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Your timing for this question is excellent. I just finished IWD/HOW once again within the last 24 hours. There's a Sahaugin prince (or lord or something) who's carrying the key very nearby. I'm guessing that you went straight up to the baby dragon preservation thingie from the arch. You need to clear out the entire area. Eventually the Sahaugin prince and his gang will come gunning for you.
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