Two flues, a fireplace and water heater. Is there something that makes you think that the water heater is venting into the fireplace flue? The clean out is generally for the fireplace only and should be kept closed to permit proper drafting for what ever is using using the flue.

In any event, any unlined flue needs evaluation.

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Eric Barker
Moraine Woods Consulting, Inc.
Barrington, IL