Norfolk Southern to pay $15 million civil penalty, cleanup costs over 2023 Ohio derailment

[May 24, 2024]  By David Shepardson and Clark Mindock

WASHINGTON (Reuters) - Norfolk Southern agreed to pay a $15 million civil penalty and $57.1 million in past government cleanup costs on Thursday, as well as millions in future costs to resolve a U.S. government lawsuit over a February 2023 train derailment in East Palestine, Ohio.

Under a proposed consent decree estimated to be worth more than $310 million, the railroad also agreed to significant safety improvements and training, which includes installing additional safety equipment after the derailment of the train that caught fire and released over a million gallons of hazardous materials and pollutants.

The Atlanta-based railroad will also pay for medical monitoring for health impacts tied to the derailment and release of hazardous chemicals. The settlement will pay for treatment for individual medical needs stemming from the disaster, the Environmental Protection Agency said.

EPA Administrator Michael Regan said the agreement will hold "Norfolk Southern accountable for the mess it made." He said the civil penalty was the maximum allowable under the Clean Water Act and called the rail safety provision "a game changer."

Norfolk Southern, which did not admit wrongdoing, said the deal means the company will face no criminal penalties and the settlement is included in the around $1.7 billion in related charges to date for the incident. It added the settlement will not require it to take additional charges. The company's shares fell 2% in afternoon trading.

The U.S. Justice Department and EPA sued Norfolk Southern in March 2023 to ensure the railroad paid full cost of cleanup and any long-term effects of the derailment.

Under the settlement, Norfolk Southern will also reimburse EPA for future cleanup and other response costs. EPA estimates Norfolk Southern will spend an estimated $235 million for all past and future cleanup costs under the proposed consent decree subject to public comment and court approval.

A Norfolk Southern train rests near the University of North Carolina's energy generation plant, after delivering coal to the facility, in Chapel Hill, North Carolina, U.S. August 11, 2022. REUTERS/Jonathan Drake

The safety improvements include installing additional devices to detect overheated wheel bearings early enough to prevent derailments like the East Palestine incident. Norfolk Southern says under the agreement it will spend $244 million on safety initiatives through 2025.

Norfolk Southern CEO Alan Shaw said the railroad was pleased "we were able to reach a timely resolution of these investigations that recognizes our comprehensive response to the community’s needs and our mission to be the gold standard of safety in the rail industry."

The settlement includes $10-$15 million for continuing monitoring of groundwater and surface water bodies and a $25 million Community Health Program providing medical exams and mental health services for the community and first responders for up to 20 years.

The railroad previously has spent $780 million in environmental response and remediation costs and $107 million in assistance to impacted residents and communities in Ohio and Pennsylvania.

Last month, Norfolk Southern agreed to pay $600 million to settle a class action lawsuit over the derailment. The settlement covers personal injury claims from residents and businesses in the city and impacted surrounding communities.

The incident sparked public outrage and calls for railroad safety reforms in Congress but legislation has stalled.

(Reporting by David Shepardson; Editing by Emelia Sithole-Matarise and Aurora Ellis)

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