SUPPORTING STATEMENT
Ensuring the safety of our Company’s railroad operations is not only a collective legal and ethical responsibility, but also a vital component of maintaining the financial health and reputation of our Company. Recent derailments in the railroad industry, including those involving our Company, have drawn attention to the potential risks associated with these operations, necessitating a proactive approach to enhance safety measures.i There are over 1,000 known train derailments a year in the United States -- averaging three a day. ii
As common carriers, railroads are required by federal law to transport hazardous materials that can result in the loss of life and environmental contamination in the event of a train derailment. In 2023, the Company’s train derailment in East Palestine, Ohio resulted in the release of vinyl chloride that captured national media attention and publicized the need for improved railroad safety. iii The 2023 East Palestine derailment has cost our Company almost $1 billion and another similar derailment at our Company could pose a significant financial risk.iv
The East Palestine train derailment has also increased scrutiny of the role of the Precision-Scheduled Railroading (“PSR”) operating model used by our Company and other Class I freight railroads to increase operating efficiency and reduce costs.vii In our view, PSR has resulted in greatly reduced staffing levels, less equipment, and longer trains, all of which have contributed to the safety issues. In 2022, Surface Transportation Board Chairman Martin Oberman stated that:
“Over the last 6 years, the Class Is collectively have reduced their work force by 29% – that is about 45,000 employees cut from the payrolls. In my view, all of this has directly contributed to where we are today – rail users experiencing serious deteriorations in rail service because, on too many parts of their networks, the railroads simply do not have a sufficient number of employees.”viii
While PSR may reduce staffing costs in the short-run, we believe that the long-term cost of increased derailments will outweigh any short-term financial gain. By empowering the Committee to review staffing levels as they relate to safety, our Company can reduce the likelihood of derailments, protect its workforce, safeguard communities along its routes, provide better service to customers, demonstrate its commitment to ethical business practices, and enhance our Company’s long-term value.
i https://www.propublica.org/article/railroad-safety-union-pacific-csx-bnsf-trains-freight; https://www.npr.org/2023/03/06/1161262824/train-derailment-springfield-ohio; https://www.npr.org/2023/05/12/1175711317/norfolk-southern-railcars-derail-in-pennsylvania
ii https://www.npr.org/2023/03/09/1161921856/there-are-about-3-u-s-train-derailments-per-day-they-arent-usually-major-disaste
iii https://www.nytimes.com/2023/02/15/us/ohio-train-derailment-anxiety.html; https://www.nytimes.com/2023/02/17/opinion/ohio-train-derailment-safety-regulation.html
iv https://www.cnn.com/2023/07/27/investing/norfolk-southern-east-palestine-derailment-costs/index.html
v https://www.ntsb.gov/news/press-releases/Pages/NR20230214.aspx
vi https://www.ntsb.gov/news/press-releases/Pages/NR20230302A.aspx
vii https://www.wsj.com/articles/norfolk-southern-derailment-spurs-questioning-of-turnaround-kings-strategy-5403464c
viii https://www.stb.gov/news-communications/latest-news/pr-22-21/