Salt Lake CC, Math 1210

Pipeline Project

The U.S. Interior Secretary recently approved drilling of natural gas wells near Vernal, Utah.
Your company has begun drilling and established a high-producing well on BLM ground. They now need to
build a pipeline to get the natural gas to their refinery. While running the line directly to the refinery will be the
least amount of pipe and shortest distance, it would require running the line across private ground and paying a
right-of-way fee. There is a mountain directly east of the well that must be drilled through in order to run the
pipeline due east. Your company can build the pipeline around the private ground by going 8 miles directly
west and then 16 miles south and finally 40 miles east to the refinery (see figure below). Cost for materials,
labor and fees to run the pipeline across BLM ground is $480,000 per mile. Cost of drilling through the existing
mountain would be a one-time cost of $4,500,000 on top of the normal costs ($480,000 per mile) of the pipeline
itself. Also the BLM will require an environmental impact study before allowing you to drill through the
mountain. Cost for the study is estimated to be $600,000 and will delay the project by 8 months costing the
company another $100,000 per month. For any pipeline run across private ground, your company incurs an
additional $360,000 per mile cost for right-of-way fees. Create a presentation that outlines all possible
scenarios, as well as the cost associated with each scenario.

a) Option 1 and Option 2: Using Only BLM Land

i) BLM Land Option 1: Running west, south and then east to the refinery.

Distances: Cost Formulas:

Distance West: 8 miles Cost: d x C/mi
Distance South: 16 miles Cost: $480,000 64
Distance East: 40 miles
Total Distance (d): 64 miles Cost: $30,720,000 (most expensive)

Associated Costs:
Cost per Mile (C/mi): $480,000

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 Salt Lake CC, Math 1210
Pipeline Project

ii) BLM Land Option 2 Heading east through the mountain, then south to the refinery.

Distances: Cost Formulas:

Distance East: 32 miles Cost: (Total Distance x C/mi) + Tunneling + Study + Delay
Distance South: 16 miles Cost: $23,040,000 + $4,500,000 + $600,000 +
$800,000
Total Distance: 48 miles
Cost: $28,940,000 (3rd least expensive)
Associated Costs:
Cost per Mile (C/mi): $480,000
Tunneling Cost: $4,500,000
Study Cost: $600,000
Delayed Project Cost: $800,000

b) Options 3 and 4 Utilizing Private Land

iii) Option 3: Running the pipeline the shortest distance across private ground to the refinery.

Distances:
Diagonal Distance (d): Cost: d x C/Mi
= 162 + 322 = 165 Cost: 165 $840,000

Associated Costs: Cost: $30,052,753.62 (4th Least Expensive)

Cost per Mile (C/Mi): ($480,000 + $360,000)/mi

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 Salt Lake CC, Math 1210
Pipeline Project

iv) Option 4: Straight south across the private ground, then straight east to the refinery.

Distances:
Distance South: 16 miles Cost: (Distance South x Private) + (Distance East x BLM)
Distance East: 32 miles Cost: 16 $840,000 + 32 $480,000
Total Miles: 48 miles
Cost: $28,800,000 (2nd Least Expensive)
Associated Costs:
Cost per mile (Private): $840,000
Cost Per Mile (BLM): $480,000

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 Salt Lake CC, Math 1210
Pipeline Project
c) Option 5: Optimal Pipeline Routing

Cost Function Variables: Final Results (See Calculations on page 5)

Private Land Distance (d): = 256 + 2 Private Land Distance (d): = 19.56
BLM Distance: 32 BLM Distance: 20.86 miles
Optimal Path Angle: Optimal Path Angle: = 34.85
Private Land Cost: $840,000 Private Land Cost: $16,377,225.87
BLM Land Cost: $480,000 BLM Land Cost: $10,012,334.41
Total Cost: Private Land + BLM Land Total Cost: $, , . (Least
Expensive)

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 Salt Lake CC, Math 1210
Pipeline Project

Cost Function: Notes:

() = , + , Substitute "256 + 2 " for , and "32 " for

() = 480,000(32 ) + 840,000256 + 2 Distribute 480,000

() = 15,360,000 480,000 + 840,000256 + 2 Find derivative of ()

() = (15,360,000 480,000 + 840,000 256 + 2 ) ( (256 + 2 ))

1
1
() = 0 480,000 + 840,000 2 (256 + 2 )2 (2)

840,000 840,000480,000 2 +256

() = 480,000 + 2 () =
+256 2 +256

Critical Point (Minimum Value): Distance/Angle Calculations:

0 = 840,000 480,000 2 + 256 64
480,000 2 + 256 = 840,000 tan = ( 33 )
16

480,000 2 + 256 840,000 64

=
480,000 480,000
tan1 ( tan ) = tan1 ( 33 )
7 2 16
2
( 2+ 256) = ( )
4
= .
2
49 2
16( + 256) = ( ) 16
16
49 2 = 16 2 + 4096 64 2
= ( ) + 256
33 2 = 4096 33
33 2 4096
=
33 33
= .
4096 BLM Distance=32
64
2 = 33
33
BLM Distance=. miles

= .

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 Salt Lake CC, Math 1210
Pipeline Project
d) Reflections