John Hutchins

Professor Sadie Thomas

SLCC Pipeline Project Fall 2017

To CEO:

In this project report, we have both proposed and calculated a few

different ways to lay pipe from our pumps to our refineries. We have analyzed the
following situations: using the provided BLM grounds ($31.5m), drilling through
the mountain to continuing with on BLM grounds($26.5m), using private lands
($29.8m), using BLM and private lands ($31.3m), and an optimized situation with
some in depth analysis of our math( $28.3m) to accomplish this project. All have a
unique way of getting this project completed, but only one with the cheapest
overall cost. Each Scenario has a breakdown of where the pipe is going, how many
miles, and the cost to complete that particular task as well as a rough break down
of the costs.

Reflection:

From this project, I have come to realize how important it is to know and
understand how optimization works. Optimization clearly plays a huge part in
how we can squeeze every last dollar out of projects (whatever those may be)
and often we need every penny of every dollar in any sizable project. Though
sometimes it may not provide the best result, it still is worthwhile to use
optimization to see if that solution may be best. In this case, we drilled through a
mountain to get our oil to our refinery as it was to most cost effective.
Part A: East-South-West through BLM Grounds

For this scenario, we will go from 18 miles west from our refinery, 43 miles south, and then 72 miles east
to get to our factory for processing with the total mileage of 133.

- Cost for materials, labor and fees to run the pipeline across BLM ground is $237,000 per mile.

Projected cost for this scenario:

() = $237,000(133) = $31,521,000

Part A-2: East through Mountain then south to factory

For this scenario, it is planned to lay pipe east which requires us to drill through the mountain at a single
cost which will be broken down at a later time. After we go 54 miles east following BLM ground until we
are south of the factory, we will then continue south 43 miles south bringing our mileage to 97.

- Cost of drilling through the existing mountain would be a one-time cost of $2,896,000 on top of
the normal costs ($237,000 per mile) of the pipeline itself.
 - Cost of impact study before allowing you to drill through the mountain $575,000 and will delay
the project by 8.
- Cost of delay per month is 12,000

Projected cost:

() = $237,000(97) + $2,896,000 + $575,000 + 12,000(8) = $26,556,000

Part B: Crossing private land

In part b, we will purely cross private land to react our factory. Though this will require us to have right-
of-ways fee, it will be the shortest amount of pipe between the pumps (not necessarily cheapest) and
the refinery. Our total number of miles: 2 = 432 + 542 = 4765 = = 69.03 Miles

- For any pipeline run across private ground, your company incurs an additional $195,000 per mile
cost for right-of-way fees in addition to the normal costs ($237,000 per mile) of the pipeline
itself.

Projected cost:

() = 69.03($237,000 + $195,000) = $29,820,960

Part B-2: Private land directly south then east through BML

Just as we did in part b, we are laying pipe through private lands, but we are only laying a total of 43
miles of it. The other 54 miles of pipe will be through the BLM grounds.

- For any pipeline run across private ground, your company incurs an additional $195,000 per mile
cost for right-of-way fees in addition to the normal costs ($237,000 per mile) of the pipeline
itself.

Projected cost:

() = $237,000(54) + $432,000(43) = 31,374,000

Part C: Optimization

In this particular scenario, we took the most optimal situation for piping. This will provide the lowest
cost which is $32,302,020.

Calculus - setting up my equation: We will need to intersect the private ground as well as use the BLM
ground to run the piping.

2 = 432 + 2 y = 1849 + 2

C(x) = 432,000 + 237,000(54 )

C(x) = 432,000(1849 + 2 ) + 237,000 (54 )

Now that we have suitable equation, we need to take the derivative of the cost function to start
optimizing the cost of our project.

C(x) = 432,000(1849 + 2 ) - 237,0000x + 12,798,000

1 1
() = 432,000 ( ) (1849 + 2 ) 2 (2x) 237,000
2

Simplifies:
1
() = 432,000(1849 + 2 ) 2 237,000

Solve for x:
1
237,000 = 432,000(1849 + 2 ) 2
 432,000 (432,000)2
= 1849 + 2 = 1849 + 2 3.323 2 =1849 + 2
237,000 (237,000)2

1849 1849
2.323 2 =1849 2 = x= = 28.213
2.323 2.323

X is our minimum number and if we plug that back into the original equation, we will get the minimum
total cost for our project using optimization.

C(x) = 432,000(1849 + 28.2152 ) + 237,000 (54 28.213)

= 432,000(51.43) + 237,000 (25.787)

= 22,217,933 + 6,111,602 = $28,329,536

Therefore, our minimum cost to complete this project is $28,329,536.

Part D: Graphing my function:

C(x) = 432,000(1849 + 2 ) + 237,000 (54 )