Tobacco buyout dispute hurts some Md. farmers

Industry says U.S. action ends payment obligation

December 22, 2004|By Timothy B. Wheeler | Timothy B. Wheeler,SUN STAFF

A dispute over a new federal buyout for tobacco growers has delayed, perhaps canceled, annual payments that about 1,000 current and former tobacco farmers in Maryland have been getting from cigarette companies as part of a legal settlement.

The Maryland Department of Agriculture informed the farmers by letter late last week that yearly checks averaging $2,700 - stemming from a settlement between the tobacco industry and states over the health costs of smoking - had been jeopardized by the tobacco industry's claim that it no longer has to make the payments because of the federal buyout.

"It is a very unfortunate and unforeseen turn of events," Patrick McMillan, assistant agriculture secretary, who has overseen the industry payments to Maryland tobacco growers, said yesterday. Checks for this year were to be mailed starting next week, he said.

Maryland farmers who grew - or, in a few cases, still grow - tobacco had been getting checks every year since 1999 as part of the tobacco industry's settlement of lawsuits filed by Maryland and many other states over the costs of treating smoking-related illnesses.

The money, totaling about $2.7 million for state growers, was intended to compensate them for the declining sales of tobacco expected as a result of the settlement, which also increased anti-smoking promotions.

The industry payments to farmers were separate from Maryland's buyout program, under which growers receive annual payments from the state if they agree to stop raising tobacco.

Nearly 90 percent of the state's tobacco farmers have opted for the state buyout, which is unaffected by the dispute.

$10 billion buyout

The problem arose after Congress approved in October a $10 billion buyout for tobacco farmers nationally, to be financed by taxing the cigarette industry.

Industry lawyers contend that the buyout, signed into law as part of a sweeping corporate tax cut measure, triggered a provision in the settlement that frees cigarette manufacturers from having to make any more payments.

McMillan said lawyers for Maryland and other states have filed petitions with the North Carolina court overseeing the settlement, challenging the industry position. A hearing was held this week, and a ruling is expected soon, he said.

Sen. Thomas M. Middleton, a Charles County Democrat, called the halt in payments a "double whammy" for Southern Maryland farmers who have been struggling to make a living growing something else since giving up tobacco cultivation under the state's buyout program.

"For those farmers that have started into diversified operations like greenhouses, they've got capital costs," Middleton said. "These payments were built into their repayment [schedules]. It's going to be kind of tough for them ... like losing your job at Christmas."

There is more potentially bad news for Maryland tobacco farmers. Government buyout checks in future years would offset the loss of settlement payments if the tobacco industry prevailed, but state growers are not eligible for the new federal program, McMillan said.

Congress specified that the buyout payments would go to farmers based on how much tobacco they grew under U.S. Department of Agriculture crop quotas. Tobacco growers in Maryland and Pennsylvania opted out of the quota system decades ago.

Inclusive language

McMillan said language specifically including the two states in the buyout wasstripped from the bill before it passed.

Lawyers for Maryland and Pennsylvania are urging the North Carolina court to maintain industry settlement payments for growers in those two states because they cannot qualify for the federal buyout, the state agriculture official said.

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