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A Superior Court judge turned down the injunction last Thursday. Kiewit appealed the decision to the Alaska Supreme Court, which upheld the lower court ruling on Monday, according to Mary Siroky, a spokeswoman with the state Department of Transportation.

Siroky said Kiewit's appeal would be heard by a state procurement officer but the department has not decided yet what it would do in the meantime.

"We have awarded a contract but we haven't issued any notices to proceed," she said.

The project has been put out to bid twice since transportation officials announced last month that they would use state money to build what is purported to be the first phase of a $258 million project to build a 50-mile highway that - with a shuttle ferry system - would link Juneau to Northern Lynn Canal communities.

Kiewit was the original low bidder on the project, but the bid was $22 million above the $30 million estimate for the work.

The company lost out the second time around when the state asked the two companies to rebid on a pared-down project.

The state on Friday awarded Southeast Road Builders a $18.6 million contract for construction of a nine-mile pioneer road out of Juneau. Construction cannot begin, however, until the U.S. Army Corps of Engineers has issued its permits.

DOT engineers said the gravel road would allow them better access to areas of heavy construction.

Former Gov. Frank Murkowski also said the first leg of the road is needed to provide access to the Kensington Mine, a gold mine about 40 miles northwest of Juneau, even though the mine has plans to ferry its workers to the site once it is operating.

The $18.6 million to be spent on the pioneer road is a portion of $45 million that state lawmakers appropriated to the Juneau road project in the state capital budget last session.

The money was intended to match federal funds going into the project. However, the transportation department is moving forward with the first phase before the funds are eligible to be used as a match.

Murkowski said he wanted to speed up the process and make sure that the bid process was complete and builders were ready to begin construction immediately once the permits are in hand.

A coalition of six conservation groups is suing federal agencies over the project, saying they did not adequately consider alternative ways of improving access to Juneau.