Management Science in Energy Policy: The Trans Canada-Great Lakes Transmission Case

This case heard before the National Energy Board (NEB) in 1966 and the decision of Lester B. Pearson's government to reject the Trans Canada Pipe Lines - Great Lakes Gas Transmission project in its original form, marks the first occasion where management science had a determining impact on Canadian public policy. It also marked a psychological breakthrough within the NEB's organization as it provided its newly created Operations Research Branch with the essential credibility base in order to effectively influence NEB's decision-making process.This paper describes TCPL's application of 1966 to expand East/West flow of natural gas by construction of a new, larger diameter pipeline, passing in the United States, south of the Great Lakes rather than expanding the TCPL system north of the Great Lakes. In support of its application, Trans Canada filed an extensive study to demonstrate that the Great Lakes proposal would result in lower costs of natural gas transportation than the expansion of its existing system and would open up new markets for Canadian natural gas in the north central region of the U. S.This paper shows how Operations Research Branch dissented with Trans Canada's position and managed to convince NEB's chairman and key branch heads that a number of staff studies had to be performed before arriving at a conclusion. These O-R studies ranged from the assessment of new pipeline technology to the use of various O-R techniques. These O-R studies met with varying degrees of acceptance; however, the contribution that had the most significant impact was a new methodology for comparison of transportation costs via two alternative routes serving different markets. Furthermore, the O-R branch performed differential economic impact studies to take into account the multiplier effects on the Canadian economy of the two projects which indicated an estimated advantage of a billion dollars in favour of expanding the Northern route. In the end a compromise solution which maintained the Northern loop as the main gas transmission system of TCPL was adopted.