Dear CEO:

In this report you will be able to find the response of your request of generating a more efficient
pipeline for the drilling in the facilities near Vernal, Utah. The following analysis will provide a
solution to bring the natural gas to the refinery in a more efficient way.
I Determine the cost of running the pipeline strictly on BLM ground with two differents
cases:
Ill set first, all the values and definitions for all variables:
BLM Ground:195,000/mi
West : 13 mi
South : 18 mi
East : 42 mi
Cost C:
C = ( west * BLM ) + ( south * BLM ) + ( east * BLM )
C = ( 13 * 195,000 ) + ( 18 * 195,000 ) + ( 42 * 195,000 )
C = 14,235,000
The cost of building a pipeline from West, South and East would cost 14,235,000 on BLM
ground, which will cover 73 miles.

One heading east through the mountain and then south to the refinery:
Mountain cost : 4,762,000
Study : 480,000
4months : 65,000
C = Mountain + Study + Delay + ( east * BLM ) + ( south * BLM )
C = 4,762,000 + 480,000 + 65,000 + ( 29 * 195,000 ) + ( 18 * 195,000 )
C = 9,382,500
Using a more direct path, and adding the expenses of drilling into the mountain and the delay
that comes with it, still on BLM ground the cost would be 9,382,500 and will cover 55 miles,
which is cheaper than the first method.
II Determine the cost of running the pipeline:

The shortest distance across the private ground to the refinery:

Private ground : 100,000
Let a = 18, b = 29
Where C is the total distance across the private ground:
Calculate in the form :
2

c 2=18

+ 29

c 2=a 2+b 2

2=
324 + 841 c =
2 c

1165

Cost C:
C = ( private + BLM ) * distance
C = (100,00 + 195,000 ) *

1165

C = 10068968.42

Using the shortest distance across private ground (and taking into account the adding cost of it)
the cost would be $10068968.42 and will cover around 38 miles.

Straight south across the private ground, then straight east to the refinery:
Cost per mile : private + BLM = 295,000
C = ( south * 295,000 ) + ( east * 295,000 )
Recall that straight south then straight east is 42 - 13 = 29 miles
C = ( 18 * 295,000 ) + ( 29 * 100,000 )
C = 8,210,000
On this method, the pipeline will be also in private grounds the first 18 miles to the south and 29
miles on BLM and will cover 47 miles in total, the cost would be $8,210,000
III Cost function for the pipeline for the configuration involving running from the well
across the private ground.

Set the main formulas ( angle and distance ):

(1) tan =
(2)

opp
x

adj
18

y 2=x 2+18 2 y = x 2 +324

Finding the cost:
C (x) = 100,000x + 295,000y
C (x) = 100,000(29 - x ) + 295,000 (

x2 +324

C (x) = 290,000 - 100,000x + 295,000

x2 +324

Derivative of C(X) cost:

.
C` (x) = -100,000 + 295,000()( x 2 +324 1 /2 (2r)
2

C` (x) = -100,000 +

1/ 2

x +324

295,000 x

C` (x) = 100,000( x 2 +324 1 /2 +295,000x

Find minimum value:
-100,000( x 2+324 1/ 2+295,000 x=0
295,000x=100,000( x 2 +324 1 /2

59 x
=( x 2 +324 1 /2
20
3481 2
x =
400

x 2 +324

3081 x 2 =129600

x=360/ 3081
Find angle:

360
tan
3081
=
400

=tan

360
3081 = 1.54
400

Find distance:

y=

360
3081 + 324
400

y=18.78

360
d=29- 3081 =28.97
400

Find minimum cost:

C=295,000(18.78)+100,000(28.97)
C=8,437,100
The pipeline on this method will be in the southeast direction on private grounds for 18.78 miles,
and will intersect BLM land with al distance of 28.97 miles to the refinery.This will cost around
$8,437,100 which will minimize the cost for building the pipeline, and of course, is the most
recommended action to take.