Norfolk Southern estimates $387 million hit from Ohio derailment

Initial forecast of incident’s cost comes as Atlanta-based railroad reports a first quarter profit
The Norfolk Southern logo is prominently displayed on the company's headquarters in Atlanta, as viewed from W. Peachtree Street NE on Tuesday, April 4, 2023.
 Miguel Martinez /

Credit: Miguel Martinez

Credit: Miguel Martinez

The Norfolk Southern logo is prominently displayed on the company's headquarters in Atlanta, as viewed from W. Peachtree Street NE on Tuesday, April 4, 2023. Miguel Martinez /

Atlanta-based Norfolk Southern said Wednesday that it has incurred an initial estimated $387 million in costs because of its toxic derailment in East Palestine, Ohio, in February.

The estimate includes costs for cleanup of the site, community support and restoration payments, legal and advisory expenses and a preliminary estimate of claims and settlements, according to Mark George, the company’s chief financial officer, in remarks during a conference call with investors. So far, the company has spent about $55 million of that total.

He noted that the company expects more costs to accrue in the future.

Some of the expenses may be “potentially recoverable under the company’s insurance policies,” which would be reported in the future, according to the railroad.

“From the beginning, we have been guided by one principle: We are going to do whatever it takes to make it right for East Palestine and the surrounding areas,” said Norfolk Southern CEO Alan Shaw in a written statement.

“We are making progress every day,” he added.

The Feb. 3 derailment of a Norfolk Southern train carrying hazardous materials that burned just on the edge of East Palestine, near the border of Ohio and Pennsylvania, has caused months of concern about the effects of the chemicals on residents in the area.

Officials decided to burn vinyl chloride from rail cars to prevent an uncontrolled explosion, which resulted in a huge plume of dark smoke over the town.

The company has faced lawsuits over the wreck by residents, shareholders, the U.S. Justice Department and Ohio’s attorney general.

The railroad and government agencies have also spent months cleaning up contamination from the hazardous materials that spilled from the train, and testing the air and water.

Norfolk Southern says since the East Palestine derailment, it has contributed more than $30 million to the community, including more than $13 million in financial assistance to families, $7.5 million to state agencies and local fire departments in Pennsylvania that responded to the derailment, $3 million to the East Palestine fire department for fire equipment used in the derailment response and other contributions.

After community outcry about contaminated soil, Norfolk Southern started pulling up the tracks at the derailment site to remove the contaminated soil. As a result it currently has only one track in service, with trains running at reduced speeds along that section of the busy corridor between Chicago and Eastern Pennsylvania, New York and New Jersey.

It’s expected to take until early June before that remediation is complete and both tracks are back in service. The railroad said it also made some operational changes “out of an abundance of caution” in early March, which initially limited train capacity.

Those moves also increased costs.

Norfolk Southern after the derailment also committed to adding more sensors to its rail lines to detect hot bearings, which are expected to cost about $50 million over the next couple of years. The National Transportation Safety Board pointed to overheated bearings as a cause of the East Palestine derailment

The $387 million charge from the derailment drove down the company’s profits to $466 million in net income in the first three months of the year, down from $703 million a year earlier.

The company’s insurance policies cover legal liability for bodily injury and property damage to third parties of $75 million to $800 million per occurrence, with up to $1.1 billion for “specific perils.”