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Stiles, I think you're thinking of the electric side. That element will fry if the electric element switch is turned on with no water in the tank. The propane side just fires off the gas and would then heat an empty tank, which also is not a good thing but maybe not instantaneously disasterous like the electric side.
Bill, in case you're not already aware, the electric element switch is on the water heater facing behind that outside door. It's often kind of hidden behind some other things.
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