Norfolk Southern Says Derailment Cost Soars to $803 Million

Cleanup at East Palestine Continues
Norfolk Southern train
Norfolk Southern’s revenue declined to $2.98 billion in the second quarter. (Norfolk Southern Corp.)

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OMAHA, Neb. — The costs associated with Norfolk Southern’s fiery February derailment in Ohio have more than doubled to $803 million as the railroad works to clean up the mess and moves forward with all the related lawsuits.

Norfolk Southern recorded another $416 million charge related to the East Palestine derailment on July 27 as part of its second-quarter earnings after previously announcing a $387 million charge earlier this year. Most of the costs are related to the cleanup of the hazardous chemicals that were released, but $222 million is a combination of legal fees and the $63 million of assistance it has offered to the community.

The derailment near the Ohio-Pennsylvania border prompted a national reckoning on railroad safety after thousands of people had to evacuate when officials decided to blow open several tank cars filled with vinyl chloride because they believed they might explode. The resulting fire sent a towering plume of black smoke over the town three days after the derailment that spilled several other hazardous chemicals when the tank cars carrying them ruptured.



The $803 million cost estimate doesn’t include funds to compensate the East Palestine community for any long-term health effects, drop in home values or drinking water issues because those are still being negotiated, so the total will grow. But Norfolk Southern also expects to eventually recover some of those costs from its insurance and lawsuits against other companies involved in the derailment.

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East Palestine derailment

This photo taken with a drone shows portions of a Norfolk Southern freight train that derailed in East Palestine, Ohio, on Feb. 3. (Gene J. Puskar/AP)

The additional charges related to the derailment, combined with a 6% drop in the number of shipments the railroad delivered, more than halved the Atlanta-based company’s profit to $356 million, or $1.56 per share. That’s down from $819 million, or $3.45 per share, a year ago.

Without the derailment costs, NS says it would have earned $2.95 per share in the quarter, still well below Wall Street expectations. The analysts surveyed by FactSet Research generally expected Norfolk Southern to report earnings per share of $3.11.

Norfolk Southern’s revenue declined to $2.98 billion in the quarter, which also disappointed. Analysts were expecting $3.08 billion revenue.

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The railroad’s traffic was hurt by the derailment because Norfolk Southern had to operate with only one of its two tracks by East Palestine running on a busy corridor. But consumer demand for imported goods has also weakened, and Norfolk Southern’s main competitor in the east, CSX, has said it was able to pick up some of Norfolk Southern’s business in the wake of the derailment.

CEO Alan Shaw said Norfolk Southern’s service has improved to levels rivaling its 2019 performance before the deep cuts it made during the pandemic once it reopened both rail lines through East Palestine. The railroad has also been hiring aggressively over the past year to give it enough crews and other workers to handle all the freight.

The average speed of Norfolk Southern’s trains reached 21.5 mph this month on average, coming close to the 21.8 mph it recorded before the derailment in January.