This Court Ruling Could Raise Natural Gas Prices

This article was written by Oilprice.com, the leading provider of energy news in the world.

We saw a landmark decision last week in U.S. courts.

One that could become the biggest new driver for North American natural gas prices.

The decision came in the supreme court of Pennsylvania. Where judges voted 4-2 to overturn new laws that limited the ability of municipalities in the state to regulate hydraulic fracturing for oil and natural gas drilling.

Pennsylvania's Republican governor Tom Corbett had previously announced the laws in an attempt to limit local bans on fracking. Several such moratoriums have been pursued by cities and counties in Pennsylvania. And around the country.

The new laws looked to be putting regulatory power firmly back in the hands of the state government. A move that would have streamlined oil and gas development here.

But no more. With the laws now overturned by the supreme court, municipalities will be free to impose their own bans on fracking. Effectively halting development in such locations.

The decision comes at a crucial juncture for natural gas prices. Pennsylvania's Marcellus shale is today the biggest driver of growth of in U.S. natural gas production. Output here continues to soar, while other big shales like the Haynesville are actually declining. Even production from go-to drilling acreage in the Eagle Ford play has been growing much more slowly of late.

That could change if the new shift in rules causes a drilling slowdown in Pennsylvania.

Putting a crimp in America's most productive shale gas play. And potentially levelling production.

That would of course be supportive for natural gas prices. Potentially speeding gains in this space, which is currently being weighed down by Pennsylvania's prolific output.

Last week's ruling may in fact accelerate the pace of opposition to fracking. As part of the decision, the presiding Chief Justice Ronald Castille took an unusual step: declaring that gas drilling is dangerous. Castille wrote decidedly that fracking has a "detrimental effect" on the environment, and compared it to coal mining.

Legal experts have noted such sentiment likely oversteps the bounds of the court. But it may nonetheless tip some communities against drilling. Leading to more local bans.

We'll see how far this spreads across the state. And how quickly the resulting production losses start to affect pricing in this market.

Here's to courting some gains,

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  • Report this Comment On December 29, 2013, at 11:40 AM, TheLizard wrote:

    Let's see . . . gas drillers are already griping about the depressed price of natural gas because of the glut on the market. People living in rural localities who don't want it to look like Elizabeth, NJ get to decide whether or not they want their towns to become polluted industrial sites with the problems that brings for the sake gas companies making money. When talking to patients who may be suffering from effects of fracking fluids, methane, and other by-products leeching into the environment, i.e., water, air, etc., doctors can now actually talk about what might be making them sick instead of having to adhere to a gag rule. When a Republican court tells a Republican governor and his Republican legislature that their law is unconstitutional, there may be a reason. Pennsylvania's courts are hardly activist.

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