Talk to Louis Fenyvesi of TransCanada's Calgary headquarters and Philip Verleger, a business professor at the University of Calgary, and you discover pretty quickly they have widely divergent views of the oil business.

Verleger, a one-time energy policy consultant to President Jimmy Carter's administration, and Fenyvesi, TransCanada's manager of markets and supplies, do agree, for example, on what might strike Nebraskans as surprising: Construction of the proposed Keystone XL pipeline would raise the price of Canadian crude oil delivered to the Midwest refineries that commonly serve Nebraska's needs.

But they disagree on why and on what almost certainly would be a matter of grave concern in a state targeted for 250 miles of the pipeline's path: whether the higher prices for Canadian crude at refineries in places such as Indiana, Illinois and Ohio would translate into higher prices for retail fuel in Lincoln, Omaha and points surrounding.

Verleger says absolutely yes. Fenyvesi says no -- definitely no.

Fenyvesi and officials with the American Petroleum Institute are adamant that Canadian crude is a far cheaper energy answer for the United States than oil from the Middle East. That savings would be passed along to the other end of the fuel supply line.

"That will have a positive impact on gasoline prices in the Midwest and other markets served from the Gulf Coast," Fenyvesi said.

But Verleger sides with the National Wildlife Federation, frequent critic of Keystone XL.

He and the federation predict at least a 7-cent increase in gasoline prices at Midwest pumps. And he predicts that market manipulation, not by TransCanada but by the owners of tar sands oil deposits, would produce that result.

With a 36-inch pipeline connection all the way to the Gulf, the 30-inch Keystone line built earlier to Illinois would get second billing. Retail prices in the Midwest would rise.

And after that, they can be expected to short the Midwest market. "They will only send as much oil to Chicago as can be allowed to keep prices from going down. They will manipulate," Verleger said.

As recently as last week, TransCanada officials came to Lincoln to promote the 1,980-mile project to a Nebraska legislative committee weighing proposed pipeline restrictions.

They said that the $7 billion Keystone XL connection between the tar sands of Alberta and oil refineries along the U.S. Gulf Coast was a key to U.S. energy security and price stability at the pump.

But on that same day, TransCanada spokesman Terry Cunha told The Associated Press that he expected the price of heavy crude oil from Canada to increase as much as $3 a barrel if the pipeline is built.

That's because the lack of pipe infrastructure to carry Canadian oil to Texas, Louisiana and the center of the nation's main refining capacity has created a glut of Canadian output in the Midwest, Cunha said.

But Fenyvesi said a per-barrel price hike would not lead to an increase at the pump.

"If the Gulf Coast gets access to cheaper crude," he said, "it will reduce their cost structure. That will allow them to compete."

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Rayola Dougher and Cindy Schild of the American Petroleum Institute say Fenyvesi is on the mark.

"Just on the face of it," said Dougher, a senior economic adviser at the institute's Washington, D.C., office, "if there are plentiful supplies of lower-cost crude coming into the United States, there's just no way that's going to raise prices. It just has to have the opposite effect because of the law of supply and demand."

Schild, refining issues manager, agreed.

"The pivotal aspect of the Keystone XL pipeline is that it brings the oil sands down to the Gulf, and the Gulf will be ready, for the first time, to really fill the gap," she said.

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Verleger and Ryan Salmon, energy policy adviser for the National Wildlife Federation, aren't sold.

Salmon said claims that the tar sands extractions moving across the U.S. border would be cheap don't take into account the higher energy costs associated with separating a sellable product from sand deposits.

Verlager said he's not being paid by the National Wildlife Federation to say anything. "I'm doing what academics are supposed to do."

He also says Midwest refineries are having to upgrade their equipment to handle a more corrosive raw material and a more challenging refining task.

"The refiners will recover their cost," he said.

The United States needs to protect itself against the flexing of marketing muscle by those who control the Canadian tar sands supply, he said.

According to Verleger, "the only way it should be approved is if there's an oversight regulator in the U.S. that once a week or once a month tells them how much oil they can move down the pipeline, because they can't manipulate the price of oil in the Midwest."

As the debate on the economic and environmental effects of Keystone XL continues, there's silence at the U.S. State Department on whether TransCanada has done enough on an environmental impact statement and whether the project is in the national interest.

And the word coming out of a TransCanada meeting called to examine its fourth-quarter financial status reflects a slight shift in its expectations on a State Department outcome from midyear to late year.

That means chances of construction work in 2011 are rapidly slipping away.

"Depending on exactly when the decision comes," said TransCanada spokesman Jeff Rauh, "you're absolutely right."

Reach Art Hovey at 402-473-7223 or at ahovey@journalstar.com.



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