Justin Behunin Math 1210 Spring 2014

Pipeline Optimization Project

The task set forth is to determine the costs of running a pipeline from a natural gas well to the refinery. The goal is to find the most cost effective route to run the pipeline. The given diagram shows the location of the well and factory in relation to the surrounding area.

4 mile BLM Ground 12 miles

BLM Ground

Private Ground

36 miles - BLM Ground

The costs for running the pipeline through the different routes have been given. 1. Over BLM land the cost is $500,000 per mile. 2. Over Private land there is a right of way fee of $350,000 per mile in addition to the regular cost of $500,000 per mile. Total cost is $850,000 per mile for pipeline run on private land. 3. Running the pipeline through the mountain has a onetime drilling cost of $2,000,000. In addition an environmental impact study is required at a cost of $320,000. The study will delay running the pipeline for 4 months at a cost of $120,000 per month totaling $480,000. The total cost of running the pipeline through the mountain is $2,800,000 plus $500,000 per mile 4 scenarios of proposed routes have been outlined for running the pipeline. Using the costs listed above each scenario determines the cost for running the pipeline for various routes. A fifth scenario will determine the optimum route to run the pipeline to minimize the cost. The scenarios and associated costs are outlined on the following pages.

Scenario 1

4 miles BLM Ground 12 miles 4 miles 12 miles Private Ground

BLM Ground

36 miles 36 miles - BLM Ground

In this scenario the pipeline will be run as shown in the diagram above. This scenario will run strictly on BLM land. Starting at the well the pipeline will run 4 miles west. It will then run 12 miles south. Finally it will run east 36 miles to the refinery. The total distance using this route will be 52 miles on BLM land at a cost of $500,000 per mile.

Running the pipeline around the private land without going through the mountain will cost a total of $26,000,000.

Scenario 2

BLM Ground 4 miles BLM Ground 12 miles 32 miles Private Ground

36 miles - BLM Ground

This scenario determines the cost of going around private land by drilling through the mountain. From the well the pipeline will run due east 32 miles going through the mountain. Then the pipeline will run 12 miles south to the refinery. The total distance will be 44 Miles at $500,000 per mile. This route also has an additional cost of $2,800,000 for the drilling, the environmental study, and the 4 month delay caused by the study.

Despite the additional cost of drilling through the mountain the cost is less than Scenario 1. This route is 8 miles shorter than the route in the first scenario making up for the extra cost of drilling through the mountain.

12 miles

Scenario 3

4 miles BLM Ground 12 miles Private Ground

X

BLM Ground

36 miles - BLM Ground

Scenario 3 explores running the pipeline the shortest distance from the well to the refinery by going straight across private land. The cost of running across private land is $850,000 per mile. Using the diagram above the Pythagorean Theorem can be used to determine the distance in miles. The resulting equation to determine the miles is . Solving for x 34.176 miles

Even though this scenario is the shortest distance, the added cost of $350,000 per mile results in Scenario 3 being the most expensive option.

12 miles

32 miles

Scenario 4

BLM Ground 4 mile BLM Ground 12 miles 12 miles

Private Ground 32 miles 36 miles - BLM Ground

Scenario 4 explores the cost of running south across private land and the rest of the way on BLM land. The pipeline will run south 12 miles across private land at a cost of $850,000 per mile. Then the pipeline will run 32 miles east on BLM land to the refinery at a cost of $500,000 per mile.

With the pipeline running directly south across private land and then going across BLM land results in slightly higher costs than Scenario 1. By reducing the miles across private land the cost is less than Scenario 3. The final scenario explores finding the most efficient route across private and BLM land to minimize costs.

Scenario 5

BLM Ground 4 mile BLM Ground 12 miles 12 miles Private Ground

32 miles - X

36 miles - BLM Ground

The cost of running on private ground is $850,000 per mile. BLM land costs $500,000 per mile. Using the diagram above an equation is created to determine the number of miles across private land and BLM land that will be the most cost effective. The diagram above displays how the number of miles across BLM ground and private ground can be determined. The following equation gives the costs of running the pipeline based on the diagram.

The critical points of the derivative of the cost function are used to minimize the cost. Critical points are obtained by setting the derivative of the function equal to 0.

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The minimum cost will be when x = 8.7 miles. This results in 23.3 miles on BLM land and 14.8 miles on private land. Entering 8.7 for x in the cost function gives the minimized cost

Scenario 5 results in the lowest cost of all the scenarios and will be the recommended route to run the pipeline. The following graph displays the cost function and the minimum cost.