Severance Tax Distribution

Two weeks ago on Capitol Watch we reviewed the current legislative proposals that deal with state severance taxes and federal mineral lease revenues. This week we bring you up to date on these proposals and discuss why these revenues are important to Western Slope communities.

There were a large number of bills introduced into both the House and Senate that seek to alter the distribution of revenues collected from state severance taxes and federal mineral lease revenues.

State Representative Bernie Buescher says, "State severance taxes are the taxes that are generated off of drilling on private land and federal mineral lease revenues that are distributed to us from the feds when there is drilling on federal land. They are completely different distributions patterns, but they are very complex."

Both State Severance Taxes and Federal Mineral Lease Revenues are commonly referred to as "energy impact funds". As the name implies, the collection of these revenues is intended to off–set the impacts of developing the resources. Although Western Colorado communities are enjoying the boost to local economies that energy development brings, they are also struggling to deal with the impacts.

Governor Ritter has re–evaluated his proposal to divert local Government Federal Mineral Lease revenues to the State Education Fund. In the meantime, other bills continue to work their way through the legislative process.

House Bill 1139, sponsored by Representatives Buescher and Curry, which would increase the severance tax distribution to local governments impacted by energy development, has passed out of the House and has been assigned to the Senate Agriculture, Natural Resources, and Energy Committee.

Senate Bill 127, sponsored by Senator Penry, would cap the Federal Mineral Lease revenues at $120 million and distribute $30 million to the State Public School Fund and $30 million to a Capital Construction Fund has passed out of the Senate Committee on Education and was referred to the Appropriations Committee.

Senate Bill 200, sponsored by Senator Isgar and Representative Buescher, requiring that severance tax funds be used to cleanup uranium mill tailings has passed the senate with amendments.

House Bill 1038, sponsored by Representative Gibbs and Senator Penry, that would transfer severance tax funds annually to pay the costs of eradicating non–native plants, has been sent to appropriations.

If you would like to see a breakdown of the State Severance Tax Distribution, please send an e-mail to

We will be happy to send you a copy of a flow chart that shows the total severance tax a breakdown of how the funds are distributed.