The decision about whether former US naval ships can be scrapped on Teesside will be made by the local authority.
The first of four ships arrived on Teesside in November 2003
Able UK wants to dismantle up to 13 so-called ghost ships at its facility in Graythorp, Hartlepool.
The Secretary of State for Communities and Local Government, Ruth Kelly, has now decided she will not call in the planning application.
It means a decision about the planning application will be made by Hartlepool Borough Council.
A planning letter setting out the decision said: "The Secretary of State has concluded that her intervention would not be justified as there is no sufficient conflict with national planning policies or any other sufficient reason to warrant calling in the applications for her own determination.
"She has therefore concluded that the applications should remain with the Hartlepool Borough Council for decision."
The plans have been met with concern by environmental groups, which claim the former naval vessels contain dangerous toxins.