The Economic and Related

Impacts of the Palmetto

Pipeline on Georgia

Jeffrey H. Dorfman, Ph.D.

Dorfman Consulting, LLC
January 2016

Summary
The total economic benefits from the Palmetto Pipeline to the citizens of Georgia would be quite
large. In its first twenty years of operation, the economic impact from pipeline construction and
operations will be $948 million (in todays dollars). The pipeline construction will create 5,397
jobs in Georgia and over its first twenty years, between construction and operation, the pipeline
will generate $46 million in new state and local tax revenues. The value of saved lives and
reduced injuries from fewer truck miles adds another $2 billion over twenty years. In addition,
households in Georgia could save $828 million in the fuel costs over those twenty years. In total,
that means an estimated benefit to Georgia of approximately $3.9 billion over twenty years.

The Economic and Related Impacts of the Palmetto Pipeline on Georgia

The proposed Palmetto Pipeline would provide many significant benefits to the citizens of
coastal and eastern Georgia. In particular, the Pipeline is expected to allow residents to buy
gasoline at a lower price, allow distributors and retailers to supply rising future demand, and
provide safety benefits to Georgia drivers by replacing over 100 million truck miles annually. In
addition, the entire State of Georgia will benefit from the economic impact of both the
construction and operation of the Pipeline, which will create jobs, grow the economy, and
generate new tax revenues for state and local governments. Over twenty years, those economics
benefits will approach $4 billion.

Cost Savings
Currently, there is only one pipeline supplying refined petroleum products to North Augusta,
South Carolina, and no pipeline serving coastal and eastern Georgia. This means that all
gasoline and other petroleum products must be trucked in from a distant pipeline terminal
(primarily Macon and North Augusta) or brought to Savannah by ship. Because truck and ship
transportation are more expensive than moving petroleum liquid by pipeline, residents of eastern
and coastal Georgia pay more for their gasoline.
Pipelines can move a barrel of liquids at a cost of $0.002/mile while the cost of moving the same
barrel by truck is $0.0085/mile and the truck must return empty, perhaps at a slightly lower cost
of $0.007/mile (ATRI, 2014). The distance from North Augusta to Savannah is 130 miles and
from North Augusta to Brunswick is 200 miles; product trucked in from Macon must travel
about 30 miles further if it goes all the way to the coast. At an average distance of 165 miles,
transportation cost differences translate into a potential savings of 5.3 cents per gallon. Free
market principles would suggest that this cost savings would result in lower, more competitive
pricing.
Assuming an average fuel efficiency of 24 miles per gallon, the annual expected savings for
households in coastal and eastern Georgia would be between $40 and $100 per year. Table 1
below shows the estimated annual savings for households located at various distances from
existing pipelines and for different levels of annual miles driven.

Table 1. Annual Per Household Cost Savings on Gasoline with the Palmetto Pipeline
Miles Saved on Truck Transport
Annual miles
125
150
175
200
25,000
$41.82/hh
$50.19/hh
$58.55/hh
$66.92/hh
30,000
$50.18
$60.23
$70.26
$80.30
35,000
$58.55
$70.27
$81.97
$93.69
Source: Dorfman Consulting calculations, assuming an average of 24 mpg for a household.
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The above potential cost savings can be translated into an aggregate benefit to Georgia with a
few assumptions. Given 1.5 million people living in the potential market area for the new
pipeline, an average of 2.4 people per household, 30,000 annual driving miles per household, 24
miles per gallon fuel efficiency, and an average distance from an existing pipeline of 165 miles
(equating to a cost savings of 5.3 cents per gallon), the aggregate annual savings would total
$41.4 million per year. Over twenty years, that would add up to $828.1 million in savings for
Georgia families. Beyond these easily observable savings, additional economic benefits of the
pipeline, by way of the enhanced competition it would create, are discussed below.

Growing Demand
The Energy Information Agency (EIA) has forecast roughly flat demand for petroleum and other
liquids through 2040, with a slight rise and then equal fall returning to essentially the current
level of consumption. However, flat national consumption does not equate to flat consumption at
various regions and sub-regions of the country. These demands can be affected by both higher
and lower paced population growth at the regional level.
The U.S. Census Bureau provides several nationwide population growth scenarios, but the
consensus of their different forecasts is a nationwide population growth of 0.75 to 1.0 percent per
year from now through 2040. In contrast, State of Georgia population growth projections for
coastal Georgia range from 1.1 to 3.9 percent per year from now through 2030 (the last year of
the state projection), depending on the specific county. While Chatham County is expected to
grow at a minimal 1.16 percent per year, Camden and Effingham Counties are projected to grow
at 3.3 and 3.5 percent percent per year, respectively. For a sample of eight representative Georgia
counties in the coastal region, the state of Georgia projects population growth of 2 percent per
year through 2030. Including a larger group of coastal and eastern counties produces a projected
growth rate of 1.66 percent annually.
If the region to be served by the Palmetto Pipeline has population growth above the national
average while national demand for petroleum products is flat, the demand for petroleum products
will grow in the faster growing region at a rate roughly equal to the difference between the
regions and the nations growth rates. In this case, that difference could range from a low of 0.66
percent per year (using the lowest figure for the Georgia market area to be served by the
Palmetto Pipeline and the highest projection for national population growth) to a high of 1.25
percent (low national growth, higher coastal Georgia population growth projections). At an
approximate midrange forecast population growth differential of 1.0 percent per year, by 2040
this faster population growth would translate into petroleum product demand that has grown by
28 percent in coastal and eastern Georgia.
Even a differential in population growth of 0.65 percent per year would add up to an 18 percent
increase in demand by 2040. The higher growth rate differential seems more likely, however,
given that the Jacksonville and Hilton Head-Bluffton-Beaufort metropolitan statistical areas,

which border the coastal region, are both on the list of the fastest growing metropolitan statistical
areas in the country. The table below shows several different plausible outcomes.
Table 2. Increased Petroleum Product Demand in Palmetto Pipeline Service Area by 2040
National Pop.
Regional Pop.
Differential
Increased
Growth
Growth
Growth
Demand in 2040
0.75 %/yr
2.00 %/yr
1.25 %/yr
+ 36.4 %
1.00 %/yr
1.66 %/yr
0.66 %/yr
+ 17.9 %
0.85 %/yr
1.85 %/yr
1.00 %/yr
+ 28.2 %
0.85 %/yr
1.66 %/yr
0.81 %/yr
+ 22.3 %
Source: Dorfman Consulting Calculations based on US Census and Georgia State Office
of Planning and Budget population projections.

Safety Benefits
Due to the lack of competition in the market, coastal and eastern Georgia currently receives
gasoline and other petroleum products via tanker truck. This means additional trucks on
Georgias roads as well as additional traffic accidents. According to the Federal Highway
Administration, trucks cause 0.14 fatalities and 4.25 injuries per million miles driven through
involvement in traffic accidents. This sounds like an impressive safety record, but when one puts
it in the context of all the miles that trucks drive, it is quite a poor record, resulting in 3,921
deaths in 2012. By contrast, pipelines generate many fewer fatalities and injuries because they
are not sharing the road or interacting with humans. Pipelines have been responsible for only 13
fatalities per year over the past three years (US Department of Transportation). Given the
average of 2,662,000 miles of pipelines nationally over those three years, that works out to
0.0000049 fatalities per year per 1,000,000 miles of pipelines. Injury rates are only slightly
higher at 0.000024 per year per 1,000,000 miles.
Given that the Palmetto Pipelines Georgia section will be 210 miles long, that means we can
expect 0.001 fatalities per year in Georgia or one fatality every 1,000 years. Similarly, one person
might be injured on average every 200 years due to the new pipeline. Thus, any petroleum
product transportation by pipeline instead of truck can be treated as producing avoided injuries
and deaths for every truck mile not driven.
The proposed Palmetto Pipeline will carry about 150,000 barrels of petroleum liquids per day. A
single tanker truck carries 200 barrels (8,400 gallons). Thus, the proposed pipeline would replace
750 truck trips per day by either displacing those truck trips entirely or requiring significantly
fewer miles of truck trips than the current supply sources. If the average tanker carrying fuel to
the region is currently averaging a 400 mile round trip, the pipeline could reduce truck traffic by
108 million miles per year.
Based on the federal statistics on truck accidents per million miles the pipeline would likely
reduce traffic fatalities by 15 people per year and reduce injuries by about 275 people annually.
While reducing fatalities is a laudable goal in and of itself, there is a corresponding economic
3

benefit to this increased safety. In purely economic terms, given a common federal estimate of
the statistical value of a life of $6 million, 15 fatalities per year avoided would translate into a
benefit of $90 million per year. The 275 avoided injuries would add additional economic benefits
of an unknown amount, likely several million dollars more (since the Federal Highway
Administration does not break their injury statistics down by type and severity, it is not possible
to provide an estimated value for avoiding them).

Figure 1. Comparison of Expected Annual Fatalities and Injuries by Mode of Transport

300

275

250
200

Truck Transport
Pipeline

150
100
50
0

15
Fatalities0

Injuries 0

Source: US DOT-PHMSA data and author calculations.

Economic Impact
When a new source of spending enters a local, regional, or national economy, it creates economic
growth due to the increased flow of money in an area. The direct impact of that economic
activity is commonly measured in terms of the number of jobs and/or amount of income the
activity represents. However, the direct activity is just the beginning of the total economic
impact. The money that flows into the region is used to purchase goods and services. Some of
these are purchased locally, while others are purchased outside of the region. To the extent that
goods and services are purchased locally, they represent an additional increase in local
employment and income, and therefore, add to the economic impact of the initial, spending. To
the extent that goods and services are purchased outside the region, they are said to have leaked
out of the local economy and have no more local economic impact. The impacts that arise from
local purchases represent the indirect impact of the initial economic activity. A final component
of the economic impact is a result of the spending decisions of employees. In a similar manner,
local employees spend some of their income locally, while some leaks out of the region. The part
of employee income spent locally also generates an additional increase in local employment and
4

income. These impacts represent the induced impact of the initial economic activity. The indirect
and induced impacts are the famed multiplier effect that increases the total impact of a project.
The total economic impact of any economic activity is the sum of the direct, indirect, and
induced economic impacts. Here, the estimated economic impact of the Palmetto Pipeline in
Georgia is simulated using the IMPLAN input-output model of the Georgia economy. The
analysis covers both the large impact of the pipeline construction and the smaller impact of its
ongoing operation.
The construction of the pipeline will produce an economic impact of $787 million and will create
and support 5,397 jobs in the state of Georgia. This economic activity will also produce an
estimated $26.6 million in new state and local government tax revenue. The ongoing operation of
the pipeline will produce an annual economic impact of $9.1 million and result in a permanent
increase of 47 jobs in the state of Georgia. Additionally, the pipeline operations will produce new
and continuing state and local tax revenue of $1.04 million per year. Details of these impacts are
shown in the below table.
Over the first twenty years of the pipelines operation, that means its economic impact will reach
$968 million (the construction impact of $787 million plus twenty times the ongoing impact of
$9.1 million per year). In addition, over those twenty years, state and local governments will
collect $47.3 million in new tax revenue.

Table 3. Economic and Employment Impact of Palmetto Pipeline in Georgia

Employment Impact

Economic Impact

Construction
Direct
2,730
$419,000,000
Indirect
1,258
$186,530,920
Induced
1,410
$181,731,352
Total
5,398
$787,262,272
Ongoing
Direct
19.0
$5,316,154
Indirect
12.5
$1,702,499
Induced
15.8
$2,040,941
Total
47.3
$9,059,593
Source: Dorfman Consulting, using IMPLAN model for Georgia.

State&Local Taxes

$26,562,388

$1,039,329

Total Economic Benefits

With a current population of 1.3 million Georgians in the potential service area for the Palmetto
Pipeline, the total economic benefits to Georgia become quite large. In its first twenty years of
operation, the economic impact from pipeline construction and operations will be $948 million
(in todays dollars). The value of saved lives and reduced injuries from fewer truck miles adds
roughly another $2 billion over twenty years (about $100 million per year). Households in
5

Georgia could save an additional $828 million over twenty years on the fuel costs. In total, that
means a potential benefit to Georgia of approximately $3.9 billion over twenty years.

Competition and the Pipeline

Competitors who currently supply gasoline and other petroleum liquids to the potential Georgia
service area of the Palmetto Pipeline have made the curious claim that the pipeline, by adding an
additional method of supplying coastal and eastern Georgia with products, would somehow
reduce competition. They purport to believe that oil suppliers who use the pipeline could lower
prices to drive companies who deliver gas and diesel by truck out of business, and then take
advantage of the monopoly they created to raise prices higher than they were before the pipeline.
There are four problems with this argument. First, given the estimated cost savings of pipeline
transport estimated here to be about 6 cents per gallon, suppliers operating through the pipeline
would have only a small range to undercut current prices before beginning to lose money. Even
if they did intentionally lose money to eliminate competitors, if they ever raised price back to its
original level, delivery by trucks could resume, limiting any opportunity for future excess profits.
Second, competition by trucks can never be fully eliminated. Even if the pipeline completely
replaced supplies currently being trucked in from more distant terminals (such as Macon), tanker
trucks will continue to be necessary to transport products short distances from the new facilities
(in North Augusta, Richmond Hill, and Jacksonville) to gas stations around the region. Truck
routes could quickly and inexpensively be reestablished to Macon (or other terminals) if a
profitable opportunity presented itself. Thus, the lack of any barrier to (re)entry by longerdistance tanker truck delivery will provide sufficient competition to restrain prices.
Third, competition between suppliers exists within the pipeline. Multiple oil companies can and
will transport their products through the Palmetto Pipeline. Unless they collude illegally, they
each have an incentive to maintain competitive prices and attempt to gain market share from the
other petroleum liquid product suppliers. The analogy is that even in a town with only one
supermarket, Coca-Cola and Pepsi can still compete on price. Even if all refined product is
delivered by pipeline, suppliers such as Shell, BP, and ExxonMobil and their associated retailers
will be competing against each other at the wholesale and retail levels.
Finally, it is worth noting that a company known as Florida Fuel Connection, LLC is proposing a
new rail delivery system in Florida. This would be a novel use of rail cars to deliver refined
petroleum products (like gasoline and diesel), rather than the more common transporting of crude
oil by rail car. The same company is reported to be eyeing the Georgia market, as well. This
suggests two things: that, again, plenty of competition will exist in a post-Palmetto Pipeline
world to maintain competitive prices and that perhaps the trucking companies fear the presence
of a new pipeline because the current prices are so high. After all, if there was no room for new
entrants to earn a profit, it is highly unlikely that two companies would be seriously considering
investments in new methods of delivering petroleum product supplies that will total in the
hundreds of millions of dollars.
6

Conclusions
Construction of the Palmetto Pipeline will increase competition in the transport of petroleum
products in coastal and eastern Georgia. As usual, more competition is good for consumers, who
benefit from the lower prices that competition brings. Currently, 1.3 million Georgians live in the
potential service area for the Palmetto Pipeline, and they stand to gain approximately $3.9 billion
over the next twenty years from its construction and operation. The economic impact from
pipeline construction and operations will be $948 million (in todays dollars) over twenty years.
Households in Georgia could save $828 million thanks to lower fuel prices over twenty years.
The value of lives saved and injuries reduced because of fewer truck miles driven adds roughly
another $2 billion over twenty years. Further, pipeline construction will create 5,397 jobs in
Georgia and over its first twenty years, between construction and operation, the pipeline will
generate $46 million in new state and local tax revenues.

References
American Transportation Research Institute, 2014. An Analysis of the Operational Costs of
Trucking: A 2014 Update. Accessed online August 4, 2015, http://www.atrionline.org/wp-content/uploads/2014/09/ATRI-Operational-Costs-of-Trucking-2014FINAL.pdf
Association of Oil Pipe Lines, 2015. About Pipelines. Accessed online August 4, 2015,
http://www.aopl.org/pipeline-basics/about-pipelines/
Federal Motor Carrier Safety Administration, 2012. Large Truck and Bus Crash Facts 2012.
Accessed online August 4, 2015, http://www.fmcsa.dot.gov/safety/data-andstatistics/large-truck-and-bus-crash-facts-2012
IMPLAN Group, LLC, IMPLAN System (data and software), 2014. (Huntersville, NC:
IMPLAN Group).
Ortman, Jennifer M., and Christine E. Guarneri, 2010. United State Population Projections: 2000
to 2050. (Washington, DC: U.S. Census Bureau).
State of Georgia, Office of Planning and Budget, 2010. Georgia 2030 Population Projections.
U.S. Department of Transportation, Pipeline and Hazardous Materials Safety Administration.
Data and Statistics website. http://phmsa.dot.gov/pipeline/library/data-stats/

About Dorfman Consulting LLC

Jeffrey H. Dorfman earned a Ph.D. in agricultural economics from the University of California,
Davis in 1989. Since then he has been a professor in the Department of Agricultural & Applied
Economics at The University of Georgia where he is also currently co-director of the Land Use
Studies Initiative. From 1998-2000 he was the founding director of the Center for Agribusiness
and Economic Development at The University of Georgia. He has written three books, coauthored another, authored or co-authored over 70 academic articles, and published hundreds of
op-ed columns for a variety of newspapers, Forbes.com, and RealClearMarkets.com. He is a
recognized expert in the economics of development, growth, sprawl, green space, and farmland
preservation. On these topics he has been invited to present talks around the nation, appeared on
television, radio, and been quoted in numerous newspaper articles. He has worked for American
Farmland Trust, the Turner Foundation, The Georgia Conservancy, 1000 Friends of Florida, and
numerous local governments on growth related issues. In addition to his work on the economics
of development issues, Dr. Dorfman also does research on productivity measurement and a
variety of topics related to the statistical analysis of economic data. He consults on a range of
economic and statistical issues for a variety of companies, government agencies, and non-profit
organizations.
To contact Dorfman Consulting, LLC:
1131 Scotland Bend
Watkinsville, GA 30677
p: 706.255.1180 f: 706.310.0342
Email: dorfmanconsulting@charter.net