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Railroad in Ohio derailment ordered to pay for cleanup

Norfolk Southern

Norfolk Southern Corp. on Tuesday was ordered by the U.S. Environmental Protection Agency to conduct and pay for all cleanup actions associated with the derailment of a train carrying hazardous materials earlier this month or pay triple the cost.

In a filing earlier this month, the railroad revealed it had up to $1.1 billion in liability insurance, though it did not comment further on the coverage.

As part of the legally binding order from the EPA, Norfolk Southern will be required to identify and clean up contaminated soil and water resources, reimburse the agency for cleaning services to residents and businesses, attend and participate in public meetings at EPA’s request and pay for the agency’s costs for work performed under the order.

Several lawsuits seeking class-action status have been filed against the Atlanta-based railroad holding company and unit Norfolk Southern Railway Co. following a Feb. 3 derailment of a train carrying hazardous materials in East Palestine, Ohio. 

The derailment contaminated at least 15,000 pounds of soil and 1.1 million gallons of water which have already been excavated from the derailment site, Norfolk Southern said in a statement Monday.

Some 38 rail cars derailed and 12 more were damaged by fire. Eleven of the cars that derailed were carrying substances including vinyl chloride, butyl acrylate, ethylene glycol monobutyl ether, ethylhexyl acrylate and isobutylene, according to a National Transportation Safety Board update issued Feb. 14. 

No fatalities or injuries were reported in the derailment.

“The Norfolk Southern train derailment has upended the lives of East Palestine families, and EPA’s order will ensure the company is held accountable for jeopardizing the health and safety of this community,” Michael S. Regan, EPA administrator said in a statement.

“Let me be clear: Norfolk Southern will pay for cleaning up the mess they created and for the trauma they’ve inflicted on this community,” Mr. Regan said.

Municipal drinking water tests continue to show no water quality concerns and there is no indication the air is unsafe, according to the EPA.

Norfolk Southern purchases liability insurance providing less than $800 million in coverage for bodily injury and property damage to third parties, while up to $1.1 billion in coverage is provided for “specific perils,” its annual 10K filing with the U.S. Securities and Exchange Commission dated Feb. 3 states. 

Coverage is provided excess of $75 million and below $800 million on a per occurrence and/or policy year basis, the filing states.

In addition to legal liability coverage, Norfolk Southern purchases insurance covering damage to property it owns or that is in its care, custody, or control. This insurance covers approximately 82% of potential losses above $75 million and below $275 million per occurrence and/or policy year, according to the filing.

The railroad also has a Georgia-domiciled captive, General American Insurance Co., which redomiclied from Vermont and merged with the company's Bermuda-based captive in 2021, according to documents filed with Georgia's Secretary of State.

Norfolk Southern declined to comment.