North Carolina judges are setting up a court battle to decide whether the world's largest pork producer will keep paying for environmental projects as it promised 18 years ago or if the millions should go to public schools instead.

A divided state Court of Appeals resurrected a lawsuit Tuesday challenging Smithfield Foods's 2000 agreement to pay up to $2 million a year for 25 years. The state attorney general has largely decided who got the money.

The court determined a trial should decide if the payments are actually penalties for bad behavior. The state constitution requires that schools get penalty payments.

Smithfield agreed in the same 2000 deal to phase out open-air hog waste pits within five years. The cesspools are still used on hundreds of farms raising Smithfield's hogs.