Thomas Hodgson & Sons, Inc. v. Federal Energy Regulatory Commission

                UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS
                    FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT
                                         

Nos. 93-1503
 94-1752
                 THOMAS HODGSON & SONS, INC.,

                         Petitioner,

                              v.

            FEDERAL ENERGY REGULATORY COMMISSION,

                         Respondent.

                                         

             ON PETITIONS FOR REVIEW OF ORDERS OF
           THE FEDERAL ENERGY REGULATORY COMMISSION

                                         

                            Before

                    Torruella, Chief Judge,
                                                      
                Bownes, Senior Circuit Judge,
                                                        
                   and Cyr, Circuit Judge.
                                                     

                                         

Howard M.  Moffett, with whom  Orr & Reno,  P.A. was  on brief for
                                                            
petitioner.
Joel  M. Cockrell,  Attorney,  with whom  Susan  Tomasky,  General
                                                                    
Counsel,  and Jerome  M.  Feit, Solicitor,  Federal Energy  Regulatory
                                      
Commission, were on brief for respondent.

                                         

                        March 13, 1995
                                         


          BOWNES, Senior Circuit Judge.    Petitioner, Thomas
                      BOWNES, Senior Circuit Judge.
                                                  

Hodgson and Sons, Inc. (Hodgson), appeals from a second order

by  respondent,  the  Federal  Energy  Regulatory  Commission

(FERC), denying Hodgson a  rehearing, and from FERC's finding

that  the  operation  of Hodgson's  China  Mill hydroelectric

plant (China  Mill) came under the  licensing jurisdiction of

Section 23(b) of  the Federal Power  Act (FPA)21 pursuant  to

                    
                                

1.    Section 23(b) of  the original  Federal Power  Act, ch.
285,     23(b), 41  Stat. 1075  (1920)  has been  amended and
codified  under  16 U.S.C.     817(1)  (1988) ("Projects  not
affecting  navigable waters;  necessity for  Federal license,
permit or right-of-way"). It provides:
          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

                             -2-
                                          2


FERC's "post-1935  construction" rule.  FERC  claims that for

purposes of  Section  23(b), shutting  down  a  hydroelectric

plant for twelve years after 1935  and powering it back up to

its former specifications constitutes  post-1935 construction

without  more.   Hodgson,  on  the  other hand,  claims  that

operating  China Mill  after  maintaining it  over the  years

until  its use  became profitable,  does not  amount  to such

construction, and that even  if it does, FERC's terms  in the

license were  unreasonable.  After reviewing  the statute and

pertinent  case  law,  we conclude  that  FERC  erred in  its

determination that it had jurisdiction over China Mill.   
                                    I.  BACKGROUND
                                    I.  BACKGROUND
                                                  

          The  China Mill  dam  was constructed  in the  late

1860's as a grist mill in Merrimack County, New Hampshire, on

the Suncook River, which is not navigable.  The site included

the dam,  diversion canal,  penstocks and turbine  which were

installed  prior  to 1900.    China Mill  was  converted from

hydromechanical  to hydroelectric  power  before 1914.    The

petitioner has owned China Mill since 1970.  

          Under   a  succession   of   owners,   China   Mill

continuously produced  electricity until 1969 in  its present

configuration.   Power  generation stopped  for approximately

twelve  years  starting in  1969.   The  parties  dispute the

                    
                                

          laws.

We  shall follow  the lead  of the parties  and refer  to the
statute as "Section 23(b)."

                             -3-
                                          3


nature of the  stoppage.  Petitioner  alleges that a  natural

disaster initially  led to the stoppage.   Respondent asserts

that the natural  disaster was only a log that  got caught in

the project's  machinery and  that  the true  reason for  the

stoppage  was purely  economic.   During the  period of  non-

generation,   the   production   of  power   was   apparently

uneconomical  for  China  Mill.     The  cost  of  purchasing

electricity was low, and no market existed for selling excess

power.   For reasons  to be  stated, the  exact cause  of the

hiatus  in  the production  of  electricity  does not  affect

FERC's jurisdiction.   

          With the  federal enactment  of the Public  Utility

Regulatory Policies Act (PURPA)2  and New Hampshire's passage

of  the Limited  Electrical  Energy  Producers Act  (LEEPA),3

Hodgson decided that it would be again profitable  to produce

power at China  Mill.   In 1981 Hodgson  started to  generate

power  at China  Mill and  sold power  to the  Public Service

Company of New Hampshire.  In September of 1989 FERC directed

Hodgson to show why  China Mill should not be  licensed under

the  FPA.  At  first, Hodgson did  not object  to obtaining a

license and  in fact  voluntarily applied  for one  in March,

1990.  

                    
                                

2.   16 U.S.C.    824 et seq.
                                        

3.   N.H. Rev. Stat. Ann.   362-A:3.

                             -4-
                                          4


          Hodgson's  spirit of  cooperation was  short lived.

In  July, 1992, FERC issued Hodgson a license with conditions

that  included, inter  alia, a  minimum water  flow of  fifty
                                       

cubic feet per second  (cfs), an historic resource management

plan,  and  aesthetic  improvements  to  the  mill  building.

Thomas Hodgson  and Sons, Inc.,  60 F.E.R.C.    62,071 (1992)
                                          

(Hodgson  I).     Hodgson   objected  to   these  conditions,
                       

especially  challenging  the fifty  cfs requirement  which it

claims would result in an annual loss of over $68,000.  

          Unhappy  with the  terms  of its  license,  Hodgson

withdrew its application4  and sought a  rehearing contesting

both  FERC's  jurisdiction  and  the terms  of  the  license.

Thomas Hodgson  & Sons,  Inc.,  63 F.E.R.C.    61,068  (1993)
                                         

(Hodgson II).   Among its reasons for  denying the rehearing,
                       

FERC stated  that the generating  capacity of China  Mill had

been increased, but  that even if  the capacity remained  the

same,  the project  had  been abandoned  and, therefore,  the

renewed operation constituted post-1935 construction.  Id. at
                                                                      

61,293.  Its determinative findings were as follows:

               Hodgson  does  not dispute  that the
          Suncook   River,   a  tributary   of  the
          Merrimack  River,  is  a Commerce  Clause
          water,  or  that   the  project   affects
          interstate    commerce    due   to    its
          interconnection   with   the   interstate

                    
                                

4.    Hodgson claims it has the right to withdraw a voluntary
license  application.  FERC does  not dispute this;  so we do
not address it.

                             -5-
                                          5


          electric grid.  However, Hodgson disputes
          that the development has  undergone post-
          1935 construction.

               As   noted   above,  the   project's
          generating  capacity  from  1934  through
          1939  was 1,300 kW, but some time between
          1939 and 1942 the generating capacity was
          increased to 1,500 kW.   The installation
          after   1935  of   additional  generating
          capacity       constitutes      post-1935
          construction.

               Even  if  the installed  capacity of
          the  project  were unchanged  after 1935,
          the project would still be required to be
          licensed.   Ordinary maintenance, repair,
          and reconstruction  activity with respect
          to a project constructed before 1935 does
          not constitute post-1935 construction for
          purposes of Section  23(b)(1).   However,
          the   pre-1935   construction   exception
          protects only operating projects.   Where
          a project has been abandoned, there is no
          basis  for  a  claim  that  the  operator
          retains  operating  rights,  even if  the
          operator,   after   1935,  restores   the
          project to a  condition identical to  its
          pre-abandonment status.  As  noted above,
                                                               
          the  China Mill Project  was abandoned in
                                                               
          the  1960s and  was  not  operated  again
                                                               
          until  1981.   Consequently,  the renewed
                                                               
          operation      constituted      post-1935
                                                               
          construction.   In  light of  all of  the
                                   
          above, we affirm  the Director's  finding
          that  the  project  is  required   to  be
          licensed. 

Id. (emphasis  added; footnotes omitted).   A second petition
               

for rehearing followed.

          During this time,  Hodgson, asserting its right  to

decline the  license, petitioned  this court  for a  stay and

review  of  the terms  of the  license.   We  determined that

Hodgson  did not accept the  license but declined  to stay or

                             -6-
                                          6


further  review  the order  until  FERC  considered Hodgson's

second  petition for rehearing.  Hodgson v. F.E.R.C., No. 93-
                                                                

1503 (1st Cir. May  14, 1993) (order denying stay  of license

terms).

          In  the  second  petition  for   rehearing,  Thomas
                                                                         

Hodgson &  Sons, Inc., 67  F.E.R.C.   61,202  (1994) (Hodgson
                                                                         

III), FERC again addressed the challenge to its jurisdiction.
               

We set forth FERC's pertinent findings:

               Construction    activity   in    the
          maintenance   and  repair   of  existing,
          continuously operating  projects does not
          constitute post-1935  construction within
          the meaning  of the  FPA, so long  as the
          construction activity does not  result in
          such   things   as  the   enlargement  of
          generating  capacity  or of  the physical
          plant.    However, construction  activity
          such as the  construction or  enlargement
          of   a  dam   or  other   project  works,
          including  the enlargement  of generating
          capacity,      constitutes      post-1935
          construction.

          . . . .

          .  .  .  [T]he   installation  of  a  new
          generator at  the China Mill  Project, of
          itself, did not result in  an increase in
          generating capacity at the project.

Id. at 61,632-33 (footnotes omitted).
               

               However, if  a hydroelectric project
          has been  taken  out  of  service  for  a
          number  of years, then the restoration of
          generation   at   the   project  is   the
          equivalent  of   post-1935  construction,
          even   if  the   project  has   not  been
          enlarged, and irrespective of how much or
          little  reconstruction  or  refurbishment
          was involved.

                             -7-
                                          7


Id. at 61,633 (footnote omitted).
               

               In  determining whether  abandonment
          has  occurred  for  purposes  of  section
          23(b)(1),  the  question  is  not  .  . .
          whether  the  site  has   been  literally
          abandoned and left  to fall into  a state
          of  disrepair.    Nor  is the  amount  of
          repair or reconstruction  work needed  to
          put  the  project  back   into  operation
          relevant.    Rather, abandonment  for FPA
          purposes  means  that  the  hydroelectric
          generating  function  of the  project has
          been abandoned.

Id. (footnote omitted).
               

               The new business  here is  Hodgson's
          commencement of hydroelectric  generation
          in 1981.  We therefore affirm our finding
          that  the China Mill  Project is required
          to  be  licensed   pursuant  to   section
          23(b)(1) of the FPA.

Id. at 61,634 (footnote omitted).  This appeal followed.
               

          We  have  jurisdiction  pursuant  to  16  U.S.C.   

825l(b) which allows a party "aggrieved by an order issued by
                

the Commission  . . . [to]  obtain a review of  such order in

the  United States court  of appeals for  any circuit wherein

the  licensee . .  . is located."   In its  petition, Hodgson

challenges FERC's  jurisdiction and, in the alternative, asks

us to review the propriety of the requirements of the license

which  it claims are unreasonable.  Finding that FERC did not

have  jurisdiction, we do not reach the merits of the license

requirements.  

                   II.  STANDARD OF REVIEW
                               II.  STANDARD OF REVIEW
                                                      

                             -8-
                                          8


          We review FERC's findings of  fact for "substantial

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

Northeast Utils.  Serv. Co.  v. F.E.R.C.,  993 F.2d  937, 944
                                                    

(1st Cir. 1993).   On  the other hand,  "[p]ure legal  errors

require no deference to agency expertise, and are reviewed de
                                                                         

novo."  Id.; see also Boston Edison Co. v. F.E.R.C., 856 F.2d
                                                               

361, 363 (1st Cir. 1988).  

          FERC asserts that this  court owes deference to its

finding of jurisdiction under Chevron U.S.A., Inc. v. Natural
                                                                         

Resources  Defense  Council,  Inc.,  467  U.S.  837   (1984).
                                              

Chevron held: 
                   

          When   a   challenge    to   an    agency
          construction  of  a statutory  provision,
          fairly conceptualized,  really centers on
          the wisdom of the agency's policy, rather
          than  whether it  is a  reasonable choice
          within a gap  left open by  Congress, the
          challenge must fail.  

Id. at 866.  FERC misplaces  its reliance on Chevron for  two
                                                                

reasons.  First, in Chevron, the Supreme  Court addressed the
                                       

issue of whether the  Environmental Protection Agency based a

policy on a  reasonable construction  of the  Clean Air  Act.

Id. at  840.  But  here, FERC did  not base  its order on  an
               

interpretation  of the  FPA,  but rather  on  its reading  of

judicial  precedent.     Chevron  and  its  progeny   mandate
                                            

deference "when a court is reviewing an agency decision based

on  a statutory  interpretation."   National  R.R.  Passenger
                                                                         

Corp. v.  Boston & Me. Corp.,  112 S. Ct. 1394,  1401 (1992).
                                        

                             -9-
                                          9


Because   FERC  did   not   base  its   jurisdiction  on   an

interpretation  of the statute but looked to case law, we owe

its finding of  jurisdiction no more deference  than we would

any lower court's analysis of law.  

          Second,  deference  to agency  interpretations does

not give an agency the final word on statutory meaning.  "The

judiciary  is  the final  authority  on  issues of  statutory

construction  and  must  reject administrative  constructions

which are contrary to  clear congressional intent."  Chevron,
                                                                        

467 U.S. at 843  n.9 (citations omitted).  The  Supreme Court

thus set out the rule: 

          If a court,  employing traditional  tools
          of  statutory   construction,  ascertains
          that  Congress  had an  intention  on the
          precise question at issue, that intention
          is the law and must be given effect. 

Id. 
               

                        III.  ANALYSIS
                                    III.  ANALYSIS
                                                  

                  Jurisdiction Under the FPA
                              Jurisdiction Under the FPA
                                                        

          The FPA provides FERC with broad but not ubiquitous

power over  hydroelectric facilities.  Originally, Section 23

of  the FPA only provided that persons intending to construct

projects5 on  nonnavigable waters6  could file  a declaration

                    
                                

5.   By "project" the FPA "means complete unit of improvement
or  development,  consisting  of  a power  house,  all  water
conduits,  all  dams  and  appurtenant  works  and structures
. . . ." See 16 U.S.C   796(11).
                        

                             -10-
                                          10


of intent at their discretion.  Farmington River Power Co. v.
                                                                      

Federal Power  Comm'n, 455 F.2d 86,  88 (2d Cir.  1972).  The
                                 

Federal  Power Commission  (FPC),  FERC's predecessor,  could

then require  a license  before  any construction  continued.

Id.   If  a  person  intending  to  construct  a  project  on
               

nonnavigable  waters did not file a  declaration, the FPC had

no power to require a license.  Id. at 89.  
                                               

          Congress  amended  the FPA  in 1935,  expanding the

FPC's   licensing  jurisdiction   to  require   that  persons

"intending to construct  a dam  or other  project works"7  on
                                   

nonnavigable  streams obtain a  license.  16  U.S.C.   817(1)

(emphasis  added).   "These  words quite  clearly indicate  a

prospective view."   Farmington River Power Co.,  455 F.2d at
                                                           

90; Aquenergy  Systs., Inc.  v. F.E.R.C.,  857 F.2d  227, 229
                                                    

(4th  Cir. 1988) (same); see  also Puget Sound  Power & Light
                                                                         

Co.  v. Federal Power Comm'n,  557 F.2d 1311,  1315 (9th Cir.
                                        

1977)  ("the statute is to apply only to projects begun after
                                                                   

the  effective  date  in   1935").    It  is  the   post-1935

construction  of   a  project  that  triggers  the  licensing

jurisdiction of Section 23(b).

                    
                                

6.    The  FPA  does  not define  "nonnavigable  waters"  but
"navigable waters," inter alia,  "means those parts of .  . .
                                          
bodies of  water over  which Congress has  jurisdiction under
its authority to regulate commerce."  See 16 U.S.C   796(8).
                                                     

7.    By   "project  works"  the  FPA   "means  the  physical
structures of a project." 16 U.S.C.   796(12).

                             -11-
                                          11


          All  construction after  1935,  however,  does  not

translate  into  jurisdictional  construction  under  the FPA

merely because it post-dates  the act.  Supplemental building

after  1935 generally  is not  post-1935 construction  if the

work  only maintains  or  restores a  project  to its  former

specifications. Puget  Sound,  557  F.2d  at 1315.    Nor  do
                                        

"repairs - even those  of substantial nature  - . . .  confer

jurisdiction  over an  otherwise  exempt facility."   Id.  at
                                                                     

1316.    

          An exception  to this  rule arises where  a project

has  been abandoned.   After  the  complete abandonment  of a

project,  an  owner  no  longer  retains  pre-1935  operating

rights.  Aquenergy, 857 F.2d at 230.  In Aquenergy, the court
                                                              

determined  that such  abandonment occurred  after more  than

thirty  years of  disuse  and neglect  which resulted  in the

project works being  reduced to ruin.   Id. at 229.   Because
                                                       

the  owner in Aquenergy  abandoned the project,  it no longer
                                   

retained  its  pre-1935  operating   rights.    Id.  at  230.
                                                               

Although Aquenergy  creates an exception to  Puget Sound, the
                                                                    

court  emphasized the  lack of  licensing jurisdiction  under

Section  23(b)  for  repairs  and  reconstruction  without  a

finding of abandonment.  Citing the general rule for  Section

23(b) the  court stated, "[a]  project is not  brought within

the Commission's  jurisdiction if work  done in  the name  of

                             -12-
                                          12


repair does  not so alter  the project that  it is  no longer

what was there before 1935."  Aquenergy, 857 F.2d at 229.
                                                   

          Both  Hodgson  and FERC  rely  on  Puget Sound  and
                                                                    

Aquenergy.   The parties do not argue  that either case is in
                     

error; rather,  they urge  that either  case controls  in the

alternative.  We, however, read Aquenergy to be  an exception
                                                     

to  Puget Sound rather than an independent rule.  The holding
                           

in Aquenergy makes this clear: 
                        

               Aquenergy  puts great  reliance upon
          Puget Sound,  but it does not  help them,
                                 
          for we take no issue with the proposition
          that  the magnitude  of the  work is  not
          controlling  or  even   relevant.     The
          relative magnitude of  the work in  Puget
                                                               
          Sound  may have  been comparable  to that
                           
          involved  here, but  the owner  had never
          abandoned  the project.    It  had  moved
          rather promptly  to put the  project back
          into  partial  operation   and  in   full
          operation  when  demand  for  its  output
          justified it.
               In great contrast, here, J.P Stevens
          simply abandoned the project.  The entire
          thing was  closed down.  The  turbine was
          apparently removed, but the rest was left
          for  deterioration to  take its  toll and
          nature  to heal  her wounds.   After such
          complete  abandonment  over  a period  of
          more than 30 years, there is no basis for
          a claim that the owner retained operating
          rights.  The statute was designed to keep
          in operation projects  existing in  1935,
          but not to restore abandoned rights.

857  F.2d  at  230.    Accordingly,  unless  the  abandonment

exception applies, FERC has no jurisdiction over China Mill.

           In  Hodgson  II  and  III,  FERC  ruled  that  the
                                                

abandonment   of   power   production   alone   and   without

                             -13-
                                          13


construction  or  physical abandonment  gave  it jurisdiction

under Section 23(a) of  the FPA when a project  resumed power

production.   FERC  stated  its jurisdictional  rationale  as

follows:

          In  determining  whether abandonment  has
          occurred   for    purposes   of   section
          23(b)(1),  the  question  is not  .  .  .
          whether  the  site  has   been  literally
          abandoned and  left to fall into  a state
          of disrepair.    Nor  is  the  amount  of
          repair or reconstruction  work needed  to
          put  the  project  back   into  operation
          relevant.    Rather, abandonment  for FPA
                                                               
          purposes  means  that  the  hydroelectric
                                                               
          generating  function  of the  project has
                                                               
          been abandoned.
                                    

Hodgson III, 67 F.E.R.C.  at 61,633 (emphasis added; footnote
                       

omitted).  We disagree for the following reasons.

          First, FERC completely misunderstands the relevance

of work to  a finding of  post-1935 construction.   Aquenergy
                                                                         

does state, "the  magnitude of the work is  not controlling,"
                                       

857 F.2d  at 229 (emphasis  added), but  at no time  does the

court  there espouse  the notion that  the existence  of work
                                                                

itself is unnecessary for jurisdiction.   To the contrary the

court states:

          One must  look to the nature  of the work
          and  the purpose  of  the  owner.   Major
          repairs  may  involve  much  construction
          activity,  but the project is not brought
          within the  Commissions's jurisdiction if
          work done in the  name of repair does not
          so alter the project that it is no longer
          what was there before 1935.

Id.
               

                             -14-
                                          14


          Second, FERC's order underestimates  the importance

of  the  physical   act  needed  to  support  a   finding  of

abandonment.   The  heart  of the  error  in Hodgson  II  and
                                                                    

Hodgson III is that there was in fact no abandonment  as that
                       

word  is generally  understood.   Abandonment  is a  question

wholly separate from the  statutory language of the FPA.   In

no place does  the FPA define or refer  to the term "abandon"

or  "abandonment."  Aquenergy  goes to great  pains to stress
                                         

the  physical abandonment that occurred in that case.  As the

court observed, "there  was no activity  at the project,  not

even  minimal   maintenance";  "[t]he   powerhouse   .  .   .

disintegrated  or was  torn down";  "trees  had reestablished

themselves"; and  "nothing was done during those  30 years to

impede nature's reclamation of  what had been her own."   857

F.2d  at 229.   Additionally,  in its  two and  one-half page

opinion the  court  in  Aquenergy notes  the  period  of  the
                                             

abandonment, "30 years," at least seven times, thus stressing

the  importance   of  physical  desertion  as   a  factor  in

abandonment.  See id. at 229-30. 
                                 

          The facts show that  China Mill was not "abandoned"

in the  Aquenergy sense.  Workers  performed general cleaning
                             

and maintenance  during the shutdown period,  and the project

required only minimal work to  restart.  Moreover, China Mill

still operated in some manner during the shutdown.   Although

not producing its own  power, China Mill was used  to control

                             -15-
                                          15


and  monitor  external  power  to  the  factory  through  its

generator  control  panel,  and  workers  checked that  panel

monthly.8   FERC does not assert that these or any activities

constituted construction,  and even  if they did,  we believe

that  they show  the  project was  not  abandoned within  the

meaning of Aquenergy.    We  believe  the   facts  here   are
                                

analogous to those of Puget Sound, which we find controlling.
                                             

In Puget Sound, a landslide destroyed a pre-1935 project, and
                          

when the  owner commenced  the extensive work  to reconstruct

the project, the FPC  claimed it needed a license.   557 F.2d

at 1312.   The court disagreed and found  that reconstruction

did  not give the FPC  jurisdiction.  It  found that, because

the repairs  "merely restored  the [project] to  its original

specifications  and  configuration,"  "[t]here  was   no  new

'construction'."  Id. at 1316.  Even though five years passed
                                 

                    
                                

8.   Hodgson III stated:
                            
          Hodgson submitted the affidavits of three
          men who  worked at China  Mill at various
          times  during  the  1960's,  1970's,  and
          early   1980's.      According   to   the
          affidavits,  mud  and  silt were  removed
          from  the  power  canal;  the  penstocks,
          turbines, and draft tubes  were inspected
          annually;  the gates  at  the  upper  and
          lower end of the power canal were checked
          and cleaned annually;  and the  generator
          control  panel  was   checked  at   least
          monthly because it controlled the voltage
          coming into the  manufacturing mill  from
          the transmission lines of  Public Service
          Company of New Hampshire. 

67 F.E.R.C. at 61,633 n.11.

                             -16-
                                          16


before the defendant repaired and put into service two of the

four preexisting generators, the court found  no jurisdiction

under the FPA.   Id. at 1313.  The court held that repair and
                                

maintenance construction on even a large scale do not  amount

to post-1935  construction if the  scope of the  work remains

within the  original specification of  the project.   Id.  at
                                                                     

1315. 

          Puget Sound applies directly here.  There was "[n]o
                                 

project enlargement . . . in capacity, diversion, or physical

plant,"  no reconfiguration  since  1935 of  "[t]he  original

sites for  the power house,  the dam  and the flume,"  and no

change in the electrical generating capacity since 1935.  Id.
                                                                         

at  1316.  There was,  therefore, just as  here, no post-1935

construction, and so no jurisdiction in FERC.

          We have reviewed FERC's own  cases addressing post-

1935 construction,  none of  which were subject  to appellate

review,  and  they do  not lend  support  to FERC's  claim of

jurisdiction.   The cases  either  contradict FERC's  current

position, contradict each other  or err for the  same reasons

we have stated.  See McRay Energy Inc.,  57 F.E.R.C.   61,061
                                                  

(1991) (no jurisdiction over project after six-year period of

"abandonment"   and  reinstallation  of  same  generator  and

minimal   repairs  to  return   to  service   because  actual

construction  is  an  essential  element  of  Section   23(b)

jurisdiction); Yankee  Hydro  Corp.,  52  F.E.R.C.     61,074
                                               

                             -17-
                                          17


(1990) (ten-year cessation  of generation at flooded  project

where  same  generator was  removed  and  later replaced  was

abandonment and required a license); Theodore A. and Holly S.
                                                                         

Keck,  51 F.E.R.C.    61,018  (1990) (after  owners installed
                

generator   of  greater  capacity,   abandonment  of  project

incurred Section  23(b) jurisdiction); North  American Hydro,
                                                                         

Inc., 46 F.E.R.C.    62,175 (1989)  (project brought back  to
                

original  capacity  after it  was  unused  for fifteen  years

required license  where  owner surrendered  the  license  and

dismantled  the  facility); Pacific  Power  &  Light Co.,  10
                                                                    

F.E.R.C.   62,209  (1980) (no post-1935  construction despite

replacement  of  wooden  diversion  structure  with  concrete

structure  because Section  23(b) jurisdiction  requires that

"construction must  increase the  project's . .  . generating

capacity  .  .  .   or  otherwise  significantly  modify  the

project's pre-1935 design or operation").9   

          We point  out  that the  one case  cited in  FERC's

brief as being contrary to circuit precedent contains, in our

view, a  correct assessment of the commission's jurisdiction.

In McRay Energy  Inc., 57 F.E.R.C.   61,061,  FERC recognized
                                 

that the resumption of power production at a pre-1935 project

                    
                                

9.   Only  one of  FERC's  recent Section  23(b) cases  faced
appellate review,  but that order  was based and  affirmed on
other grounds.  In Habersham Mills v. F.E.R.C., 976 F.2d 1381
                                                          
(11th Cir. 1992), the Eleventh Circuit  did not address post-
1935  construction  because  the petitioner  only  questioned
FERC's determination  that  the project  affected  interstate
commerce. 

                             -18-
                                          18


did not give rise to Section 23(b) jurisdiction absent actual

physical   construction.    In   reaching  its  holding  FERC

accurately noted,  "actual construction or  reconstruction of

facilities  is  an   essential  element  of   the  'post-1935

construction' prong  of section 23(b) jurisdiction, even when

the  project has  been abandoned  and restarted  after 1935."

Id.  at  61,234.    At  China  Mill  not  only  was  there no
               

abandonment,  there was  no  finding of  any construction  by

FERC.  

                       IV.  CONCLUSION
                                   IV.  CONCLUSION
                                                  

          The  order of FERC assuming jurisdiction over China

Mill  is  reversed with  directions  to  dismiss the  license

application.

          Costs awarded to petitioner.

          Concurrence follows.
                      Concurrence follows.

                             -19-
                                          19


               CYR,  Circuit  Judge  (concurring).    As  the
                           CYR,  Circuit  Judge  (concurring).
                                               

fallacy  in relying on  Puget Sound and  Aquenergy for FERC's
                                                              

misinterpretation  of the  statutory  term "[post-1935]  con-

struction" is plainly exposed in the majority opinion, it  is

neither  necessary nor  provident  for the  panel to  embrace

these  decisions as First Circuit precedent,  see supra at p.
                                                                   

16 ("[W]e  find [Puget Sound] controlling."),  in the context
                                        

of this case.

               The  issue  on   appeal  is   straightforward:

whether the plain language  of FPA   23(b)     requiring FERC

licensure  of a  "grandfathered" facility  only in  the event

there  has been  "[post-1935] construct[ion]"     encompasses

circumstances in which no such construction has occurred, and
                                                                    

the owner merely reopens intact physical structures following

a  period of  closure?   If, as  I respectfully  submit, this

question  clearly must  be answered  in the  negative, FERC's

plea for Chevron deference is precluded, see Estey v. Commis-
                                                                         

sioner of Maine  Dep't of  Human Servs., 21  F.3d 1198,  1201
                                                   

(1st Cir. 1994), and the court ought not venture further.

               The majority opinion accedes to FERC's invita-

tion to extend its licensure authority based on the reasoning

in Puget Sound and  Aquenergy.  In Puget Sound,  however, the
                                                          

putative licensee unquestionably  had "constructed"  physical

structures anew at the "grandfathered" power facility follow-

ing a devastating natural disaster.  Based on its unexplained

                              19


assumption that  Congress could  not have intended  to divest

innocent owners of their "grandfathered"  power-plant operat-

ing rights merely for restoring to its original configuration

a facility  damaged in a natural disaster,  the Ninth Circuit

resorted to an equitable  exception in interpreting the plain

language  of the  FPA  as precluding  the agency's  licensure

jurisdiction.  See Puget Sound Power & Light Co., 557 F.2d at
                                                            

1315.  The Ninth  Circuit panel pointed to no  statutory lan-

guage  or  legislative  history  remotely  supportive of  its

strained  interpretation of  the statutory  term "construct."

See id.  (merely  noting,  without  citation  to  legislative
                   

history, "[w]e think Congress intended no such result").  

               As if to illustrate  the maxim that hard cases

beget bad  law, the Fourth  Circuit later extended  the error

propounded in Puget Sound.  See Aquenergy Systs., 857 F.2d at
                                                            

227.   Aquenergy  Systems'  actions clearly  came under  FERC
                                                       

jurisdiction for the simple  reason that it had "constructed"

anew, from the ground up, disintegrated structures (including

an entire  powerhouse) following  a voluntary closure  of the

facility lasting thirty years.  Eschewing this plain language

approach, the  Aquenergy court  attempted to  accommodate the
                                    

Puget Sound rationale by  engaging in an "abandonment" analy-
                       

sis which overlooked the  fact that the FPA contains  not one
                                                                         

word suggesting that Congress intended FERC licensure to turn
                

on the licensee's (or predecessor's) "abandonment" of "grand-

                             -20-
                                          20


fathered" pre-1935  "operating rights."   Id. at  230 (merely
                                                         

concluding, without  citation  to legislative  history,  that

"[t]he  [FPA]  was designed  to  keep  in operation  projects

existing  in 1935,  but  not to  restore abandoned  rights").

Quite  the contrary,  FPA   23(b)  focuses  unambiguously and
                                                                     

exclusively  on a  specific  event     the "construction"  of
                       

physical structures at the "grandfathered" generating site. 
                               

               Although I wholeheartedly concur in the result

reached  by the court in  the instant case,  I cannot endorse

its gratuitous adoption of the fallacious position  advocated

by FERC,  that Aquenergy  and Puget Sound  are "controlling."
                                                     

Although  those decisions  apparently  control  FERC  in  the

Fourth and Ninth Circuits, respectively, neither FERC nor the

majority opinion suggests a sound  reason for reaching out in

obiter dicta to  embrace the problematic FPA  interpretations
                        

propounded  in  Puget Sound  and  Aquenergy.   Indeed,  it is
                                                       

particularly  ironic that  we should  strain to  embrace them

even though FERC itself has not seen fit to do so.  See McRay
                                                                         

Energy, Inc., 57 F.E.R.C.   61,061  (1991) (no FERC jurisdic-
                        

tion over  project even  after six-year  "abandonment," where

facility  reopened but  no "construction"  of facilities  oc-

curred).

                             -21-
                                          21