FRANKFORT — An environmental coalition is calling an agreement filed Friday in Franklin Circuit Court with the Energy and Environment Cabinet and ICG Coal an “historic settlement” that addresses water pollution and false reporting by the coal company.

If approved by Franklin Circuit Judge Phillip Shepherd, the agreement calls for more than $500,000 in fines and penalties, which will be used to monitor and clean up polluted waterways in eastern Kentucky and provides for a third party to audit future pollution reports by the company.

Ted Withrow, a retired state Division of Water employee and a member of Kentuckians for the Commonwealth, said the agreement meets nearly all of the environmentalists’ goals.

“We got what we needed to protect the people of eastern Kentucky,” Withrow said. “That was our goal going into this litigation and we believe we have a solid agreement that will help us improve the water quality in eastern Kentucky, assure better enforcement of the Clean Water Act and stop the blatant disregard for the people who live downstream from these mining operations.”

Under the terms of the agreement, ICG will pay $335,000 to Kentucky PRIDE to use toward eliminating residential “straight pipes” dumping sewage into streams and another $240,000 the cabinet can use to monitor water quality in Eastern Kentucky streams. Withrow said the second amount will be matched by the federal Office of Surface Mining, increasing its impact.

An initial agreement between the cabinet and ICG in December 2010 would have imposed $350,000 in civil penalties on ICG. The environmental groups, Appalachian Voices, Kentuckians for the Commonwealth, Waterkeeper Alliance, Kentucky Riverkeeper and three private citizens, sued to intervene in the case, contending the penalties assessed by the cabinet were insufficient to deter future violations.

Shepherd granted their request and urged the parties to negotiate an agreement. Friday’s filing represents the results of those negotiations. The original complaints filed by the environmental groups also named Frasure Creek for a similar pattern of violations, but that company faces financial pressures and has not reached agreement with the environmental groups or the cabinet.

In a press release announcing the agreement, the environmental coalition said Friday it agreed to accept the civil penalties originally levied by the cabinet against ICG because of the assurance the money will go directly to fund general water quality improvements and water monitoring programs in eastern Kentucky.

The settlement also sets fines for potential future violations.

Withrow said the agreement sets a precedent for private citizens and environmental groups because they now “have the right to intervene in cabinet enforcement actions taken to state court — an underlying principle of the Clean Water Act that we had previously been denied. This is huge.”

Bruce Scott, the commissioner of Environm-ental Protection, has questioned the precedent-setting nature of the agreement. He said last month when it was disclosed the parties were close to agreement that the settlement makes the state a direct party to the agreement unlike consent agreements reached by violators and the federal Environmental Protection Agency.

Scott also said the agreement “affirms the amounts the cabinet assigned to ICG two years ago” and those it sought to impose for subsequent violations uncovered after the original 2010 cabinet proposal.

In 2010, Appalachian Voices and the Waterkeeper Alliance alleged they found false pollution reports by ICG and Frasure Creek disguising thousands of CWA violations. They alleged the companies deliberately cut and pasted data from one report to subsequent reports.

“They apparently were not actually doing the required testing,” said Eric Chance, water quality specialist for Appalachian Voices. “And the state, which citizens depend on to protect their health and the environment, failed utterly in its responsibility to catch this industry-wide pattern of misreporting.”

Scott and the cabinet originally maintained that many of the violations were transcription and administrative errors and blamed much of the problem on independent laboratories used by the coal companies. And they said the cabinet moved quickly when the environmentalists pointed out the violations and discovered others during its own investigation.

Withrow said that’s why the inclusion of a third-party monitoring of ICG’s reports is so crucial to the settlement.

“Third-party monitoring is a very important part of this agreement,” he said. “Third-party monitoring was necessary because the cabinet has shown it was either unwilling or unable to do this mandatory work. We hope that this will help change the culture of non-enforcement that has existed for way too long in the Kentucky Energy and Environment Cabinet.”

Scott said Friday the cabinet is pleased with the settlement and sees it as an affirmation of their original penalties. But he is disappointed with the criticism leveled by the environmental groups.

“It is disappointing that despite this good faith agreement among the parties and the substantial efforts by the cabinet to work cooperatively with all parties throughout this lengthy process that the intervening parties have elected to announce the agreement by resorting to criticisms of the cabinet,” Scott said.

Pat Banks of Madison County, who heads the Kentucky Riverkeeper and one of the private citizens who originally filed suit, said the agreement is necessary.

“I frequently go paddling and swimming in the Kentucky River, but I am worried about the safety of the water,” she said. “What are we to do when cases like this clearly show that the cabinet is not doing its job? How are we supposed to know that the water we drink, play, and bathe in are safe?”