OTTAWA, Sept 12 (Reuters) - Canada will compensate people who may have been hurt by U.S. testing of the defoliant Agent Orange at a Canadian military base in New Brunswick during the Vietnam War, the government said on Wednesday.

It will pay C$20,000 ($19,200) to those who have come down with conditions such as spina bifida and prostate cancer and who lived in or near the Gagetown base during the 1966-67 period when the testing went on.

During the testing, helicopters sprayed about 745 pounds (338 kg) of Agent Orange on 138 acres (0.6 sq km) in a remote, unused part of the base, the Canadian Department of National Defence said.

Canada did not fight in Vietnam. During the war, Agent Orange was used by the United States to defoliate areas of Vietnam to deprive enemy forces of tree cover.

"We are proud to announce a plan that is fair and shows compassion to the thousands of Canadians whose lives have been so affected," Veterans Affairs Minister Greg Thompson said in a statement.

The payments are separate from disability pensions that veterans can apply for if they have contracted medical conditions related to their military service. In addition, a class action lawsuit is under way against the government and chemical manufacturers.

For the package announced on Wednesday, the government has set aside C$96 million ($92 million) to cover 4,500 people as well as operational and advertising costs.

CBC television quoted Ken Dobbie, president of the Agent Orange Association of Canada, as saying that some members of his group spend more on drugs in a year than the one-time payment of C$20,000 that is being offered by the government.

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