SB 25-040

Senate Bill 25-040 establishes a task force in Colorado to study how to fund water needs and energy grants despite decreasing revenue from severance taxes. The bill requires the Department of Natural Resources to hire an outside expert to conduct this study, which will look at ways to maintain funding without transferring money to the general fund. A draft report is due by January 15, 2026, with a final report and recommendations submitted to the relevant committee by July 15, 2026. The bill has been signed into law and allocates $198,592 from the severance tax operational fund for its implementation in the 2025-26 fiscal year. This affects anyone involved with water management or energy grants in Colorado who relies on severance taxes as a funding source.

Official Summary

The act creates the future of severance taxes and water funding task force (task force). The department of natural resources is required to contract with a third party to conduct a study on severance taxes and water funding and develop recommendations for ways to continue funding water needs and energy impact grants in the face of decreasing severance tax revenue (study). The study must focus on identifying ways to alleviate the need to transfer revenues derived from severance taxes to the general fund and to replace severance tax revenue that was previously transferred to the general fund. The purpose of the task force is to work with the third party to conduct the study and develop recommendations. No later than January 15, 2026, the third party must submit a draft report, detailing the results of the study and any recommendations, to the department of natural resources and the task force for review. The task force is required to provide input on the draft report. No later than July 15, 2026, the third party must submit a final report, which incorporates the input of the task force, to the water resources and agriculture review committee (committee). The task force must present the final report to the committee during the 2026 legislative interim. The act changes the manner in which a credit allowed against severance tax in taxable years commencing January 1, 2026, but prior to January 1, 2028, is calculated. For the 2025-26 state fiscal year, $198,592 is appropriated from the severance tax operational fund to the department of natural resources to implement the act. (Note: This summary applies to this bill as enacted.)

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