The thread seal on the pipe has rusted. To stop the leak, remove the pipe by unscrewing it. Clean up the threads with a wire brush. Wrap three layers of teflon sealing tape on the pipe threads, and screw the pipe back into the water heater. Don't over tighten the pipe, as the tape will seal the threads. That seal the leak. If the pipe threads are too rusted to reseal, replace the pipe, using the teflon tape.
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I am draining the heater now and will try your suggestion after it is all out.
The installer put some kind of sealer on the threads plus it is copper piping going to plastic.
Also could the rubber gasket on the outside of the discharge be cracked or broken?