Are exterior flues like this allowed? It is above the roof by 2 feet it appears. I’ve been told this can prevent proper drafting. We do have cold winters here. This was water heater, furnace flue was same opposite side.
The b-vent (assuming it’s what they used) should be enclosed in a chase to protect it against the cold. There is a concern about poor draft and condensation forming with what you have in the picture, especially with a typical low BTU (30-45k) residential water heater. I would double check with local building department if they approve of such installations in your area. The only metal vent I’m okay with on the outside in a cold climate is L vent that receives much higher flue gasses or that of a solid fuel appliance (class A vent).
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This one I couldn’t see any labeling on but the furnace was a type B vent on the other side the same way. The strapping seemed good and both were 2 feet above the roof. I see this fairly often so it may be allowed but I thought that poor drafting was a possibility.
You didn’t see any issues with/at the water heater as a result of this? What size was the vent piping and the water heater? Yes, it’s allowed when sized and installed properly. That’s a really long run for one appliance. I seriously doubt a water heater could keep that piping warm enough for an effective draft.
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I’m not sure I didn’t measure it but the water heater was new and no issues visible.
where are You located, ?
Probably recently replaced because the old one was visually suffering from draft problems 
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That’s exactly what I was thinking as well
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West Virginia Kentucky-Ohio tri state
Unfortunately that’s a very real possibility. Furnace was a few years old with orange flame