Speaking from her home in Colne, she told how she had left James to spend the sunny evening with his friends. After watching the ‘commotion unfold’, she tried to phone him but received no answer.
Unknown to her, he had disappeared underwater after trying to swim from the raft to the shore. Police divers recovered his body ten hours later after searching through the night.
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Water Safety Map are heartbroken to hear about this mother’s loss. Please take precautions wherever you can before entering water and if you aren’t 100% comfortable, do not take the plunge.
“foulridge reservoir” by www.flickr.com/photos/atoach, license: creativecommons.org/licenses/by/2.0