Pipelines To Nowhere: The Real Costs Of TMX & The Dutch Hydrogen Network

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Infrastructure megaprojects have an irresistible allure, and the Netherlands and Canada are illustrative of this. Governments, engineers, and industrial backers alike see in them the potential for transformative leaps forward—massive pipelines to move energy, corridors connecting resources to markets, and infrastructure that promises to underpin entire industries or energy transitions.

Yet, time and again, these ambitions collide spectacularly with stubborn realities: escalating costs, delays, and a seemingly inevitable drift toward heavy, persistent subsidies. The Canadian Trans Mountain Expansion (TMX) pipeline is perhaps the most telling recent case, now joined by the emerging story of the Dutch national hydrogen pipeline network, each offering valuable lessons in financial and planning pitfalls.

In Canada, the TMX pipeline expansion was originally portrayed as a straightforward project—lay a new pipe parallel to an existing route to triple oil transport capacity from around 300,000 to 890,000 barrels per day. The initial estimates in the early 2010s hovered around C$7 billion, a seemingly reasonable price to unlock Alberta’s heavy crude, delivering it efficiently to coastal terminals and hypothesized high-value markets. Yet, as construction dragged through a gauntlet of permitting hurdles, fierce public opposition, Indigenous rights challenges, and environmental controversies, costs ballooned dramatically. By the time it was finally completed in 2024, total costs had soared to over C$30 billion. This represents not merely a miscalculation but an existential cost escalation—roughly four times higher than originally projected.

Now the Dutch are navigating a strikingly similar path, albeit with hydrogen rather than oil. The national hydrogen network, intended to link key industrial clusters and ports such as Rotterdam, Zeeland, and Groningen, was first pitched in 2023 at an appealingly modest price of €1.5 billion. The Dutch government was banking on repurposing extensive portions of existing natural gas infrastructure, a plan initially touted as a low-cost, pragmatic solution. Yet, reality quickly set in.

Recent estimates from the Dutch Authority for Consumers and Markets have shown costs swelling beyond €3.8 billion, more than doubling the initial projections. Reasons given for these overruns echo the TMX experience—overly optimistic assumptions about reuse of existing pipelines, unexpected technical complexity, delayed permitting, and inflationary pressures across supply chains and labor markets. Dutch policymakers quietly acknowledge that the €3.8 billion figure remains uncertain, with further cost escalation highly probable as construction progresses.

These two projects offer fascinating parallels not only in spiraling costs but in the structural design of their funding and pricing mechanisms. TMX locked itself into long-term shipping contracts, with rates fixed years before completion. Shippers secured rates of approximately C$11.46 per barrel, rates so low they now cover less than half the pipeline’s actual capital costs. The financial shortfall amounts to billions per year, a permanent and involuntary subsidy by Canadian taxpayers to the oil industry. This underscores a critical lesson: once infrastructure tolls are locked in, revisiting them upward becomes politically and commercially impossible, leaving taxpayers to permanently fill the gap.

The Dutch hydrogen pipeline attempts a different approach, opting for regulated tariffs rather than fixed-rate contracts with users. The government set an initial transport tariff at around €0.50 per kilogram of hydrogen—seemingly affordable, intended to entice industry and spur investment. However, the regulator now warns that without massive ongoing subsidies, real costs could reach eight times this figure—€4 or even €6 per kilogram—driving hydrogen transmission costs to a level that could render green hydrogen commercially unviable.

While the Dutch government’s regulated tariff approach offers more flexibility than TMX’s locked-in contracts, it faces a similar fundamental challenge. Politically, tariffs can rarely rise significantly without severe pushback from industry and consumers, effectively locking governments into a permanent subsidy structure reminiscent of TMX’s experience.

Both projects also suffer from persistent underutilization risks, another financial black hole. TMX, even now operational, has around 20% uncommitted capacity. This idle portion generates no revenue but still costs billions, built on overly optimistic market assumptions about Canadian oil demand growth and export potential. The Dutch hydrogen pipeline faces even greater underutilization, initially close to 70–80%.

With hydrogen production projects lagging, demand uncertain, and significant infrastructure hurdles still ahead, it remains unclear when or if utilization will ever reach economically sustainable levels. Early underutilization dramatically amplifies costs per unit of transported energy, making hydrogen prohibitively expensive in its first decade or longer. Even optimistic mid-range scenarios projecting rapid uptake of electrolyzers and hydrogen demand appear deeply speculative, given current market and technological realities.

First-of-a-kind infrastructure risks further compound the challenges faced by the Dutch hydrogen project. Hydrogen itself is notoriously difficult to handle—embrittling steel pipelines, requiring specialized compressors, and demanding stringent safety and purity standards. Although the Dutch government initially counted on simple reuse of existing natural gas pipelines, closer technical evaluation revealed significant requirements for new pipelines or costly retrofits, introducing unexpected complexity. This technological uncertainty, combined with the inherently unpredictable timeline of a nascent hydrogen economy, ensures that further cost overruns and delays are virtually inevitable.

In this context, the pipeline’s current €3.8 billion estimate appears shaky at best, with a final tally closer to €5 or even €6 billion much more likely.

Comparing the delivered cost per unit of energy transported underscores these challenges starkly. TMX, heavily subsidized through low toll rates, currently delivers oil transport services at roughly C$1.9 per gigajoule—a deceptively modest figure, given taxpayers are absorbing at least an equal amount in subsidy. Hydrogen pipeline tariffs, even at the highly subsidized initial rate of €0.50 per kilogram and optimistic volumes, are around €4 per gigajoule—more than double TMX’s subsidized oil transport costs.

Without subsidy and with more likely volumes, realistic tariffs would leap to around €30 or more per gigajoule, utterly uncompetitive compared to fossil fuels, electricity transmission, or even trucking. This critical comparison highlights a profound policy dilemma: hydrogen pipelines inherently struggle to achieve cost competitiveness due to hydrogen’s low volumetric energy density, expensive compression, and technical challenges.

Ultimately, the key question is whether governments should continue investing heavily in expensive pipeline-based energy corridors. TMX offers a stark warning—once built, these assets lock in decades of taxpayer-funded subsidies, regardless of shifts in market demand or technological alternatives. The Dutch hydrogen project, while nobler in its climate intentions, faces an eerily similar fiscal trajectory.

Policymakers seem committed to subsidizing the hydrogen infrastructure indefinitely, driven by political imperatives to stimulate industrial transformation and climate progress. Yet the economic realities suggest a much harsher truth: these subsidies might never disappear, potentially becoming perpetual drains on public resources. Even modest utilization and uptake scenarios are optimistic; the middle- or high-end projections used to justify the projects appear speculative, bordering on wishful thinking.

What’s likely is that that the €1.5 billion total cost of the pipeline will balloon to €5, volumes through the pipeline will remain small because energy markets for hydrogen will dissipate like mist, and the annual subsidies for the limited pipeline use will be €1 every year for a couple of decades until the bad idea is scrapped entirely. From €1.5 to €25 through bad assumptions and bad policy won’t win friends and influence voters.

Perhaps the most fundamental lesson from both TMX and the Dutch hydrogen network is that energy infrastructure is extraordinarily costly and unpredictable. The wiser policy path may lie in focusing infrastructure investments on electricity grids and direct electrification pathways—technologies proven cheaper, more efficient, and less vulnerable to perpetual subsidies. Billions of public dollars could yield far greater climate and economic returns by building electric transmission infrastructure instead of pipelines for fuels.

As policymakers around the world plan future energy corridors, these lessons should serve as cautionary tales, warning against repeating past mistakes. After all, as Canada and now the Netherlands are discovering, the true cost of infrastructure projects often remains hidden until it’s too late—and taxpayers are left permanently footing the bill.