WASHINGTON — The country's fourth-largest coal producer, Massey Energy Co., will pay a $20 million fine as part of a settlement with the government over allegations it routinely polluted hundreds of streams and waterways in West Virginia and Kentucky with sediment-filled waste water and coal slurry.

Under the agreement with the Environmental Protection Agency, Massey Energy, headquartered in Richmond, Va., also will invest millions of dollars for pollution control improvements at its 44 mines and coal facilities in the two states and in Virginia, the EPA and Justice Department said Thursday.

The EPA estimates the improvements required by the settlement will cost Massey as much as $10 million, although the company said the cost is expected to be less. "That's their estimate," said Shane Harvey, Massey's assistant general counsel. "We do not have a firm estimate at this time. My guess is it would be below $10 million."

The agreement settled a complaint filed by the EPA in May 2007 alleging that the company violated the federal Clean Water Act on at least 4,500 occasions between January 2000 and the end of 2006 by discharging mining waste and sediment _ including hazardous metals _ into hundreds of streams and waterways and failing to control spills of coal slurry during its mining operation.

Some of the waste water discharges were more than 10 times the amounts allowed by state permits, the EPA said.

Massey officials announced the agreement Thursday, noting that it would allow the company to avoid costly litigation and resolve questions about its liability for the damage. "We believe this agreement will benefit the environment as well as our shareholders," said Baxter F. Phillips Jr., the company's executive vice president and chief administrative officer.

The maximum penalties facing the company for the thousands of violations and days when permits were exceeded could have been as high as $2.4 billion, according to the EPA.

The pollution "destroyed streams, destroyed fish habitat. There was definitely an environmental impact here," Granta Nakayama, the assistant EPA administrator for enforcement, said in an interview. "We thought it was very serious."

The $20 million civil penalty is the largest ever for discharge permit violations under the Clean Water Act, said Nakayama. "This is a landmark settlement for the environment, and raises the bar for the mining industry."

As part of the agreement, Massey promises to develop and implement new procedures and tracking systems to prevent waste water discharges and slurry spills, and allow third-party audits of its pollution prevention program. The company also agrees to set aside 200 acres of riverfront land in West Virginia for conservation and protection against future mining.

Ronald Tenpas, head of the Justice Department's environment and natural resources division, said the measures agreed to by the coal company "represent a significant step forward in the way that mining facilities currently address Clean Water Act compliance."

The new pollution prevention measures are expected to keep an estimated 380 million pounds of sediment and other pollutants from Massey's mining operation out of the three states' waters each year.

The settlement concludes an EPA investigation of more than two years of Massey's mining operation. The complaint filed last May alleged that Massey routinely released metals, sediment and acid mine drainage into streams and rivers at amounts 40 percent or more than allowed by state permits.

And investigators found that Massey's operations failed to control spills of coal slurry, containing sediment and metals, allowing it to clog streams and harm fish habitat.

Massey, which reported $89 million in profits on revenues of nearly $1.7 billion for the first nine months of 2007, is the largest coal producer in the Appalachia region, operating 19 mining complexes _ 33 underground and 11 surface mines as well as processing facilities _ in southern Virginia, southern West Virginia and eastern Kentucky.

The company has been embroiled in a string of legal and environmental disputes from complaints about its hilltop mining practices and pollution of waterways to mine safety and high-profile contract disputes.

Currently its president and chairman, Don Blankenship, is at the center of conflict of interest allegations involving the chief justice of West Virginia's supreme court. Photographs surfaced with Blankenship and the justice, Elliott Maynard, socializing together on the Mediterranean last summer _ four months before the court in a 3-2 decision with Maynard in the majority reversed a $76.3 million judgment against Massey in a dispute brought by a bankrupt coal company. Other problems facing Massey include a $219.8 million jury verdict awarded to Wheeling-Pittsburgh Steel Corp. in a contract dispute and a record $1.5 million in fines by the federal Mine Safety and Health Administration for safety violations involving the deaths of two miners in a January 2006 mine fire. The fire at the Aracoma Alma No. 1 Mine in Logan County, W.Va., also is the subject of a federal criminal investigation.

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On the Net:

Environmental Protection Agency: http://www.epa.gov

Massey Energy Company: http://www.masseyenergyco.com/

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