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Ohio Train Wreck: What Will Happen Next?

Posted on Apr 17, 2023, jshell55

We’re going to predict what will happen next in the Ohio Train Wreck story. Due to our powers of prognostication, and our experience around various examples of organizational dysfunction, we can predict the future.

Of course if you feel like rereading what we have already said on this please click back.

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Back Story

Oh, yeah, we’ve been writing about this for awhile now. This wreck happened in early February, was the nation’s top story for about two weeks, and has since faded into the background.

That is what is called the “news cycle.” But the 1900 feet of contaminated ballast, a pile of stinking burned out rail cars and lung irritation still remain.

Here’s a summary. You can follow some of my other posts on this in case you forgot.

Dissecting Human Error: The Ohio Train Disaster

There Will Be More Disasters

This one is fairly easy. The nation’s railroad infrastructure is a mess. This is because it costs money to maintain it and the railroads have all the incentive not to spend it. The system was built 150 years ago and can’t be brought up to speed without a herculean effort.

So, what that means is, we will still have hazardous materials, rolling through the little towns, on decaying track and in bad rail cars.

This is obvious because it has already happened. Since the time of the first Ohio wreck there have been several more. I’ve linked an article. Train wrecks have been part of railroading since the invention of trains and they aren’t going away.

In fact, it is ironic. Casey Jones, the iconic hero of railroad history in the US, was killed in a train wreck. The part of Casey on 50’s TV was paid by this fellow, whose later character is indelibly linked with ship piloting failure.

Laws will be Passed Without Enforcement

Well, things being what they are, there will be a knee jerk reaction on the part of the US political system. There will be hearings, a law will be proposed, and a lot of new rules will be added to the already complex set of rules on putting trains together, and maintaining them.

The reality of this situation is there are plenty of laws, safety procedures and work instructions on the books right now. We’ve already highlighted some of these, regarding track inspections and crew training.

There is a Federal Railway Administration already, that is understaffed and underfunded. This has the effect of watering down the existing regulations by enforcing them poorly.

The railroads are politically influential and although they are not evil, they also at the same time don’t want to spend money on overhead. I have linked an article in the references to back up this statement.

Ohio Train Wreck: The Truth about Railroad Cars

The Railroad Will Pay a Settlement

There will be lawsuits, of course. These are already happening.

The lawyers, using my list of things to investigate, will find enough problems with the multiple systems to suggest negligence on the part of the railroad.

The railroads already know this. What they also know is that despite the mayhem, no one has died yet, and most of the people have recovered from this. There will be a few of the citizens who will complain of breathing issues. In East Palestine, a lot of them will be seen at the vape shops, allowing the lawyers for the railroad to argue the direct connection between the train wreck and their lung problems.

The Railroad’s Likely Response

The railroad will put an end to all of it by settling it. The amount of money they spend will seem like a lot, when it hits the headlines, but in the grand scheme of things, relative to the railroad, it won’t be a lot.

The lawyers will do well. The citizens with lung problems will see a little money, and the town will get a grant for new fire equipment.

In fact, a whole little industry has developed of lawyers that specialize in suing the railroad, and the railroad keeps a staff of lawyers of their own.

They have something like $1B of insurance to cover some of this and there will no doubt be lawsuits between the railroad and the insurance companies.

I’ve linked a Norfork Southern 10Q down below. Here is a snip from it.

The Government will give the Railroad some Money

This is also a no-brainer because it already happened. These railroads get Federal and State money all the time.

Railroading is one of the most heavily subsidized activities in the country. It is considered a national defense issue. It is considered an essential economic activity.

Everybody in the system including the people that live next to the track in East Palestine are aware of the state of the “industry.”

So, what will happen is that the government will pass the law that says there are more regulations, and shortly thereafter give railroad bailouts to make sure they keep running.

I have linked a recent example below.

The Railroad/Government Reality

The reality of this is that because of the huge capital investment, the system wouldn’t have been built in the first place had it not been for generous government spending. Elsewhere in the world, they have no qualms at all about the government owning part or all of the system, but we nominally have “free enterprise” here. Therefore, it is politically unacceptable for anyone to admit it.

Who benefits from this? Well, you do, of course. Because of these grants, and the “agreement” on the part of the railroad to keep freight rates as low as possible, we’re able to get our distribution of everything everywhere at a rate that is lower than it would otherwise be.

The CEO will get a raise

This one is also inevitable.

i am not sure whether this job would be hard or not. His job, of course, is to maximize the wealth of the shareholders.

The primary shareholders of this outfit, the Norfolk Southern corporation are some of the big mutual fund companies, Vanguard and Black Rock. It also includes a lot of pension plans and similar entities that need dependable income. So those are the people his job it is to maximize the wealth of. The Joe Schmoe investors only own about 20% of the company.

In the case of a railroad, they don’t expect the same amount of sales growth, or profit growth that you would get out of one of the high tech businesses. So, the value of the company is tied to how efficiently they can run. That means that they need to responsibly maintain their system so that they can serve their customers adequately. But they obviously need to

So, this fellow’s primary job is to keep the system going and not screw it up. His background is a BS degree, and an MBA from Virginia Tech, and some time at Harvard being “groomed.” He started in the chemical division so he may have paid attention in Chemistry class.

He looks good on TV, and has already spent some time in East Palestine apologizing to the locals. No doubt he’ll be called into a congressional hearing or two, if he hasn’t already.

Do you know what this reminds me of? The famed South Park episode where the president of BP apologizes for whatever disaster happened at the time. Here is the clip.

https://youtu.be/HQhmGIW7MVU

Management Talent?

Does this pass for “management talent?” I can’t possibly decide that. My dad would say that any college guy who doesn’t know the difference between a spike maul and a sledgehammer, and what their respective jobs are relative to the track, is missing the “railroad experience.”

But what we do know is that as long as he doesn’t screw anything up, the board of directors, who were selected by the mutual fund people above will keep him around. The board consists of financial people and also people from similar businesses that are capital-intense, such as energy, aerospace, and a couple of retail companies.

In order to make sure his compensation remains “competitive with other companies at this level in the S&P 500” they will make sure his salary rises with theirs, and so he will get his raises.

The critics of this system point out correctly that the rest of the people in the system, namely the engineer, car inspector, Trainmaster and the like aren’t as priviledged, and it is they who have to cope with the mess. Their wages won’t keep up with the CEO salaries on the S&P.

The Fire Chief will have a story to tell.

After further review, including review of the SDS document, I’ve come to the conclusion that the fire chief did his job.

He did exactly what it said on the SDS to do, in the face of a catastrophic disaster, with helicopters and streaming video and politicians.

No one will give him a medal, though. He couldn’t wave his hand and make it all go away. He can’t deal with the irritated lungs and the 1900 feet of contaminated dirt. That wasn’t his job.

His job, which he did, was to keep people away from the whole thing until it could be brought safely under control.

Will he get a raise? He, and the fire chiefs in all of the little towns all along the line will be underpaid and underappreciated. They won’t get the equipment they need to fight the next fire. They still won’t have paid attention in Chemistry class.

Does anyone benefit from this system?

Well, as we said above, you do. You benefit from the cheap shipping that the railroad gives. We as a society accept the risk of an occasional disaster, just like we do for offshore drilling and airplane disasters.

A large fraction of the nation’s coal, therefore electrical power travel by train. Same goes with commodities like chemicals and other lovely stuff.

The railroads invented the “piggyback” system at one point, which then morphed into shipping containers. Auto carriers are still a big business.

So it is true that the railroads, being a critical element of the “transportation system” will still be around. They have been around a lot longer than the town of East Palestine in fact, and the system will keep going as long as it can.

I believe we said early on that this is a system of “brontosaurustructure” where it is so big and so old that no one can change it.

That’s my prediction for the future. No one can change it.