Norfolk Southern owes direct payments to residents
After early missteps and a disturbing display of corporate arrogance in responding to the East Palestine, Ohio, derailment, the railroad’s leadership appears to have finally come to its senses. Last Thursday’s roundtable with East Palestine residents, while several weeks late, demonstrated a belated openness to people harmed by the company’s reckless behavior.
But Norfolk Southern has still not owned up to the full breadth of the disaster. It reports having spent $24 million as part of its “Making It Right” commitment to East Palestine and surroundings. Only about $1 million, however, is set aside for a direct community fund. The rest is public safety reimbursements, donations to local institutions and trinkets like flower bouquets and Kindle devices to appease residents and avoid just compensation. NS hasn’t accounted for the egregious costs to innocent residents of towns and countrysides — and, if nothing changes, someday urban centers — when hazmat trains malfunction.
East Palestine must be a turning point, where state and federal governments declare that toxic disasters will trigger severe financial consequences for careless companies. It will take hundreds of millions of dollars to remediate the environmental and human damage in East Palestine and the surrounding countryside. Even if environmental tests are encouraging, the market value of residents’ homes — and farmers’ goods — has been seriously undermined. Those harmed deserve compensation.
The governments of Ohio and Pennsylvania, along with the federal government, should negotiate compensation on behalf of their residents, amounting to a certain percentage of the pre-derailment value of their real estate and business income.
Profits over people
The immediate cause of the East Palestine derailment was a malfunctioning, overheated wheel bearing. But the deeper cause was a revolution in railroad business practices and corporate culture called Precision Scheduled Railroading (PSR). It was designed in the early 1990s to maximize profits. Just about everyone else in the industry, including railroads’ shipping clients and employees, have argued that the plan hurts them. Even so, it is now standard across the continents’ biggest companies, except for the privately owned BNSF.
Industry analyst Michael
Baudenistel writes that PSR “generally involves eliminating classification yards, consolidating dispatch centers, greatly reducing headcount, and reducing capital budgets with the ultimate objectives of greatly improving a railroad’s margins and returns on invested capital through greater asset utilization.”
Put more simply and truthfully, PSR reduces costs and increases returns at the expense of employees and operational safety. Employees are on-call 24/7 and sometimes given only an hour’s notice, even on weekends and holidays, to report for duty. Further, the system results in much longer trains, measured in miles, that are more susceptible to breakdowns and derailments. Still, PSR railroads are pushing to further reduce staffing, from two people per train to one.
Making residents whole
Railroads, like other large corporations, consider fines and liability for accidents part of the cost of doing business. Finally, however, the U.S. Transportation Secretary and U.S. senators from Ohio and Pennsylvania acknowledge fines levied by the federal government for safety violations aren’t enough to change corporate behavior.
Gov. Josh Shapiro has received a $7.5 million commitment from Norfolk Southern, the vast majority to reimburse state and local agencies that responded to the derailment and supported remediation. But the $1 million community support pledge for Pennsylvania businesses that suffered losses is badly insufficient.
There is no price tag for the anxiety and uncertainty experienced by the people of East Palestine and the Pennsylvania borderlands. But declines in the value of homes, farms and other businesses within the blast radius of the spill and fumes are easier to calculate. In some cases, the market value of real estate — and therefore a lifetime of wealth accumulation — has been wiped out, at least temporarily. Farmers may suffer at least one year’s loss of income due to consumer suspicion of their produce, even if soil tests are encouraging.
Among those impacted, adequate compensation would likely average at least $20,000 per person. Based on an estimate of 15,000 people in the area, Norfolk Southern would need to pay $300 million in direct payments — or about 2.5% of its 2022 revenue. And the final figure could be higher.
Only elected officials in Washington, Harrisburg and Columbus can — and must — make it happen.