Legal Responsibility, Result of Declared Incident

Appeal Brief

Summary Paragraph

The State of Vermont experienced severe storms during an incident period of July 29-30, 2021. The Vermont Agency of Transportation (Applicant) requested Public Assistance (PA) for repairs to the railroad (Facility), which the State owned, but which the Applicant, a State agency acting on behalf of the State, leased to a private entity, Vermont Railway, Inc. (VTR). FEMA created Grants Manager Project (GMP) 553012 to document the Applicant’s completed work, which FEMA recorded as the installation of 4 inches of ballast to restore the Facility to predisaster condition, and approximately 8 inches of ballast to raise the track elevation as a hazard mitigation (HM) measure. FEMA denied funding for the project in a Determination Memorandum, finding that the Applicant was not legally responsible for the work. The Applicant submitted a first appeal, asserting that the lease between it and VTR did not delegate to VTR the responsibility for disaster-related repairs. The Vermont Department of Public Safety (Recipient) forwarded the appeal to FEMA with its support. FEMA submitted a Request for Information to the Applicant seeking documentation that demonstrated the work was required as result of the disaster. The Applicant responded with additional documentation, including predisaster inspection reports from three weeks before the disaster. The FEMA Region 1 Regional Administrator denied the appeal, finding that the Applicant was not legally responsible for the work and did not demonstrate that the damages were disaster-related. The Applicant submitted a second appeal, reiterating first appeal arguments. The Applicant also clarified the that 8 inches of ballast to raise the track elevation was an immediate response to the event to protect the Facility from further damage and minimize disruption to freight transportation and should be considered emergency protective measures. The Recipient transmitted the appeal with its support. 

Authorities and Second Appeals

• Stafford Act §§ 403, 406(a)
• 44 C.F.R. §§ 203.223, 206.225, 206.226.
• PAPPG at 51-53, 63-64, 110.
• The Ethician Foundation, GMP 40361, FEMA-4332-DR-TX, at 2; Erie County, FEMA-1857-DR-NY, at 3.

Headnotes

• In the case of a leased facility, FEMA reviews the lease agreement to determine legal responsibility for repair of damage caused by the incident. If the lease does not specify either party as responsible, FEMA considers the owner of the facility legally responsible for the costs to restore the facility.
  • The lease is silent on responsibility for disaster-related damage repairs and therefore the Applicant, as the Facility’s owner, retains legal responsibility. 
• To be eligible, work must be required as a result of the declared incident. 
  • The Applicant did not demonstrate that the repairs to its Facility, or work to elevate the track, were required a result of the declared incident.

Conclusion

The Applicant has demonstrated it is legally responsible for disaster-related repairs to the Facility, but in this case, it has not demonstrated the work requested is required as a result of the declared incident. Therefore, this appeal is denied.

Appeal Letter

Appeal Analysis

Background

The State of Vermont experienced severe storms during an incident period of July 29-30, 2021.[1] The Vermont Agency of Transportation (Applicant) applied for FEMA Public Assistance (PA) funding for a state-owned railway (Facility) that the Applicant, a state agency acting on behalf of the State of Vermont, leased to Vermont Railway, Inc. (VTR).[2] In its request for PA, the Applicant indicated that flood waters washed sediment onto the rail tracks and into the ballast from Mile Post (MP) 28.57 to 29.30.[3] The Applicant washed sediment off the track ballast and installed 12 inches/1260 tons of ballast at a total cost of $21,806.48. FEMA prepared Grants Manager Project (GMP) 553012, which stated that 4 inches of ballast was installed as an in-kind repair, and approximately 8 inches of ballast was used to raise the track elevation as a hazard mitigation (HM) measure. Based on the invoices describing the labor, equipment, and material costs, FEMA estimated that $9,624.81 was associated with the claimed repair, and $12,181.67 was related to the track elevation/HM measure. The Applicant also installed a new cross drain/culvert at the site to encourage water flow, but did not request PA funding for this work.

In support of its request for PA, the Applicant provided a post-disaster photograph (undated), which showed ankle-deep water sitting on the Facility’s tracks. The Applicant also submitted VTR daily work logs dated during and immediately after the disaster, which contained observations of conditions at MPs along the Facility. A log from August 1, 2021, pertaining to MP 16 to 28.8, stated that water was 2.5 inches over the rail. 

FEMA issued a Determination Memorandum (DM) on June 21, 2022, finding the Applicant was not legally responsible for the repair of the Facility. FEMA noted that while the Applicant may own the Facility, the lease agreement between the Applicant and VTR assigned VTR the responsibility to repair or replace “rail, ties, and other items of track or signaling equipment as may be necessary to keep railroad in good operating condition.”[4] 

First Appeal 

The Applicant filed a first appeal in a letter dated August 19, 2022. The Applicant noted that according to PA policy, FEMA looks to the controlling lease to determine legal responsibility for repair, and, if the lease does not specify either party as responsible, FEMA considers the owner of the Facility legally responsible for costs to restore the Facility. The Applicant provided the lease and cited to specific provisions that it stated supported its position that the lease did not clearly delegate legal responsibility to VTR or specify either party as responsible for the claimed disaster-related repairs. The Applicant argued that a force majeure clause in the lease relieves VTR from its obligation to maintain and operate the line if certain conditions (such as a flood) exist. In response to statements in the DM questioning whether work was required as a result of the disaster, the Applicant explained that the saturation of the railroad subgrade made it subject to deformation that could cause the track structure to subside, and that when ballast is exposed to high floodwaters, sediment can compromise and negatively impact its drainage capability. The Vermont Emergency Management, Department of Public Safety (Recipient) forwarded the appeal, with its support, to FEMA on August 26, 2022. 

FEMA issued a Request for Information on November 29, 2022, requesting documentation demonstrating that the work to repair the Facility was required as a result of the declared incident because the record did not contain enough evidence concerning the predisaster condition of the Facility. FEMA also asked for a benefit-cost analysis (BCA) demonstrating the cost-effectiveness of the HM measure to elevate the track with the installation of 840 tons of ballast. The Applicant provided, in part, a statement identifying and explaining documentation from VTR’s track inspection program, weekly track inspection reports from July 18 through August 2, 2021,[5] screenshots of an April 28, 2021 video inspection of the Facility, photographs of the Facility after the claimed disaster repairs were completed, and the specification for the ballast used under the Facility’s tracks. The Applicant explained that the documentation showed the Facility was maintained within regulatory parameters before the disaster and performing adequately. The Applicant did not address the request for a BCA.

The FEMA Region 1 Regional Administrator denied the appeal on April 12, 2023. FEMA first found that the Applicant had not demonstrated that it was legally responsible for the permanent repairs to the Facility. FEMA noted that the lease obligated VTR to perform all obligations of the owner set forth in Title 49 of the Code of Federal Regulations, section 213.5, of the Federal Railroad Administration (FRA) Track Safety Standards, which includes Part 213 requirements specifically pertaining to the repair and restoration of ballast to bring the train line into compliance with other standards.[6] Regarding the force majeure clause, FEMA found that the clause did not relieve VTR of its obligations; instead, it related to VTR’s obligation to operate the line at a minimum frequency along three routes. FEMA also found that the Applicant did not provide documentation that would allow FEMA to conclude that the claimed damages were directly caused by the disaster. FEMA stated the predisaster inspection reports did not specify the condition of the ballast. Therefore, FEMA found the work to repair the Facility was not a result of the declared incident. Additionally, FEMA found that the HM was not cost effective.

Second Appeal

The Applicant submitted a second appeal in a letter dated June 7, 2023. Regarding the issue of legal responsibility, the Applicant asserts that since the lease does not specify responsibility for repair of damage resulting from a disaster, the owner of the Facility is responsible. The Applicant argues that 49 C.F.R. § 213.5 makes VTR responsible for routine inspection and maintenance only and, therefore, the language in the lease transferring legal responsibility for § 213.5 obligations does not transfer legal responsibility for disaster-related repairs. Next, the Applicant states that FEMA erred by interpreting the force majeure clause in the lease too narrowly, arguing that the language relieving the Applicant of “any obligation hereunder” can be read to encompass all obligations under the lease. Regarding the issue of whether the work was required as a result of the declared incident, the Applicant states that prior to the disaster, the Facility was regularly inspected and maintained, and the ballast was functional and in a state of good repair, with years of useful life remaining. Finally, the Applicant stated that work previously described as a HM measure was undertaken in the immediate response to the event to protect the Facility from further damage and minimize disruption to freight transportation and should be considered emergency protective measures. The Recipient forwarded the Applicant’s appeal with its support on June 8, 2023.

Discussion

Legal Responsibility 

FEMA may provide PA funding for the repair, restoration, reconstruction, or replacement of a public facility damaged by a major disaster.[7] To be eligible for PA, the work must be the legal responsibility of an eligible applicant.[8] To determine legal responsibility for permanent work, FEMA evaluates whether the applicant claiming the costs had legal responsibility for disaster-related restoration of the facility at the time of the incident based on ownership and the terms of any written agreements.[9] In the case of a leased facility, FEMA reviews the lease agreement to determine legal responsibility for repair of damage caused by the incident.[10] If the lease does not specify either party as responsible, FEMA considers the owner of the facility legally responsible for the costs to restore the facility.[11]

Here, the Applicant owns the Facility but leases it to VTR. Therefore, FEMA reviewed the lease agreement between the Applicant and VTR to determine whether the lease assigned legal responsibility for disaster-related restoration to VTR by specifying that VTR would be responsible for repair of damages caused by a disaster. Although sections of the lease obligate VTR to maintain the line “in good operating condition” and comply with the FRA Track Safety Standards, they do not specify either party as responsible for disaster-related repairs.[12] For example, these provisions, and the regulatory standards incorporated by reference at 49 C.F.R. § 213.5, do not expressly address extraordinary repairs, or repairs that would be required as a result of a disaster or any other cause beyond the parties’ control.[13]Thus, as the Facility’s owner, the Applicant retains its inherent legal responsibility for disaster-related Facility repairs.[14]

Result of Declared Incident

FEMA may reimburse eligible applicants for the repair, restoration, reconstruction, or replacement of public facilities damaged or destroyed by a major disaster on the basis of their predisaster design, function, and capacity in conformity with other provisions.[15] To be eligible for PA funding, an item of work must be required as a result of a major disaster, and the applicant must demonstrate that the damage was directly caused by the incident.[16] When necessary to validate damage, the applicant may be required to provide documentation supporting the predisaster condition of the facility (e.g., facility maintenance records, inspection/safety reports).[17] If a facility was functioning prior to the disaster and the disaster caused damage that rendered the facility non-functional, the facility may be eligible provided the predisaster condition was not a significant contributing factor in the cause of failure.[18] The applicant is responsible for providing documentation to support its claim as eligible.[19]

In its second appeal, the Applicant states that floodwaters washed sediment onto portions of the track and into the ballast. It states that in response, new materials were brought in to keep the line in service by raising the track structure 6-to-8 inches. The information the Applicant provided on appeal, and in the record, does not establish that this work was required as a result of the disaster to restore the Facility to its predisaster design, function, or capacity; describe or document disaster-caused damages or how the disaster rendered the Facility non-functional; or differentiate between the pre- and post-disaster condition of the Facility’s ballast in order to validate damage. 

For example, the records from three weeks before the declared incident indicate that the ballast was performing adequately; however, they do not assist in validating disaster-caused damages. Similarly, the post-disaster weekly track inspection reports do not help to distinguish between pre- and post-disaster condition or describe damages to the ballast. The VTR daily log from August 1, 2021 stated that water was 2.5 inches over the rail, and a report from August 2, 2021 for MP 2.65 through 30.0 contained an entry of “no defects noted.” The Applicant states that predisaster screenshots from April 2021 show that the rail met FRA standards. However, neither these screenshots, nor other pre- or post-disaster photographs provided, assist in demonstrating disaster-caused damages. Post-disaster photographs showed that the tracks were flooded, but do not establish that the ballast was damaged by the event, nor that the Facility was subject to high-velocity floodwaters that caused erosion.[20] 

In addition, the Applicant installed a cross drain/culvert at the site, for which it did not request PA funding; it is not clear if or how this work impacted the Facility and the Applicant’s request for the ballast work. In sum, the documentation in the record does not demonstrate direct disaster-caused damages, or establish that the work the Applicant performed was required as a result of the disaster. 

Finally, in its second appeal, the Applicant asks that FEMA consider what was previously described as a HM measure, elevation of the track by adding 840 tons of ballast to the Facility, to instead be considered as emergency protective measures. FEMA is authorized to provide emergency protective measures to save lives and protect public health and safety.[21] For emergency protective measures to be eligible, an applicant is responsible for showing the work is required to address an immediate threat resulting from the declared incident.[22] The Applicant states that the 6-to-8 inch elevation raised the track above the observed flood levels to protect the line from further damage and keep it passable. Similar to the claimed repair work, the Applicant has not demonstrated that the requested work was required to address an immediate threat. 

Conclusion

The Applicant has demonstrated it is legally responsible for disaster-related repairs to the Facility; but in this case, it has not demonstrated the work requested was required as a result of the declared incident. Therefore, this appeal is denied.