"U.S. Official Says BP Spill Fines Should Go To Gulf"

"A large portion of fines that BP Plc may pay for its role in the worst oil spill in U.S. history should go toward fixing the damage caused to Gulf Coast states, a federal official said on Tuesday.

Navy Secretary Ray Mabus, who drew up a Gulf Coast recovery plan at the direction of President Barack Obama, said Congress should dedicate "a significant amount" of penalties levied on BP under the Clean Water Act to restoring a region that suffered economic and environmental damage from the spill.

Mabus did not make clear what proportion of the BP fines should be dedicated to the recovery effort and how much money it would involve. BP faces potentially billions of dollars in fines from the spill, which began in April and was plugged in July.

Meanwhile, a U.S. Department of Justice official denied that it was in settlement talks with the British energy giant after a U.S. congressman told reporters the two parties were in negotiations over spill fines."

Kathy Finn reports for Reuters September 29, 2010.