Norfolk Southern balks at compensating homeowners in East Palestine

By Anna Bahney and Chris Isidore, CNN

Jim Stewart was getting ready to sell his home in East Palestine, Ohio, and retire. Then came the derailment of a Norfolk Southern train on February 3, releasing toxic chemicals into the air and nearby water, and he fears crashing the value of his home.

He and his wife hoped to put their three-bedroom home on the market this spring, as prices were still high and inventory was low. Alternatively, they talked about his son’s family buying a house that was on the market down the street from Stewart.

But even though state officials are saying the water is safe to drink, convincing potential homebuyers otherwise is an uphill battle.

“Since the derailment, I lost all those options,” he said. “Who is going to buy contaminated land? The older people are willing to stay and live it out. The younger bunch, they are smarter. They’re thinking of their families. I wouldn’t want my grandchildren here. We don’t know if the ground is going to be good enough to grow grass. There are too many unknowns.”

Stewart, 65, recently voiced his fury and sadness about what he lost to Norfolk Southern CEO Alan Shaw on a February 22 Town Hall about the derailment on CNN.

“You burned me,” he told Shaw. “We were going to sell our house. Our value went phoom,” pointing his hands down.

Shaw was asked point blank by another resident if Norfolk Southern was ready to buy Stewart’s house, he replied only, “we’re going to do what’s right for this community.” That wasn’t satisfactory for Stewart or many of the other participants at the Town Hall.

“I lost everything now,” Stewart says he told Shaw.

Stewart works as a manager at a commercial baking company.

“I worked hard. I’m still working,” he says he told Shaw. “I’m in the 44th year at my job. I wanted to get out. Now I’m just stuck.”

Stewart fears he lost a tremendous amount of the value of his home, which he bought in 2016 for $85,000.

The property was worth about $135,000 a month ago, according to an estimate from Zillow. Lack of transactions since then make a current estimate difficult.

“I’ll never get that. I’ll be lucky to get what I paid for it, if that,” he said of the estimate. In addition, Stewart believes it would cost a lot to do the repairs and tests to ensure the home is safe.

“At whose expense? That’s the biggest issue right now,” said Stewart. “At whose expense are we going to do things to make sure it’s okay?”

Stewart isn’t the only one that was angry with Shaw and Norfolk Southern for the railroad’s refusal to offer to compensate the community for the property value that has been destroyed by the derailment.

At Thursday’s Senate hearing on the crash, Sen. Ed Markey, a Massachusetts Democrat, asked Shaw four different times to commit to compensating homeowners, only to hear Shaw repeatedly reply, “Senator, I’m committed to do what’s right.”

Markey said that wasn’t an acceptable answer.

“Will you commit to insuring that these families, these innocent families do not lose their life savings in their homes and small businesses? The right thing to do is to say, ‘Yes we will.'” Markey told Shaw. “These families want to know long term are they just going to be left behind. Once the cameras move on, once the national attention dies down, where will these families be? I think they’re going to be in the crosshairs of the accountants of Norfolk Southern saying ‘We’re not going to pay full compensation.'”

Norfolk can afford to compensate homeowners

Paying the homeowners and businesses wouldn’t necessarily be difficult for Norfolk Southern.

With a population of about 5,000 people, there are roughly 2,600 residential properties in East Palestine according to Attom, a property data provider. The average value of a property there in January of this year, prior to the derailment, was $146,000, according to Attom.

Taken together, the value of all residential real estate in the town adds up to about $380 million, including single family homes and multi-family properties.

Those values are only a fraction of the money that Norfolk Southern earns. Last year it reported a record operating income of $4.8 billion, and a net income of $3.3 billion, up about 9% from a year earlier. It had $456 million in cash on hand on its books as of December 31.

It’s been returning much of that profit to shareholders, repurchasing $3.1 billion in shares last year and spending $1.2 billion on dividends. And it announced a 9% increase in dividends just days before the accident.

A year ago its board approved a $10 billion share repurchase plan, and it had the authority to buy $7.5 billion of that remaining on the plan as of December 31.

Asked by Sen. Jeff Merkley, an Oregon Democrat, at Thursday’s hearing, “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,” Shaw again dodged the question by answering only with, “I will commit to continuing to invest in safety.”

And the company also invests a great deal of money in lobbying, spending $1.8 million on lobbying in 2022, according to OpenSecrets.org, which tracks lobbying and political contributions expenditures.

Those lobbying expenses also came under attack by senators at the hearing, especially since Shaw would not commit to supporting the bipartisan bill introduced in the Senate since the derailment to improve railroad safety. Asked if he would support or oppose the legislation, Shaw wouldn’t endorse all of the provisions of the bill, but he responded “we are committed to the legislative intent to make rail safer.”

On Sunday, National Transportation Safety Board Chair Jennifer Homendy told ABC News that the safety goals offered by Norfolk Southern in response to the train wreck were “not robust enough.”

The company announced a six-point safety plan last week, which included revamping its network of hot bearing detectors. The detectors use infrared sensors to record the temperatures of railroad bearings as trains pass by. Following the East Palestine crash, NTSB investigators discovered that sensors had detected a wheel bearing heating up miles before it eventually failed — but didn’t alert the train’s crew until it was too late, according to a February 23 preliminary report by the agency.

Not looking for a big payout

A big payout probably isn’t what many in East Palestine are looking for, said Jim Warren, manager and co-owner of Kelly Warren and Associates Real Estate Solutions, in Boardman, which is about 15 miles away from East Palestine. They just want a home that’s safe to live in and to be made whole on its value, he said.

“The people around here don’t want a lot,” he said. “We don’t chase the flashy items like other places in the world. We want to grow up, raise our kids, make a living, and have a nice place to live, that’s all we want.”

This area, like the rest of the country, saw the real estate market heat up over the past few years with multiple offers on homes and properties selling over the asking price. But, Warren said, unlike other parts of the country the market stays fairly steady in this part of Ohio.

“Our area doesn’t move up as much and it doesn’t move down as much,” he said. “We don’t have the big swings.”

Warren’s firm currently has two listings in the town.

“That’s no more nor less than usual,” he said. There are only ever about ten properties on the market there, he said.

But, he added, “if your property is contaminated, that is a concern for yourself and for any buyer.”

As with any real estate purchase, an appraisal and tests for safety would need to be done for homes in East Palestine. But like Stewart, Warren said it is not yet clear who will pay for the additional tests on water and ground contamination for that peace of mind.

“For all we know, the county might cover it, or the EPA or Ohio state government. That remains to be seen,” he said.

Overall, Warren said, he expects homes to continue to be bought and sold in East Palestine.

“We don’t foresee the market tanking, we foresee steady growth,” he said. “After all the hype is gone, we are still living here. We’re going to have to figure it out because this is our home.”

Correction: An earlier version of the story gave the incorrect amount spent on lobbying by Norfolk Southern.

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