Buttigieg calls for bigger fines on railways that flout safety rules

Current fines are “pretty much a rounding error for a multi-billion dollar corporation,” the Transportation Secretary said.

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As part of its response to the fiery Norfolk Southern Corporation (NSC) rail disaster in Ohio, the Biden administration announced Tuesday it is calling on Congress to allow much bigger fines on rail companies who violate safety regulations.

Currently, according to the Department of Transportation, the maximum penalty that can be levied for an egregious rail violation that involves hazard materials and results in fatalities is just $225,455.

That “is pretty much a rounding error for a multi-billion dollar corporation,” Transportation Secretary Pete Buttigieg said in a statement. “I'm concerned that some rail companies treat fines for safety violations as a cost of doing business and then the real cost is borne by families and communities when that safety violation leads to a tragedy. It's just not enough to have an adequate deterrent effect.”

Norfolk Southern's stock is down about 9.5% since the February 3 derailment.

The Transportation Secretary spoke with reporters on Monday to preview the actions unveiled this morning in response to the derailment in the town of East Palestine, Ohio, which led to chemicals being released into the local air and water with local residents expressing deep worry about their health as a result.

The Ohio crash is still being investigated by the National Transportation Safety Board. Norfolk Southern has not yet been accused of any safety lapses. Nevertheless, Buttigieg sent a stern letter over the weekend to president and CEO Alan Shaw asking the company to support the local community and accusing the railway of having a record of thwarting efforts to improve rail safety standards in the U.S.

The company didn’t immediately respond to Buttigieg’s note, but previously sent a letter of their own promising “We will not walk away, East Palestine.”

This video screenshot released by the U.S. National Transportation Safety Board (NTSB) shows the site of a derailed freight train in East Palestine, Ohio, the United States. About 50 Norfolk Southern freight train cars derailed on the night of Feb. 3 in East Palestine, a town of 4,800 residents near the Ohio-Pennsylvania border, due to a mechanical problem on an axle of one of the vehicles.
   There were a total of 20 hazardous material cars in the train consist, 10 of which derailed, according to the NTSB, a U.S. government agency responsible for civil transportation accident investigation. (NTSB/Handout via Xinhua)
This video screenshot released by the National Transportation Safety Board (NTSB) shows the site of a derailed freight train in East Palestine, Ohio after about 50 Norfolk Southern freight train cars derailed on the night of Feb. 3 in East Palestine, a town of 4,800 residents near the Ohio-Pennsylvania border. (NTSB/Handout via Xinhua) (Xinhua News Agency via Getty Images)

‘A pretty good place to begin would be to add a zero’

The call from the Biden administration for new fines came as part of a series of announcements unveiled Tuesday.

The administration called on the freight rail industry to use safer tank cars, provide workers with paid sick leave, and other measures. The Transportation Department also said it intends to take unilateral action of its own such as new rules around train crew size as well as more rigorous and focused safety inspections.

Those announcements are paired with the proposal for increased fines, which would need to be approved by Congress. The Biden administration is calling for other actions from Congress, including strengthening the rules that govern high-hazard flammable trains.

Buttigieg said he hopes there is currently a window of opportunity on Capitol Hill following the bipartisan outcry in recent days following the rail disaster. "If people are going to find religion on rail regulation, I welcome that," he said.

As for the level of fines, he would like to see: “This is something I want to work with Congress on but at a common sense level, I think a pretty good place to begin would be to add a zero,” Buttigieg says.

The Tuesday announcement from Buttigieg comes as the Transportation Secretary himself weathers criticism of his own, especially from Republicans, for what is seen as a slow federal government response to the derailment.

EAST PALESTINE, OH - FEBRUARY 14: A Norfolk Southern train is en route on February 14, 2023 in East Palestine, Ohio. Another train operated by the company derailed on February 3, releasing toxic fumes and forcing evacuation of residents. (Photo by Angelo Merendino/Getty Images)
A Norfolk Southern train passes through East Palestine, Ohio on February 14. Another train operated by the company derailed on February 3, releasing toxic fumes and forcing evacuation of residents. (Angelo Merendino/Getty Images) (Angelo Merendino via Getty Images)

Senator Marco Rubio (R-FL) even called for Sec. Buttigieg to resign claiming he has “demonstrated a gross level of incompetence and apathy” during his two years in office. Rubio says that a lack of oversight from Washington was a part of the reason for the crash.

In response, Buttigeig scoffed at Rubio’s charges, pointing to a 2021 letter pushing for more automated track inspections that was signed by Rubio and other GOP senators that, Buttigieg said, “was pretty obviously drafted by industry, calling on us to weaken our practices around track inspection.”

During a recent Yahoo Finance Live interview, Purdue University Lyles School Professor Andrew J. Whelton spread the blame around saying "State, federal, and local officials haven't been forthright and transparent enough with the population."

Buttigieg and other Biden officials meanwhile are clearly aiming to have Norfolk Southern shoulder most of the blame. But the partisan battle is only expected to increase this week: former President Donald Trump is scheduled to visit the northeastern Ohio town. “I'll see you on Wednesday!” the former President wrote this weekend in a statement.

Ben Werschkul is Washington correspondent for Yahoo Finance.

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