The outcome stemmed from claims the Ohio Valley Environmental Coalition, the West Virginia Highlands Conservancy and the Sierra Club made under the Clean Water Act relating to Patriot’s surface mining activities in West Virginia and pollution from several of its operations.

The deal, presented to US District Judge Robert Chambers in Huntington, West Virginia, allows the Missouri-based miner to postpone as much as $US27 million in compliance-related expenses into 2014 and beyond, including an extension to those changes under the Hobet 22 permit from next May to August 2014.

In exchange for the extra time to place the selenium treatment systems, Patriot agreed to gradually eliminate its mountaintop removal sites and have maximum caps attached to the coal tonnage produced from its strip mines.

Additionally, Patriot will withdraw two applications for Clean Water Act section 404 valley fill permits that are pending with the Army Corps of Engineers, and surrender all remaining rights under a third permit.

It will not apply for any additional large-scale surface mine permits and also will not open any stand-alone surface mines. Any small scale surface mining will be conducted only in conjunction with existing and planned underground mining.

Patriot can move forward with plans to open a metallurgical mine that has a pending 404 permit, but the groups have the right to challenge the permit if the Environmental Protection Agency identifies water quality concerns.

Finally, the producer will donate $500,000 to a not-yet-identified West Virginia non-profit organization.

The litigation resolution was a must-do for Patriot during the proceedings of its Chapter 11 bankruptcy, which it filed for in July.

The agreement serves to enhance its liquidity and increase the likelihood it will emerge from its reorganization protection with a viable business.

“Importantly, this proposed settlement allows Patriot to continue mining according to existing permits and is consistent with our long-term business plan to focus capital on expanding higher-margin metallurgical coal production and limiting thermal coal investments to selective opportunities where geologic and regulatory risks are minimized,” president and chief executive officer Bennett Hatfield said.

The settlement remains subject to the approval of the District Court for the Southern District of West Virginia, which will come after a public comment period.

It also will need the green-light of the Bankruptcy Court for the Southern District of New York, where Patriot has filed its Chapter 11.

However, the Sierra Club touted victory on behalf of all three groups, calling the decision a “historic moment” for those impacted the most be mountaintop removal mining.

“Tens of thousands of people have worked tirelessly to put an end to this destructive process, and today’s agreement is a major step towards ending this abhorrent form of mining and repairing the damage done to communities and ecosystems across the region,” director Michael Brune said.

“Patriot Coal may be the first company to cease mountaintop removal mining but, because of the tireless efforts of committed volunteers and community organizations, it certainly won’t be the last.”

West Virginia Highlands Conservancy’s Cindy Rank added: “We've been saying for many years that if companies had to pay the real costs of mountaintop removal, it would not be economically feasible.

“Hopefully, it’s now become clear that when coal companies are required to prevent illegal selenium pollution and pay the costs for cleanup themselves it’s simply doesn’t make economic sense to continue this destructive form of mining.”