By JOHN FLESHERTRAVERSE CITY, Mich. (AP) â¿¿ The nation's last operating coal-fired ferryboat would stop dumping waste ash into Lake Michigan within two years under a deal with federal regulators announced Friday. The agreement between Lake Michigan Carferry, which operates the S.S. Badger, and the U.S. Environmental Protection Agency would require the ship to retain its coal ash during trips across the lake and dispose of it on land. The 410-foot Badger hauls passengers, vehicles and cargo between its home port of Ludington, Mich., and Manitowoc, Wis., from May to October. Currently, ash from its boilers is mixed with water and piped overboard. More than 500 tons of ash is released during a typical season. The EPA ordered the Badger to stop the practice in 2008 and granted a four-year grace period, which expired in December â¿¿ raising the possibility that the historic vessel would be unable to continue sailing. The company had applied for a permit to continue dumping the ash while researching how to retrofit the ship to operate on liquefied natural gas. Under a proposed consent decree filed in U.S. District Court in Grand Rapids, the company would scrap that option in favor of onboard storage. Disposal into the lake would be reduced over the next two years and stop altogether by the end of the 2014 sailing season. After a 30-day public comment period, a judge will decide whether to approve the deal, which also would require the company to pay a $25,000 civil penalty for exceeding mercury pollution standards last year. Coal ash contains low concentrations of arsenic, mercury and other heavy metals, although it's not classified as hazardous. The company denied violating federal or state mercury regulations. "This consent decree offers the fastest and most certain path available to EPA to stop the discharge of coal ash from the Badger into Lake Michigan," said Susan Hedman, EPA regional administrator.