TORONTO - Canada is one step closer to bringing the ongoing aboriginal occupation in the southwestern Ontario town of Caledonia to an end with a $26-million offer to settle a 178-year-old claim, the province's aboriginal affairs minister said Wednesday.

Michael Bryant said the cash offer to compensate Six Nations for the loss of 970 hectares of land flooded for the Welland Canal project shows the federal government is serious about resolving the land dispute.

"I'm a little more hopeful today that we're moving in the right direction,'' Bryant told The Canadian Press in an interview. "The federal and provincial governments are very serious about trying to come to a resolution.''

But much of that depends on Six Nations leaders, Bryant said.

The federal government made a $125-million offer to Six Nations in May which would have settled a number of claims, including the loss of land due to the Welland Canal. That offer was called "a token'' by Six Nations negotiators and was rejected.

Six Nations have deemed this latest offer to be "worth considering,'' and that might give the talks "some momentum,'' Bryant said.

"People are certainly embittered and a lot of healing needs to be done in this community,'' he said. "But everybody understands and accepts that we've got to come to a resolution. We're clearly going to do it at the negotiating table. We have to make some progress.''

Six Nations negotiator Allan MacNaughton sent out a statement last week in anticipation of Wednesday's offer, saying the dispute "will not be resolved simply by throwing money at Six Nations.''

Compensation for the Welland Canal negotiations is focused on replacing land that was flooded, as well as money to compensate for the loss of that land over the years, he said.

"They are not going to hand us money to buy back our own lands,'' said the Mohawk chief. "No one is taking into consideration that land was stolen from us. ... Promises were broken and land has to be returned.''

But federal negotiator Ron Doering said he's optimistic the offer will be considered. The earlier $125-million offer was "a little too big for them to get their arms around,'' so the federal government has separated the compensation specifically for the construction of the Welland Canal, he said.

The government has admitted that when the lands were flooded, most people were compensated but Six Nations were not, Doering said. Ottawa has calculated the value of the lands today and came up with a "fair and generous offer,'' he added.

"We've made clear all along that Canada cannot return those lands to them,'' Doering said. "They're flooded. Canada can't give land back. We don't have any. ... This is way more than a gesture. This is $26 million, and you can buy a lot of land with $26 million.''

Six Nations have been occupying a former housing development site in Caledonia since February 2006. The occupation has been marked by violent clashes between aboriginal protesters and town residents and barricades that cut off the town's main thoroughfare.

Six Nations protesters say the land was stolen from them by the Crown more than 200 years ago, and they won't leave until it is returned to them.