A CONTROVERSIAL £11m plan to dismantle condemned US navy ships in the North-East lay in tatters last night after the Environment Agency performed a U-turn.

Only ten days before the first two ships from the US Naval Reserve fleet are due to arrive at the Able UK yard, in Hartlepool, the organisation has withdrawn its approval for the contract.

The fleet is maintained by the Maritime Administration (Marad), part of the US Department of Transportation.

Last night, Marad announced that the ships - the Canisteo, Caloosahatchee, Canopuss and Compass - would not turn back despite the Environment Agency's move.

A Marad statement said: "As we work toward a resolution of these issues between the UK Environment Agency and Able UK, the ships will continue to transit the Atlantic.

"Prior to the ships' departure, Marad sought and received official approvals from the UK Environment Agency, the UK Maritime Coastguard Agency, the US Environmental Protection Agency and the US Coast Guard. Without these official approvals in hand, these ships would not have departed their James River moorings."

Officials may be faced with the nightmare prospect of the four ships becoming pariahs, unable to dock in Britain and incapable of returning home.

Able UK managing director Peter Stephenson said last night the company was considering turning the ships back.

He added: "But given the stormy weather, I don't think it is a risk anyone would want to take."

Plans to dismantle the vessels - contaminated with chemicals including PCBs, asbestos and heavy diesel - were discussed at a day-long public meeting in Hartlepool yesterday.

But as delegates from nine key organisations were involved in talks, the Environment Agency delivered a blow to Able. The agency said it was concerned that planning and environmental requirements for the dry dock dismantling at the Graythorp yard had not been met.

Its prior approval for the deal was granted on the assumption the ships would be broken up in a dry dock, which it considered to be environmentally safer.

Mr Stephenson believes all the paperwork will be in place before the ships arrive. He said it was surprising that the agency had publicly revealed its position yesterday.

Mr Stephenson said: "We do remain satisfied that we have relevant planning permissions in place for the recycling of the vessels and the creation of dry dock facilities.

"We have discussed the reasons for this and we don't concur with them at the moment.

"We have applied for approvals from the Department for the Environment, Food and Rural Affairs in relation to work on the dry dock facilities, covering matters such as dredging.

"Given that similar approvals have been given in the past, we are confident these will be in place by mid-November."

The recycling deal has been dogged by criticism from environmentalists, who say the ships are a pollution risk.

The Environment Agency granted Able an extension to its waste management licence which allows a maximum of 25,000 tonnes - approximately one ship - on site at any one time.

But the exemption, along with a Transfrontier Shipment (TFS) authorisation, are invalid because of the firm's failure to create a dry dock.

An Environment Agency spokeswoman said: "We had assessed the environmental impact of breaking up the ships in a dry dock, but now there is no guarantee there is going to be a dry dock we have withdrawn permission.

"The ships cannot be taken on to that site. They cannot come into UK waters unless Able applies for another TFS authorisation, and we would need two months to consider such a thing."

Friends of the Earth's executive director Tony Juniper said: "This is a real victory for the environment and for local people on Teesside.

"We are delighted that the agency has realised it exists to protect the environment rather than help America get rid of its waste overseas."