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Regional differences
Regional coefficients show that all differences in compressor station construction cost components are related to station location (Table 1). The material cost model’s coefficients show material costs in the Northeast, Midwest, and Western regions related and much higher than that in the Central region. The Western region has the highest material cost among these four regions.
The labor cost model shows a relationship between the Northeast and Midwest regions and that the labor costs in these two regions are higher than those in the Central region. The Western region shows the highest labor cost.
The miscellaneous cost model displays a relationship to the Northeast, Southeast, and Central regions, with all coefficients positive. The Northeast region has the highest miscellaneous cost among these three regions.
The land cost shows a relationship to the Western and Central regions, and the coefficient of the Western region is positive.
Total cost models show relationships to the Northeast, Western, and Central regions, and all coefficients are positive. The Western regions have the highest costs in these three regions.
The Southwest region is the only region that doesn’t show a relationship to any component cost. Other regions show a relationship to at least two component costs. The Central region appears to have the lowest cost for all construction components combined.
Table 5 provides unit costs of construction components for a 5,000-hp compressor station in different regions with cost estimation models.
Unit total costs of compressor stations in different locations show a noticeable difference. The unit total cost in the Central region is $2,097/hp, but unit total cost in the Western region is $2,820/hp. Compressor station unit total costs in the Western region are 34% higher than in the Northeast region and 20% higher than the national average. Unit land cost in the Western region is more than three times higher than unit land cost in the Central region and in the whole nation. The unit total cost difference for compressor station construction component costs caused by geography can reach more than 34%. Therefore, the geographical factor is critical in determining the compressor station construction cost.
The values of the coefficient of the Western and Northeast regions show the Northeast’s cost of living as slightly higher than the West. The Western region, however, has a higher cost in material, labor, land, and total cost than the Northeast region.
This comparison shows economies of concentration plays as playing an important role in compressor station construction cost. Economies of concentration are a type of economy of scale, also called external economies. Economies of scale tend to arise when firms or projects in the same industry are located close together.11
About 28% of US compressor stations are in the Northeast region, with 50.8% of these concentrated in Pennsylvania, while only 13.3% of US compressor stations are in the Western regions. The fact that a large number of compressor stations were built in the Northeast region and in Pennsylvania reduces unit cost of compressor station construction.
Major factors for cost differences in different regions include:
• Cost differences between regions, such as material and land costs.
• Geographic factors, such as terrain and population density.6
Weather conditions, soil properties, cost of living, and distance from supplies are also variables for cost differences between regions.12 Whether the compressor station is a Greenfield project also helps determine costs.13 Economies of concentration are also an important factor for determining cost differences in different regions. It is impossible, however, to conduct quantitative analysis of cost difference in different locations without detailed information.
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