L.S. Starrett Co. v. Federal Energy Regulatory Commission

United States Court of Appeals
For the First Circuit

No. 10-1470

L.S. STARRETT COMPANY,

Petitioner, Appellant,

v.

FEDERAL ENERGY REGULATORY COMMISSION,

Respondent, Appellee.

PETITION FOR REVIEW OF ORDERS FROM THE
FEDERAL ENERGY REGULATORY COMMISSION

Before

Torruella, Stahl, and Howard,
Circuit Judges.

Joseph M. Hamilton, with whom David K. McCay and Mirick,
O'Connell, DeMallie & Lougee, LLP, were on brief for appellant.
Beth Guralnick Pacella, Senior Attorney, with whom Thomas R.
Sheets, General Counsel, and Robert H. Solomon, Solicitor, was on
brief for appellee.

June 15, 2011
 TORRUELLA, Circuit Judge. L.S. Starrett Company

("Starrett") appeals from two orders by the Federal Energy

Regulatory Commission ("FERC" or "Commission"). The Commission

concluded that Starrett would be required to seek licensing

pursuant to Section 23(b) of the Federal Power Act ("FPA")1 if it

proceeded with certain proposed changes to its Crescent Street Dam

Project ("the Project"), a hydroelectric generating facility.

Under Section 23(b), Starrett must seek licensing if (1) its

facility is located on a stream over which Congress has Commerce

1
Section 23(b), codified at 16 U.S.C. § 817(1), governs the
licensing of dams and other project works on non-navigable waters
and provides, in relevant part, as follows:

Any person, association, corporation, State, or
municipality intending to construct a dam or other
project works across, along, over, or in any stream or
part thereof, other than those defined in this chapter as
navigable waters, and over which Congress has
jurisdiction under its authority to regulate commerce
with foreign nations and among the several States shall
before such construction file declaration of such
intention with the Commission, whereupon the Commission
shall cause immediate investigation of such proposed
construction to be made, and if upon investigation it
shall find that the interests of interstate or foreign
commerce would be affected by such proposed construction,
such person, association, corporation, State, or
municipality shall not construct, maintain, or operate
such dam or other project works until it shall have
applied for and shall have received a license under the
provisions of this chapter. If the Commission shall not
so find, and if no public lands or reservations are
affected, permission is granted to construct such dam or
other project works in such stream upon compliance with
State laws.

16 U.S.C. § 817(1).

-2-
Clause jurisdiction, (2) its proposed changes constitute "post-1935

construction" within the meaning of the FPA, and (3) the proposed

modifications will affect the interests of interstate or foreign

commerce. See 16 U.S.C. § 817(1). For the reasons below, we

conclude that we have no choice2 but to affirm.

I. Background

The Project is located on the non-navigable Millers River

in Athol, Massachusetts, on property that belongs to Starrett. It

consists of (1) an 87-acre-foot reservoir; (2) a 20-foot-high, 127-

foot-long concrete gravity dam; (3) two powerhouses, one at each

end of the dam; and (4) various appurtenant facilities. The

turbine generator in the powerhouse on the right side of the dam

("the right-side generator") currently has an installed capacity3

2
Given the state of the law as herein expounded, we are required
to affirm the exercise of the FERC's jurisdiction over the dam in
question. We do so without much enthusiasm, however. It may not
be coincidental that Starrett, which was established in 1880 and is
the principal employer in Athol, Massachusetts, is the last of its
kind remaining within our borders. Its attempt to keep its
manufacturing costs down to allow it to remain competitive with
foreign industry has unfortunately come to naught in the face of
bureaucratic outreach. Cf. United States v. Johnson, 437 F.3d 157,
159 (1st Cir.), withdrawn and vacated, 467 F.3d 56 (1st Cir. 2006);
Michele Morgan Bolton, Cranberry Lawsuit at an End, Boston Globe,
May 26, 2011, http://www.boston.com/news/local/articles/2011/05/
26/21_year_legal_battle_over_cranberry_bogs_in_carver_ends/?page
=full.
3
Starrett explains that "installed capacity," or "nameplate
capacity," is the maximum potential generating capacity of a
turbine generator. "Actual capacity," on the other hand, is the
measured capacity upon installation, which is affected by various
site conditions.

-3-
of 250 kW and an actual capacity of 80 kW. The turbine generator

in the powerhouse on the dam's left side ("the left-side

generator") had an installed and actual capacity of 112 kW until

2006, when it failed. Prior to the failure of the left-side

generator, the combined installed capacity for the Project was 362

kW. This installed capacity was memorialized in a 1992 FERC order,

which concluded that the Project did not require FERC licensing

because there had been no post-1935 construction. See L.S.

Starrett Co., 61 FERC ¶ 62,200 (1992) ("Starrett I"). The

facility, however, could only actually produce 192 kW of

electricity, even prior to the failure of the left-side generator,

because of the physical limitations of the site.

After the left-side generator failed, Starrett began to

investigate its options for replacement or repair. In early 2007,

Starrett retained GZA GeoEnvironmental, Inc. ("GZA"), which

prepared a feasibility study that examined the financial costs and

benefits of repairing the left-side generator. The study concluded

that it would be cost effective to use hydropower generated by a

new left-side turbine generator ("the new left-side generator").

The new left-side generator's installed and actual capacity would

be 198 kW. Installing the new left-side generator would increase

the Project's combined installed capacity approximately 24%, to 448

kW, and its total actual capacity approximately 45%, to 278 kW.

The total actual capacity of the Project, however, would remain

-4-
less than the previous total installed capacity (i.e., 362 kW, the

capacity documented in Starrett I), a point that Starrett now

emphasizes.

In September 2008, believing that it did not require FERC

licensing in order to proceed with its proposed changes,4 Starrett

ordered a new cross-flow turbine generator5 and began the

4
Starrett believed that it was not required to obtain FERC
licensing because of certain conversations that GZA had with
Michael Spencer, a FERC employee. According to Starrett, on
August 9, 2007, GZA contacted the Commission's small hydropower
hotline, and Spencer informed GZA that repairs to the Project would
not trigger FERC licensing jurisdiction so long as the total
capacity of the Project would not exceed the total listed in
Starrett I (i.e., 362 kW) and the height of the dam was not being
increased.

Spencer called GZA back the following day regarding an
outstanding question about the need to notify the Commission prior
to starting the repair and rehabilitation project. Spencer said
that Starrett did not need to notify the Commission so long as
neither the dam nor the powerhouse was to be enlarged and so long
as the Project's total capacity would not exceed the capacity
listed in Starrett I.

The Commission, however, notes that the opinions of staff do
not bind the Commission, and Starrett does not argue otherwise.
Furthermore, the Commission pointed out in its order denying
rehearing, L.S. Starrett Co., 130 FERC ¶ 61,112, at 61,521 n.10
(2010), that because Spencer's "advice to Starrett [was] not
memorialized in the written record of this proceeding, . . . [it
could not] evaluate whether Starrett's conclusion . . . represented
a reasonable reliance on staff advice." Thus, we only recount the
details of GZA's conversations with Spencer to provide context for
Starrett's actions.
5
According to a GZA employee, a cross-flow turbine was chosen
because of its efficiency over a wide range of flows, and because
of certain self-cleaning characteristics that are helpful when the
river is carrying a heavy leaf load. The cross-flow turbine has
had a good performance record in New England.

-5-
preparatory work for its installation inside the left powerhouse.

According to Starrett, replacing the left-side generator required

the following: (1) lowering the floor inside the powerhouse by

approximately 5 feet;6 (2)(a) improving the plunge pool7 within the

building footprint by mounting the draft tube8 below the turbine

generator, and (b) widening the outlet portal from under the

powerhouse to the river from approximately 4 to 17 feet, both in

order to improve outlet hydraulics and project efficiency; (3)

excavating approximately 10 cubic yards of bedrock from the bottom

of the Millers River, again in order to improve outlet hydraulics

and project efficiency; and (4) installing a transition piece to

connect the existing penstock9 to the new turbine.

6
According to Starrett, it planned to lower the powerhouse floor
in order to "reduce the amount of suction head that the turbine
experiences and prevent cavitation." "Cavitation" is "the pitting
of a solid surface such as metal or concrete." McGraw-Hill
Dictionary of Engineering 88 (Sybil P. Parker ed., 1997).
7
A "plunge pool" serves to dissipate hydraulic energy before the
water that passed through a turbine rejoins a river. See Stefano
Pagliara et al., Plunge Pool Scour in Prototype and Laboratory, in
Hydraulics of Dams and River Structures: Proceedings of the
International Conference on Hydraulics of Dams and River
Structures, 26-28 April 2004, Tehran, Iran 165, 165 (Farhad
Yazdandoost & Jalal Attari eds., 2004).
8
A "draft tube" is a tube through which water travels after it
passes through the turbine and before it rejoins the river. See
Anand Prakash, Water Resources Engineering: Handbook of Essential
Methods and Design 271 (2004).
9
A "penstock" is the pipe in which water travels toward the
turbine. See Prakash, supra note 8, at 270.

-6-
 In March 2009, as Starrett was working to replace its

left-side generator, the U.S. Fish and Wildlife Service ("USF&WS")

wrote to the Commission to request that the Commission investigate

the work occurring at the Project. The USF&WS had become aware

that Starrett planned to install higher capacity machinery, and was

concerned that the increased capacity at the Project would

negatively impact migratory fish.

On May 4, 2009, the Commission notified Starrett that its

proposed work would increase the capacity of the Project and would

be considered post-1935 construction, thus triggering the

Commission's licensing jurisdiction. The Commission asked Starrett

to submit various details about its dam and the proposed changes.

Starrett provided the requested details but maintained that its

proposed work would not lead to an increase in capacity above the

362 kW total memorialized in Starrett I because only the installed

capacity, not the actual capacity, would be over 362 kW. After

reviewing these materials, the Commission issued an order finding

that licensing of the Project was required. See L.S. Starrett Co.,

129 FERC ¶ 62,053 (2009) ("Starrett II"). Following Starrett's

request for rehearing, the Commission issued an order denying

rehearing. See L.S. Starrett Co., 130 FERC ¶ 61,112 (2010)

("Starrett III").

-7-
 II. Discussion

We are now required to review the Commission's

determination that the Project fell within its jurisdiction under

Section 23(b) of the FPA. Under that section, a hydroelectric

project "without a valid pre-1920 permit" is subject to the

Commission's licensing jurisdiction if it

(1) is located on a navigable water of the
United States;
(2) occupies lands of the United States;
(3) utilizes surplus water or water power
from a government dam or
(4) [a] is located on a stream over which
Congress has Commerce Clause
jurisdiction, [b] is constructed or
modified on or after August 26, 1935,
and [c] affects the interests of
interstate or foreign commerce.

Starrett II, 129 FERC ¶ 62,053, at 64,160; see also 16 U.S.C.

§ 817(1). The Commission concluded that Starrett's dam was subject

to licensing under the fourth criterion. We lay out the governing

standard of review, and then address each of the three prongs of

the fourth criterion.

A. Standard of Review

Reviewing the Commission's orders under the

Administrative Procedures Act, we "must reverse an agency action

that is 'arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law.'" Knott v. FERC, 386 F.3d

368, 372 (1st Cir. 2004) (quoting Wis. Valley Improvement Co. v.

FERC, 236 F.3d 738, 742 (D.C. Cir. 2001)); see also 5 U.S.C. § 706.

-8-
 "We review FERC's findings of fact for 'substantial

evidence,' and if so supported, such findings are conclusive."

Knott, 386 F.3d at 371 (quoting Thomas Hodgson & Sons v. FERC, 49

F.3d 822, 825 (1st Cir. 1995)) (internal quotation marks omitted).

"We 'defer to the agency's expertise . . . so long as its decision

is supported by "substantial evidence" in the record and reached by

"reasoned decisionmaking," including an examination of the relevant

data and a reasoned explanation supported by a stated connection

between the facts found and the choice made.'" Id. (quoting Ne.

Utils. Serv. Co. v. FERC, 993 F.2d 937, 944 (1st Cir. 1993)

(citation omitted)).

"'Pure' legal errors require no deference to agency

expertise, and are reviewed de novo." Id. at 372 (quoting Ne.

Utils. Serv. Co., 993 F.2d at 944) (internal quotation marks

omitted). "Questions involving an interpretation of the FPA

involve a de novo determination by the court of congressional

intent; if that intent is ambiguous, FERC's conclusion will only be

rejected if it is unreasonable." Id. (quoting Ne. Utils. Serv.

Co., 993 F.2d at 944) (internal quotation marks omitted). When

determining congressional intent, courts must first ask whether

Congress has "directly addressed the precise question at issue."

Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S.

837, 843 (1984); see also Massachusetts v. Sebelius, 638 F.3d 24,

30 (1st Cir. 2011). If Congress has indeed addressed the "precise

-9-
question at issue" and "the intent of Congress is clear, that is

the end of the matter; for the court, as well as the agency, must

give effect to the unambiguously expressed intent of Congress."

Chevron, 467 U.S. at 842-43.

B. A "Commerce Clause Stream"

Section 23(b) requires us to ask whether L.S. Starrett's

dam is on "a stream over which Congress has Commerce Clause

jurisdiction," see 16 U.S.C. § 817(1), i.e., a "Commerce Clause

stream." The Commission concluded, and L.S. Starrett does not

dispute on appeal, that the Millers River is a "Commerce Clause

stream." See Starrett III, 130 FERC ¶ 61,112, at 61,521 n.6. We

agree with the Commission's assessment because "the headwaters and

tributaries of navigable waters are [C]ommerce [C]lause streams,"

id. (citing Fed. Power Comm'n v. Union Elec. Co., 381 U.S. 90, 94-

96 (1965)), and the Millers River is a tributary of the Connecticut

River, which is navigable, see Starrett II, 129 FERC ¶ 62,053, at

64,161 n.6.

C. Post-1935 "Construction"

In 1935, Congress amended the FPA "to require that

persons 'intending to construct a dam or other project works' on

nonnavigable streams obtain a license." Thomas Hodgson, 49 F.3d

822, 826 (second emphasis added) (quoting 16 U.S.C. § 817(1)); see

also Public Utility Act of 1935, ch. 687, sec. 210, § 23(b), 49

Stat. 803, 846 (1935). Thus, if post-1935 work constitutes

-10-
"construction" within the meaning of the FPA and the other two

prongs of Section 23(b) are met, a facility will be subject to the

Commission's licensing jurisdiction.

The Commission argues that, because Congress has not

spoken on the precise question at issue here -- which it frames as

"what constitutes 'construction'"10 -- we need only determine if its

interpretation of Section 23(b) was unreasonable. See Section

II.A., supra; Chevron, 467 U.S. at 844 (explaining that when

Congress implicitly delegates a question to an administrative

agency, "a court may not substitute its own construction of a

statutory provision for a reasonable interpretation made by the

administrator of an agency"). The Commission contends that it was

reasonable for it to determine that Starrett's proposed work would

constitute post-1935 construction because the work would increase

the Project's installed capacity. In addition, it notes that the

Commission also found that the installation of the new generator

would increase actual capacity, another indication that the

proposed work constituted post-1935 construction. Alternatively,

the Commission argues that it was reasonable for it to conclude

10
The Commission points out that although the statute defines
other terms, it does not define "construction" or otherwise clarify
the meaning of the term.

-11-
that the proposal would result in post-1935 construction because it

would increase the Project's "head."11

Starrett, on the other hand, argues that Congress has

addressed the precise question at issue here by limiting the

Commission's jurisdiction to post-1935 "construction." Starrett

contends that because the proposed work was merely a repair, and

would not increase actual capacity beyond the 1992 installed

capacity, it was not post-1935 construction.

1. Standard of Review

We must first determine whether Congress unambiguously

expressed an intent about the precise question at issue here. If

we conclude that Congress did unambiguously express such an intent,

our analysis ends there. If we conclude that Congress did not

unambiguously express an intent on the precise question here, we

must analyze whether the Commission's conclusion that the work here

constituted jurisdictional construction was unreasonable.

"In determining congressional intent, we employ the

traditional tools of statutory construction, including a

consideration of the language, structure, purpose, and history of

the statute." In re Hill, 562 F.3d 29, 34 (1st Cir. 2009) (quoting

11
"Head" can refer to a number of different things. According to
Starrett's brief, "gross head" is the difference between the water
surface elevation immediately upstream of the dam and the water
elevation immediately downstream of the dam. "Net head," on the
other hand, is the amount of gross head that the turbine can
effectively use.

-12-
McKenna v. First Horizon Home Loan Corp., 475 F.3d 418, 423 (1st

Cir. 2007)) (internal quotation marks omitted). Our research has

not uncovered, and the parties do not call to our attention, any

legislative history that sheds light on where Congress would draw

the line between jurisdictional construction and other work. Where

"[t]here is no legislative history that illuminates the purpose" of

a particular statutory term, we "are left with language, structure,

and evident purpose." Id.; see also Robinson v. Shell Oil Co., 519

U.S. 337, 341 (1997) ("The plainness or ambiguity of statutory

language is determined by reference to the language itself, the

specific context in which that language is used, and the broader

context of the statute as a whole."); Sebelius, 638 F.3d at 31 ("To

determine 'whether a statute exhibits Chevron-type ambiguity

. . . courts look at both the most natural reading of the language

and the consistency of the "interpretive clues" Congress

provided.'" (quoting Succar v. Ashcroft, 394 F.3d 8, 22 (1st Cir.

2005) (quoting Gen. Dynamics Land Sys., Inc. v. Cline, 540 U.S.

581, 586 (2004)))).

a. Language of the Statute

"We begin with the actual language of the statute, and

ask whether . . . ["construction"] has a 'plain and unambiguous

meaning with regard to the particular dispute in [this] case.'"

Pérez-Olivo v. Chávez, 394 F.3d 45, 49 (1st Cir. 2005) (second

alteration in original) (quoting Duckworth v. Pratt & Whitney,

-13-
Inc., 152 F.3d 1, 5 (1st Cir. 1998) (quoting Robinson 519 U.S. at

340)). When Congress chooses "not to define [a] phrase . . . in

the statute itself, we can look to the dictionary for clarification

of the plain meaning of the words selected by Congress." Id.

Black's Law Dictionary defines "construction" as "[t]he

act of building by combining or arranging parts or elements."

Black's Law Dictionary 355 (9th ed. 2009). Another dictionary

defines "construction" as "the act of putting parts together to

form a complete integrated object," and the verb "construct" as "to

form, make, or create by combining parts or elements." Webster's

Third New International Dictionary (Philip Babcock Gove et al.

eds., 1971). These definitions do not suggest that "construction"

has "a plain and unambiguous meaning with regard to the particular

dispute" here. Duckworth, 152 F.3d at 5 (quoting Robinson, 519

U.S. at 340). Rather, "construction" "is a chameleon, capable of

taking on different meanings, and shades of meaning, depending on

the subject matter and the circumstances of each particular usage."

Strickland v. Comm'r, Me. Dep't of Human Servs., 48 F.3d 12, 19

(1st Cir. 1995).

b. Statute as a Whole

If we conclude that the "plain language of the statute,

standing alone, is ambiguous," the next step is to "ask whether

this ambiguity can be resolved by looking to the 'specific context

in which [the] language is used, and the broader context of the

-14-
statute as a whole.'" Pérez-Olivo, 394 F.3d at 49 (quoting

Robinson, 519 U.S. at 341) (alteration in original). The parties

have not called to our attention, and we have not found in our

review of the FPA, any clues about the meaning of the word

"construction" as it applies here. Therefore, we move on to the

second stage of the Chevron analysis.

2. Reasonableness

The Commission argues that its conclusion here -- i.e.,

that Starrett's proposed work would constitute jurisdictional

construction -- was reasonable because the proposed changes

involved (1) an increase in installed capacity and (2) an increase

in head. Responding to the Commission's argument about increased

capacity, Starrett contends that the Project's new actual capacity

(278 kW, up from 192 kW) would remain below the 1992 installed

capacity (362 kW), and thus the Commission should not have

exercised its jurisdiction. We conclude that the Commission's

determination was reasonable because there is no doubt that, under

Starrett's plan, there would be an increase in capacity no matter

how the capacity was measured; both the actual and the installed

capacities would be greater than their respective 1992 values.12

12
The Commission makes much of the fact that its own opinions have
held that an increase in installed capacity constitutes post-1935
construction. See, e.g., Gilman Bros. Co., 67 FERC ¶ 61,151, at
61,436 (1994) ("The addition of generating capacity constitutes
post-1935 construction for section 23(b)(1) purposes."). We,
however, are not bound by its conclusions, and do not add our
imprimatur to its determination regarding installed capacity here.

-15-
For this reason, we need not analyze the head issue or resolve any

of the factual disputes related to that issue.13

Given the state of the law, we must conclude that the

Commission's interpretation of "construction" as including the work

here was reasonable. In 1965, the Supreme Court explained that

[t]he central purpose of the Federal Water
Power Act was to provide for the comprehensive
control over those uses of the Nation's water
resources in which the Federal Government had
a legitimate interest; these uses included
navigation, irrigation, flood control, and,
very prominently, hydroelectric power-uses
which, while unregulated, might well be
contradictory rather than harmonious.

Union Elec. Co., 381 U.S. at 98. In 1986, Congress amended the FPA

and made clear that when the Commission decides whether to grant a

license under Section 23(b) and various other sections of the FPA,

it should "give equal consideration to" (1) "the power and

development purposes for which licenses are issued" and (2) "the

purposes of energy conservation, the protection, mitigation of

damage to, and enhancement of, fish and wildlife (including related

spawning grounds and habitat), the protection of recreational

13
The Commission argues that the proposed work would increase the
head of the Project, and that under its precedent, this increase
constitutes post-1935 construction. See, e.g., Cent. Vt. Pub.
Serv. Corp., 54 FERC ¶ 61,132, at 61,434 ("'Post-1935 construction'
at an existing project . . . includes construction which increases
the project's head, generating capacity or storage capacity.").
L.S. Starrett counters that the proposed work would increase only
net, not gross, head, and therefore does not constitute post-1935
construction on this basis. As noted, we need not address this
issue.

-16-
opportunities, and the preservation of other aspects of

environmental quality." 16 U.S.C. § 797(e); Electric Consumers

Protection Act of 1986, Pub. L. No. 99-495, 100 Stat. 1243. We

cannot say, as a matter of law, that it was unreasonable for the

Commission to conclude that in order to ensure that the Nation's

waterways be used in a "harmonious" fashion, and to ensure, among

other things, that fish and wildlife were protected, it could

interpret "construction" as including all increases in capacity.

The cases that Starrett cites to support its position are

distinguishable because they did not involve increases in capacity.

In Thomas Hodgson, the court relied in part upon the fact that

there was no increase in capacity when concluding that no post-1935

construction had occurred. See Thomas Hodgson, 49 F.3d at 828 (no

post-1935 construction where dam owners restarted operation of

inactive dam after twelve years but there was "no project

enlargement . . . in capacity, diversion, or physical plant"

(quoting Puget Sound Power & Light Co. v. Fed. Power Comm'n, 557

F.2d 1311, 1316 (9th Cir. 1977)) (internal quotation marks

omitted)). The same can be said of Puget Sound. See 557 F.2d at

1316 (noting that the work there "merely restored the . . . project

to its original specifications and configuration" and that there

was no increase in the project's electrical generating capacity).

Similarly, in Aquenergy Systems, Inc. v. Federal Energy Regulatory

Commission, 857 F.2d 227 (4th Cir. 1988), although the court ruled

-17-
on another ground that the dam was subject to the Commission's

licensing jurisdiction, it acknowledged that where a new project

was "carefully planned . . . to meet the specifications of the

original project" and where neither "designed capacity," head, nor

the amount of electricity generated was to increase, such work

would not ordinarily constitute jurisdictional construction under

Section 23(b). Id. at 229-30.

In short, we conclude that the Commission's determination

that Starrett's facility met the second required prong was not

unreasonable.

D. The Effect on Interstate Commerce

Before allowing the FERC to exert its licensing

jurisdiction over projects involving post-1935 construction,

Section 23(b) requires the Commission to "find that the interests

of interstate or foreign commerce would be affected by [the]

proposed construction." 16 U.S.C. § 817(1). The Commission argues

that Starrett's construction meets the interstate commerce

requirement because its dam is a member of a class of small

hydroelectric projects that collectively have a substantial impact

on interstate commerce because they produce power that would

otherwise have to be produced elsewhere on the interstate grid.

Starrett responds that (1) it is improper for the Commission to

rely on this "cumulative effect" theory because it leaves the

Commission's Commerce Clause jurisdiction without boundary; and (2)

-18-
in any case, the Commission has not shown that Starrett's facility

belongs to a class of small hydroelectric projects that

collectively affect interstate commerce.

We first address whether it was unreasonable for the

Commission to consider the cumulative effect on commerce of many

small hydroelectric facilities, and then address whether there was

substantial evidence that Starrett's dam, in conjunction with

others, actually has a significant impact on interstate commerce.

See Habersham Mills v. FERC, 976 F.2d 1381, 1384-85 (11th Cir.

1992) (first addressing whether the FERC "misappl[ied] the [FPA] by

considering the cumulative effect of a class of small hydroelectric

projects that include[d]" the two projects at issue, and then

addressing whether there was substantial evidence of an effect on

interstate commerce); City of Centralia v. FERC, 661 F.2d 787, 791-

93 (9th Cir. 1981) (first explaining that if "a local activity

belongs to a class of activities having a cumulative effect on

interstate commerce, it may fall within the commerce power," and

then analyzing whether there was substantial evidence that the

hydropower facility at issue, either alone or in conjunction with

other facilities, had a real and substantial effect on interstate

commerce).

1. The "Cumulative Effect" Theory

The Supreme Court has noted that the language of the FPA

"strongly implies that Congress drew upon its full authority under

-19-
the Commerce Clause" in enacting the statute. Union Elec. Co., 381

U.S. at 96. "Full authority under the Commerce Clause includes the

power to reach a local activity whose effect on commerce, 'taken

together with that of many others similarly situated, is far from

trivial.'" Habersham, 976 F.2d at 1384 (quoting Wickard v.

Filburn, 317 U.S. 111, 128 (1942)); see also Gonzales v. Raich, 545

U.S. 1, 17 (2005) (noting that Supreme Court "case law firmly

establishes Congress' power to regulate purely local activities

that are part of an economic 'class of activities' that have a

substantial effect on interstate commerce"). Assuming there was

substantial evidence supporting the Commission's factual findings,

it would not be unreasonable for the Commission to regulate

Starrett's dam because "a small hydroelectric project that affects

commerce only slightly" can "still be subject to congressional

regulation if it is part of a class with a significant cumulative

effect." Habersham, 976 F.2d at 1384. We thus turn to the second

part of our analysis and ask whether the Commission's conclusion

that Starrett's dam is part of a class of projects that, in the

aggregate, have the required effect on interstate commerce "is

supported by substantial evidence." City of Centralia, 661 F.2d at

792.

2. Substantial Evidence

Starrett contends that its situation is comparable to the

one in City of Centralia, where the Ninth Circuit concluded that

-20-
the record failed to support the Commission's conclusion that a

hydroelectric project either (1) itself had a substantial effect on

commerce, 661 F.2d at 792; or (2) was part of a class of projects

that, cumulatively, had a substantial effect on interstate

commerce, id. at 793. We agree with the Commission that this case

is more comparable to Habersham, where the Eleventh Circuit

concluded that two small dams did meet the interstate commerce

requirement because the Commission presented evidence that (1) by

supplying power to a factory, the two hydroelectric projects

"effectively displace[d] electricity that the factory otherwise

would draw from the interstate grid," 976 F.2d at 1384; and (2) the

Commission referred to two FERC reports that "indicate[d] that the

small [hydroelectric] projects [around the nation] collectively

account for a substantial portion of the nation's hydroelectric

generating capacity," id. at 1385.14 Here, the Commission (1)

explained that Starrett's dam produces power that Starrett would

otherwise receive from the interstate grid, a point supported by

the record; and (2) cited Habersham -- which in turn, as noted

above, cited two FERC studies -- to support the proposition that

small hydroelectric projects that displace power from the national

14
Starrett encourages us to reverse by arguing that the FERC
inappropriately grouped Starrett's facility with projects that
generate power back to the grid. As Habersham notes, however, this
distinction does not matter: "whatever they do with their
electricity, . . . small projects [across the nation] displace
power that otherwise would be generated by facilities connected to
the interstate grid." 976 F.2d at 1385.

-21-
grid can have a significant cumulative effect on interstate

commerce. Starrett III, 130 FERC ¶ 61,112, at 61,522-61,523. We

believe that there was substantial evidence to support the factual

findings underlying the Commission's interstate commerce

conclusion.

III. Conclusion

For the reasons stated, we affirm.15

Affirmed.

-Concurring Opinion Follows-

15
We do so regretfully because we are not blind to the economic
realities of the situation. Under the facts of this case, the FERC
could have certainly exercised its administrative discretion.

-22-
 STAHL, Circuit Judge, concurring, joined by TORRUELLA,

Circuit Judge. I join this opinion with great reluctance. I do so

because Chevron deference requires the result reached here, not

that the result makes economic or realistic sense.

Here, we have the last full-line precision tool company

producing its product within the United States. Although Starrett

has several manufacturing locations worldwide, the Athol location

produces most of the precision tools and has remained the company's

headquarters since its founding in 1880. Starrett is the largest

employer in the greater Athol area, and its payroll typically

contributes over $2 million per month to the economy.

In order to remain competitive in the global marketplace,

Starrett has aggressively sought to lower its cost structures and

has instituted many energy conservation measures, which have both

saved operating costs and reduced the company's carbon footprint.

One of these measures included the replacement of the failed left

turbine generator with a new, energy-efficient generator, the

source of controversy in this case.

Innovations like those taken by Starrett are a necessary

concomitant if we are to reinvigorate the nation's manufacturing

base. Our decision today, however, may well mean that this company

loses the economic advantage it would have from its low-cost,

nonpolluting power structure. Cost-saving measures like those

instituted by Starrett are particularly key for companies based in

-23-
high energy cost states, like Massachusetts, and may well make the

difference in keeping the plant open, providing good paying jobs,

and maintaining an essential business such as this in our country.

Indeed, machine tools are the lifeblood of industry, and when we

have lost all of our domestic capacity, we become less secure and

less able to compete. It is said by some that American industry

has died from a thousand cuts, and many contend that over-

regulation bears a share of the responsibility.

Further, it is unfortunate that a small power producer

like the Starrett facility falls within the ambit of the

Commission's jurisdiction because it is located on a non-navigable

stream that is a tributary to a navigable water and affects

interstate commerce through its connection to the interstate grid.

Although I acknowledge that Wickard v. Filburn, 317 U.S. 111

(1942), and its progeny give the Commission power to reach purely

local activity, the result strikes me as ironic. In Wickard, the

government was confronted with a surplus of wheat, and it regulated

production to avoid dramatically low wheat prices around the

country. The market at issue here, however, proves just the

opposite. Today, rising energy prices and a diminishing supply of

resources pose a real challenge, and our national and state

governments are doing all that they can to promote energy

efficiency in order to lower energy costs. It would seem that

Starrett's Project is a prime example of efficient usage through a

-24-
nonpolluting power source and is one that we should be encouraging,

not stifling.

Perhaps a better argument not advanced by Starrett would

have been that, although Chevron applies, the Commission's

definition of post-1935 construction was unreasonable in view of

the realities presented by this project. Defining construction to

include any increase in capacity still less than that originally

authorized, without a de minimis exception and without

consideration of a project's increased efficiency and economic

impact, strikes me as troubling. But Starrett did not make this

point, nor was there evidence of the costs it would incur in

seeking the Commission's licensing and whether those costs and the

necessary delay would take away from the project's economic

advantages. We must deal with the record we have.

-25-