peter wrote:
When I stand right next to the water heater, I smell a little bit of
gas at certain height. If I move to 1 foot away, I no longer can
smell it.

I found the problem. There are two gas tubes coming out of the temperature
control box, a big one supplies the burner, and a small one supplies the
pilot light:

http://www.smugmug.com/gallery/990857/1/82458064

The installer did not use any joint compound on these tube fittings, so they
leak a little. Instead, he overtightened the large nut, but that still
doesn't work.

I bought some joint compound from HD (says ok to use on gas pipe) and put
them in the threads. That's the white stuff you see in the threads. This
eliminates almost all the gas odor. I no longer smell gas when standing next
to the water heater. I still smell a faint odor at the bottom of the control
box.

I think a little bit of gas is leaking out between the nut and the tubes.
How do you seal this? Yes, I know I can call the gas company, or call the
installer to fix it. That would be the last resort. I want to learn
something in the process if I could.