JAKARTA, Indonesia - Even here in Indonesia, where there is a strong tradition of tolerance, there is a war going on between radicals and moderates for Muslim hearts and minds. You can see that war in the police armed with automatic rifles, manning anti-vehicle barriers in front of my hotel and every other large Western-linked building in Jakarta. In August, Islamist terrorists blew up a suicide bomb in front of the Marriott Hotel here and are threatening to hit a long list of targets that includes schools attended by Western children. These are the same bombers who killed more than 200 people in Bali last November. The war is being fought on Indonesia's campuses, particularly secular universities where students are intrigued by radical Islam. Activists from Indonesia's liberal Islamic movement disdainfully call them "born-again Muslims'' and hold provocative campus forums with titles like ``There is no such thing as an Islamic state.'' At a religious boarding school in Yogjakarta, one of tens of thousands of pesantran spread across this vast country, they teach that the Koran is to be understood, not just rotely chanted in Arabic. "We are not frozen in those Koranic verses,'' director Tabiq Ali said. ``Interpretation depends on our own thinking.'' You can even see the war in a steamy best-seller about a Muslim woman whose faith was shattered by the hypocrisy of Islamic radicals who preached righteousness while sleeping with her. The subject of the book, a Yogjakarta university student, now fears retribution. This is a war we cannot afford to see lost. Indonesia is not only the largest Muslim nation in the world, but it could also become a base for radical Islam to spread throughout Southeast Asia. Alternately, Indonesia's struggling democracy could set an example for others in the Muslim world. "You have all the ingredients that could make this place the first Muslim majority democracy that works,'' says Sidney Jones, a leading expert on Islamic terrorism in Southeast Asia. ``And you have all the dark forces eager to push Indonesia in the opposite direction. The question is where does it come out.'' What can the United States do in this war? So far our efforts have focused almost entirely on aiding the pursuit of Jemaah Islamiyah, a Southeast Asian terrorist group linked to al-Qaida. Initially, the government denied it had a home-grown problem and was wary of seeming to follow American dictates. But after the shock of the Bali and Marriott bombings, the authorities have captured many of the terrorists and successfully prosecuted them. Ultimately, however, Indonesia needs to build a modern society. While the rest of Asia, from India to Vietnam, vibrates with the energy brought by the information technology revolution, Indonesia feels like a stagnant backwater. Its economy limps along, plagued by poverty and corruption. The key is a woefully underfunded educational system. Unlike Pakistan's madrassah system, the religious schools are integrated into the state system, and many offer a secular curriculum along with religious teaching. But in the pesantran that I visited, one in a city center and the other in the countryside, I found classrooms that offered little more than whitewashed walls and wooden desks. Computers are few in number and science labs primitive, if even existing. State schools are better equipped but still backward. Why not wire every school to the Internet, build science labs and, most importantly, train teachers? A recent report on U.S.-Indonesia relations by the U.S.-Indonesia Society and Stanford University's Asia-Pacific Research Center urged a significant effort to fund education. President Bush picked up on that idea, announcing a U.S. educational aid program during his October stopover here. But he alarmed Indonesians by tying the initiative to the war on terror. The U.S. ambassador had to make the rounds assuring Indonesians that the U.S. was not out to dictate curriculum in its religious schools. More troubling is the pathetic amount of money he offered -- most of it funds shifted from existing programs -- only $157 million over 6 years. Says former Ambassador Paul Cleveland, who heads the U.S.-Indonesia Society: "You would get more democracy out of $1 billion spent in Indonesia than $20 billion spent in Iraq.''

WASHINGTON - Take Jamey Bennett. When he first began selling his LightWedge personal reading lamp a few years ago, everything was made in China. Then the headaches began: Numerous conference calls in the middle of the night. Shipment delays because of a dockworker strike in California. And many problems related to language differences. The problems became so acute that Bennett transferred the manufacturing to Virginia two months ago.

"Managing a significant manufacturing effort in China remotely with a business of our size is very difficult," Bennett says.

"Firms that just believe that this is going to be simple ... very often get burned," says Martin Kenney, a University of California-Davis professor who recently completed a study of firms doing work in India. "This is a very, very complicated business activity, and there are a thousand ways it can go wrong."

Examples of the perils of moving work abroad keep cropping up. Last month, Indiana said it was halting a contract with an Indian company to upgrade its computer system for its unemployment benefits office after politicians and others started an uproar about the work leaving the state, not to mention the country.

Dell recently shifted some of its computer call center work from India. After moving some of its appliance call center work to India a few years ago, GE in May moved the work back to the Phoenix area. It found that workers in India, who don't own many appliances, couldn't relate to the customers' problems. U.S. workers can take more calls because they resolve issues faster, boosting productivity.

Highlighting how sensitive the topic of moving work outside the USA is, spokesmen for Dell and GE declined to comment. But Dell CEO Michael Dell recently told USA TODAY his company sticks with U.S. employees for many jobs for their skills.

"Most of our (employees) are in the U.S., and it's probably going to remain that way for a long time," Dell said. "The fear of jobs moving from one country to another, at least in our case, is probably greater than the reality."

That doesn't mean the trend will go away. Repetitive and low-skilled manufacturing and services work will likely continue to be sent abroad. But some firms' experiences suggest the hysteria about work going outside the USA may be overblown.

'Lost in the translation'

Several major issues confront businesses when they shift manufacturing outside the USA:

?Culture, language. U.S. firms are finding the do-it-now culture of the USA and some American tastes don't easily translate overseas.

Wells Fargo chief economist Sung Won Sohn says companies he has come in contact with have complained of productivity problems. A U.S. furniture importer has had a tough time persuading his overseas manufacturers to "distress" furniture, a popular style in some U.S. markets that evokes an antique feel. His workers don't see the point in taking a new product and making it look older.

And there are language issues. Although many people overseas speak English, phrasing and other issues can crop up when English is not the first language.

"Quite a bit was sort of lost in the translation," LightWedge's Bennett says.

A Dell spokesman told the Associated Press the company was shifting some corporate clients from Bangalore, India, to Texas, Idaho and Tennessee after receiving service complaints.

Gary Beach, publisher of CIO Magazine, recently was on the phone with a Dell agent in Bangalore for 11/2 hours after having problems with a notebook computer. "The guy was very polite, but he had to go to his supervisor after 65 minutes," Beach says. "It was a change in power options in your control panel. You had to switch to 'always on.' ... Duh!"

-Expertise. Many countries are churning out well-educated engineers, scientists and others while some foreigners are coming to the USA to be educated and then return home. But such education often does not replace experience.

Bethlehem, Pa.-based Air Products and Chemicals makes liquefied natural gas machinery in Wilkes-Barre, Pa. The firm has no plans to move the factory, even though none of the products is sold in the USA.

"We have spent a number of years building up this plant, making major investments and also building up a skilled workforce," spokeswoman Kassie Hilgert says. "Both the workforce and the technology are not transferable to anywhere else in the world."

Kenney notes that some of the businesses overseas are so new that there are few trained managers who know how to properly oversee both service and manufacturing operations.

-Shipping. Some manufacturers are finding the time, money and extra regulatory burdens associated with shipping products to the USA prohibitive. Those issues were compounded after the Sept. 11 attacks, because import regulations were strengthened.

Sanjay Chandra, co-founder of American Leather, a furniture producer in Dallas, does all manufacturing in-house. With hundreds of combinations of styles and fabrics and other attributes to choose from, the firm waits to produce the furniture until orders are received and prides itself on getting the products shipped out in a matter of weeks. Shipments from China are estimated to take about six weeks, after production, according to manufacturers.

"Special order, quick ship doesn't really lend itself to foreign manufacturing because of the time issues," Chandra says.

The shipping headaches may grow. Under rules starting this month, importers are required to electronically send lists to the government in advance of shipments, to help Customs and border protection agents identify high-risk cargo that deserves special attention because of terrorism fears. That is upsetting some importers who say the lists will cost them time and money if there are delays at the borders.

The challenges of importing were also highlighted a little more than a year ago when dockworkers in California were locked out during a labor dispute, stranding Asian imports at sea. The 10-day action that led to the closure of 29 docks was estimated to cost the U.S. economy up to $2 billion a day and forced some manufacturers who rely on foreign parts to shut down.

Keeping supplies flowing

The dockworker strike persuaded Alan Schulman, owner of Glentronics, to stick to his supply method. Schulman, who sells battery-operated, backup sump pumps, has suppliers both overseas and near his headquarters in Wheeling, Ill. When the dock strike started, he was able to switch to his local supplier and continued without any interruptions.

"I always want Plan B."

There are numerous other issues that U.S. firms are bumping into when it comes to working abroad. Many companies find themselves holding more inventory in case there is a supply disruption. That means added costs, because more inventory requires extra space, financing and, sometimes, employees.

"Supply Chain 101 says the most important thing is continuity of supply," says Norbert Ore, who organizes a regular survey of manufacturers for the Institute for Supply Management. "And when you establish a supply line that is 12,000 miles long ... you have to weigh the costs of additional inventory and logistics costs vs. what you can save in terms of lower costs per unit or labor costs."

Shipping business abroad also means relinquishing some control, which for some business owners is easier said than done. And, unless you own the facility and have an employee on-site, fixing any problems that require in-person work involves a lot of time and money. The contracts to set up facilities abroad can also be lengthy, involving months of negotiations and lawyer and consultant costs.

Regional conflicts, such as the periodic clashes between India and Pakistan, also must be considered.

Some move despite challenges

Despite all those issues, for some, moving work abroad is the way to go.

Wall Street giant Goldman Sachs estimates that of the 2.7 million U.S. factory jobs cut in the last three years, 1 million have been relocated abroad.

A wide range of service jobs, such as customer call centers, medical billing and architectural drafting, are also moving outside the USA. In the next 15 years, U.S. employers will move about 3.3 million white-collar jobs abroad, Forrester Research predicts.

The main motivation: money. UC-Davis' Kenney and co-author Rafiq Dossani of Stanford University estimate a call center worker who costs clients $12.47 an hour - including equipment and other costs - in Kansas City costs $4.12 an hour in Mumbai, the Indian city formerly known as Bombay. Indiana originally went with the Indian company after its bid for the computer work came in at $15 million, $8 million below the closest competitor.

After working in Asia and Europe for 15 years, Philip Ison, president of Ison International, bought an upholstery factory in Tennessee in 1999 and shut it down after two years.

"There was just no profit margin to be made," he says. "With all of the headaches between health insurance, workman's comp, OSHA, you can just keep on going down the list. It's not economically feasible to produce something here that takes a lot of labor."

Ison now produces furniture in Romania and ships the products to Norfolk, Va., before selling in the USA.

"With the Internet and the communication systems that are available at this point in time, it's no big deal to sit here and run the factory," he says.

But while some jobs may continue to be sent overseas, it's clear that others - especially those requiring special skills, quick turnaround times or customer contact - will stay in the USA.

"Most companies believe it's going to be easier (to shift work)," says Rudy Puryear of Bain and Co., who has consulted with clients on setting up operations abroad. He says he's seen some firms pull back two or three years after shifting to foreign workers or suppliers. "It is a buyer beware situation."

Perhaps no other country has more to lose from North Korea's acquisition of a sizeable nuclear arsenal than China. The existence of such weapons would not only endanger the city of Beijing but also provoke a regional arms race in which Japan, South Korea, and possibly even Taiwan would eventually develop their own strategic deterrents. Given these facts, it is surprising that China has not acted more forcefully to persuade Pyongyang to terminate its nuclear program.

The explanation for this reluctance is the importance Beijing attaches to regional stability. If the North Korean regime were to collapse, a refugee crisis would ensue as starving people flooded across the border into northeastern China, and the way would be opened for South Korean and American troops to advance up the peninsula towards Beijing.

If the Bush administration wants to enlist Chinese help against Pyongyang, therefore, it must first assuage these very reasonable concerns.

China's importance to the United States stems from the absence of other sources of leverage over Pyongyang. Military action against North Korea is an unattractive option because Kim Jong Il and his generals could retaliate massively. Promises of long-term economic aid in exchange for Pyongyang's renouncing its nuclear aspirations also offers little hope. Kim has a long record of consenting to such deals and then surreptitiously reviving his armament efforts.

What is needed is an intermediate form of suasion. China is the only power that possesses this sort of leverage. According to South Korean analysts, in 2002 China supplied 31 percent of North Korea's imports and accounted for 37 percent of its exports. In addition, each year Beijing gives several hundred thousand tons of food aid to its troublesome neighbor, and, now that the United States and Japan have suspended their oil shipments, provides the preponderance of its fuel.

Beijing has occasionally used its influence to express discontent with North Korean behavior, and, by all accounts, the diplomatic dialogue between the two states has also become more acrimonious of late.

However, Beijing will presumably not press Pyongyang much further unless it is assured of the Bush administration's goodwill. In practice, this means that Washington must identify and alleviate China's specific geopolitical concerns. If Beijing fears a refugee crisis, then the United States and its allies must promise to help finance the care of the displaced and perhaps to absorb some significant number of North Korean emigrants. If Beijing fears the approach of American military forces, Washington should consider promising to limit U.S. activities north of the demilitarized zone.

While demonstrating that the United States is willing to accommodate China's needs, the Bush administration must also prove that Pyongyang's policies represent an immediate threat to East Asian stability. To do this, Washington needs to engage more frequently and more conciliatorily in diplomatic talks with Kim and his representatives. For with each abortive discussion, each rejection of reasonable American gestures, the North Koreans push Beijing closer to the conclusion that they pose an unacceptable danger to China's national security interests.

The effect of this policy of dual engagement with China and North Korea would almost certainly be positive. As Beijing's attitude towards Pyongyang hardened, the world might see a sharp reduction in its oil shipments, the deployment of more troops to the North Korean border, or overt discussions with the United States about the future of the peninsula. This would be the strongest possible signal to Pyongyang, short of war, that the world will not tolerate its emergence as a major nuclear power. If, on the other hand, he remained intransigent until the intensified pressure caused North Korea to collapse, Washington and Beijing would still be relatively well situated to deal with the ensuing challenges.

It is through the joint resolution of serious challenges that potential rivals like the United States and China learn to trust each other. If there is a silver lining to the North Korean cloud, it is this opportunity to improve bilateral communications in anticipation of future exigencies.

The writer is a fellow at the Asia-Pacific Research Center, Stanford Institute for International Studies.

STANFORD, California Perhaps no other country has more to lose from North Korea's acquisition of a sizeable nuclear arsenal than China. The existence of such weapons would not only endanger the city of Beijing but also provoke a regional arms race in which Japan, South Korea, and possibly even Taiwan would eventually develop their own strategic deterrents. Given these facts, it is surprising that China has not acted more forcefully to persuade Pyongyang to terminate its nuclear program.

The explanation for this reluctance is the importance Beijing attaches to regional stability. If the North Korean regime were to collapse, a refugee crisis would ensue as starving people flooded across the border into northeastern China, and the way would be opened for South Korean and American troops to advance up the peninsula towards Beijing.

If the Bush administration wants to enlist Chinese help against Pyongyang, therefore, it must first assuage these very reasonable concerns.

China's importance to the United States stems from the absence of other sources of leverage over Pyongyang. Military action against North Korea is an unattractive option because Kim Jong Il and his generals could retaliate massively. Promises of long-term economic aid in exchange for Pyongyang's renouncing its nuclear aspirations also offers little hope. Kim has a long record of consenting to such deals and then surreptitiously reviving his armament efforts.

What is needed is an intermediate form of suasion. China is the only power that possesses this sort of leverage. According to South Korean analysts, in 2002 China supplied 31 percent of North Korea's imports and accounted for 37 percent of its exports. In addition, each year Beijing gives several hundred thousand tons of food aid to its troublesome neighbor, and, now that the United States and Japan have suspended their oil shipments, provides the preponderance of its fuel.

Beijing has occasionally used its influence to express discontent with North Korean behavior, and, by all accounts, the diplomatic dialogue between the two states has also become more acrimonious of late.

However, Beijing will presumably not press Pyongyang much further unless it is assured of the Bush administration's goodwill. In practice, this means that Washington must identify and alleviate China's specific geopolitical concerns. If Beijing fears a refugee crisis, then the United States and its allies must promise to help finance the care of the displaced and perhaps to absorb some significant number of North Korean emigrants. If Beijing fears the approach of American military forces, Washington should consider promising to limit U.S. activities north of the demilitarized zone.

While demonstrating that the United States is willing to accommodate China's needs, the Bush administration must also prove that Pyongyang's policies represent an immediate threat to East Asian stability. To do this, Washington needs to engage more frequently and more conciliatorily in diplomatic talks with Kim and his representatives. For with each abortive discussion, each rejection of reasonable American gestures, the North Koreans push Beijing closer to the conclusion that they pose an unacceptable danger to China's national security interests.

The effect of this policy of dual engagement with China and North Korea would almost certainly be positive. As Beijing's attitude towards Pyongyang hardened, the world might see a sharp reduction in its oil shipments, the deployment of more troops to the North Korean border, or overt discussions with the United States about the future of the peninsula. This would be the strongest possible signal to Pyongyang, short of war, that the world will not tolerate its emergence as a major nuclear power. If, on the other hand, he remained intransigent until the intensified pressure caused North Korea to collapse, Washington and Beijing would still be relatively well situated to deal with the ensuing challenges.

It is through the joint resolution of serious challenges that potential rivals like the United States and China learn to trust each other. If there is a silver lining to the North Korean cloud, it is this opportunity to improve bilateral communications in anticipation of future exigencies.

The writer is a fellow at the Asia-Pacific Research Center, Stanford Institute for International Studies. Enlisting Beijing

The United States needs natural gas. Developing countries many thousands of miles away are willing to supply it. This sleepy beachfront town and other communities along the Gulf of Mexico are likely to become the links between producers and consumers.

Altogether, energy companies are planning to spend more than $100 billion in the next decade to bring gas from developing countries to rich nations, according to PFC Energy, a Washington consulting firm. The only way to do it is to supercool the gas so that it condenses into a liquid, which is then compact enough to load onto tankers and send across oceans.

For years, this process was too costly to compete with relatively cheap domestic supplies of natural gas and with imports from Canada. But those supplies are tightening just as the demand for clean-burning gas is soaring. That has led to the most severe gas shortage in the last 25 years and caused domestic gas prices to double this year.

The gap between domestic supply and total demand is forecast to grow significantly over the next 20 years. That has made liquefied natural gas competitive, if only companies can find places that are willing to accept having L.N.G. terminals built nearby. "We've entered the gas age, and there's no turning back if we want a firm supply of a strategically crucial fuel," said Michael S. Smith, an investor who controls Freeport LNG, a Houston company that plans to build a receiving terminal on Quintana Island.

Mr. Smith and his partners, Cheniere Energy and Contango Oil and Gas, both of Houston, expect to begin construction of the terminal early next year on this tiny island about 70 miles south of Houston. The $400 million operation will be able to receive ships full of liquefied natural gas, warming the gas and piping it to a nearby plant owned by the Dow Chemical Company.

Quintana Island's attraction lies not only in its proximity to a plant that uses natural gas as a raw material but also in its location near the center of the nation's energy industry. That, it is hoped, will make political resistance to such projects tepid compared with the safety, aesthetic and environmental concerns in places like Northern California and Massachusetts.

Despite such concerns and worries that large, potentially explosive gas terminals could become terrorist targets, energy companies are eager to import liquefied natural gas. It is a shift that could avoid gas shortages forecast for the future, but could also increase the nation's dependence on foreign energy supplies.

"Just as we're debating the need to diversify our oil supplies, we're faced with an array of challenges to secure reliable and politically stable sources of gas," said David G. Victor, director of the Program on Energy and Sustainable Development at Stanford University.

More than a dozen projects like the one here are seeking approval from regulators in North America, including several on the Gulf Coast and in the northern Mexican state of Baja California.

The United States is already the world's largest natural gas producer, and domestic production is expected to increase to 28.5 trillion cubic feet in 2020 from 19.1 trillion cubic feet in 2000, according to the Energy Information Administration. Still, demand is expected to far outstrip production, growing to 33.8 trillion cubic feet by 2020 from 22.8 trillion cubic feet in 2000.

The gas to close that gap - more than five trillion cubic feet, a 40 percent increase in 20 years - will have to come largely from outside the United States.

Almost all of America's imported natural gas currently comes by pipeline from Canada. But a growing market for gas within Canada and rapidly depleting Canadian wells are expected to weaken that country's ability to increase exports. Mexico, though believed to have large untapped gas reserves, is mired in nationalist debate over making it easier for foreign financiers and companies to explore for gas.

As a result, Mexico, a power in crude oil, is a growing importer of natural gas - and an attractive base for liquefied natural gas receiving terminals, which cost as much as $700 million to build. The Organization for Economic Cooperation and Development recently forecast that the percentage of North America's gas from imports would climb to 26 percent by 2030 from just 1 percent today.

Those imports will come mostly from developing nations like Equatorial Guinea, a former Spanish colony in West Africa where Marathon Oil of Houston plans to build an L.N.G. plant able to serve gas fields throughout the Gulf of Guinea.

Ambitious ventures are also under way in other West African countries, including Angola and Nigeria, where energy companies were recently burning gas escaping from oil drilling operations because there was no ready market for it. In the Middle East, small countries like Oman, a sultanate on the Strait of Hormuz, and Qatar, are emerging as important gas powers.

In South America, Trinidad and Tobago has become an early leader in exporting liquefied natural gas, although companies in Bolivia and Peru have had difficulties advancing efforts to export L.N.G. to California. Producers in Indonesia, Malaysia and Russia could step in to supply the West Coast, pushing the Andean countries to the margins of the business.

In some ways, the scramble for natural gas projects resembles the heady early days of the oil industry a century ago. Then, British, Dutch and American investors raced around the world to stake out interests in remote oil fields in the Middle East, Central Asia and the archipelagoes of the Java Sea.

Some regions are considered more promising than others. Industry executives point out that just three countries  Iran, Qatar and Russia  hold more than half of the world's natural gas reserves, inevitably focusing attention on the delicate interplay between politics and commerce in these places.

Russia, with the largest proven reserves, plans to start exporting liquefied natural gas in 2007 with deliveries to Japan. Iran, while off limits to American companies because of trade restrictions by the United States, has attracted Japanese, French, British, Indian and South Korean concerns interested in mounting gas ventures.

There are important differences, however, between past oil booms and the current interest in natural gas. For one thing, studies show the world will be swimming in natural gas supplies while oil reserves are expected to dwindle in the decades ahead. Just one area in Qatar, a monarchy near Saudi Arabia with fewer than a million people, is thought to have enough gas to supply the United States for 40 years, according to a study by Deutsche Bank.

The natural gas industry has to overcome several obstacles before evolving into a vibrant global market. Even with ample supplies there is no market for trading liquefied natural gas, as there is for crude oil. Instead, producers and customers sign long-term contracts, sometimes resulting in significant price differences from one year to the next or from one country to another.

One reason the natural gas market has remained fragmented is because the fuel is difficult and expensive to extract and transport. But these costs are declining, adding to the appeal of gas projects. Lord Browne, the chief executive of BP, said the cost of developing gas liquefaction plants had halved since the 1980's, while shipping costs had also fallen.

Shipbuilders are seeking to meet demand for tankers, with the global gas fleet expected to grow to 193 ships by 2006 from 136 in 2002, according to LNG One World, a gas- shipping information service operated by Drewry International of Britain and Nissho Iwai of Japan.

Natural gas is still not considered as crucial as oil for overall energy security since oil's main use is for transportation and there is no short-term alternative. Natural gas has a variety of important industrial uses, like serving as a raw material for fertilizer and generating electricity.

Still, the growth in demand for liquefied natural gas in the United States is expected to outstrip other parts of the world. It is likely to grow 35 percent in the next five years, compared with 20 percent in other North Atlantic countries and 12 percent worldwide, according to Deutsche Bank. Hence the rush to proceed with projects that supply liquefied natural gas to the United States.

"The world could be consuming more gas than oil by 2025," Philip Watts, the chairman of the Royal Dutch/Shell Group, the large British-Dutch energy company, said in a recent address to industry executives in Tokyo. "We must be prepared for growing geopolitical turbulence and volatility in an increasingly interdependent world."

The United States has only five terminals capable of receiving L.N.G., including one in Puerto Rico. Almost 20 are on the drawing board, but opposition to the terminals has already prevented the start of work on several of them. Earlier this year, for instance, Shell and Bechtel Enterprises shelved a plan to build a terminal about 30 miles north of San Francisco because of stiff public opposition.

California remains perhaps the most difficult place in the country to gain approval for gas-receiving terminals. This has encouraged imaginative proposals like one last month from BHP Billiton, Australia's largest energy company, for a $600 million floating terminal 20 miles off the coast of Oxnard in the southern part of the state. It remains to be seen whether any of the California projects will be built.

An air of resignation hangs over even the critics of the plan to build the terminal on Quintana, which is scheduled to start operating by 2007. Officials from Freeport LNG have told residents that they expect to make more than $1 million a year in tax payments to the city, a substantial sum for a community of 40 homes that is the smallest municipality in Texas.

At the Jetties, a restaurant on the island's edge overlooking the brown water of the Gulf of Mexico, the walls are plastered with warnings of the perceived dangers of receiving tankers full of potentially combustible gas from far-flung parts of the world. But the restaurant's employees seem to believe that the terminal will be built, inevitably changing the island's easygoing atmosphere.

"People come out here to drink beer on the beach and look at the birds and the gulf," said Dana Difatta, a cook at the restaurant. "Imagine what they'll think when they're staring at some huge vats holding natural gas. Will they be horrified or relieved?"