The claim of Virginia to the western lands, including Kentucky, is based on the Second Charter from James II, issued in 1609. It defined Virginia as extending from sea to sea, west and northwest.
Exploration into the Appalachian Plateau of western Virginia was triggered by land speculators who obtained massive land grants from the king, then sought to survey and sell parcels to the growing population in the colonies. The gentry of Virginia and Pennsylvania in particular coerced the colonial governments and Native Americans into making land speculation "legal," then sponsored expeditions to explore, hype, and sell western lands.
What is now the state of Kentucky was explored initially by representatives of the Loyal Land Company, who had obtained rights to 800,000 acres. Dr. Thomas Walker gets credit for discovering and naming the Cumberland Gap on 1750, while scouting for this company (in which he was an "owner"). The need to define the edges of the territory was driven by the arrival of settlers, who desired clear political boundaries in order to obtain clear title to land.
The French and Indian War involved tense fighting with Native American tribes. That delayed travel by settlers down the Ohio River from the "Forks of the Ohio" (Pittsburgh), and walking through Cumberland Gap to occupy lands west of the Allegheny Ridge.
Legal confusion was another factor in slowing settlement. The French and Spanish both claimed the lands east of the Mississippi River. Only in 1763 did the Treaty of Paris defined the far western edge of Virginia, and the colony no longer stretched from "from sea to sea..."
Until 1770, just one county (Augusta) included all the land claimed by Virginia that was west of the Blue Ridge and south of the Fairfax Grant, between the North Carolina border and the Great Lakes, all the way west to the Mississippi River. In 1770, Botetourt County was carved out of Augusta, and in 1772 Fincastle County was created out of Botetourt.
Fincastle County was still huge. Boundaries were defined by a line that ran from the Ohio River up the New River to "Culbertson's creek" (perhaps the mouth of the Greenbrier River in West Virginia), then east across Giles County to roughly I-81 (near Exit 118 to Virginia Tech...), then west of Radford though Floyd County to the crest of the Blue Ridge, on south to the North Carolina border, and then west to the Mississippi River.1
British leaders struggling to pay for the recent war thought it was time to rein in the Virginians, and minimize the costs of expansion. So in 1763, officials in London determined that English settlement should be restricted to the Atlantic Ocean watersheds, and King George III issued the Proclamation of 1763 banning settlement west of the Appalachians.
This ban (and the concurrent opening of the Natchez territory in Mississippi to settlement) was expected to minimize disputes over territory with the Iroquois, Shawnee, Cherokee, and other tribes. Fewer disputes would, at least in theory, minimize the military costs for protecting English settlements.
In Williamsburg, there was a different perspective. Lord Dunmore, though the royal governor of Virginia, was more than willing to ignore the restrictions in the Proclamation of 1763, the 1768 Treaty of Fort Stanwix, and the 1774 transfer of Virginia's western lands to the province of Quebec.
In 1773, Dunmore overruled objections from local - Fincastle County - officials and approved private surveys for land claims at the obviously-valuable but far-away Falls of the Ohio River (now Louisville). He also declared that military warrants, which entitled officers and soldiers who fought in the French and Indian War to land grants, could be filed anywhere in Virginia. In addition to helping make Kentucky more attractive by facilitating land claims, Dunmore even initiated war with the Shawnee and forced them to withdraw from territory south of the Ohio River.2
In 1775, Lord Dunmore was forced to flee Williamsburg as the colony joined what became the American Revolution. Virginia officials faced the same choices as the British officials: how much should be invested in protecting the scattered settlements on the frontiers?
The "rebels" in Williamsburg were reluctant to supply arms and ammunition to the frontier settlers west of Cumberland Gap, when George Rogers Clark arrived in Williamsburg and requested supplies. However, after he complained "if a country were not worth protecting, it was not worth claiming," the rebel governor (Patrick Henry) quickly provided the requested lead and powder.3
In 1776, the General Assembly separated Kentucky County from the lands east of the Cumberland Mountains, and used the Big Sandy River to define the new county boundaries as:4
In 1780, Kentucky County was subdivided into Jefferson, Lincoln, and Fayette counties.
Settlers on the western side of the Cumberland Mountains had little interest in paying taxes to a legislature in Richmond. The General Assembly was dominated by Chesapeake Bay-oriented gentry, and was unresponsive to concerns regarding navigation on the Ohio/Mississippi rivers (the primary outlet for shipping goods from Kentucky to market).
Legal appeals from local court decisions required traveling to Richmond. Plans for funding local militia defense - or attacks on Native Americans across the Ohio River - required approval from so far away, it was unlikely Virginia could protect its distant frontier. The General Assembly created additional counties as population increased in the far western corner of the state, but made no investments in the Kentucky country.
It was obvious that Virginia would provide almost no services to the southwestern edge of the state, and that Kentucky would become an independent political unit. There was even a possibility it could become part of a new colony of Transylvania, proposed by a land speculator who purchased the rights of the Cherokees. There were 10 conventions in Kentucky between 1784-1792, when the US Congress made Kentucky the second new state to enter the Federal union to balance the addition of Vermont in the north.5
As part of the deal, Virginia reserved lands between the Green and Cumberland rivers for honoring warrants for military service in the French and Indian War - comparable to the Virginia Military Reserve north of the Ohio River in what became the Northwest Territory, after Virginia ceded that land to the new Federal government.
Virginia awarded land bounties to recruit soldiers, and designated land within Kentucky for award of that land
Source: Kentucky Secretary of State, Neal Hammon Series of Maps - Virginia's Western Counties, 1780
Virginia was slow in establishing Kentucky as an independent state in part because Virginia's claims to the Northwest Territory were a bargaining chip to solidify Virginia's control over Kentucky. The traditional Virginia pattern of transferring land to private ownership was inefficient and created excessive legal confusion, but state officials were not willing to risk that the new national government might declare all existing claims void and force everyone to repurchase their land.
In the cession of the Northwest Territory Virginia carefully defined its boundary as the low water mark on the northern shore of the Ohio River (not to the middle of the river), thus claiming the entire Ohio River - just as Maryland had established title to the entire Potomac River.
The General Assembly determined, in the legislation authorizing Kentucky independence, that6
Thomas Jefferson proposed that Kentucky should be enlarged, not so much for Kentucky's benefit as for Virginia's. Jefferson had proposed the Northwest Territory be subdivided into small states, and felt that Virginia was unable to govern effectively all the territory it would retain after the separation of Kentucky. From Jefferson's perspective, Kentucky should have included all the territory southwest of the confluence of the Kanawha River and the Ohio River.7
To mark the boundary in 1799, Kentucky and Virginia followed the time-honored process used for defining Virginia's boundaries: each state appointed commissioners and surveyors. At the time, all the land on the northeastern side of the Big Sandy/Tug Fork rivers was still Virginia; West Virginia was not created until 1863.
They followed the Big Sandy/Tug Fork upstream to a point they defined as the intersection of the crest of Cumberland Mountain. They also surveyed northeast along the crest of Cumberland Mountain, starting from "seven pines and two black oaks" on the Walker Line (which was Virginia's definition of its border with Tennessee, in 1799).
The commissioners and surveyors traced the mountain ridge northeastward. They cut away from the Cumberland River/Powell River watershed divide (the Tennessee Valley Divide) and moved to the crest of Pine Mountain, southwest of the current Pound, Virginia. The commissoners and surveyors followed the ridge of Pine Mountain to the current location of Breaks Interstate Park, where Russell Fork (a tributary of Levisa Fork, which is a tributary of the Big Sandy River, which runs into the Ohio River...) cuts through the mountain. There, the surveyors quit following the natural features and marked a 45-degree line straight line northeast to Tug Fork.8
Virginia originally drew the Fincastle county line at the Tug Fork, but determining the "main or north easterly branch" required some judgement. According to one report, the commissioners and surveyors met at the confluence of the Tug and Levisa forks of the Big Sandy River on October 13, 1799. Their discussions were mellowed by strong drink, and they agreed that the Tug Fork was the larger tributary and thus the "main Branch."
The officials of each state planned to sign documents to that effect the next morning. In the evening a major rainstorm caused the Levisa Fork to rise - but on October 14, the "true Kentuckians and Virginians agreed to ratify while sober, what they had agreed while drunk" and the Tug Fork was defined as the boundary line.9
shape of Virginia after 1790 (when Kentucky became an independent state) until 1863 (when West Virginia was created)
Source: Library of Congress, New map of Virginia (1861)