North Dakota's House has endorsed a temporary tax cut for new oil wells in western North Dakota's Bakken producing region. The move touched off debate about whether lawmakers should approve an oil industry incentive when oil and gasoline prices are high.

"I'm not going to go back to my constituents and tell them we gave oil a break when gas is $2.75 a gallon," said Rep. Rod Froelich, D-Selfridge.

Supporters of the legislation, which the House approved 63-26 on Friday, said the incentive was justified because of high drilling costs and lower tax rates in other oil-producing states.

Rep. Glen Froseth, R-Kenmare, said the lower tax rate would apply only to new oil production. The state Tax Department estimates the change would mean the loss of $3.2 million in tax collections, but that is questionable, Froseth said.

"If you don't have any production, you can't have a loss. If you do have production, you're going to have a gain," Froseth said. "I think that any incentive we can give to this type of new exploration in North Dakota is going to have nothing but a positive benefit."

The legislation would affect new wells drilled between July 1 and June 30, 2008. If a well is drilled during that period, its tax rate would drop from 11.5 percent to 7 percent. The lower rate would apply for 18 months, or until the well produced 75,000 barrels of oil.

The bill now moves to the North Dakota Senate, which earlier approved a much different incentive plan. The legislation is likely to end up in a conference committee where House and Senate negotiators will shape its final details.

Rep. Pam Gulleson, D-Rutland, said high oil prices offer plenty of incentive for companies to drill. She called the tax cut "ill-founded and untimely" at a time "when you cannot pick up a major newspaper … and not read headlines on record profits."

The bill is SB2397.