From The Wilderness Publications

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Japan plans to temporarily freeze its yen loans to China for the current fiscal year because of worsening relations between the two nations, Kyodo News agency reported Thursday.

A senior Foreign Ministry official told a committee of the ruling Liberal Democratic Party on Thursday of the decision to freeze the loans, Kyodo said in the unsourced report.

Japan provided 86 billion yen ($735 million) in loans to China in the 2004 fiscal year, which ended March 31, 2005, the news agency said.

Ties between Japan and China have deteriorated sharply in the past year. The two are feuding over maritime gas deposits, interpretations of World War II history and other issues.

"We have no other choice but to freeze loans considering the situation surrounding bilateral relations," Kyodo quoted Senior Vice Foreign Minister Yasuhisa Shiozaki as telling the LDP committee.

China has been notified of the decision through diplomatic channels, it reported.

by Michael Ruppert
Ashland Daily Tidings
Ashland, Oregon
Wednesday, March 22, 2006

There were a number (sic) unfair characterizations in a recent story (March 11) about me and my publication’s recent move to Ashland. Here are my objections to the story by Robert Plain:

In describing my discovery that the CIA was actively involved in importing drugs into the United States Bob Plain wrote: “Rather than becoming a paid government drug dealer, he says, he rated on them. This led to not only his disgrace on the force but also several attempts at his life.”

The use of the word “disgrace” is insulting and unfair. I showed Mr. Plain that the entirety of my L.A.P.D. record is not only spotless, but marked with the highest-possible rating reports, 13 citations for bravery and tactics and four commendations. None of that was mentioned. I have never felt or earned any disgrace.

Many aspects of my company’s history were selectively omitted from this story. FTW is read b y 60 members of Congress (from both parties) and in more than 40 countries. Our subscribers include professors at more than 50 universities around the world. I have lectured in nine countries and at a minimum of 20 universities. The Tidings report seems to suggest that I publish a little throwaway conspiracy newsletter.

In quoting me about my book, “Crossing the Rubicon: the Decline of the American Empire at the End of the Age of Oil,” Plain cited a 2002 non-fact-based critique of a single article I wrote two years before my book was ever published. In other words, I was correct and there is no known credible refutation of the research in my book anywhere. That’s why a thousand footnotes were included in my book.

There are other subtle nuances of distortion in the article with which I take exception. The term “far-fetched” in the headline slug is also misleading. If the work of FTW is so far-fetched than why was I summoned to Washington, D.C. last summer to act as an official questioner in a House hearing sponsored by the Honorable Cynthia McKinney, D-Ga.? Why did Congressman Roscoe Bartlett, R-Md., invite me to his office to discuss peak oil just before he, in turn, briefed the president?

Disgraced ex-cops with far-fetched stories who do sloppy research don’t get to do such things. FTW’s stories have been picked up by the AP and other major news organizations. I’ll be spending the rest of my life in Ashland and the Rogue Valley; dedicated to becoming a trusted citizen and to making Oregon a better place to live. I have hired three people locally and plan on hiring more. One thing everyone can be sure of is that almost every penny of FTW’s profits will be spent here and shared with the people who have otherwise so warmly welcomed us to Ashland.

If you look at FTW’s website today, you will see that in a recent interview I misquoted Hollywood producer Aaron Russo. What did I do about it? I published a correction and apology the next day. I don’t expect the Tidings to do that, but we will see if Dow Jones and Ottaway really believe in free speech by publishing this letter. I’ll be publishing it on my website as well. Checks and balances.

Eds note: This letter has been edited to meet our editorial page guidelines for length. The full length of Mr. Ruppert’s response can be read at his Web site, www.fromthewilderness.com

To read the full-length version of Mike Ruppert’s letter on FTW’s website, click here. Ruppert has stated that he is satisfied with the Daily Tiding’s response. Thanks to all FTW subscribers who contacted the paper on our behalf.

DESPITE pledges of greater co-operation and trade during his two-day visit this week, Russian President Vladimir Putin has reminded China that "serious problems" remain between the neighbouring giants.

Speaking to a China-Russia business forum before returning to Moscow, Mr Putin expressed concern about the imbalance in trade between the countries. Russian exports of machinery, equipment and other manufactured goods have plummeted in the past few years, while China has increased exports of the products to Russia.

According to Chinese figures, trade between Russia and China has been growing rapidly, with total trade leaping 37 per cent, from $US20 billion in 2004 to more than $US29 billion ($A40 billion) last year.

The countries agreed in 2004 to aim for a volume of $US80 billion by 2010, a target reaffirmed this week.

Although Russia is still exporting more goods to China, the Russians are complaining that more than 90 per cent are raw materials.

China says its exports of mechanical and electronic products to Russia last year increased 70 per cent, to $US7.2 billion (24 per cent of total exports). Machinery made up 25 per cent of Russia's total exports to China in 1998. But that has now plunged to about 2 per cent.

China is Russia's fourth-largest trading partner. Russia is China's eighth-largest.

Mr Putin warned that Beijing's almost exclusive focus on buying raw materials from Russia could lead to "instabilities". He called on China to increase imports of Russian machinery and equipment.

"We must honestly admit there are some serious problems still, among which the most important one is the unreasonable imbalance of bilateral trade," Mr Putin told the first Sino-Russian Industrial and Commercial Forum in Beijing as President Hu Jintao sat beside him.

"In 2005, Russia's export of mechanical and electronic products to China dropped almost 50 per cent. At the same time, China's export of the same products to Russia increased remarkably.

"To eliminate such a threat, we must improve the trade level and develop technology co-operation and production co-operation."

Despite broad agreement between Russia and China on many international political issues, such as the softly-softly approach to containing Iran's nuclear ambitions, Russia remains uneasy about its fast-growing neighbour.

Russia has been slow to respond to energy-hungry China's efforts to secure more supplies from it, prompting unusually open expressions of concern from Chinese officials before of Mr Putin's visit.

But the signing by the two leaders on Tuesday of a sweeping joint declaration should alleviate some of that frustration. The agreement includes three oil and gas deals and two new pipelines to bring Russian natural gas to China. But energy specialists said previous deals had failed to amount to much.

Beijing and Moscow on Tuesday inked several agreements as part of a state visit by Russian President Vladimir Putin, the most crucial focusing on long-term energy co-operation in oil and natural gas.

But no accord was reached over the route of an oil pipeline from east Siberia seen as crucial to China’s securing access to Russian oil and gas, highlighting Chinese officials’ growing frustration over the failure to reach concrete deals with Russia.

Energy-hungry China depends on Russia oil imports that account for about 5 per cent of its total foreign purchases and currently are delivered via an overloaded rail system.

“Current Russia-China relations have reached a high level,” Mr Putin told Chinese President Hu Jintao on the first leg of his two-day visit to China.

Of the 15 agreements signed on Tuesday, three involved China National Petroleum Corporation. One will pair CNPC with oil giant Rosneft to form a joint venture, another deal is with Gazprom to guarantee gas supplies and a third is with Transneft, the Russian pipeline transport firm, according to the Xinhua news agency.

However, the gas deals in particular face obstacles. China’s domestic price controls keep costs of the resource to consumer and industry far lower than global benchmark prices, making sales of Russian gas uneconomic.

Sino-Russian economic ties have been expanding, despite difficulties over some key deals, as total bilateral trade volume reached $29.1bn last year, a year on year increase of 37 per cent.

For months, officials on both sides have been locked in negotiations over a proposed Siberian oil pipeline, as Beijing and Tokyo are pushing for competing routes. China sees the pipeline as a potentially valuable source of future oil supply and is lobbying for it to be extended into its northern oil heartland, while Japan wants to it to reach the western Pacific coast, bypassing China.

Senior Chinese officials, including vice minister Zhang Guobao of the National Development and Reform Commission, which is in charge of energy policy, have reportedly been confounded by Russia’s wavering in its decion on the pipeline’s route.

Moscow has its own worries, as Mr Putin expressed concerns in a recent Xinhua interview over declining exports of Russian machinery to China. “Efforts should be made to promote Russia’s export of machinery to China, particularly products of Russia with an absolute competitive edge,” Mr Putin said.

The Exxon Mobil Corporation is moving to temporarily halt production at a Venezuelan oil field amid problems in getting the state oil company to transport crude being pumped there to market, the company said. Closing the field, called La Ceiba, is the most recent in a string of setbacks for Exxon. A spokesman, Richard N. Bailey, said the company was notified by Venezuela's state-owned oil company, Petróleos de Venezuela, that it would discontinue lifting crude oil from La Ceiba. As a result, Exxon "has proceeded to request to the Ministry of Energy and Petroleum a temporary and safe shutdown of production," Mr. Bailey said. It was not immediately clear why the state oil company had decided to stop lifting oil from the site.

Today's Paul Reveres of "peak oil" aren't waiting for Washington to save us from apocalypse. They're already planting gardens and drafting city plans for the days when oil is gone.

Matt Savinar, 27, once aspired to own a Hummer. He studied poli sci at the University of California, Davis, before going on to get his law degree at U.C. Hastings in San Francisco. He was into bodybuilding. Today, Savinar doesn't own any car, much less a Hummer, and he doesn't practice law, although he's licensed to do so. Frankly, he doesn't think that driving or the legal profession, with the exception of maybe bankruptcy law, have much of a future. Instead of buying a car, Savinar walks, takes the bus and catches rides with friends, but not because he's trying to save the world, he assures me.

Savinar doesn't drive because he's saving the money he'd spend on a used car to buy land; he's not sure exactly where yet, but somewhere with a supply of fresh water, arable soil, low population density and that's far from military bases. He's starting to get back into bodybuilding again, too, all the better to be healthy and in shape to till the earth and grow food, when the time comes. "I happen to think that we're going straight to hell, and I'm trying to figure out how to be in the least hot place of hell," he told me recently on an incongruously balmy 72 degree February afternoon in sunny Santa Rosa, Calif., at a restaurant just a few blocks from the apartment where he lives.

For a young, quick-witted, able-bodied man with an advanced degree, living in the most prosperous country in the world, Savinar has a pretty dim view of his -- and all the rest of our -- prospects. He believes that many if not most of the trappings of modern American life are endangered species and he's trying to figure out how not to become one of them. So Savinar has become a full-time prophet of "peak oil," spreading the word about how the world's oil production will soon peak and global demand will outstrip supply.

The group wants San Francisco to undertake a study to gauge what peak oil will mean to the city's economy, food distribution, transportation and tourism. "I want to see Golden Gate Park planted with community gardens," Heartwell tells me later. Heartwell, who studied international environmental issues in college, says that she's never been an activist but she's recently become obsessed with peak oil and reads sites like Energy Bulletin and the Oil Drum religiously. "Honestly, I don't think that it's likely that we're going to make smart choices in the next 10 or 20 years. It's hard but I personally don't see anything to be done but keeping at it," she says of the lobbying efforts. "Five years down the road, 10 years down the road, I would be kicking myself if I didn't do something, unless I'm starving, in which case, I would probably be kicking myself even more."

Some members of the group are trying to lower their personal energy consumption -- in the peak-oil vernacular, "powering down." One man has cut his gas consumption in half on his daily commute by buying a hybrid car. Several don't own cars. Some have solar panels on their homes and sensors so that the lights turn off when they leave the room. One chose to travel by train rather than plane on a trip to visit family in Texas over the holidays. But while they support the idea of taking individual action, they're aware that their own efforts are drops in the global bucket, and while they believe in setting a good example about a lower-energy lifestyle, they know just how hard it is to get anyone to listen when you're sounding this kind of alarm.

"The public doesn't understand how integrated oil is into every aspect of our lives," says Richard Katz, 55, who is fond of bringing oil industry newspaper ads to group meetings and giving a gallows-humor take on them. "The American spin on the world is that there is always some new technology or new answer that's around the corner. Standard economics says that there is always something to replace whatever is rare. But what we're talking about here -- oil -- is the product of millions and millions of years of distilled sunlight. How do you get people excited about living with less?"

Fridley of the Lawrence Lab rises out of his seat to tell us about "the myth of biofuels." He argues that the likes of ethanol, fuel drawn from crops like corn or plants like switchgrass, are not going to save the day. "Once you get past the media hype about ethanol, the reality scares you," he says. Fridley fears that in the search for cheap liquid fuel to replace oil we'll end up overmining the soil. By his calculations, the long-term potential of biofuels is low, yet it's draining federal dollars from wind and solar, about which he's more optimistic.

Finally, a documentary filmmaker working on a project called "Everybody Loves Oil" shows a preview and makes a plea for funds, while everyone passes around a glass mason jar, decorated with an apple, grapes and a pear, and filled with oil that was pumped out of a well in Bakersfield. It's a reminder that the slimy gunk that brought us together tonight is about to tear our whole world apart.

Plenty of social critics see the peak oilers as the latest horsemen of the environmental apocalypse. Take "J.D." (the only name he would give me), a 44-year-old American living in Japan who runs the blog Peak Oil Debunked. "Clearly, the radical environmentalists and primativists love peak oil," he writes in an e-mail. "It's like a dream come true for them." To the "doomers," peak oil is the "deus ex machina that will fulfill their long-cherished dream of bringing down 'growth' and modern, globalized, corporate, industrial society."

The fact is, though, the Cassandras of peak oil are not all wearing fleece and Birkenstocks, and using peak oil as a convenient reason to rekindle back-to-the-land fantasies. They are geologists and energy experts in governments, universities and think tanks. And many of them echo the core conviction of the activists: Oil-drunk America has to go on the wagon or it will soon be heading into a dauntingly thirsty future.

Experts point out that U.S. domestic oil production peaked in the early '70s. The world is expected to consume 85 million barrels of oil per day this year, with the U.S. guzzling some 21 million of that. Even Chevron admits that the era of oil that's easy to extract -- "the easy oil" -- is over. The question of when exactly global production will peak and then slide down the bell curve, with demand outstripping supply, is disputed by geologists, but some believe that it's already here and the world is already experiencing the fallout.

"The World Trade Center, the first Iraq war, the second Iraq war, high gasoline prices and enormous volatility in price," reels off Kenneth S. Deffeyes, an emeritus Princeton professor who calculates that the world passed peak last December -- Dec. 16, 2005, to be exact. "When supply and demand are closely matched, something as small as two hurricanes makes the price go wild; we saw gasoline go up almost a dollar. Political troubles in Venezuela, labor strikes in Nigeria make the oil price flap."

If Deffeyes turns out to be anywhere close to right, this is prescient news indeed. Even strategic advisors to the Bush administration's Department of Energy believe it would take a good 20 years and trillions of dollars of investment in infrastructure for the nation to avoid liquid fuel shortages, when peak passes. A 91-page report released in February 2005 by Science Applications International Corp. played out three scenarios for the Department of Energy. Titled "Peaking of World Oil Production: Impacts, Mitigation and Risk Management," it's come to be known as the Hirsch report, after one of its authors. Those three scenarios: Wait until the peak occurs to transition to other fuels, plan for the transition a decade in advance, plan for the transition 20 years in advance. In the first case, they predict significant fuel shortages globally and economic upheaval. Only in the third scenario do the report's writers conclude that major liquid fuel shortages could be avoided.

The report predicts that peaking will result in much higher oil prices, which will cause "protracted economic hardship in the United States and around the world." Yet it argues that impact can be mitigated if efforts are made on both the "supply and demands sides."

Deffeyes concurs. He believes that our short-term energy future would have been different, if we'd, oh, say, listened to Jimmy Carter and started preparing decades ago. "We'd be in great shape now. But we didn't. We've driven off the cliff without anyone putting their foot on the brake."

But even if Deffeyes is wrong, and peak is still 20 or 30 years off, peak oilers are skeptical that an orderly transition to alternative energies can be made. They worry that the alternatives to oil will not scale up to provide the amount of energy that we're used to consuming, and only by changing our consumption habits can we adjust. Some believe that making the transition won't just take a rough five or 10 years, but that it will mean a meaningful permanent decline in how much energy we use.

Richard Heinberg, author of "Power Down: Options and Actions for a Post-Carbon World," one of the peak-oil gurus, runs down a list of possible alternatives: coal to liquids, gas to liquids, ethanol, methanol, bio-diesel, not to mention getting oil from tar sands, shale oil and heavy oil from Venezuela. "Each of those alternatives has inherent constraints in supply," he says. "You can't increase the amount that you can produce to any arbitrary level by throwing money at the problem. There are practical constraints."

The fear is that even if the U.S. were throwing all the billions that we're spending on things like fighting the war in Iraq into a moon-shot-like effort to transition to alternatives, which we're obviously not doing now, despite the president's recent lip service to ethanol, we would not be able to produce the amount of energy that we now get from 21 million barrels of oil a day.

Like Fridley, Heinberg asserts that biofuels are not the answer. He notes that they appeal to environmentalists because they could be produced in a carbon-neutral way, as well as to patriotic conservatives because American farmers can help solve the problem, while lessening our dependence on foreign oil from the Middle East. "We don't have oodles and oodles of agricultural land that's not being used for growing biofuels, and the energy payoff is very low compared to what we're used to from oil," he says. "The net energy being produced is going to be very costly."

Of course, there are always techno-optimists, and in this case they are led by Amory Lovins of the Rocky Mountain Institute, co-author of "Winning the Oil Endgame." Lovins argues that ethanol, for instance, can be produced without using cropland, but from woody, weedy plants, like switchgrass, on currently idle conservation reserve land. He quotes Sheikh Yamani, a leading figure in OPEC for 25 years, who said, "The Stone Age did not end because the world ran out of stones, and the Oil Age will not end because the world runs out of oil."

Lovins thinks that oil will go the way of whale oil as alternatives are perfected. Besides, he contends, nobody knows who is right about peak oil, given that 94 percent of oil reserves are held by sovereign governments that have no incentive to reveal how much recoverable oil they actually have, even if they know themselves. He says an oil shortage is far more likely to be caused by an attack on a Saudi oil processing plant, or a natural disaster demolishing a key refinery. Ultimately, Lovins says, we will get much more out of the remaining oil by tripling the efficiency of cars, trucks and planes. "The rest of the oil," he states, "can then be displaced by a combination of saved natural gas and advanced biofuels." So, pessimists, chill out.

At a gathering at Berkeley Ecology Center, there's a vision of Utopia over the door. It's a painting, in which the rays of a huge sun beam down on a dark-skinned woman on her hands and knees gardening while a yellow butterfly flutters above her hands. A child holding a cornucopia of fruits and vegetables looks directly out from the painting. Over this pastoral tableau looms the slogan "Another World Is Possible."

This is a kind of community center where visitors can buy reusable hemp coffee filters, get info on local seed swaps and learn about the best source of worms for composting. From the magazine rack, the cover lines on Permaculture magazine shout: "Prepare for Life Without Oil. Find Your Own Wild Winter Food."

At the front of the room, David Room, director of municipal response for the Post-Carbon Institute, holds up his 3-year-old daughter to a microphone, and asks her to repeat the first word she learned to read: "Organic!" she proclaims, drawing appreciative laughs from the crowd of 80. Later, Aaron Lehmer, another post-carboner, asks the assembled: "How many people believe in the next couple of years that we are at the threshold of peak oil?" Half the hands in the room go up. The purpose of this meeting is to recruit volunteers and raise money for an effort called Bay Area Relocalize.

The goal is to do a citizen's assessment of West Oakland and a to-be-determined neighborhood in San Francisco to see how much of the energy and goods used there are produced locally. Likely answer: not very much. Then, to try to determine what could be produced locally if it had to be from food to energy to goods. Using Google Earth, and by walking around neighborhoods, the group wants to determine: How big are backyards? What roofs could be turned into rooftop gardens? What resources does this community have? Bethany Schroeder, a former Berkeley resident, who has relocated to Ithaca, N.Y., and speaks about a similar effort there, explains that everyone must understand Ithaca is way to the left of Berkeley. "You can't get into Ithaca and buy a house without a copy of 'The End of Suburbia' in your DVD file," she says. The Ecology Center event draws pledges of $1,100, and signs up 30 volunteers.

Room, who studied electrical engineering at Stanford as an undergrad and has a master's degree in engineering economic systems, used to do risk analysis and assessment for a consulting firm. Now he's in the nonprofit world where he believes he can help people reduce the great risks facing them from peak oil by making their local communities less dependent on the rest of the world.

"We believe that we're on a treadmill to tragedy," Room says. "We're headed for disaster but we're not there yet. We don't have time to lament about it, or to panic about it, we just need to act," he says. To him, that means each community taking steps to reduce its own vulnerability by "relocalizing." (He and others from the Post-Carbon Institute have written a forthcoming book called "Relocalize Now! Getting Ready for Climate Change and the End of Cheap Oil.")

An example of a community that's on its way is Willits, Calif., where Jason Bradford, 36, armed with a copy of "The End of Suburbia," launched a movement. Willits is a small town in Mendocino County, where just 5,100 people live within the city limits of 2.8 square miles. Yet there are about 13,500 people in the surrounding area of 322 square miles. Bradford, 36, a professional biologist, was so galvanized when he started to learn about peak oil in early 2002 that he and his wife, a doctor, moved to Willits with their twins in July 2004.

"I essentially wanted to find a small town where I could try to transform it politically and the infrastructure," Bradford says. He showed "The End of Suburbia" at the local library, at the high school cafeteria, at the charter school. He showed it for eight months, twice a month, at city council chambers. Thus was born the Willits Economic Localization Project, an effort to make the whole ZIP code as energy and food self-reliant as possible.

"We're just trying to do as much as we can as fast as we can and hope for the best," says Bradford. Citizens have already done the kind of assessment that the San Francisco post-carbon group is lobbying its government to undertake, and the Bay Area Relocalize group is just beginning. The city has put out a request for proposals asking contractors to bid to supply all its electricity with renewables. Bradford is leading an effort to convert one acre of the backyard of his children's elementary school into a farm, in hopes of bringing healthy food to the cafeteria. There are plans to put a three-acre farm next to a proposed hospital. A gleaning club is working with local orchardists to take the fruit that isn't market-worthy to food banks, and divide it among themselves.

Bradford is optimistic about finding local sources for electricity, like solar, biomass such as wood, and even hydropower from creeks in the local hills. Yet, like most of the rest of the United States, the area consumes much of its energy in transportation. "Over 50 percent of the energy consumed in the Willits area is in transportation -- oil and diesel for people's cars and trucks," Bradford says. "That's a common percentage around the country. It's very hard to replace that." And right now the ecologist says he does not see any easy, long-term solution for our car-mad consumption of oil.

South of Willits, the slightly larger city of Sebastopol, population 7,800, is also taking official government action to try to grapple with the post-peak future. Already, the city gets about a sixth of its energy from solar energy, and the majority of the members of its city council are affiliated with the Green Party. So, last October, a town-hall meeting starring "Power Down" author Heinberg, discussing peak oil and energy vulnerability, drew 200 citizens, and led to the formation of an official 11-member Citizen's Advisory Group on Energy Vulnerability.

Gas in the area is currently selling for about $2.40 a gallon but the group, which includes an economist and alternative energy experts, is now trying to imagine what will happen to city services if gas goes to $5 a gallon, $8 a gallon, $12 a gallon, as well as what if electricity went to 25 cents a kilowatt hour, 50 cents a kilowatt hour and so on. "We could see $5 a gallon gasoline within a year or two, or it could be 10 years off," says Larry Robinson, the former Green Party mayor of Sebastopol, who sits on the city council. "I want to be prepared for that, not saying: 'Oh my god, how are we going to pump water to provide for all these households.'"

The group is working on contingency plans so that the city will be able to maintain public safety, public facilities, streets, parks, water delivery and sewer services should the spikes in energy prices come. It's also exploring how the same energy increases would affect citizens, from transportation to education, food supply and even social cohesion, and it's arranging a meeting with pols from the four surrounding counties -- Marin, Napa, Lake and Mendocino -- to formulate a regional response to energy vulnerability.

"I think that a lot of people have their head in the sand about this," says Robinson. "Some believe that the market will solve the problem, and ultimately, it will, but markets aren't anticipatory. They're more reactive. If we wait for a market solution, it's going to come probably in the midst of a lot of disruption and unnecessary suffering."

But the Sebastopol City Council member also sees some silver linings in the slide down Hubbert's Peak. First, he believes that savvy local entrepreneurs will be able to create new businesses and local jobs, manufacturing shoes and clothes, when transportation costs make it prohibitively expensive to import them from halfway around the world. Beyond that, he sees peak oil as providing a kind of wholesale referendum on the American way of life.

"I think that we can adapt, but our adapting may not be so much technological, as sociological, and maybe even spiritual," Robinson says. "It really comes down to the question of the place that we see for ourselves in the world and what we need in order to live a meaningful life. For quite a while now, a meaningful life in America has meant acquisition of things and cheap energy, and we associate that with freedom. We do not see that it's really a form of dependence and slavery. So, I see the potential for a much greater level of freedom and spiritual fulfillment and social cohesion, and restoration of balance with the natural world. This is one of the great possibilities that I see on the other side of the crisis, and whether we get to that is a question of the choices that we make now."

Ottawa to buy Russian natural gas, sell it to U.S.

Canada is planning to capitalize on shortages of natural gas, exacerbated by last year's hurricanes, by importing vast quantities of liquefied natural gas (LNG) from Russia to be exported to the United States.

The Canadian government recently approved a $1.5 billion joint venture of Petro-Canada and Russian giant Gazprom to build a plant near St. Petersburg in Russia to liquefy the gas and load it into giant tanker ships.

The tankers would be unloaded in Quebec and the liquid converted back into gas that could be pumped through existing pipeline networks to U.S. customers.

"LNG is going to be a big part of the future of the gas market in North America," said Ron Brenneman, president and chief executive officer of Petro-Canada.

"As this project moves forward, we will be in an excellent position to import long-term gas supply, not only from Russia but from other parts of the world as well. We see this agreement as an important part of our overall growth strategy," he said.

The United States, a growing natural-gas consumer, saw a decline in production in 2005 by about 4 percent, in large part because of the major disruptions to infrastructure in the Gulf of Mexico from Hurricanes Katrina and Rita, according to the U.S. Energy Information Administration (EIA).

The United States looks to secure long-term supplies, but it lacks facilities to import the liquid and convert it back into gas.

"Russia may have questions on the timing and availability of U.S. East Coast regasification facilities to handle imports, and the Canadians have expressed an interest in building a regasification facility in the Northeast that would serve New England markets," said Frank A. Verrastro, senior fellow at the Center for Strategic and International Studies, a Washington think tank.

Unlike oil, which is a globally traded commodity shipped by tanker from producers thousands of miles away to consumers, natural gas has traditionally been a continental market, with suppliers and consumers linked by pipelines crisscrossing North America.

Liquefied natural gas is cooled to minus 300 degrees Fahrenheit to condense it into a liquid state, making it more cost efficient to transport over long distances.

As the third-largest producer after Russia and the United States, Canada exported about 3.5 trillion cubic feet of gas to the United States in 2003.

This accounted for nearly all of Canada's natural-gas exports, but represented just 16 percent of U.S. natural-gas consumption, according to the EIA.

The two companies reached a deal during talks between Alexei Miller, chief executive officer of Gazprom, and Mr. Brenneman of Calgary's Petro-Canada, said Sergei Kupriyanov, Gazprom's spokesman.

For several years now, Gazprom has been looking for a partner to construct an LNG plant in the Baltic port of Ust-Luga in the St. Petersburg region.

But Gazprom will need to secure supplies for its St. Petersburg LNG plant before this project can materialize successfully. The company is exploring a couple suppliers.

Industry analysts fear that Petro-Canada faces several hurdles before it can import natural gas into Canada. It faces regulatory obstacles at its Gros-Cacouna regasification facility in Quebec and long-term supplies need to be secured for the deal to be profitable.