The Pennsylvania Department of Conservation and Natural Resources has reached a $36 million settlement with Consol Energy over claims the company’s coal mining caused structural damage that required a lake to be drained at a nearby state park.

As part of the settlement, Consol will, among other things, pay the $36 million to restore the lake at Ryerson Station State Park and give the state eight plots of land to increase the park’s size by 506 acres. The DCNR will allow Consol to drill for natural gas under the state park, but it can only do so from off-park property, according to a release detailing the settlement.

In addition to the settlement payments, Consol has also agreed to give the DCNR an 18 percent royalty fee on natural gas production from the park once Consol realizes $13.7 million from such gas production, according to the release issued by the DCNR.

The settlement brings to a close an administrative damages claim the DCNR filed against Consol under the Bituminous Mine Subsidence and Land Conservation Act. The case was being heard before the state Environmental Hearing Board, but was resolved through mediation with mediator Thomas Rutter of ADR Options.

The DCNR owns Ryerson Station State Park in Greene County, Pa., near the West Virginia border. The park included a concrete gravity dam that created a 60-acre recreational water body known as Duke Lake. The DCNR alleged the dam was structurally damaged in 2005 by mine subsidence and ground movement caused at the nearby Bailey Mine’s longwall mining operations conducted by Consol. Subsidence is the downward movement of the earth. The lake ultimately had to be drained and has sat as a dry lakebed for years.

As part of the three-day mediation between the parties, a public hearing was held earlier this year in which area residents suggested they wanted the lake to be restored as soon as possible, would be amenable to the necessary give-and-take between the parties to resolve the dispute, understood the importance of gas drilling to the region and would be OK with drilling under the park as long as there was no further drilling in the park itself, according to a mediation report done by Rutter in February 2013.

Consol Energy is the parent of Consol Pennsylvania Coal Co., which operates Bailey Mine. Consol has disputed that its operations at the mine caused subsidence or ground movement that damaged the park’s dam. It argued its operations were too far removed from the dam to have caused the damage, which Consol said most likely occurred because of the natural shifting of the earth in that region, according to the mediation report.

The Pennsylvania Department of Environmental Protection investigated the damage to the dam at Ryerson Station and determined Bailey Mine activities caused the damage, according to the mediation report. The DEP found the dam should be rebuilt at Consol’s cost. The DCNR solicited a design proposal to rebuild the land, which determined it would cost $21.7 million to make the repairs. Consol has argued that is excessive in scope and cost, according to Rutter’s report. Consol appealed the findings to the Environmental Hearing Board. It will withdraw that appeal in light of the settlement, the DCNR said in a statement.

In his mediation report, Rutter had described the case as a "battle of experts." He said that if the case were to go to trial and the DCNR were to win, a verdict may be in the range of $29 million. Rutter noted that did not include the DCNR’s additional claim against Consol, filed in the Allegheny County Court of Common Pleas, for natural resource damages. Those types of damages, Rutter said in a footnote to his mediation report, are "controversial and contested" and should not, in Rutter’s opinion, be any part of a negotiated settlement.

Stewart L. Cohen of Cohen, Placitella & Roth, who represented the DCNR along with DCNR attorney Dennis A. Whitaker, said the settlement resolves the natural resource damages claim as well.

Consol had argued the subsidence claim damages are more akin to a range of between $10.6 million and $17.7 million, according to the report.

Duke Lake is expected to be restored by the summer of 2017.

"I’m gratified that this litigation has resulted in replacing a dam and a major recreational source," Cohen said.

Cohen said Rutter was instrumental in resolving the "genuine" dispute that existed between the parties.

Stanley R. Geary of Consol Energy represented the company along with Thomas C. Reed of Dinsmore & Shohl and Samuel W. Braver of Buchanan Ingersoll & Rooney.

The Center for Coalfield Justice, which was granted intervenor status in the case, was represented by Emily A. Collins and Oday Salim of the University of Pittsburgh Environmental Law Clinic.

Consol Energy President Nicholas J. DeIuliis said the company was pleased the settlement was reached, allowing the parties to avoid long and protracted litigation.

"This agreement is proof positive that with strong leadership and sustained focus on a common goal, collaboration does deliver results," he said. "The Ryerson Station State Park settlement achieves the desired objective of restoring and improving this tremendous regional amenity to Greene County and Southwestern Pennsylvania as a recreational and tourist destination for generations to come."

Gina Passarella can be contacted at 215-557-2494 or at gpassarella@alm.com. Follow her on Twitter @GPassarellaTLI.