Norfolk Southern agrees to US$600M settlement in fiery Ohio derailment. Locals fear it's not enough

Norfolk Southern, whose train derailed in Ohio and ignited hazardous cargo that triggered an evacuation in 2023, says it will settle legal claims for those affected. (Norfolk Southern, via AP)

Norfolk Southern has agreed to pay US$600 million in a class-action lawsuit settlement for a fiery February 2023 train derailment in Ohio, but residents worry the money not only won’t go far enough to cover future health needs that could be tremendous but also won't amount to much once divvied up.

“It’s not nowhere near my needs, let alone what the health effects are going to be five or 10 years down the road,” said Eric Cozza, who lived just three blocks from the derailment and had 47 family members living within a mile (1.61 kilometres).

More than three dozen of the freight train's 149 cars derailed on the outskirts of East Palestine, Ohio, a town of almost 5,000 residents near the Pennsylvania state line. Several cars spilled a cocktail of hazardous materials that caught fire. Three days later, officials, fearing an explosion, blew open five tankcars filled with vinyl chloride and burned the toxic chemical — sending thick, black plumes of smoke into the air. Some 1,500 to 2,000 residents were evacuated.

Norfolk Southern said the agreement, if approved by the court, will resolve all class action claims within a 20-mile (32-kilometre) radius of the derailment and, for residents who choose to participate, personal injury claims within a 10-mile (16-kilometre) radius of the derailment.

The area includes East Palestine and people who evacuated, as well as several other larger towns.

The settlement, which doesn’t include or constitute any admission of liability, wrongdoing or fault, represents only a small slice of the US$3 billion in revenue Norfolk Southern generated just in the first three months of this year. The railroad said that even after the settlement it still made a US$213 million profit in the quarter.

East Palestine resident Krissy Ferguson called the settlement a “heart-wrenching day.”

“I just feel like we’ve been victimized over and over and over again,” she said. “We fought and we’re still fighting. And contamination is still flowing down the creeks. People are still sick. And I think people that had the power to fight took an easy way out.”

More than a year later residents still complain about respiratory problems and unexplained rashes and nosebleeds, but the greater fear is that people will develop cancer or other serious conditions because of the chemicals they were exposed to. Researchers have only begun to work on determining the lasting repercussions of the derailment.

The company said Tuesday that individuals and businesses will be able to use compensation from the settlement in any manner they see fit.

The settlement is expected to be submitted for preliminary approval to the U.S. District Court for the Northern District of Ohio this month. Payments could begin to arrive by the end of the year, subject to final court approval.

Norfolk Southern has already spent more than US$1.1 billion on its response to the derailment, including more than US$104 million in direct aid to East Palestine and its residents. Partly because Norfolk Southern is paying for the cleanup, U.S. President Joe Biden has never declared a disaster in the town, which remains a sore point for many.

The railroad has promised to create a fund to help pay for the long-term health needs of the community, but that hasn’t been finalized yet.

The plaintiffs' attorneys said the deal follows a year of intense investigation and should provide meaningful relief to residents.

Still, residents like Misti Allison have many unanswered questions.

“What goes through my head is, after all the lawyers are paid and the legal fees are accounted for, how much funding will be provided for families? And is that going to be enough for any of these potential damages moving forward?” she said.

Jami Wallace, too, worries about having a settlement without knowing the long-term impact of the derailment.

“I would really like to see the numbers because in my opinion, taking a plea deal only is in the best interest of the attorneys,” she said. “They’re all going to get their money. But we’re the residents that are still going to be left to suffer.”

Cozza said he spent about US$8,000 to move out of town and that — along with medical bills and the cost of replacing his contaminated belongings — exhausted what little savings he had. And he can't put a price on the 10-year relationship he lost or the way his extended family was scattered after the derailment.

The CEO of Threshold Residential, one of the biggest employers in town, estimates that his business has lost well over US$100,000.

Last week federal officials said that the aftermath of the train derailment doesn’t qualify as a public health emergency because widespread health problems and ongoing chemical exposure haven’t been documented, contrasting residents' reports.

The head of the U.S. National Transportation Safety Board recently said the agency’s investigation showed that venting and burning of the vinyl chloride was unnecessary because the producer of the chemical ascertained that no dangerous reaction occurred inside the tank cars. Officials who made the decision — Ohio’s governor and the local fire chief leading the response — have said they were never told that.

The NTSB’s full investigation into the cause of the derailment won’t be complete until June, but the agency has said that an overheating wheel bearing on one of the railcars, which wasn’t detected in time by a trackside sensor, likely caused the crash.

The EPA has said cleanup in East Palestine is expected to be completed this year.

The railroad announced preliminary first-quarter earnings of 23 U.S. cents per share Tuesday, which reflects the cost of the US$600 million settlement. Without the settlement and some other one-time costs, the railroad said it would have made US$2.39 per share.

Railroad CEO Alan Shaw, who is fighting for his job against an activist investor aiming to overhaul the railroad's operations, said Norfolk Southern is “becoming a more productive and efficient railroad” but acknowledged there is more work to do.

Ancora Holdings is trying to persuade investors to support its nominees for Norfolk Southern's board and its plan to replace Shaw and the rest of the management team at the railroad's May 9 annual meeting. Ancora says the company's profits have lagged behind the other major freight railroads for years and the investors question Shaw's leadership.

The railroad said that in addition to the settlement, its results were hurt by US$91 million in unusual expenses including money it is spending to fight back against Ancora, management layoffs and the US$25 million it gave to CPKC last month for the right to hire one of that railroad's executives to be Norfolk Southern's new chief operating officer.

The railroad said Tuesday that even though volume was up four per cent during the first quarter, company revenue fell by four per cent because of lower fuel surcharge revenue and changes in the mix of shipments it handled to include more containers of imported goods that railroads get paid less to deliver than other commodities.

Shares of Norfolk Southern Corp., based in Atlanta, were up slightly through the day after a flat start following the settlement announcement.

Associated Press writer Brooke Schultz contributed to this report from Harrisburg, Pennsylvania, and Michelle Chapman contributed from New York.