The commission may designate highways subject to improvement under the provisions of Title 23, U.S.C., even though those highways are not located entirely and continuously within the boundaries of the state. The designations shall meet the following conditions:
(1) the highway is on an approved federal-aid route and eligible for improvement under Title 23, U.S.C.;
(2) the location of a portion of the route outside the boundaries of the state is necessary because of natural geographical or physical conditions which make the construction of the highway within the state impossible or impracticable;
(3) the portion of the route located outside the state does not connect with and is not a part of the state highway system of the adjoining state.