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Politics

Company of senator's husband stands to benefit from state megaproject

  • Author: Nathaniel Herz
  • Updated: September 28, 2016
  • Published March 6, 2015

JUNEAU -- A state senator oversaw a committee hearing last week on Juneau's big road project without disclosing her husband's connection to a gold mine that would get its first land access if the project is completed.

Sen. Anna MacKinnon, R-Eagle River, leads the Senate's work on the state's construction budget as co-chair of the Senate Finance Committee. She said in last week's hearing that she supports completing an environmental review for the Juneau Access project, the next phase in the road's development.

That's a step also endorsed by Gov. Bill Walker's transportation commissioner.

MacKinnon said in a subsequent interview that she had no conflict of interest. Until a reporter asked her about the project last week, she said, she didn't know it would link to property controlled by a company in which her husband owns a stake.

Under current plans, the project would connect Juneau to an existing road leading to the Kensington gold mine, which leases land for its operations under a long-term agreement with the Hyak Mining Co.

MacKinnon's husband, John MacKinnon, owns 11 percent of Hyak and serves on its board of directors. His brother, Neil MacKinnon, is the company's president.

John MacKinnon reported between $20,000 and $50,000 in income from Hyak in a disclosure filing he made last year as part of his service on the Alaska Workforce Investment Board.

The international corporation that owns Kensington, Coeur, makes minimum annual lease payments to Hyak of $268,000, which will continue at least through 2035 and longer if Kensington continues using Hyak's property. Coeur and the state both say the Juneau Access road would benefit Kensington, which currently relies on boats to transport its 318 workers to and from the mine site about 45 miles north of Juneau. Supplies and the mine's product, gold concentrate, are hauled by barge.

Completion of the federally funded environmental review for the road project is expected early next year. The state's transportation department does not require legislative approval to finish the study, a spokesman said.

The study would cost $800,000 to complete and is a necessary next step before the road can be built. The review would also protect the state from having to repay $27 million in federal money already spent if the project is abandoned in the state's austerity climate.

It's unclear what role the Senate Finance Committee would play in the decision to move ahead on construction of the road.

The state transportation department has $48 million in state money and the authority to spend some $160 million more in federal funding. But the department would need legislative approval to spend an additional $360 million in federal money to complete the project as it's currently proposed, said spokesman Jeremy Woodrow.

The route for the road could also change, though the state transportation department and the federal government currently prefer a plan that connects to the Hyak property.

In an interview Wednesday, Anna MacKinnon said she didn't know the mine's location or that the proposed road would link to Hyak's property. She said she hadn't known the specific extent of her husband's ownership interest in the company until a conversation with him on Tuesday, and added that she and her husband have each created wills that would transfer their assets to their own children.

She said the Senate Finance Committee hasn't yet been presented with any decisions involving money for the Juneau Access project. And she said she was still going through her husband's financial records in advance of a March 15 disclosure deadline, "to understand and identify if there are points in time that I need to acknowledge a perception or a conflict of interest."

"There is no conflict when we have any projects in front of us that we're talking about potential," she said. "Absolutely, if we have an operating budget in front of us that would include a dollar amount that benefited the Juneau Access road -- knowing the interest that surrounds this issue for those in opposition or others, I would absolutely say that my husband's family has an interest."

MacKinnon married her husband last year and is serving her first legislative session as co-chair of the Senate Finance Committee, a leadership post she'll keep at least through next year.

She's responsible for overseeing the Senate's work on the state's capital budget, which pays for infrastructure and construction projects like the Juneau Access road. Her committee counterpart, Sen. Pete Kelly, R-Fairbanks, is responsible for state agency budgets.

John MacKinnon's interest in Hyak is only a side business for him. He's also executive director of Associated General Contractors of Alaska, the leading advocacy group for the state's construction industry. The group has endorsed the Juneau Access road in its list of 2015 legislative priorities, as well as other proposed state construction projects like the bridge across the Knik Arm near Anchorage, the Susitna-Watana dam and a natural gas pipeline from the North Slope.

But with the state facing a multibillion-dollar budget deficit after a drop in oil prices, Gov. Bill Walker in late December stopped new spending on six state infrastructure projects and ordered a review of each one, including the Juneau Access road.

The proposed road dates back more than two decades, and it has powerful supporters in Juneau. It has also generated local opposition, with critics citing state data that show annual operations and maintenance costs for the new road that would be greater than costs for continuing ferry service.

MacKinnon led a committee hearing on the Juneau Access road last week at which the state transportation commissioner, Marc Luiken, briefed members on the project's status.

He said the state would have to use about $800,000 in federal money to finish its environmental review and get to what's called a "record of decision," which would pick the final route for the road.

MacKinnon responded by offering her support.

"I'm only a single senator but I support the administration going through and completing the process, specifically so that we don't owe the check to the federal government," she said. "If I have a vote on that particular piece at some time, I'll support getting to the record of decision."

Afterward, road opponents noted MacKinnon's endorsement and pointed out that she hadn't recused herself from the hearing.

The state's legislative ethics act requires legislators to conduct public business in a way that avoids conflicts, "or even appearances of conflicts."

MacKinnon's colleagues have praised her integrity. But Sen. Dennis Egan, a Juneau Democrat and road supporter, acknowledged that MacKinnon's husband's interest in the Hyak property "looks bad."

"I can see where people would think it's a conflict," said Egan, who went to high school with Neil MacKinnon. "It's up to her but some of it doesn't look good."

Boosters of Juneau Access, including former Gov. Frank Murkowski, have long cited its potential to help the economics of the Kensington mine. But both Neil and John MacKinnon said in interviews that the road's construction would not provide their company, or Anna MacKinnon, with a significant financial benefit.

"We don't need this road to make it work -- it makes no difference to me or Hyak. Our deal doesn't change one iota," Neil MacKinnon said in an interview in his Juneau office. "Any value is so totally speculative. It's not worth one's time to try to cogitate what it is."

Hyak controls what's known as the Jualin property. It's adjacent to the active area of the Kensington mine, which has a camp on the Jualin property and uses the area to access its deposits.

Coeur also plans to spend $2.2 million this year on expansion in the Kensington and Jualin territory, according to filings with the U.S. Securities and Exchange Commission.

The long-term value of Hyak's lease with Kensington is contingent on the mine's success. Kensington is currently projected to operate until 2021 but the state, in its draft environmental review for the Juneau road, says the mine's lifetime is expected to grow as more resources are discovered.

Under its lease, Coeur's annual minimum payments of $268,000 to Hyak extend through 2035, and continue for longer if Kensington is still mining or doing production work on Hyak's property.

John MacKinnon first publicly addressed the relationship between Hyak and the Juneau Access project a decade ago when he was acting commissioner of the state transportation department. At the time, he had removed himself from decisions about the road project, though his ownership stake in Hyak still drew criticism from road opponents.

In a phone interview Tuesday, John MacKinnon said his income from Hyak was "set into a contract long ago."

"The only thing that can affect what I will receive from that is the price of gold," he said. "The road may help the economics of the mining company but that doesn't affect our royalty interest because it's not based on the net profit."

But Hyak's lease with Kensington also explicitly provides for royalties above the minimum payments based on a percentage of the "net returns" from products Coeur extracts from Hyak's territory, with deductions allowed for transportation and other costs.

Neil MacKinnon also acknowledged that a road could potentially extend Kensington's lifetime by lowering transportation costs for workers, which a spokeswoman for Coeur, in an email, called a "significant operating expense."

But MacKinnon pointed out that construction of the Juneau Access project could ultimately cost Hyak money by linking it to the road system and causing its property tax rate to rise. That would be an indication that the local assessor believed the road made the property more valuable.

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