In November, Bill Stock, general manager for the Louisiana Division of Coastal States Chemicals and Fertilizers, received a letter from Fred McNair of the Cajun Pipeline Company which notified Coastal States that priorities had been established for the allocation of natural gas. The letter stated that Cajun Pipeline, the primary sucolier of natural gas to Coastal States, might be instructed to curtail natural gas supplies to its industrial and commercial customers by as much as 40 percent during the ensuing winter months. Moreover, Cajun Pipeline had the approval of the Federal Power Commission (FPC) to curtail such supplies. Possible curtailment was attributed to the priorities established for the use of natural gas: First priority. Residential and commercial heating Second priority: Commercial and industrial users whereby natural gas is used as a source of raw material Third priority: Commercial and industrial users whereby natural gas is used as boiler fuel Almost all of Coastal States' uses of natural gas were in the second and third priorities. Hence, its plants were certainly subject to brown-outs, or natural gas curtailments. The occurrence and severity of the brown-outs depended on a number of complex factors. First of all, Cajun Pipeline was part of an interstate transmission network that delivered natural gas to residential and commercial buildings on the Atlantic Coast and in northeastern regions of the United States. Hence, the severity of the forthcoming winter in these regions would have a direct impact on the use of natural gas. Secondly, the demand for natural gas was soaring because it was the cleanest and most efficient fuel. There were almost no environmental problems in burning natural gas. Moreover, maintenance problems due to fuel-fouling in fireboxes and boilers were negligible with natural gas systems. Also, burners were much easier to operate with natural gas as compared to the use of oil or the stoking operation when coal was used as fuel. Finally, the supply of natural gas was dwindling. The traditionally depressed price of natural gas had discouraged new exploration for gas wells; hence, shortages appeared imminent. Stock and his staff at Coastal States had been aware of the possibility of shortages of natural gas and had been investigating ways of converting to fuel oil or coal as a substitute for natural gas. Their plans, however, were still in the developmental stages. Coastal States required an immediate contingency plan to minimize the effect of a natural gas curtailment on its multiplant operations. The obvious question was, what operations should be curtailed and to what extent to minimize the adverse effect upon profits? Coastal States had the approval from the FPC and Cajun Pipeline to specify which of its plants would bear the burden of the curtailment if such cutbacks were necessary. McNair, of Cajun Pipeline, replied, "It's your 'pie': we don't care how you divide it if we make it smaller." The Model Six plants of Coastal States Louisiana Division were to share in the "pie." They were all located in the massive Baton Rouge-Geismar-Gramercy industrial complex along the Mississippi River between Baton Rouge and New Orleans. Products produced at those plants which required significant amounts of natural gas were phosphoric acid, urea, ammonium phosphate, ammonium nitrate, chlorine, caustic soda, vinyl chloride monomer, and hydrofluoric acid. Stock called a meeting of members of his technical staff to discuss a contingency plan for allocation of natural gas among the products if a curtailment developed. The objective was to minimize the impact on profits. After detailed discussion, the meeting was adjourned. Two weeks later, the meeting reconvened. At this session, the data in the accompanying table were presented. Coastal State's contract with Cajun Pipeline specified a maximum natural gas consumption of 36,000 cu ft x 10' per day for all of the six member plants. With these data, the technical staff proceeded to develop a model that would specify changes in production rates in response to a natural gas curtailment. (Curtailments are based on contracted consumption and not current consumption.) per Capacity (Tons per Maximum Production Rate (Percent of Product ton day) Capital) Natural gas Consumption (1,000 CU FT per ton) Phosphoric 60 400 80 5.5 acid Urea 80 80 7.0 Ammonium 90 300 90 8.0 phosphate Ammonium nitrate 100 300 100 10.0 50 800 Chlorine Caustic soda 50 15.0 1,000 60 16.0 Vinyl chloride 65 500 60 12.0 monomer Hydroflouric acid 70 400 11.0 Discussion Questions 1. Develop a contingency model and specify the production rates for each product for: a. a 20% natural gas curtailment and b. a 40% natural gas curtailment 2. Explain which of the products in the table should require the most emphasis with regard to energy conservation. 3. What problems do you foresee if production rates are not reduced in a planned and orderly manner? 4. What impact will the natural gas shortage have on company profits?
In November, Bill Stock, general manager for the Louisiana Division of Coastal States Chemicals and Fertilizers, received a letter from Fred McNair of the Cajun Pipeline Company which notified Coastal States that priorities had been established for the allocation of natural gas. The letter stated that Cajun Pipeline, the primary sucolier of natural gas to Coastal States, might be instructed to curtail natural gas supplies to its industrial and commercial customers by as much as 40 percent during the ensuing winter months. Moreover, Cajun Pipeline had the approval of the Federal Power Commission (FPC) to curtail such supplies. Possible curtailment was attributed to the priorities established for the use of natural gas: First priority. Residential and commercial heating Second priority: Commercial and industrial users whereby natural gas is used as a source of raw material Third priority: Commercial and industrial users whereby natural gas is used as boiler fuel Almost all of Coastal States' uses of natural gas were in the second and third priorities. Hence, its plants were certainly subject to brown-outs, or natural gas curtailments. The occurrence and severity of the brown-outs depended on a number of complex factors. First of all, Cajun Pipeline was part of an interstate transmission network that delivered natural gas to residential and commercial buildings on the Atlantic Coast and in northeastern regions of the United States. Hence, the severity of the forthcoming winter in these regions would have a direct impact on the use of natural gas. Secondly, the demand for natural gas was soaring because it was the cleanest and most efficient fuel. There were almost no environmental problems in burning natural gas. Moreover, maintenance problems due to fuel-fouling in fireboxes and boilers were negligible with natural gas systems. Also, burners were much easier to operate with natural gas as compared to the use of oil or the stoking operation when coal was used as fuel. Finally, the supply of natural gas was dwindling. The traditionally depressed price of natural gas had discouraged new exploration for gas wells; hence, shortages appeared imminent. Stock and his staff at Coastal States had been aware of the possibility of shortages of natural gas and had been investigating ways of converting to fuel oil or coal as a substitute for natural gas. Their plans, however, were still in the developmental stages. Coastal States required an immediate contingency plan to minimize the effect of a natural gas curtailment on its multiplant operations. The obvious question was, what operations should be curtailed and to what extent to minimize the adverse effect upon profits? Coastal States had the approval from the FPC and Cajun Pipeline to specify which of its plants would bear the burden of the curtailment if such cutbacks were necessary. McNair, of Cajun Pipeline, replied, "It's your 'pie': we don't care how you divide it if we make it smaller." The Model Six plants of Coastal States Louisiana Division were to share in the "pie." They were all located in the massive Baton Rouge-Geismar-Gramercy industrial complex along the Mississippi River between Baton Rouge and New Orleans. Products produced at those plants which required significant amounts of natural gas were phosphoric acid, urea, ammonium phosphate, ammonium nitrate, chlorine, caustic soda, vinyl chloride monomer, and hydrofluoric acid. Stock called a meeting of members of his technical staff to discuss a contingency plan for allocation of natural gas among the products if a curtailment developed. The objective was to minimize the impact on profits. After detailed discussion, the meeting was adjourned. Two weeks later, the meeting reconvened. At this session, the data in the accompanying table were presented. Coastal State's contract with Cajun Pipeline specified a maximum natural gas consumption of 36,000 cu ft x 10' per day for all of the six member plants. With these data, the technical staff proceeded to develop a model that would specify changes in production rates in response to a natural gas curtailment. (Curtailments are based on contracted consumption and not current consumption.) per Capacity (Tons per Maximum Production Rate (Percent of Product ton day) Capital) Natural gas Consumption (1,000 CU FT per ton) Phosphoric 60 400 80 5.5 acid Urea 80 80 7.0 Ammonium 90 300 90 8.0 phosphate Ammonium nitrate 100 300 100 10.0 50 800 Chlorine Caustic soda 50 15.0 1,000 60 16.0 Vinyl chloride 65 500 60 12.0 monomer Hydroflouric acid 70 400 11.0 Discussion Questions 1. Develop a contingency model and specify the production rates for each product for: a. a 20% natural gas curtailment and b. a 40% natural gas curtailment 2. Explain which of the products in the table should require the most emphasis with regard to energy conservation. 3. What problems do you foresee if production rates are not reduced in a planned and orderly manner? 4. What impact will the natural gas shortage have on company profits?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Question
![In November, Bill Stock, general manager for the Louisiana Division of Coastal
States Chemicals and Fertilizers, received a letter from Fred McNair of the Cajun
Pipeline Company which notified Coastal States that priorities had been established for
the allocation of natural gas. The letter stated that Cajun Pipeline, the primary sucolier
of natural gas to Coastal States, might be instructed to curtail natural gas supplies to its
industrial and commercial customers by as much as 40 percent during the ensuing
winter months. Moreover, Cajun Pipeline had the approval of the Federal Power
Commission (FPC) to curtail such supplies. Possible curtailment was attributed to the
priorities established for the use of natural gas:
First priority. Residential and commercial heating
Second priority: Commercial and industrial users whereby natural gas is used as a
source of raw material
Third priority: Commercial and industrial users whereby natural gas is used as boiler
fuel
Almost all of Coastal States' uses of natural gas were in the second and third
priorities. Hence, its plants were certainly subject to brown-outs, or natural gas
curtailments. The occurrence and severity of the brown-outs depended on a number of
complex factors. First of all, Cajun Pipeline was part of an interstate transmission
network that delivered natural gas to residential and commercial buildings on the
Atlantic Coast and in northeastern regions of the United States. Hence, the severity of
the forthcoming winter in these regions would have a direct impact on the use of natural
gas.
Secondly, the demand for natural gas was soaring because it was the cleanest
and most efficient fuel. There were almost no environmental problems in burning natural
gas. Moreover, maintenance problems due to fuel-fouling in fireboxes and boilers were
negligible with natural gas systems. Also, burners were much easier to operate with
natural gas as compared to the use of oil or the stoking operation when coal was used
as fuel.
Finally, the supply of natural gas was dwindling. The traditionally depressed price
of natural gas had discouraged new exploration for gas wells; hence, shortages
appeared imminent.
Stock and his staff at Coastal States had been aware of the possibility of
shortages of natural gas and had been investigating ways of converting to fuel oil or
coal as a substitute for natural gas. Their plans, however, were still in the developmental
stages. Coastal States required an immediate contingency plan to minimize the effect of
a natural gas curtailment on its multiplant operations. The obvious question was, what
operations should be curtailed and to what extent to minimize the adverse effect upon
profits? Coastal States had the approval from the FPC and Cajun Pipeline to specify
which of its plants would bear the burden of the curtailment if such cutbacks were
necessary. McNair, of Cajun Pipeline, replied, "It's your 'pie': we don't care how you
divide it if we make it smaller."
The Model Six plants of Coastal States Louisiana Division were to share in the
"pie." They were all located in the massive Baton Rouge-Geismar-Gramercy industrial
complex along the Mississippi River between Baton Rouge and New Orleans. Products
produced at those plants which required significant amounts of natural gas were
phosphoric acid, urea, ammonium phosphate, ammonium nitrate, chlorine, caustic
soda, vinyl chloride monomer, and hydrofluoric acid. Stock called a meeting of members
of his technical staff to discuss a contingency plan for allocation of natural gas among
the products if a curtailment developed. The objective was to minimize the impact on
profits.
After detailed discussion, the meeting was adjourned. Two weeks later, the
meeting reconvened. At this session, the data in the accompanying table were
presented. Coastal State's contract with Cajun Pipeline specified a maximum natural
gas consumption of 36,000 cu ft x 10' per day for all of the six member plants. With
these data, the technical staff proceeded to develop a model that would specify
changes in production rates in response to a natural gas curtailment. (Curtailments are
based on contracted consumption and not current consumption.)
per
Capacity
(Tons per
Maximum
Production Rate
(Percent of
Product
ton
day)
Capital)
Natural gas
Consumption (1,000
CU FT per ton)
Phosphoric
60
400
80
5.5
acid
Urea
80
80
7.0
Ammonium
90
300
90
8.0
phosphate
Ammonium
nitrate
100
300
100
10.0
50
800
Chlorine
Caustic soda 50
15.0
1,000
60
16.0
Vinyl chloride
65
500
60
12.0
monomer
Hydroflouric
acid
70
400
11.0
Discussion Questions
1. Develop a contingency model and specify the production rates for each
product for:
a. a 20% natural gas curtailment and
b. a 40% natural gas curtailment
2. Explain which of the products in the table should require the most emphasis
with regard to energy conservation.
3. What problems do you foresee if production rates are not reduced in a
planned and orderly manner?
4. What impact will the natural gas shortage have on company profits?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F52476ee9-c360-4937-8f5a-8576cacac103%2F554a48e2-b804-4e12-9db2-edf4595753b5%2Fxwybhgo_processed.png&w=3840&q=75)
Transcribed Image Text:In November, Bill Stock, general manager for the Louisiana Division of Coastal
States Chemicals and Fertilizers, received a letter from Fred McNair of the Cajun
Pipeline Company which notified Coastal States that priorities had been established for
the allocation of natural gas. The letter stated that Cajun Pipeline, the primary sucolier
of natural gas to Coastal States, might be instructed to curtail natural gas supplies to its
industrial and commercial customers by as much as 40 percent during the ensuing
winter months. Moreover, Cajun Pipeline had the approval of the Federal Power
Commission (FPC) to curtail such supplies. Possible curtailment was attributed to the
priorities established for the use of natural gas:
First priority. Residential and commercial heating
Second priority: Commercial and industrial users whereby natural gas is used as a
source of raw material
Third priority: Commercial and industrial users whereby natural gas is used as boiler
fuel
Almost all of Coastal States' uses of natural gas were in the second and third
priorities. Hence, its plants were certainly subject to brown-outs, or natural gas
curtailments. The occurrence and severity of the brown-outs depended on a number of
complex factors. First of all, Cajun Pipeline was part of an interstate transmission
network that delivered natural gas to residential and commercial buildings on the
Atlantic Coast and in northeastern regions of the United States. Hence, the severity of
the forthcoming winter in these regions would have a direct impact on the use of natural
gas.
Secondly, the demand for natural gas was soaring because it was the cleanest
and most efficient fuel. There were almost no environmental problems in burning natural
gas. Moreover, maintenance problems due to fuel-fouling in fireboxes and boilers were
negligible with natural gas systems. Also, burners were much easier to operate with
natural gas as compared to the use of oil or the stoking operation when coal was used
as fuel.
Finally, the supply of natural gas was dwindling. The traditionally depressed price
of natural gas had discouraged new exploration for gas wells; hence, shortages
appeared imminent.
Stock and his staff at Coastal States had been aware of the possibility of
shortages of natural gas and had been investigating ways of converting to fuel oil or
coal as a substitute for natural gas. Their plans, however, were still in the developmental
stages. Coastal States required an immediate contingency plan to minimize the effect of
a natural gas curtailment on its multiplant operations. The obvious question was, what
operations should be curtailed and to what extent to minimize the adverse effect upon
profits? Coastal States had the approval from the FPC and Cajun Pipeline to specify
which of its plants would bear the burden of the curtailment if such cutbacks were
necessary. McNair, of Cajun Pipeline, replied, "It's your 'pie': we don't care how you
divide it if we make it smaller."
The Model Six plants of Coastal States Louisiana Division were to share in the
"pie." They were all located in the massive Baton Rouge-Geismar-Gramercy industrial
complex along the Mississippi River between Baton Rouge and New Orleans. Products
produced at those plants which required significant amounts of natural gas were
phosphoric acid, urea, ammonium phosphate, ammonium nitrate, chlorine, caustic
soda, vinyl chloride monomer, and hydrofluoric acid. Stock called a meeting of members
of his technical staff to discuss a contingency plan for allocation of natural gas among
the products if a curtailment developed. The objective was to minimize the impact on
profits.
After detailed discussion, the meeting was adjourned. Two weeks later, the
meeting reconvened. At this session, the data in the accompanying table were
presented. Coastal State's contract with Cajun Pipeline specified a maximum natural
gas consumption of 36,000 cu ft x 10' per day for all of the six member plants. With
these data, the technical staff proceeded to develop a model that would specify
changes in production rates in response to a natural gas curtailment. (Curtailments are
based on contracted consumption and not current consumption.)
per
Capacity
(Tons per
Maximum
Production Rate
(Percent of
Product
ton
day)
Capital)
Natural gas
Consumption (1,000
CU FT per ton)
Phosphoric
60
400
80
5.5
acid
Urea
80
80
7.0
Ammonium
90
300
90
8.0
phosphate
Ammonium
nitrate
100
300
100
10.0
50
800
Chlorine
Caustic soda 50
15.0
1,000
60
16.0
Vinyl chloride
65
500
60
12.0
monomer
Hydroflouric
acid
70
400
11.0
Discussion Questions
1. Develop a contingency model and specify the production rates for each
product for:
a. a 20% natural gas curtailment and
b. a 40% natural gas curtailment
2. Explain which of the products in the table should require the most emphasis
with regard to energy conservation.
3. What problems do you foresee if production rates are not reduced in a
planned and orderly manner?
4. What impact will the natural gas shortage have on company profits?
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