96 chey vortec has water in oil

It could be due to a blown head gasket, if the engine ever overheated, or due to ethanol in the gasoline. In winter, particularly with a lot of short trips, E10 gasoline can significantly increase the amount of moisture in the gas tank and engine oil. It's such a big problem that GF5 oils are starting to come to market to protect engines from water and acids associated with ethanol in the gasoline.