US-based Arch Coal and its subsidiaries have agreed to make system-wide upgrades to their operations in a bid to prevent the release of pollutants into the waterways.
The company and its 14 subsidiaries under the International Coal Group (ICG) have agreed to conduct these comprehensive upgrades to ensure compliance with the Clean Water Act.
Under the proposed consent decree lodged in the US District Court for the Southern District of West Virginia, the companies will also pay a $2m civil penalty.
According to the US Environmental Protection Agency (EPA) and the US Department of Justice (DOJ), the settlement resolves various violations that are related to illegal discharges of pollutants at the companies' coal mines located in Kentucky, Pennsylvania, Maryland, Virginia and West Virginia.
Other plaintiffs in the settlement include the states of West Virginia, Virginia and Pennsylvania.
EPA Office of Enforcement and Compliance Assurance assistant administrator Cynthia Giles said: "Businesses have an obligation to ensure that their operations don't threaten the communities they serve, especially those that are overburdened by or more vulnerable to pollution.
"This settlement will prevent future environmental and public health risks by making sure these companies comply with federal and state clean water laws."
Environment and Natural Resources Division assistant attorney general John Cruden said: "This joint enforcement effort, with three states, has resulted in a settlement that will require changes that will benefit the health and environment of Appalachian communities for many years to come.
"Under the terms of the agreement, Arch Coal and its subsidiaries will pay a significant penalty, improve their pollution control systems and provide for independent monitoring and data tracking that will make it a better company and a better neighbor to these communities."
To ensure compliance and prevent future Clean Water Act violations, the companies are required to develop and implement a compliance management system and conduct periodic internal and third-party environmental compliance audits.
A data management system should be put in place to track violations, water sampling data and compliance efforts.
Environmental managers and others responsible for the consent decree are required to be given proper training.
The companies should be ready to pay stipulated penalties if violations persist.
The decree is subject to a 30-day public comment period and approval by the federal court, EPA said.