Bankrupt coal company Alpha Natural Resources Inc. has come to terms with West Virginia environmental regulators, agreeing to cover hundreds of millions of dollars of reclamation work at its mines.

As part of the settlement, West Virginia's Department of Environmental Protection agreed to drop objections to Alpha's chapter 11 plan, which drew fire because of its lack of provision for environmental damage left behind by coal mining operations.

"Alpha and its secured creditors might have just walked away from West Virginia and tried to leave hundreds of millions of dollars of reclamation and water treatment work at its abandoned mine sites to the state's Special Reclamation Fund. Instead, they have stepped up and provided significant funding," said Randy C. Huffman, cabinet secretary for the West Virginia DEP, in a release.

The agreement calls for surety bonds that Alpha posted to obtain its mining permits to remain in place. Alpha will post an additional $100 million in penal bonds and $39 million in letters of credit or cash bonds as a further layer of financial protection. According to the West Virginia DEP, the settlement is valued at $309 million and subject to bankruptcy-court approval.

Alpha, based in Bristol, Va., sought chapter 11 protection in August. Its chapter 11 exit plan is out for voting now, and the company is under pressure to reach an agreement with federal regulators and other states worried that taxpayers will wind up footing the bill to clean up mining contamination.

Alpha is one of a number of coal companies driven to bankruptcy because of debt that became insupportable when market prices fell. Under its chapter 11 plan, creditors will take ownership of its best mines, while other mines would be left behind to form a restructured Alpha.

Regulators worry that the postbankruptcy company won't have the financial strength to clean up the land and water. According to court papers, nearly $293 million in reclamation obligations will be associated with the mines that Alpha keeps, while another $181.1 million in reclamation obligations would follow the mines that the creditors take.

Jacqueline Palank contributed to this article.

Write to Peg Brickley at peg.brickley@wsj.com

(END) Dow Jones Newswires

June 09, 2016 17:25 ET (21:25 GMT)

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