Arch coal and its 14 subsidiaries have agreed to pay $2m in civil penalty for illegal discharges of pollutants from the company's mines in Kentucky, Pennsylvania, Maryland, Virginia and West Virginia.
The companies have also agreed with US EPA to carry out comprehensive upgrades to their operations to ensure compliance with the Clean Water Act.
The companies have also been ordered to implement measures including developing and implementing a compliance management, conduct third-party environmental compliance audits, maintain data to track violations of water sampling data, and compliance efforts to avoid the occurrence of such situation in future.
The company has reached an agreement with the US Environmental Protection Agency (EPA) and the US Department of Justice (DOJ) and the plaintiffs in the settlement include T 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 C. 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."