``We're very optimistic. We hope to present an agreement in principle to the White House," said Scott Harshbarger, the Massachusetts Attorney- general.
Talks between tobacco industry representatives and the state attorneys general have been going on since early April. The negotiations are aimed at a broad settlement of the huge legal claims against the industry in return for some form of increased regulation and curbs on advertising and marketing of tobacco products.
Forty states have sued the industry to recoup the costs of treating sick smokers. The states are demanding that the industry agree to be punished for past actions, that it pay compensatory and punitive damages for smoking-related injuries and that it agree to allow the Food and Drug Administration to regulate cigarettes as a drug.
Sources close to both the state attorneys general and the tobacco industry said they doubted a deal would be reached until late last night at the soonest, and some said they thought it might be today.
Asked how talks were progressing, Richard Scruggs, a Mississippi lawyer assisting several of the states, replied, "The horse is still breathing."
The main negotiator representing the anti-smoking, American health organisations, Matthew Myers, was absent Thursday to attend a funeral.
The Connecticut Attorney-general Richard Blumenthal said two areas of disagreement remained.
``One, details as to the terms of any final settlement protecting public health." Blumenthal said. "And the larger issues relating to assuring that people's rights are protected to sue the industry for the harm that's done," he added.
The main tobacco companies Philip Morris, RJ Reynolds, and Brown & Williamson declined to comment on the negotiations.
The White House has taken a keen interest in the talks but has been careful not to appear to be running them.
Negotiators have considered turning over an incomplete proposal to the White House and asking it to resolve the contentious issue of whether the industry would pay so-called punitive damages, according to sources close to the talks. Punitive damages are awarded to punish and deter wrongful behaviour.
In an interview with the Wall Street Journal, President Bill Clinton urged tobacco companies and anti-smoking forces to stay at the negotiating table until they reached an agreement. However, he did not preclude personally intervening if he is convinced the two sides have exhausted all hope of reaching a deal.
``I don't want to rule in or out what I might say, but I want these parties to come to me and say, `This is where we are. We've done all we can do, here's where we are','' Mr Clinton said in an interview on Wednesday. "And I want them to do the very best they can first."
President Clinton left Washington yesterday for a summit of world leaders in Denver without his top advisor on the tobacco negotiations, Bruce Lindsey, who stayed behind to monitor the talks. White House spokesman Mike McCurry said Lindsey would delay his departure for Denver until tomorrow.