That looks like a water drain, but look for a check valve either at the compressor outlet before the drain or after the drain. If before the drain then it would not release the pressure. But if after the drain it should allow the drain to release the pressure and the check should hold the system air. That way it would allow the compressor to start at ambient pressure.
my 2004 has a solenoid valve right after the compressor that acts as a check valve and bleeds a small amount of air off when the compressor shuts off, the way i got around the compressor not starting all the time was too loosen the air fitting on the compressor off a very small amount so the head preasure would leak off. The solenoid valve would stop the rest of the system from leaking
Does the water separator function releasing the water when the compressor stops? Per Forest, there should be a check valve after the water separator and before the tank. I do not see the check valve in the photo.
on my 02 there is a 12v solenoid valve that is on the bottom of the water separator. when the compressor shuts off, 12v is applied to the valve that when it opens it bleeds pressure off the head by blowing any water in the bowl out through a hose on the bottom and at the same time that bleeds the head pressure off. these compressors are absolutely not made to start up with that kind of pressure on them.
see the picture below.
btw, your water separator looks like it has been replaced to me. looks pretty new.
tom
I can't tell from the photo. My speciality is redneck diagnostics. If you stand near the compressor when it's running, do you hear any hiss or air escaping when it first turns off? If you do, you have some sort of mechanism for releasing the air. If you don't then you may not have such a device.