The federal government will pay Post-Service Remediation Partners of New York $14.8 million to remove and dismantle the ships under a contract worth a total of $17.8 million to the company.

In addition to the money, Post-Service Remediation Partners also will receive two tanker ships that were mothballed before construction was complete and whose value is set at $3 million. The company will decide whether to dismantle those two ships or find a way to place them in service, said Robyn Boerstling, a spokeswoman for the maritime administration.

A British company named Able UK Ltd., working in partnership with Post-Service Remediation Partners, will dismantle the obsolete ships in Teesside, England.

The contract will help alleviate an environmental threat posed by the oldest of the more than 70 ships kept by the government at anchor in the James River off Fort Eustis in the James River Reserve Fleet.

The fleet, often called the ghost fleet, is the largest of three National Defense Reserve Fleet locations operated by the federal government. The fleet serves in part as a storage anchorage for merchant-type ships that are obsolete and out of service.

A federal prohibition on the export of ships containing certain toxic chemicals, in effect since 1994, halted what had been a regular process of selling obsolete ships to foreign customers.

Those prohibitions have been relaxed to permit the 13-ship export on an experimental basis. As old ships have grown more numerous, the fleet has been the site of nine oil spills over the past three years. The ships contain millions of gallons of oil and other pollutants in hulls that are so rusty that officials say they can be pierced in some cases with a hammer blow. Virginia's congressional delegation was instrumental in securing a $31 million allocation for the removal of the dangerous ships.

"We must continue working toward removing more of these ships," Rep. Jo Ann Davis, R-1st, said in a news release announcing the contract. "This job will not be done until all vessels posing an environmental hazard are gone from the James."

The maritime administration, part of the Department of Transportation, earlier contracted with two Texas companies to dismantle an additional five ships from the fleet.

An earlier announcement that the agency was negotiating to send the ships to England for dismantling stirred some opposition by some elected officials representing domestic ship scrappers and by environmentalists who fear the ships could lose oil, or worse, while under tow to England.

British environmental authorities have approved the plan, Boerstling said, and the ships will not be moved until the U.S. Coast Guard authorizes the tow. She said the contract calls for the ships to be removed by Nov. 30.

Boerstling said yesterday the agency is negotiating with a domestic company to remove four more of the ships.

"As stewards of the environment, the responsible disposal of obsolete ships is a high priority for the Department of Transportation," said U.S. Transportation Secretary Norman Y. Mineta.

"The award of these contracts is welcome progress and the Bush administration has been forward-thinking in facing the challenges of the James River Reserve Fleet."

Contact: Andrew Petkofsky at (757) 229-1512 or apetkofsky@timesdispatch.com