DuPont Co. (DD) on Thursday reached a tentative settlement potentially worth nearly $393 million in a class-action case involving chemical releases from its Washington Works plant in Wood County, W.Va.

Residents in West Virginia and southeast Ohio sued DuPont in August 2001, alleging the company polluted their drinking water with unsafe levels of C8 (search) — a chemical also known as PFOA, used in the production of Teflon (search).

A circuit judge must still approve the terms reached between DuPont and lawyers for as many as 60,000 residents in the area around the Washington Works (search) plant.

If approved, the settlement would fund a $5 million study into whether C8 causes disease in humans. If a scientific panel finds such a link, DuPont would pay up to $235 million —- the bulk of the potential settlement —- on medical monitoring testing of residents.

"In addition, DuPont will also offer to provide six area water districts a state-of-the-art water treatment system designed to reduce the level of C-8 in the water supply," a DuPont press release said.

The proposed settlement also includes $70 million that DuPont would pay into a fund to be overseen by a court-appointed administrator. At least $20 million of that would pay for health and education projects. Another $22.6 million of the potential settlement is earmarked for lawyers' fees and expenses.

"We strongly believe that this settlement is in the best interests of the class," said Harry Deitzler, one of the lawyers for the residents. "Had it been litigated, we wouldn't be at this point for another two years."

DuPont shares closed up 14 cents at $42.90 in trading Thursday on the New York Stock Exchang.

DuPont told investors in July that it had set aside $45 million to defend against the lawsuit.

The proposed settlement follows a report that month by the Environmental Protection Agency (search) alleging DuPont failed to properly report the discovery of C8 in drinking water adjacent to the Washington Works facility and in the blood of pregnant employees at plant.

The EPA is seeking millions of dollars in fines from DuPont for two alleged violations of the Toxic Substances Control Act (search) and one violation of the Resource Conservation and Recovery Act (search).

DuPont has said it had no legal obligation to provide information to the EPA about C8 releases.

Teflon is one of DuPont's most popular products. The nonstick substance can be found in everything from cookware and clothing to car parts and flooring.

Though used since World War II, C8 is unregulated by either federal or state agencies and its long-term effects on humans are unknown. In early 2002, air and water samples taken by the state Department of Environmental Protection found concentrations of C8 upstream of the plant, apparently released by its stacks and carried by prevailing winds.

Residents of both Ohio and West Virginia filed the lawsuit in 2001. Trial had been set for Oct. 11 in Wood County Circuit Court. Circuit Judge George Hill had ordered DuPont last year to pay for blood tests of residents, but was later overturned by the state Supreme Court.

The Associated Press contributed to this report.