The Oil Drum: Canada

Will the Fed cut interest rates to alleviate the developing credit crunch, and will it have the desired effect if they do? Can lowering the cost of credit overcome risk aversion and the fear of cascading default? If not then the Fed will not be able to prevent the contraction of the money supply and the spread of contagion amid a sea of margin calls.

In Canada, oil sands fever continues unabated and a drilling frenzy may be shaping up in the Arctic. One political leader urges the defence of sovereignty in the Arctic, while another holds talks on North American Union well away from the public eye. In Ontario, businesses are paid not to consume power.

On the climate front, northern infrastructure faces a serious challenge as melting permafrost undermines it's foundations, while Australia experiences a 1000 year drought.

Finally, we remember that 62 years ago, the world was waking up to the beginning of the nuclear weapons age.

Mortgage Maze May Increase Foreclosures

And the very innovation that made mortgages so easily available — an assembly line process known on Wall Street as securitization — is creating an obstacle for troubled borrowers. As they try to restructure their loans, they are often thwarted, lawyers say, by strict protections put in place for investors who bought the mortgage pools.

This impasse could exacerbate the housing slump, pushing more homeowners into foreclosure. That would lead to a bigger glut of properties for sale, depressing home prices further.

“Securitization led to this explosion of bad loans, and now it is harder to unwind and modify them even where it is in the best interests of both the borrower and the investors,” Kurt Eggert, an associate professor at the Chapman University School of Law in Orange, Calif., said in an interview. “The thing that caused the problem is making it harder to solve the problem.”

Creating difficulties is the complex design of mortgage securities.

Ontario has nuclear ambitions, the first of which is being thwarted by a lack of transmission capacity. If the power can't be transmitted once the deadline arrives, Ontario will have to pay for it anyway under the terms of their agreement with Bruce Power. Meanwhile, Quebec has difficulties with transport infrastructure, Alberta is losing it's skilled workforce in the oilpatch to early retirement, and Danny Williams may (or may not) be talking to the oil companies in Newfoundland.

CIBC, pondering its exposure to the subprime mess south of the border, is concerned about the prospect of $100 oil, and that risk may be becoming a four-letter word. The M&A juggernaut may be coming to an end, as Canada worries about the knock-on effect of a US recession. The subprime nosedive gets dramatically worse, with some investors threatening to sue Bear Stearns over a total loss. Desperate optimism continues, despite the subprime problems being "safely contained to all 15 ABX indexes". Meanwhile the Mortgage Lender Implode-O-Meter reaches 100.

Water quantity is a problem for both California and London, England, whereas water quality is the issue in Alberta, Ottawa, China and the Gulf of Mexico. China in particular is paying the price for being "filthy rich".

Landowners worry about bulldozed rights

Hundreds of Ontario landowners have begun banding together in an effort to ensure their rights aren't bulldozed along with their homes and properties as part of a $635-million plan to get new nuclear and green power to the Toronto area....

....Under an agreement with Bruce Power, the province has contracted to buy 1,500 megawatts of electricity produced by the nuclear plant at the lake's edge near Kincardine, Ont., when two reactors come back on line in 2009 and the plant gets up to full strength by 2012....

....Provincial rate payers will be on the hook for up to $460 million a year for each "stranded" nuclear unit that cannot get power to the grid because of transmission issues, government documents show.

Also, the province has committed to at least 700 megawatts of wind power from the Bruce County area as part of its strategy to mothball its coal-fired power plants.

In March, the Ontario Power Authority, which administers power contracts in the province, urged Hydro One to get cracking on building a new 500-kilovolt transmission line to ensure the power can flow to energy-hungry southern Ontario.

LNG beats pipeline

Treating delta gas as an LNG opportunity is much more attractive than the Mackenzie pipeline option. Maybe the big giants behind the backers -- Exxon Mobil, Conoco Phillips, and Royal Dutch Shell -- fear upsetting their global petroleum, natural gas and LNG apple carts by allowing their Canadian subsidiaries to start playing for the first time outside their Canadian sand boxes. It may be an intolerable horror for these multi-nationals to see delta LNG "washing up" at global LNG terminals, and competing with their own non-Canadian LNG delivered to U.S. and overseas LNG-terminals. Or might marketing delta gas globally snatch away the currently dominant fuel, gas, from the ravenous appetites of oilsands gas-guzzlers, forcing them to consider fuel options other than gas, and risking further delays, because they are also primary holders of Alberta oilsands leases.