Three years ago, the multi-billion-dollar Denver-based Anschutz Exploration Corp., which helped make its founder Philip Anschutz one of the richest men in America, filed a lawsuit against Dryden, a small town in upstate New York.

The issue: Dryden was sitting on top of some of the best shale gas prospects in the country, and Anschutz had bought a substantial number of leases giving it the right to drill there. But in August that year, Dryden – like towns across the country seeking to restrain the rush to drill for shale oil – had banned the combination of hydraulic fracturing and horizontal drilling known as fracking. It did this by adopting new language for its zoning laws and by citing road use regulations, noise limits and the need to protect 31 “critical environmental areas.”

This week in a landmark decision, the New York State Court of Appeals ruled in favor of the town of Dryden and another town, Middlefield, which had been sued separately over similar local ordinances.

While it applies to local governments across the state of New York, the court’s 5-2 decision in favor of “home rule” by towns and counties will reverberate across the country, where many other local governments are putting up a fight to slow what has become a massive national shift toward natural gas production.

“This is simply a victory for local control,” said Dryden town board member Linda Lavine, a retired psychology professor. “It is a victory for liberals and conservatives of all sorts. It is what democracy is all about.”

There has been a wave of local resolutions, laws or proposals to ban or limit fracking and the disposal of fracking waste, including 35 such efforts in New Jersey, 13 in California, 10 in Colorado, 18 in Michigan and many more in Ohio, Pennsylvania and North Carolina, according to activist group Food and Water Watch. Even the District of Columbia has adopted a resolution urging a prohibition on fracking in the George Washington National Forest.

In the eyes of the oil and gas industry, though, putting the power to regulate fracking in local hands is bad for business and bad for U.S. energy policy. Shale gas drilling has unlocked vast reserves, and shale gas now accounts for about 40 percent of total U.S. natural gas production. Without it, companies would be lining up to import natural gas, not export it as many now want to do.

POLITICAL IMPLICATIONS DEEP

The New York decision – and the whole issue of local resistance to fracking – also has broad political implications. In New York, it eases pressure on Gov. Andrew Cuomo, a Democrat, to take a position on fracking. Cuomo, widely believed to have national political ambitions, has avoided taking a position on fracking while sticking with a six-year-old “temporary” moratorium he inherited when he came into office in 2011. He has maintained the moratorium pending the outcome of a health study. That study probably won’t be done until after his next gubernatorial election.

In Colorado, where Democratic Sen. Mark Udall is in a tough reelection race that will hinge in part on a variety of energy issues, the decision in New York is likely to encourage local foes of fracking.

Fifty-nine percent of voters in Longmont, Colorado, cast ballots in favor of a ban on fracking and waste disposal even though nationwide industry groups poured money into Longmont Taxpayers for Common Sense, which opposed the ban. Since then, four more Colorado towns have also banned or declared long moratoria on fracking. Court challenges have been filed.

Udall, who appears to be seeking middle ground, has said that some areas should be off limits to shale drilling. But at a forum in May, he said, “it has risks but it can be done safely. ” On his website, he says, “As Coloradans, we want our country to be energy independent, but we don’t want to sacrifice our land, water and air.” He vowed to press for higher safety standards, but not to ban drilling.

And Colorado Gov. John Hickenlooper, a Democrat who has imposed disclosure and leak prevention rules on the industry, also opposes local fracking bans. Hickenlooper is now seeking a special legislative session this summer in order to pass a compromise bill; if the bill fails, the fracking question is likely to be put on the ballot this fall for voters to decide.

Each state is different, however. The issue in the New York court case was whether towns like Dryden and Middlefield, which includes part of the village of Cooperstown, have the right to limit oil and gas drilling through their local zoning laws or whether the state’s Oil, Gas and Solution Mining Law preempts the home rule authority to regulate land use.

Dryden is part of Tompkins County, one of two New York counties where the Marcellus shale formation juts out from Pennsylvania, where oil and gas companies have drilled more than 13,000 wells using fracking techniques.

Industry sources say that Chesapeake Energy, Anschutz and XTO Energy, now part of Exxon Mobil, had purchased lease holdings in the area, some as early as 2006.

But the 2011 activism in Dryden was followed by a landslide victory that fall by local council members who made the fracking ban a centerpiece of their campaigns.

“The voice of the people was actually very clear,” Lavine said.

COMMON GROUND AGAINST INDUSTRY

The state court of appeals ruling backs up the Dryden council, and it garnered support from both the liberal and conservative ends of the spectrum. Written by Judge Victoria Graffeo, who was appointed by Republican Gov. George Pataki, the decision was joined by another Pataki appointee, Judge Susan Phillips Read. They were joined by Chief Judge Jonathan Lippman, who was appointed by Democratic Gov. David A. Paterson and two Cuomo appointees, Judges Jenny Rivera and Sheila Abdus-Salaam.

“We do not lightly presume preemption where the preeminent power of a locality to regulate land use is at stake,” Graffeo wrote. “Rather, we will invalidate a zoning law only where there is a ‘clear expression of legislative intent to preempt local control over land use.’ ”

She added that “at the heart of these cases lies the relationship between the State and its local government subdivisions, and their respective exercise of legislative power. These appeals are not about whether hydrofracking is beneficial or detrimental to the economy, environment or energy needs of New York, and we pass no judgment on its merits.”

Instead, she and the four judges who joined her said that the language and history of the state oil and gas law did not show any intent to exercise its power to supersede home rule.

Thomas S. West, an Albany-based oil and gas industry attorney for Norse Energy, argued before the court of appeals on June 3 that the towns had exceeded their authority. He vowed that the industry would go to the state legislature to get it to step in.

“Are we going to let 932 towns decide the energy policy of New York state?” asked Scott Kurkoski, a lawyer for a dairy farm that had signed exploration leases in 2007.

Industry groups condemned this week’s decision.

“A regime where you essentially have local control of the process at the township level is a challenge and is more problematic for companies than if you had a statewide program,” said Frank Macchiarola, executive vice president for government affairs at America’s Natural Gas Alliance, an industry group. “The regulatory structure at the state level is substantially better for a number of reasons. One is the expertise brought to bear by the state department of environmental conservation versus the local or county council.”

But foes of fracking cheered the state court ruling. They asserted that the drilling would risk exposure to toxic substances and that it would destroy the small-town atmosphere central to the identity of these communities.