Norfolk Southern’s Profits and Accident Rates Rose in Recent Years

Last month, as Norfolk Southern, one of the largest railroads in North America, reported record profits, Alan H. Shaw, its chief executive, told shareholders that the company’s service was “at the best it’s been in more than two years.”

About a week later, one of the company’s freight trains derailed in East Palestine, Ohio, forcing a controlled burn of toxic chemicals and the evacuation of hundreds of residents. Another Norfolk Southern train came off the rails near Detroit on Thursday.

The accidents were a stark reminder that, even as freight railroad companies have become much more profitable in recent years, accidents, some serious, still regularly occur on the 140,000 miles of track that make up their networks.

The rate of accidents on Norfolk Southern’s railway increased in each of the last four years, according to a recent company presentation. The record has worsened as executives at Norfolk Southern and other railroads have been telling investors on Wall Street that they can bolster their profit margins by keeping a lid on costs. At the same time, railway companies have lobbied against new rules aimed at making trains safer.

Norfolk Southern, which earned more than $3 billion last year, invested close to $2 billion in its railways and operations, up a third from 2021. But over the past five years, it paid shareholders nearly $18 billion through stock buybacks and dividends — twice as much as the amount it invested in its railways and operations. Other large railways have paid out billions to their shareholders, too, and their shares have done better than the wider stock market over the last decade.

“For years, the railroads have fought all kinds of basic safety regulations — modern braking systems, stronger tank cars for explosive materials, even information about what’s on trains passing through communities — based on an argument that it simply costs too much to protect our lives, health, and our air and water,” said Kristen Boyles, a managing attorney at Earthjustice, an environmental group. “It’s disgusting to find out that at the same time these companies have been making massive shareholder payments.”

Criticisms about railroads putting profits over other concerns echo the complaints of railroad union members who nearly went on strike last year. Workers said staffing shortages and railroad scheduling policies made it difficult or impossible for them to take time off, including for medical reasons. Congress and President Biden imposed a contract that included pay raises but not the paid-time-off policies that workers wanted in a bid to avoid a strike.

Though government agencies have said that the air in East Palestine is now safe to breathe and that residents can return to their homes, many people have expressed skepticism and anger at the railroad and government officials. Five of the derailed tank cars were carrying vinyl chloride, which is used to make plastic and can release hydrogen chloride and other toxic chemicals when burned.

Norfolk Southern freight trains passing through East Palestine this week. The train that derailed on Feb. 3 had 149 cars.Credit…Gene J. Puskar/Associated Press

Norfolk Southern has said it will provide financial aid to the residents and businesses of East Palestine and work to clean up the area. Mr. Shaw, the chief executive, wrote a letter saying that “we are here and will stay here for as long as it takes to ensure your safety and to help East Palestine recover and thrive.”

The National Transportation Safety Board said that 38 cars had derailed and that a fire had damaged 12 more. Of those that derailed, 11 carried hazardous materials. The agency said a video from a nearby home appeared to show a wheel bearing overheating and close to failure moments before the derailment.

Safety experts say there are many unanswered questions about what caused the accident and whether better safety policies at the railroad or tougher government regulations could have prevented it.

Those questions include: Did Norfolk Southern have enough heat detectors on the railway line, and were those sensors working properly? Was Norfolk Southern operating too many very long trains, which can cause more damage when they derail? The company has said it wants to run longer trains to improve efficiency. The train that derailed had 149 cars; federal regulators classify trains with 150 cars or more as “very long.”

“The longer, heavier and faster you make the trains, without any commensurate adjustment in safety protocols, the thinner your risk margins are getting,” said Ian Naish, a train safety consultant and a former investigator at the Transportation Safety Board of Canada.

In a statement, Norfolk Southern said, “We diligently monitor our trains and infrastructure to identify potential hazards, and we invest approximately a billion dollars into maintaining our infrastructure annually.”

Norfolk Southern referred questions about train lengths to the Association of American Railroads, the freight industry’s trade organization in Washington. A spokeswoman for the association, Jessica Kahanek, said in an email, “Comparable length trains have been safely operating for decades and the industry’s safety record has seen dramatic improvements over those same decades.”

Tony Hatch, a railway industry analyst, said it was “ridiculous” to highlight Norfolk Southern’s shareholder payouts, arguing that the company’s maintenance investments had been “strong and very steady.” The debate over safety, he added, should also look at why U.S. regulators have not pushed for new automated train inspection technology that has been introduced in Canada.

An emergency crew worked at the site of a Norfolk Southern train derailment in Michigan on Thursday.Credit…Mandi Wright/Detroit Free Press, via Associated Press

Railways are expected to play an increasingly important role in the North American infrastructure, especially as the Biden administration and companies seek to address climate change. Freight trains can move goods at a lower cost while producing less greenhouse gas emissions than big trucks. But trains have vulnerabilities that can at times lead to catastrophe. In 2013, a train carrying oil derailed, causing an explosion that incinerated most of downtown Lac-Mégantic, Quebec.

Some railroad unions and other critics say the accident in Ohio adds to a growing body of evidence that the industry’s cost-cutting has gone too far.

Chris Smith, Iowa state legislative director for the International Association of Sheet Metal, Air, Rail and Transportation Workers, said freight rail companies had reduced the number of safety inspectors they employed even as they ran more longer trains. Mr. Smith said he was trying to get lawmakers in Iowa to pass a bill that would prevent railroads from running trains that exceed 8,500 feet in length, or about 1.6 miles.

“There has been a noticeable increase in train derailments and major incidents since rail companies have started running longer and bigger trains,” Mr. Smith said. “Previously, they were running larger trains but not to the magnitude that they are today.”

Since the Feb. 3 derailment in Ohio, some lawmakers and activists have pointed to a 2015 safety regulation adopted by the Obama administration as an example of the changes that they say are needed to make railroads safer.

That rule required electronically controlled pneumatic, or E.C.P., brakes that would simultaneously slow down an entire train rather than individual cars. The rule applied to certain “high-hazard flammable trains” carrying at least 20 consecutive cars filled with liquids like crude oil.

The rule was put in place in hopes of moving away from air brakes for trains carrying crude oil to make them safer, after accidents and explosions involving those trains increased because of a boom in shale drilling across the country.

But after lobbying by the railroad industry, the Trump administration repealed the rule in 2018.

Even had the rule remained in effect, it would not have applied to the Norfolk Southern train that derailed in East Palestine, Jennifer Homendy, who heads the National Transportation Safety Board, said in an interview.

“I can tell you right now, because I’m very familiar with that rule, that the rule would have had no impact on this train,” Ms. Homendy said. “Those brakes wouldn’t have been on this one.”

Railroads have maintained that the Obama-era braking rule was itself problematic. “Several U.S. railroads have engaged in extensive real-world tests of E.C.P. brakes and found that the failure rate of E.C.P. systems is significant and the repair time is much too long to make them practical,” Ms. Kahanek, the industry association’s spokeswoman, said.

Still other changes appear to have had an impact. The inspector general of the Transportation Department highlighted weaknesses in the Federal Railroad Administration’s oversight of hazardous materials in a 2016 report. In the next five years, through September 2021, government inspectors identified nearly 13,000 violations relating to hazardous materials, about a third more than in the previous five years.

Another Obama-era railroad rule appears to have helped. That policy required the use of stronger cars for the transportation of crude oil and other explosive liquids.

Three of the cars that derailed in East Palestine were the stronger type, according to a list provided by the N.T.S.B. One of them, carrying propylene glycol, a chemical used in many products, including pharmaceuticals, antifreeze and perfumes, was not breached. But a car that did not have the enhanced specifications, carrying the same material, was breached, according to the agency’s list. The less protected cars also carried vinyl chloride and benzene.

“The upgrades to the tank cars made a big difference,” Ms. Boyles, the environmental lawyer, said.

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