Page 1
March 28, 2022 SB 22-138
Legislative Council Staff
Nonpartisan Services for Colorado’s Legislature
Revised Fiscal Note
(replaces fiscal note dated March 4, 2022)
Drafting Number:
Prime Sponsors:
LLS 22-0335
Sen. Hansen
Rep. Valdez A.
Date:
Bill Status:
Fiscal
Analyst:
March 28, 2022
Senate Finance
Christina Van Winkle | 303-866-6289
Christina.VanWinkle@state.co.us
Bill Topic: REDUCE GREENHOUSE GAS EMISSIONS IN COLORADO
Summary of
Fiscal Impact:
☒ State Revenue
☒ State Expenditure
☐ State Diversion
☒ TABOR Refund
☒ Local Government
☒ Statutory Public Entity
This bill creates a state income tax credit for electric-powered small off-road
equipment, requires PERA and insurance companies to study climate risks to their
investment portfolios, authorizes the Department of Natural Resources to regulate
Class VI injection wells, and requires the Department of Agriculture to study carbon
sequestration opportunities in the agriculture sector. Beginning in FY 2022-23, the bill
reduces state revenue and increases state, local government and statutory public
entity expenditures.
Appropriation
Summary:
For FY 2022-23, the bill requires an appropriation of $227,218 to multiple state
agencies and includes an appropriation of $2.2 million to the Department of
Agriculture.
Fiscal Note
Status:
The fiscal note reflects the introduced bill as amended by the Senate Transportation
and Energy Committee.
Table 1
State Fiscal Impacts Under SB 22-138
Budget Year
FY 2022-23
Out Year
FY 2023-24
Revenue General Fund ($1.6 million) ($3.1 million)
Total Revenue ($1.6 million) ($3.1 million)
Expenditures General Fund $2,345,789 $860,235
Cash Funds $1,881,429 $1,915,028
Centrally Appropriated $82,761 $270,449
Total Expenditures $4,308,979 $3,045,712
Total FTE 3.1 FTE 15.2 FTE
Transfer General Fund ($1,800,000) ($1,800,000)
Cash Funds $1,800,000 $1,800,000
Net Transfer $0 $0
Other Budget Impacts TABOR Refund ($1.6 million) ($3.1 million)
General Fund Reserve $351,868 $129,035 Page 2
March 28, 2022 SB 22-138
Summary of Legislation
The bill includes a number of provisions to reduce greenhouse gas (GHG) emissions in the state.
Specifically, the bill:
establishes GHG reduction goals of 40 percent by 2028 and 75 percent by 2040;
requires insurance companies that report more than $100 million to complete an annual climate
risk disclosure;
requires the Public Employees’ Retirement Association (PERA) to prepare a financial report
providing a climate-risk assessments on its investment portfolio;
specifies that wastewater thermal energy equipment is a type of pollution control device that may
be certified as pollution control equipment;
requires the Air Quality Control Commission (AQCC) to adopt rules to reduce greenhouse gas
emissions from the industrial and manufacturing sector by December 31, 2022;
creates a state income tax credit for the purchase of new, electric-powered small off-road
equipment for tax years 2023 through 2029;
authorizes the Colorado Oil and Gas Conservation Commission (COGCC) to regulate Class VI
Injection Wells after publically determining that COGCC has the necessary resources to ensure
the safe and effective regulation of these wells;
requires the Department of Agriculture (CDA) to study carbon reduction and sequestration
opportunities in the agricultural sector and in land management and report recommendations by
October 1, 2024, and makes a $2.2 million appropriation for this purpose in FY 2022-23;
authorizes the CDA to finance agricultural research on the use of agrivoltaics and their impact on
wildlife, allows the CDA to seek, accept, and expend gifts, grants, and donations for such projects
and requires that $1.8 million per year be transferred from the General Fund to a program cash
fund for five years, from FY 2022-23 to FY 2027-28;
adds wastewater thermal energy to the definition of a clean heat resource; and
amends the definition of agrivoltaics concerning allowable co-location activities and property tax
valuation.
Background
GHG Emissions Reduction Targets. House Bill 19-1261, the Climate Action Plan to Reduce Pollution,
establishes goals to reduce GHG emissions by 26 percent by 2025, 50 percent by 2030, and 90 percent by
2050, measured relative to the 2005 baseline emissions. This bill adds intermediary GHG reduction goals
for 2028 (40 percent) and 2040 (75 percent).
House Bill 21-1266, the Environmental Justice Act, required the AQCC to adopt rules to reduce statewide
GHG emissions in the oil and gas sector by January 1, 2022, that reduces emissions by at least 36 percent
by 2025, and 60 percent by 2030 below the 2005 baseline. The bill also directed the AQCC to adopt rules to
reduce statewide GHG emissions from the industrial and manufacturing sector by at least 20 percent by
2030 below the 2015 baseline, with realized emissions reductions beginning no later than
September 30, 2024. This bill requires the AQCC to adopt rules to meet these industrial and manufacturing
targets by December 31, 2022.
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March 28, 2022 SB 22-138
Class VI Geologic Sequestration Wells. Class VI wells are used for the geologic sequestration and
long-term storage of carbon dioxide in deep rock formations. Class VI injection permits are designed
to protect underground drinking water sources and are regulated by the U.S. Environmental
Protection Agency (EPA), in states, including Colorado, that have not enacted their own regulatory
process for these permits. Senate Bill 21-264 required the Department of Natural Resources (DNR) to
study the resource needed to safely and effectively regulate greenhouse gas sequestration. A copy of
the report can be found here:
https://cogcc.state.co.us/documents/library/Technical/UIC/COGCC Class VI Report.pdf
This bill authorizes the COGCC to issue Class VI injection permits, which will require the COGCC to
pursue Class VI primacy with the EPA. The COGCC currently only has primacy for Class II wells,
which are used for the injection of fluids associated with oil and natural gas production. North Dakota
and Wyoming are the only states to have primacy for permitting Class VI wells.
As of February 2022, only two Class VI wells, both in Illinois, are currently permitted by the EPA.
1
Geologic sequestration is regulated under the federal Safe Drinking Water Act for the purpose of
protecting underground sources of drinking water.
State Revenue
This bill will decrease state income tax revenue by up to $1.6 million in FY 2022-23 (half-year impact)
and by up to $3.1 million in FY 2023-24 and subsequent years through FY 2029-30. The bill reduces
income tax revenue to the General Fund, which is subject to TABOR.
The fiscal note assumes that the new tax credit will be used for the purchase of 67,635 pieces of electric
lawn or garden equipment in 2023, and 68,785 pieces in 2024. This estimate is based on sales of electric
lawn and garden equipment in California, adjusted for the smaller population of Colorado. Further,
the fiscal note assumes that taxpayers will claim the bill’s tax credit for about 30 percent of electric
lawn and garden equipment purchases. To the extent that more or fewer taxpayers claim this credit,
the revenue reduction will either be larger or smaller.
The average tax credit value will be about $46 per piece of electric lawn or garden equipment
purchased, but the average credit amount will vary significantly depending on the type of equipment
purchased, ranging from about $1,050 for an electric ride-on mower to $30 for an electric trimmer.
The fiscal note assumes that all taxpayers will claim the full value of this tax credit in the year that the
purchase occurs. To the extent that some taxpayers do not have sufficient tax liability to claim the full
credit, the reduction in revenue will be delayed or reduced entirely if taxpayers cannot claim the full
credit within the five-year carry-forward period.
1
Class VI Wells Permitted by EPA. Last updated February 15, 2022. Available at: https://www.epa.gov/uic/class-vi-wells-permitted-
epa. Page 4
March 28, 2022 SB 22-138
State Transfer
The bill transfers $1.8 million per year from the General Fund to the Agriculture Value-Added Cash
Fund, from FY 2022-23 through FY 2027-28. The first transfer occurs on the effective date of this bill,
which is assumed to occur in FY 2022-23; the remaining annual transfers will occur on July 1 of each
year. The Agriculture Value-Added Cash Fund is continuously appropriated to the Colorado
Agricultural Value-Added Development Board for financial and technical assistance to agricultural
projects, project concepts, and research as approved by the board.
State Expenditures
The bill increases state expenditures by $4,208,763 in FY 2022-23 and $3,146,928 in FY 2023-24 and
future years, paid from the General Fund and the Oil and Gas Conservation Cash Fund. These costs,
which are in multiple agencies, are detailed in Table 2 and described below.
Table 2
State Expenditures Under SB 22-138
Cost Components FY 2022-23 FY 2023-24
Department of Natural Resources
Personal Services $72,649 $87,178
Operating Expenses $1,080 $1,350
Capital Outlay Costs $6,200 -
Training $1,500 $1,500
Computer Software - $25,000
Centrally Appropriated Costs
1
$18,558 $23,523
FTE – Personal Services 0.8 FTE 1.0 FTE
DNR Subtotal $99,987 $138,551
Department of Agriculture
2
Personal Services $74,900 $99,866
Operating Expenses $1,080 $1,350
Capital Outlay Costs $6,200 -
Carbon Sequestration Study Contract $2,016,604 -
Agrivoltaic Research Project Funding $1,800,000 $1,800,000
Centrally Appropriated Costs
1
$31,641 $39,803
FTE – Personal Services 0.8 FTE 1.0 FTE
CDA Subtotal $3,930,425 $1,941,019
Department of Public Health and Environment
Personal Services $131,094 $107,628
Operating Expenses $2,295 $1,755
Capital Outlay Costs $12,400 -
Public Outreach and Communication - $4,500
Centrally Appropriated Costs
1
$32,562 $32,297
FTE – Personal Services 1.5 FTE 1.3 FTE
CDPHE Subtotal $178,351 $146,180
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March 28, 2022 SB 22-138
Table 2
State Expenditures Under SB 22-138 (Cont.)
Cost Components FY 2022-23 FY 2023-24
Department of Revenue
3
Personal Services - $620,628
Operating Expenses - $17,415
Capital Outlay Costs - $80,600
Computer Programming and Testing - $20,943
Document Management - $6,766
Centrally Appropriated Costs
1
- $174,826
FTE – Personal Services - 11.9 FTE
DOR Subtotal - $921,178
Total $4,208,763 $3,146,928
Total FTE 3.1 FTE 15.2
1
Centrally appropriated costs are not included in the bill's appropriation.
2
Personal services and operating expenses in the CDA in FY 2023-24 are assumed
to be paid from $2.2 million appropriation to the department in FY 2022-23,
included in the bill.
3
See Department of Revenue expenditure section below for information on
additional expenditures that begin in FY 2024-25.
Department of Natural Resources. Beginning in FY 2022-23, the DNR requires staff and other
resources to develop and administer an Underground Injection Control Program for Class VI injection
wells, as outlined in the COGCC Class VI Report. These resources align with other states that have
primacy to regulate Class VI wells. This fiscal note assumes funds will be appropriated from the Oil
and Gas Conservation Cash Fund. The recently enacted federal Infrastructure Investment and Jobs
Act included a grant program pertaining to Class VI wells and, if funding is made available to
Colorado, the need for state funds may be reduced.
Primacy staff. Beginning in FY 2022-23, in order to assume permitting and enforcement authority,
the COGCC will hire a Class VI Coordinator to oversee the application for primacy with the EPA,
which is anticipated to take approximately two years to complete, and then oversee the regulatory
program beginning in FY 2024-25. As Class VI wells are an emerging technology, the new staff
will require annual training costs of $1,500 to attend relevant conferences, seminars, and
workshops related to geological carbon sequestration.
Regulatory staff. After assuming primacy, COGCC staff will require an additional 2.0 FTE
beginning in FY 2024-25 and ongoing to implement all aspects of the program under EPA
guidance, including reviewing permits, reporting to the EPA, communicating with operators and
the public about projects, and ensuring compliance with permit conditions and Class VI well rules.
The DNR will pursue additional federal funds to support this program, which may reduce these
cash fund requirements in future fiscal years. In addition, hydrogeology staff will review injection
well permit applications to ensure underground drinking water sources will not be impacted by
injection operation, which can be accommodated with existing resources.
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March 28, 2022 SB 22-138
Computer software and hardware. In addition to staff to regulate Class VI wells, DNR will purchase
computer hardware and software to model underground reservoirs and simulate the effects of
GHG injections. Based on costs in another state that recently attained primacy, the DNR will have
costs for an annual license fee of $10,000 for simulation software beginning in FY 2023-24, and
one-time costs of $15,000 in FY 2023-24 for the purchase of a server.
Department of Agriculture. The bill appropriates $2.2 million in FY 2022-23 to CDA to study carbon
reduction and sequestration opportunities in the agriculture and land management sectors, including
the feasibility of a certified carbon offset and credit training program. The CDA requires 1.0 FTE for
a project manager with subject matter expertise to direct and complete the study, and to manage a
grant contract with an Institute of Higher Education to produce this research. Costs reflect a
September 1 start date and include capital outlay and operating expenses. The Colorado Energy Office
and the Air Quality Control Commission in the CDPHE will incur absorbable workload impacts to
consult on the study. The study must be submitted by October 1, 2024. This fiscal note assumes that
the money appropriated in FY 2022-23 will require roll-forward spending authority throughout the
duration of the study. If roll forward spending authority is not authorized, the CDA will require an
appropriation in FY 2023-24 for staff costs.
The bill also annually transfers $1.8 million in General Funds to the Agriculture Value Added Cash
Fund to make investments in agrivoltaics research. The CDA will have increased workload to support
these investments, which can be accommodated with existing staff resources. The Department of
Natural Resources will have workload impacts to consult with recipients regarding wildlife impacts
of agrivoltaics use. The Agriculture Value Added Cash Fund is continuously appropriated to the
CDA. The fiscal note assumes the entire $1.8 million transferred annually will be used each year, but
the timing of actual expenditures may differ.
Department of Regulatory Agencies. In FY 2022-23, the Department of Revenue will have additional
workload to support rulemaking by the Commissioner of Insurance that requires insurers to
participate in the NAIC’s annual survey, and to email insurers that meet the threshold requirements
established in the bill with the survey and instructions. This workload can be accomplished within
existing resources.
Department of Public Health and Environment. The CDPHE will require additional staff from
September 1, 2022 through December 31, 2023 to develop and adopt rules for GHG emission
reductions from the industrial and manufacturing sector to achieve at least a 20 percent emissions
savings by 2030, below the 2015 baseline. To accommodate the expedited nature of rulemaking, the
CDPHE will require an additional 2.0 FTE for environmental protection specialists. In addition,
0.3 FTE marketing and communication specialist will be needed in the first half of FY 2023-24 to
support enhanced community engagement once the proposed rules have been prepared, in addition
to $4,500 in costs for facilities rental, childcare services, and participant incentives. Staff costs are
prorated to reflect the General Fund pay date shift in FY 2022-23, and includes standard capital outlay
and operating expense. See Technical note about the feasibility of meeting the bill’s deadline for
completing this rulemaking.
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March 28, 2022 SB 22-138
Department of Revenue. Beginning in FY 2023-24, expenditures will increase for the Department of
Revenue (DOR) for additional tax examiners. The DOR requires an additional 11.9 FTE tax examiners
in FY 2023-24, and 12.5 FTE tax examiners in FY 2024-25 and subsequent years to process and review
additional returns claiming the new tax credit and to resolve errors in returns. The fiscal note assumes
that the lack of a certification system associated with the new tax credit will result in a higher error
rate in individual returns and require additional reviews of returns.
Computer programming and testing. For FY 2023-24 only, the bill requires changes to the DOR’s
GenTax system and additional computer and user acceptance testing. Approximately 12 hours of
computer programming will be required to make changes in the GenTax system, totaling $2,700.
Additional computer and user acceptance testing are required to ensure programming changes
are functioning properly, resulting in an additional $11,843.
Document Management. The bill requires an additional $6,766 in expenditures to implement
document management and tax form changes in FY 2023-24, and $6,434 in FY 2024-25. These
expenditures are in the Department of Personnel and Administration using reappropriated funds.
Data reporting. Beginning in FY 2023-24, the Office of Research and Analysis within the DOR will
expend $6,400 each year to collect and report data on the new tax credit.
Centrally appropriated costs. Pursuant to a Joint Budget Committee policy, certain costs associated
with this bill are addressed through the annual budget process and centrally appropriated in the Long
Bill or supplemental appropriations bills, rather than in this bill. These costs, which include employee
insurance and supplemental employee retirement payments, are shown in Table 2.
Other Budget Impacts
General Fund Reserve. Under current law, an amount equal to 15 percent of General Fund
appropriations must be set aside in the General Fund statutory reserve beginning in FY 2022-23. Based
on this fiscal note, the bill is expected to increase the amount of General Fund held in reserve by the
amounts shows in Table 1, which will decrease the amount of General Fund available for other
purposes.
TABOR refunds. The bill is expected to decrease the amount of state revenue required to be refunded
to taxpayers by the amounts shown in the State Revenue section above. This estimate assumes the
December 2021 LCS revenue forecast. A forecast of state revenue subject to TABOR is not available
beyond FY 2023-24. Because TABOR refunds are paid from the General Fund, decreased General
Fund revenue will lower the TABOR refund obligation, but result in no net change to the amount of
General Fund otherwise available to spend or save.
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March 28, 2022 SB 22-138
Statutory Public Entity
The Public Employees' Retirement Association (PERA) currently publishes an Investment
Stewardship Report https://www.copera.org/files/e281fe352/5-169.pdf that explains how PERA's
investment philosophy addresses climate-related risks; however, this is not a topic that is addressed
in its certified annual financial report https://www.copera.org/files/d44458867/5-20-20.pdf. Assuming
the PERA Board contracts with an independent third-party to complete this assessment, one-time
costs are initially estimated at $300,000, paid in equal parts from the divisional trusts.
Effective Date
The bill takes effect 90 days following adjournment of the General Assembly sine die, assuming no
referendum petition is filed.
State Appropriations
For FY 2022-23, the bill requires the following appropriations:
$81,429 to the Department of Natural Resources, from the Oil and Gas Conservation Cash Fund
and 0.8 FTE; and
$145,789 to the Department of Public Health and Environment from the General Fund, and
1.5 FTE.
For FY 2022-23, the bill includes an appropriation of $2.2 million from the General Fund to the
Colorado Department of Agriculture. In addition, it is assumed that the CDA requires roll-forward
spending authority through FY 2023-24 through the expected completion date of this study.
Technical Note
The Air Quality Control Commission is not able to meet the December 31, 2022 deadline to adopt rules
related to GHG emission reductions in the industrial and manufacturing sector. This fiscal note
assumes that rulemaking will be completed by October 2023, and reflects staff and other resource costs
according to this assumed timeline.
Departmental Difference
The DOR estimates that it will have General Fund expenditures of $1,965,942 and 25.7 FTE in
FY 2023-24 and $1,822,032 and 26.4 FTE in FY 2024-25, based on the assumption that it will need to
review 100 percent of tax returns claiming the bill’s new tax credit. This fiscal note assumes that a
smaller share of returns claiming the credit will need to be reviewed, resulting in a lower workload
for the department and fewer additional tax examiners.
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March 28, 2022 SB 22-138
State and Local Government Contacts
Agriculture Colorado Energy Office Information Technology
Local Affairs Natural Resources PERA
Personnel Public Health and Environment Regulatory Agencies
Revenue Law
The revenue and expenditure impacts in this fiscal note represent changes from current law under the bill for each
fiscal year. For additional information about fiscal notes, please visit: leg.colorado.gov/fiscalnotes.