The settlement drew immediate criticism from a water protection group, while the hardest-hit locality — the city of Danville — continues to negotiate with Duke.
The Virginia Department of Environmental Quality said the settlement would include $2.25 million in environmental projects that Duke would perform in communities affected by the spill in February 2014. The remaining $250,000 would be placed in a fund for the department to respond to environmental emergencies.
The spill originated in Eden, North Carolina, but affected areas in Virginia, too, leaving more than 2,500 tons of the toxic ash backed up behind a dam in Danville. The ash is the waste left behind when coal is burned to generate electricity. It contains toxic metals.
The Virginia settlement is still subject to approval by the State Water Control Board. The consent order does not preclude affected localities from seeking their own settlements with Duke.
Danville officials said the spill has affected economic development and made some residents wary of the river.
"Here it is, more than a year later, and we still have citizens who are afraid to drink the water," spokesman Arnold Hendrix said. "They're still afraid that the coal ash is still there."
Hendrix said testing has shown city water supplies are safe.
City Manager Joe King said Danville has been discussing several projects with Duke that he said would restore confidence in the river.
"So far they've not responded to requests," he said.
The Roanoke River Basin Association said that the full environmental impact of the spill is still unknown and that the settlement does not rise to a "transgression of this magnitude."
"We have yet to see the total impacts on water quality, tourism, the region's image, and property values," Executive Director Andrew Lester wrote in an email to The Associated Press.
"What price do you put on these impacts? $2.5 Million is not the number," he said.
In a statement, Duke energy called the settlement a "fair outcome."
"Duke Energy is committed to working with the Virginia Department of Environmental Quality to expedite the benefits of this agreement and to help protect and promote natural resources in the state," Paul Newton, Duke Energy president for North Carolina, said in the statement.
In February, Duke and federal prosecutors said the energy giant had agreed to plead guilty to violations of the Clean Water Act and pay $102 million in fines, restitution and community service. The company said the costs of the settlement will be borne by its shareholders, not passed on to its electricity customers.
Duke adamantly denied any wrongdoing regarding its coal ash dumps for years. But in December, the company conceded in regulatory filings that it had identified about 200 leaks and seeps at its 32 coal ash dumps statewide that together ooze out more than 3 million gallons of contaminated wastewater each day.
A new state law passed in August requires Duke to either clean up or permanently cap all of its ash dumps in North Carolina by 2029.
Virginia environmental officials said they have assisted U.S. Department of Justice officials in developing a criminal case against Duke, and would press the state's interests in any settlement.
DEQ Director David K. Paylor said in a statement the consent decree with Duke ensures that the utility "is held fully accountable for the impact of this incidence."
The public will have until May 20 to comment on the settlement before the water board considers it.
Steve Szkotak can be reached on Twitter at http://twitter.com/sszkotakap.