Norfolk Southern Lifts Ohio Derailment Cost to Over $800 Million
Atlanta-based railroad operator’s second-quarter earnings fall sharply Further legal costs, fines and penalties related to the East Palestine, Ohio, train derailment are possible, Norfolk Southern said. Photo: Gene J. Puskar/Associated Press By Esther Fung Updated July 27, 2023 11:25 am ET Norfolk Southern raised its estimate on costs associated with the East Palestine, Ohio, train derailment to $803 million, a move that sent its profit sharply lower in the second quarter. The updated cost forecast Thursday was more than double the estimate that the Atlanta-based railroad operator provided earlier this year. Executives said that the bulk of the costs are from the environmental cleanup, and added that there might be additional legal costs, fines and penalties in
Further legal costs, fines and penalties related to the East Palestine, Ohio, train derailment are possible, Norfolk Southern said.
Photo: Gene J. Puskar/Associated Press
Norfolk Southern raised its estimate on costs associated with the East Palestine, Ohio, train derailment to $803 million, a move that sent its profit sharply lower in the second quarter.
The updated cost forecast Thursday was more than double the estimate that the Atlanta-based railroad operator provided earlier this year.
Executives said that the bulk of the costs are from the environmental cleanup, and added that there might be additional legal costs, fines and penalties in the coming quarters. These are difficult to estimate, they said.
“This is going to take a little bit more time,” said Mark George, chief financial officer of Norfolk Southern, during an earnings conference call. “We’ve got a lot more visibility now than we did in [the first quarter].”
On Feb. 3, dozens of railcars, including some tankers carrying hazardous materials, derailed in East Palestine, just miles from the Ohio-Pennsylvania border. The accident spawned a complex cleanup and environmental-monitoring effort that involves local, state and federal agencies.
Railcars, including some tankers carrying hazardous materials, derailed in February near the Ohio-Pennsylvania border.
Photo: Gene J. Puskar/Associated Press
George said that the company expects cleanup activity to continue into October, and then moderate after that. So far, the company said it has paid $287 million in derailment-related costs.
Norfolk Southern said it is making claims from its insurance policies and seeking recoveries from other parties.
In late June, the company sued a number of parties in federal court, including the chemical shipper and the owners of railcars that derailed. Federal transportation-safety investigators have said an overheated wheel bearing on a railcar was the likely cause of the derailment. The complaint “seeks to ensure that others responsible for the safe transport of their railcars and their chemicals contribute resources to the effort.”
In the most recent quarter, Norfolk’s profit from railway operations fell by more than half to $576 million from the prior year.
Revenue dropped 8% to $3 billion, missing analysts’ expectations of $3.1 billion, Norfolk Southern added.
Shares in the company were up less than 1% at midday.
—Sabela Ojea contributed to this article.
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