This article is the second in a series on federal permitting in the United States.
Last year, we estimated that the United States has more than $1 trillion in infrastructure in federal permitting at any point in time. We emphasized that a functioning permitting process is critical for safeguarding people and ecosystems and highlighted changes that could streamline it—opening the way for clean energy, critical mineral supply, gas pipelines, rail upgrades, and more—without compromising the important functions it serves.
That article offered a first-order estimate of the economic impact of the federal permitting pipeline. By design, it didn’t capture how dramatically the economic impacts of delayed infrastructure vary by state, nor did it estimate the split between public and private investments. This new article fills in both gaps and addresses a third: what companies with projects in the permitting queue can do about it (see sidebar, “Methodology”). States experience federal permitting delays very differently depending on their mix of industries, and that variation matters for companies too. The states where federal permitting delays have the largest economic consequences are also the states where the permitting process carries the largest financial consequences for the companies building there.
Last year, we estimated that the infrastructure moving through federal permitting was associated with up to $2.4 trillion in unrealized economic activity, based on the 2024 Annual Capital Expenditures Survey (2022 spend). This analysis included additional effects beyond the projects themselves, including the related spending by suppliers within a project’s state, and induced effects—the additional spending that occurs when construction and supplier workers spend the wages they earn in the local economy. Updating the analysis to current-day spending estimates brings the total to more than $3 trillion in cumulative, unrealized economic activity—a multiyear total tied to the projects currently in the permitting pipeline, not a single-year addition to GDP. States—and, by extension, companies—do not experience this evenly. Recent permitting reform such as Fast-41 (Title 41 of the Fixing America’s Surface Transportation Act) has helped reduce timelines in some cases, as described in our previous article, but many bottlenecks remain. These bottlenecks, combined with growing infrastructure demands, mean companies may benefit from active planning for permitting-associated risk. In this article, we illustrate how the permitting pipeline affects states and sectors, and suggest ways that companies can manage their exposure to permitting delays.
Which sectors and states are most exposed to federal permitting delays?
Across the economy, projects requiring federal permitting are concentrated in eight sectors: electricity generation, electricity transmission, oil and gas extraction, oil and gas pipelines, broadband and telecom, transportation, mining, and manufacturing (Exhibit 1). These sectors tend to involve projects that are large in scale, span multiple states, sit on federal land, or touch environmentally or culturally sensitive areas. Together, they accounted for an estimated $900 billion of the approximately $2.2 trillion of construction underway in the United States in 2025, about 40 percent of the total.
It is estimated that priority sectors accounted for about 40 percent of US construction spend in 2025.
1Previous article, “Unlocking US federal permitting: A sustainable growth imperative,” McKinsey, July 28, 2025, identified category as energy generation to represent generation component of NAICS 2211–Electric Power Generation, Transmission and Distribution.
The remaining roughly 60 percent of construction activity, including housing, commercial buildings, and data centers, sits largely outside the federal permitting queue we measure here, though not entirely: Wetland permits, air permits for on-site generation, and federally financed housing all carry federal review. These sectors also depend on the federally permitted infrastructure built to serve them, particularly power generation, transmission, and transportation.
When we break the analysis down to the state level, the states with the most investment dollars subject to federal permitting are the states with the largest economies and infrastructure markets overall—Texas, California, Florida, and New York (Exhibit 2). But when we measure permitting-exposed investment relative to state GDP, a different set of states rises to the top based on the mix of sectors represented: Wyoming, Alaska, North Dakota, New Mexico, and West Virginia, all resource- and energy-intensive economies (Exhibit 3).
The total value of projects in federal permitting across all 50 states is $1.8 trillion.
Note: In our previous article, “Unlocking US federal permitting: A sustainable growth imperative,” McKinsey, July 28, 2025, we estimated $1.1 trillion–$1.5 trillion of infrastructure capital expenditure currently in federal permitting, based on 2022 data. The $1.8 trillion estimate includes updated data as of 2025.
1Includes the District of Columbia.
2Previous article identified category as energy generation to represent generation component of NAICS 2211–Electric Power Generation, Transmission and Distribution.
Four states experience project values entering the federal permitting queue annually that exceed 5 percent of their GDP.
1Includes the District of Columbia.
2Previous article, “Unlocking US federal permitting: A sustainable growth imperative,” McKinsey, July 28, 2025, identified category as energy generation to represent generation component of NAICS 2211–Electric Power Generation, Transmission and Distribution.
These two rankings tell different stories, and both matter. California, Florida, and New York have large absolute dollars at stake mainly because they are large economies; there, permitting-exposed investment is a modest share of state economic activity. Texas is the exception among large states: Its exposure is large in both dollars at stake and percentage of GDP. In Alaska, New Mexico, North Dakota, West Virginia, and Wyoming, permitting-exposed investment represents a much larger share of each state’s entire economy, so delays there carry outsize risk to state-level growth even though the dollar amounts are smaller in absolute terms.
How far do economic impacts spread?
Permitting bottlenecks don’t just delay the projects in the queue—they also delay the regional economic activity connected to those projects. While a project remains in permitting, the construction spending, supplier activity, labor income, and related service activity that would flow from it are delayed too. That’s the basis for the more than $3 trillion estimate above: It reflects the economic activity associated with developing and constructing these projects, but it excludes the ongoing benefits infrastructure provides once it’s operational (Exhibits 4 and 5).
The total economic impact of the federal permitting queue across all 50 states is more than $3 trillion.
1Includes the District of Columbia.
2Previous article, “Unlocking US federal permitting: A sustainable growth imperative,” McKinsey, July 28, 2025, identified category as energy generation to represent generation component of NAICS 2211–Electric Power Generation, Transmission and Distribution.
Five states experience total economic impact of projects entering the federal permitting queue annually that exceeds 10 percent of their GDP.
1Includes the District of Columbia.
2Previous article, “Unlocking US federal permitting: A sustainable growth imperative,” McKinsey, July 28, 2025, identified category as energy generation to represent generation component of NAICS 2211–Electric Power Generation, Transmission and Distribution.
These secondary effects aren’t evenly distributed either. States with deeper manufacturing, energy, and industrial supply chains capture more economic activity per dollar of infrastructure investment. In California, for example, the total economic activity associated with building a project can exceed 2.5 times the initial capital investment in some sectors; in Washington, DC, the comparable multiplier is closer to 1.25 times.1 The gap reflects how much of a project’s spending stays local—on suppliers, contractors, and services within the state—versus flowing to businesses elsewhere.
Our estimates capture only economic activity generated within a state’s own borders; they exclude spillover effects on suppliers and workers in other states. States with deeper supply chains, such as California and Texas, provide components, materials, and services to permitted projects beyond their own borders, so their real economic stake in federal permitting outcomes is probably larger than these figures show.
Understanding state-level variation can help not only state governments and policymakers but also companies. The states where permitting delays carry the largest economic stakes are also the states where a company’s own permitting strategy has the most to gain or lose. That’s the second half of the story: What companies building in this environment can do about permitting.
How should companies think about permitting?
Federal permitting is often discussed as a public infrastructure challenge, but most of the capital moving through it is private. Of the roughly $1.8 trillion in infrastructure currently in federal permitting, we estimate $1.1 trillion (61 percent) is privately financed, while $700 billion is publicly funded, (Exhibit 6)—in the same realm as the pattern in US infrastructure, where private capital funds about three-quarters of construction value.
Of the roughly $1.8 trillion of infrastructure currently in federal permitting, $1.1 trillion is privately financed.
Note: In our previous article, “Unlocking US federal permitting: A sustainable growth imperative,” McKinsey, July 28, 2025, we estimated $1.1 trillion–$1.5 trillion of infrastructure capital expenditure currently in federal permitting, based on 2022 data. The $1.8 trillion estimate includes updated data as of 2025. Figures may not sum to totals, because of rounding.
1Previous article identified category as energy generation to represent generation component of NAICS 2211–Electric Power Generation, Transmission and Distribution.
Recent legislation has amplified the private sector’s exposure. The Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and the Creating Helpful Incentives to Produce Semiconductors Act collectively committed more than $1 trillion in public support and were designed to unlock substantial private investment on top of that. As a result, federal permitting increasingly determines when—and whether—that private capital gets converted into productive assets.
In public projects, the cost of delay falls on the taxpayer. With construction costs rising roughly 5 percent a year, a project delayed by four to five years can require 20 to 30 percent more capital to deliver the same infrastructure. The cost increase associated with permitting delays was further exacerbated by postpandemic inflationary pressures on projects already in the queue. Projects that were developed prepandemic but received permits in the inflationary window then had to find ways to build with significantly higher cost of labor and materials.
For privately financed projects, permitting delays can directly affect project value. Capital stays tied up, while development costs rise and expected cash flows are pushed out, lowering returns and increasing financing requirements. As timelines stretch and become less predictable, projects may need to be redesigned, downsized, or recapitalized. In some cases, an investment that looked attractive when proposed no longer clears its required return threshold by the time approvals finally arrive, leading to capital being redeployed elsewhere or the project being abandoned altogether.
To better understand the magnitude of this effect, we modeled how permitting delays influence project costs across the eight sectors impacted by federal permitting. We find that for capital-intensive projects, even modest schedule slippage can meaningfully alter investment economics. Across the sectors analyzed, we estimate that permitting delays are associated with roughly a 5 percent annual increase in total project costs, resulting in lower project internal rates of return. In one example, we find that a five-year delay in beginning power plant construction turns an approximately $240 million NPV project into an approximately $160 million loss (Exhibit 7).
A power plant project shows how permitting delays can turn an otherwise profitable investment into one with negative net present value.
1Net present value.
2Weighted average cost of capital.
Because of this effect, companies building capital-intensive infrastructure should treat permitting risk as a capital allocation input, not just an execution risk. As projects grow larger and more capital-intensive, permitting timelines increasingly shape where investment happens, when it happens, and whether it happens at all. Companies can build this capability across three dimensions: people, process, and tools.
People
For major infrastructure projects, companies can benefit from creating a dedicated permitting management office with expertise spanning environmental permitting, legal, engineering, rights-of-way, stakeholder engagement, and finance. The strongest offices build five capabilities:
- Critical-path ownership. Map required approvals, dependencies, decision points, and sequencing to keep workstreams moving in parallel where possible.
- Early federal nexus and risk assessment. Identify federal review triggers, environmental constraints, stakeholder issues, and litigation risks before route, site, or design choices are locked in.
- Agency and stakeholder coordination. Engage agencies, communities, landowners, and other stakeholders early to surface issues, resolve concerns, and reduce formal objections.
- Documentation management. Track filings, studies, comments, responses, mitigation commitments, and alternatives considered to keep submissions on time and build a strong administrative record.
- Permitting-informed capital allocation. Model approval scenarios and permitting-adjusted returns (for example, accelerated, on time, and delayed) to determine whether projects should proceed, be redesigned, phased, or deprioritized.
One underground precious-metals mining project put this into practice after falling behind on an aggressive permitting timeline. The company stood up a dedicated permitting management office to run the full environmental approval path—scoping requirements with outside experts, identifying engineering and modeling gaps, sequencing stakeholder outreach, and tracking milestones daily through a permitting control tower. The project got back on schedule, submitting all required environmental permit documents on time and avoiding further slippage on an already tight timeline.
Process
Companies may benefit from embedding permitting complexity into capital planning and project stage-gates so approval risk is assessed before capital is locked in. Each major investment decision should include three elements:
- Design for permitting feasibility: Test whether the same commercial objective can be achieved through lower-risk choices, such as private land instead of federal land, previously disturbed sites rather than greenfield sites, existing corridors instead of new routes, and intrastate configurations where viable. Alternatives should be evaluated against commercial, environmental, and community considerations in compliance with relevant requirements. In one example, a utility-scale solar project repurposed a reclaimed coal mine instead of developing undisturbed land, which allowed the project to move from a state energy infrastructure permit application through federal permitting to final approval in approximately 8.5 months.
- Build permitting risk into stage gates: Require teams to identify federal review triggers, stakeholder risks, critical approvals, mitigation options, and redesign decisions before projects advance. This helps leadership determine which projects should proceed, be redesigned, phased, or deprioritized.
- Standardize the permitting process: Use clear templates, completeness checklists, early issue identification, and disciplined tracking of key stakeholder comments to reduce rework and improve predictability. The Environmental Policy Innovation Center estimates that earlier identification of application issues and avoiding repeated re-reviews of materials already deemed complete could reduce restoration-project review timelines by roughly nine months on average and generate meaningful avoided financing costs.
Tools
Technology can help companies identify constraints earlier, reduce manual labor, and track progress systematically. Several capabilities can help:
- Spatial analytics: Spatial analytics offer detailed and multidimensional data for potential sites that can improve site selection. In one example, a utility-scale renewables developer used a digital siting and due diligence platform to screen environmental, transmission, parcel, slope, and land use constraints earlier in the development process. By quickly filtering out lower-quality sites, the team increased confidence in viable locations and reduced prospecting time by approximately 50 percent.
- AI-enabled workflows: Artificial intelligence can support process improvements in many workstreams. Across a representative set of National Environmental Policy Act document sections from 18 federal agencies, subject-matter experts found that generalized coding agents could reduce document drafting time by up to approximately 15 percent, saving roughly one to five hours per subsection. One analysis estimates that applying AI to classify, group, and analyze public comments could reduce processing time by roughly 30–40 percent, while improving classification consistency and creating meaningful annual cost savings.
- Internal dashboards: Dashboards that track approvals, bottlenecks, and accountability across a company’s full permitting portfolio help leadership see where risk is concentrated before it becomes a delay.
Permitting’s economic footprint is larger and more unevenly distributed than a simple count of projects in the queue would suggest. States with deep supplier ecosystems and resource-intensive economies carry disproportionate exposure—and companies with capital moving through the same pipeline carry a version of that same exposure at the project level. The two are connected: Understanding where and why permitting risk concentrates is what allows a company to decide where to build, when to build, and how much permitting capability to build first. In a permitting-constrained market, companies that treat permitting risk as seriously as they treat construction risk will be the ones that convert capital into productive assets fastest—and the competitive edge may come from pipeline clarity, not pipeline size.
