Imagine you are a pipeline company trying to sell a new projectto a shipper of oil for a new refinery in Grand Forks. In order toprepare for selling this idea to shippers and hopefully win thecontract, you need to calculate the average cost per unit($/barrel) of oil to ship over this line in the first year; takinginto account Capital, Operating and Energy Cost. This is acompetitive proposal, so you will want to make sure your price isas low as you can make it!! The refinery is scheduled to take300,000 barrels per day of Bakken Crude at typical temperures.Pipeline construction costs average $100,000/foot mile. A foot mileis 1 mile of 12 inch pipe. 2 miles of 16” pipe would be 2.6667 footmile, and so on. The price includes all pipe and installation andis based on using X-42 and schedule 20 pipe. You have the option ofincreasing the pipe wall thickness to schedule 40 for an additional10% and schedule 80 for 20% more than schedule 20. You also havethe option of increasing the pipe strength to X60 for an additional10% or X-72 for 20% above X-42. Each pump station will cost$2,000,000 +$2000/hp of pump. The inlet pressure of pumpingstations should not fall below 400 psi. Pipeline flows entirelythrough class I locations except for 10 miles located in a class IVlocation. You have the option of bypassing the class IV location byrunning the pipeline an additional 50 miles. Cost of electricity todrive pumps is $.08 per kWh. (1 kW for 1 hour) Annualized Capitalcosts can be assumed to be an estimated by a fixed charge rate of.15 (meaning it costs 15% of the total project cost each year tocover debt and equity used to finance the construction) The fixedO&M is $0.10 per inch mile The variable O&M is $0.25 perbarrel Hint: Partial credit will be awarded based on the followingscale: Please note