A deal is set to be struck on the thorny baselands issue with the US set to renounce a claim to the land while Bermuda gets a $11 million payoff.

The deal concludes years of negotiations between the American, British and Bermuda Governments over who should pay for the estimated $60 million clean-up costs.

The former Naval Annex in Southampton was left with raw sewage and thousands of leaked gallons of oil in underlying caves when the American forces left in 1995.

And the former US naval air station at St. David's was left with substantial amounts of asbestos and other pollutants.

In a statement to the House of Assembly yesterday, Premier Jennifer Smith said the US will renounce rights to re-occupy the bases in a crisis while the UK will include Bermuda in Nato agreements to allow forces to use Bermuda if needed.

She said the US government was negotiating a settlement package including coast guard help while the Americans would at last honour its duty to maintain Longbird Bridge with a one-off final $11 million payment, which would be the end of its commitment.

Ms Smith said the US had a longstanding policy of not accepting responsibility for environmental damage caused by its armed forces in foreign countries.

"Therefore it is no surprise to members to learn that the Pentagon has remained steadfast on this issue in Bermuda's case.

"The United States has categorically refused to pay any financial compensation for environmental damage. We have to accept this position is unlikely to change."

She paid tribute to the role of the British government in lobbying on Bermuda's behalf and stressed negotiations were not yet complete.

The US government had not originally wanted to terminate the 1941 Leased Bases Agreement, said Ms Smith

She said: "Our task was more than just the termination of an agreement. Our task was to ensure the full return of the former base lands to Bermudian jurisdiction.

"To be frank, negotiations have not been easy or straightforward and we are grateful to the Foreign and Commonwealth Office for their invaluable assistance."

She said the US had a counter-claim against Bermuda over improvements they made such as the airport, roads and land reclamation projects at both the airport and at Morgan's Point.

"Although these claims were not accepted we could not deny the many positive contributions made by the US forces during their time in Bermuda."

Ms Smith said the US Coastguard had already visited Bermuda to assess how its maritime capacity could be enhanced as part of the deal and was working out if it could provide a coastguard vessel.

She said the Bermuda Regiment would start training with the US Florida National Guard while the British government lobbied Washington to help with further help for the Regiment.

Ms Smith said: "I believe that the terms of the proposed agreement, once the value of the benefits can be quantified, will represent an excellent overall outcome for Bermuda."

The baselands were given to the US by Britain on a 99-year lease. Bermuda was used as an airbase to patrol the Atlantic and Caribbean, a stop off point for military and supply planes going to Europe and to stop the Germans taking the Island and striking at America.

Acting Governor Tim Gurney said of the negotiations: "It's good news for Bermuda because it can get back about one eighth of its land mass."

He said the deal was a result of a long process involving Government, Government House, the Foreign and Commonwealth Office, the British embassy in Washington and the US gvernment.

He said: "We have come a long, long way in a period of about three years and, fingers crossed, we'll enter into a deal."

Opposition Leader Grant Gibbons said the US had paid about $100 million for clean-ups to two former bases in Canada and should have done the same for Bermuda. He said: "It's very disappointing people in Bermuda will have to pay for the big environmental clean-up and not the US. We always feel if someone leases a property they need to return it in a good condition. Clearly the US government has not done that in this case."

Dr. Gibbons said Government had given in too early, leaving taxpayers to foot the bill.

"We were in a parallel situation with Canada and were making reasonable progress in addressing appropriation committees dealing with the military in Congress. We were advised if we stuck with it and made similar arguments we could have reached an accommodation, even though, as Jennifer Smith says, it was tough going. It was the kind of thing we could have worked out."

He said he was puzzled the Government was saying the Americans were renouncing rights to the land because they had done that in 1994, allowing Government to look for developers. "If you lease out Morgan's Point you don't want someone moving back."

The Government last night passed the United States Bases (Termination of Agreements) Act 2002 to set the process in motion.