Senate hearing on the Norfolk Southern train derailment in Ohio

Norfolk Southern CEO Alan Shaw has repeatedly stressed that the company spends more than $1 billion a year in safety, but the company has plans to repurchase another $7.5 billion of its shares, on top of the $12.8 billion in share repurchases it has done since 2018. And its CEO declined to say he has any plan to stop those massive purchases.

"Will you pledge to no more stock buybacks until a raft of safety measures have been completed to reduce the risk of derailments and crashes in the future," asked Sen. Jeff Merkley, an Oregon Democrat, at Thursday's hearing.

"I will commit to continuing to invest in safety," Shaw said in response to the question.

Shaw did not detail what was — and what was not — included in Norfolk Southern's safety plan. But it is still far less than the money being returned to shareholders through either share repurchases or dividend payments.

Correction: An earlier version of this post incorrectly described Norfolk Southern's safety plan.

Sen. Bernie Sanders pointed to a rail industry program called Precision Scheduled Railroading (PSR), and claimed that it helped Norfolk Southern increase its profits and reduce its workforce by almost 40% over six years.

Sanders said workers from Norfolk Southern and other companies told him that they are "being asked to do more work with fewer workers, and that includes safety inspections."

According to the US Government Accountability Office: PSR is used by six of the seven largest American freight railroads, and is "intended to increase efficiency and reduce costs. While there is no one definition of PSR, stakeholders told us this strategy is associated with fewer staff, longer trains, and more."

But railroad representatives, employee unions and shippers said told the GAO that PSR, in general, is associated with reductions in staff, longer trains and fewer locomotives to move those trains.

And all seven railroads told the GAO they ran longer trains with the goal of increasing efficiency in 2022.

"So well before this disaster in East Palestine, we have been told about the potential safety hazards. Will you make a commitment right now to the American people that you will lead the industry in ending this disastrous Precision Scheduled Railroading (PSR), which has slashed your workforce and made railroading much less safe?" Sanders asked.

Norfolk Southern CEO Alan Shaw did not confirm or deny Sanders' claims, and would not specifically answer on the topic of PSR, but he instead said the company has been on a "hiring spree" since he became CEO.

"The number of employees at Norfolk Southern today is 1,500 more than it was this time last year," he said.

Sanders' interrupted Shaw in the interest of time and pressed him once more on whether or not he would make the commitment to end the program.

Shaw did not respond with a yes or no. "Senator, in December of last year, I charted a new course in the industry. I said we're going to move away from a near-term focus solely on profits. And then we're going to take a longer-term view that's founded on our engagement with our craft employees who are so critical to our success. We were the first to pivot out of it."

Norfolk Southern CEO Alan Shaw wouldn't endorse all provisions of a bipartisan rail safety bill introduced in the wake of the railroad's derailment in East Palestine, Ohio — although he said he supports "the legislative intent to make railroads safer."

There are a number or provisions of the bill, including a requirement to have a minimum two-person crews on every locomotive, that the railroad industry is on record opposing. The railroads have pressed its unions to allow the engineers to ride alone in freight locomotives, and have conductors who now ride in locomotives be shifted to pickup trucks driving along the track system. The unions argue that would pose a safety hazard to both crew members and the communities through which trains travel.

Shaw did not address that proposed rule, and follow-up questions did not press him on the issue.

Shaw did say there are "a number of provisions we absolutely would support," including tighter railroad tank car standards and improved trackside detectors that would alert train crews that axles or bearings are at risk of overheating and causing a derailment.

He defended Norfolk Southern's safety record, despite a recent decision by the National Transportation Safety Board to start a special investigation into the railroad's safety culture.

Debra Shore, the regional administrator of the US Environmental Protection Agency, laid out a plan in front of the Senate Environment and Public Works Committee on how the agency plans to hold Norfolk Southern accountable after its toxic train derailment.

"We've used one of EPA's most powerful enforcement tools to hold Norfolk Southern accountable and to require the company to clean up the mess it made," she said Thursday, and detailed the "unilateral administrative order" issued by the EPA to Norfolk Southern on Feb. 21:

The EPA is overseeing that Norfolk Southern's cleanup work is done per the agency's specifications, she added.

About the company's finances:  Norfolk Southern can afford to pay a $70,000 a day fine for the next 18 years with the $456 million in cash it had on hand on its books as of December 31. And a year ago, the Norfolk Board announced plans to repurchase $10 billon worth of its stock. As of December 31, it still had $7.5 billion available under that plan to spend on shares.

Norfolk Southern CEO Alan Shaw began his Capitol Hill testimony with an apology to the communities hurt by his railroad's February 3 derailment, and a vow to do the work and spend the money they need to be made whole.

Shaw detailed pledges that the company has made of $21 million in help for East Palestine, and $7.5 million for communities in Pennsylvania. The derailment occurred near the state line between Ohio and Pennsylvania. 

"All of this is just a downpayment," he said. "We will be in the community for as long as it takes."

He cited an initial finding from the National Transportation Safety Board (NTSB) that the train was going below the speed limit for that portion of track and that there is no sign the crew did anything wrong, but he admitted, "it is clear the safety mechanisms in place were not enough."

The NTSB has announced a special investigation into the safety culture at Norfolk Southern. Shaw defended that culture, saying safety is a priority for the railroad and its front-line staff

"The events of the last month are not who we are as a railroad," he said.

The Senate Environment and Public Works Committee is now hearing from the second panel.

The hearing is expected to focus on health and safety concerns as well as the timeline of state and federal Environmental Protection Agency response to the incident, according to a source.

Here's who you will see on the second panel:

Three senators from the affected states were on the first panel — Sens. Sherrod Brown and J.D. Vance of Ohio and Sen. Bob Casey of Pennsylvania.

Sen. Bob Casey, testifying on the first panel at the Senate Environment and Public Works Committee hearing, said he heard from the farming community that they are calling for testing following the toxic train derailment in East Palestine, Ohio.

He also quoted a farmer in his testimony, who said: "We along with countless other local agriculture producers have years invested in telling our stories and developing relationships with our customers. The stories of working in harmony with nature to produce a superior product. This story was ripped to pieces on the day of the derailment."

The farmer called for more testing, saying it would help build back trust with their customers, Casey said.

"The economics of our industry is very emotionally driven. Emotions are now being driven by perception and lack of information. We need testing. We need factual information. We needed it yesterday and we are still not receiving that response," Casey quoted in his testimony.

Casey also called on Congress to pass the bipartisan Railway Safety Act of 2023 that he has proposed along with Republican Sens. J.D. Vance of Ohio, Marco Rubio of Florida and Josh Hawley of Missouri, and Democratic Sens. Sherrod Brown of Ohio and John Fetterman of Pennsylvania.

"It will be a good start by Norfolk Southern to tell us today ... that they support the bill," he said.

In the lead-up to Thursday's Senate committee hearing on the toxic train derailment that spilled chemicals in the Ohio town of East Palestine last month, a bipartisan group of senators is introducing a new bill aimed at shoring up rail safety.

The Railway Safety Act of 2023 is being introduced by Republican Sens. J.D. Vance of Ohio, Marco Rubio of Florida and Josh Hawley of Missouri, and Democratic Sens. Sherrod Brown of Ohio, and Bob Casey and John Fetterman of Pennsylvania.

Vance, Casey and Brown are among the senators testifying in today's Senate hearing.

The bill includes a number of provisions to boost safety procedures to prevent future incidents, including “new safety requirements and procedures for trains carrying hazardous materials like vinyl chloride,” a requirement for advance notice from railways to state emergency response officials about what their trains are carrying, requirements to prevent blocked railway crossings and new rules for train size and weight, according to a statement from the senators.

The bill also addresses the risk of wheel bearing failures by ramping up detection and inspection. It has a provision requiring “well-trained, two-person crews aboard every train.” And it boosts the maximum fines for rail carriers for wrongdoing.

The legislation also increases grants for HAZMAT training and Federal Railroad Administration research and development, as well as funding for the Pipeline and Hazardous Materials Safety Administration’s development of tank car safety features.

Bipartisan challenges: This rare, general bipartisan agreement about taking action in the wake of the derailment follows years of Republicans generally supporting the deregulation of the rail industry, including the broad rollback of transportation rules during the Trump administration.

Experts point out several areas of opportunity to enhance rail safety and hold rail companies further accountable: updating trains’ braking systems, shortening the lengths of freight trains, further separating cars with hazardous material, requiring more crew members to be on board and increasing penalties.

Many of these proposals, experts say, have been around for decades, and have oftentimes been diminished or entirely eliminated after rail lobbying efforts. Data compiled by the nonprofit OpenSecrets show that Norfolk Southern, the company involved in the Ohio derailment, spent $1.8 million on federal lobbying last year.

CNN's Maegan Vazquez, Pete Muntean and Aileen Graef contributed to this report.

Sen. Tom Carper, the chair of the Senate Environment and Public Works Committee, delivered opening remarks at the hearing on the toxic train derailment in East Palestine, Ohio, saying that while Norfolk Southern did commit money to helping the impacted residents, the ultimate costs from the disaster may exceed the immediate cleanup needs.

Norfolk Southern "has agreed to pay for the environmental cleanup resulting from the derailment. However, the ultimate costs may exceed the immediate cleanup needs," Carper said Thursday.

"And moreover," he added, citing an "apparent lack of transparency on the part of Norfolk Southern, at least in the early days of the response," there are still members of the community "battling with mistrust and looking for answers."

Carper's comments underline the fears among the East Palestine community about the threat of long term chemical exposure from the toxic train derailment.

Some background: Norfolk Southern has so far committed $21 million to the residents and communities affected by the February 3 toxic chemical release caused by its train derailment in East Palestine. It says this is only the beginning of the help it will pay to victims of the derailment in years to come.