11752 Federal Register / Vol. 77, No. 39 / Tuesday, February 28, 2012 / Rules and Regulations 

F. Executive Order 13175: Consultation 

and Coordination With Indian Tribal 

Governments 

Executive Order 13175, entitled 

‘‘Consultation and Coordination with 

Indian Tribal Governments’’ (59 FR 

22951, November 9, 2000), requires EPA 

to develop an accountable process to 

ensure ‘‘meaningful and timely input by 

tribal officials in the development of 

regulatory policies that have tribal 

implications.’’ This rule does not have 

tribal implications, as specified in 

Executive Order 13175 because EPA 

retains its authority over Indian 

Country. Thus, Executive Order 13175 

does not apply to this rule. 

G. Executive Order 13045: Protection of 

Children From Environmental Health 

and Safety Risks 

EPA interprets Executive Order 13045 

(62 FR 19885, April 23, 1997) as 

applying only to those regulatory 

actions that concern health or safety 

risks, such that the analysis required 

under section 5–501 of the Executive 

Order has the potential to influence the 

regulation. This action is not subject to 

Executive Order 13045 because it 

approves a state program. 

H. Executive Order 13211: Actions That 

Significantly Affect Energy Supply, 

Distribution, or Use 

This rule is not subject to Executive 

Order 13211, ‘‘Actions Concerning 

Regulations that Significantly Affect 

Energy Supply, Distribution, or Use’’ (66 

FR 28355, May 22, 2001) because it is 

not a ‘‘significant regulatory action’’ as 

defined under Executive Order 12866. 

I. National Technology Transfer and 

Advancement Act 

Section 12(d) of the National 

Technology Transfer and Advancement 

Act of 1995 (‘‘NTTAA’’), Public Law 

104–113, 12(d) (15 U.S.C. 272), directs 

EPA to use voluntary consensus 

standards in its regulatory activities 

unless to do so would be inconsistent 

with applicable law or otherwise 

impractical. Voluntary consensus 

standards are technical standards (e.g., 

materials specifications, test methods, 

sampling procedures, and business 

practices) that are developed or adopted 

by voluntary consensus bodies. The 

NTTAA directs EPA to provide 

Congress, through OMB, explanations 

when the Agency decides not to use 

available and applicable voluntary 

consensus standards. This rulemaking 

does not involve technical standards. 

Therefore, EPA is not considering the 

use of any voluntary consensus 

standards. 

J. Executive Order 12898: Federal 

Actions To Address Environmental 

Justice in Minority Populations and Low 

Income Populations 

Executive Order 12898 (59 FR 7629, 

February 16, 1994) establishes Federal 

executive policy on environmental 

justice. Its main provision directs 

Federal agencies, to the greatest extent 

practicable and permitted by law, to 

make environmental justice part of their 

mission by identifying and addressing, 

as appropriate, disproportionately high 

and adverse human health or 

environmental effects of their programs, 

policies, and activities on minority 

populations and low-income 

populations in the United States. EPA 

has determined that this rule will not 

have disproportionately high and 

adverse human health or environmental 

effects on minority or low-income 

populations. This rule does not affect 

the level of protection provided to 

human health or the environment 

because this rule authorizes pre-existing 

State rules which are no less stringent 

than existing Federal requirements. 

K. Submission to Congress and the 

General Accounting Office 

Under 5 U.S.C. 801(a)(1)(A) as added 

by the Small Business Regulatory 

Enforcement Fairness Act of 1996, EPA 

submitted a report containing this rule 

and other required information to the 

U.S. Senate, the U.S. House of 

Representatives and the Comptroller 

General of the General Accounting 

Office prior to publication of the rule in 

today’s Federal Register. This rule is 

not a ‘‘major rule’’ as defined by 5 

U.S.C. 804(2). 

List of Subjects in 40 CFR Part 281 

Environmental protection, 

administrative practice and procedure, 

hazardous materials, state program 

approval, and underground storage 

tanks. 

Authority: This document is issued under 

the authority of section 9004 of the Resource 

Conservation and Recovery Act, 42 U.S.C. 

6991c. 

Dated: February 14, 2012. 

Dennis J. McLerran, 

Regional Administrator, Region 10. 

[FR Doc. 2012–4657 Filed 2–27–12; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

46 CFR Part 401 

[USCG–2011–0328] 

RIN 1625–AB70 

2012 Rates for Pilotage on the Great 

Lakes 

AGENCY: Coast Guard, DHS. 

ACTION: Final rule. 

SUMMARY: The Coast Guard is adjusting 

the rates for pilotage services on the 

Great Lakes, which were last amended 

in February 2011. The adjustments 

establish new base rates and are made 

in accordance with a required full 

ratemaking procedure. They result in an 

average decrease of approximately 2.62 

percent from the rates established in 

February 2011. This final rule promotes 

the Coast Guard’s strategic goal of 

maritime safety. 

DATES: This final rule is effective August 

1, 2012. 

ADDRESSES: Comments and material 

received from the public, as well as 

documents mentioned in this preamble 

as being available in the docket, are part 

of docket USCG–2011–0328 and are 

available for inspection or copying at 

the Docket Management Facility (M–30), 

U.S. Department of Transportation, 

West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue SE., 

Washington, DC 20590, between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. You may also 

find this docket on the Internet by going 

to http://www.regulations.gov, inserting 

USCG–2011–0328 in the ‘‘Keyword’’ 

box, and then clicking ‘‘Search.’’ 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this rule, call or 

email Mr. Todd Haviland, Management 

& Program Analyst, Office of Great 

Lakes Pilotage, Commandant (CG–5522), 

Coast Guard; telephone 202–372–2037, 

email Todd.A.Haviland@uscg.mil, or fax 

202–372–1909. If you have questions on 

viewing the docket, call Renee V. 

Wright, Program Manager, Docket 

Operations, telephone 202–366–9826. 

SUPPLEMENTARY INFORMATION: 

Table of Contents for Preamble 

I. Abbreviations 

II. Regulatory History 

III. Basis and Purpose 

IV. Background 

V. Discussion of Comments and Changes 

VI. Discussion of the Final Rule 

A. Summary 

B. Calculating the Rate Adjustment 


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1 ‘‘On register’’ means that the vessel’s Certificate 

of Documentation has been endorsed with a registry 

endorsement, and therefore, may be employed in 

foreign trade or trade with Guam, American Samoa, 

Wake, Midway, or Kingman Reef. 46 U.S.C. 12105, 

46 CFR 67.17. 

2A ‘‘laker’’ is a commercial cargo vessel 

especially designed for and generally limited to use 

on the Great Lakes, engaged in trade across the 

Great Lakes region, including trade between the 

U.S. and Canada. 

VII. Regulatory Analyses 

A. Regulatory Planning and Review 

B. Small Entities 

C. Assistance for Small Entities 

D. Collection of Information 

E. Federalism 

F. Unfunded Mandates Reform Act 

G. Taking of Private Property 

H. Civil Justice Reform 

I. Protection of Children 

J. Indian Tribal Governments 

K. Energy Effects 

L. Technical Standards 

M. Environment 

I. Abbreviations 

AMOU American Maritime Officers Union 

CFR Code of Federal Regulations 

COBRA Consolidated Omnibus Budget 

Reconciliation Act 

CPA Certified public accountant 

CPI Consumer Price Index 

FR Federal Register 

GLPAC Great Lakes Pilotage Advisory 

Committee 

NAICS North American Industry 

Classification System 

NPRM Notice of proposed rulemaking 

OMB Office of Management and Budget 

ROI Return on Investment 

§ Section symbol 

U.S.C. United States Code 

II. Regulatory History 

On August 4, 2011, we published a 

notice of proposed rulemaking (NPRM) 

entitled ‘‘2012 Rates for Pilotage on the 

Great Lakes’’ in the Federal Register (76 

FR 47095). We received 10 comments 

on the proposed rule. No public meeting 

was requested and none was held. 

III. Basis and Purpose 

The basis of this rule is the Great 

Lakes Pilotage Act of 1960 (‘‘the Act’’) 

(46 U.S.C. chapter 93), which requires 

U.S. vessels operating ‘‘on register’’ 1

and foreign vessels to use U.S. 

registered pilots while transiting the 

U.S. waters of the St. Lawrence Seaway 

and the Great Lakes system. 46 U.S.C. 

9302(a)(1). The Act requires the 

Secretary of Homeland Security to 

‘‘prescribe by regulation rates and 

charges for pilotage services, giving 

consideration to the public interest and 

the costs of providing the services.’’ 46 

U.S.C. 9303(f). Rates must be 

established or reviewed and adjusted 

each year, not later than March 1. Base 

rates must be established by a full 

ratemaking at least once every 5 years, 

and in years when base rates are not 

established they must be reviewed and 

adjusted if necessary. 46 U.S.C. 9303(f). 

The Secretary’s duties and authority 

under the Act have been delegated to 

the Coast Guard. Department of 

Homeland Security Delegation No. 

0170.1, paragraph (92)(f). Coast Guard 

regulations implementing the Act 

appear in parts 401 through 404 of Title 

46, Code of Federal Regulations (CFR). 

Procedures for use in establishing base 

rates appear in 46 CFR part 404, 

Appendix A (‘‘Appendix A’’), and 

procedures for annual review and 

adjustment of existing base rates appear 

in 46 CFR part 404, Appendix C 

(‘‘Appendix C’’). 

The purpose of this rule is to establish 

new base pilotage rates using the 

Appendix A methodology. 

IV. Background 

The vessels affected by this rule 

traverse the U.S. waters of the Great 

Lakes and are engaged in foreign trade. 

United States and Canadian lake 

freighters, or ‘‘lakers,’’ 2 which account 

for most commercial shipping on the 

Great Lakes, are not affected. 46 U.S.C. 

9302. 

The U.S. waters of the Great Lakes 

and the St. Lawrence Seaway are 

divided into three pilotage districts. 

Pilotage in each district is provided by 

an association certified by the Coast 

Guard Director of Great Lakes Pilotage. 

It is important to note that, while we set 

rates, we do not control the actual 

number of pilots an association 

maintains, as long as the association is 

able to provide safe, efficient, and 

reliable pilotage service. We also do not 

control the actual compensation that 

pilots receive. The actual compensation 

is determined by each of the three 

district associations, which use different 

compensation practices. 

District One, consisting of Areas 1 and 

2, includes all U.S. waters of the St. 

Lawrence River and Lake Ontario. 

District Two, consisting of Areas 4 and 

5, includes all U.S. waters of Lake Erie, 

the Detroit River, Lake St. Clair, and the 

St. Clair River. District Three, consisting 

of Areas 6, 7, and 8, includes all U.S. 

waters of the St. Mary’s River, Sault Ste. 

Marie Locks, and Lakes Michigan, 

Huron, and Superior. Area 3 is the 

Welland Canal, which is serviced 

exclusively by the Canadian Great Lakes 

Pilotage Authority and, accordingly, is 

not included in the U.S. rate structure. 

Areas 1, 5, and 7 have been designated 

by Presidential Proclamation, pursuant 

to the Act, to be waters in which pilots 

must at all times be fully engaged in the 

navigation of vessels in their charge. 

Areas 2, 4, 6, and 8 have not been so 

designated because they are open bodies 

of water. While working in those 

undesignated areas, pilots must only 

‘‘be on board and available to direct the 

navigation of the vessel at the discretion 

of and subject to the customary 

authority of the master.’’ 46 U.S.C. 

9302(a)(1)(B). 

This rule is a full ratemaking to 

establish new base pilotage rates using 

the Appendix A methodology. Among 

other things, the Appendix A 

methodology requires us to review 

detailed pilot association financial 

information, and we contract with 

independent accountants to assist in 

that review. The last full ratemaking 

established the current base rates in 

2006 (final rule, 71 FR 16501, April 3, 

2006). Following the 2006 full 

ratemaking, and for the first time since 

1996 when the Appendix A and 

Appendix C methodologies were 

established, we began a series of five 

annual Appendix C rate reviews and 

adjustments, each of which produced 

overall rate increases. The most recent 

Appendix C annual review was 

concluded on February 4, 2011 (76 FR 

6351), and adjusted pilotage rates 

effective August 1, 2011. 

We intended to establish new base 

rates within 5 years of the 2006 full 

ratemaking, or by March 1, 2011. In 

order to meet that deadline, we started 

our ratemaking process early and were 

using 2007 financial data reported by 

the pilot associations as audited by our 

independent accountant. However, the 

independent accountant’s report on 

pilot association financial information 

proved to be incomplete and inadequate 

for ratemaking purposes due to 

inconsistent financial data collection. 

We went to great lengths and expended 

significant time and resources to resolve 

these inadequacies with the 

independent accountant, to no avail. We 

finally concluded, as we previously 

announced last year (2011 NPRM, 75 FR 

51191 at 51192, col. 3), that we would 

need to contract with a new 

independent accountant, which delayed 

this Appendix A ratemaking. The 

second independent accountant used 

the most recent available data, which 

was for 2009. This year’s NPRM and this 

final rule both are based on our review 

of the second independent accountant’s 

financial report of 2009 data. We 

discuss the comments by the pilot 

associations on that report and the 

independent accountant’s final findings 

in our ‘‘Summary—Independent 

Accountant’s Report on Pilot 

Association Expenses, with Pilot 

Association Comments and 

Accountant’s Responses,’’ which 


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appears in the docket for this 

rulemaking. 

V. Discussion of Comments and 

Changes 

We received public comments on our 

NPRM from 10 commenters. Some 

commenters submitted multiple 

comments. Nine commenters were 

groups or individuals representing 

pilots; the remaining commenter was an 

association representing the agents, 

owners, and operators of ocean ships 

trading to or from the U.S. Great Lakes. 

As a result of these comments and as 

summarized in part VII.A of this 

preamble, when the rate adjustments 

shown in Tables 35 through 37 of this 

preamble are averaged, the average 

decrease in rates for 2012 will be 2.62 

percent and not 4 percent as we 

proposed in the NPRM. 

The 2009 audit base year. Nine 

commenters questioned the Coast 

Guard’s use of 2009 as the auditing base 

year for this ratemaking. They pointed 

out that the Coast Guard originally 

stated (see, for example, the 2007 final 

rule, 72 FR 53158 at 53159 col. 3, Sep. 

18, 2007) that we would base the next 

Appendix A ratemaking on audited data 

‘‘at the completion of the 2007 

navigation season.’’ Some commenters 

felt we had not adequately explained 

why our original audit was unusable, or 

why we did not have the second auditor 

work with the same data that was 

available to the first auditor. All of the 

commenters noted that 2009 was 

historically their ‘‘all time lowest season 

by traffic volume,’’ and hence not 

representative. One commenter 

suggested that we ‘‘apparently selected 

[2009] solely for the effect that it would 

have on the outcome of the rate 

calculation.’’ Some commenters also felt 

that the use of a historically low-traffic 

season as the auditing base year ‘‘flies 

in the face of reason’’ and freezes the 

expense base at 2009 levels even though 

the NPRM projects that 2012 traffic 

levels will be 56 percent higher overall 

than they were in 2009. 

As discussed in part IV of this 

preamble, the first independent 

accountant’s report was based on 

improperly collected 2007 financial 

data, and proved unusable for 

ratemaking. We discussed the issue in 

greater detail at the Great Lakes Pilotage 

Advisory Committee (GLPAC) meeting 

held on October 18, 2011, which was 

attended by most of the nine 

commenters or their representatives. A 

transcript of that meeting appears in the 

docket. It is true that 2009 was a 

historically low base year, but we have 

traditionally and consistently used the 

most recent financial data available for 

ratemaking purposes and there was no 

legitimate basis to depart from this 

precedent. As we explained at the 

GLPAC meeting, we intend to use the 

Appendix A ratemaking methodology 

annually, beginning next year, so that 

year-to-year variations in financial 

conditions can be more quickly 

reflected in the rates. The impact of 

using the 2009 data is somewhat 

ameliorated by the adjustments we are 

making in this final rule, in response to 

comments on the NPRM. Also, the 

improved conditions pilots experienced 

in 2010 should be reflected in the next 

ratemaking cycle. 

Demand projections. Four 

commenters cited the Coast Guard’s 

‘‘consistent over-projection of traffic’’ as 

the main reason pilots consistently fail 

to meet target compensation, have the 

lowest compensation of any pilots in 

America, and are leaving Great Lakes 

piloting for other work. These 

commenters also said traffic falls short 

of projection, so sufficient revenue is 

not generated. One commenter 

suggested that the Coast Guard 

deliberately overestimates projected 

traffic levels to harm the pilots. Other 

commenters suggested that we should 

be more transparent in revealing our 

sources for these projections. 

We would like to be more transparent 

in publicizing these sources and the 

weight we assign to each source. 

However, we know of no single source 

that projects either demand for pilotage 

service or Great Lakes traffic that will 

require a U.S. pilot. Therefore, we must 

rely on historic data, input from pilots 

and industry, periodicals and trade 

magazines, and information from 

conferences to project demand for 

pilotage services. We reduced our 

projections for pilotage service demand 

by nearly 27 percent between 2006 and 

2011. For this 2012 ratemaking, we 

anticipate an additional 4.3 percent 

decrease in demand for pilotage 

services. At the May 20, 2011, GLPAC 

meeting, a transcript of which also 

appears in the docket, we presented an 

analysis of projected bridge hours to 

actual bridge hours. The analysis 

demonstrates that the projected and 

actual bridge hours values converge 

between 2006 and 2010. This 

convergence shows that our ability to 

project demand has improved, and we 

expect that improvement to continue. 

We discussed the issue of pilotage 

demand and traffic projection again at 

the October 2011 GLPAC meeting. 

GLPAC recommended that we consider 

adding a review of using a 3-, 5-, or 7- 

year rolling average of actual bridge 

hours to project bridge hours for future 

rates to the proposed bridge hour study. 

We agreed to include this 

recommendation in the proposed study. 

Work standards and bridge hours. 

Three commenters said that the current 

workload standard of 1,000 bridge hours 

in designated waters and 1,800 bridge 

hours in undesignated waters is 

unrealistically high and jeopardizes 

safe, efficient, and reliable pilotage 

service. This issue was discussed at 

GLPAC’s October 2011 meeting and 

GLPAC approved our outline for a thirdparty study of bridge hours and the 

workload standard. We are currently 

preparing the necessary documentation 

to select a suitable third party to 

conduct the study. While there is 

general consensus that a more accurate 

bridge hour standard needs to be 

developed, there is no evidence that the 

current standard is ‘‘unrealistically high 

and jeopardizes safe, efficient, and 

reliable pilotage service.’’ We will 

continue to use the current established 

standard until a new study provides an 

alternate standard. 

Another commenter said that we had 

departed from the ‘‘previous Appendix 

A procedure’’ in calculating revenue per 

bridge hour. However this commenter 

did not provide any further explanation. 

This commenter said we should ‘‘revert 

to the prior more reasonable practice’’ of 

using revenue and bridge hours from the 

audited year, adjusted for changes in the 

interim period between the audited year 

and the base year. We have never 

performed the procedure outlined by 

this commenter. We followed the same 

procedure we used for the last 

Appendix A review (71 FR 16501 at 

16509, paragraph H), and the steps 

required by the methodology to 

calculate projected revenue by 

multiplying the projected demand for 

bridge hours by the rates currently in 

effect. 

Coast Guard discretionary authority. 

Two commenters who represent pilots 

said without further explanation that we 

should use our broad Appendix A 

authority to revise the proposed 2012 

rates and make them ‘‘fairer, more 

reasonable, and indicative of actual 

expected traffic levels.’’ We disagree 

with the underlying premise of this 

comment that the Appendix A 

methodology provides us with broad 

authority to revise rates. The Appendix 

A methodology requires strict adherence 

to a series of steps and equations that 

leads to consistent ratemaking results. 

As previously stated, we rely on historic 

data, input from pilots and industry, 

periodicals and trade magazines, and 

information from conferences to project 

demand for pilotage services and traffic 

levels. 


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Other comments relating to 

methodology. An industry commenter 

said we consistently ignore the actual 

cost to the industry of pilotage services 

in the United States and that our 

ratemaking methodology only makes 

reference to projected or required 

revenues and never includes any 

mention of actual costs for previous 

years. We disagree. Operating expenses 

represent one of the primary drivers of 

the current ratemaking methodology. 

The operating expenses reported in the 

pilot association financial statements 

and the independent accountant’s 

audits are actual expenses that are used 

in developing the ‘‘projection of 

operating expenses’’ for the coming 

year. This is the first step of an 

Appendix A ratemaking. In addition, 

the expenses of pilot compensation and 

benefits that must be recovered in the 

rate are also included in the calculation 

using past years’ data to project the cost 

into the coming year. The Appendix A 

methodology similarly dictates how we 

project revenues for ratemaking 

purposes which also require an 

examination of historical data. The 

commenter states that no where does 

the methodology mention ‘‘total costs 

for previous years.’’ While true, as 

discussed, the methodology does take 

into consideration total prior costs and 

expenses in the ratemaking process. In 

addition, our shift to conducting 

Appendix A rulemakings on an annual 

basis will also recognize ‘‘necessary and 

reasonable’’ operating expenses in a 

more timely manner, allow us to use a 

more accurate operating expense base 

when we establish rates, and better 

reflect the operating expenses associated 

with providing pilotage on the Great 

Lakes. 

A pilot association commenter said 

that our inflation/deflation and payroll 

tax adjustments should account for the 

3 years between the 2009 base year and 

conditions that can be projected for the 

2012 navigation season. We disagree. 

The Appendix A methodology clearly 

states that the inflation/deflation 

adjustment must be based on the single 

year between the base year and the 

succeeding navigation season, and 

payroll expense adjustments must be 

based on actual base year expenses. 

The same commenter said that 

because most rate adjustment factors are 

unrelated to the benchmark union 

contract changes that take effect in 

August, those unrelated factors should 

be recognized in rate changes that take 

effect at the beginning of the 2012 

shipping season, and not be delayed 

until August. We disagree. These 

benchmark changes, though perhaps 

few in number compared to the many 

factors our ratemaking methodology 

takes into account, continue to be the 

substantial portion of the rate 

adjustment. We will continue this 

practice for the 2012 Appendix A 

rulemaking, as in every year since 2009 

when the rate became effective August 

1, consistent with the date when the 

benchmark contract changes take effect. 

One commenter, representing all three 

Great Lakes pilotage associations, said 

that membership dues for the American 

Pilots’ Association (APA) should not be 

viewed as discretionary or personal to 

pilots, but as necessary and reasonable 

expenses of each association, and that 

except for the portion directly 

attributable to lobbying expenses, these 

dues should be included in the rate 

base. The issue of pilot association dues 

arose in our last Appendix A 

ratemaking. 71 FR 16501 at 16507, col. 

3. Our regulations provide clear 

guidance concerning this issue and 

state, ‘‘[each] expense item included in 

the rate base is evaluated to determine 

if it is necessary for the provision of 

pilotage service, and if so, what dollar 

amount is reasonable for the expense.’’ 

46 CFR 404.5(a)(1). Recognizable 

expenses must be both ‘‘reasonable and 

necessary for the provision of pilotage.’’ 

This topic is analogous to a licensure 

issue. Expenditures associated with 

obtaining and maintaining one’s pilot’s 

license represent ‘‘necessary’’ expenses 

that are recognized. Membership in a 

voluntary special interest association, 

like the APA, is not necessary for the 

provision of pilotage. Therefore, we 

found then, and continue to find, that 

American Pilots’ Association 

membership dues are not necessary and 

thus are excluded from the rate’s 

expense base. 71 FR at 16506, col. 3. 

Another commenter representing 

pilots said it is very frustrating to 

address the same issues year after year 

in connection with the ratemaking 

process with no progress made on what 

are clearly identified problems. We 

understand the commenter’s frustration, 

but the progress the commenter seeks 

cannot take place within the annual 

ratemakings that simply apply the 

existing ratemaking methodology. The 

upcoming third-party study of the 

bridge hour definition and the workload 

standard, and our decision to begin 

annual Appendix A reviews, are all 

efforts to address these issues and 

should alleviate stakeholder concerns. 

In addition, these issues have been the 

subject of discussion at the May and 

October 2011 GLPAC meetings, both of 

which were open to the public. 

District One-specific comments. 

Commenters representing pilots in 

District One raised comments specific to 

that district. Some of the following 

comments were made by the local 

pilotage association and others were 

made by the association’s controller. 

First, the pilots said that to derive the 

full cost of their operating expenses and 

return on investment, we should 

include the operating expenses and 

assets of the service corporation 

affiliated with the pilots’ association. 

Our ratemaking is based on the financial 

information provided by each 

association, Appendix A, Sub-step 1.A. 

The independent accountant’s draft 

financial report included expenses of 

the service corporation and the 

association did not raise this issue when 

it reviewed the draft report. The draft 

report’s findings, the association’s 

comments on those findings, and the 

final findings are all discussed in the 

‘‘Summary—Independent Accountant’s 

Report on Pilot Association Expenses, 

with Pilot Association Comments and 

Accountant’s Responses,’’ which appear 

in the docket for this rulemaking. 

However, the independent 

accountant’s financial reports did not 

include the investment base calculation. 

We coordinated with the independent 

accountant and used the financial 

information provided by District One to 

calculate the investment base for this 

rulemaking. The independent 

accountant’s financial reports will 

include the investment base calculation 

for future rulemakings. 

Second, the pilots raised a number of 

questions about the expenses they are 

now incurring for a new pilot boat that 

entered service after the close of the 

2009 base year. Under the ratemaking 

methodology, we can recognize 

‘‘foreseeable circumstances’’ that could 

affect operating expenses in the 

upcoming year, but we cannot recognize 

foreseeable circumstances that might 

affect the calculation of the association’s 

2012 investment base (Appendix A, 

Sub-steps 1.D, 4). We consider 

significant capital expenditures and the 

fixed costs associated with those capital 

expenditures as ‘‘foreseeable 

circumstances.’’ The rest of the 

expenses that fluctuate due to market 

forces and the variance in demand for 

pilot services will be reimbursed when 

they are recognized in the independent 

accountant’s financial reports that we 

will use in future ratemaking. Thus, for 

2012, and for the duration of the pilot 

boat mortgage contract, we will 

recognize the association’s mortgage 

payments on the boat as a foreseeable 

circumstance affecting their operating 

expenses. Also, we will recognize the 

current insurance costs for the boat as 

a one-time expense for 2012. We will 

not recognize the boat’s depreciation 


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11756 Federal Register / Vol. 77, No. 39 / Tuesday, February 28, 2012 / Rules and Regulations 

because we are already recognizing the 

payment of the mortgage principle. 

Recognizing the payment of the 

mortgage principal and depreciation 

would be double counting for the same 

expense. 

Third, the pilots raised questions 

about a new dock and boatlift they plan 

to acquire in 2012. Based on the 

agreement the association has entered 

into for the performance of this work, 

we will recognize the association’s cost 

as a foreseeable circumstance affecting 

their operating expenses in 2012. We 

will adjust for any expense shortfalls or 

overages in the following year’s 

ratemaking. 

Fourth, the association’s controller 

said we should adjust projected 

operating expenses for pilot subsistence 

and travel, in recognition of projected 

2012 traffic levels for Areas 1 and 2 that 

are 62 percent and 50 percent higher, 

respectively, than 2009 levels. The 

controller also said we should raise the 

adjustment for license insurance 

because the association is adding a new 

pilot, and that 2012 projections should 

discount the layoffs that economic 

conditions forced in 2009 that 

consequently lowered the association’s 

2009 operating expenses. We believe 

that each of the proposed adjustments 

rests on assumptions that by themselves 

are too speculative to constitute 

‘‘foreseeable circumstances’’ for 2012 

within the meaning of Appendix A, 

Step 1.D. Our planned use of Appendix 

A for future annual ratemakings will 

allow demonstrated changes in each of 

these factors to be recognized beginning 

in 2013. 

District Two-specific issues. 

Commenters representing pilots in 

District Two raised comments specific 

to that district. Some of the following 

comments were made by the local 

pilotage association and others were 

made by the association’s certified 

public accountant (CPA). 

The association said we should adjust 

the 2012 rates in recognition that several 

unusual factors of the 2009 base year are 

unlikely to reoccur in 2012. In 2009, the 

commenter claimed that there were 

significant layoffs, the association 

eliminated one pilot’s position, health 

plan coverage was temporarily 

suspended for retirees, pilots’ 

subsistence and travel expenses were 

decreased, the American Pilots’ 

Association temporarily reduced the 

association’s dues because of economic 

hardship, and the association moved out 

of temporary headquarters into a more 

costly new headquarters late in the year. 

We are recognizing the mortgage and tax 

payments the association is making on 

its new headquarters as ‘‘foreseeable 

circumstances’’ affecting 2012 operating 

expenses, but the other proposed 

adjustments rest on assumptions that, 

by themselves, are too speculative to 

constitute foreseeable circumstances for 

2012 within the meaning of Appendix 

A, Step 1.D. Our use of the Appendix 

A methodology for annual ratemakings 

will account for demonstrated changes 

in each of these factors, which will be 

recognized beginning in 2013. 

The association’s CPA said the 

association’s interest expenses increased 

in 2011 due to motor and interior 

upgrades on two pilot boats in this 

rulemaking. We are recognizing those 

expenses for one of the boats. For the 

other, we still lack sufficient 

documentation to treat any increase as 

a foreseeable circumstance affecting 

2012 operating expenses because the 

association is still negotiating the 

contract related to the financing of the 

upgrades. 

The same CPA also said that the 

association’s investment base should be 

increased by the cost of constructing the 

association’s new headquarters and to 

reflect the fair market value of the 

upgraded pilot boat. Changes to the 

investment base cannot be treated on 

the same ‘‘foreseeable circumstances’’ 

basis we use for operating expenses, but 

these impacts, once they are actually felt 

by the association and reported, should 

be captured in future annual Appendix 

A ratemakings, perhaps as early as next 

year. 

Annual Appendix A reviews. One 

commenter, representing all three 

pilotage associations, encouraged us to 

follow through with annual Appendix A 

reviews beginning next year, noting that 

this would be fairer to all parties than 

our past practice of using the Appendix 

A methodology once every 5 years and 

relying on the Appendix C methodology 

in interim years. We agree and have 

already begun the audit of 2010 

expenses in preparation for next year’s 

Appendix A ratemaking. The 

associations will have an opportunity to 

review, question, and comment on the 

independent accountant’s draft reports. 

The independent accountant will 

consider the questions and comments 

and draft the final financial reports, 

which we will then use as the basis for 

next year’s NPRM and final rule. 

VI. Discussion of the Final Rule 

A. Summary 

We are decreasing base pilotage rates 

in accordance with the Appendix A 

methodology. The new rates will be 

established by March 1, 2012, and 

effective August 1, 2012. Table 1 shows 

the percent change for the new rates for 

each area. Overall, rates will average 

approximately 2.62 percent less than the 

February 2011 rate adjustments, not 4 

percent as we proposed in the NPRM. 

TABLE 1—SUMMARY OF RATE

ADJUSTMENTS

If pilotage service is required 

in: 

Then the percent change 

over the current rate is: 

Area 1 (Designated Waters) 3.59 

Area 2 (Undesignated 

Waters) .............................. ¥3.10 

Area 4 (Undesignated 

Waters) .............................. ¥3.90 

Area 5 (Designated Waters) ¥3.03 

Area 6 (Undesignated 

Waters) .............................. ¥3.73 

Area 7 (Designated Waters) ¥3.08 

Area 8 (Undesignated 

Waters) .............................. ¥5.08 

B. Calculating the Rate Adjustment 

Appendix A provides seven steps, 

with sub-steps, for calculating rate 

adjustments. The following discussion 

describes those steps and sub-steps and 

includes tables showing how we 

applied them to the 2009 detailed pilot 

financial information. 

Step 1: Projection of Operating 

Expenses. In this step, we project the 

amount of vessel traffic annually. Based 

on that projection, we forecast the 

amount of fair and reasonable operating 

expenses that pilotage rates should 

recover. 

Sub-step 1.A: Submission of Financial 

Information. This sub-step requires each 

pilot association to provide us with 

detailed financial information in 

accordance with 46 CFR part 403. The 

associations complied with this 

requirement, supplying 2009 financial 

information in 2010. 

Sub-step 1.B: Determination of 

Recognizable Expenses. This sub-step 

requires us to determine which reported 

association expenses will be recognized 

for ratemaking purposes, using the 

guidelines shown in 46 CFR 404.5. We 

contracted with an independent 

accountant to review the reported 

expenses and submit findings with 

recommendations on which reported 

expenses should be recognized. The 

accountant also reviewed which 

reported expenses should be adjusted 

prior to recognition and which, if any, 

should be denied for ratemaking 

purposes. The independent accountant 

made preliminary findings; these 

findings were sent to the pilot 

associations, and the pilot associations 

reviewed and provided comments. 

Then, the independent accountant made 

final findings. The Coast Guard Director 


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of Great Lakes Pilotage reviewed and 

accepted those final findings, resulting 

in the determination of recognizable 

expenses. The preliminary findings, the 

associations’ comments on those 

findings, and the final findings are all 

discussed in the ‘‘Summary— 

Independent Accountant’s Report on 

Pilot Association Expenses, with Pilot 

Association Comments and 

Accountant’s Responses,’’ which appear 

in the docket for this rulemaking. Tables 

2 through 4 show each association’s 

recognized expenses. 

TABLE 2—RECOGNIZED EXPENSES FOR DISTRICT ONE

Reported expenses for 2009 

Area 1 Area 2 

Total St. Lawrence 

River Lake Ontario 

Other Pilot Costs: 

Pilot subsistence/travel ................................................................................................... $164,782 $131,436 $296,218 

License insurance ........................................................................................................... 28,428 18,952 47,380 

Other ............................................................................................................................... 980 857 1,837 

Pilot Boat and Dispatch Expenses: 

Pilot boat expense .......................................................................................................... 101,612 82,506 184,118 

Administrative Expenses: 

Legal ............................................................................................................................... 10,450 8,685 19,135 

Depreciation/auto leasing/other ...................................................................................... 8,917 7,283 16,200 

Dues and subscriptions .................................................................................................. 13,717 10,678 24,395 

Bad debt expense .......................................................................................................... 9,302 1,004 10,306 

Utilities ............................................................................................................................ 478 346 824 

Accounting/professional Fees ........................................................................................ 2,182 1,818 4,000 

Bookkeeping and Administration .................................................................................... 77,730 66,121 143,851 

Other ............................................................................................................................... 762 582 1,344 

Total Recognizable .................................................................................................. 419,340 330,268 749,608 

Adjustments: 

Other Pilot Costs: 

Pilotage Subsistence/Travel .................................................................................... (4,624 ) (3,641 ) (8,265 ) 

Payroll taxes ............................................................................................................ 48,508 38,204 86,712 

Other ........................................................................................................................ (589 ) (463 ) (1,052 ) 

Administrative Expenses: 

Legal ............................................................................................................................... (270 ) (212 ) (482 ) 

Dues and subscriptions .................................................................................................. (13,647) (10,748 ) (24,395 ) 

Bad debt expense .......................................................................................................... (5,765 ) (4,540 ) (10,305 ) 

Other ............................................................................................................................... (120 ) (94 ) (214 ) 

Total CPA Adjustments ........................................................................................... 23,495 18,504 41,999 

Total Expenses ................................................................................................ 442,835 348,772 791,607 

TABLE 3—RECOGNIZED EXPENSES FOR DISTRICT TWO

Reported expenses for 2009 

Area 4 Area 5 

Total 

Lake Erie 

Southeast 

Shoal to Port 

Huron, MI 

Other Pilot Costs 

Pilot subsistence/travel ................................................................................................... $67,580 $101,371 $168,951 

License insurance ........................................................................................................... 6,254 9,380 15,634 

Payroll taxes ................................................................................................................... 19,453 43,770 63,223 

Other ............................................................................................................................... 12,697 28,662 41,359 

Pilot Boat and Dispatch Expenses: 

Pilot boat expense .......................................................................................................... 28,026 179,577 207,603 

Dispatch expense ........................................................................................................... 12,975 0 12,975 

Payroll taxes ................................................................................................................... 0 7,154 7,154 

Administrative Expenses: 

Legal ............................................................................................................................... 30,052 45,079 75,131 

Office rent ....................................................................................................................... 30,275 45,413 75,688 

Insurance ........................................................................................................................ 10,408 15,611 26,019 

Employee benefits .......................................................................................................... 26,483 39,725 66,208 

Payroll taxes ................................................................................................................... 3,821 5,731 9,552 

Other taxes ..................................................................................................................... 9,815 14,723 24,538 

Depreciation/auto leasing/other ...................................................................................... 27,383 41,075 68,458 

Interest ............................................................................................................................ 16,314 24,471 40,785 

Dues and subscriptions .................................................................................................. 4,450 6,675 11,125 

Salaries ........................................................................................................................... 12,164 18,245 30,409 

Accounting/professional Fees ........................................................................................ 43,071 64,607 107,678 

Bookkeeping and Administration .................................................................................... 9,400 14,100 23,500 


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TABLE 3—RECOGNIZED EXPENSES FOR DISTRICT TWO—Continued 

Reported expenses for 2009 

Area 4 Area 5 

Total 

Lake Erie 

Southeast 

Shoal to Port 

Huron, MI 

Other ............................................................................................................................... 9,427 14,140 23,567 

Total Recognizable .................................................................................................. 380,048 719,509 1,099,557 

Adjustments: 

Other Pilot Costs: 

Pilotage Subsistence/Travel .................................................................................... (1,338 ) (2,533 ) (3,871 ) 

Pilot Boat and Dispatch Expenses: 

Pilot boat expense .......................................................................................................... 2,907 5,504 8,411 

Administrative Expenses: 

Legal ............................................................................................................................... (4,915 ) (9,305 ) (14,220 ) 

Employee benefits .......................................................................................................... 1,177 2,228 3,405 

Other taxes ..................................................................................................................... (238 ) (450 ) (688 ) 

Depreciation/auto leasing/other ...................................................................................... 2,398 4,540 6,938 

Interest ............................................................................................................................ (10,379 ) (19,649 ) (30,028 ) 

Dues and subscriptions .................................................................................................. (3,807 ) (7,208 ) (11,015 ) 

Salaries ........................................................................................................................... 417 789 1,206 

Other ............................................................................................................................... (833 ) (1,577 ) (2,410 ) 

Total CPA Adjustments ........................................................................................... (14,611 ) (27,661 ) (42,272 ) 

Total Expenses ................................................................................................ 365,437 691,848 1,057,285 

TABLE 4—RECOGNIZED EXPENSES FOR DISTRICT THREE

Reported expenses for 2009 

Area 6 Area 7 Area 8 

Total Lakes Huron 

and Michigan St. Mary’s River Lake Superior 

Other Pilot Costs: 

Pilot subsistence/Travel .................................................................... $144,081 $75,501 $95,005 $314,587 

License insurance ............................................................................. 10,577 5,543 6,975 23,095 

Other ................................................................................................. 1,025 537 675 2,237 

Pilot Boat and Dispatch Expenses: 

Pilot boat costs ................................................................................. 156,031 81,763 102,885 340,679

Dispatch expense ............................................................................. 46,365 24,296 30,572 101,233 

Payroll taxes ..................................................................................... 5,846 3,064 3,855 12,765 

Administrative Expenses: 

Legal ................................................................................................. 16,462 8,626 10,855 35,943 

Office Rent ........................................................................................ 4,534 2,376 2,990 9,900 

Insurance .......................................................................................... 6,730 3,527 4,438 14,695 

Employee benefits ............................................................................ 50,668 26,551 33,410 110,629 

Payroll taxes ..................................................................................... 4,774 2,502 3,148 10,424 

Other taxes ....................................................................................... 11,599 6,078 7,648 25,325 

Depreciation/auto Leasing ................................................................ 17,396 9,116 11,471 37,983 

Interest .............................................................................................. 2,417 1,267 1,594 5,278 

Dues and Subscriptions ................................................................... 15,594 8,172 10,283 34,049 

Utilities .............................................................................................. 15,182 7,956 10,011 33,149 

Salaries ............................................................................................. 35,110 18,398 23,151 76,659 

Accounting/professional fees ............................................................ 8,588 4,500 5,663 18,751 

Other ................................................................................................. 6,852 3,591 4,518 14,961 

Total Recognizable .................................................................... 559,831 293,364 369,147 1,222,342 

Adjustments: 

Other Pilot Costs:.

Pilotage Subsistence/Travel ...................................................... (1,102 ) (578 ) (727 ) (2,407 ) 

Payroll taxes .............................................................................. 28,842 15,114 19,018 62,973 

Other .......................................................................................... (196 ) (103 ) (129 ) (428 ) 

Pilot Boat and Dispatch Expenses: 

Dispatch costs .................................................................................. (3,367 ) (1,764 ) (2,220 ) (7,352 ) 

Administrative Expenses: 

Legal ................................................................................................. (1,447 ) (758 ) (954 ) (3,159 ) 

Employee benefits ............................................................................ (1,380 ) (723 ) (910 ) (3,013 ) 

Depreciation/auto leasing/other ........................................................ 599 314 395 1,307 

Dues and Subscriptions ................................................................... (15,594 ) (8,172 ) (10,283 ) (34,049 ) 

Other ................................................................................................. (528 ) (277 ) (348 ) (1,153 ) 


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TABLE 4—RECOGNIZED EXPENSES FOR DISTRICT THREE—Continued 

Reported expenses for 2009 

Area 6 Area 7 Area 8 

Total Lakes Huron 

and Michigan St. Mary’s River Lake Superior 

Total CPA Adjustments ............................................................. 5,825 3,053 3,841 12,719 

Total Expenses .................................................................. 565,656 296,417 372,988 1,235,061 

Sub-step 1.C: Adjustment for Inflation 

or Deflation. In this sub-step we project 

rates of inflation or deflation for the 

succeeding navigation season. Because 

we used 2009 financial information, the 

‘‘succeeding navigation season’’ for this 

ratemaking is 2010. We based our 

inflation adjustment of 2 percent on the 

2010 change in the Consumer Price 

Index (CPI) for the North Central Region 

of the United States, which can be 

found at: http://www.bls.gov/xg_shells/

ro5xg01.htm. This adjustment appears 

in Tables 5 through 7. 

TABLE 5—INFLATION ADJUSTMENT, DISTRICT ONE

Reported expenses for 2009 

Area 1 Area 2 

Total St. Lawrence 

River Lake Ontario 

Total Expenses .............................................................................................. $442,835 $348,772 $791,607 

2010 change in the Consumer Price Index (CPI) for the North Central Region 

of the United States .......................................................................................... × .02 × .02 × .02 

Inflation Adjustment .............................................................................................. = $8,857 = $6,975 = $15,832 

TABLE 6—INFLATION ADJUSTMENT, DISTRICT TWO

Reported expenses for 2009 

Area 4 Area 5 

Total 

Lake Erie 

Southeast 

Shoal to Port 

Huron, MI 

Total Expenses .............................................................................................. $365,437 $691,848 $1,057,285 

2010 change in the Consumer Price Index (CPI) for the North Central Region 

of the United States .......................................................................................... × .02 × .02 × .02 

Inflation Adjustment .............................................................................................. = $7,309 = $13,837 = $21,146 

TABLE 7—INFLATION ADJUSTMENT, DISTRICT THREE

Reported expenses for 2009 

Area 6 Area 7 Area 8 

Total Lakes Huron 

and Michigan 

St. Mary’s 

River Lake Superior 

Total Expenses .......................................................... $565,656 $296,417 $372,988 $1,235,061 

2010 change in the Consumer Price Index (CPI) for the 

North Central Region of the United States ................... × .02 × .02 × .02 × .02 

Inflation Adjustment ........................................................... = $11,313 = $5,928 = $7,460 = $24,701 

Step 1.D: Projection of Operating 

Expenses. The final sub-step of Step 1 

is to project the operating expenses for 

each pilotage area on the basis of the 

preceding sub-steps and any other 

foreseeable circumstances that could 

affect the accuracy of the projection. We 

received comments and supporting 

material and determined that 

foreseeable circumstances exist in 

Districts One and Two that could affect 

the accuracy of the projection. As 

previously stated, we consider only 

significant capital expenses and the 

fixed costs associated with the expenses 

as foreseeable circumstances. 

District One’s pilot boat mortgage 

payments, pilot boat insurance, and 

dock renovation and boat lift project 

qualify as foreseeable circumstances. 

For District One, the projected operating 

expenses are based on the calculations 

from Sub-steps 1.A through 1.C and the 

aforementioned foreseeable 

circumstances. Table 8 shows these 

projections. 


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TABLE 8—PROJECTED OPERATING EXPENSES, DISTRICT ONE

Reported expenses for 2009 

Area 1 Area 2 

Total St. Lawrence 

River Lake Ontario 

Total expenses before foreseeable circumstances .............................................. $442,835 $348,772 $791,607 

Inflation adjustment 2% ........................................................................................ + $8,857 + $6,975 + $15,832 

Foreseeable circumstances (Director’s adjustment): 

Pilot boat mortgage payments ...................................................................... + $39,643 + $31,222 + $70,865

Pilot boat insurance ....................................................................................... + $10,831 + $8,531 + $19,362 

Dock renovation and boat lift project ............................................................ + $72,486 + $57,089 + $129,575

Total projected expenses for 2012 pilotage season .............................. = $574,652 = $452,590 = $1,027,242 

District Two’s pilot boat (HURON 

MAID) upgrade, annual mortgage 

expense, and property tax expense 

qualify as foreseeable circumstances. 

During the audit for next year’s 2013 

Appendix A rulemaking, the 

independent accountant informed us 

that District Two applied for and 

received a Consolidated Omnibus 

Budget Reconciliation Act (COBRA) 

subsidy for the third and fourth quarter 

of 2009. The American Recovery and 

Reinvestment Act of 2009 provided for 

a temporary premium subsidy for 

COBRA continuation coverage. The 

amount of the COBRA insurance 

subsidy for the period 2009 was 

$99,993.02. For District Two, the 

projected operating expenses are based 

on the calculations from Sub-steps 1.A 

through 1.C, the aforementioned 

foreseeable circumstances, and the 

COBRA subsidy. Table 9 shows these 

projections. 

TABLE 9—PROJECTED OPERATING EXPENSES, DISTRICT TWO

Reported expenses for 2009 

Area 4 Area 5 

Total 

Lake Erie 

Southeast 

Shoal to Port 

Huron, MI 

Total expenses ..................................................................................................... $365,437 $691,848 $1,057,285 

Inflation adjustment 2% ........................................................................................ + $7,309 + $13,837 + $21,146 

Foreseeable circumstances (Director’s adjustment): 

Huron Maid upgrade ...................................................................................... + $27,104 + $40,657 + $67,761 

Annual mortgage expense ............................................................................ + $7,804 + $11,706 + $19,511

Property tax expense .................................................................................... + $1,693 + $2,540 + $4,233 

American Recovery and Reinvestment Act of 2009 COBRA subsidy .......... + ($39,997) + ($59,996) + ($99,993) 

Total projected expenses for 2012 pilotage season .............................. = $369,351 = $700,592 = $1,069,943 

Because we are not now aware of any 

such foreseeable circumstances for 

District 3, the projected operating 

expenses are based exclusively on the 

calculations from Sub-steps 1.A through 

1.C. Table 10 shows these projections. 

TABLE 10—PROJECTED OPERATING EXPENSES, DISTRICT THREE

Reported expenses for 2009 

Area 6 Area 7 Area 8 

Total Lakes Huron 

and Michigan 

St. Mary’s 

River Lake Superior 

Total .................................................................................. $565,656 $296,417 $372,988 $1,235,061 

Inflation Adjustment 2% .................................................... + $11,313 + $5,928 + $7,460 + $24,701 

Total projected expenses for 2012 pilotage season = $576,969 = $302,345 = $380,448 = $1,259,762 

Step 2: Projection of Target Pilot 

Compensation. In Step 2, we project the 

annual amount of target pilot 

compensation that pilotage rates should 

provide in each area. These projections 

are based on our latest information on 

the conditions that will prevail in 2012. 

Sub-step 2.A: Determination of Target 

Rate of Compensation. We first 

explained the methodology we 

consistently used for this sub-step in the 

interim rule for our last Appendix A 

ratemaking (68 FR 69564 at 69571 col. 

3; December 12, 2003), and most 

recently restated this explanation in our 

2011 Appendix C final rule (76 FR 6351 

at 6354 col. 3; February 4, 2011). Target 

pilot compensation for pilots in 

undesignated waters approximates the 

average annual compensation for first 

mates on U.S. Great Lakes vessels. 

Compensation is determined based on 

the most current union contracts and 

includes wages and benefits received by 

first mates. We calculate target pilot 

compensation for pilots on designated 

waters by multiplying the average first 

mates’ wages by 150 percent and then 

adding the average first mates’ benefits. 

The most current union contracts 

available to us are American Maritime 

Officers Union (AMOU) contracts with 

three U.S. companies engaged in Great 

Lakes shipping. There are two separate 

AMOU contracts available—we refer to 

them as Agreements A and B and 

apportion the compensation provided 

by each agreement according to the 

percentage of tonnage represented by 


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companies under each agreement. 

Agreement A applies to vessels operated 

by Key Lakes, Inc., and Agreement B 

applies to all vessels operated by 

American Steamship Co. and Mittal 

Steel USA, Inc. 

Agreements A and B both expired on 

July 31, 2011, and AMOU did not reach 

an agreement on new contracts in time 

for us to incorporate them into this 

ratemaking. However, based on past 

contract increases and on the current 

contracts, we can project that any new 

contracts would provide for annual 3- 

percent wage increases. Under 

Agreement A, we project that the daily 

wage rate would increase from $278.73 

to $287.09. Under Agreement B, we 

project that the daily wage rate would 

increase from $343.59 to $353.90. 

Because we are interested in annual 

compensation, we must convert these 

daily rates. Agreements A and B both 

use monthly multipliers to convert daily 

rates into monthly figures that represent 

actual working days and vacation, 

holiday, weekend, or bonus days. The 

monthly multiplier for Agreement A is 

54.5 days and the monthly multiplier 

for Agreement B is 49.5 days. We 

multiply the monthly figures by 9, 

which represents the average length (in 

months) of the Great Lakes shipping 

season. Table 11 shows our calculations. 

TABLE 11—PROJECTED WAGE COMPONENTS

Monthly component 

Pilots on 

undesignated 

waters 

Pilots on 

designated 

waters 

Agreement A: 

$287.09 daily rate × 54.5 days ......................................................................................................................... $15,646 $23,470 

Monthly total × 9 months = total wages ........................................................................................................... 140,818 211,226 

Agreement B: 

$353.90 daily rate × 49.5 days ......................................................................................................................... 17,518 26,277 

Monthly total × 9 months = total wages ........................................................................................................... 157,662 236,494 

Based on increases over the 5-year 

history of the current contracts, we 

project that both Agreements A and B 

will increase their health benefits 

contributions and leave 401K plan and 

pension contributions unchanged. On 

average, health benefits contribution 

rates have increased 10 percent 

annually. Thus, we project that both 

Agreements A and B will increase this 

benefit from $97.64 to $107.40 per day. 

The multiplier that both agreements use 

to calculate monthly benefits from daily 

rates is currently 45.5 days, and we 

project that this figure will remain 

unchanged. We use a 9-month 

multiplier to calculate the annual value 

of these benefits. Table 12 shows our 

calculations. 

TABLE 12—PROJECTED BENEFITS COMPONENTS

Monthly component 

Pilots on 

undesignated 

waters 

Pilots on 

designated 

waters 

Agreement A: 

Employer contribution, 401K plan (Monthly wages × 5%) ............................................................................... $782.32 $1,173.48 

Pension = $33.35 × 45.5 days ......................................................................................................................... 1,517.43 1,517.43 

Health = $107.40 × 45.5 days .......................................................................................................................... 4,886.70 4,886.70 

Monthly total benefits ....................................................................................................................................... 7,186.45 7,577.61 

Monthly total benefits × 9 months .................................................................................................................... 64,678 68,198 

Agreement B: 

Employer contribution, 401K plan (Monthly wages × 5%) ............................................................................... 875.90 1,313.85 

Pension = $43.55 × 45.5 days ......................................................................................................................... 1,981.53 1,981.53 

Health = $107.40 × 45.5 days .......................................................................................................................... 4,886.70 4,886.70 

Monthly total benefits ....................................................................................................................................... 7,744.13 8,182.08 

Monthly total benefits × 9 months .................................................................................................................... 69,697 73,639 

Table 13 combines our projected wage 

and benefit components of annual target 

pilot compensation. 

TABLE 13—PROJECTED WAGE AND BENEFITS COMPONENTS, COMBINED

Pilots on 

undesignated 

waters 

Pilots on 

designated 

waters 

Agreement A: 

Wages ............................................................................................................................................................... $140,818 $211,226 

Benefits ............................................................................................................................................................. 64,678 68,198 

Total .................................................................................................................................................................. 205,496 279,425 

Agreement B: 

Wages ............................................................................................................................................................... 157,662 236,494 


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TABLE 13—PROJECTED WAGE AND BENEFITS COMPONENTS, COMBINED—Continued 

Pilots on 

undesignated 

waters 

Pilots on 

designated 

waters 

Benefits ............................................................................................................................................................. 69,697 73,639 

Total .................................................................................................................................................................. 227,360 310,132 

Agreements A and B affect three 

companies. Of the tonnage operating 

under those three companies, 

approximately 30 percent operates 

under Agreement A and approximately 

70 percent operates under Agreement B. 

Table 14 provides detail. 

TABLE 14—SHIPPING TONNAGE APPORTIONED BY CONTRACT

Company Agreement A Agreement B 

American Steamship Company ....................................................... ............................................................ 815,600 

Mittal Steel USA, Inc. ...................................................................... ............................................................ 38,826 

Key Lakes, Inc. ................................................................................ 361,385 ............................................................

Total tonnage, each agreement ............................................... 361,385 854,426 

Percent tonnage, each agreement .................................................. 361,395 ÷ 1,215,811 = 29.7238% 854,426 ÷ 1,215,811 = 70.2962% 

We use the percentages from Table 14 

to apportion the projected wage and 

benefit components from Table 13. This 

gives us a single tonnage-weighted set of 

figures. Table 15 shows our 

calculations. 

TABLE 15—TONNAGE-WEIGHTED WAGE AND BENEFIT COMPONENTS

Undesignated 

waters 

Designated 

waters 

Agreement A: 

Total wages and benefits .................................................................................................................. $205,496 $279,425 

Percent tonnage ................................................................................................................................ × 29.7238% × 29.7238% 

Total ........................................................................................................................................... = $61,081 = $83,056 

Agreement B: 

Total wages and benefits .................................................................................................................. $227,360 $310,132 

Percent tonnage ................................................................................................................................ × 70.2762% × 70.2762% 

Total ........................................................................................................................................... = $159,780 = $217,949 

Projected Target Rate of Compensation: 

Agreement A total weighted average wages and benefits ............................................................... $61,081 $83,056 

Agreement B total weighted average wages and benefits ............................................................... + $159,780 + $217,949 

Total ........................................................................................................................................... = $220,861 = $301,005 

Sub-step 2.B: Determination of 

Number of Pilots Needed. Subject to 

adjustment by the Coast Guard Director 

of Great Lakes Pilotage to ensure 

uninterrupted service or for other 

reasonable circumstances, we determine 

the number of pilots needed for 

ratemaking purposes in each area by 

dividing projected bridge-hours for each 

area by either 1,000 (designated waters) 

or 1,800 (undesignated waters). We 

round the mathematical results and 

express our determination as whole 

pilots. 

Bridge hours are ‘‘the number of 

hours a pilot is aboard a vessel 

providing pilotage service.’’ 46 CFR part 

404, Appendix A, Sub-step 2.B(1). For 

that reason, and as we explained most 

recently in the 2011 ratemaking’s final 

rule, we do not include, and never have 

included, pilot delay or detention in 

calculating bridge hours. 76 FR 6351 at 

6352 col. 3 (February 4, 2011). Projected 

bridge-hours are based on the vessel 

traffic that pilots are expected to serve. 

We use historical data, input from the 

pilots and industry, periodicals and 

trade magazines, and information from 

conferences to project demand for 

pilotage services for the coming year. 

In our 2011 final rule, we determined 

that 38 pilots would be needed for 

ratemaking purposes. We have 

determined that 38 remains the proper 

number to use for ratemaking purposes 

in 2012. This includes 5 pilots in Area 

2, where rounding up alone would 

result in only 4 pilots. For the same 

reasons we explained at length in the 

final rule for the 2008 ratemaking, 74 FR 

220 at 221–22 (January 5, 2009), we 

have determined that this adjustment is 

essential for ensuring uninterrupted 

pilotage service in Area 2. Table 16 

shows the bridge hours we project will 

be needed for each area and our 

calculations to determine the number of 

whole pilots needed for ratemaking 

purposes. 


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Federal Register / Vol. 77, No. 39 / Tuesday, February 28, 2012 / Rules and Regulations 11763 

TABLE 16—NUMBER OF PILOTS NEEDED

Pilotage area 

Projected 

2012 bridge 

hours 

Divided by 

1,000 

(designated 

aters) or 1,800 

undesignated 

aters) 

Calculated 

value of pilot 

demand 

Pilots 

needed 

(total = 38) 

AREA 1 (Designated Waters) ............................................................... 5,114 ÷ 1,000 = 5.114 6 

AREA 2 (Undesignated Waters) ........................................................... 5,401 ÷ 1,800 = 3.001 5 

AREA 4 (Undesignated Waters) ........................................................... 6,680 ÷ 1,800 = 3.711 4 

AREA 5 (Designated Waters) ............................................................... 5,002 ÷ 1,000 = 5.002 6 

AREA 6 (Undesignated Waters) ........................................................... 11,187 ÷ 1,800 = 6.215 7 

AREA 7 (Designated Waters) ............................................................... 3,160 ÷ 1,000 = 3.160 4 

AREA 8 (Undesignated Waters) ........................................................... 9,353 ÷ 1,800 = 5.196 6 

Sub-step 2.C: Projection of Target 

Pilot Compensation. In Table 17 we 

project total target pilot compensation 

separately for each area by multiplying 

the number of pilots needed in each 

area, as shown in Table 16, by the target 

pilot compensation shown in Table 15. 

TABLE 17—PROJECTION OF TARGET PILOT COMPENSATION BY AREA

Pilotage area Pilots needed 

(total = 38) 

Target rate 

of pilot 

compensation 

Projected 

target pilot 

compensation 

AREA 1 (Designated Waters) ...................................................................................... 6 × $301,005 = $1,806,030 

AREA 2 (Undesignated Waters) .................................................................................. 5 × 220,861 = 1,104,304 

AREA 4 (Undesignated Waters) .................................................................................. 4 × 220,861 = 883,443 

AREA 5 (Designated Waters) ...................................................................................... 6 × 301,005 = 1,806,030 

AREA 6 (Undesignated Waters) .................................................................................. 7 × 220,861 = 1,546,026 

AREA 7 (Designated Waters) ...................................................................................... 4 × 301,005 = 1,204,020 

AREA 8 (Undesignated Waters) .................................................................................. 6 × 220,861 = 1,325,165 

Step 3 and Sub-step 3.A: Projection of 

Revenue. In these steps, we project the 

revenue that would be received in 2012 

if demand for pilotage services matches 

the bridge hours we projected in Table 

16 and 2011 pilotage rates are left 

unchanged. Table 18 shows this 

calculation. 

TABLE 18—PROJECTION OF REVENUE BY AREA

Pilotage area 

Projected 

2012 bridge 

hours 

2011 Pilotage 

rates 

Revenue 

projection for 

2012 

AREA 1 (Designated Waters) ...................................................................................... 5,114 × $451.38 = $2,308,357 

AREA 2 (Undesignated Waters) .................................................................................. 5,401 × 298.98 = 1,614,791 

AREA 4 (Undesignated Waters) .................................................................................. 6,680 × 196.19 = 1,310,549 

AREA 5 (Designated Waters) ...................................................................................... 5,002 × 519.89 = 2,600,490 

AREA 6 (Undesignated Waters) .................................................................................. 11,187 × 199.12 = 2,227,555 

AREA 7 (Designated Waters) ...................................................................................... 3,160 × 495.54 = 1,565,906 

AREA 8 (Undesignated Waters) .................................................................................. 9,353 × 193.72 = 1,811,863 

Total ....................................................................................................................... ........................ ........................ 13,439,512 

Step 4: Calculation of Investment 

Base. This step calculates each 

association’s investment base, which is 

the recognized capital investment in the 

assets employed by the association that 

is required to support pilotage 

operations. This step uses a formula set 

out in 46 CFR part 404, Appendix B. 

The first part of the formula identifies 

each association’s total sources of funds. 

Tables 19 through 21 follow the formula 

up to that point. 

TABLE 19—TOTAL SOURCES OF FUNDS, DISTRICT ONE

Area 1 Area 2 

Recognized Assets: 

Total Current Assets ................................................................................................................................. $233,316 $174,705 

Total Current Liabilities ............................................................................................................................. ¥ 20,091 ¥ 15,044 

Current Notes Payable .............................................................................................................................. + 0 + 0 

Total Property and Equipment (NET) ....................................................................................................... + 0 + 0 

Land .......................................................................................................................................................... ¥ 0 ¥ 0 


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11764 Federal Register / Vol. 77, No. 39 / Tuesday, February 28, 2012 / Rules and Regulations 

TABLE 19—TOTAL SOURCES OF FUNDS, DISTRICT ONE—Continued 

Area 1 Area 2 

Total Other Assets .................................................................................................................................... + 0 + 0 

Total Recognized Assets ................................................................................................................... = 213,225 = 159,661 

Non-Recognized Assets: 

Total Investments and Special Funds ...................................................................................................... + 0 + 0 

Total Non-Recognized Assets ........................................................................................................... = 0 = 0 

Total Assets: 

Total Recognized Assets .......................................................................................................................... 213,225 159,661 

Total Non-Recognized Assets .................................................................................................................. + 0 + 0 

Total Assets ....................................................................................................................................... = 213,225 = 159,661 

Recognized Sources of Funds: 

Total Stockholder Equity ........................................................................................................................... 213,225 159,661 

Long-Term Debt ........................................................................................................................................ + 0 + 0 

Current Notes Payable .............................................................................................................................. + 0 + 0 

Advances from Affiliated Companies ........................................................................................................ + 0 + 0 

Long-Term Obligations—Capital Leases .................................................................................................. + 0 + 0 

Total Recognized Sources ................................................................................................................. = 213,225 = 159,661 

Non-Recognized Sources of Funds: 

Pension Liability ........................................................................................................................................ 0 0 

Other Non-Current Liabilities .................................................................................................................... + 0 + 0 

Deferred Federal Income Taxes ............................................................................................................... + 0 + 0 

Other Deferred Credits .............................................................................................................................. + 0 + 0 

Total Non-Recognized Sources ......................................................................................................... = 0 = 0 

Total Sources of Funds: 

Total Recognized Sources ........................................................................................................................ 213,225 159,661 

Total Non-Recognized Sources ................................................................................................................ + 0 + 0 

Total Sources of Funds ..................................................................................................................... = 213,225 = 159,661 

TABLE 20—TOTAL SOURCES OF FUNDS, DISTRICT TWO

Area 4 Area 5 

Recognized Assets: 

Total Current Assets ................................................................................................................................. $228,212 $515,150 

Total Current Liabilities ............................................................................................................................. ¥ 214,412 ¥ 484,000 

Current Notes Payable .............................................................................................................................. + 23,063 + 52,061 

Total Property and Equipment (NET) ....................................................................................................... + 321,550 + 725,847 

Land .......................................................................................................................................................... ¥ 269,122 ¥ 607,500 

Total Other Assets .................................................................................................................................... + 0 + 0 

Total Recognized Assets ................................................................................................................... = 89,290 = 201,559 

Non-Recognized Assets: 

Total Investments and Special Funds ...................................................................................................... + 0 + 0 

Total Non-Recognized Assets ........................................................................................................... = 0 = 0 

Total Assets: 

Total Recognized Assets .......................................................................................................................... 89,290 201,559 

Total Non-Recognized Assets .................................................................................................................. + 0 + 0 

Total Assets ....................................................................................................................................... = 89,290 = 201,559 

Recognized Sources of Funds: 

Total Stockholder Equity ........................................................................................................................... 53,061 119,778 

Long-Term Debt ........................................................................................................................................ + 282,288 + 637,220 

Current Notes Payable .............................................................................................................................. + 23,063 + 52,061 

Advances from Affiliated Companies ........................................................................................................ + 0 + 0 

Long-Term Obligations—Capital Leases .................................................................................................. + 0 + 0 

Total Recognized Sources ................................................................................................................. = 358,413 = 809,058 

Non-Recognized Sources of Funds: 

Pension Liability ........................................................................................................................................ 0 0 

Other Non-Current Liabilities .................................................................................................................... + 0 + 0 

Deferred Federal Income Taxes ............................................................................................................... + 0 + 0 

Other Deferred Credits .............................................................................................................................. + 0 + 0 

Total Non-Recognized Sources ......................................................................................................... = 0 = 0 

Total Sources of Funds: 

Total Recognized Sources ........................................................................................................................ 358,413 809,058 


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TABLE 20—TOTAL SOURCES OF FUNDS, DISTRICT TWO—Continued 

Area 4 Area 5 

Total Non-Recognized Sources ................................................................................................................ + 0 + 0 

Total Sources of Funds ..................................................................................................................... = 358,413 = 809,058 

TABLE 21—TOTAL SOURCES OF FUNDS, DISTRICT THREE

Area 6 Area 7 Area 8 

Recognized Assets: 

Total Current Assets .................................................................................................. $439,799 $230,463 $289,999 

Total Current Liabilities .............................................................................................. ¥ 61,507 ¥ 32,231 ¥ 40,557 

Current Notes Payable .............................................................................................. + 13,525 + 7,087 + 8,918 

Total Property and Equipment (NET) ........................................................................ + 42,019 + 22,019 + 27,707 

Land ........................................................................................................................... ¥ 0 ¥ 0 ¥ 0 

Total Other Assets ..................................................................................................... + 343 + 180 + 227 

Total Recognized Assets ................................................................................... = 434,180 = 227,518 = 286,293 

Non-Recognized Assets: 

Total Investments and Special Funds ....................................................................... + 0 + 0 + 0 

Total Non-Recognized Assets ............................................................................ = 0 = 0 = 0 

Total Assets: 

Total Recognized Assets ........................................................................................... 434,180 227,518 286,293 

Total Non-Recognized Assets ................................................................................... + 0 + 0 + 0 

Total Assets ........................................................................................................ = 434,180 = 227,518 = 286,293 

Recognized Sources of Funds: 

Total Stockholder Equity ........................................................................................... 417,721 218,893 275,441 

Long-Term Debt ........................................................................................................ + 2,934 + 1,537 + 1,935 

Current Notes Payable .............................................................................................. + 13,525 + 7,087 + 8,918 

Advances from Affiliated Companies ........................................................................ + 0 + 0 + 0 

Long-Term Obligations–Capital Leases .................................................................... + 0 + 0 + 0 

Total Recognized Sources ................................................................................. = 434,180 = 227,518 = 286,293 

Non-Recognized Sources of Funds: 

Pension Liability ......................................................................................................... 0 0 0

Other Non-Current Liabilities ..................................................................................... + 0 + 0 + 0 

Deferred Federal Income Taxes ............................................................................... + 0 + 0 + 0 

Other Deferred Credits .............................................................................................. + 0 + 0 + 0

Total Non-Recognized Sources ......................................................................... = 0 = 0 = 0 

Total Sources of Funds: 

Total Recognized Sources ........................................................................................ 434,180 227,518 286,293 

Total Non-Recognized Sources ................................................................................ + 0 + 0 + 0 

Total Sources of Funds ...................................................................................... = 434,180 = 227,518 = 286,293 

Tables 19 through 21 relate to the 

second part of the formula for 

calculating the investment base. The 

second part establishes a ratio between 

recognized sources of funds and total 

sources of funds. Since non-recognized 

sources of funds (sources we do not 

recognize as required to support 

pilotage operations) do not exist for any 

of the pilot associations for this year’s 

rulemaking, the ratio between 

recognized sources of funds and total 

sources of funds is 1:1 (or a multiplier 

of 1) in all cases. Table 22 applies the 

multiplier of 1, and shows that the 

investment base for each association 

equals its total recognized assets. Table 

22 also expresses these results by area, 

because area results are needed in 

subsequent steps. 

TABLE 22—INVESTMENT BASE BY AREA AND DISTRICT

District Area 

Total 

recognized 

assets 

($) 

Recognized 

sources of 

funds 

($) 

Total sources 

of funds 

($) 

Multiplier (ratio 

of recognized 

to total 

sources) 

Investment 

base 

($) 1

One ...................................................................... 1 213,225 213,225 213,225 1 213,225 

2 159,661 159,661 159,661 1 159,661 

Total .............................................................. ............ ........................ ........................ ........................ ........................ 372,886 

Two 2 .................................................................... 4 89,290 358,413 358,413 1 89,290 


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TABLE 22—INVESTMENT BASE BY AREA AND DISTRICT—Continued 

District Area 

Total 

recognized 

assets 

($) 

Recognized 

sources of 

funds 

($) 

Total sources 

of funds 

($) 

Multiplier (ratio 

of recognized 

to total 

sources) 

Investment 

base 

($) 1

5 201,559 809,058 809,058 1 201,559 

Total .............................................................. ............ ........................ ........................ ........................ ........................ 290,849 

Three .................................................................... 6 434,180 434,180 434,180 1 434,180 

7 227,518 227,518 227,518 1 227,518 

8 286,293 286,293 286,293 1 286,293 

Total .............................................................. ............ ........................ ........................ ........................ ........................ 947,991 

1 Note: ‘‘Investment base’’ = ‘‘Total recognized assets’’ x ‘‘Multiplier (ratio of recognized to Total sources)’’ 2 Note: The pilot associations that provide pilotage services in Districts One and Three operate as partnerships. The pilot association that provides pilotage service for District Two operates as a corporation. As shown in Table 20, Total Recognized Assets do not equal Total Sources of 

Funds due to the level of long-term debt in District Two. 

Step 5: Determination of Target Rate 

of Return. We determine a marketequivalent return on investment (ROI) 

that will be allowed for the recognized 

net capital invested in each association 

by its members. We do not recognize 

capital that is unnecessary or 

unreasonable for providing pilotage 

services. There are no non-recognized 

investments in this year’s calculations. 

The allowed ROI is based on the 

preceding year’s average annual rate of 

return for new issues of high-grade 

corporate securities. For 2010, the 

allowed ROI was a little more than 4.94 

percent, based on the average rate of 

return that year on Moody’s AAA 

corporate bonds which can be found at: 

http://research.stlouisfed.org/fred2/

series/AAA/downloaddata?cid=119. 

Step 6: Adjustment Determination. 

The first sub-step in the adjustment 

determination requires an initial 

calculation that applies a formula 

described in Appendix A. The formula 

uses the results from Steps 1, 2, 3, and 

4 to project the ROI that can be expected 

in each area if no further adjustments 

are made. This calculation is shown in 

Tables 23 through 25. 

TABLE 23—PROJECTED ROI, AREAS IN DISTRICT ONE

Area 1 Area 2 

Revenue (from Step 3) ............................................................................................................................. + $2,308,357 + $1,614,791 

Operating Expenses (from Step 1) .......................................................................................................... ¥ 574,652 ¥ 452,590 

Pilot Compensation (from Step 2) ............................................................................................................ ¥ 1,806,030 ¥ 1,104,304 

Operating Profit/(Loss) ............................................................................................................................. = (72,324) = 57,897 

Interest Expense (from audits) ................................................................................................................. ¥ 0 ¥ 0 

Earnings Before Tax ................................................................................................................................ = (72,324) = 57,897 

Federal Tax Allowance ............................................................................................................................. ¥ 0 ¥ 0 

Net Income ............................................................................................................................................... = (72,324) = 57,897 

Return Element (Net Income + Interest) .................................................................................................. (72,324) 57,897 

Investment Base (from Step 4) ................................................................................................................ ÷ 213,225 ÷ 159,661 

Projected Return on Investment .............................................................................................................. = (0.34) = 0.36 

TABLE 24—PROJECTED ROI, AREAS IN DISTRICT TWO

Area 4 Area 5 

Revenue (from Step 3) ............................................................................................................................. + $1,310,549 + $2,600,490 

Operating Expenses (from Step 1) .......................................................................................................... ¥ 369,351 ¥ 700,592 

Pilot Compensation (from Step 2) ............................................................................................................ ¥ 883,443 ¥ 1,806,030 

Operating Profit/(Loss) ............................................................................................................................. = 57,755 = 93,868 

Interest Expense (from audits) ................................................................................................................. ¥ 3,302 ¥ 7,455 

Earnings Before Tax ................................................................................................................................ = 54,453 = 86,414 

Federal Tax Allowance ............................................................................................................................. ¥ 2,210 ¥ 4,990 

Net Income ............................................................................................................................................... = 52,243 = 81,424 

Return Element (Net Income + Interest) .................................................................................................. 55,545 88,879 

Investment Base (from Step 4) ................................................................................................................ ÷ 89,290 ÷ 201,559 

Projected Return on Investment .............................................................................................................. = 0.62 = 0.44 

TABLE 25—PROJECTED ROI, AREAS IN DISTRICT THREE

Area 6 Area 7 Area 8 

Revenue (from Step 3) ......................................................................................... + $2,227,555 + $1,565,906 + $1,811,863 

Operating Expenses (from Step 1) ....................................................................... ¥ 576,969 ¥ 302,345 ¥ 380,448 

Pilot Compensation (from Step 2) ........................................................................ ¥ 1,546,026 ¥ 1,204,020 ¥ 1,325,165 

Operating Profit/(Loss) .......................................................................................... = 104,560 = 59,542 = 106,250 


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TABLE 25—PROJECTED ROI, AREAS IN DISTRICT THREE—Continued 

Area 6 Area 7 Area 8 

Interest Expense (from audits) ............................................................................. ¥ 2,417 ¥ 1,267 ¥ 1,594 

Earnings Before Tax ............................................................................................. = 102,143 = 58,275 = 104,656 

Federal Tax Allowance ......................................................................................... ¥ 0 ¥ 0 ¥ 0 

Net Income ........................................................................................................... = 102,143 = 58,275 = 104,656 

Return Element (Net Income + Interest) .............................................................. 104,560 59,542 106,250 

Investment Base (from Step 4) ............................................................................ ÷ 434,180 ÷ 227,518 ÷ 286,293 

Projected Return on Investment ........................................................................... = 0.24 = 0.26 = 0.37 

The second sub-step required for Step 

6 compares the results of Tables 23 

through 25 with the target ROI 

(approximately 4.94 percent) we 

obtained in Step 5 to determine if an 

adjustment to the base pilotage rate is 

necessary. Table 26 shows this 

comparison for each area. 

TABLE 26—COMPARISON OF PROJECTED ROI AND TARGET ROI, BY AREA 1

Area 1 Area 2 Area 4 Area 5 Area 6 Area 7 Area 8 

St. 

Lawrence 

River 

Lake 

Ontario Lake Erie 

Southeast 

Shoal to 

Port Huron, 

MI 

Lakes 

Huron and 

Michigan 

St. Mary’s 

River 

Lake 

Superior 

Projected return on investment ................ (0.339) 0.363 0.622 0.441 0.241 0.262 0.371 

Target return on investment .................... 0.049 0.049 0.049 0.049 0.049 0.049 0.049 

Difference in return on investment .......... (0.389) 0.313 0.573 0.392 0.191 0.212 0.322 

1 Note: Decimalization and rounding of the target ROI affects the display in this table but does not affect our calculations, which are based on 

the actual figure. 

Because Table 26 shows a significant 

difference between the projected and 

target ROIs, an adjustment to the base 

pilotage rates is necessary. Step 6 now 

requires us to determine the pilotage 

revenues that are needed to make the 

target return on investment equal to the 

projected return on investment. This 

calculation is shown in Table 27. It 

adjusts the investment base we used in 

Step 4, multiplying it by the target ROI 

from Step 5, and applies the result to 

the operating expenses and target pilot 

compensation determined in Steps 1 

and 2. 

TABLE 27—REVENUE NEEDED TO RECOVER TARGET ROI, BY AREA

Pilotage area 

Operating 

expenses 

(Step 1) 

Target pilot 

compensation 

(Step 2) 

Investment 

base 

(Step 4) 

times; 

4.94% 

(Target 

ROI) 

(Step 5) 

Federal tax 

allowance 

Revenue 

needed 

AREA 1 (Designated Waters) ............................... $574,652 + $1,806,030 + $10,540 + .................... = $2,391,222 

AREA 2 (Undesignated Waters) ........................... 452,590 + 1,104,304 + 7,893 + .................... = 1,564,786 

AREA 4 (Undesignated Waters) ........................... 369,351 + 883,443 + 4,414 + 2,210 = 1,259,418 

AREA 5 (Designated Waters) ............................... 700,592 + 1,806,030 + 9,964 + 4,990 = 2,521,575 

AREA 6 (Undesignated Waters) ........................... 576,969 + 1,546,026 + 21,463 .... .................... = 2,144,458 

AREA 7 (Designated Waters) ............................... 302,345 + 1,204,020 + 11,247 .... .................... = 1,517,612 

AREA 8 (Undesignated Waters) ........................... 380,448 + 1,325,165 + 14,152 + .................... = 1,719,765 

Total ............................................................... 3,356,946 + 9,675,017 + 79,673 + 7,200 = 13,118,836 

The ‘‘Revenue Needed’’ column of 

Table 27 is less than the revenue we 

projected in Table 18 with the exception 

of Area 1. For purposes of transparency, 

we verify the calculations in Table 27 by 

rerunning the first part of Step 6 using 

the ‘‘revenue needed’’ from Table 27 

instead of the Table 18 revenue 

projections we used in Tables 23 

through 25. Tables 28 through 30 show 

that attaining the Table 27 revenue 

needed is sufficient to recover target 

ROI. 

TABLE 28—BALANCING REVENUE NEEDED AND TARGET ROI, DISTRICT ONE

Area 1 Area 2 

Revenue Needed ..................................................................................................................................... + $2,391,222 + $1,564,786 

Operating Expenses (from Step 1) .......................................................................................................... ¥ 574,652 ¥ 452,590 


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TABLE 28—BALANCING REVENUE NEEDED AND TARGET ROI, DISTRICT ONE—Continued 

Area 1 Area 2 

Pilot Compensation (from Step 2) ............................................................................................................ ¥ 1,806,030 ¥ 1,104,304 

Operating Profit/(Loss) ............................................................................................................................. = 10,540 = 7,893 

Interest Expense (from audits) ................................................................................................................. ¥ 0 ¥ 0 

Earnings Before Tax ................................................................................................................................ = $10,540 = $7,893 

Federal Tax Allowance ............................................................................................................................. ¥ $0 ¥ $0 

Net Income ............................................................................................................................................... = $10,540 = $7,893 

Return Element (Net Income + Interest) .................................................................................................. $10,540 $7,893 

Investment Base (from Step 4) ................................................................................................................ ÷ $213,225 ÷ $159,661 

Return on Investment ............................................................................................................................... = 0.0494 = 0.0494 

TABLE 29—BALANCING REVENUE NEEDED AND TARGET ROI, DISTRICT TWO

Area 4 Area 5 

Revenue Needed ..................................................................................................................................... + $1,259,418 + $2,521,575 

Operating Expenses (from Step 1) .......................................................................................................... ¥ $369,351 ¥ $700,592 

Pilot Compensation (from Step 2) ............................................................................................................ ¥ $883,443 ¥ $1,806,030 

Operating Profit/(Loss) ............................................................................................................................. = $6,624 = $14,953 

Interest Expense (from audits) ................................................................................................................. ¥ $3,302 ¥ $7,455 

Earnings Before Tax ................................................................................................................................ = $3,322 = $7,499 

Federal Tax Allowance ............................................................................................................................. ¥ $2,210 ¥ $4,990 

Net Income ............................................................................................................................................... = $1,112 = $2,509 

Return Element (Net Income + Interest) .................................................................................................. $4,414 $9,964 

Investment Base (from Step 4) ................................................................................................................ ÷ $89,290 ÷ $201,559 

Return on Investment ............................................................................................................................... = 0.0494 = 0.0494 

TABLE 30—BALANCING REVENUE NEEDED AND TARGET ROI, DISTRICT THREE

Area 6 Area 7 Area 8 

Revenue Needed .................................................................................................. + $2,144,458 + $1,517,612 + $1,719,765 

Operating Expenses (from Step 1) ....................................................................... ¥ $576,969 ¥ $302,345 ¥ $380,448 

Pilot Compensation (from Step 2) ........................................................................ ¥ $1,546,026 ¥ $1,204,020 ¥ $1,325,165 

Operating Profit/(Loss) .......................................................................................... = $21,463 = $11,247 = $14,152 

Interest Expense (from audits) ............................................................................. ¥ $2,417 ¥ $1,267 ¥ $1,594 

Earnings Before Tax ............................................................................................. = $19,046 = $9,980 = $12,558 

Federal Tax Allowance ......................................................................................... ¥ $0 ¥ $0 ¥ $0 

Net Income ........................................................................................................... = $19,046 = $9,980 = $12,558 

Return Element (Net Income + Interest) .............................................................. $21,463 $11,247 $14,152 

Investment Base (from Step 4) ............................................................................ ÷ $434,180 ÷ $227,518 ÷ $286,293 

Return on Investment ........................................................................................... = 0.0494 = 0.0494 = 0.0494 

Step 7: Adjustment of Pilotage Rates. 

Finally, and subject to the requirements 

of the Memorandum of Arrangements 

with Canada or adjustment for other 

supportable circumstances, we calculate 

rate adjustments by dividing the Step 6 

revenue needed (Table 27) by the Step 

3 revenue projection (Table 18), to give 

us a rate multiplier for each area. Tables 

31 through 33 show these calculations. 

TABLE 31—RATE MULTIPLIER, AREAS IN DISTRICT ONE

Ratemaking projections 

Area 1 St. 

Lawrence 

River 

Area 2 Lake 

Ontario 

Revenue Needed (from Step 6) ............................................................................................................... $2,391,222 $1,564,786 

Revenue (from Step 3) ............................................................................................................................. ÷ $2,308,357 ÷ $1,614,791 

Rate Multiplier .......................................................................................................................................... = 1.036 = 0.969 

TABLE 32—RATE MULTIPLIER, AREAS IN DISTRICT TWO

Ratemaking projections Area 4 Lake 

Erie 

Area 5 

Southeast 

Shoal to Port 

Huron, MI 

Revenue Needed (from Step 6) ............................................................................................................... $1,259,418 $2,521,575 

Revenue (from Step 3) ............................................................................................................................. ÷ $1,310,549 ÷ $2,600,490 


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TABLE 32—RATE MULTIPLIER, AREAS IN DISTRICT TWO—Continued 

Ratemaking projections Area 4 Lake 

Erie 

Area 5 

Southeast 

Shoal to Port 

Huron, MI 

Rate Multiplier .......................................................................................................................................... = 0.961 = 0.970 

TABLE 33—RATE MULTIPLIER, AREAS IN DISTRICT THREE

Ratemaking projections 

Area 6 Lakes 

Huron and 

Michigan 

Area 7 St. 

Mary’s River 

Area 8 Lake 

Superior 

Revenue Needed (from Step 6) ........................................................................... $2,144,458 $1,517,612 $1,719,765 

Revenue (from Step 3) ......................................................................................... ÷ $2,227,555 ÷ $1,565,906 ÷ $1,811,863 

Rate Multiplier ....................................................................................................... = 0.963 = 0.969 = 0.949 

We calculate a rate multiplier for 

adjusting the basic rates and charges 

described in 46 CFR 401.420 and 

401.428 and applicable in all areas. We 

divide total revenue needed (Step 6, 

Table 27) by total projected revenue 

(Steps 3 & 3A, Table 18). Our rate 

changes for 46 CFR 401.420 and 401.428 

reflect the multiplication of the rates we 

established for those sections in our 

2011 final rule by the rate multiplier 

shown as the result of our calculation in 

Table 34. 

TABLE 34—RATE MULTIPLIER FOR BASIC RATES AND CHARGES IN 46 CFR 401.420 AND 401.428 

Ratemaking projections 

Total revenue Needed (from Step 6) ........................................................................................................................................... $13,118,836 

Total revenue (from Step 3) ........................................................................................................................................................ ÷ $13,439,512 

Rate Multiplier .............................................................................................................................................................................. = 0.976 

Rates for cancellation, delay, or 

interruption in rendering services (46 

CFR 401.420) and basic rates and 

charges for carrying a U.S. pilot beyond 

the normal change point, or for boarding 

at other than the normal boarding point 

(46 CFR 401.428), will decrease by 2.39 

percent in all areas. 

We multiply the existing rates we 

established in our 2011 final rule by the 

rate multipliers from Tables 31 through 

33 to calculate the Area by Area rate 

changes we propose for 2012. Tables 35 

through 37 show these calculations. 

TABLE 35—ADJUSTMENT OF PILOTAGE RATES, AREAS IN DISTRICT ONE

2011 rate Rate 

multiplier Adjusted rate for 2012 

Area 1—St. Lawrence River 

Basic Pilotage ..................................................................... $18.36/km, $32.50/mi .......... × 1.036 = $19.02/km, $33.67/mi 

Each lock transited ............................................................. 407 ....................................... × 1.036 = 422 

Harbor movage ................................................................... 1,333 .................................... × 1.036 = 1,381 

Minimum basic rate, St. Lawrence River ............................ 889 ....................................... × 1.036 = 921 

Maximum rate, through trip ................................................. 3,901 .................................... × 1.036 = 4,041 

Area 2—Lake Ontario 

6 hour period ....................................................................... $893 ..................................... × 0.969 = $865 

Docking or Undocking ......................................................... 852 ....................................... × 0.969 = 826 

TABLE 36—ADJUSTMENT OF PILOTAGE RATES, AREAS IN DISTRICT TWO

2011 

Rate 

Rate 

multiplier 

Adjusted 

rate for 

2012 

Area 4—Lake Erie 

6 hour period ............................................................................................................................................ $791 × 0.961 = $760 

Docking or undocking ............................................................................................................................... 609 × 0.961 = 585 

Any point on Niagara River below Black Rock Lock ............................................................................... 1,554 × 0.961 = 1,493 


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TABLE 36—ADJUSTMENT OF PILOTAGE RATES, AREAS IN DISTRICT TWO—Continued 

2011 

Rate 

Rate 

multiplier 

Adjusted 

rate for 

2012 

Area 5—Southeast Shoal to Port Huron, MI, between any point on or in 

Toledo or any point on Lake Erie west of Southeast Shoal .................................................................... 1,412 × 0.970 = 1,369 

Toledo or any point on Lake Erie west of Southeast Shoal & Southeast Shoal ..................................... 2,389 × 0.970 = 2,317 

Toledo or any point on Lake Erie west of Southeast Shoal & Detroit River ........................................... 3,102 × 0.970 = 3,008 

Toledo or any point on Lake Erie west of Southeast Shoal & Detroit Pilot Boat .................................... 2,389 × 0.970 = 2,317 

Port Huron Change Point & Southeast Shoal (when pilots are not changed at the Detroit Pilot Boat) 4,162 × 0.970 = 4,036 

Port Huron Change Point & Toledo or any point on Lake Erie west of Southeast Shoal (when pilots 

are not changed at the Detroit Pilot Boat) ............................................................................................ 4,821 × 0.970 = 4,675 

Port Huron Change Point & Detroit River ................................................................................................ 3,126 × 0.970 = 3,031 

Port Huron Change Point & Detroit Pilot Boat ......................................................................................... 2,432 × 0.970 = 2,358 

Port Huron Change Point & St. Clair River .............................................................................................. 1,729 × 0.970 = 1,677 

St. Clair River ........................................................................................................................................... 1,412 × 0.970 = 1,369 

St. Clair River & Southeast Shoal (when pilots are not changed at the Detroit Pilot Boat) ................... 4,162 × 0.970 = 4,036 

St. Clair River & Detroit River/Detroit Pilot Boat ...................................................................................... 3,126 × 0.970 = 3,031 

Detroit, Windsor, or Detroit River ............................................................................................................. 1,412 × 0.970 = 1,369 

Detroit, Windsor, or Detroit River & Southeast Shoal .............................................................................. 2,389 × 0.970 = 2,317 

Detroit, Windsor, or Detroit River & Toledo or any point on Lake Erie west of Southeast Shoal .......... 3,102 × 0.970 = 3,008 

Detroit, Windsor, or Detroit River & St. Clair River .................................................................................. 3,126 × 0.970 = 3,031 

Detroit Pilot Boat & Southeast Shoal ....................................................................................................... 1,729 × 0.970 = 1,677 

Detroit Pilot Boat & Toledo or any point on Lake Erie west of Southeast Shoal .................................... 2,389 × 0.970 = 2,317 

Detroit Pilot Boat & St. Clair River ........................................................................................................... 3,126 × 0.970 = 3,031 

TABLE 37—ADJUSTMENT OF PILOTAGE RATES, AREAS IN DISTRICT THREE

2011 

rate 

Rate 

multiplier 

Adjusted 

rate for 

2012 

Area 6—Lakes Huron and Michigan: 

6 hour period ..................................................................................................................................... $688 × 0.963 = $662 

Docking or undocking ........................................................................................................................ 653 × 0.963 = 629 

Area 7—St. Mary’s River between any point on or in: 

Gros Cap & De Tour ......................................................................................................................... 2,650 × 0.969 = 2,568 

Algoma Steel Corp. Wharf, Sault Ste. Marie, Ont. & De Tour ......................................................... 2,650 × 0.969 = 2,568 

Algoma Steel Corp. Wharf, Sault. Ste. Marie, Ont. & Gros Cap ...................................................... 998 × 0.969 = 967 

Any point in Sault St. Marie, Ont., except the Algoma Steel Corp. Wharf & De Tour ..................... 2,221 × 0.969 = 2,153 

Any point in Sault St. Marie, Ont., except the Algoma Steel Corp. Wharf & Gros Cap .................. 998 × 0.969 = 967 

Sault Ste. Marie, MI & De Tour ........................................................................................................ 2,221 × 0.969 = 2,153 

Sault Ste. Marie, MI & Gros Cap ...................................................................................................... 998 × 0.969 = 967 

Harbor movage .................................................................................................................................. 998 × 0.969 = 967 

Area 8—Lake Superior: 

6 hour period ..................................................................................................................................... 608 × 0.949 = 577 

Docking or undocking ........................................................................................................................ 578 × 0.949 = 549 

VII. Regulatory Analyses 

We developed this rule after 

considering numerous statutes and 

executive orders related to rulemaking. 

Below we summarize our analyses 

based on 14 of these statutes or 

executive orders. 

A. Regulatory Planning and Review 

Executive Orders 12866 (‘‘Regulatory 

Planning and Review’’) and 13563 

(‘‘Improving Regulation and Regulatory 

Review’’) direct agencies to assess the 

costs and benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. This final 

rule has not been designated a 

‘‘significant regulatory action’’ under 

section 3(f) of Executive Order 12866. 

Accordingly, the final rule has not been 

reviewed by the Office of Management 

and Budget. 

Based on comments received, the 

Coast Guard is adjusting the analysis 

from the NPRM to account for increased 

expenses in District One, as well as a 

COBRA subsidy provided to District 2. 

These changes reduced the overall 

savings to shippers from an estimated 

$1 million in the NPRM to 

approximately $835,000 for this final 

rule. A final Regulatory Assessment 

follows: 

The Coast Guard is required to review 

and adjust pilotage rates on the Great 

Lakes annually. See Parts III and IV of 

this preamble for detailed discussions of 

the Coast Guard’s legal basis and 

purpose for this rule and for background 

information on Great Lakes pilotage 

ratemaking. Based on our annual review 

for this rule, we are adjusting the 

pilotage rates for the 2012 shipping 

season to generate sufficient revenue to 

cover allowable expenses, target pilot 

compensation, and returns on 

investment. The rate adjustments in this 

final rule will lead to a cost savings in 

six of the seven areas and all three 

districts with an estimated cost savings 

to shippers of approximately $835,000 

across all three districts. 

This rule applies the 46 CFR part 404, 

Appendix A, full ratemaking 


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methodology and decreases Great Lakes 

pilotage rates, on average, 

approximately 2.62 percent overall from 

the current rates set in the 2011 final 

rule. The Appendix A methodology is 

discussed and applied in detail in Part 

VI of this preamble. Part VI reflects 

audited 2009 financial data from the 

pilotage associations (the most recent 

year available for auditing), projected 

association expenses, and regional 

inflation or deflation. The last full 

Appendix A ratemaking was concluded 

in 2006 and used financial data from the 

2002 base accounting year. The last 

annual rate review, conducted under 46 

CFR part 404, Appendix C, was 

completed in early 2011. 

In general, we expect an increase in 

pilotage rates for a certain area to result 

in additional costs for shippers using 

pilotage services in that area, while a 

decrease in a specific area would result 

in a cost reduction or savings for 

shippers in that area. The shippers 

affected by these rate adjustments are 

those owners and operators of domestic 

vessels operating on register (employed 

in foreign trade) and owners and 

operators of foreign vessels on a route 

within the Great Lakes system. These 

owners and operators must have pilots 

or pilotage service as required by 46 

U.S.C. 9302. There is no minimum 

tonnage limit or exemption for these 

vessels. Our interpretation is that the 

statute applies only to commercial 

vessels and not to recreational vessels. 

Owners and operators of other vessels 

that are not affected by this rule, such 

as recreational boats and vessels 

operating only within the Great Lakes 

system may elect to purchase pilotage 

services. However, this election is 

voluntary and does not affect our 

calculation of the rate and is not a part 

of our estimated national cost to 

shippers. Our sampling of pilot data 

suggests there are very few U.S. 

domestic vessels, without registry and 

operating only in the Great Lakes that 

voluntarily purchase pilotage services. 

We used 2008–2010 vessel arrival 

data from the Coast Guard’s MISLE 

system to estimate the average annual 

number of vessels affected by the rate 

adjustment to be 204 vessels that 

journey into the Great Lakes system. 

These vessels enter the Great Lakes by 

transiting through or in part of at least 

one of the three pilotage Districts before 

leaving the Great Lakes system. These 

vessels often make more than one 

distinct stop, docking, loading, and 

unloading at facilities in Great Lakes 

ports. Of the total trips for the 204 

vessels, there were approximately 319 

annual U.S. port arrivals before the 

vessels left the Great Lakes system, 

based on 2008–2010 vessel data from 

MISLE. 

The impact of the rate adjustment to 

shippers is estimated from the District 

pilotage revenues. These revenues 

represent the direct and indirect costs 

(‘‘economic costs’’) that shippers must 

pay for pilotage services. The Coast 

Guard sets rates so that revenues equal 

the estimated cost of pilotage. 

We estimate the additional impact 

(costs or savings) of the rate adjustment 

in this rule to be the difference between 

the total projected revenue needed to 

cover costs in 2012, based on the 2011 

rate adjustment, and the total projected 

revenue needed to cover costs in 2012 

as set forth in this rule. Table 38 details 

additional costs or savings by area and 

district. 

TABLE 38—RATE ADJUSTMENT AND ADDITIONAL IMPACT OF THE RULE BY AREA AND DISTRICT

[$U.S.; Non-discounted] 

Projected 

revenue needed 

in 2011* 

Projected 

revenue needed 

in 2012** 

Additional costs or 

savings of this 

rule 

Area 1 ............................................................................................................................ $2,348,516 $2,391,222 $42,706 

Area 2 ............................................................................................................................ 1,689,246 1,564,786 (124,460 ) 

Total, District One ................................................................................................... 4,037,763 3,956,008 (81,755 ) 

Area 4 ............................................................................................................................ 1,436,140 1,259,418 (176,722 ) 

Area 5 ............................................................................................................................ 2,649,876 2,521,575 (128,301 ) 

Total, District Two ................................................................................................... 4,086,016 3,780,993 (305,023 ) 

Area 6 ............................................................................................................................ 2,311,006 2,144,458 (166,548 ) 

Area 7 ............................................................................................................................ 1,614,974 1,517,612 (97,362 ) 

Area 8 ............................................................................................................................ 1,904,237 1,719,765 (184,472 ) 

Total, District Three ................................................................................................ 5,830,218 5,381,835 (448,383 ) 

* These 2011 estimates are detailed in Table 16 of the 2011 final rule (76 FR 6351). 

** These 2012 estimates are detailed in Table 27 of this rulemaking. 

Some values may not total due to rounding. 

‘‘Additional Revenue or Cost of this Rulemaking’’ = ‘‘Revenue needed in 2012’’ minus ‘‘Revenue needed in 2011.’’ 

After applying the rate change in this 

rule, the resulting difference between 

the projected revenue in 2011 and the 

projected revenue in 2012 is the annual 

impact to shippers from this rule. This 

figure would be equivalent to the total 

additional payments or savings that 

shippers would incur for pilotage 

services from this rule. As discussed 

earlier, we consider a reduction in 

payments to be a cost savings. 

The impact of the rate adjustment in 

this rule to shippers varies by area and 

district. The rate adjustments would 

lead to a cost savings in all seven areas 

and all three districts, with affected 

shippers operating in District One, 

District Two, and District Three 

experiencing savings of $82,000, 

$305,000, and $448,000, respectively 

(values rounded). To calculate an exact 

cost or savings per vessel is difficult 

because of the variation in vessel types, 

routes, port arrivals, commodity 

carriage, time of season, conditions 

during navigation, and preferences for 

the extent of pilotage services on 

designated and undesignated portions of 

the Great Lakes system. Some owners 

and operators would pay more and 

some would pay less depending on the 

distance and port arrivals of their 

vessels’ trips. However, the additional 

savings reported above captures the 

adjustment the shippers would 


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experience as a result of the rate 

adjustment in this rule. As Table 38 

indicates, shippers operating in all areas 

would experience an annual savings 

due to this rule. The overall impact of 

the rule would be a cost savings to 

shippers of approximately $835,000 

across all three districts. 

The effects of a rate adjustment on 

costs and savings vary by year and area. 

A decrease in projected expenses for 

individual areas or districts is common 

in past pilotage rate adjustments. Most 

recently, in the 2011 ratemaking, 

District Three experienced a decrease in 

projected expenses due to an adjustment 

in bridge hours from the 2010 final rule. 

That decrease led to a savings for that 

district and yielded a net savings for the 

system. 

This rule will allow the Coast Guard 

to meet the statutory requirements to 

review the rates for pilotage services on 

the Great Lakes. 

B. Small Entities 

Under the Regulatory Flexibility Act 

(5 U.S.C. 601–612), we have considered 

whether this rule would have a 

significant economic impact on a 

substantial number of small entities. 

The term ‘‘small entities’’ comprises 

small businesses, not-for-profit 

organizations that are independently 

owned and operated and are not 

dominant in their fields, and 

governmental jurisdictions with 

populations of less than 50,000 people. 

We expect that entities affected by 

this rule would be classified under the 

North American Industry Classification 

System (NAICS) code subsector 483– 

Water Transportation, which includes 

the following 6-digit NAICS codes for 

freight transportation: 483111-Deep Sea 

Freight Transportation, 483113-Coastal 

and Great Lakes Freight Transportation, 

and 483211-Inland Water Freight 

Transportation. According to the Small 

Business Administration’s definition, a 

U.S. company with these NAICS codes 

and employing less than 500 employees 

is considered a small entity. 

We reviewed recent company size and 

ownership data from 2008–2010 Coast 

Guard MISLE data and business revenue 

and size data provided by publicly 

available sources such as Manta and 

ReferenceUSA. We found that large, 

mostly foreign-owned shipping 

conglomerates or their subsidiaries 

owned or operated all vessels engaged 

in foreign trade on the Great Lakes. We 

assume that new industry entrants 

would be comparable in ownership and 

size to these shippers. 

There are three U.S. entities affected 

by this rule that receive revenue from 

pilotage services. These are the three 

pilot associations that provide and 

manage pilotage services within the 

Great Lakes districts. Two of the 

associations operate as partnerships and 

one operates as a corporation. These 

associations are designated using the 

same NAICS industry classification and 

small entity size standards described 

above, but they have far fewer than 500 

employees—approximately 65 

combined. We expect no adverse impact 

to these entities from this rule because 

all associations receive enough revenue 

to balance the projected expenses 

associated with the projected number of 

bridge hours and pilots. 

Therefore, the Coast Guard certifies 

under 5 U.S.C. 605(b) that this final rule 

will not have a significant economic 

impact on a substantial number of small 

entities. 

C. Assistance for Small Entities 

Under section 213(a) of the Small 

Business Regulatory Enforcement 

Fairness Act of 1996 (Pub. L. 104–121), 

we offered to assist small entities in 

understanding this rule so that they 

could better evaluate its effects on them 

and participate in the rulemaking. If the 

rule would affect your small business, 

organization, or governmental 

jurisdiction and you have questions 

concerning its provisions or options for 

compliance, please consult Mr. Todd 

Haviland, Management & Program 

Analyst, Office of Great Lakes Pilotage, 

Commandant (CG–5522), Coast Guard; 

telephone 202–372–2037, email 

Todd.A.Haviland@uscg.mil, or fax 202– 

372–1909. The Coast Guard will not 

retaliate against small entities that 

question or complain about this rule or 

any policy or action of the Coast Guard. 

Small businesses may send comments 

on the actions of Federal employees 

who enforce, or otherwise determine 

compliance with, Federal regulations, to 

the Small Business and Agriculture 

Regulatory Enforcement Ombudsman 

and the Regional Small Business 

Regulatory Fairness Boards. The 

Ombudsman evaluates these actions 

annually and rates each agency’s 

responsiveness to small business. If you 

wish to comment on actions by 

employees of the Coast Guard, call 

1–888–REG–FAIR (1–888–734–3247). 

D. Collection of Information 

This rule calls for no new collection 

of information under the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501– 

3520). This rule does not change the 

burden in the collection currently 

approved by the Office of Management 

and Budget under OMB Control Number 

1625–0086, Great Lakes Pilotage 

Methodology. 

E. Federalism 

A rule has implications for federalism 

under Executive Order 13132, 

Federalism, if it has a substantial direct 

effect on State or local governments and 

would either preempt State law or 

impose a substantial direct cost of 

compliance on them. Congress directed 

the Coast Guard to establish ‘‘rates and 

charges for pilotage services.’’ 46 U.S.C. 

9303(f). This regulation is issued 

pursuant to that statute and is 

preemptive of state law as outlined in 

46 U.S.C. 9306. Under 46 U.S.C. 9306, 

a ‘‘State or political subdivision of a 

State may not regulate or impose any 

requirement on pilotage on the Great 

Lakes.’’ Because States may not 

promulgate rules within this category, 

preemption is not an issue under 

Executive Order 13132. 

Additionally, President Barack 

Obama’s memorandum of May 20, 2009, 

titled ‘‘Preemption,’’ states that 

‘‘preemption of State law by executive 

departments and agencies should be 

undertaken only with full consideration 

of the legitimate prerogatives of the 

States and with a sufficient legal basis 

for preemption.’’ To that end, when a 

department or agency intends to 

preempt State law, it should do so only 

if justified under legal principles 

governing preemption, including those 

outlined in Executive Order 13132, and 

it should also include preemption 

provisions in the codified regulation. As 

currently stated in 46 CFR § 401.120, 

states, municipalities, and other local 

authorities are prohibited from requiring 

‘‘the use of pilots or [regulating] any 

aspect of pilotage in any of the waters 

specified in the Act.’’ Therefore, this 

regulation complies with the 

requirements of the memorandum. 

F. Unfunded Mandates Reform Act 

The Unfunded Mandates Reform Act 

of 1995 (2 U.S.C. 1531–1538) requires 

Federal agencies to assess the effects of 

their discretionary regulatory actions. In 

particular, the Act addresses actions 

that may result in the expenditure by a 

State, local, or tribal government, in the 

aggregate, or by the private sector of 

$100,000,000 (adjusted for inflation) or 

more in any one year. Though this rule 

will not result in such an expenditure, 

we do discuss the effects of this rule 

elsewhere in this preamble. 

G. Taking of Private Property 

This rule will not cause a taking of 

private property or otherwise have 

taking implications under Executive 

Order 12630, Governmental Actions and 

Interference with Constitutionally 

Protected Property Rights. 


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H. Civil Justice Reform 

This rule meets applicable standards 

in sections 3(a) and 3(b)(2) of Executive 

Order 12988, Civil Justice Reform, to 

minimize litigation, eliminate 

ambiguity, and reduce burden. 

I. Protection of Children 

We have analyzed this rule under 

Executive Order 13045, Protection of 

Children from Environmental Health 

Risks and Safety Risks. This rule is not 

an economically significant rule and 

does not create an environmental risk to 

health or risk to safety that may 

disproportionately affect children. 

J. Indian Tribal Governments 

This rule does not have tribal 

implications under Executive Order 

13175, Consultation and Coordination 

with Indian Tribal Governments, 

because it does not have a substantial 

direct effect on one or more Indian 

tribes, on the relationship between the 

Federal Government and Indian tribes, 

or on the distribution of power and 

responsibilities between the Federal 

Government and Indian tribes. 

K. Energy Effects 

We have analyzed this rule under 

Executive Order 13211, Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use. We have 

determined that it is not a ‘‘significant 

energy action’’ under that order because 

it is not a ‘‘significant regulatory action’’ 

under Executive Order 12866 and is not 

likely to have a significant adverse effect 

on the supply, distribution, or use of 

energy. The Administrator of the Office 

of Information and Regulatory Affairs 

has not designated it as a significant 

energy action. Therefore, it does not 

require a Statement of Energy Effects 

under Executive Order 13211. 

L. Technical Standards 

The National Technology Transfer 

and Advancement Act (NTTAA) (15 

U.S.C. 272 note) directs agencies to use 

voluntary consensus standards in their 

regulatory activities unless the agency 

provides Congress, through the Office of 

Management and Budget, with an 

explanation of why using these 

standards would be inconsistent with 

applicable law or otherwise impractical. 

Voluntary consensus standards are 

technical standards (e.g., specifications 

of materials, performance, design, or 

operation; test methods; sampling 

procedures; and related management 

systems practices) that are developed or 

adopted by voluntary consensus 

standards bodies. This rule does not use 

technical standards. Therefore, we did 

not consider the use of voluntary 

consensus standards. 

M. Environment 

We have analyzed this rule under 

Department of Homeland Security 

Management Directive 023–01 and 

Commandant Instruction M16475.lD, 

which guide the Coast Guard in 

complying with the National 

Environmental Policy Act of 1969 

(NEPA) (42 U.S.C. 4321–4370f), and 

have concluded that this action is one 

of a category of actions that do not 

individually or cumulatively have a 

significant effect on the human 

environment. This rule is categorically 

excluded under section 2.B.2, figure 2– 

1, paragraph (34)(a) of the Instruction. 

Paragraph 34(a) pertains to minor 

regulatory changes that are editorial or 

procedural in nature. This rule adjusts 

rates in accordance with applicable 

statutory and regulatory mandates. An 

environmental analysis checklist and a 

categorical exclusion determination are 

available in the docket where indicated 

under ADDRESSES. 

List of Subjects in 46 CFR Part 401 

Administrative practice and 

procedure, Great Lakes, Navigation 

(water), Penalties, Reporting and 

recordkeeping requirements, Seamen. 

For the reasons discussed in the 

preamble, the Coast Guard amends 46 

CFR part 401 as follows: 

PART 401—GREAT LAKES PILOTAGE 

REGULATIONS 

■ 1. The authority citation for part 401 

continues to read as follows: 

Authority: 46 U.S.C. 2104(a), 6101, 7701, 

8105, 9303, 9304; Department of Homeland 

Security Delegation No. 0170.1; 46 CFR 

401.105 also issued under the authority of 44 

U.S.C. 3507. 

■ 2. In § 401.405, revise paragraphs (a) 

and (b), including the footnote to Table 

(a), to read as follows: 

§ 401.405 Basic rates and charges on the 

St. Lawrence River and Lake Ontario. 

* * * * * 

(a) Area 1 (Designated Waters): 

Service St. Lawrence River 

Basic Pilotage ........................................................................................... 1 $19.02 per kilometer or $33.67 per mile. 

Each Lock Transited ................................................................................. 1 $422. 

Harbor Movage ......................................................................................... 1 $1,381. 

1The minimum basic rate for assignment of a pilot in the St. Lawrence River is $921, and the maximum basic rate for a through trip is $4,041. 

(b) Area 2 (Undesignated Waters): 

Service Lake 

Ontario 

Six-hour Period ........................................................................................................................................................................................ $865 

Docking or Undocking ............................................................................................................................................................................. 826 

■ 3. In § 401.407, revise paragraphs (a) 

and (b), including the footnote to Table 

(b), to read as follows: 

§ 401.407 Basic rates and charges on Lake 

Erie and the navigable waters from 

Southeast Shoal to Port Huron, MI. 

* * * * * 

(a) Area 4 (Undesignated Waters): 


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Service 

Lake Erie 

(East of 

Southeast 

Shoal) 

Buffalo 

Six-hour Period ................................................................................................................................................................ $760 $760 

Docking or Undocking ..................................................................................................................................................... 585 585 

Any Point on the Niagara River Below the Black Rock Lock ......................................................................................... N/A 1,493 

(b) Area 5 (Designated Waters): 

Any point on or in Southeast 

Shoal 

Toledo or 

any point on 

Lake Erie 

west of 

Southeast 

Shoal 

Detroit River Detroit Pilot 

Boat 

St. Clair 

River 

Toledo or any port on Lake Erie west of Southeast Shoal ..................... $2,317 $1,369 $3,008 $2,317 N/A 

Port Huron Change Point ........................................................................ 1 4,036 1 4,675 3,031 2,317 $1,677 

St. Clair River ........................................................................................... 1 4,036 N/A 3,031 3,031 1,369 

Detroit or Windsor or the Detroit River .................................................... 2,317 3,008 1,369 N/A 3,031 

Detroit Pilot Boat ...................................................................................... 1,677 2,317 N/A N/A 3,031 

1When pilots are not changed at the Detroit Pilot Boat. 

■ 4. In § 401.410, revise paragraphs (a), 

(b), and (c) to read as follows: 

§ 401.410 Basic rates and charges on 

Lakes Huron, Michigan and Superior, and 

the St Mary’s River. 

* * * * * 

(a) Area 6 (Undesignated Waters): 

Service 

Lakes 

Huron and 

Michigan 

Six-hour Period ........................................................................................................................................................................................ $662 

Docking or Undocking ............................................................................................................................................................................. 629 

(b) Area 7 (Designated Waters): 

Area De Tour Gros Cap Any Harbor 

Gros Cap ................................................................................................................................................. $2,568 N/A N/A 

Algoma Steel Corporation Wharf at Sault Ste. Marie, Ontario ............................................................... 2,568 $967 N/A 

Any point in Sault Ste. Marie, Ontario, except the Algoma Steel Corporation Wharf ............................ 2,153 967 N/A 

Sault Ste. Marie, MI ................................................................................................................................. 2,153 967 N/A 

Harbor Movage ........................................................................................................................................ N/A N/A $967 

(c) Area 8 (Undesignated Waters): 

Service Lake 

Superior 

Six-hour Period ........................................................................................................................................................................................ $577 

Docking or Undocking ............................................................................................................................................................................. 549 

§ 401.420 [Amended] 

■ 5. Amend § 401.420 as follows: 

■ a. In paragraphs (a) and (b), remove 

the text ‘‘$127’’ and add, in its place, the 

text ‘‘$124’’; and remove the text 

‘‘$1,989’’ and add, in its place, the text 

‘‘$1,942’’; and 

■ b. In paragraph (c)(1), remove the text 

‘‘$751’’ and add, in its place, the text 

‘‘$733’’; and in paragraph (c)(3), remove 

the text ‘‘$127’’ and add, in its place, the 

text ‘‘$124’’, and remove the text 

‘‘$1,989’’ and add, in its place, the text 

‘‘$1,942.’’ 

§ 401.428 [Amended] 

■ 6. In § 401.428, remove the text 

‘‘$766’’ and add, in its place, the text 

‘‘$748.’’ 

Dated: February 9, 2012. 

Dana A. Goward, 

Director, Marine Transportation Systems 

Management, U.S. Coast Guard. 

[FR Doc. 2012–4453 Filed 2–27–12; 8:45 am] 

BILLING CODE 9110–04–P 


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