Welcome back to The Month in Infrastructure, a monthly recap of the top trends affecting the built environment and the people who work in it.
September’s headlines arrived with a familiar undertow: The physical world is being asked to carry more weight than it was built to handle. Costs are up, courts are stepping in where regulators won’t and the grid is strained at every link in the chain. Here’s what moved the needle.
Construction costs take another hit
September gave contractors another reason to worry about their margins. Diesel hit a record $6.23 per gallon on September 14, a 69% jump from the same time last year, when prices averaged $3.69 per gallon. The spike is being driven by geopolitical pressure around Iranian energy routes and refinery disruptions in Russia, which have tightened global distillate supplies even as gasoline prices have attracted more public attention.
For infrastructure contractors, fixed-price contracts become especially risky in this environment, since cost increases have nowhere to go but into already thin margins. The firms best positioned to weather this are those that have diversified their fuel pricing strategies through fixed-price agreements, floating arrangements or collar contracts that cap exposure within a defined range.
Diesel is not the only cost moving in the wrong direction. A new Cushman & Wakefield report found that industrial construction costs rose across the Americas this year as recovering demand and a rebuilding development pipeline renewed competition for materials and skilled labor. Small industrial projects averaged $144 per square foot, up 3.6% year over year. Medium projects rose 2.8% to $87 per square foot and large ones increased 2.3% to $78 per square foot. The message, as one C&W executive put it, is that the next phase of the cycle will require greater discipline around location, building specs and capital planning.
The transformer crunch is structural, not cyclical
If there is one supply chain story that deserves more attention than it gets, it is the global transformer shortage. A recent McKinsey analysis suggests the transformer market has entered a supercycle and supply is the binding constraint. For most of the past two decades, the transformer market was predictable and backlogs were manageable. Now, data center expansion and broader electrification have pushed global power demand sharply upward and the transformer industry, despite stretching capacity, cannot keep up.
The numbers tell the story. In 2025, domestic power transformer demand in Europe and North America exceeded supply by 38%, and that gap is expected to persist through the end of the decade. Lead times that once averaged about a year have stretched to as long as five years in some cases. Prices have surged more than 50% since 2021. By 2030, McKinsey projects the accumulated backlog of unserved demand could reach roughly 1,690 gigavolt-amperes, more than three times the annual domestic supply.
The implications are significant for anyone building or operating grid-dependent infrastructure. Securing transformer capacity early is no longer a procurement detail. It is a strategic variable that can determine whether a project moves forward on schedule or sits idle for years waiting on equipment. Data center developers in particular are being advised to lock in sourcing years ahead of planned commissioning dates, a timeline that would have been unthinkable a decade ago.
Speaking of data centers…
For much of the past several years, the primary friction point between data centers and local communities has been water, power and tax policy. You can now add noise to the list.
At least six noise-related lawsuits against data center operators have been filed in 2026, targeting facilities in Wisconsin, Mississippi, New Jersey, Michigan, New York and Texas. The legal theories rely on established nuisance and negligence claims, but the targets are new. Residents argue that the low-frequency hum from cooling systems and generators is reducing their quality of life and depressing property values, and that operators could have done more to contain it.
The Wisconsin case is particularly notable because the noise at issue is so low in frequency that standard municipal monitoring equipment does not detect it. It creates a compliance gap that local governments were not prepared for and that existing noise ordinances were not written to address. Legal observers have described this emerging field of litigation as early-stage but likely to grow. One settlement already reached in a separate environmental case resulted in a payment exceeding $20 million.
Backlash arrives in force
For years, the political consensus around data center development was essentially settled: Localities competed for the investment, offered tax abatements and got out of the way. September marked a decisive break from that consensus, and it happened simultaneously in two of the country’s most important data center markets.
In Virginia, the Loudoun County Board of Supervisors voted 7-1 on September 15 to advance a 12-month pause on new data center and substation applications. Loudoun County is home to more than 230 facilities and is the area that gave “Data Center Alley” its name. The pause is not a legal moratorium — the county attorney noted that Virginia’s Dillon Rule limits local governments to powers explicitly granted by the state — but a formal resolution is expected in October. County officials cited the strain that data center growth places on the power grid, local water resources and surrounding communities. The county currently operates approximately 4,700 diesel backup generators across its data center footprint, a number that has quietly become a rallying point for residents and emissions advocates alike.
Not long after, Texas Gov. Greg Abbott expanded his statewide crackdown by directing the Texas Commission on Environmental Quality to halt all environmental permits sought by data center projects until ERCOT completes an audit of their grid and water impacts. Abbott had already imposed a moratorium on new grid connections in August. The September order widened it to cover every regulatory approval in the state. Analysts at BloombergNEF wrote that nearly 50 gigawatts of proposed US data center capacity is tied up in Texas and could be at risk, with potential revenue losses exceeding $8 billion by early 2027.
The two actions together show that it is no longer just communities near individual facilities who are pushing back. Governors and county boards of supervisors in the two largest data center markets in the country, acting with broad political support, are demanding that the industry account for its full footprint before adding more. A red-state governor and a blue-leaning county arrived at essentially the same conclusion from different directions. The question of who pays for the grid upgrades, the water consumption and the diesel exhaust is no longer abstract.
EPA dismantles decades of power plant regulation
On September 14, the EPA finalized a rule repealing emissions limits on coal and natural gas power plants, one of the most significant environmental rollbacks of the current administration. The move eliminates Biden-era standards that would have required coal plants to capture most of their carbon emissions by 2039 or close, along with limits on current and future gas plants. The agency estimates the repeal saves the industry more than $300 billion in compliance costs.
The Trump administration has argued that power plant emissions do not meet the threshold for regulatory action under existing law, a position that environmental groups are expected to challenge in court. Critics note that the repeal comes at a moment when 2026 is tracking as one of the warmest years on record and point out that power plants account for roughly a quarter of the nation’s climate pollution.
For infrastructure stakeholders, the near-term read is straightforward: Gas-fired generation faces fewer regulatory constraints and the case for new capacity investments has gotten easier to make. The longer-term uncertainty is legal. If courts reject the underlying argument, the rule could be reversed again, leaving utilities caught between capital commitments and a shifting regulatory floor.
Wetlands protection continues to shrink
In a quieter but consequential regulatory development, the EPA and Army Corps of Engineers released a supplemental proposal in early September to clarify which wetlands receive federal protection under the Clean Water Act, following up on a November 2025 proposal to conform with the Supreme Court’s 2023 Sackett v. EPA ruling.
That ruling significantly narrowed the definition of protected waters, requiring a continuous surface connection to navigable waterways. The agencies’ latest proposal attempts to reduce the confusion the initial rulemaking created, particularly around how to define and identify wet seasons in different regions. Trade groups representing transportation contractors and builders are broadly supportive, saying the proposal gives them clearer guidance on which roadside ditches and drainage features require federal permitting and which do not.
Environmental groups are less sanguine. According to the Natural Resources Defense Council, the agencies’ own analysis projects that most streams would lose federal protection under the new framework, with the western United States facing the greatest impact. A final rule is expected before year’s end.
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