Weighing arguments without knowing the underlying facts is a useful skill. I first learned it many years ago when I was on the Greenwich Representative Town Meeting.

Although I was very active in town politics and hand strong opinions on many issues I quickly learned how to judge arguments where I didn’t have a strong grasp of the underlying facts.

Case in point:

Any time one side of the debate says: “This proposal  has X effect”, and the response by supporters of the proposal  is to say “What we are trying to do is to Y” you always know invariably that the person alleging X is correct.

This approach to issues has a strong impact on my views on Global Warming, Climate Change, or whatever it is called these days. There is a public campaign against global warming “skeptics”. Apparently I am one of them.

One way I know that I am one of them is that what exactly it means to be a global warming skeptic is never defined. So, for example, someone who believes the absurd proposition that no warming has occurred at all over the last 100 years is lumped into the same group as a scientist who believes that there has been warming, that, human activity is likely the cause, but that given that the models have been totally wrong for the last 20 years perhaps we don’t fully understand what is going on and should tread carefully with policy proposals.

Thus, we end up in a situation where serious scientists or other academics who question the more alarmist global warming pronouncements are the subject of repeated assaults on their reputation while ego-maniacs like Michael Mann who conspire to hide data, keep his opponents from being published, lie about his credentials, and then later blatantly lie in court filings is feted.

Before anyone writes in to tell me that the vast majority of scientists believe in “Global Warming”: don’t bother. I know. They are probably right. But the tone of the argument and the behavior of the participants on both sides leads me to label myself a “skeptic”.

Oklahoma City’s famous Aubrey McClendon recently gave a strong tell in a public spat that he is having with Chesapeake Energy.

There is an article last week about CHK founder Aubrey McClendon with his new company American Energy Partners being sued by and countersuing Chesapeake.

Here is the article:

http://newsok.com/chesapeake-sues-founder-mcclendon-fires-back/article/5394170

Major point:

Chesapeake says that after McClendon found out he was leaving Chesapeake, McClendon took over 20 terabytes of data including information about the Utica shale that he has since used to grow American Energy Partners.

McClendon countersues on the basis that he has not been provided info on the existing wells that he still has an interest in with Chesapeake.

The two key points, however, are as follows:

1. McClendon is indignant!. From the article:

“It is beyond belief that the company that I co-founded 25 years ago and where I worked tirelessly to build it into one of America’s largest and most successful oil and gas producers has now decided to add insult to injury almost two years to the day after my resignation by wrongly accusing me of misappropriating information,” McClendon said in a statement.”

I’m pretty good at reading people’s responses to accusations. The second I read this I figured McClendon was in the wrong. People who are right about an argument typically point that out rather than complaining about how they are being treated.

McClendon adds “Under my agreements with Chesapeake, I am entitled to possess and use the 20 terabytes of information I own,”

Let’s see: McClendon put up a site where he posts all the relevant documents (he claims) to the case: http://aelpvchklitigation.com.

Let’s look at the separation terms documents:

http://aelpvchklitigation.com/docs/agreed-terms.pdf

“Continued Services: In addition to the continued accounting support provided in 4.7, the company will provide the data, licenses, and services, including administrative, engineering, IT, and software, necessary to facilitate the efficient exchange of land, well, title and other information kept in the Company’s well files, previously provided to Mr. McClendon in written form on a routine basis or requested by Mr McClendon and development of reserve reports in connection with oil and gas interests acquired under the FWPP, or jointly owned by any affiliate of Mr. McClendon’s and the Company.”

It seems that the basis of the disagreement comes down to how exactly this is being interpreted. Let’s look at it two different ways (bold added by me):

It seems Mr. McClendon is reading it this way:

“…the company will provide the data, licenses, and services, including administrative, engineering, IT, and software, necessary to facilitate the efficient exchange of land, well, title and other information kept in the Company’s well files, previously provided to Mr. McClendon in written form on a routine basis or requested by Mr McClendon and development of reserve reports in connection with oil and gas interests acquired under the FWPP, or jointly owned by any affiliate of Mr. McClendon’s and the Company.

While CHK is reading it this way:

“Continued Services: In addition to the continued accounting support provided in 4.7, the company will provide the data, licenses, and services, including administrative, engineering, IT, and software, necessary to facilitate the efficient exchange of land, well, title and other information kept in the Company’s well files, previously provided to Mr. McClendon in written form on a routine basis or requested by Mr McClendon and development of reserve reports in connection with oil and gas interests acquired under the FWPP, or jointly owned by any affiliate of Mr. McClendon’s and the Company.”

I emailed the media contact person at McClendon’s litigation website if that was the basis of the disagreement but so far have received no response.

Perhaps McClendon’s argument is that as long as he was still at CHK on his last day he had a right to the data.

Given McClendon’s long-standing treatment of CHK as his own personal company the main issue is most likely that deep down he was entitled to whatever he wanted from the company that he built.

His outrage to a factual accusation probably means he is wrong.

Either way, this is a good lesson in how expensive lawyers can still botch things up. While it’s easy to make the argument that CHK would never have agreed to give McClendon information in perpetuity, the fact is that this clause in the separation agreement could have easily been more clear by simply starting it with “In connection with oil and gas interests acquired under the FWPP, or jointly owned by any affiliate of Mr. McClendon’s and the Company” instead of ending it with that clause.

I was prompted to write this essay because of this item on seeking alpha: “Russians financed U.S. anti-fracking movement, Continental’s Hamm says”

My friends all know that I am very bearish on the drilling stocks, Continental included. In short, while production and inventories rise, many investors still believe that an oil rebound is near. It could be, nobody can really tell you or I what the price of oil will be one month from now, but there are a lot of reasons to believe oil will stay down for a long time. If so, the leveraged Exploration and Production companies are in big trouble. Already most of them are living on their credit lines, and I don’t believe that those lines are as secure as oil bulls think.

I think these companies are in big trouble. When the CEO of one of the largest starts complaining about the Russians (whether it is true or not) that is a sign of desperation and I am taking it as a sign that I am right.