North Dakota oil producers are in line for a temporary tax cut for newly drilled wells, despite one lawmaker's argument that producers are having difficulty marketing the crude they're already pumping.

The North Dakota Senate on Tuesday voted 35-11 to give the tax cut final legislative approval. It takes effect July 1 and lasts for one year, covering new horizontal oil wells in western North Dakota's Bakken geologic rock formation.

The legislation drops the state tax rate on the first 75,000 barrels of production from 11.5 percent to 7 percent of the oil's value. The lesser tax rate prevails for 18 months if the well does not produce 75,000 barrels.

Gov. John Hoeven said he would sign the bill.

Sen. Rich Wardner, R-Dickinson, said operators are risking $4 million to $6 million with each new Bakken horizontal well, and other oil-producing states have lower tax rates on new production. A horizontal well is drilled down at first, then extends laterals that are parallel to the ground's surface.

"There are a lot of people out there in the oil fields that are taking financial risks every day," Wardner said in a Senate floor speech. "They're not all big oil companies, like some people make them out to be. They're just a bunch of everyday people that are trying to make a living."

Sen. Tracy Potter, D-Bismarck, said the pipeline system that transports North Dakota crude to refineries already is full, a circumstance that has driven down the prices that North Dakota oilmen can get for their production.

"Our production outstrips our ability to get it to market," Potter said. "The economics of this just don't make sense to me, why we have to provide economic incentives to an industry that's already producing faster than it can."

North Dakota's Tax Department estimates the tax break is worth $3.2 million to the oil industry.

"I think it's just shameful, the way that we throw quarters around like they're manhole covers when it comes to human needs," Potter said. "But when it comes to the oil industry, we're willing to spend like drunken sailors."

Oil producers believe the Bakken formation, which underlies much of western North Dakota - it extends from Stark County in the southwest to Bottineau County in the north-central part of the state - holds rich potential as an oil producer.

However, getting Bakken wells to produce has been expensive and tricky. Wardner said legislative incentives to encourage drilling were especially important, because each well drilled adds to industry knowledge about the formation, and increases the odds that subsequent wells will be successful.

Sen. John Warner, D-Ryder, said the formation offered "enormous potential for our state."

"If we don't act in a prudent and expedient way, we're going to lose that opportunity within a couple of generations," Warner said.

The bill has been changed considerably since it was first introduced. It originally sought a permanent tax cut, from 11.5 percent to 9 percent, on wells drilled after Jan. 1.

Senators rewrote the bill, setting a new tax range from 7 percent to 9 percent and applying the rates to wells drilled after June 30, 2008. It taxed newly drilled wells, which tend to produce more oil, at a higher rate while lowering the long-term top rate on production.

Once the Senate version moved to the House, it was rewritten again into what turned out to be its final version. The Senate's vote on Tuesday was to endorse the House's changes, which finished the Legislature's work on the bill.

The bill is SB2397.