The maritime agency, which owns the rotting ships, renegotiated its contract with British recycler Able UK to forgo the export of nine additional ships from the James. The initial four ships that were sent in 2003 will still be scrapped in England, if Able UK can obtain the needed permits that have been delayed for years.

In addition, Able UK could still receive two never-completed U.S. oilers, as called for in the original $17.8 million contract.

Environmentalists cheered the decision, saying the United States should not export hazardous material such as asbestos and cancer-causing PCBs that are embedded in the deteriorating vessels. Under the Toxic Substances Control Act, it is illegal to export PCBs without a special government exemption.

"The death of this contract is good news for the environment and for American workers," said Martin Wagner, an attorney for Earthjustice who fought to block the export in federal court. "The management of U.S. toxic waste is a U.S. responsibility. Why dump our trash in other countries when we can take care of it here and create new jobs at the same time?"

Four years ago, a federal judge allowed the first four ships to go to England as a pilot program, but blocked the remaining nine ships from leaving the James until further environmental reviews were conducted.

The maritime agency, an arm of the U.S. Transportation Department, argued that foreign recyclers were needed to help reduce the backlog of obsolete ships in the James in a timely manner. But the British deal proved an embarrassment after some vocal residents in England protested what they viewed as an effort to turn their town into "Bush's toilet."

When the town of Hartlepool, on the northeast English coast, refused to give Able UK a permit it needs to dismantle the ships, the dispute ground to a stalemate. Able UK's contract with the United States was repeatedly extended in hopes that work could proceed.

In the latest revision, however, the U.S. agency gave up its option to send nine more ships.

"Instead, the agency will work within the domestic recycling community to dispose of those vessels," the Maritime Administration said in a statement.

Eight of the nine ships originally slated to go to England have since been removed from the James and disposed of domestically, said Maritime Administration spokeswoman Shannon Russell.

The ninth ship should be removed some time in 2008, she said.

The chairman of Able UK, Peter Stephenson, said in a statement that his company will continue to fight for a permit to dispose of the four ships that still sit in his dock. The Hartlepool Council rejected a permit application last fall, but an appeal is scheduled for September.

While applauding the U.S. decision to continue to try to dispose of four ships at his recycling plant, Stephenson expressed regret that no more work will be made available.

"It is disappointing that, after all the efforts of so many people, the opportunity to bring the additional work which would have been generated through the other nine vessels, has been lost due to the delay," he said.

If the required permits are obtained later this year, he said, the disposal of the four ships now in Hartlepool would occur early in 2008 - five years after they arrived.

With Able UK's work now limited to four ships, the value of the contract has been reduced from $17.8 million to $10.1 million, Russell said.

There is currently a backlog of about 45 ships in the James, anchored off of Fort Eustis.

President Bush has proposed spending $20 million on ship disposal next year, but most of that money will be used on ships in California and Texas because the most high-risk ships have already left the James, the agency has said.