Derailments Haven't Stopped Railway Companies From Reaping Huge Profits

By Rachel Phua

On Feburary 3, 2023, a freight train owned by railway giant Norfolk Southern — one of America's seven Class I freight railroads, which are railroads that make nearly $1 billion or more a year — derailed in East Palenstine, a town of around 4,500 people on the Ohio-Pennsylvania border about 50 miles northwest of Pittsburgh. Fifty-three cars derailed, 11 of them carrying hazardous materials, causing a fire and the chemicals to be released into the air. One of them is vinyl chloride, a colorless, odorless chemical used to make plastic that's cancerous.

The dire aftermath of the crash drew widespread attention and criticism on the industry after it was found that the accident was preventable, if the train crew was alerted earlier that one of the wheels had overheated.

But derailments have been a common occurence among the railroads, with over 1,000 in 2022 alone, or about three a day. Though they pose a huge safety risk on workers and residents who live near rail lines, railways often go under-penalized for their negligence, and so shareholders continue to bet on them.

Under current laws, rail companies face a maximum fine of only $225,455 for each safety breach, when these companies make billions of dollars in profits a year. Transportation secretary Pete Buttigieg said he would call on Congress to raise the fine amount.

Railroads have also been allowed to increase the length of their trains, and cut workers. A 2019 report by the Government Accountability Office found that trains have gotten 25% longer since 2008, with average lengths of 1.2 to 1.4 miles.

Over the past seven years, these Class I companies have slashed their headcount by 29% collectively, or 45,000 employees, with the aim of "lowering their operating ratios and satisfying their shareholders," federal freight rail regulator Surface Transportation Board chairman Martin Oberman said last year. This has led to a “serious deteriorations in rail service.”

The chief culprit is “precision scheduled railroading,” a system that the rail companies used to run as few services as possible on as small a headcount as possible, which has led to train delays and safety issues.

Because the Class 1 railroads are an oligopoly — with four of the seven Class I's owning about 83% to 90% of the freight rail market — customers have no choice but to use them, even if there's a risk their goods will not arrive safely at their destination. Railroad company profits have gone up even though derailments are still happening. And rail workers have few choices in employers.

Rail workers previously told me that precision scheduled railroading has led to burnout since they're now expected to work longer and more shifts. If a train is delayed, for example, workers' shifts are also delayed. "It ends up coming into town eight hours late. By that time, I’m exhausted,” said Michael Paul Lindsey, an engineer with Union Pacific.

It is also difficult for current workers to run such long trains. Hugh Sawyer, a Norfolk Southern engineer who has been in the industry for 35 years, said that in the late 1980s, there would be five to six workers to a train — an engineer, a conductor, two helpers, a fireman, and a yard worker. Today, there is only the conductor and the engineer.

Methodology: I looked at data on rail accidents from the Federal Railroad Administration, and filtered it just for Class I railroads, and derailments that happened between 2018 and 2022. I also looked at the earnings reports filed by the railroad companies for their profits, and downloaded the monthly closing share price data from Yahoo! Finance.

I also took data on the miles each Class I railroad traveled between 2018 and 2022 to calculate the number of derailments per million miles traveled, since every railroad is of a different size.

I didn't end up using the information, but you can take a look at my analysis on my jupyter notebook scratchpad. I used Pandas to do my analysis, and R/Ggplot to make my charts. To make the radar-like chart, I used Rawgraphs' template and modified it. My next step will be to turn the radar chart into a scrollytelling bit.

Here is my repository.