Norfolk Southern agrees to settlement of more than $300 million with federal government over East Palestine, Ohio, derailment

By James Rogers

Norfolk Southern has reached a settlement with the federal government over last year's derailment of one of the company's trains in East Palestine, Ohio

Norfolk Southern Corp. has reached an agreement with the U.S. Department of Justice, the U.S. Environmental Protection Agency, and the U.S. Department of the Interior to resolve all their claims and investigations relating to last year's derailment of one of the company's trains in East Palestine, Ohio.

Shares of Norfolk Southern (NSC) are down 1.2% Thursday.

Under the terms of the agreement, the carrier will pay a $15 million civil penalty and reimburse the EPA for its full response expenses, which were approximately $57 million through Nov. 30, 2023, the company said in a statement. Norfolk Southern will also reimburse subsequent response costs.

Related: One year after Norfolk Southern's East Palestine derailment, rail safety is still in the spotlight

In addition to completing the cleanup of the East Palestine site, Norfolk Southern will also implement a number of environmental remediation projects to tackle pre-existing pollution and improve water quality, costing an estimated $7 million.

The company will also continue its monitoring of groundwater and surface water at an estimated cost of $10 to $15 million. Additionally, Norfolk Southern will set up a drinking-water-monitoring program at an estimated cost of $15 million over 10 years.

A $25 million community health program will also be set up to provide medical exams and mental-health services for the community and first responders for up to 20 years, Norfolk Southern said, and $244 million will be spent on safety initiatives through 2025.

Related: Norfolk Southern reaches agreement to settle East Palestine derailment class action

The financial impact of these efforts has either been previously estimated as part of the total $1.7 billion recognized in response to the incident through March 31, 2024, according to Norfolk Southern's statement - or included as part of the company's ongoing financial outlook.

No one was killed or injured in the derailment, but the incident was described as a "PR nightmare" for Norfolk Southern and the rail industry.

Separately, last month Norfolk Southern said it has reached a $600 million agreement in principle to settle a class-action lawsuit brought after the derailment.

Related: Norfolk Southern reaches agreement to settle East Palestine derailment class action

Norfolk Southern shares are down 3.7% in 2024, compared with the S&P 500 index's SPX gain of 11.3%.

-James Rogers

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05-23-24 1253ET

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