At the weekly brainstorming session, John Spychalski, president of CNG Pipeline Company (CNG), suggested that they build a new pipeline from Elizabeth, New Jersey, to the Midwest to move refined petroleum products, gasoline, and diesel fuel. Following some discussion, he asked the strategic planning group to consider the idea before the next brown-bag session.
Skip Grenoble, vice president for strategic planning, thought that John was not considering the cost and impact of this idea. How could CNG obtain land to build the pipeline, let alone obtain the necessary capital to finance the project? Then there was the question of the existing refineries located in Ohio, Indiana, and Illinois. Skip knew refined petroleum products were being transported from the Gulf of Mexico refineries via barge and pipeline to the Midwest market areas currently.
Skip turned over the project to Evelyn Thomchick, chief strategy analyst, to develop a preliminary analysis of the viability of building a new pipeline. In the span of six days Evelyn found the following strategic issues for the project:
At least four Midwest refineries were being planned for closure within the next five years because of environmental and cost considerations.
A number of major refineries were considering building new refineries off- shore, closer to the sources of foreign oil. Both cost and environmental considerations suggested this consideration.
The New Jersey-Midwest corridor was one of the most-developed land regions in the United States with the highest land values.
The demand for refined petroleum products was expected to increase, but
the keen interest in alternative sources of energy, more fuel-efficient cars, and sustainability issues were matters of some concern.
The project would require approximately 10 years to complete, including the time to obtain land via the eminent domain process.
The capital requirements for the project were estimated at $800 billion.
CASE QUESTIONS
- Do you feel the project has any merit for further investigation? Why or why not?
- What additional information is needed beyond that provided by Evelyn Thom chick to make a better decision?
- What is your political assessment of building a pipeline that will traverse five states?