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Risk assessment

Department of Public Instruction School Superintendent Kirsten Baesler talks in 2015 about a survey taken by 10,325 North Dakota high school students showing a drop in tobacco use during a news conference in November at the state Capitol in Bismarck. In the background, from left, are Clint Boots, of the Department of Health, Jeanne Prom, of BreatheND, and Gail Schauer, of DPI.

A settlement agreement with major tobacco companies will release more than $34 million from an escrow account to North Dakota, according to an announcement made today by Attorney General Wayne Stenehjem.

The decade-long dispute revolves around enforcement of the 1998 Tobacco Master Settlement Agreement, which requires tobacco companies to make annual payments to the states, including North Dakota, that signed onto the agreement, that is meant to serve as reimbursement for costs associated with sick and dying cigarette smokers.

“This is a win-win proposition for North Dakota. We will see an immediate payment of more than $34 million and will also eliminate the need for an expensive arbitration process year after year,” Stenehjem said.

The tobacco companies had been withholding part of their combined annual settlement payments, claiming the states, including North Dakota, had not diligently enforced a specific tobacco-control statute. The adjustment, which is subject to arbitration, has forced North Dakota to devote considerable resources and money to prove it diligently enforced its laws, according to Stenehjem, who said North Dakota won its first arbitration dispute, concerning funds withheld in 2003. If it had not prevailed, the state risked losing more than $20 million.

Without this settlement, North Dakota was scheduled to arbitrate the 2004 payment dispute this month, worth about $23 million.

“By settling the dispute for 2004, and all potential disputes through 2017, the settlement agreement resolves all disputes concerning past annual payments and eliminates decades of potential litigation,” Stenehjem said.

Under the terms of the structured settlement, the tobacco companies are required to release 100 percent of the disputed payments held in escrow. In addition to the lump sum payment, North Dakota will continue to receive the annual payments due under the Master Settlement Agreement. In return, the tobacco companies receive a partial credit on the next five years of annual payments. 

“If North Dakota had been forced to continue with these annual arbitrations, it risked losing the entire annual payment for any year it was found non-diligent. Through the end of the 2015-2017 biennium, North Dakota has received more than $470 million in tobacco settlement payments,” Stenehjem said.