Norfolk Southern now estimates its Ohio derailment costs at $803M

Cleanup and community support costs soar nearly six months since crash and release of toxic chemicals
An aerial photo shows cleanup and remediation continuing on the site of the Feb. 3 Norfolk Southern freight train derailment, Saturday, July 15, 2023, in East Palestine. (Matt Freed for The Atlanta Journal-Constitution)

Credit: (Matt Freed for the Atlanta Journal Constitution)

Credit: (Matt Freed for the Atlanta Journal Constitution)

An aerial photo shows cleanup and remediation continuing on the site of the Feb. 3 Norfolk Southern freight train derailment, Saturday, July 15, 2023, in East Palestine. (Matt Freed for The Atlanta Journal-Constitution)

Atlanta-based Norfolk Southern now estimates its costs from its derailment in East Palestine, Ohio, have soared to $803 million, the company disclosed Thursday.

The disclosure was made public during the railroad’s second quarter earnings report and includes significant increases in estimated environmental, legal and community support costs. In its report, Norfolk said the cumulative estimate includes $581 million for the environmental response, remediation and oversight since the Feb. 3 wreck, and $222 million in legal costs and community assistance.

“We continue to deliver on our commitment to make things right for the people of East Palestine and the surrounding communities,” Norfolk Southern CEO Alan Shaw said during the investor call. “Our financial results were challenged this quarter. ... They reflect the decisive actions we have taken to advance our strategy and keep our promises in East Palestine.”

The estimated cost of the derailment includes $416 million recorded for the second quarter of this year, on top of $387 million recorded in the first quarter. Of the total, Norfolk Southern has paid $287 million so far. It expects roughly half of the remainder to be paid this year and the other half next year and beyond.

Norfolk Southern CEO Alan Shaw answers questions from AJC's reporters Kelly Yamanouchi and Michael Kanell at Norfolk Headquarters in Atlanta on Tuesday, April 4, 2023. 
Miguel Martinez / miguel.martinezjimenez@ajc.com

Credit: Miguel Martinez

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Credit: Miguel Martinez

The estimate of expenses could change in the future. And, the railroad is working to recover some of its costs through lawsuits and insurance claims.

“Any changes in the nature, extent and duration of the remaining cleanup activities and government oversight activities may impact our current estimate,” Norfolk Southern Chief Financial Officer Mark George said during the investor call. He also said development of a health care fund for affected residents and potential fines, penalties or settlements and legal expenses will likely impact future costs.

Norfolk Southern has already filed suit against railcar owners and shippers connected to the chemicals that spilled in the derailment.

And the railroad plans to begin filing insurance claims in the next couple of months, though it doesn’t expect the payouts to come until next year.

The recorded costs have cut into the railroad’s profits. Overall, Norfolk Southern reported a $356 million profit for the second quarter, down 57% from $819 million a year earlier.

Its results for the quarter ended June 30 included $2.98 billion in operating revenues, down from $3.25 billion in the same quarter last year. The company has lost an estimated $175 million to $200 million in revenue from service disruptions after the East Palestine derailment, according to George, as its customers turned to alternatives including trucks and other railroads

Norfolk Southern’s quarterly operating expenses were $2.4 billion, 21% higher than the $1.98 billion it saw a year earlier.

A Norfolk Southern logo is seen at the Norfolk Southern Headquarters building from W. Peachtree Street NE in Atlanta on Tuesday, April 4, 2023. 
 Miguel Martinez / miguel.martinezjimenez@ajc.com

Credit: Miguel Martinez

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Credit: Miguel Martinez

Separately, Shaw said he has been working with elected officials and regulators who are seeking to improve federal rail safety regulation. He said he has endorsed “a lot of the provisions that are in various bills that are moving through the House or moving through the Senate.”

Norfolk Southern has resisted certain proposed requirements such as two-person crew mandates. But Shaw also said Thursday: “I don’t see anything out there right now that is going to be too onerous on the rail industry, its cost structure.”

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