  We report the results from a 200 ks Chandra observation of the z=1.786 radio
galaxy 3C294 and its cluster environment, increasing by tenfold our earlier
observation. The diffuse emission, extending about 100 kpc around the nucleus,
has a roughly hourglass shape in the N-S direction with surprisingly sharp
edges to the N and S. The spectrum of the diffuse emission is well fitted by
either a thermal model of temperature 3.5 keV and abundance <0.9 solar
(2-sigma), or a power-law with photon index 2.3. If the emission is due to hot
gas then the sharp edges mean that it is probably not in hydrostatic
equilibrium. Much of the emission is plausibly due to inverse Compton
scattering of the Cosmic Microwave Background (CMB) by nonthermal electrons
produced earlier by the radio source. The required relativistic electrons would
be of much lower energy and older than those responsible for the present radio
lobes. This could account for the lack of detailed spatial correspondence
between the X-rays and the radio emission, the axis of which is at a position
angle of about 45 deg. Hot gas would still be required to confine the
relativistic plasma; the situation could parallel that of the radio bubbles
seen as holes in nearby clusters, except that in 3C294 the bubbles are bright
in X-rays owing to the extreme power in the source and the sixty fold increase
in the energy density of the CMB. The X-ray spectrum of the radio nucleus is
hard, showing a reflection spectrum and iron line. The source is therefore an
obscured radio-loud quasar.
