[Federal Register Volume 66, Number 183 (Thursday, September 20, 2001)]
[Notices]
[Pages 48417-48424]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-23228]


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DEPARTMENT OF AGRICULTURE

Rural Utilities Service


Jackson County Lake Project, KY

AGENCY: Rural Utilities Service, USDA.

ACTION: Notice of availability of record of decision.

-----------------------------------------------------------------------

SUMMARY: Notice is hereby given that the Rural Utilities Service (RUS) 
is issuing a Record of Decision (ROD) on the Environmental Impact 
Statement (EIS) prepared for the Jackson County Lake Project. The EIS 
was prepared pursuant to the National Environmental Policy Act of 1969 
(NEPA) (U.S.C. 4231 et seq.) in accordance with the Council on 
Environmental Quality regulations for implementing the procedural 
provisions of NEPA (40 CFR 1500-1508) and RUS regulations (7 CFR 1794). 
The ROD concludes the EIS process for this proposal.
    After reviewing comments from interested citizens, local 
businesses, environmental advocacy organizations, and other State and 
Federal agencies, RUS, with conditions, agrees to participate in the 
co-funding of its previously identified preferred alternative--the War 
Fork and Steer Fork (WSF), a 3.5 million gallons per day (MGD) 
reservoir and the construction of a raw water transmission main from 
the proposed reservoir to the existing JCWA Treatment Plant. This 
decision was made after comparing overall estimated project costs, user 
rate impacts, future growth prospects of Jackson County, Kentucky and 
adjacent areas, and evaluating other relevant information with regard 
to the reasonable alternatives considered in the EIS. The dam would be 
situated on War Fork, 0.75 miles north of the confluence with Steer 
Fork and located about 0.5 miles southwest of Turkey Foot campground in 
eastern Jackson County. The roller compacted concrete dam would be 
about 87 to 107 feet tall, 760 to 790 feet long, and 102 to 122 feet 
wide, creating a reservoir with an average yield of 3.5 MGD of raw 
water. At a normal pool elevation of 980 feet above mean sea level 
(MSL), the surface area of this reservoir would be about 116 acres. At 
a potential maximum flood elevation of 1,000 feet above MSL, the 
surface area of the reservoir would be approximately 162 acres. The 
total acreage for a reservoir at maximum flood level at this site, with 
a 300-foot buffer extending from normal pool level, would be about 337 
acres of land. As much of this land is currently part of the Daniel 
Boone National Forest, land acquisition at this site would require a 
land exchange with the U.S. Forest Service. In addition, impounding 
``waters of the United States'' will require a Clean Water Act, Section 
404 permit from the U.S. Army Corps of Engineers. Other permits will be 
required; the applicants will be responsible for obtaining all 
applicable permits prior to construction.

FOR FURTHER INFORMATION CONTACT:  For more information, contact: Mark 
S. Plank, Senior Environmental Scientist, USDA, Rural Utilities 
Service, Engineering and Environmental Staff, 1400 Independence Avenue, 
Mail Stop 1571, Washington, DC 20250, telephone (202) 720-1649, fax 
(202) 720-0820, or email: [email protected]. Further information can 
also be obtained from: Kenneth Slone, State Director, USDA, Rural 
Development State Office, 771 Corporate Drive, Suite 200, Lexington, KY 
40503, telephone (606) 224-7300, or fax (606) 224-7340.
    A copy of the ROD can be obtained or viewed online at http://www.usda.gov/rus/water/ees/eis.htm. The document is in a portable 
document format (pdf); in order to review or print the document, users 
need to obtain a free copy of Acrobat Reader. The Acrobat Reader can be 
obtained from http://www.adobe.com/prodindex/acrobat/readstep.html.

SUPPLEMENTARY INFORMATION: On July 10, 1997, the Jackson County Water 
Association (JCWA) and the Jackson County Empowerment Zone Community, 
Inc. (JCEZ) submitted an application to the U.S. Department of 
Agriculture, Rural Utilities Service (RUS) requesting financial 
assistance to co-fund a proposed reservoir whose purpose was two-fold: 
to provide water supply for the citizens of Jackson County, Kentucky 
and adjacent areas and for recreation. The proposal was to construct a 
115-foot roller-concrete compacted dam on the Laurel Fork of the 
Rockcastle River creating a 640-acre reservoir and the construction of 
a raw water transmission main from the proposed reservoir to the JCWA 
Treatment Plant located at Tyner Lake in eastern Jackson County. In 
response to the application and in accordance with the National 
Environmental Policy Act of 1969 (42 U.S.C. 4231 et seq.) and Agency 
regulations (7 CFR 1794, Environmental Policies and Procedures), RUS 
initiated the

[[Page 48418]]

preparation of an Environmental Impact Statement (EIS). Initial co-
funding partners for the proposal were JCEZ; Appalachian Regional 
Commission; U.S. Department of Commerce, Economic Development 
Administration; and U.S. Housing and Urban Development, Community Block 
Grant Program.
    After reviewing comments from interested citizens, local 
businesses, environmental advocacy organizations, and other State and 
Federal agencies, RUS, with conditions, agrees to participate in the 
co-funding of its previously identified preferred alternative--the War 
Fork and Steer Fork (WSF), a 3.5 million gallons per day (MGD) 
reservoir and the construction of a raw water transmission main from 
the proposed reservoir to the existing JCWA Treatment Plant. This 
decision was made after comparing overall estimated project costs, user 
rate impacts, future growth prospects of Jackson County and adjacent 
areas, and evaluating other relevant information with regard to the 
reasonable alternatives considered in the EIS. The dam would be 
situated on War Fork, 0.75 miles north of the confluence with Steer 
Fork and located about 0.5 miles southwest of Turkey Foot campground in 
eastern Jackson County. The roller compacted concrete dam would be 
about 87 to 107 feet tall, 760 to 790 feet long, and 102 to 122 feet 
wide, creating a reservoir with an average yield of 3.5 MGD of raw 
water. At a normal pool elevation of 980 feet above mean sea level 
(MSL), the surface area of this reservoir would be about 116 acres. At 
a potential maximum flood elevation of 1,000 feet above MSL, the 
surface area of the reservoir would be approximately 162 acres. The 
total acreage for a reservoir at maximum flood level at this site, with 
a 300-foot buffer extending from normal pool level, would be about 337 
acres of land. As much of this land is currently part of the Daniel 
Boone National Forest, land acquisition at this site would require a 
land exchange with the U.S. Forest Service. In addition, impounding 
``waters of the United States'' will require a Clean Water Act, Section 
404 permit from the U.S. Army Corps of Engineers. Other permits will be 
required; the applicants will be responsible for obtaining all 
applicable permits prior to construction.
    Lists of the alternatives reviewed prior to this decision are as 
follows. The first list contains the alternatives evaluated and 
eliminated from further study, and the rationale for their elimination. 
These alternatives were determined not to be reasonable for the reasons 
stated. The second list is a list of alternatives determined to be 
reasonable; these were evaluated in detail in the EIS. In addition, 
total estimated project costs are listed for these alternatives.

               Alternatives Eliminated From Further Study
------------------------------------------------------------------------
            Alternative                   Rationale for elimination
------------------------------------------------------------------------
                       Non-Reservoir Alternatives
------------------------------------------------------------------------
Groundwater Development...........   Insufficient yield to meet
                                     the projected needs of Jackson
                                     County due to the geology of the
                                     County.
                                     Potential for groundwater
                                     contamination.
Expansion of Tyner Lake and/or       Insufficient yields to meet
 McKee Reservoir.                    the projected needs of Jackson
                                     County due to the sizes of the
                                     watersheds.
Importing Water From Surrounding     Not cost-effective \1\
 Counties: Buckhorn Lake (Perry      Administrative, legal, and
 and Leslie Counties) and Laurel     temporal hurdles (for the Buckhorn
 Lake (Laurel County).               Lake alternative only).
Water Conservation \2\............   Insufficient quantity of
                                     water able to be conserved to meet
                                     the projected needs of Jackson
                                     County.
Pumped Storage From Existing
 Sources in Jackson County:
     Laurel Fork and the     Laurel Fork and the Middle
     Middle Fork of the Rockcastle   Fork of the Rockcastle River:
     River.                          Presence of Federally-
                                     listed Threatened or Endangered
                                     species (Cumberland Bean Pearly
                                     Mussel) in tributaries of the
                                     Cumberland River.
                                     No improvement in Jackson
                                     County's ability to withstand multi-
                                     year droughts (no additional water
                                     storage).
     Indian Creek Rock       Indian Creek Rock Quarry:
     Quarry.
                                        Presence of Federally-
                                        listed Threatened or Endangered
                                        species (Cumberland Bean Pearly
                                        Mussel) downstream of Indian
                                        Creek.
                                        No improvement in
                                        Jackson County's ability to
                                        withstand multi-year droughts
                                        (no additional water storage).
                                        Concerns over water
                                        quality and adequacy of flows.
------------------------------------------------------------------------
                         Reservoir Alternatives
------------------------------------------------------------------------
Laurel Fork and Buzzard...........   Presence of Federally-
                                     listed Threatened or Endangered
                                     species (Cumberland Bean Pearly
                                     Mussel).
                                     Branch Outstanding Resource
                                     Water (ORW) designation.
Laurel Fork and McCammon Branch...   Presence of Federally-
                                     listed Threatened or Endangered
                                     species (Cumberland Bean Pearly
                                     Mussel).
                                     ORW designation.
Horse Lick Creek..................   Presence of Federally-
                                     listed Threatened or Endangered
                                     species (Cumberland Bean Pearly
                                     Mussel).
                                     ORW designation.
South Fork of Station Camp Creek     Wild and Scenic Study River
 and Rock Lick.                      designation of South Fork.
South Fork of Station Camp Creek     Wild and Scenic Study River
 and Cavanaugh Creek #2.             designation of South Fork.
South Fork of Station Camp Creek     Wild and Scenic Study River
 and Cavanaugh Creek.                designation of South Fork.

[[Page 48419]]

 
McCammon Branch...................   Presence of Federally-
                                     listed Threatened or Endangered
                                     species (Cumberland Bean Pearly
                                     Mussel) downstream.
                                     Downstream feeds into
                                     waters with ORW designation.
Mill Creek........................   Presence of Federally-
                                     listed Threatened or Endangered
                                     species (Cumberland Bean Pearly
                                     Mussel) downstream.
                                     Stream waters feed into
                                     waters with ORW designation.
                                     Insufficient yield for
                                     Jackson County during worst drought
                                     conditions; Insufficient
                                     sustainable yield for Jackson
                                     County and the region.
War Fork and Alcorn Branch........   Wild and Scenic Study River
                                     designation of included portion of
                                     War Fork.
South Fork of Station Camp Creek     Wild and Scenic Study River
 and War Fork.                       designation of South Fork.
Travis Creek......................   Insufficient yield.
------------------------------------------------------------------------
\1\ Revised cost estimates for pipelines from the Wood Creek Water
  District water distribution system and from Lock 14 of the Kentucky
  River were prepared for the FEIS. Based on a simple comparison of the
  estimated costs of construction and operation of these pipelines, and
  on the distances over which the Wood Creek Lake and Lock 14 pipelines
  would travel, rough construction and operation costs were projected
  for the Buckhorn Lake and Laurel Lake alternatives. Construction and
  operation of a pipeline from Buckhorn Lake is projected to cost well
  over $10 million more than either the Wood Creek Lake or Lock 14
  pipelines. Construction and operation of a pipeline from Laurel Lake
  is project to cost well over $6 million more than either the Wood
  Creek Lake or Lock 14 pipelines. These costs suggest that these
  alternatives would not be cost-effective.
\2\ Water conservation alone has been eliminated as a reasonable
  alternative to entirely meet the projected water needs for Jackson
  County and the region. However, in the revised water needs analysis
  presented in the FEIS, a water conservation factor of 10 percent was
  determined reasonable for incorporation into the revised water needs
  projections.


   List of Reasonable Alternatives Considered--Total Estimated Project
                                Costs \1\
------------------------------------------------------------------------
                                                               Total
                       Alternative                           estimated
                                                           project costs
------------------------------------------------------------------------
No Action (existing rates)..............................             N/A
War Fork, 3.5 mgd (preferred alternative)...............     $12,224,000
War Fork, 2.2 mgd.......................................       9,631,000
War Fork, 1.3 mgd.......................................       7,804,000
Sturgeon Creek, 3.5 mgd.................................      13,286,000
Wood Creek Lake Pipeline, 2.2 mgd.......................      11,441,000
    Purchase of Potable Water...........................      20,183,000
Wood Creek Lake Pipeline, 1.3 mgd.......................       9,452,000
    Purchase of Potable Water...........................      16,213,000
Lock 14 Pipeline, 2.2 mgd...............................      10,221,000
Lock 14 Pipeline, 1.3 mgd...............................      8,964,000
------------------------------------------------------------------------
\1\ Includes 50-year operation and maintenance costs of the water
  transmission facilities.

    Based on the analyses and conclusions presented in the Draft and 
Final EISs, RUS identified the WSF, 3.5 MGD alternative as its 
preferred alternative. Within the context of the proposed action's 
purpose and need as submitted to RUS, this alternative is the most 
environmentally preferable of the reasonable reservoir alternatives 
considered in the EIS.
    Responses to the FEIS's public comments and RUS's analyses 
supporting its Record of Decision are presented in the following 
discussion.
    As an overview, a public notice announcing a ``Notice of Intent to 
Prepare an Environmental Impact Statement and Notice of Public 
Meeting'' was published in the Federal Register (62 FR 41336 (1997)) 
and local newspapers on or beginning on August 1, 1997. Subsequent to 
these notices, a public scoping meeting to solicit public comments 
regarding the scope of the ensuing environmental impact analysis was 
held in McKee, Kentucky on August 21, 1997.
    Prior to preparing and publishing a Draft EIS (DEIS), RUS undertook 
a number of investigative and preparatory studies to determine the 
basic parameters of the follow-on studies. The initial studies 
included: Water Need Analysis, Recreational Needs Analysis, Alternative 
Analysis, Endangered Species Screening Study and Field Survey for the 
Cumberland Bean Pearly Mussel, and Preliminary Survey for the Federally 
Endangered Indiana Bat and Virginia Big-eared Bat. The results and 
conclusions of these studies focused the follow-on, more detailed 
analyses on the alternatives determined to be reasonable.
    Public notices announcing the availability of the DEIS and notice 
of public meetings were published in the Federal Register (65 FR 34142 
(2000)) and local newspapers on or beginning on May 26, 2000. Because 
of the early identification and presence of endangered species at the 
proposal's site--the 640-acre reservoir at the Laurel Fork of the 
Rockcastle River--and the availability of other reasonable 
alternatives, RUS declined to participate in co-funding the proposal at 
this site. Instead RUS selected a preferred alternative that could meet 
the purpose and need of the proposal--the 3.5 MGD, 116-acre reservoir 
at the confluence of the War Fork and Steer Fork Rivers. The applicants 
agreed to the change in the proposal's location. The public comment 
period was 45 days. RUS held two public meetings to solicit public 
comments on the DEIS on June 27, 2000 in McKee, Kentucky.
    In response to the public comments received on the DEIS, RUS re-
evaluated a number of issues and prepared a Final EIS (FEIS). Public 
notices announcing the available of the FEIS were published in the 
Federal Register (66 FR 29768 (2001)) and local newspapers on or

[[Page 48420]]

beginning on June 1, 2001. Public comment period was 30 days.
    RUS received comments from the following groups in support or 
opposition to RUS's preferred alternative:

                         Public Comments on FEIS
------------------------------------------------------------------------
                                              Support       Opposition
                  Group                      (number)        (number)
------------------------------------------------------------------------
Private Citizens........................             159              20
Businesses..............................               8               0
Environmental Advocacy Groups...........               0               5
Local/State/Federal Governmental                       2               2
 agencies...............................
------------------------------------------------------------------------

    In general, a review of the FEIS's comments indicates commenters 
were confused as to the proposed action to which RUS is responding. 
Comments were made criticizing RUS for an overemphasis on or a bias to 
the proposal's recreational component and requests were made to remove 
this element from the proposed action. A brief summary of the 
applicant's proposal or proposed action is as follows.
    The proposed action as stated in RUS's ``Notice of Intent to 
Prepare an Environmental Impact Statement'' published in the Federal 
Register and local newspapers stated: ``The primary scope of the EIS is 
to evaluate the environmental impacts of and alternatives to the 
Jackson County Water Association's applications for financial 
assistance to provide water supply for the residents of Jackson and 
surrounding counties. This project, known as the Jackson County Lake 
(Project), is one of the initiatives developed for the Kentucky 
Highlands Empowerment Zone. The project proposes to construct a 115 
foot tall dam on the Laurel Fork of the Rockcastle River in Jackson 
County, Kentucky creating a 640 acre lake, storing approximately 28,440 
acre feet of water. Included in the proposal is a raw water intake, 
pumps, water treatment plant upgrade from 1.0 million gallons per day 
(MGD) to 2.0 MGD, and pipelines necessary for transporting raw water to 
the Jackson County Water Association's water treatment plant for 
treatment and distribution to residents in Jackson County and portions 
of Lee, Madison, Owsley, and Rockcastle Counties. In addition to 
improving the water supply of the areas specified above, the Project 
will serve to meet a stated goal of the Kentucky Highland Empowerment 
Zone's Strategic Plan for increasing local recreational and tourism 
opportunities in the Jackson County area.''
    The stated purpose and need for the proposal was two-fold--water 
supply and recreation. In responding to applicants' proposals, RUS 
normally does not dictate specific project elements. As long as 
proposed actions or project elements thereof meet RUS's loan and 
facility eligibility requirements as promulgated in 7 CFR 1780.7, 
Eligibility, and the project element is not unreasonable or unfeasible 
from a cost or technical (including environmental) perspective, RUS 
normally evaluates the proposal as submitted. Even if specific project 
elements do not meet the agency's eligibility requirements, RUS is not 
precluded from participating in the financing of the proposal as long 
as RUS's financial assistance is used to finance eligible project 
purposes.
    RUS is responsible pursuant to the National Environmental Policy 
Act (NEPA) to objectively evaluate the potential environmental effects 
of the proposed action and through an informed decision-making process 
decide whether or not to fund the proposal. As stated above, the 
analyses performed during the EIS did determine that the proposal's 
original site was unreasonable due to the presence of threatened and 
endangered species and with the availability of other reasonable 
alternatives, RUS selected with the applicant's concurrence an 
alternate location. This location was asserted in the EIS as the 
agency's preferred alternative. Conclusions drawn from the Recreational 
Needs Analysis determined that the recreational component of the 
proposal was not unreasonable and met the applicants' stated purpose 
and need for the proposal. Therefore, RUS finds that the requests to 
remove the recreational elements from the proposal are not appropriate.
    To clarify the genesis of the proposal with regard to the Kentucky 
Highland Empowerment Zone the following is presented.
    On August 10, 1993, President Bill Clinton signed Public Law 103-
66, Omnibus Budget Reconciliation Act of 1993. Subchapter XIII of the 
Act, titled ``Empowerment Zones, Enterprise Communities and Rural 
Development Investment Areas'' created the Empowerment Zone initiative 
for the purpose of empowering local communities and their residents to 
design and implement their own strategic plan for creating jobs and 
opportunities to build a better and brighter future.
    In support of Public Law 103-66, President Clinton signed a 
directive on September 9, 1993 establishing the President's Community 
Enterprise Board to assist in coordinating across Federal agencies the 
various programs available to distressed communities. The Board was to 
assist in enabling distressed communities through a ``comprehensive, 
coordinated, and integrated approach that combines bottom-up 
initiatives and private-sector innovations with responsive Federal-
State support.'' It emphasized a bottom-up community based strategy 
rather than the traditional top-down bureaucratic approach; in other 
words, the program provides for local self-determination in setting 
priorities, and puts the Federal government in the role of assisting 
communities with the priorities they have chosen and maintaining the 
integrity of the program's local implementation. It was a strategy to 
address economic, human, community, and physical development problems 
and opportunities in a comprehensive fashion. In addition, the program 
was intended to combine the resources of the Federal Government with 
those of State and local governments, educational institutions, and the 
private and non-profit sectors to implement community-developed 
strategic plans for economic development.
    The statute specified certain criteria that must apply in order for 
an area to be eligible for Empowerment Zone designation, including 
geographic size, population, poverty rate by census tract (or by block 
numbering areas when the community is not delineated by census tracts), 
pervasive poverty, unemployment, and general distress of the area. The 
statute created urban and rural empowerment zones.
    To support the selection and designation of rural empowerments 
zones, USDA published a notice in the

[[Page 48421]]

Federal Register on January 18, 1994, ``Notice Inviting Applications 
for Designation of Rural Empowerment Zones and Enterprise Communities'' 
(59 FR 2696 (1994)). This Notice invited applications from State and 
local governments, regional planning agencies, non-profit 
organizations, community-based organizations, or other locally based 
organizations to compete for the Secretarial designations as 
Empowerment Zones or Enterprise Communities. Application deadlines were 
set for June 30, 1994.
    This notice prompted citizens from Clinton, Jackson, and Wayne 
Counties, Kentucky to initiate a series of public meetings to identify 
economic development goals for inclusion into a comprehensive Strategic 
Plan that was required as part of the Empowerment Zone application 
process. In conjunction with the Kentucky Highlands Investment 
Corporation, a private corporation exempt from taxation under the 
provisions of Section 501 (c) (4) of the Internal Revenue Code, these 
local citizens and leaders organized a Kentucky Highlands Steering 
Committee. In order to identify and establish ``benchmark'' economic 
development goals for the Strategic Plan, planning committees and 
subcommittees from each county were organized.
    The Jackson County Planning Committee and its various subcommittees 
held and participated in public meetings on May 4, May 17, June 7 and 
June 14, 1994 with the goal to identify their local benchmarks. By the 
May 17 public meeting, the Infrastructure and Tourism Subcommittees 
both identified the lake proposal as a goal and the Jackson County 
Planning Committee submitted the goal to the Kentucky Highland Steering 
Committee for inclusion in the Strategic Plan. The Kentucky Highland 
Steering Committee agreed to include the goal and submitted the 
Strategic Plan and application to USDA.
    On December 21, 1994, President Clinton announced the jurisdictions 
that were designated as Rural Empowerment Zones by USDA and the 
Kentucky Highlands application was one of three jurisdictions in the 
United States to be designated. This announcement was formalized in a 
Federal Register notice published by USDA on May 10, 1995 (60 FR 24828 
(1995)), ``Notice of Designation of Empowerment Zones and Enterprise 
Communities.'' In accordance with the authorizing statute, each 
Empowerment Zone was entitled to receive grants of $40 million dollars 
for the economic development activities identified in their Strategic 
Plan. With the Empowerment Zone designation, the Kentucky Highlands 
Empowerment Zone was created and the lake proposal identified in the 
Kentucky Highlands Strategic Plan was established as Benchmark 19 with 
a $5 million budget.
    Subsequent to the Empowerment Zone designation and with partial 
funding from a grant from the U.S. Forest Service and assistance from 
the Center for Economic Development, Eastern Kentucky University, the 
JCEZ prepared a May 1995 report titled, ``What We Envision: A Strategic 
Plan for Future Development, Jackson County.'' This plan developed an 
action plan that identified as Goal 3, Infrastructure--``Provide safe 
drinking water and an adequate supply for all residents and businesses 
of Jackson County.'' This report also re-examined and included by 
reference a 1988 study titled ``Prospects and Impacts of a Reservoir 
Location for Jackson County.'' The 1988 study evaluated eight potential 
reservoir sites in the county using broad socio-economic and 
environmental criteria and concluded that a 600-acre reservoir at the 
Steer/War/Hughes Fork site would reasonably meet the goals of the 
community and should be considered as the top candidate for such a 
reservoir proposal. The 1988 and 1995 report recommended evaluating the 
proposal in greater detail and further recommended that Empowerment 
Zone funds be utilized to further this stated goal.
    All of the above led to the JCWA and JCEZ's July 10, 1997 
application to RUS requesting financial assistance to co-fund their 
lake proposal. In reviewing the past and more recent planning actions 
of the local community and the JCEZ, RUS determined that the proposal 
would require an EIS. In addition to comply with the procedural 
requirements and intent of the National Environmental Policy Act 
(NEPA), RUS determined that both reservoir and non-reservoir 
alternatives had to be evaluated as part of the EIS. It was understood, 
that the non-reservoir alternatives would not meet the overall stated 
purpose and need of the applicant's proposed action--that is, the 
recreational component of the proposal. However, the analysis would be 
necessary in the event the reservoir alternatives would prove 
unfeasible for economic or environmental reasons.
    In the Alternative Analysis and DEIS, RUS evaluated a number of 
reservoir locations as well as non-reservoir alternatives and the 
required no-action alternative. These alternatives are listed in the 
tables presented above. A total of eleven proposed reservoir locations 
were initially evaluated in the Alternative Analysis. Many of these 
reservoir alternatives were considered unreasonable, insufficient, or 
impracticable primarily due to the presence of threatened and 
endangered species, Outstanding Resource Waters designation, Wild and 
Scenic River designations, or insufficient yields. From this analysis, 
three reservoir alternatives were determined to be reasonable and were 
examined in greater detail in the EIS. Those alternatives and locations 
were the WSF and two scenarios in the Sturgeon Creek watershed.
    Based on the Water Needs Analysis, RUS evaluated a number of water 
supply options for the pipeline alternatives and the three selected 
reasonable reservoir alternatives. The reservoir alternatives were 3.5 
MGD for the WSF and 3.5 MGD and 8.5 MGD for the Sturgeon Creek 
watershed. The latter reservoir size was being evaluated for the 
potential of pursuing a more regional water supply approach to meeting 
the needs of Jackson and surrounding counties. This alternative, 
however, was abandoned because of the estimated project cost and the 
inability to secure any contractual or financial commitments from 
surrounding communities to pursue such a proposal. The pipeline 
alternatives were dismissed as unfeasible due to high project costs.
    In response to public comments received on the DEIS and changes in 
the methodology used by University of Louisville, Kentucky Population 
Research for projecting future demographic trends, RUS recalculated 
water needs and re-evaluated costs and project feasibility associated 
with the non-reservoir alternatives that were earlier dismissed as too 
expensive. The revised water needs were recalculated for Jackson County 
residents alone and one that provided for a moderate growth potential 
and expansion of water service to the areas identified in the ``Notice 
of Intent to Prepare an Environmental Impact Statement.'' These areas 
included areas that are presently served by the JCWA, i.e., Rockcastle 
and Lee Counties as well as the adjacent, unserved areas in Owsley and 
Estill County that could be potentially served by the JCWA. While not a 
true regional approach, this was determined to be feasible and 
reasonable for contributing to the long-term water needs of central 
Kentucky.
    Cost analyses in the FEIS included two pipeline alternatives (Wood 
Creek and Kentucky River, Lock/Pool 14) with two water supply scenarios 
and reservoir alternatives for the WSF with 3 water supply scenarios 
and one water

[[Page 48422]]

supply scenario for Sturgeon Creek. The table below summarizes these 
cost analyses.

                      Impacts on Typical Residential Water Rates Under Each Alternative \1\
----------------------------------------------------------------------------------------------------------------
                                                                                  Increased cost      Percent
                           Alternative                                Average       for average    increase over
                                                                   monthly bill    monthly bill   existing rates
----------------------------------------------------------------------------------------------------------------
No Action (existing rates)......................................          $25.02              NA              NA
War Fork, 3.5 mgd...............................................           32.05           $7.03          $28.16
War Fork, 2.2 mgd...............................................           30.45            5.44           21.72
War Fork, 1.3 mgd...............................................           29.33            4.31           17.29
Sturgeon Creek, 3.5 mgd.........................................           32.87            7.85           31.38
Wood Creek Lake Pipeline, 2.2 mgd...............................           33.31            8.30           33.17
Wood Creek Lake Pipeline, 1.3 mgd...............................           32.23            7.21           28.81
Lock 14 Pipeline, 2.2 mgd.......................................           30.56            5.54           22.19
Lock 14 Pipeline, 1.3 mgd.......................................           30.02            5.00          20.04
----------------------------------------------------------------------------------------------------------------
\1\ Based on an average monthly JCWA residential bill of $25.02 for 4,517 gallons of water.

    In addition to the confusion regarding the development of the 
proposed action, significant public comments were made regarding the 
following issues: over-inflated water needs analyses; regional demand/
supply issue; criticism regarding recreational needs analyses; status 
of Wild and Scenic River designation for the War Fork; improper 
consultation with other Federal agencies; consistency with or proper 
evaluation of the proposal's effect to waters of the United States 
relative to the Clean Water Act, Section 404(b)(1), 40 CFR part 230--
``Guidelines for Specifications of Disposal Sites for Dredged or Fill 
Material,'' and criticism for not factoring potential Section 404 
compensatory mitigation costs into total project costs. Each of these 
issues will be responded to briefly.
    Over-inflated Water Needs--Primary concerns related to use of 
state-wide water use data for residential purposes versus actual data 
from the JCWA and use of 15% water loss and 10% water conservation in 
the overall water needs calculation. RUS continues to maintain that 
each of the parameters used are reasonable industry-wide standards for 
rural areas and use of such standards for long-range projections is 
reasonable and appropriate.
    Regional Demand/Supply Issue--Evaluating, promoting and funding 
regional water systems, through for example consolidations, for 
financial, managerial and technical capacity development is consistent 
with RUS, U.S. Environmental Protection Agency and Safe Drinking Water 
Act policies. The EIS with limitations did attempt to look beyond just 
the immediate jurisdiction of Jackson County. Because the JCWA 
currently serves customers outside Jackson County it is logical that 
they will continue to do so particularly if additional potable water 
becomes available. It is also logical that they will continue to expand 
their service area as necessary to serve presently unserved citizens. 
As stated in the Water Needs Analysis, four jurisdictions--Rockcastle, 
Owsley, Lee and Clay counties--expressed interest in obtaining water, 
if available, at some future date.
    Comments criticized RUS's calculation of water needs outside 
Jackson County (42% of Jackson County needs). Commenters are referred 
to the Water Needs Analysis, Regional Needs Assessment, page E-16 for 
clarification as to the methods used to quantify regional needs. RUS 
maintains that the value developed in the Water Needs Analysis is not 
unreasonable given the imprecise nature of a 50-year water needs 
projection and an inability, as earlier stated, of obtaining 
contractual or financial commitments from surrounding jurisdictions to 
pursue a more regional water supply perspective. In the DEIS, RUS did 
evaluate a 8.5 MGD Sturgeon Creek alternative but was dismissed due to 
reasons cited above. Placing the time and financial burden on the 
Jackson County community to fully explore a multi-county jurisdictional 
water system is unreasonable; the approach taken by the community and 
RUS in exploring expanded peripheral service beyond the JCWA's present 
service area is more reasonable and served as the basis for the 
analysis.
    Recreational Needs Analysis--Many comments were received concerning 
the analyses presented in the EIS regarding recreational needs. The 
interest shown by the public on this issue demonstrates the 
subjectivity of determining recreational needs for and interests of a 
diverse population. The Recreational Needs Analysis (page F-21) 
indicated that at some level ``there will be increasing needs for 
additional camping, picnicking, hiking, and swimming facilities in the 
future. Based on the current facility plans, the proposed Jackson 
County lake would help meet some of the needs for picnicking 
facilities, and all of the needs for swimming facilities, which is 
projected to reach a maximum of only 29 acres for the planning period.
    The Level of Lake Use (Section 3.2) in the area cannot be 
adequately assessed because recreational use data is very limited for 
the existing lakes in the study area. Based on the limited data, the 
current use of the lakes can be described as moderate to heavy. Since 
population is expected to increase in the study area under moderate and 
high growth scenarios, the proposed lake may help alleviate the 
potential heavy use of the surrounding lakes in the future.''
    If the proposed lake is permitted, the types of recreational 
activities developed at the proposed lake will be determined in 
consultation with the U.S. Forest Service and be consistent with the 
water supply aspects of the reservoir. RUS acknowledges that the State 
of Kentucky has recommended water uses for water supply reservoirs.
    RUS believes the conclusions drawn from the analyses presented in 
the Recreational Needs Analysis are reasonable and are consistent with 
the goals of the Kentucky Highlands Empowerment Zone Strategic Plan.
    Status of the Wild and Scenic River Designation of War Fork--Many 
comments were received regarding the status of the War Fork as a 
candidate for the Wild and Scenic River System. The proposal's location 
is upstream from the segment of War Fork that has been recommended by 
the U.S. Forest Service for inclusion into the Wild and Scenic River 
System. The recommendation determined that this segment is eligible for 
a ``scenic'' classification.
    While the candidacy or eligibility of stream segments for inclusion 
into the

[[Page 48423]]

Wild and Scenic River System was a major factor in the initial 
alternative analysis performed prior to the publication of the DEIS, 
RUS does not believe the proposed action, particularly with flow 
requirements required by the State of Kentucky, will have a significant 
effect on the streams' scenic classification or qualities.
    Improper Consultation with Other Federal Agencies--Comments 
received criticized RUS for not consulting properly with other Federal 
agencies, primarily the U.S. Fish and Wildlife Service (USFWS). RUS 
does not agree with this charge. Considerable effort was made to 
include all of the pertinent agencies throughout the EIS. The USFWS was 
invited and participated in most of the planning and technical review 
sessions held throughout the entire analyses. Formal reviews of the EIS 
were coordinated, as requested, with the Department of Interior, Office 
of the Secretary, Office of Environmental Policy and Compliance. A 
comment letter was received from this office on the FEIS concurring on 
our no effect determination on threatened and endangered species. In 
addition, the Department of Interior stated that if the proposal is 
approved and permitted a pre-construction survey for the Grey Bat must 
be conducted. RUS will make this requirement a condition of its 
financial assistance.
    In addition, comments were received alleging that RUS did not 
properly consult with the Kentucky Heritage Council. Based on the 
preliminary investigation performed prior to publication of the DEIS 
(see Appendix K), it is unlikely any historic properties will be 
affected by the proposed WSF reservoir. However, as a condition of 
financial assistance and upon successful permitting of the WSF 
reservoir, RUS will require the applicant to execute a Memorandum of 
Agreement (MOA) with and between the Kentucky Heritage Council (KHC), 
the Kentucky State Historic Preservation Officer (SHPO) and RUS. The 
MOA will formalize a phased identification and evaluation process 
consistent with 36 CFR 800.4(b)(2), Phased Identification and 
Evaluation.
    Clean Water Act, Section 404(b)(1), 40 CFR Part 230--Guidelines for 
Specifications of Disposal Sites for Dredged or Fill Material--Many 
comments were received regarding the proposal's consistency with the 
Clean Water Act, Section 404(b)(1) Guidelines. The guidelines provide 
policy guidance to the U.S. Corps of Engineers (USACE) in determining 
consistency with the policies and goals of the Clean Water Act when 
issuing Section 404 permits. As stated in the U.S. Corps of Engineers 
Regulatory Guidance Letter 93-02, ``The fundamental precept of the 
Guidelines is that discharges of dredged or fill material into waters 
of the United States, including wetlands, should not occur unless it 
can be demonstrated that such discharges, either individually or 
cumulatively, will not result in unacceptable adverse effects on the 
aquatic ecosystem.''
    In general, determining compliance with the 404(b)(1) Guidelines 
requires avoidance and minimization of adverse impacts and, in 
addition, compensatory mitigation is required for unavoidable adverse 
impacts. Determinations of whether the intent of these Guidelines have 
been met are a determination that USACE will make when acting on the 
JCEZ and JCWA's Section 404 permit application.
    The primary purpose of the alternative analyses performed, as part 
of the EIS, was to avoid and minimize any unacceptable adverse 
environmental impacts. The preferred alternative was selected based on 
a comprehensive analysis of critical environmental and socio-economic 
factors; such as, the presence of threatened and endangered species; 
potential residential relocations in the Sturgeon Creek alternative; of 
numerous alternative locations for a reservoir; an evaluation of other 
reasonable non-reservoir alternatives; and, as required by NEPA, the 
no-action alternative. These non-reservoir alternatives ultimately did 
not meet the proposal's two-fold purpose and need, but were analyzed in 
the event the reservoir alternatives would prove unfeasible for 
economic or environmental reasons.
    The EIS outlines and compares all of the WSF alternative's 
potential impacts. Most notably and significant will be the long-term 
effect of converting a free-flowing stream to an open water lake 
environment. This change will have predicable effects, primarily 
changes to water quality, such as dissolved oxygen, downstream 
temperatures, and stream flow rates. In addition, the EIS describes the 
likely biological effects. It is possible to manage most of these 
concerns and, therefore, minimize these potentially adverse effects 
through specific dam construction practices, all of which were 
discussed in the EIS and would be addressed during the Federal and 
State permitting process and through final design and specifications.
    While recognizing that significant biological effects to the 
aquatic environment will occur, RUS does not believe that these effects 
are unacceptable in the context of the Section 404(b)(1) Guidelines. 
Notwithstanding these impacts, the fact that the WSF is located 
predominantly within National Forest System Lands is desirable for 
water quality purposes. No develop will likely occur in the buffer zone 
and the JCEZ proposes to purchase and convey the few remaining 
privately owned parcels surrounding the proposed lake for inclusion 
into the National Forest System. Therefore, the U.S. Forest Service 
will manage all developmental proposals surrounding the proposed 
reservoir.
    The EIS clearly demonstrated the need for the Jackson County 
community to develop additional water supplies, particularly in meeting 
existing and future needs. Commenters to the EIS argued that the 
selection of one of the pipelines, particularly the pipeline to the 
Kentucky River, could logically meet the water needs of the Jackson 
County community; consultations with the Kentucky River Authority 
support this position in that the river is capable of supplying these 
needs. However, RUS's decision weighs heavy in supporting the intent 
and goals of the Empowerment Zone initiative by showing deference to 
the local citizens' long-stated desire, as expressed in the Kentucky 
Highlands Empowerment Zone's Strategic Plan and earlier documents, for 
a reservoir to provide a long-term, sustainable water supply and for 
developing recreational opportunities to further the Zone's economic 
development goals.
    In agreeing to co-fund the WSF proposal, RUS will condition its 
loan approval on the following conditions. The JCEZ and JCWA shall:
     Obtain and comply with all local, State and Federal 
permits required for the construction and operation of the reservoir.
     Prior to construction consult with the U.S. Fish and 
Wildlife Service to perform a pre-construction survey for Grey Bats.
     Execute a Memorandum of Agreement (MOA) with the Kentucky 
Heritage Council (KHC), the Kentucky State Historic Preservation 
Officer and RUS. This MOA will formalize a phased identification and 
evaluation consistent with 36 CFR 800.4(b)(2), Phased Identification 
and Evaluation.
    In addition, RUS fully supports the Jackson County community in its 
goal of obtaining a long-term, sustainable water supply. In the event 
that the JCEZ and JCWA are unable to obtain the proper permits, RUS 
stands ready to fund any other reasonable and feasible alternative 
identified in this EIS. Any deviation from the alternatives and their 
areas of potential affect evaluated in the EIS may

[[Page 48424]]

require supplemental environmental analyses.

    Dated: September 11, 2001.
Blaine D. Stockton,
Acting Administrator, Rural Utilities Service.
[FR Doc. 01-23228 Filed 9-19-01; 8:45 am]
BILLING CODE 3410-15-P