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(Updates throughout with more background on claims fund and comments from Feinberg.) By Shayndi Raice Of DOW JONES NEWSWIRES WASHINGTON (Dow Jones)--The administrator of a $20 billion fund set up by BP (BP, BP.LN) to compensate the Gulf Coast tourism industry said Tuesday there are significant challenges ahead in assessing claims. "It's easy to compensate a hotel on the beach where there's oil. You don't need the wisdom of Solomon for that claim," said Kenneth Feinberg. "Proximity is going to be the problem here." The comments came during testimony before a U.S. House panel considering ways to ensure the Gulf Coast tourism industry receives compensation for damages it has suffered due to the Deepwater Horizon oil spill. Feinberg explained that it will be difficult, for example, to determine the claims of a restaurant miles away from the beach that has seen a decline in business because of the lack of tourism. Rep. Bobby Rush (D., Ill.), chairman of the House Energy and Commerce Committee, noted that the perception that the Gulf Coast area is unsafe has damaged tourism. "The region is losing business not only because the beaches may not be safe, but because travelers think it is not safe to travel to the Gulf Coast region," he said. Feinberg stressed during questioning that the perception that Gulf Coast beaches or seafood are contaminated, even if they are in fact safe, was a solid basis for a claim. "You do not need oil on the beach for a compensable claim," he added. "Perception is compensable." Feinberg was tapped by the Obama administration and BP to administer the claims process for the fund created by the company in June to compensate victims of the spill. BP and the administration are still negotiating the terms of the fund. Feinberg expects those negotiations to be completed soon, and to have full control of the fund by mid-August. The Gulf Coast tourism industry accounts for one million jobs, making it the second-largest industry in the region, according to the U.S. Travel Association. The spill could cost almost $23 billion in lost travel and tourism revenue with its effect lasting up to three years, according to a study released Thursday by Oxford Economics and the U.S. Travel Association. The fund administered by Feinberg will offer emergency payments for up to six months without requiring victims to waive their right to sue BP at a later date. After the emergency payment period, victims may apply for a lump-sum settlement for all losses, at which point they must waive the right to sue BP in the future. The region has just begun to heal from Hurricane Katrina and tourism companies were set for a recovery to finally kick in this year, according to witnesses. "On April 20, the Deepwater Horizon sunk and so did our hopes to finally re-establish the Mississippi Gulf Coast as a tourist destination," said Rip Daniels, vice president of the Mississippi Gulf Coast Tourism Commission, before the panel. "I don't know a single business in this town that has not been affected," said Herb Malone, president and chief executive of the Alabama Gulf Coast Convention and Visitors Bureau. "I look at the eyes of my friends and colleagues and I see despair I've never seen before." Malone told the panel he expects his state's tourism industry to lose about $1 billion. Feinberg told the committee that he anticipates a variety of claims related to removal and cleanup, damages to personal injury or personal property, lost profits and earning capacity and claims for the loss of subsistence use of natural resources. "All these claims will be considered on their individual merits and decisions concerning both eligibility and calculation of awards will be made promptly, with maximum efficiency," he said in prepared testimony submitted to the panel. BP has already paid out over $200 million in emergency payments, processing the claims through 36 regional offices with 1,500 employees. Claims by the government for loss of tax revenue and other effects from the spill will be the responsibility of BP, but the government will not be compensated through this fund. Feinberg was previously responsible for administering the September 11th Victims Compensation Fund, a $7 billion fund created by the government to compensate families of victims of the terror attacks on Sept. 11, 2001. -By Shayndi Raice, Dow Jones Newswires; 202-862-9291; shayndi.raice@dowjones.com. (END) Dow Jones Newswires July 27, 2010 12:31 ET (16:31 GMT)