Another by product of natural gas combustion; weird looking minerals. A big cold chimney does not invite good drafting, it does invite condensation though. In fact it looks like this one never drafted from day one!

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...and we have a winner!  Best in Crusty Water Heater category...

Is that really just condensation and not a tiny leak?  How's condensation forming on the draft hood?  

From inside further up the flue, is my guess. The main products of the combustion of natural gas are carbon dioxide and water. If that water heater was spending most of it's life backdrafting, the flue gas may have been getting a cold shot in the little distance it did travel up. This would cause it to condensate and "rain" back downward, bringing with it crud from inside of the chimney.

Now watch somebody come along and debunk my theory! Oh well this is how we learn if that be the case. Love hurts!

(Where's that whistling smile at?) If I didn't know better & yes I could be mistaken but it looks like someone used that "stop water leak tape" at least once if not twice & never really got it right

Doesn't matter Guy, you still get best in class...

LOL, yes indeed... well for now at least

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