ABH Consulting Senior Transportation Analyst Anthony Hatch joins Yahoo Finance Live to discuss railroad safety amid Norfolk Southern's recent derailments.
Video Transcript
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ALAN SHAW: We will be in the community for as long as it takes. To be clear, there are no strings attached to our assistance. If residents have a concern, we want them to come talk to us. Our website, nsmakingitright.com, provides the latest information and details on how to reach us. We have been cooperating fully with the NTSB's investigation into the cause of the derailment. The preliminary report found that the Norfolk Southern crew was operating the train below the speed limit and in an approved manner. Yet, it is clear the safety mechanisms in place were not enough.
SEANA SMITH: That was Norfolk Southern CEO Alan Shaw testifying on Capitol Hill today, detailing the rail company's efforts to clean up last month's chemical spill in East Palestine, Ohio. Now, joining us to discuss this and much more, we want to bring in ABH Consulting Senior Transportation Analyst Tony Hatch. Tony, it's great to see you here. So the latest comments that we heard from CEO Alan Shaw, what did you think?
ANTHONY HATCH: Well, that was a tough couple of hours there. I was shocked at how little people seemed to want to learn, but rather just say things. I thought Shaw did a good job. He had to know what he was going to face, and I thought he did a good job. And I thought really all the presenters at that panel-- the EPA, OH EPA, and the EMT-- all did a good job at that.
DAVE BRIGGS: This is not likely a short fix for them, given the long-term health implications of the residents there in Ohio. What do you think the impact will be on Norfolk Southern?
ANTHONY HATCH: Financially, it will not be very large. It's a reputational hit. And it's just unfortunate that it comes after a period of which there were service issues and the supply chain issues that they were part of, very contentious labor negotiations that they just finished. So it sort of adds to the sense that railroads aren't really doing their job, when in fact, the fact that they have such a good safety record is why they carry this.
It was Norfolk Southern who tried to get out from this common carrier obligation, saying that the risks were so great of carrying hazardous materials. But in essence, the government said, no, you must because the alternative, the highway, is so much worse. You know, people keep saying, why are they allowed to do this? And my answer is, they're not allowed to, they're compelled to.
So it is going to be a reputational hit. Financially, they'll be able to do this. There were no casualties. They'll get the-- from a building stock point of view, that's all manageable. We'll see with the long-term impacts. You know, I'm not an expert on the side of high hopes that with the EPA, the Ohio EPA, and Norfolk Southern's money, they can resolve the long-term impacts of these leaks.
DAVE BRIGGS: So, Tony, is your suggestion that this is more of a federal government issue than it is a Norfolk Southern one?
ANTHONY HATCH: Well, that's probably overstating it. I mean, they have to carry these. They have every incentive to carry them safely. Look at what's happened to them, also to, of course, the poor citizens of the town. I'm just saying it's just ironic that of this railroad, which had the, overall, the historic best safety record, a railroad that, in their investor conference in December, pledged to do things differently with their stakeholders, including labor and shippers, this was the railroad here that had led the fight against having to carry these goods in the aughts. And so this is the railroad that has an accident.
These things, unfortunately, happen from time to time. It was-- it appears to be a bearing failure, which is unseeable to the human eye as you walk past it. And they have hotbox detectors. Now they'll have more of them. Their safety record is actually pretty remarkable. 99.99% get through. It's just-- I guess instead of being thankful, that it could have been worse, we're sort of attacking them as being unsafe. And that seems unfair.
But the federal government and the shippers of the product also bear responsibility in this. These goods go to a factory where people work to be used, or they go to chlorine for drinking water. People want those things. They want chemical factories to be open. They want water to be clean. Railroads have the responsibility to carry them because the highway is worse. It's just, nobody seemed to mention that as they all took-- since all of the senators took turns, you know, grandstanding. It was very disappointing for me as a US citizen to see that part of the hearings today.
DAVE BRIGGS: US senators grandstanding at a hearing, Tony? Say it ain't so. I mean, that has pretty much become their job recently. But Norfolk Southern has had another derailment since the one in East Palestine. CSX had one on Wednesday that's now put oil into one of our oldest rivers that's part of the National Park Service. Are there more derailments as of late or just more focus on them by the media? You talked about Norfolk's safety record.
ANTHONY HATCH: The latter. The derailments-- if you look at the track record since deregulation in 1980, since the turn of the century, since the start of-- over the last 10 years, pick your poison-- that's a terrible phrase-- you'll see the track record gets better. It's really good business to stay on the tracks. Norfolk Southern also had a third incident since-- that you didn't mention, which a truck hit it.
You remember that a large part of these accidents are often non-rail people getting in the way of moving freight trains on private property. In this case, at Cleveland-Cliffs, a dump truck hit a Norfolk Southern locomotive. Think about how out of control you have to be to do that. And unfortunately, there was a fatality, unlike the other instances you mentioned.
Right now, anything that happens is going to get a lot of attention. The locomotive turns over, and you can see the logo on the side. These things happen to the tune of several times a day. Mostly, it's a wheel that slips off the track. That's not good for the railroad either. It closes the main line down, let's say. It tears up the track, costs a lot of money. Mostly, they don't happen in this way, where you need controlled explosions under the glare of the camera lights--
DAVE BRIGGS: If they weren't busy-- if they weren't so busy, Tony, grandstanding, what would you like to see from our nation's senators and congressmen and women?
ANTHONY HATCH: Well, the-- most of the proposals, ironically, that they've talked about in the bill so far and the DoT secretary's letter would be solving problems that don't have-- that had nothing to do with this or solving problems that may not even exist. The issues that they discussed, for example, Senator Sanders talked about paid sick leave. There was no sign that these three employees in the cab were sick. That's completely unrelated. So is train length. So are ECP brakes. They don't work as well as air brakes, even though they are more modern technology.
I don't know what I want the government to do. The FRA and the government should take a look at the final NTSB report and then make actions. The things they're talking about now are just so they can say that they're "doing something." But the NTSB is a highly respected organization that is apolitical and is scientific. And when they make a recommendation, that's what-- when things should be done. NS has already said they're going to do more hot boxes, which detect failed bearings in these things. And if they do that, that'll be helpful and something they could do. That's a voluntary program, by the way.
I'm not sure what a regulatory-- what in regulations could be done under the existing rules or even the ones that are proposed that would have changed this outcome. When the NTSB said, oh, this accident is preventable, they meant all accidents are preventable. This was a series of very bad luck. Or if you think about the fact that nobody got hurt, maybe good luck. One way you could stop it is not move these goods. But then you'd shut a lot of factories down.
DAVE BRIGGS: Right. Great context there. Tony Hatch, ABH Consulting. Appreciate all that. Thanks so much.
