Jan. 9 (Bloomberg) -- The Tennessee Valley Authority, the federally owned utility, was sued on behalf of residents and property owners in eastern Tennessee affected by a coal-ash spill that dumped 1 billion gallons of sludge.

The Dec. 22 spill at TVA’s Kingston Fossil plant, 40 miles west of Knoxville, Tennessee, released “toxin-laden” sludge in a rural neighborhood when the retaining wall for a waste-storage pond failed, according to the complaint filed by eight residents in federal court in Knoxville. The complaint seeks damages of more than $5 million.

“The massive discharge violated several federal and state environmental laws and created conditions harmful to human health and the environment,” lawyers for the residents said in the filing.

The spill swamped more than 300 acres of rural Roane County, destroying three homes and damaging 42 other properties. Authorities warned residents against using private wells or touching the ash after tests found levels of arsenic and other metals above drinking-water standards. TVA Chief Executive Officer Tom Kilgore gave no timetable for cleanup during testimony at a Senate hearing yesterday.

“We do not have a date,” John Moulton, a TVA spokesman, confirmed today in a telephone interview. “We’re very much focused on cleaning it up.”

TVA will review any lawsuits that are filed and will “respond through the courts,” he said.

The coal ash contained toxic metals such as arsenic, thallium, antimony, lead, cadmium, mercury and boron, according to the complaint.

‘Human Carcinogen’

“Arsenic has been designated by the U.S. Environmental Protection Agency as a Class A human carcinogen, based on increased lung cancer mortality for people exposed through inhalation,” lawyers for the residents said in the filing.

The group is seeking damages for injuries to personal property, loss of quality of life, and medical monitoring for potential health effects. The plaintiffs also asked a judge to order TVA to completely remove the sludge from their properties and monitor air and water quality for toxic components, according to the complaint.

U.S. Senator Barbara Boxer, a California Democrat who is chairman of the Environment and Public Works Committee, said at a hearing yesterday that she would press for regulations on coal ash in light of the TVA spill. Coal-ash storage facilities at power plants aren’t federally regulated and are subject only to state oversight.

TVA said today that it was investigating a leak from a gypsum pond at the Widows Creek Fossil plant in Stevenson, Alabama. The leak, discovered before 6 a.m., was contained and federal and state authorities were notified, the utility said in a statement on its Web site. Gypsum contains calcium sulfate, which is commonly used in drywall, Moulton said.

The case is Mary Margaret Blanchard v. Tennessee Valley Authority, 09-00009, U.S. District Court, Eastern District of Tennessee (Knoxville).

To contact the reporter on this story: Sophia Pearson in Wilmington, Delaware, at spearson3@bloomberg.net.

Last Updated: January 9, 2009 14:33 EST