After years of dispute and delay, the federal government on Wednesday said it would remove a decaying armada from the San Francisco Bay estuary that has shed toxic substances into the water for decades.

The U.S. Maritime Administration, or MARAD, settled a lawsuit and agreed to remove most of the Suisun Bay Reserve Fleet, known as the "ghost fleet," a decrepit collection of mostly obsolete military vessels dating back to World War II.

The gray and rust-red ships, some with their hulls flaked with peeling paint, are anchored in rows in Suisun Bay, a shallow estuary between San Francisco Bay and the Sacramento-San Joaquin Delta.

Studies by the administration have suggested the old warships have dumped more than 20 tons of copper, lead, zinc and other metals into the estuary, a critical habitat for a number of endangered species.

"We are moving expeditiously to remove the worst polluting ships first and diligently moving to clean the rest," said David Matsuda, acting administrator of MARAD.

The settlement involving MARAD, environmental groups and state water quality regulators will see half of the ships deemed obsolete _ the 25 worst polluters _ removed by September 2012, with the rest gone by September 2017. In all, 52 ships eventually will be recycled at various MARAD yards.

The federal agency plans to keep more than a dozen of the ships anchored in the bay _ including the iconic battleship USS Iowa _ that are in better shape or still considered useful.

Some of the removals have already begun, with four taken out since November 2009.

On Wednesday, tugboats dragged the gray, rusty USS Mission Santa Ynez toward San Francisco Bay. The ship, once a U.S. Navy oil and fuel tanker used from World War II through the late 1960s, was on its way to a dry dock in San Francisco, where it would be cleaned and prepared for the longer journey through the Panama Canal to a recycling yard in Texas.

The U.S. Department of Transportation said it could not estimate how much the removal of 52 ships would cost, but so far, taking out the Santa Ynez and four other ships has cost almost $1.7 million, including costs of dry-docking, towing and dismantling.

Under terms of the settlement, which still needs final approval from a judge, MARAD also agreed to clean up within 120 days piles of hazardous paint chips from the rotting old decks. Each ship will be inspected every 90 days, Matsuda said, and paint chips removed from the deck before being blown into the water.

"The San Francisco Bay should never have been a dumping ground for toxic waste. Getting these ships cleaned up and removed is a huge victory for our environment and the people of California," said Michael Wall, lead attorney for the Natural Resources Defense Council, one of the environmental groups who sued to get the site cleaned up.

Congress had previously ordered MARAD to dismantle the ships classified as no longer useful by 2006, but that never happened. Maritime officials blamed funding and a shortage of facilities for the failure to act on the Congressional mandate.

Still, cleaning up the damage that has already been done is impossible, as Suisun Bay is a tidal environment, so the paint that has peeled off the ships is now mixed in with sediments throughout the bay.

However, environmental groups said removing the ships would keep an estimated 50 tons of pollutants from entering the bay. Current cleanup efforts had already removed 120 tons of debris from the old warships, Matsuda said.

Suisun Bay was chosen by the military as one of several sites for ships withdrawn from active military service. MARAD continues to manage two other ghost fleets in U.S. waters in James River, Va. and Beaumont, Texas.

Over the years, the ships became unusable and too expensive to repair, so they were allowed to rot and pollute nearby waters and wildlife while officials debated what to do about the vessels.

Deb Self, executive director of San Francisco Bay Keeper, one of the environmental organizations that joined the lawsuit, said the ship removal is a key step toward cleaning up the polluted waters of the bay and delta. She said the waterways are key habitat for struggling chinook salmon and the tiny, endangered delta smelt.

"This area is a nursery for fisheries in San Francisco Bay and the Sacramento-San Joaquin Delta," she said. "Keeping these toxins out of the water gives these young fish a fighting chance.