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The money, which will go to state school districts, local governments and the water conservation board, is 32.5 percent more than the previous fiscal year, when Colorado received $80.5 million.

Colorado retained its No. 3 rank among the 35 royalty-receiving states, behind Wyoming's $878 million and New Mexico's $444 million.

The Denver-based Minerals Management Service - an arm of the Interior Department - collects a royalty, or fee, from oil, natural gas and mining companies that drill wells or mine on federal lands in individual states. The fee usually is a percentage of the resource being produced, paid in cash or in kind. The agency later splits the money equally with the states. Alaska is the only exception: It gets back 90 percent of its royalties.

"These revenues are an extremely important source of funds to many states today," said Johnnie Burton, director of MMS. "States use the money to fund local education, critical infrastructure projects and assistance to local counties where the energy production occurs."

The increase in Colorado's share of the federal royalty is because of the skyrocketing price of natural gas in the past year coupled with steadily increasing energy production. In calendar year 2004, the state produced a record 1.1 trillion cubic feet of gas, according to the Colorado Oil and Gas Conservation Commission. The value of oil, natural gas and carbon dioxide production in 2004 totaled $6.75 billion, up 35 percent from 2003. A cubic foot is a standard measure of gas, and 6,000 cubic feet of gas is the equivalent of one barrel of oil. Record coal production in 2004 offset a slight drop in coal prices on federal leases to $18.09 a ton in 2004 from $19.59 in 2003. The state produced 40 million tons of coal in 2004, up from the previous year's 35.9 million tons.

From all indications, energy production will jump 5 percent to 6 percent in calendar year 2005, the commission estimates.

With demand far surpassing supply, energy prices are touching record-high levels. Right now, prices are nearly double what they were two years ago. Apart from royalties on mineral production on federal lands, the state also earns severance taxes and property tax from oil and gas operators. According to Colorado law, 50 percent of the severance tax revenue flows to local governments, and 50 percent flows into a state trust fund to replace depleted natural resources and to complete water projects.

Royalties at a glance
Fiscal year Colorado's federal royalty

2001 $68.2 million
2002 $43.7 million
2003 $53.9 million
2004 $80.5 million
2005 $106.7 million

Source: Minerals Management Service