Increased Operating Expenses, Immediate Threat, 705(c)

Appeal Brief

Summary Paragraph

From June 23, 2012 through July 26, 2012, high winds, heavy rain, and localized flooding from Tropical Storm Debby impacted the Applicant.  Disaster related rainwaters mixed with solid waste at Applicant’s four landfill facilities creating leachate.  The Applicant subsequently sought funding for costs associated with removing and processing this leachate.  FEMA prepared PW 989 to address the Applicant’s request and identified $102,188.72 in eligible costs associated with leachate removal and processing.  On March 4, 2013, the Applicant submitted its first appeal to the Florida Division of Emergency Management (Grantee) and requested an additional $208,213.31 in funding for a total request of $310,402.02.  The Applicant proposed that FEMA use a different methodology to calculate the amount of leachate processed at sites 1, 2, and 4.  On December 5, 2014, the FEMA Region IV Regional Administrator (RA) denied the Applicant’s first appeal, stating that leachate removal and processing is not eligible for funding unless an immediate threat exists.  The RA determined there was no basis to approve additional funding, but stated an immediate threat of leachate overflow existed at sites 2 and 3.  On March 27, 2015, the Applicant submitted its second appeal, arguing that its methodology for calculating leachate is sound and pointing out that FEMA had used the same methodology in a previous storm, 1481-DR-FL.  The Grantee transmitted the Applicant’s second appeal to FEMA and asserted that removing and processing leachate is not an increased operating expense, arguing that had the Applicant simply continued routine operations surrounding land and groundwater would have been contaminated.  On September 30, 2015, FEMA sent a Request for Information (RFI) to the Applicant requesting additional documentation describing the existence of an immediate threat.  The Applicant provided no response to the RFI. 

Authorities and Second Appeals

• 44 C.F.R. §§ 206.224(a), 206.225(a), 206.206(a).

• PA Guide, at 54-55, 67, 73-74.

• Sonama Cnty, FEMA-1203-DR-CA, at 1-2.

• New Hanover Cnty, FEMA-1608-DR-NC, at 2.

Headnotes

• Pursuant to to be eligible for assistance emergency protective measures work must be necessary to eliminate immediate threats to lives, public health, and safety.

  • Transporting and processing leachate does not necessarily involve an immediate threat.

• Pursuant to the PA Guide, at 54, the costs of operating a facility may increase due to or after a disaster, these increased operating costs are not eligible for assistance.

  • Costs to remove and process leachate, absent an immediate threat, were increased operating expenses as leachate removal and processing are part of normal landfill operations.

• Section 705(c) of the Stafford Act bars FEMA from deobligating previously awarded funding if: “(1) the payment was authorized by an approved agreement specifying the costs; (2) the costs were reasonable; and (3) the purpose of the grant was accomplished.”

  • All three criteria were satisfied, therefore FEMA is barred from disallowing the previously obligated PA funding.

Appeal Letter

Appeal Analysis

Background

From June 23, 2012 through July 26, 2012, high winds, heavy rain, and localized flooding from Tropical Storm Debby impacted Pasco County (Applicant).  Disaster related rainwaters percolated through solid waste at the Applicant’s landfill facilities, creating leachate.[1]  The Applicant subsequently sought FEMA Public Assistance (PA) funding for costs associated with work to remove and process disaster related leachate.  

The Applicant requested funding for leachate removal and processing at four separate landfill sites.  Each site has a different procedure for removing and processing leachate.  Site 1, a class III landfill,[2] utilizes a pumping system that pumps leachate directly to the Applicant’s Shady Hills Wastewater Treatment Plant (SHWTP) located adjacent to site 1.  Site 2, a Class I landfill,[3] utilizes a leachate retention pond, wherein leachate collects and is pumped to the adjacent SHWTP.  Site 3, a Class I landfill, processes ash-monofil, the by-product of incinerated garbage.   The leachate from site 3 accumulates in a storage tank.  The Applicant then pumps the leachate from the storage tank into trucks that haul it to a wastewater treatment plant in Tampa, Florida.  Site 4, like site 2, is a Class I landfill where leachate collects in a retention pond.  Unlike site 2, site 4 is not adjacent to the SHWTP.  Rather than pumping the leachate directly to the SHWTP, the Applicant pumps it from the site 4 retention pond into trucks that haul the leachate to the SHWTP.  On December 5, 2012, FEMA obligated Project Worksheet (PW) 989 for $102,188.72 and categorized the work as Category A, debris removal.  

To calculate the cost to process leachate at site 1, FEMA relied upon documentation describing the number of gallons processed in previous years and compared it to the gallons of leachate processed in 2012.[4]  FEMA arrived at a total figure of 1,699,238.00 gallons of excess leachate processed in 2012 at site 1.[5]  FEMA estimated the total cost to treat excess leachate resulting from the storm to be $6,185.23.[6] 

FEMA used the same methodology at site 1 to calculate the leachate processed at site 2 and calculated the cost at $9,421.74.  At site 2, FEMA also considered 37.5 hours of force account overtime and 57.5 hours of equipment time to pump leachate into trucks because, as the PW noted, the retention pond could not contain the leachate and was on the verge of overflow.  On August 1 and August 2, 2012, the Applicant used force account labor and interdepartmental contracts to remove blockage in the drainage system.[7]  These additional non-processing costs totaled $7,578.89.[8]  FEMA obligated $17,000.63 for the work performed at site 2.[9]

The Applicant does not process leachate from site 3 at the SHWTP because the leachate created by ash requires specialized treatment.  Accordingly, the Applicant incurred costs to transport and process leachate created at site 3.[10]  The PW notes that the Applicant operated the storage tank and tanker truck pumping station nearly 24 hours per day for several weeks due to the volume of leachate.[11]

FEMA determined that considerations for runoff and topography would not apply to site 3 because this landfill uses a lining that captures rain that falls on the site.  FEMA’s methodology did not include consideration for runoff and topography, which resulted in an estimate of an additional 1,469,061 gallons of leachate.[12]  Applying this number, FEMA assessed transportation, hauling and treatment costs at $60,673.20.[13]  FEMA also accounted for the 211 hours of overtime and 231 hours of equipment costs totaling $7,312.93, bringing the total funding awarded for the work performed at site 3 to $67,986.13.[14]

At site 4, FEMA applied the same methodology used for sites 1 and 2 and estimated 215,169 gallons of leachate would need processing[15] for a total cost of $783.21.[16]  At $33.45 per 1,000.00 gallons,[17] the cost to transport 215,169 gallons of leachate totaled $7,197.40, bringing the total amount of funding to process leachate at site 4 to $7,980.61.[18]

FEMA obligated PA funding for a total of $102,188.72 in costs for the work performed at the four landfill sites.[19] 

First Appeal

The Applicant submitted its first appeal on March 4, 2013 to the Florida Division of Emergency Management (Grantee).  The Applicant requested an additional $208,213.31 in PA funding for a total request of $310,402.02.  The Applicant reasoned that FEMA should calculate the amount of disaster related leachate and the cost of processing the leachate at sites 1, 2, and 4 using the methodology used by FEMA at site 3.[20]  The Applicant refers to this methodology as the “rainfall methodology” or the “rejected methodology.”[21]  

The Applicant conceded that its original estimate of acreage at sites 1 and 2 was too high, stating that only the active acres[22] should be used in the calculation.[23]  At site 1, the Applicant asserted it was appropriate to calculate costs associated with only 5.179 active acres, as opposed to the 11.25 acres originally requested.[24]  Using its proposed methodology, the Applicant requested a total of $6,923.52 to process leachate at site 1, thus requesting an additional $738.29.[25]  At site 2, the Applicant acknowledged it was appropriate to calculate costs associated with only 8.84 active acres and requested a total of $11,824.13, an additional $2,402.39.[26]  At site 4, the Applicant does not propose a reduction of the acreage of the active area as it did at sites 1 and 2.  Using the rainfall methodology with reduced acreage, the Applicant requested treatment costs totaling $216,748.26, a request of an additional $208,767.65 at the site 4 location.[27]

On December 15, 2014, the FEMA Region IV Regional Administrator (RA) denied the first appeal finding that leachate removal and processing, without the existence of an immediate threat, is an ineligible increased operating expense.  The RA only determined that an immediate threat was present at sites 2 and 3.  Based on these determinations, the RA asserted there was no basis to approve additional funding.[28]  However, the RA did not deobligate any of the previously awarded funding.      

Second Appeal

The Applicant submitted its second appeal on March 27, 2015, contesting the RA’s first appeal decision and arguing the “rainfall methodology” is sound and FEMA used this methodology for a previous storm, FEMA-1481-DR-FL, PW-170.  The applicant did not state an amount of requested funding.[29]  In a May 22, 2015 letter, the Grantee forwarded the Applicant’s second appeal to FEMA.  This transmittal letter provided a more detailed argument supporting the appeal.  The Grantee’s primary contention is that leachate removal was not debris removal but an emergency protective measure as the leachate posed an immediate threat to life public health, or safety.  To support this position, the Grantee asserts Tropical Storm Debby caused leachate to accumulate in retention ponds and storage tanks to a level one foot above the liner.[30]  The Grantee then argues this accumulation, if not addressed by non-routine operation, would have caused the retention ponds and storage tanks to leak at an increased rate.  Any such leakage would have allowed contamination of surrounding land and groundwater creating a threat to public health.  The Grantee also asserts that FEMA in response to two previous disasters—DR-1545, PW 5445 and DR-1481, PW170— had determined similar leachate removal and processing costs to be eligible at sites 2 and 4.

On September 30, 2015, FEMA sent a Request for Information (RFI) to the Applicant requesting additional documentation showing the existence of an immediate threat.[31]  The Applicant acknowledged receipt of the RFI but did not respond with documentation.[32]  

Discussion

Section 403(a) of the Stafford Act authorizes Federal agencies, including FEMA, to provide assistance essential to meet immediate threats to life and property resulting from a major disaster, including work that “reduce[s] immediate threats to life, property, and public health and safety.”[33]  Pursuant to 44 C.F.R. § 206.201(b), emergency work is defined as work which must be done immediately to save lives and to protect improved property and public health and safety, or to avert or lessen the threat of a major disaster.[34]

Immediate Threat

Pursuant to 44 C.F.R. § 206.225(3), to be eligible for PA funding, emergency protective measures[35] must be necessary to (1) eliminate immediate threats to lives, public health, and safety; (2) eliminate immediate threats of significant damage to improved public or private property when the measure is cost effective; or (3) ensure economic recovery of the affected community to the benefit of the community at large.[36]  In general, while the costs of operating a facility may increase due to or after a disaster, these increased operating costs are not eligible for assistance.[37]  There is an exception to this principle whereby increased operating costs may be eligible, but only in the event of reasonable short-term costs that are directly related to accomplishing emergency health and safety tasks as part of emergency protective measures.[38]  In sum, for an emergency protective measure to be eligible for funding an immediate threat must be present.  Accordingly, once any immediate threat ends, continued work is no longer eligible for funding.[39]

While leachate is hazardous to the environment if it is released into the environment or not properly processed, work to remove and process leachate and the associated costs are normal components of landfill operations.  Accordingly, work to remove and process leachate cannot be eligible for PA funding unless the work is necessary to eliminate an immediate threat.[40]  Without the existence of an immediate threat caused by the disaster, leachate removal and processing work and its associated costs qualify as increased operating expenses.[41]  The processing of leachate at a wastewater treatment plant generally would not be addressing an immediate threat because once the leachate has reached a processing plant it is contained, awaiting treatment, and no longer a threat to health and safety.  Methodologies—like those made the subject of the Applicant’s appeals—attempt to determine the amount of leachate created by a rain event and then include the resulting processing and transportation costs as components of the emergency protective measure.  This methodology, however, does not account for the requirement of an immediate threat and may improperly blend costs associated with eligible work and increased operating expenses.  As such, a site-by-site assessment is required to determine if and when an immediate threat existed for costs to be eligible.

Site 1

The Applicant provided no documentation to support its position that an immediate threat existed at site 1 or that leachate was one foot above the double liner system as claimed by the Grantee.  Even assuming leachate reached this level, the Applicant failed to provide any documentation demonstrating how any such scenario caused an immediate threat.  Undercutting an argument an immediate threat existed, the Applicant did not institute any work outside of its normal procedure for pumping leachate from the landfill.  The pumping that occurred was part of the normal operations of the landfill, and to the extent the cost to perform these normal operations increased as a result of the disaster, those costs are increased operating expenses.  Without the existence of an immediate threat, these increased costs are not eligible for funding.  Therefore, the previously obligated funding in the amount of $6,185.23 should have been disallowed.

Site 2

FEMA documented that an immediate threat existed at site 2’s retention pond.  The PW states that the retention pond was “on the verge of overflowing.”[42]  To address this immediate threat, the Applicant rented equipment and used overtime labor to pump the leachate into trucks and deliver it to the SHWTP.  Overtime work, transportation costs, and rental costs of the pump were all outside of the normal operating procedure.  The non-routine procedure of pumping and transporting leachate and the removal of blockage in the pump indicate the Applicant performed the work because an immediate threat of overflow was present.  Accordingly, $7,578.89 in costs pertaining to site 2 are eligible for funding.

The increased operating costs incurred to process the leachate are not eligible for funding because the Applicant failed to provide documentation to show how this work addressed an immediate threat.  Therefore, $9,421.74 in previously obligated funding should have been disallowed.

Site 3

FEMA noted that “because the volume of leachate was so great” at this site, the Applicant’s labor force operated on a nearly 24-hour per day basis for several weeks to prevent overflow of the storage tank.[43]  These non-routine procedures, which involved 211 hours of force account overtime and 231 hours of equipment time, were properly documented and demonstrated they were performed to address an immediate threat.  Accordingly, the $7,312.93 in costs associated with labor and equipment are eligible for funding.  Consequently, the $60,673.20 in subsequent processing and transporting costs from the site’s holding tank are not eligible for funding because they are increased operating costs.  As with site 2, once the emergency protective measure of removing the leachate was complete, the immediate threat of overflow no longer existed.

Site 4

The Applicant did not provide documentation of an immediate threat of overflow at the site 4 leachate storage tank/retention pond.  While it is clear that the Applicant removed and processed additional disaster related leachate at site 4, it followed the same leachate removal and processing procedures after the storm as were conducted prior to it.  Additional costs from this work are increased operating expenses because nothing suggests an immediate threat was present.  Therefore $7,980.61 in previously obligated funding should have been disallowed.

In summary, out of the total $102,188.72 in costs covered by the original obligation, a total of $14,891.82 in costs is eligible for Public Assistance funding, and a total of $87,296.90 is ineligible for funding. 

Prior Funding

Both the Applicant and Grantee pointed to the fact that in previous disasters FEMA reimbursed the Applicant for leachate removal and processing.  They further point out that FEMA calculated costs using the Applicant’s requested methodology and specifically point to DR-1545, PW-5445 and DR-1481, PW-170.  The sufficiency of the documentation supporting any immediate threat that potentially arose from those disasters is not the issue presently on appeal.  FEMA can only consider the documentation provided by the Applicant to support the present appeal.  As described previously, the Applicant has not supported all elements of its claim in this appeal. 

Stafford Act § 705(c) Applicability

Section 705(c) of the Stafford Act bars FEMA from deobligating previously awarded funding if: “(1) the payment was authorized by an approved agreement specifying the costs; (2) the costs were reasonable; and (3) the purpose of the grant was accomplished.”[44]  FEMA issued FP-205-081-2, Stafford Act Section 705, Disaster Grant Closeout Procedures, to clarify these three criteria.  For PA appeals that may result in a recovery of funding, the policy applies when an applicant’s appeal rights have not been exhausted and FEMA has not made a final administrative decision.[45]  The policy is therefore applicable to this appeal.  FEMA has determined, in this instance, that the three requirements are satisfied.  Consequently, although $102,188.72 in costs described above are ineligible, FEMA is precluded from recovering them.

Conclusion

The Applicant failed to provide documentation to support its position that an immediate threat existed at sites 1 and 4.  Accordingly, the costs associated with work to remove and process leachate at those sites are increased operating expenses and ineligible.  At sites 2 and 3, only costs to remove an immediate threat are eligible for funding.  The amount of costs eligible for funding should only total $14,891.82.  However, FEMA has determined that section 705(c) of the Stafford Act applies and the RA is instructed not to deobligate any funding for the previously approved costs of $102,188.72.