Norfolk Southern (NS) will establish a fund to compensate homeowners in East Palestine, Ohio for property value diminution in response to the Feb. 3 derailment there, NS President and CEO Alan Shaw wrote in a letter to Sens. Maria Cantwell (D-Wash.), Ted Cruz (D-Tex.), Sherrod Brown (D-Ohio) and J.D. Vance (R-Ohio).
The May 9 letter (download below) was sent at the “encouragement of Senator Cruz to reaffirm Norfolk Southern’s commitment to make it right for the people of East Palestine,” Shaw wrote.
The railroad has also paid more than $15 million directly to affected residents through its family assistance center and compensated first responder agencies “for the costs incurred for their heroic work,” in addition to site remediation expenditures, he reported.
“We are committed to this community not just for the near term, but for the long haul, and are investing in the community and its citizens to ensure its long term success,” Shaw reported. “This enormous financial commitment is just a downpayment. Last month, Norfolk Southern announced total accrued charges for the derailment of nearly $400 million. Of particular significance, this amount does not include expected costs for funds relating to property value diminution, long-term health care, or water treatment. The expected costs for these funds are not included in the accrual because, while Norfolk Southern understands the vital importance of establishing these funds, properly structuring them requires an iterative process with all stakeholders, including Attorney General Yost, Attorney General Henry, U.S. EPA, Ohio EPA, community leaders, local citizens, and attorneys for the recently consolidated pending putative class action. It is also critical to recognize that Norfolk Southern is undertaking these efforts and expenses without any judicial or investigatory finding of fault. In fact, the NTSB has yet to determine a cause of the derailment. There is a likelihood that other parties will bear some responsibility for the February 3 derailment, but the judicial and investigatory processes move at a measured pace. Making it right the right way means respecting the legal process while taking care of the immediate needs of all affected.”
NS, Shaw said, “has not waited for the judicial process to be completed prior to getting to work on the structure and shape of a real property fund that will compensate homeowners.” The railroad has selected Alvarez & Marsal “to evaluate the local property market and develop a plan,” he noted. “Norfolk Southern will develop the full details of the real property fund, including the fair geographic radius to which this compensation will apply, in concert with the key stakeholders involved with the legal process, in order to ensure we are following appropriate procedures and are respecting the class action participants’ rights.”
The railroad expects that homeowners eligible for the compensation will initially be those with homes within an approximately five-mile radius of the derailment, and who sell their homes for less than their property’s pre-Feb. 3 appraised value, Shaw reported. “Moreover, prior to establishing the real property fund pursuant to the ongoing litigation, Norfolk Southern commits to compensate homeowners who sell their homes for less than their property’s pre-February 3 appraised value with the understanding that such homeowners will execute a release of any future claims for property value diminution from the property fund once established and will have substantially complied with the terms of the fund,” he wrote. “Any homeowners who have such claims will be able to submit them through the family assistance center.”
Payments to eligible homeowners are slated to begin within one year, according to Shaw.
“This commitment demonstrates that … Norfolk Southern understands that this derailment was not the fault of the people of East Palestine,” Shaw wrote. “I have been to the village and surrounding communities numerous times and I see that this is a strong and resilient population, but they are victims of this circumstance.”
In a related development, S.576, the Rail Safety Act of 2023, on May 10 was passed by the Senate Committee on Commerce, Science and Transportation, and will go to the full Senate for consideration after amendments have been added. It was introduced by Sens. Sherrod Brown (D-Ohio), J.D. Vance (R-Ohio), Bob Casey (R-Pa.) and John Fetterman (D.-Pa.), along with Sens. Marco Rubio (R-Fla.) and Josh Hawley (R-Mo.), following the derailment in East Palestine.