multi-million-dollar pollution clean-up could be settled within three months.

The US Senate is set to decide in January whether or not to pay for environmental work on two of the Island's former US Navy bases.

Green experts have found fuel and oil pollution deep inside Basset's Cave, below the former US Naval Annex -- now Morgan's Point -- on the Great Sound.

There are already plans to build a cottage colony and championship golf course designed by Jack Nicklaus on the site.

Scientists hired by the Bermuda Government also found oil pollution and asbestos in buildings at Southside, St. Davids', the old US Naval Air Station.

The Bermuda Land Development Company last week announced proposals to ship Hamilton's container docks to the site on Marginal Wharf.

They also want to redesign 54 officers' quarters to lease out as three-bedroom houses.

Finance Minister Grant Gibbons said none of the housing units were thought to contain asbestos.

And he said all pollution on the former Base lands sites would be cleaned up before any redevelopment work takes place.

But Mr. Gibbons insisted the US Government still had an obligation to pay for any environmental damage left by the military.

The American Senate instructed the US Navy to look into pollution problems on the Island earlier this year, and defence chiefs are still wading through a huge dossier of their own data and Bermudian Government research.

Top navy officers are expected to make a presentation to the Senate before the end of January, when Senators will decide whether or not to pay millions of dollars for clean-ups at both ends of Bermuda.

Mr. Gibbons said: "We are still waiting for the US Navy to report back to the Senate and the House will have a number of options open to them once that report is made.

"We are delighted that the Senate is taking seriously exactly what happened here and it is our view that the American Navy has an obligation in terms of an environmental clean-up.

"The US Navy did their own environmental research while they were here. And we commissioned several environmental reports as a consequence of the closure of the bases in September 1995.

"It is still slightly unclear exactly when the Navy will report back to the Senate although January is looking a reasonable bet.'' He also said the cost of removing all the asbestos from former US military sites and clearing away oil and fuel from the cave and beneath storage tanks would "run into millions''.

Meanwhile, it is understood the Americans could waive a $140 million bill for building Bermuda's airport as part of a trade-off deal.

And one US Government source said Britain might even be asked to pay Bermuda's environmental costs in return for American defence equipment.

But Mr. Gibbons said: "Absolutely nothing has been decided yet. We have been in discussions with the US Navy both in Bermuda and in Washington and they are continuing.

"We have collected many containers of asbestos and they are sitting at Marginal Wharf. We will not be disposing of the asbestos and ideally we would like the Americans to take it home with them.''