Eighteen months ago state Department of Environmental Protection Secretary Kathleen McGinty proposed that Neville Chemical Co. be fined $17 million for disregarding pollution laws for 20 years and refusing to stop a hazardous oil and chemical slick seeping into the Ohio River.

Yesterday, the DEP and the company announced a settlement of the civil penalty case that will require the Neville Island-based chemical manufacturer to spend $2 million over the next five years to replace pipes that may or may not have leaked and contaminated groundwater under the plant.

Neville Chemical agreed to replace underground pipes leading from processing facilities to its own water treatment facility with above-ground pipes. It also agreed to inspect and repair the old pipe system and use it to carry storm water to the treatment facility.

"We believe the highly contaminated process wastewater may have been leaking from the underground system for some time," said Ken Bowman, DEP regional director. "Those leaks allowed hazardous substances into the groundwater under the site and into the Ohio River."

Tom McKnight, Neville Chemical chief operating officer, said he "respectfully disagrees," attributing the groundwater contamination to "historical processes" that included surface storage of contaminants in lagoons. The company has operated at the site since 1925.

"The company knows of no pipeline leaks that caused the pollution into the Ohio River," said McKnight.

In addition, Neville Chemical could pay a fine of $400 a day for any day that an oil sheen is observed along the company's property line at the shoreline of the river, but not until April 1, 2006. The agreement gives the company until March 31, 2008, to correct the problem or the DEP may initiate further enforcement actions.

McKnight said contaminated oil continues to seep from the shoreline about three times a month, but no contaminated groundwater has migrated to the river since June 2002, when the company restarted its well pumping to reverse the underground flow.

McKnight said that under an April 2004 agreement, the company installed three new wells and retrofitted an existing well to pump contaminated groundwater to its treatment facility.

"I think both sides are very happy with the settlement," McKnight said. "We've shown good faith in terms of our investment in installing the wells."

The two sides haven't agreed on much during two decades of enforcement actions, penalties and court orders concerning surface and groundwater contamination, and some local residents and environmental organizations weren't happy they started yesterday.

"That's not a penalty at all. It's ridiculous," said Suzie Brindle, a spokeswoman for Clean Water Action, an environmental group that has pushed for tougher enforcement of pollution laws on the highly industrialized island in the Ohio River. "That $2 million investment is something the company should have been doing for the last 20 years."

The oils and chemicals that discharged into the Ohio River come from a layer of pollutants that floats on top of the groundwater beneath the company's plant.