Henry Hub connects a dozen interstate and intrastate pipelines near Erath, Louisiana. Its physical importance has faded as production shifted to Appalachia and the Permian, but its role as the pricing reference has not, because contracts, LNG export agreements and utility tariffs are written against it.
Regional gas trades at a basis differential to Henry Hub reflecting pipeline capacity. When takeaway capacity is short, those differentials can be enormous and occasionally negative, meaning producers pay to have gas taken away.
Example: Waha hub gas in West Texas has traded at minus $2.00 against Henry Hub at $3.20, an effective price of negative $2.00 — producers with no pipeline space paid to dispose of associated gas rather than shut oil wells.
Related: natural-gas-futures, basis, spark-spread, seasonality, cushing