It's in Rupture Farms, near the start. You can hear the slig droping (but not splating) depending on which way he's walking when you pull the lever.
To get used to finding hidden areas, spend a few hours trying to find all 28 Muds in Rupture Farms. It takes a good lot of "where the heck are they", but allows you to see a lot of other secret areas in the other levels.
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