Railroad Facility Repairs

Appeal Brief Appeal Letter Appeal Analysis

Appeal Brief

DisasterFEMA-1093-DR
ApplicantSEDA-COG Joint Rail Authority
Appeal TypeSecond
PA ID#000-91027
PW ID#Multiple
Date Signed1998-07-22T04:00:00
Citation: FEMA-1093-DR-PA, SEDA-COG Joint Rail Authority; Various DSRs

Cross Reference: Permanent repair of railroad facilities, legal responsibility

Summary: The SEDA-COG Joint Rail Authority (subgrantee) was established by the Commonwealth of Pennsylvania as a public entity that owns railroad tracks and related facilities. As a result of flooding in January of 1996, several sections of the Nittany and Bald Eagle Railroad were damaged. The damages included washouts of tracks, culverts, and bridges; deposition of debris in ditches and culverts; and signal box destruction. The repairs were estimated at a cost of $103,243. All of the Damage Survey Reports (DSRs) prepared for this work were determined to be ineligible because the subgrantee did not have legal responsibility for the repairs according to a review of the Operating Agreement (Agreement) between the subgrantee and the Nittany and Bald Eagle Railroad Company (Operator). For the first appeal, dated May 15, 1997, the subgrantee stated that the "force majure" clause in the Agreement released the Operator from the responsibility of repairing the railroad facilities. The Regional Director denied the appeal, with a July 14, 1997, letter because the "force majure" clause did not indicate that the Subgrantee was assigned the legal responsibility for the repairs following the flood disaster. Additionally, it was noted that the Agreement was not valid. The subgrantee submitted a second appeal of this determination, with information to support its position.

Issues:
  1. Is the Agreement valid?
  2. Does the Agreement give the legal responsibility of the repairs to the subgrantee?
  3. Has the subgrantee demonstrated a history of payment (responsibility) for repairs to the railroad facilities?
Findings:
  1. No, the Agreement commenced seven months after the disaster declaration date and it was not signed by either party; therefore, the Agreement was not in effect at the time of the disaster.
  2. No, the "force majure" clause does not exclusively state that the subgrantee is responsible for repairs resulting in events such as floods, which are the normal requirements of the Operator.
  3. No, the subgrantee has not set precedence for funding repairs. The only instance of such an action was for the October 1996 when the subgrantee funded fifty-percent of the repair of damage.
Rationale: In accordance with 44 CFR 206.223, to be eligible the work must be the legal responsibility of the subgrantee. The Agreement between the subgrantee and the Operator does not assign specific responsibility to the subgrantee for the repairs. Additionally, the Agreement is not valid due to the factors explained above.

Appeal Letter

July 22, 1998

Mr. Charles F. Wynne
Governor's Authorized Representative
Director, Pennsylvania Emergency Management Agency
Post Office Box 3321
Harrisburg, Pennsylvania 17105

Dear Mr. Wynne:

This is in response to your March 20, 1998, letter on behalf of the SEDA-COG Joint Rail Authority (Subgrantee). The Subgrantee is appealing the Federal Emergency Management Agency (FEMA) determination that sixteen Damage Survey Reports (DSRs), prepared for railroad washouts and other related damages, for a total of $103,243, were not eligible for disaster assistance under FEMA-1093-DR-PA. The Subgrantee is requesting disaster assistance in the amount of approximately $63,783 for the repair of the disaster damages. The appeal was submitted on the basis that the repairs are the legal responsibility of the Subgrantee. In support of their position, the Subgrantee cited specific sections of their Agreement with the Nittany and Bald Eagle Railroad Company, which is the entity that operates the railroad.

Based on a review of the incoming documentation, including the DSR information, the Agreement, and associated correspondence, I have determined that the Subgrantee does not have the legal responsibility to fund the repairs to the damaged railroad facilities. As such, the repairs are not eligible for disaster assistance, and the appeal is denied. For a detailed explanation of this determination, refer to the enclosed appeal analysis.

Please inform the applicant of my determination. In accordance with the appeal procedure governing appeal decisions made on or after May 8, 1998, my decision constitutes the final decision on this matter. The current appeal procedure was published as a final rule in the Federal Register on April 8, 1998. It amends 44 CFR 206.206.

Sincerely,
/S/
Lacy E. Suiter
Executive Associate Director
Response and Recovery Directorate

Enclosure

cc: Rita A. Calvan
Regional Director
FEMA Region III

Appeal Analysis

BACKGROUND
The SEDA-COG Joint Rail Authority (Subgrantee) is a public entity established by the Commonwealth of Pennsylvania in 1945 and owns railroad tracks and other railroad facilities in various counties in Pennsylvania. As a result of flooding in January 1996 (FEMA-1093-DR-PA), damages occurred at several locations along the Nittany and Bald Eagle Railroad in Centre, Clinton, Columbia, Montour, Northumberland and Union Counties. The work, which included repairing washouts of tracks, culverts, and bridges; ditch cleaning and shaping; signal box replacement; and culvert cleaning, were documented and cost estimates were computed for sixteen Damage Survey Reports (DSRs). The estimated cost to restore the pre-disaster condition of the affected facilities was $103,243. All of the DSRs were determined to be ineligible because the FEMA review of the Operating Agreement (Agreement) between the Subgrantee and the Nittany and Bald Eagle Railroad Company (Operator) did not assign legal responsibility for the repairs to the Subgrantee.

First Appeal
With a letter dated May 15, 1997, the Pennsylvania Emergency Management Agency (PEMA) forwarded the first appeal for the Subgrantee to FEMA. PEMA stated, in agreement with the Subgrantee, that the "force majure" clause in the above mentioned Agreement alleviates the Operator from repairing the damages caused by the flood disaster. Specific sections of the Agreement were cited in support of the first appeal. Additionally, a legal opinion from the Subgrantee's attorney and documentation of a previous payment made by the Subgrantee to a company that performed repair work were submitted to demonstrate that the Subgrantee has the responsibility for the repairs of the damaged railroad tracks and facilities. Thus, the Subgrantee requested $103,243, to fund all of the repairs shown in the DSRs.

The Regional Director denied the appeal with a July 14, 1997 letter to PEMA. The basis of this determination was that the Operator was responsible for the repair and maintenance of the railroad, and the "force majure" clause did not indicate that responsibility was reassigned to the Subgrantee as a result of the flood disaster. Additionally, the Regional Director noted that the Agreement had not been signed by the entities in question; moreover, it was prepared after the declared disaster event. Further, there was no precedence established that the Subgrantee had previously funded repairs to the railroad facilities. Accordingly, the first appeal was denied.

Second Appeal
With a February 19, 1998, letter to PEMA, the Subgrantee submitted a second appeal and provided documentation to support their claim, which includes a check to the Northshore Railroad Company for approximately $63,783 to fund repairs at three sites. In a March 20, 1998, letter PEMA forwarded the second appeal to FEMA for a reconsideration of the eligibility decision and requested funding for the cost to repair the railroad facilities.

DISCUSSION
All of the documentation submitted by the Subgrantee has been reviewed as a result of the second appeal. Specifically, the Operating Agreement submitted in support of the second appeal was reviewed to determine the existence and extent of the Subgrantee's legal responsibility to fund the repairs to the railroad facilities. The following addresses each issue.

AgreementCommencement Date
The first section of that document notes that the Agreement was "made and entered" on August 15, 1996, which is seven months after the disaster declaration. Therefore, the Agreement was not in effect at the time of the disaster.

Operator's Obligations
Section seven of the Agreement outlines the Operator's obligations. In particular, paragraph (d) of this section states that the maintenance and operation of the "Railroad Premises" are the responsibility of the Operator. This Agreement requires that the maintenance and operation measures be performed to the appropriate standards. Further, paragraph (e) explains that the Operator agrees to "repair or replace at its own expense, any rails, ties, and other items of track or signaling equipment" to provide good operating conditions for the railroad. These sections assign the responsibility to maintain and repair the railroad facilities exclusively to the Operator.

Force Majure
In section twenty of the Agreement, force majure is addressed. This portion of the Agreement explains that neither party would be held responsible, or in breach of the Agreement, if there was any loss, delay, damage, or the like resulting in the requirements of the Agreement not being met. However, the loss, delay, damage or the like must be the result of an event out of the reasonable control of either party. Such events include "perils of water including floods" and "Acts of God including storms or other adverse weather conditions." According to the Agreement, the party experiencing the force majure must provide written notice to the other party and state that as soon as possible the operation would be returned to normal as soon as possible. Additionally, this section of the Agreement states that if one party is unable to perform its duties, the other party's obligation may also be suspended until the situation is resolved.

This portion of the Agreement implies that if an event, such as a flood, does occur neither party is required to perform its responsibilities until the effects of the event are dissipated and normal procedures can resume. Nonetheless, the Agreement does not assert that the Subgrantee is responsible for funding the repairs or replacement of any Railroad Premises, which are normally the requirements and responsibility of the Operator.

Signature
The Subgrantee and the Operator did not sign the Agreement. Therefore, even if the "force majure" could be interpreted such that the Subgrantee was responsible for the repairs, the unsigned Agreement would not be a legally binding document.
Other Issues
In addition to the issues related to the Agreement, the Subgrantee attempts to establish that they fund repairs associated with the railroad system. However, even though the Subgrantee funded fifty percent of the repair of damage that occurred in October 1996, a history of payment responsibility has not been established by the Subgrantee. There is no indication that the Subgrantee has repeatedly funded repairs in the past, or would do so in the future.

CONCLUSION
As explained above, the Agreement between the Subgrantee and the Operator does not place exclusive responsibility for the repair of the damaged railroad facilities on the Subgrantee. Therefore, in accordance with Title 44 Code of Federal Regulations (44 CFR) Section 206.223(a)(3), which states general work eligibility is contingent upon the applicant having the legal responsibility to perform the work, the Subgrantee and the work performed to repair the railroad facilities are not eligible for FEMA disaster assistance. Consequently, the second appeal is denied.
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