Black soot visible on top of your water heater? You've got a problem. A backdraft problem. Backdrafting is the flow of flue gases or exhaust in the wrong direction. Backdrafting can result in the release of invisible and odorless toxic byproducts of combustion into the living space. Excessive exposure can have serious health consequences, even death. Shut it down immediately and have it evaluated by a licensed plumber or HVAC technican.