Expanding Pathways for Thermal Energy and Geothermal Development

Colorado lawmakers are advancing a bipartisan proposal aimed at accelerating thermal energy resource development across the state, including geothermal energy and industrial waste. The bill reflects Colorado’s broader push toward decarbonization and electrification and could potentially impact municipalities, utilities, industrial operators and energy developers.

What’s In the Bill

Senate Bill 26-142, “Concerning the Development of Thermal Energy Resources,” would significantly expand opportunities for geothermal energy development by creating clearer pathways for both distributed and utility-scale projects.

Most notably, the bill increases the allowable size of community-scale geothermal projects from 5 MW to 25 MW and contemplates that investor-owned electric utilities “shall identify one or more potential small-scale geothermal projects” for development. At the same time, the legislation lays the groundwork for large-scale geothermal deployment by directing utilities and state agencies to identify and evaluate geothermal resources and opportunities.

SB 26-142 also contains a set of provisions that would expand the role of the Colorado Energy and Carbon Management Commission (ECMC) and related agencies in advancing geothermal development. The bill directs ECMC, in coordination with the Colorado Geological Survey, to collect, analyze and publish data on geothermal resources statewide, including leveraging existing subsurface information such as oil and gas well data. This effort is intended to address a major barrier to geothermal investment—limited access to reliable geological data.

In addition, the legislation requires ECMC to develop recommendations to support safe and effective geothermal development and report those findings to the General Assembly by Nov. 15, 2026. The bill also directs ECMC to consider the potential creation of a geothermal development authority, which could facilitate public-private partnerships, secure federal funding and provide financial risk-mitigation tools for geothermal exploration, transmission infrastructure and thermal energy network development.

The bill passed out of the Senate on a 27-7 vote and went to the House Energy and Environment Committee, where it was amended to clarify the regulatory framework governing thermal energy networks and their interaction with existing utility laws, among other changes.

The House committee amendments confirm that local governments—and private entities acting on their behalf—may develop and operate thermal energy networks without being treated as public utilities, while expressly excluding public utilities and their affiliates from this exemption.

At the same time, the amendments preserve the rights of incumbent electric utilities by providing that utilities retain the exclusive right to serve thermal energy network facilities with retail electric service within their certificated service territories, subject to existing distributed generation rights. The amendments also clarify that nothing in the bill alters existing statutory requirements governing utility service territories or the acquisition of electric distribution infrastructure.

Finally, the amendments integrate thermal energy networks into Colorado’s clean heat regulatory framework by allowing emissions reductions associated with qualifying thermal energy networks to be counted toward a utility’s clean heat plan obligations, even where the utility does not own or operate the network.

All considered, SB 26-142 signals a meaningful shift: geothermal and thermal energy networks are moving from niche technologies toward more clearly defined, financeable resource classes within Colorado’s broader energy portfolio. At the same time, the House committee amendments ensure that these emerging systems are integrated with rather than disruptive to the existing regulated utility framework.

Upon receiving amendments in committee, SB 142 proceeded to receive unanimous support on the House floor and will now be sent back to the Senate to concur with the amendments made in the bill’s second chamber.

How It Interplays with Federal Policy Changes

At the federal level, efforts are also underway to streamline geothermal development. On April 23, 2026, the U.S. House of Representatives passed H.R. 5587, the Harnessing Energy at Thermal Sources Act of 2026 (the HEATS Act). The legislation would amend the Geothermal Steam Act of 1970 to accelerate geothermal development by reducing federal permitting and environmental review requirements for qualifying projects where existing state geothermal permitting processes are in place.

Key components of the HEATS Act:

• The bill would eliminate the requirement for a federal drilling permit for geothermal exploration and production on non-federal surface lands where the United States owns less than 50% of the subsurface geothermal estate.
• Eligible projects could proceed 30 days after submission of a state permit, without additional federal approvals.
• Covered projects would be exempt from review under the National Environmental Policy Act (NEPA), the Endangered Species Act, and—unless the state lacks a historic preservation law—the National Historic Preservation Act.
• Projects on Indian lands are expressly excluded and remain subject to existing federal permitting and environmental review requirements.
• Federal geothermal royalty obligations and federal audit authority would remain unchanged.

If enacted, the HEATS Act would significantly reduce regulatory hurdles for many geothermal projects by shifting primary oversight to the states. This approach could materially shorten development timelines and lower costs, while making state permitting strategy an increasingly critical factor for project planning and investment decisions.

At the same time, the express exclusion of projects on Indian lands creates a bifurcated permitting regime. As a result, tribes seeking to develop geothermal resources on their lands would remain subject to a more time-consuming federal process, potentially making projects in Indian country less competitive than similar projects on state or private lands.

The HEATS Act passed the House with notable bipartisan support, including backing from a geographically diverse group of Democrats. This could lead to increased interest in the Senate to move the HEATS Act forward, including among some Democrats on the Senate Energy and Natural Resources Committee, who have previously been supportive of geothermal. 

A separate bipartisan geothermal bill to watch is the Geo POWER Act (S. 4116), introduced by Democratic Sens. John Hickenlooper (Colorado) and Alex Padilla (California) alongside Republican Sens. John Curtis (Utah) and Steve Daines (Montana), with strong industry support and a House companion (H.R. 8437) introduced by Reps. Nick Begich (R-Alaska) and Susie Lee (D-Nevada). While the Senate Energy and Natural Resources Committee has struggled to move legislation in recent years, the bill could advance similarly to the HEATS and SPEED acts.

The HEATS Act is also more aggressive than prior geothermal permitting reforms considered in the 118th Congress, including the geothermal provisions in the Manchin-Barrasso Energy Reform Permitting Act, and its passage adds pressure to ongoing Senate negotiations over broader permitting reform packages spanning multiple committees.

The HEATS Act now heads to the U.S. Senate, where comprehensive permitting reform faces both procedural and political headwinds. 

We will continue to monitor developments closely and are available to discuss how the HEATS Act and related permitting reform efforts at the state and federal level could affect your geothermal projects or investment strategies.