Tobacco Farmers to Receive Money for Lost Profits

Source from:  tfq.itsmyiq.com Aug 27, 2007 08/28/2007

Lancaster Farming reports that tobacco companies have been ordered to compensate Pennsylvania and Maryland farmers millions of dollars in lost profits as a result of a recent court judgement in North Carolina. The ruling marks the end of nearly three years of litigation, which started as a result of a Congressional act passed in 2004 that tobacco companies argued excluded them from making compensatory payments to Pennsylvania and Maryland tobacco farmers. Under the 1999 Tobacco Growers Trust Agreement, three major tobacco companies; Philip Morris, USA, Inc., R.J. Reynolds Tobacco Company, and Lorillard Tobacco Company, agreed to compensate tobacco farmers in 13 states, including Pennsylvania and Maryland, for lost profits as a result of a decline in cigarette consumption. According to the Maryland Attorney General's Office, the 1999 agreement was intended to address the economic consequences of the multi-billion dollar 1998 tobacco settlement. However, a provision in the agreement stated payments to farmers could end if federal legislation benefiting tobacco farmers was passed. In 2004, the U.S. Congress passed the Fair and Equitable Tobacco Reform Act (FETRA), which provided payments for tobacco farmers in all grower states except for Pennsylvania and Maryland, because they did not participate in the federal tobacco quota system. As a result, the three tobacco companies stopped making payments to Pennsylvania and Maryland farmers, claiming the new law exempted them from making the payments. Pennsylvania and Maryland took the issue to court, arguing the three companies were still obligated to make payments under the 1999 agreement. On Aug. 17, the court ruled against the tobacco companies and ordered them to make payments through 2010 in the amounts of $11 million to Pennsylvania farmers and $13 million to Maryland farmers. The attorneys general in both states are pleased by the ruling. "This decision protects our farmers from the tobacco companies' efforts to deny them the benefits bargained for us in the (1999) agreement," Maryland Attorney General Doug Gansler said in a news release. "The court agreed with us that the 1999 Trust Agreement was intended to provide a safety net to Maryland farmers and that our farmers must continue to receive these benefits." "I am very pleased with the outcome of this court ruling," said Pennsylvania Attorney General Tom Corbett. "The decision gives Pennsylvania farmers the same safety net as other tobacco-grower states and makes sure they receive the benefits negotiated for in the original trust agreement." As of earlier this week, there was no word if the tobacco companies would appeal the decision, although a source within the Maryland Department of Agriculture said an appeal is likely. If that happens, any disbursement of monies could be delayed months or years until the appeals process ends. Bill Belts, a representative from Philip Morris USA, had this to say about the ruling. "We are disappointed with the decision and Philip Morris USA is currently reviewing its options." Calls to R.J. Reynolds and Lorillard for comment were not returned by presstime. Maryland's Deputy Secretary of Agriculture Buddy Hance said Wednesday the money will be distributed to tobacco farmers based on production and size of their farms. He said lower prices for tobacco, pressures from foreign companies, and the original settlements themselves devastated Maryland's tobacco industry, with more than 80 percent of tobacco growers having to take buyouts that would guarantee them payments until 2010. Most of Maryland's tobacco farms are in the southern portion of the state. The 1999 agreement, he said, was created as a safety net for the remaining producers. Between 2000 and 2004, Hance said the remaining producers in the state received an average of $2 million a year that was split up among them to cover for lost profits. "Something had to happen to support the industry," Hance said. In Pennsylvania, Lancaster County tobacco growers, mostly Amish and Mennonite, will be the ones that will benefit most from the ruling, as 90 percent of tobacco grown in the state is from Lancaster County. According to the Lancaster Intelligencer Journal, there are about 50 to 60 growers in the county who plant almost 4,000 acres of tobacco. That number is way down from 20 years ago, when over 7,000 acres of tobacco were planted. Pennsylvania's Secretary of Agriculture Dennis Wolff applauded the decision. "After working for nearly two years to secure payments, this settlement is a victory for Pennsylvania's 500 tobacco growers," Wolff said. "Our farmers have experienced difficult economic times since the 1999 agreement was signed. It is reassuring to know the payments will resume so Pennsylvania's tobacco growers can make the needed investments in their farms and continue playing a vital role in our state's agriculture industry." Enditem