Duke Energy will pay North Carolina about $20 million for contaminating groundwater with coal ash, a settlement environmentalists call a sweetheart deal for the largest US utility.

The settlement includes a $7 million fine and $10-15 million to speed the cleanup of groundwater around four coal-fired power plants, the state Department of Environmental Quality (DEQ) announced this week.

"This settlement resolves the issue of fines for past violations and allows DEQ to commit all of its resources to overseeing Duke Energy's clean-up process," DEQ Secretary Donald R. van der Vaart said in a statement announcing the deal.

But regulators initially sought to fine Duke Energy $25 million for contaminated groundwater at one power plant, near Wilmington. Duke challenged the fine in court, arguing the state failed to follow a 2011 policy by giving the company the chance to clean up its own mess before hitting it with penalties. The resulting $7 million covers all 14 of the utility's coal-ash sites — and environmentalists say the state took a dive.

"It's a really outrageous failure of the state to live up to its responsibility to protect the people of the state and its natural resources," said Frank Holleman, senior attorney for the Southern Environmental Law Center, which represents a coalition of environmental groups that had brought both state and federal court cases against Duke over coal ash leaks.

"This is abandonment by our Department of Environmental Quality of its enforcement of clean water laws against the contamination of the state's groundwater by coal ash," he said. "They expressly say that they will not take action for past, present, or future groundwater contamination due to coal ash as part of this settlement, and Duke Energy, amazingly, in exchange, does not agree to do anything it didn't have to do anyway."

Crystal Feldman, a spokeswoman for the state agency, said in an e-mail that the state was hamstrung by the 2011 policy, which now has been rescinded. The settlement announced this week was "a win-win" under those constraints, she wrote.

"The settlement requires Duke Energy to accelerate cleanup at four sites and drop its legal challenges on other regulatory requirements we have imposed to better protect the environment," Feldman added. "Along with resolving the legal case, the estimated $20 million settlement prevents the state from incurring additional legal fees associated with protracted litigation."

Vast stores of heavy metal-laden ash piling up outside coal-fired power plants have become a major environmental issue in the Southeast in the past decade. A dam breach outside a Tennessee plant in 2008 released the largest ash spill in history, pouring more than 1 billion gallons of sludge into nearby Tennessee River tributaries. And in early 2014, a ruptured pipe at a Duke Energy plant in North Carolina led to 39,000 tons of ash pouring into the Dan River; that spill led to a $102 million settlement with the federal government, corporate guilty pleas by three Duke subsidiaries, and additional cleanup work at three other power plants.

This week's settlement only covers groundwater contamination, Feldman said. Surface spills like the Dan River disaster aren't covered, and reversing the 2011 policy means DEQ officials "have all the tools required to enforce the law and penalize future polluters."

The federal Environmental Protection Agency estimates that Duke Energy has more than 100 million tons of coal ash stored in basins around North Carolina. Duke said Tuesday's settlement will allow it "to put this issue behind us" and let it get on with its plans to clean up the 14 coal ash sites "as quickly as the state process will allow."

"It allows us to get out the courtroom and back into the field," Duke Energy spokesperson Paige Sheehan said. The company, the state and environmental groups "all agree groundwater must be protected, and that's the work that we're getting busy doing — and that we have been doing for some time now," she said.

Utility officials "certainly don't agree" that a $7 million fine is a sweetheart deal, Sheehan said. But Catawba Riverkeeper Sam Perkins said this week's settlement is "grossly undervalued" and showed that DEQ failed to learn anything from the Dan River spill.

"Our ultimate goal is we want to see these old, unlined, leaking sites be moved to a new, lined location away from water," Perkins said. "If it was a small fine, but the agreement was to truly clean up all 14 sites, I think you'd see pretty unequivocal support for that." But this deal, he said, amounts to "putting a rug over a mess."

DEQ, until recently known as the Department of the Environment and Natural Resources, had proposed an earlier settlement with Duke over coal ash that would have totaled only $99,000 — a proposal withdrawn after the Dan River spill amid heavy public criticism.

Holleman said the law center and its clients are still trying to figure out their options after this week's announcement. But he said the deal has "no impact whatsoever" on the cases the law center is pursuing in federal court and will challenge any attempt to invoke it in state cases.

"We will fight that and continue to fight, even if the state does not," he said.

Watch the VICE News documentary Toxic Waste in the US: Coal Ash here: