Colorado is a large energy producing state. Compared to other energy producing states, Colorado's current severance tax policies and rates are very lenient towards energy companies. There have been proposals to change these rates and policies but these proposals have been highly contested. The purpose of this thesis is to investigate Colorado's current policies and determine whether new rates and restructuring of the taxes would benefit the state of Colorado and its citizens. This paper uses past data and tax collections to create hypothetical situations for the future of Colorado's severance taxes. By studying the years of 1981-2008 a long range of effects of the potential policy change are examined. Using extraction models, rate changes are determined to have a small effect on the extraction paths and prices for crude oil. Calculations done to determine the effect of an endowment on Colorado's tax payout find a much more stable, but not necessarily larger payout.