Some more of the story . . .
There are three water falls on the SF Sky, Sunset, Canyon, and Eagle. Each is a barrier to upstream fish migration. WDFW has operated a trap-and-haul facility around the falls since the 1950s. The facility is out dated and near the end of its useful life.
The proposed dam is a diversion dam, about 10 feet high, to divert water into a penstock. So there would be a very small pool or reservoir behind the dam, less than 2 acres I think.
The water diversion will be required to have a NMFS' criteria fish screen, with openings between the wedgewire bars of no more than 2 mm and an approach water velocity of 0.4 fps to protect juvenile fish migrating downstream. Fish will be bypassed away from the water intake tunnel and pass down Sunset Falls just as they do now.
If the project is developed, Snohomish PUD will rebuild the WDFW fish ladder and trap to modern fish facility standards. This appears to be important to WDFW, which has no funds to upgrade the facility and can barely keep it operable now.
IMO legitimate reasons for opposing the project include: NIMBY, it will probably be ugly and detract from the appearance of an attractive natural waterfall, there will be some unavoidable slight adverse environmental effects, the cost of the project's energy will be relatively high (the PUD is thinking toward future energy costs), and the SF Skykomish is a state designated Wild and Scenic River. Also the SF Sky is on a regional list of prohibited hydro sights because of being located in an anadromous fish zone.