Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations 10365 

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. 

State and location Community 

No. 

Effective date authorization/cancellation of 

sale of flood insurance in community 

Current effective 

map date 

Date certain 

Federal 

assistance no 

longer available 

in SFHAs 

Riley County, Unincorporated Areas ..... 200298 June 23, 1975, Emerg; April 1, 1982, Reg; 

March 16, 2015, Susp.

......do ............... Do. 

* -do- =Ditto. 

Code for reading third column: Emerg.—Emergency; Reg.—Regular; Susp.—Suspension. 

Dated: February 6, 2015. 

David L. Miller, 

Associate Administrator, Federal Insurance 

and Mitigation Administration, Department 

of Homeland Security, Federal Emergency 

Management Agency. 

[FR Doc. 2015–03954 Filed 2–25–15; 8:45 am] 

BILLING CODE 9110–12–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

46 CFR Part 401 

[Docket No. USCG–2014–0481] 

RIN 1625–AC22 

Great Lakes Pilotage Rates—2015 

Annual Review and Adjustment 

AGENCY: Coast Guard, DHS. 

ACTION: Final rule. 

SUMMARY: The Coast Guard is adjusting 

rates for pilotage services on the Great 

Lakes, which were last amended in 

March 2014. The adjustments establish 

new base rates made in accordance with 

a full ratemaking procedure. 

Additionally, the Coast Guard exercises 

the discretion provided by Step 7 of the 

Appendix A methodology. The result is 

an upward adjustment to close the gap 

between revenues projected by this 

rulemaking and those collected by the 

pilot associations. Our proposed rates 

planned to maintain parity with the 

Canadian Great Lakes Pilotage 

Authority. While this continues to be 

our goal, we have since discovered a 

more significant challenge demonstrated 

by the recently completed revenue 

audits. This is a more pressing concern 

for the operation of safe, efficient, and 

reliable pilotage service on the Great 

Lakes than maintaining parity because it 

demonstrates that the pilot associations 

are unable to properly fund their 

operations. Also, we are implementing 

temporary surcharges to accelerate 

recoupment of necessary and reasonable 

training and investment costs for the 

pilot associations. This final rule 

promotes the Coast Guard’s strategic 

goal of maritime safety. 

DATES: This final rule is effective August 

1, 2015. 

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–2014–0481 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–2014–0481 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, Director, 

Great Lakes Pilotage, Commandant (CG– 

WWM–2), Coast Guard; telephone 202– 

372–2037, email Todd.A.Haviland@

uscg.mil, or fax 202–372–1914. If you 

have questions on viewing or submitting 

material to the docket, call Ms. Cheryl 

Collins, 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 

A. Ratemaking Methodology 

B. AMOU Contracts 

C. Surcharge 

D. Revenue Audits 

E. Pilot Boats 

VI. Summary of the Rule and Discussion of 

Methodology 

A. Summary of the Rule 

B. Discussion of the Methodology 

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 

APA American Pilots Association 

CFR Code of Federal Regulations 

CPA Certified public accountant 

CPI Consumer Price Index 

E.O. Executive Order 

FR Federal Register 

GLPA Great Lakes Pilotage Association 

MISLE Marine Information for Safety and 

Law Enforcement 

MOA Memorandum of Arrangements 

MOU Memorandum of Understanding 

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 

WGLPA Western Great Lakes Pilots 

Association 

II. Regulatory History 

On September 4, 2014, we published 

a notice of proposed rulemaking 

(NPRM) titled ‘‘Great Lakes Pilotage 

Rates—2015 Annual Review and 

Adjustment’’ in the Federal Register (79 

FR 52602). We received 10 submissions 

on the NPRM from multiple sources, 

including pilotage associations, pilots, 

pilot organizations, and shippers. No 

public meeting was requested and none 

was held. 

On December 1, 2014, we published 

the recently completed revenue audits 

of the pilot associations and reopened 

the public comment period in the 

Federal Register (79 FR 71082). We 

received 5 submissions on the revenue 

audits. 

III. Basis and Purpose 

The basis of this final 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. or 

Canadian registered pilots while 

transiting the U.S. waters of the St. 

Lawrence Seaway and the Great Lakes 


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

especially designed for and generally limited to use 

on the Great Lakes. 

system. 46 U.S.C. 9302(a)(1). The Act 

requires the Secretary 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, if necessary, adjusted. 

Id. 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, and procedures for annual 

review and adjustment of existing base 

rates appear in 46 CFR part 404, 

Appendix C. 

The purpose of this final rule is to 

establish new base pilotage rates, using 

the methodology found in 46 CFR part 

404, Appendix A. 

IV. Background 

The vessels affected by this final rule 

are those engaged in foreign trade upon 

the U.S. waters of the Great Lakes. 

United States and Canadian ‘‘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 

to operate a pilotage pool. It is 

important to note that we 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 Association (GLPA) and, 

accordingly, is not included in the 

United States 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 final rule is a full ratemaking to 

establish new base pilotage rates, using 

the methodology found in 46 CFR part 

404, Appendix A (hereafter ‘‘Appendix 

A’’). The last full ratemaking established 

the current base rates in March 2014 (79 

FR 12084; Mar. 4, 2014). 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. We 

have now completed our review of the 

independent accountants’ 2012 

financial reports. The comments by the 

pilot associations on those reports and 

the independent accountants’ final 

findings are discussed in our document 

titled ‘‘Summary—Independent 

Accountant’s Report on Pilot 

Association Expenses, with Pilot 

Association Comments and 

Accountant’s Responses,’’ which 

appears in the docket. In addition, we 

also use the independent accountant’s 

review of pilot association revenues. 

The review, contracted by the Coast 

Guard, confirms the revenues of the 

pilot associations and it establishes a 

baseline of comparison between actual 

collected revenues and those projected 

by the rulemaking. The revenue reports 

also appear in the docket. 

V. Discussion of Comments and 

Changes 

We received 10 public submissions in 

response to the initial public comment 

period of our NPRM. 

In the NPRM, the Coast Guard 

proposed a 2.5 percent across the board 

rate increase for the three pilotage 

districts and varying surcharge levels 

across the three districts. However, due 

to the completion of the revenue audits 

during the initial comment period, the 

Coast Guard extended the comment 

period for 30 days for the public to 

comment on the revenue audits. We 

received an additional five comments to 

our supplementary comment period 

focusing on the revenue audits. Of all 

the comments we received, 10 came 

from pilots or pilot associations, 3 came 

from industry groups, and 2 came from 

the union whose contract data provides 

benchmark data for pilot compensation. 

Based on the comments and revenue 

audits, the Coast Guard is implementing 

a 10 percent across the board rate 

increase for the three pilotage districts 

and a 10 percent surcharge for each 

district. The reasoning behind the 

changes follows. Any further changes 

involving the Appendix A methodology 

will be published for notice and 

comment in a future rulemaking. 

A. Ratemaking Methodology 

Three commenters questioned various 

aspects of the ratemaking methodology. 

First, a pilot from the Western Great 

Lakes Pilots Association (WGLPA) 

questioned the application of bridge 

hours, as well as what the definition 

should include. We are currently 

working with the pilots, industry, and 

the American Pilots Association to 

finalize a new model to gauge necessary 

pilot strength. We plan to propose this 

model in a future rulemaking. We 

believe this coordinated, thorough 

process is needed to address the 

longstanding challenges with pilot 

recruitment and retention on the Great 

Lakes. Another pilot suggested that we 

need to incorporate multiple years of 

inflation in the rate to compensate for 

the time lapse between the conduct of 

the audits and the effective date of the 

rate. Under Step 1.C of the Appendix A 

methodology, the adjustment for 

inflation or deflation is a 1-year 

adjustment between the reported year 

(the audit year) and the succeeding 

navigation season. As we have stated in 

previous rulemakings, we are unable to 

incorporate a multiyear adjustment in 

the current methodology. We will 

consider changing this step in a future 

rulemaking. 

Also, the same commenter questioned 

our application of benefits to the 

American Maritime Officers Union 

(AMOU) contract. This is a longstanding 

issue and the commenter argues that we 

should multiply first mate wages and 

benefits by 150 percent to determine 

designated waters compensation. We 

disagree and continue to maintain that 

the 150 percent applies only to wages; 

benefits are then added to the result. As 

part of our extensive review of the 

Appendix A methodology, we are 

actively seeking alternative 

compensation benchmarks to the 

AMOU contracts. Another commenter 

believes that compensation must exceed 

that of the AMOU in order to 

successfully recruit future pilots. We 


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agree that actual pilot compensation 

should be sufficient to attract and retain 

U.S. Registered Pilots and we are 

actively pursuing alternatives to the 

AMOU contracts for a new pilot 

compensation standard. Two 

commenters suggested that the pilot 

strength called for in the rate is 

inadequate. As discussed previously, we 

believe the current bridge hour standard 

is not an effective means of establishing 

pilot strength. We plan to continue 

efforts to develop a new pilot strength 

model based on feedback from the 

stakeholders and will provide it for 

public comment in a future rulemaking. 

Another commenter questioned the 

effective date of the rate, saying that the 

rate should go into effect at the start of 

the season instead of aligning with the 

union contract start date of August 1. 

Since the AMOU contracts are part of 

the current Appendix A methodology, 

August 1 continues to be the effective 

date of the rate. We are open to 

adjusting the effective date of the rate in 

a future rulemaking in coordination 

with our expansive review of the 

methodology if doing so will enhance 

the delivery of safe, efficient, and 

reliable service. 

Additionally, five commenters 

questioned use of our discretion under 

Step 7 of the Appendix A methodology. 

Two of those commenters, a member of 

industry and a pilot, disagree with our 

basis for Step 7 adjustments, citing 

insufficient support for our justification 

of parity adjustments under the 

Memorandum of Arrangements/ 

Memorandum of Understanding (MOA/ 

MOU) with Canada and Executive Order 

(E.O.) 13609. We disagree. The purpose 

of the MOA/MOU and E.O. 13609 is to 

work to better align U.S. and Canadian 

regulatory schemes. We agree that the 

new MOU has a less strict interpretation 

of parity, seeking comparable rates over 

identical ones. However, we believe that 

the revenue shortfall against projections 

uncovered in the recently completed 

audits calls for action. Our actions to 

seek comparable rates are undercut by 

overprojections and the inability of the 

current billing scheme to generate 

sufficient revenue to operate the 

pilotage associations. The third 

commenter, also a member of industry, 

asserts that the results of our 

calculations represent a ‘‘serious flaw’’ 

in the methodology. We plan to address 

the challenges with the current 

methodology in a future rulemaking. We 

neither believe the calculations 

resulting from the methodology in this 

rule are representative of economic 

conditions in the Great Lakes region, 

nor do they represent increased 

efficiencies of the pilot organizations. 

As such, we continue to utilize our Step 

7 discretion to adjust them. 

Another commenter stated that the 

Canadian GLPA is actually raising their 

rates only 1 percent rather than 2.5 

percent as stated in the NPRM. While 

we continue to strive for comparability 

with Canadian rates, our greater concern 

currently is the gap in revenue. Thus, 

we seek to actively close the confirmed 

revenue gap between pilot association 

collections and Coast Guard projections 

by increasing the rate. The gap 

highlighted in the revenue audits points 

to an even greater disparity between 

U.S. and Canadian rates on the Great 

Lakes that must be addressed. 

This leads into a discussion of the 

final commenter on the ratemaking 

methodology. The remaining 

commenter highlights the gap between 

revenues projected in the rate and those 

actually collected by the pilot 

association, as well as the second and 

third order effects of that gap. Based on 

a review of the recently completed 

revenue audits, we agree with the 

commenter that the gap between 

revenue projections in the rate and the 

revenues actually collected by the pilot 

associations presents an untenable 

situation. The revenue projections in the 

rate for each pilot association directly 

impact each association’s ability to 

provide safe, efficient, and reliable 

service. Since the actual revenues 

collected by the associations fall well 

short of our projections, we are utilizing 

our Step 7 discretion to increase the 

rates in all areas by 10 percent. This rate 

increase will begin to address the 

significant shortfall in pilotage revenue 

against our projections. We believe that 

the current shortfall in revenue is a 

result of both bridge hour projections 

and a billing scheme that is not properly 

baselined to collect appropriate 

revenue. Rate increases to address the 

shortfall will continue to be separate 

and distinct from the temporary 

surcharges applied in the districts for 

training and investments. 

B. AMOU Contracts 

Five commenters–three pilots or 

pilots’ representatives and two officials 

from the AMOU–addressed our use of 

AMOU contracts to estimate average 

annual compensation for U.S. 

Registered Pilots in Step 2.A of our 

Appendix A ratemaking methodology. 

Since the application of these contracts 

is currently the subject of pending 

litigation, we refrain from addressing 

these comments and will continue to 

utilize the AMOU contract data as we 

did in the 2013 and 2014 ratemakings. 

C. Surcharge 

Eight commenters–seven pilots or 

pilot associations and one member of 

industry–addressed the proposed 

surcharges in the NPRM. We received a 

comment from the Lakes Pilots 

Association, Inc. supporting the 

proposed surcharge for District Two. 

Commenters from both District One and 

District Three stated that they require 

two additional pilot applicants each 

above their authorized strength to deal 

with personnel turnover. We agree with 

both commenters. The pilotage 

associations are facing a wave of 

retirements, both expected and 

unexpected, and these additional 

applicant pilots are necessary to ensure 

the system continues to operate 

smoothly. The long lead time for pilot 

training necessitates that the pilot 

associations begin training now to 

address current pilot retirements as well 

as those projected for the next 24 

months. Thus, we are using our 

surcharge authority to fund applicant 

pilots that exceed the current authorized 

pilot strength of the associations. Based 

on how three associations plan to 

compensate the applicants and the costs 

associated with training, we have 

estimated that a 5 percent surcharge is 

necessary to fund each applicant pilot. 

As you will see in the following 

discussion, we have established a 10 

percent surcharge for each district in 

order to accelerate the costs associated 

with training 2 applicant pilots. 

In the case of District One, we agree 

with the need for two applicant pilots 

above their authorized strength of 11 

pilots to ensure safe, efficient, and 

reliable pilotage service. To fund these 

applicant pilots, we will increase their 

authorized surcharge to 10 percent. 

We also agree with the need for two 

applicant pilots above their authorized 

strength of 15 pilots to ensure safe, 

efficient, and reliable pilotage service in 

District Three. Accordingly, we will 

fund two additional applicants above 

their authorized pilot strength and 

increase their authorized surcharge to 

10 percent. As mentioned above, in 

conjunction with stakeholders, we are 

developing a new pilotage strength 

model that we will provide for public 

comment in a future rulemaking. 

Finally, a member of industry 

questioned the need for pilot training 

surcharges and the authority to charge 

for expenses not yet incurred. The Coast 

Guard has the authority to prescribe 

rates and charges pursuant to 46 U.S.C. 

9303. Temporary surcharge authority 

was implemented through regulation in 

the 2014 ratemaking cycle. See 78 FR 

48376. The surcharges include funds for 


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professional training, investments in 

pilotage technology, and the costs to 

train and fund six new applicant pilots 

across the system. These applicants will 

all be in place for the 2015 shipping 

season and thus, through the temporary 

surcharge, the Coast Guard is 

accelerating recoupment of these 

important expenses. We fully support 

investments in professional 

development and technology to enhance 

the safety, reliability, and efficiency of 

the system. Further, we believe the 

recruitment, funding, and training of 

applicant pilots before the retirement of 

current registered pilots is essential to 

the stability of the system and to 

achieve and maintain acceptable levels 

of service. Any overages in surcharge 

collection against the actual costs will 

be adjusted in the next year’s rate. We 

discuss surcharges further in Part VI 

after our discussion of other comments. 

D. Revenue Audits 

We received three comments on the 

revenue audits—two from pilots and 

one from industry. Both pilot 

commenters approved of the revenue 

audits and asked the Coast Guard to 

adjust for the differences between actual 

and projected revenues. We agree with 

these comments and have adjusted our 

rate increase to 10 percent across all 

districts to begin aligning actual and 

projected revenues. Our discussion in 

Step 7 provides additional discussion 

on this topic. It is clear that the audits 

for the 2013 Appendix A rulemaking 

demonstrate a significant shortfall. 

Since we only have a single data point, 

we plan to increase the base rate to fill 

this gap over a multi-year period. Ten 

percent is reasonable because this is 

greater than inflation and begins to align 

the revenues needed to provide safe, 

efficient, and reliable service with the 

actual revenues that our rulemakings 

generate. We will also work to address 

this discrepancy in a future rulemaking 

regarding the methodology. We discuss 

this further in Step 7 of the 

methodology. The industry commenter 

disapproves of the open-ended nature of 

the comment period, seeking further 

clarity regarding our plan for use of the 

revenue audits and a better explanation 

of our use of discretion. We disagree. 

The comment period was set up to 

allow access by all parties to the 

revenue audits and to provide feedback 

to the Coast Guard regarding their 

review and incorporation into the 

ratemaking methodology. The revenue 

audits clearly point to a shortcoming in 

the billing scheme and methodology 

that significantly reduces actual 

revenue. Failure to act on the revenue 

audits would ignore the point ‘‘and 

other supportable economic factors’’ in 

Step 7 of the methodology. While we do 

not propose a solution for the 

methodology in this rulemaking, we are 

working to develop new proposals to 

address the significant hindrances of the 

current methodology. The discretion 

exercised in Step 7 seeks to maintain 

safe, efficient, and reliable pilotage 

service while we prepare a future 

rulemaking to address the current 

methodology. 

E. Pilot Boats 

We received two comments regarding 

purchase of new pilot boats. District 

Two submitted information regarding 

the purchase of a new boat for use in 

Detroit for consideration in the rate. 

However, based on the documents 

submitted, the pilots have reached an 

agreement with the Canadian GLPA and 

industry to fund the pilot boat through 

usage fees, not through the rate. As a 

result, the expenses associated with the 

new pilot boat will not be included in 

the 2015 rate. Similarly, a pilot from the 

WGLPA believes that infrastructure 

investment in a new dock and new pilot 

boat near Sault Sainte Marie, MI should 

be included in the rate. We disagree. 

Like District Two, the letter of intent 

signed between the WGLPA and the 

Canadian GLPA plans to recoup the cost 

of their infrastructure improvement 

through levied pilot boat fees, not the 

pilotage rate. We support and encourage 

the investment of both associations in 

badly needed infrastructure and capital 

assets but cannot allow recoupment of 

expenses already marked to be paid by 

industry separately. 

VI. Summary of the Rule and 

Discussion of Methodology 

A. Summary of the Rule 

We are establishing new base pilotage 

rates in accordance with the 

methodology outlined in Appendix A to 

46 CFR part 404. The new rates will be 

established by March 1, 2015 and 

become effective August 1, 2015. Our 

calculations under Steps 1 through 6 of 

Appendix A would result in an average 

12 percent rate decrease. This rate 

decrease is not the result of increased 

efficiencies in providing pilotage 

services but rather is a result of changes 

to AMOU contract data. 

Additionally, the recently completed 

revenue audits demonstrate a significant 

shortfall between revenues projected by 

the Coast Guard using the Appendix A 

methodology and those actually 

captured by the current billing scheme. 

This gap, explained further in our Step 

7 discussion, demonstrates that a more 

significant rate increase is necessary to 

promote a standard safe, efficient, and 

reliable pilotage service by ensuring the 

pilot associations have sufficient actual 

revenue to continue operations. 

Therefore, we will continue to exercise 

the discretion outlined in Step 7, 

increasing rates by 10 percent to begin 

closing the gap between projected 

revenues and those actually collected by 

the pilot associations. Table 1 shows the 

percent change for the new rates for 

each area. 

Secondly, we are implementing 

temporary surcharges for the pilot 

associations to recoup necessary and 

reasonable training and investment 

expenses incurred or that are expected 

to be incurred prior to the required 

March 1, 2015 publication of the final 

rule. Normally, these expenses would 

not be recognized until the 2016 annual 

ratemaking or later. By authorizing the 

temporary surcharges now, this action 

will accelerate the reimbursement for 

necessary and reasonable training and 

investment expenses. The surcharge 

will be authorized for the duration of 

the 2015 shipping season, which begins 

in March 2015. The value of the 

surcharges is based on the audited 

revenues of the pilot associations and 

the identified need to train two 

additional pilot applicants per District. 

This action will merely accelerate the 

recoupment of these expenses. At the 

conclusion of the 2015 shipping season, 

we would account for the monies 

generated by the surcharge and make 

adjustments as necessary to the 

operating expenses for the following 

year. 

In District One, we are implementing 

a temporary surcharge of 10 percent to 

compensate pilots for $28,028.91 that 

the District One pilot association spent 

on training in 2013 and early 2014, as 

well as the anticipated $300,000 cost to 

train two new applicant pilots and 

prepare replacements for retiring pilots. 

We believe this training is necessary 

and reasonable to promote safe, 

efficient, and reliable pilotage on the 

Great Lakes and support the St. 

Lawrence Seaway Pilots Association’s 

continued commitment to the training 

and professional development of their 

pilots. 

Additionally, we are implementing a 

temporary surcharge of 10 percent in 

District Two to compensate pilots for 

$300,000 that the District Two pilot 

association spent training two applicant 

pilots in 2014. This is necessary and 

reasonable to allow the association to 

bring on new pilots in the face of 

upcoming retirements without adjusting 

the pilotage needs as determined by the 

ratemaking methodology. This 

surcharge will also accelerate the 


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3 ‘‘Director’’ is the Coast Guard Director, Great 

Lakes Pilotage, which is used throughout this rule. 

repayment of the association’s 

investment in upgraded technology 

($25,829.80) to enhance the situational 

awareness of pilots on the bridge. We 

believe this needed technology will 

assist in the safety, efficiency, and 

reliability of the system. 

Next, we are implementing a 

temporary surcharge of 10 percent in 

District Three to compensate pilots for 

$26,950 that the District Three pilot 

association plans to spend on training at 

the conclusion of the 2014 shipping 

season. We believe this training is 

necessary and reasonable for the 

provision of safe pilotage service. This 

also compensates District Three for the 

anticipated $300,000 cost of training 

two additional pilot applicants to 

increase pilot strength and advance safe, 

efficient, and reliable pilotage service in 

the district. 

All figures in the tables that follow are 

based on calculations performed either 

by an independent accountant or by the 

Director’s 3 staff. In both cases, those 

calculations were performed using 

common commercial computer 

programs. Decimalization and rounding 

of the audited and calculated data 

affects the display in these tables but 

does not affect the calculations. The 

calculations are based on the actual 

figures, which are rounded for 

presentation in the tables. 

TABLE 1—SUMMARY OF RATE ADJUSTMENTS BASED ON STEP 7 DISCRETION

If pilotage service is required in: 

Then the percent 

change over the 

current rate is: 

Area 1 (Designated waters) ........................................................................................................................................................... 10 

Area 2 (Undesignated waters) ....................................................................................................................................................... 10 

Area 4 (Undesignated waters) ....................................................................................................................................................... 10 

Area 5 (Designated waters) ........................................................................................................................................................... 10 

Area 6 (Undesignated waters) ....................................................................................................................................................... 10 

Area 7 (Designated waters) ........................................................................................................................................................... 10 

Area 8 (Undesignated waters) ....................................................................................................................................................... 10 

B. Discussion of the Methodology 

The Appendix A methodology 

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 have applied them to 

the 2012 financial information supplied 

by the pilots association. 

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 necessary and reasonable 

operating expenses that pilotage rates 

should recover. 

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 2012 financial 

information in 2013. This is the most 

current and complete data set we have 

available. 

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 

recommending which reported expenses 

should be recognized. The accountant 

also reviewed which reported expenses 

should be adjusted prior to recognition 

or disallowed for ratemaking purposes. 

The accountant’s preliminary findings 

were sent to the pilot associations, they 

reviewed and commented on those 

findings, and the accountant then 

finalized the findings. The Director 

reviewed and accepted the 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 

appears in the docket. Tables 2 through 

4 show each association’s recognized 

expenses. 

TABLE 2—RECOGNIZED EXPENSES FOR DISTRICT ONE

Reported expenses for 2012 

Area 1 Area 2 

Total St. Lawrence 

River Lake Ontario 

Operating Expenses: 

Other Pilotage Costs: 

Pilot subsistence/Travel ........................................................................................................ $227,199 $137,315 $364,514 

License insurance ................................................................................................................. 0 0 0 

Payroll taxes ......................................................................................................................... 62,038 48,452 110,490 

Other ..................................................................................................................................... 596 549 1,145 

Total Other Pilotage Costs ............................................................................................ 289,833 186,316 476,149 

Pilot Boat and Dispatch Costs: 

Pilot boat expense ................................................................................................................ 108,539 95,405 203,944 

Dispatch expense ................................................................................................................. 0 0 0 

Payroll taxes ......................................................................................................................... 13,429 11,804 25,233 


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TABLE 2—RECOGNIZED EXPENSES FOR DISTRICT ONE—Continued 

Reported expenses for 2012 

Area 1 Area 2 

Total St. Lawrence 

River Lake Ontario 

Total Pilot and Dispatch Costs ...................................................................................... 121,968 107,209 229,177 

Administrative Expenses: 

Legal—general counsel ........................................................................................................ 1,369 1,281 2,650 

Legal—lobbying .................................................................................................................... 3,957 3,478 7,435 

Insurance .............................................................................................................................. 21,907 18,998 40,905 

Employee benefits ................................................................................................................ 21,281 18,509 39,790 

Payroll taxes ......................................................................................................................... 0 0 0 

Other taxes ........................................................................................................................... 18,491 15,801 34,292 

Travel .................................................................................................................................... 473 416 889 

Depreciation/Auto leasing/Other ........................................................................................... 38,346 33,705 72,051 

Interest .................................................................................................................................. 15,484 13,610 29,094 

Dues and subscriptions ........................................................................................................ 13,740 10,240 23,980 

Utilities .................................................................................................................................. 4,549 3,897 8,446 

Salaries ................................................................................................................................. 48,837 42,927 91,764 

Accounting/Professional fees ............................................................................................... 4,683 4,317 9,000 

Pilot Training ......................................................................................................................... 26,353 21,961 48,314 

Other ..................................................................................................................................... 10,689 8,974 19,663 

Total Administrative Expenses ...................................................................................... 230,159 198,114 428,273 

Total Operating Expenses 641,960 491,639 1,133,599 

Adjustments (Independent certified public accountant (CPA)): 

Pilotage subsistence/Travel .................................................................................................. (887) (779) (1,666) 

Payroll taxes ......................................................................................................................... (13,719) (12,058) (25,777) 

Dues and subscriptions ........................................................................................................ (13,740) (10,240) (23,980) 

TOTAL CPA ADJUSTMENTS ....................................................................................... (28,346) (23,077) (51,423) 

Adjustments (Director): 

American Pilots Association (APA) Dues ............................................................................. 11,679 8,704 20,383 

Pilot Training (surcharge) ..................................................................................................... (26,353) (21,961) (48,314) 

Legal—lobbying .................................................................................................................... (3,957) (3,478) (7,435) 

TOTAL DIRECTOR ADJUSTMENTS ........................................................................... (18,631) (16,735) (35,366)

Total Operating Expenses ............................................................................................. 594,983 451,827 1,046,810 

Note: Numbers may not total due to rounding. 

TABLE 3—RECOGNIZED EXPENSES FOR DISTRICT TWO

Reported Expenses for 2012 

Area 4 Area 5 

Total 

Lake Erie 

Southeast 

Shoal to Port 

Huron, MI 

Operating Expenses: 

Other Pilotage Costs: 

Pilot subsistence/Travel ........................................................................................................ 86,947 130,421 217,368 

License insurance ................................................................................................................. 6,168 9,252 15,420 

Payroll taxes ......................................................................................................................... 42,218 63,328 105,546 

Other ..................................................................................................................................... 23,888 35,833 59,721 

Total Other Pilotage Costs ............................................................................................ 159,221 238,834 398,055 

Pilot Boat and Dispatch Costs: 

Pilot boat expense ................................................................................................................ 131,285 196,930 328,215 

Dispatch expense ................................................................................................................. 6,600 9,900 16,500 

Employee Benefits ................................................................................................................ 48,310 72,465 120,775 

Payroll taxes ......................................................................................................................... 7,412 11,119 18,531 

Total Pilot and Dispatch Costs ...................................................................................... 193,607 290,414 484,021 

Administrative Expenses: 

Legal—general counsel ........................................................................................................ 2,054 3,082 5,136 

Legal—lobbying .................................................................................................................... 2,704 4,055 6,759 

Legal—litigation .................................................................................................................... 6,488 9,733 16,221 

Office rent ............................................................................................................................. 26,275 39,413 65,688 

Insurance .............................................................................................................................. 10,682 16,024 26,706 

Employee benefits ................................................................................................................ 16,452 24,678 41,130 

Payroll taxes ......................................................................................................................... 4,143 6,216 10,359 

Other taxes ........................................................................................................................... 12,546 18,819 31,365 


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TABLE 3—RECOGNIZED EXPENSES FOR DISTRICT TWO—Continued 

Reported Expenses for 2012 

Area 4 Area 5 

Total 

Lake Erie 

Southeast 

Shoal to Port 

Huron, MI 

Depreciation/Auto leasing/Other ........................................................................................... 9,074 13,610 22,684 

Interest .................................................................................................................................. 2,989 4,483 7,472 

Utilities .................................................................................................................................. 13,917 20,876 34,793 

Salaries ................................................................................................................................. 36,252 54,377 90,629 

Accounting/Professional fees ............................................................................................... 11,764 17,646 29,410 

Pilot Training ......................................................................................................................... 0 0 0 

Other ..................................................................................................................................... 9,405 14,108 23,513 

Total Administrative Expenses ...................................................................................... 164,745 247,120 411,865 

Total Operating Expenses ............................................................................................. 517,573 776,368 1,293,941 

Adjustments (Independent CPA): 

Pilot subsistence/Travel ........................................................................................................ (1,982) (2,974) (4,956) 

Employee benefits ................................................................................................................ (3,585) (5,378) (8,963) 

TOTAL CPA ADJUSTMENTS ....................................................................................... (5,567) (8,352) (13,919) 

Adjustments (Director): 

Federal Tax Allowance ......................................................................................................... (5,200) (7,800) (13,000) 

APA Dues ............................................................................................................................. 7,344 11,016 18,360 

Legal—lobbying .................................................................................................................... (2,704) (4,055) (6,759) 

Legal—litigation .................................................................................................................... (6,488) (9,733) (16,221) 

TOTAL DIRECTOR ADJUSTMENTS ........................................................................... (7,048) (10,572) (17,620) 

Total Operating Expenses ............................................................................................. 504,958 757,444 1,262,402 

Note: Numbers may not total due to rounding. 

TABLE 4—RECOGNIZED EXPENSES FOR DISTRICT THREE

Reported expenses for 2012 

Area 6 Area 7 Area 8 

Total Lakes Huron 

and Michigan 

St. Mary’s 

River Lake Superior 

Operating Expenses: 

Other Pilotage Costs: 

Pilot subsistence/Travel ............................................................................ $180,316 $77,278 $110,398 $367,992 

License insurance ..................................................................................... 8,859 3,797 5,424 18,080 

Payroll taxes ............................................................................................. 0 0 0 0 

Other ......................................................................................................... 2,875 1,232 1,760 5,867 

Total Other Pilotage Costs ................................................................ 192,050 82,307 117,582 391,939 

Pilot Boat and Dispatch Costs: 

Pilot boat expense .................................................................................... 261,937 112,259 160,370 534,566 

Dispatch expense ..................................................................................... 81,958 35,125 50,178 167,261 

Payroll taxes ............................................................................................. 8,203 3,515 5,022 16,740 

Total Pilot Boat and Dispatch Costs ................................................. 352,098 150,899 215,570 718,567 

Administrative Expenses: 

Legal—lobbying ........................................................................................ 4,304 1,845 2,635 8,784 

Office rent ................................................................................................. 4,851 2,079 2,970 9,900 

Insurance .................................................................................................. 6,469 2,773 3,961 13,203 

Employee benefits .................................................................................... 77,348 33,149 47,356 157,854 

Payroll taxes ............................................................................................. 5,404 2,316 3,309 11,029 

Other taxes ............................................................................................... 941 403 576 1,920 

Depreciation/Auto leasing ......................................................................... 17,462 7,484 10,691 35,637 

Interest ...................................................................................................... 2,692 1,154 1,648 5,494 

Utilities ...................................................................................................... 20,950 8,979 12,827 42,756 

Salaries ..................................................................................................... 54,003 23,144 33,063 110,210 

Accounting/Professional fees ................................................................... 13,157 5,639 8,055 26,851 

Pilot Training ............................................................................................. 0 0 0 0 

Other ......................................................................................................... 4,657 1,996 2,851 9,504 

Total Administrative Expenses .......................................................... 212,238 90,961 129,942 433,141 

Total Operating Expenses ................................................................. 756,386 324,167 463,094 1,543,647 

Adjustments (Independent CPA): 

Pilot subsistence/travel ............................................................................. (5,303) (2,273) (3,247) (10,823) 


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TABLE 4—RECOGNIZED EXPENSES FOR DISTRICT THREE—Continued 

Reported expenses for 2012 

Area 6 Area 7 Area 8 

Total Lakes Huron 

and Michigan 

St. Mary’s 

River Lake Superior 

Payroll taxes ............................................................................................. 44,613 19,120 27,314 91,046 

Other taxes ............................................................................................... (1,761) (755) (1,078) (3,594) 

Other ......................................................................................................... (637) (273) (390) (1,300) 

TOTAL CPA ADJUSTMENTS ........................................................... 36,912 15,819 22,599 75,329 

Adjustments (Director): 

APA dues .................................................................................................. 11,695 5,012 7,160 23,868 

Legal—lobbying ........................................................................................ (4,304) (1,845) (2,635) (8,784) 

TOTAL DIRECTOR ADJUSTMENTS ............................................... 7,391 3,167 4,525 15,084 

Total Operating Expenses ................................................................. 800,689 343,153 490,218 1,634,060 

Note: Numbers may not total due to rounding. 

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 2012 financial information, the 

‘‘succeeding navigation season’’ for this 

ratemaking is 2013. We based our 

inflation adjustment of 1.4 percent on 

the 2013 change in the Consumer Price 

Index (CPI) for the Midwest 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. 

The Coast Guard is aware that the 

current annual adjustment for inflation 

does not account for the value of money 

over time. We are working on a solution 

to allow for a better approximation of 

actual costs. 

TABLE 5—INFLATION ADJUSTMENT, DISTRICT ONE

Reported expenses for 2012 

Area 1 Area 2 

Total St. Lawrence 

River Lake Ontario 

Total Operating Expenses: ....................................................................... $594,983 $451,827 $1,046,810 

2013 change in the CPI for the Midwest Region of the United States .... × .014 × .014 × .014 

Inflation Adjustment .................................................................................. = $8,330 = $6,326 = $14,655 

TABLE 6—INFLATION ADJUSTMENT, DISTRICT TWO

Reported expenses for 2012 

Area 4 Area 5 

Total 

Lake Erie Southeast Shoal 

to Port Huron, MI 

Total Operating Expenses ........................................................................ $504,958 $757,444 $1,262,402 

2013 change in the CPI for the Midwest Region of the United States .... × .014 × .014 × .014 

Inflation Adjustment .................................................................................. = $7,069 = $10,604 = $17,674 

TABLE 7—INFLATION ADJUSTMENT, DISTRICT THREE

Reported expenses for 2012 

Area 6 Area 7 Area 8 

Total Lakes Huron and 

Michigan St. Mary’s River Lake Superior 

Total Operating Expenses ................................ $800,689 $343,153 $490,218 $1,634,060 

2013 change in the CPI for the Midwest Region of the United States ............................... × .014 × .014 × .014 × .014 

Inflation Adjustment ........................................... = $11,210 = $4,804 = $6,863 = $22,877 

Step 1.D: Projection of Operating 

Expenses. In this final sub-step of Step 

1, we 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. 

For District One, the projected 

operating expenses are based on the 

calculations from Steps 1.A through 1.C. 

Table 8 shows these projections. 


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TABLE 8—PROJECTED OPERATING EXPENSES, DISTRICT ONE

Reported expenses for 2012 

Area 1 Area 2 

Total St. Lawrence 

River Lake Ontario 

Total operating expenses ......................................................................... $594,983 $451,827 $1,046,810 

Inflation adjustment 1.4% ......................................................................... + $8,330 + $6,326 + $14,655 

Total projected expenses for 2015 pilotage season ................................ = $603,313 = $458,153 = $1,061,465 

Note: Numbers may not total due to rounding. 

In District Two the projected 

operating expenses are based on the 

calculations from Steps 1.A through 1.C. 

Table 9 shows these projections. 

TABLE 9—PROJECTED OPERATING EXPENSES, DISTRICT TWO

Reported expenses for 2012 

Area 4 Area 5 

Total 

Lake Erie Southeast Shoal to 

Port Huron, MI 

Total Operating Expenses ........................................................................ $504,958 $757,444 $1,262,402 

Inflation adjustment 1.4% ......................................................................... + 7,069 + 10,604 + 17,674 

Total projected expenses for 2015 pilotage season ................................ = 512,027 = 768,048 = 1,280,076 

In District Three, projected operating 

expenses are based on the calculations 

from Steps 1.A through 1.C. Table 10 

shows these projections. 

TABLE 10—PROJECTED OPERATING EXPENSES, DISTRICT THREE

Reported expenses for 2012 

Area 6 Area 7 Area 8 

Total Lakes Huron and 

Michigan St. Mary’s River Lake Superior 

Total Expenses ............................................... $800,689 $343,153 $490,218 $1,634,060 

Inflation adjustment 1.4% ................................ + 11,210 + 4,804 + 6,863 + 22,877 

Total projected expenses for 2015 pilotage 

season ......................................................... = 811,899 = 347,957 = 497,081 = 1,656,937 

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 2015. 

Step 2.A: Determination of Target 

Rate of Compensation. 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 on 

designated waters by multiplying the 

average first mates’ wages by 150 

percent and then adding the average 

first mates’ benefits. 

We rely upon union contract data 

provided by the AMOU, which has 

agreements with three U.S. companies 

engaged in Great Lakes shipping. We 

derive the data from two separate 

AMOU contracts—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 companies 

under each agreement. Agreement A 

applies to vessels operated by Key 

Lakes, Inc., and Agreement B applies to 

vessels operated by American 

Steamship Co. and Mittal Steel USA, 

Inc. 

Agreements A and B both expire on 

July 31, 2016. The AMOU has set the 

daily aggregate rate, including the daily 

wage rate, vacation pay, pension plan 

contributions, and medical plan 

contributions effective August 1, 2015, 

as follows: (1) In undesignated waters, 

$632.12 for Agreement A and $624.34 

for Agreement B; and (2) In designated 

waters, $870.05 for Agreement A and 

$856.42 for Agreement B. 

Because we are interested in annual 

compensation, we must convert these 

daily rates. We use a 270-day multiplier 

which reflects an average 30-day month, 

over the 9 months of the average 

shipping season. Table 11 shows our 

calculations using the 270-day 

multiplier. 

TABLE 11—PROJECTED ANNUAL AGGREGATE RATE COMPONENTS

Aggregate Rate–Wages and Vacation, Pension, and Medical Benefits 

Pilots on undesignated waters 

Agreement A: 

$632.12 daily rate × 270 days ...................................................................................................................................................... $170,672.40 


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TABLE 11—PROJECTED ANNUAL AGGREGATE RATE COMPONENTS—Continued 

Agreement B: 

$624.34 daily rate × 270 days ...................................................................................................................................................... 168,571.80 

Pilots on designated waters 

Agreement A: 

$870.05 daily rate × 270 days ...................................................................................................................................................... 234,913.50 

Agreement B: 

$856.42 daily rate × 270 days ...................................................................................................................................................... 231,233.40 

We apportion the compensation 

provided by each agreement according 

to the percentage of tonnage represented 

by companies under each agreement. 

Agreement A applies to vessels operated 

by Key Lakes, Inc., representing 

approximately 30 percent of tonnage, 

and Agreement B applies to vessels 

operated by American Steamship Co. 

and Mittal Steel USA, Inc., representing 

approximately 70 percent of tonnage. 

Table 12 provides details. 

TABLE 12—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 .................................................. 361,385 ÷ 1,215,811 = 29.7238% 854,426 ÷ 1,215,811 = 70.2762% 

We use the percentages from Table 12 

to apportion the projected compensation 

from Table 11. This gives us a single 

tonnage-weighted set of figures. Table 

13 shows our calculations. 

TABLE 13—TONNAGE-WEIGHTED WAGE AND BENEFIT COMPONENTS

Undesignated 

waters 

Designated 

waters 

Agreement A: 

Total wages and benefits .................................................................................................................. $170,672.40 $234,913.50 

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

Total ........................................................................................................................................... = $50,730 = $69,825 

Agreement B: 

Total wages and benefits .................................................................................................................. $168,571.80 $231,233.40 

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

Total ........................................................................................................................................... = $118,466 = $162,502 

Projected Target Rate of Compensation: 

Agreement A total weighted average wages and benefits ............................................................... $50,730 $69,825 

Agreement B total weighted average wages and benefits ............................................................... + $118,466 + $162,502 

Total ........................................................................................................................................... = $169,196 = $232,327 

Step 2.B: Determination of the 

Number of Pilots Needed. Subject to 

adjustment by the Director to ensure 

uninterrupted service or for other 

reasonable circumstances, we determine 

the number of pilots needed for 

ratemaking purposes in each area 

through dividing projected bridge hours 

for each area by either the 1,000 

(designated waters) or 1,800 

(undesignated waters) bridge hours 

specified in Step 2.B. We round the 

mathematical results and express our 

determination as a whole number of 

pilots. 

According to 46 CFR part 404, 

Appendix A, Step 2.B(1), bridge hours 

are the number of hours a pilot is aboard 

a vessel providing pilotage service. For 

that reason, and as we explained most 

recently in the 2011 ratemaking’s final 

rule (76 FR 6351 at 6352 col. 3 (Feb. 4, 

2011)), we do not include, and never 

have included, pilot delay, detention, or 

cancellation in calculating bridge hours. 

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 2014 final rule, we determined 

that 36 pilots would be needed for 

ratemaking purposes. For 2015, we 

project 36 pilots is still the proper 

number to use for ratemaking purposes. 

The total pilot authorization strength 

includes five pilots in Area 2, where 

rounding up alone would result in only 

four pilots. For the same reasons we 

explained at length in the 2008 

ratemaking final rule (74 FR 220 at 221– 

22 (Jan. 5, 2009)), we have determined 

that this adjustment is essential for 


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ensuring uninterrupted pilotage service 

in Area 2. Table 14 shows the bridge 

hours we project will be needed for each 

area and our calculations to determine 

the whole number of pilots needed for 

ratemaking purposes. 

TABLE 14—NUMBER OF PILOTS NEEDED

Pilotage area Projected 2015 

bridge hours 

Divided by 1,000 

(designated waters) 

or 1,800 

(undesignated 

waters) 

Calculated value of 

pilot demand 

Pilots needed 

(total = 36) 

Area 1 (Designated waters) ........................................ 5,116 ÷ 1,000 = 5.116 6 

Area 2 (Undesignated waters) .................................... 5,429 ÷ 1,800 = 3.016 5 

Area 4 (Undesignated waters) .................................... 5,814 ÷ 1,800 = 3.230 4 

Area 5 (Designated waters) ........................................ 5,052 ÷ 1,000 = 5.052 6 

Area 6 (Undesignated waters) .................................... 9,611 ÷ 1,800 = 5.339 6 

Area 7 (Designated waters) ........................................ 3,023 ÷ 1,000 = 3.023 4 

Area 8 (Undesignated waters) .................................... 7,540 ÷ 1,800 = 4.189 5 

Step 2.C: Projection of Target Pilot 

Compensation. In Table 15, we project 

total target pilot compensation 

separately for each area by multiplying 

the number of pilots needed in each 

area, as shown in Table 14, by the target 

pilot compensation shown in Table 13. 

TABLE 15—PROJECTION OF TARGET PILOT COMPENSATION BY AREA

Pilotage area Pilots needed 

(total = 36) 

Target rate 

of pilot 

compensation 

Projected 

target pilot 

compensation 

Area 1 (Designated waters) ................................................................................... 6 × $232,327 = $1,393,964 

Area 2 (Undesignated waters) ............................................................................... 5 × 169,196 = 845,981 

Area 4 (Undesignated waters) ............................................................................... 4 × 169,196 = 676,785 

Area 5 (Designated waters) ................................................................................... 6 × 232,327 = 1,393,964 

Area 6 (Undesignated waters) ............................................................................... 6 × 169,196 = 1,015,177 

Area 7 (Designated waters) ................................................................................... 4 × 232,327 = 929,309 

Area 8 (Undesignated waters) ............................................................................... 5 × 169,196 = 845,981 

Note: Numbers may not total due to rounding. 

Steps 3 and 3.A: Projection of 

Revenue. In Steps 3 and 3.A., we project 

the revenue that would be received in 

2015 if demand for pilotage services 

matches the bridge hours we projected 

in Table 14, and if 2014 pilotage rates 

are left unchanged. Table 16 shows this 

calculation. 

TABLE 16—PROJECTION OF REVENUE BY AREA

Pilotage area Projected 2015 

bridge hours 

2014 Pilotage 

rates 

Revenue 

projection 

for 2015 

Area 1 (Designated waters) ............................................................................. 5,116 × $472.50 = $2,417,285 

Area 2 (Undesignated waters) ......................................................................... 5,429 × 291.96 = 1,585,032 

Area 4 (Undesignated waters) ......................................................................... 5,814 × 210.40 = 1,223,262 

Area 5 (Designated waters) ............................................................................. 5,052 × 521.64 = 2,635,314 

Area 6 (Undesignated waters) ......................................................................... 9,611 × 204.95 = 1,969,800 

Area 7 (Designated waters) ............................................................................. 3,023 × 495.01 = 1,496,427 

Area 8 (Undesignated waters) ......................................................................... 7,540 × 191.34 = 1,442,677 

Total ........................................................................................................... ............................ ............................ 12,769,797 

Note: Numbers may not total due to rounding. 

Step 4: Calculation of Investment 

Base. In this step, we calculate each 

association’s investment base, which is 

the recognized capital investment in the 

assets employed by the association 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 17 through 

19 follow the formula up to that point. 

TABLE 17—TOTAL SOURCES OF FUNDS, DISTRICT ONE

Area 1 Area 2 

Recognized Assets: 

Total Current Assets ......................................................................................................................... $532,237 $467,833 

Total Current Liabilities ..................................................................................................................... ¥ 61,808 ¥ 54,329 

Current Notes Payable ...................................................................................................................... + 23,413 + 20,579 


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TABLE 17—TOTAL SOURCES OF FUNDS, DISTRICT ONE—Continued 

Area 1 Area 2 

Total Property and Equipment (NET) ............................................................................................... + 445,044 + 391,191 

Land .................................................................................................................................................. ¥ 11,727 ¥ 10,308 

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

Total Recognized Assets ........................................................................................................... = 927,159 = 814,966 

Non-Recognized Assets: 

Total Investments and Special Funds .............................................................................................. + 6,452 + 5,672 

Total Non-Recognized Assets ................................................................................................... = 6,452 = 5,672 

Total Assets: 

Total Recognized Assets .................................................................................................................. 927,159 814,966 

Total Non-Recognized Assets .......................................................................................................... + 6,452 + 5,672 

Total Assets ............................................................................................................................... = 933,611 = 820,638 

Recognized Sources of Funds: 

Total Stockholder Equity ................................................................................................................... 659,141 579,380 

Long-Term Debt ................................................................................................................................ + 262,785 + 230,986 

Current Notes Payable ...................................................................................................................... + 23,413 + 20,579 

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

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

Total Recognized Sources ......................................................................................................... = 945,339 = 830,945 

Non-Recognized Sources of Funds: 

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

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

Deferred Federal Income Taxes ....................................................................................................... + 10,675 + 9,383 

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

Total Non-Recognized Sources ................................................................................................. = 10,675 = 9,383 

Total Sources of Funds: 

Total Recognized Sources ................................................................................................................ 945,339 830,945 

Total Non-Recognized Sources ........................................................................................................ + 10,675 + 9,383 

Total Sources of Funds ............................................................................................................. = 956,014 = 840,328 

Note: Numbers may not total due to rounding. 

TABLE 18—TOTAL SOURCES OF FUNDS, DISTRICT TWO

Area 4 Area 5 

Recognized Assets: 

Total Current Assets ......................................................................................................................... 498,456 747,683 

Total Current Liabilities ..................................................................................................................... ¥ 494,410 ¥ 741,614 

Current Notes Payable ...................................................................................................................... + 33,962 + 50,942 

Total Property and Equipment (NET) ............................................................................................... + 436,063 + 654,094 

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

Total Other Assets ............................................................................................................................ + 60,418 + 90,627 

Total Recognized Assets ........................................................................................................... = 534,488 = 801,733 

Non-Recognized Assets: 

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

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

Total Assets: 

Total Recognized Assets .................................................................................................................. 534,488 801,733 

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

Total Assets ............................................................................................................................... = 534,488 = 801,733 

Recognized Sources of Funds: 

Total Stockholder Equity ................................................................................................................... 85,846 128,768 

Long-Term Debt ................................................................................................................................ + 414,681 + 622,022 

Current Notes Payable ...................................................................................................................... + 33,962 + 50,942 

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


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TABLE 18—TOTAL SOURCES OF FUNDS, DISTRICT TWO—Continued 

Area 4 Area 5 

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

Total Recognized Sources ......................................................................................................... = 534,488 = 801,733 

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 ................................................................................................................ 534,488 801,733 

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

Total Sources of Funds ............................................................................................................. = 534,488 = 801,733 

Note: Numbers may not total due to rounding. 

TABLE 19—TOTAL SOURCES OF FUNDS, DISTRICT THREE

Area 6 Area 7 Area 8 

Recognized Assets: 

Total Current Assets ...................................................................................... 656,459 281,340 401,914 

Total Current Liabilities .................................................................................. ¥ 82,775 ¥ 35,475 ¥ 50,679 

Current Notes Payable .................................................................................. + 7,730 + 3,313 + 4,733 

Total Property and Equipment (NET) ............................................................ + 19,611 + 8,405 + 12,007 

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

Total Other Assets ......................................................................................... + 490 + 210 + 300 

Total Recognized Assets ....................................................................... = 601,515 = 257,793 = 368,275 

Non-Recognized Assets: 

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

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

Total Assets: 

Total Recognized Assets ............................................................................... 601,515 257,793 368,275 

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

Total Assets ............................................................................................ = 601,515 = 257,793 = 368,275 

Recognized Sources of Funds: 

Total Stockholder Equity ............................................................................... 586,300 251,271 358,959 

Long-Term Debt ............................................................................................ + 7,485 + 3,208 + 4,583 

Current Notes Payable .................................................................................. + 7,730 + 3,313 + 4,733 

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

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

Total Recognized Sources ..................................................................... = 601,515 = 257,793 = 368,275 

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 ............................................................................ 601,515 257,792 368,275 

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

Total Sources of Funds .......................................................................... = 601,515 = 257,792 = 368,275 

Note: Numbers may not total due to rounding. 


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Tables 17 through 19 also 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) only exist for 

District One 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) for Districts Two 

and Three. District One has a multiplier 

of 0.99. Table 20 applies the multiplier 

of 0.99 and 1 as necessary and shows 

the investment base for each 

association. Table 20 also expresses 

these results by area, because area 

results will be needed in subsequent 

steps. 

TABLE 20—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 ........................................................................ 1 927,159 945,339 956,014 0.99 916,806 

2 814,966 830,945 840,328 0.99 805,866 

Total ................................................................ .......... .................... .................... .......................... .................................. 1,722,672 

Two 2 ...................................................................... 4 534,488 534,488 534,488 1 534,488 

5 801,733 801,733 801,733 1 801,733 

Total ................................................................ .......... .................... .................... .......................... .................................. 1,336,221 

Three ...................................................................... 6 601,515 601,515 601,515 1 601,515 

7 257,793 257,792 257,792 1 257,793 

8 368,275 368,275 368,275 1 368,275 

Total ................................................................ .......... .................... .................... .......................... .................................. 1,227,581 

1 ‘‘Investment base’’ = ‘‘Total recognized assets’’ × ‘‘Multiplier (ratio of recognized to total sources)’’. 2The 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. 

Note: Numbers may not total due to rounding. 

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 2013, the 

preceding year, the allowed ROI was 

4.24 percent, based on the average rate 

of return for 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 part of the adjustment 

determination requires an initial 

calculation, applying 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 21 through 23. 

TABLE 21—PROJECTED ROI, AREAS IN DISTRICT ONE

Area 1 Area 2 

Revenue (from Step 3) ............................................................................................................................. $2,417,285 $1,585,032 

Operating Expenses (from Step 1) .......................................................................................................... ¥ $603,313 ¥ $458,153 

Pilot Compensation (from Step 2) ............................................................................................................ ¥ $1,393,964 ¥ $845,981 

Operating Profit/(Loss) ............................................................................................................................. = $420,009 = $280,899 

Interest Expense (from audits) ................................................................................................................. ¥ $15,484 ¥ $13,610 

Earnings Before Tax ................................................................................................................................ = $404,525 = $267,289 

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

Net Income ............................................................................................................................................... = $404,525 = $267,289 

Return Element (Net Income + Interest) .................................................................................................. $420,009 $280,899 

Investment Base (from Step 4) ................................................................................................................ ÷ $916,806 ÷ $805,866 

Projected Return on Investment .............................................................................................................. = 0.46 = 0.35 

TABLE 22—PROJECTED ROI, AREAS IN DISTRICT TWO

Area 4 Area 5 

Revenue (from Step 3) ............................................................................................................................. $1,223,262 $2,635,314 

Operating Expenses (from Step 1) .......................................................................................................... ¥ $512,027 ¥ $768,048 

Pilot Compensation (from Step 2) ............................................................................................................ ¥ $676,785 ¥ $1,393,964 

Operating Profit/(Loss) ............................................................................................................................. = $34,450 = $473,302 

Interest Expense (from audits) ................................................................................................................. ¥ $2,989 ¥ $4,483 

Earnings Before Tax ................................................................................................................................ = $31,461 = $468,819 


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TABLE 22—PROJECTED ROI, AREAS IN DISTRICT TWO—Continued 

Area 4 Area 5 

Federal Tax Allowance ............................................................................................................................. ¥ $5,200 ¥ $7,800 

Net Income ............................................................................................................................................... = $26,261 = $461,019 

Return Element (Net Income + Interest) .................................................................................................. $29,250 $465,502 

Investment Base (from Step 4) ................................................................................................................ ÷ $534,488 ÷ $801,733 

Projected Return on Investment .............................................................................................................. = 0.05 = 0.58 

TABLE 23—PROJECTED ROI, AREAS IN DISTRICT THREE

Area 6 Area 7 Area 8 

Revenue (from Step 3) ......................................................................................... $1,969,800 $1,496,427 $1,442,677 

Operating Expenses (from Step 1) ....................................................................... ¥ $811,899 ¥ $347,957 ¥ $497,081 

Pilot Compensation (from Step 2) ........................................................................ ¥ $1,015,177 ¥ $929,309 ¥ $845,981 

Operating Profit/(Loss) .......................................................................................... = $142,724 = $219,161 = $99,615 

Interest Expense (from audits) ............................................................................. ¥ $2,692 ¥ $1,154 ¥ $1,648 

Earnings Before Tax ............................................................................................. = $140,032 = $218,007 = $97,967 

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

Net Income ........................................................................................................... = $140,032 = $218,007 = $97,967 

Return Element (Net Income + Interest) .............................................................. $142,724 $219,161 $99,615 

Investment Base (from Step 4) ............................................................................ ÷ $601,515 ÷ $257,793 ÷ $368,275 

Projected Return on Investment ........................................................................... = 0.24 = 0.85 = 0.27 

The second part required for Step 6 

compares the results of Tables 21 

through 23 with the target ROI (4.24 

percent) we obtained in Step 5 to 

determine if an adjustment to the base 

pilotage rate is necessary. Table 24 

shows this comparison for each area. 

TABLE 24—COMPARISON OF PROJECTED ROI AND TARGET ROI, BY AREA1

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 ................... 0.4581 0.3486 0.0547 0.5806 0.2373 0.8501 0.2705 

Target return on investment .......................... 0.0424 0.0424 0.0424 0.0424 0.0424 0.0424 0.0424 

Difference in return on 

investment ................ 0.4157 0.3062 0.0123 0.5382 0.1949 0.8077 0.2281 

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 24 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 25. 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 25—REVENUE NEEDED TO RECOVER TARGET ROI, BY AREA

Pilotage area 

Operating 

expenses 

(Step 1) 

Target pilot 

compensation 

(Step 2) 

Investment base 

(Step 4) × 4.24% 

(Target ROI 

Step 5) 

Federal tax 

allowance Revenue needed 

Area 1 (Designated 

waters) ......................... $603,313 + 1,393,964 + 38,873 + 0 = 2,036,149 

Area 2 (Undesignated 

waters) ......................... $458,153 + 845,981 + 34,169 + 0 = 1,338,302 

Area 4 (Undesignated 

waters) ......................... $512,027 + 676,785 + 22,662 + 5,200 = 1,216,674 

Area 5 (Designated 

waters) ......................... $768,048 + 1,393,964 + 33,993 + 7,800 = 2,203,805 

Area 6 (Undesignated 

waters) ......................... $811,899 + 1,015,177 + 25,504 + 0 = 1,852,580 


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TABLE 25—REVENUE NEEDED TO RECOVER TARGET ROI, BY AREA—Continued 

Pilotage area 

Operating 

expenses 

(Step 1) 

Target pilot 

compensation 

(Step 2) 

Investment base 

(Step 4) × 4.24% 

(Target ROI 

Step 5) 

Federal tax 

allowance Revenue needed 

Area 7 (Designated 

waters) ......................... $347,957 + 929,309 + 10,930 + 0 = 1,288,197 

Area 8 (Undesignated 

waters) ......................... $497,081 + 845,981 + 15,615 + 0 = 1,358,677 

Total ......................... $3,998,479 + 7,101,160 + 181,747 + 13,000 = 11,294,385 

The ‘‘Revenue Needed’’ column of Table 

25 is less than the revenue we projected 

in Table 16. 

Step 7: Adjustment of Pilotage Rates. 

Finally, we calculate rate adjustments 

by dividing the Step 6 revenue needed 

(Table 25) by the Step 3 revenue 

projection (Table 16), to give us a rate 

multiplier for each area. These rate 

adjustments are subject to adjustment 

based on the requirements of 

agreements between the United States 

and Canada and adjustment for other 

supportable circumstances. Tables 26 

through 28 show these calculations. 

TABLE 26—RATE MULTIPLIER, AREAS IN DISTRICT ONE

Ratemaking projections 

Area 1 Area 2 

St. Lawrence 

River Lake Ontario 

Revenue Needed (from Step 6) ..................................................................................................... $2,036,149 $1,338,302 

Revenue (from Step 3) ................................................................................................................... ÷ $2,417,285 ÷ $1,585,032 

Rate Multiplier ................................................................................................................................ = 0.8423 = 0.8443 

TABLE 27—RATE MULTIPLIER, AREAS IN DISTRICT TWO

Ratemaking projections 

Area 4 Area 5 

Lake Erie Southeast Shoal 

to Port Huron, MI 

Revenue Needed (from Step 6) ..................................................................................................... $1,216,674 $2,203,805 

Revenue (from Step 3) ................................................................................................................... ÷ $1,223,262 ÷ $2,635,314 

Rate Multiplier ................................................................................................................................ = 0.9946 = 0.8363 

TABLE 28—RATE MULTIPLIER, AREAS IN DISTRICT THREE

Ratemaking projections 

Area 6 Area 7 Area 8 

Lakes Huron and 

Michigan St. Mary’s River Lake Superior 

Revenue Needed (from Step 6) ....................................................... $1,825,580 $1,288,197 $1,358,677 

Revenue (from Step 3) ..................................................................... ÷ $1,969,800 ÷ $1,496,427 ÷ $1,442,677 

Rate Multiplier ................................................................................... = 0.9405 = 0.8608 = 0.9418 

Note: Numbers may not total due to rounding. 

We calculate a rate multiplier for 

adjusting the basic rates and charges 

described in 46 CFR 401.420 and 

401.428, and it is applicable in all areas. 

We divide total revenue needed (Step 6, 

Table 25) by total projected revenue 

(Steps 3 and 3.A, Table 16). Table 29 

shows this calculation. 

TABLE 29—RATE MULTIPLIER FOR

BASIC RATES AND CHARGES IN 46 

CFR 401.420 AND 401.428 

Ratemaking Projections: 

TABLE 29—RATE MULTIPLIER FOR

BASIC RATES AND CHARGES IN 46 

CFR 401.420 AND 401.428—Continued 

Total Revenue 

Needed (from 

Step 6) ............... $11,294,385 

Total revenue (from 

Step 3) ............... ÷ $12,769,797 

Rate Multiplier ............... = 0.884 

Using this table, we calculate 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). The result is a decrease by 

11.55 percent in all areas. 

Without further action, the existing 

rates we established in our 2014 final 

rule would then be multiplied by the 

rate multipliers from Tables 29 through 

31 to calculate the area by area rate 

changes for 2015. The resulting 2015 

rates across the Great Lakes, on average, 

would then decrease by approximately 

12 percent from the 2014 rates. This 

decrease is not due to increased 


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efficiencies in pilotage services but 

rather a result of adjustments to AMOU 

contract data. 

We decline to impose this decrease 

because recently completed 

independent audits of pilot association 

revenues detail a significant gap 

between revenues projected by the Coast 

Guard and those actually collected by 

the pilot associations. Implementing a 

rate decrease would further widen this 

disparity and adversely impact the 

provision of safe, efficient, and reliable 

pilotage service on the Great Lakes. In 

light of the revenue studies, our initial 

proposal in the NPRM to raise rates 2.5 

percent in order to gain parity with the 

Canadian GLPA now appears 

insufficient to ensure the funding of 

safe, efficient, and reliable pilotage 

service. In 46 U.S.C. 9303(f), the statute 

states ‘‘The Secretary shall prescribe by 

regulation rates and charges for pilotage 

services, giving consideration to the 

public interest and the costs of 

providing the services.’’ We believe the 

public interest is best served through 

promotion of safe, efficient, and reliable 

pilotage service. Sufficient revenue to 

fund safe, efficient, and reliable pilotage 

operations are considered integral to the 

public interest. Table 30 demonstrates 

the results of the revenue audits 

compared to our projections. 

TABLE 30—REVENUE GAP

District 

Ratemaking 

projections 

(2015) 

Actual revenue 

revenue audits 

(2013) 

Revenue shortfall 

(projections 

minus actual) 

1 ............................................................................................................... $4,002,317 $3,406,164 $596,153 

2 ............................................................................................................... 3,858,576 3,169,377 689,199 

3 ............................................................................................................... 4,908,904 4,323,965 584,939 

Further, the gap captured in Table 30 

actually underestimates the revenue gap 

because the projections of the current 

rulemaking rely on the alterations of 

proprietary union contracts. Table 31 

illustrates the average U.S. Registered 

Pilot compensation, assuming all 

revenue remaining after expenses is 

distributed as compensation. 

TABLE 31—2013 AVERAGE ACTUAL COMPENSATION * 

District Revenues Expenses 

Total 

available for 

compensation 

Number 

of pilots ** 

Approximate 

compensation 

per pilot 

1 ..................................................................................... $3,406,164 $1,272,365 $2,133,799 11 $193,982 

2 ..................................................................................... 3,169,377 1,461,438 1,707,939 10 170,794 

3 ..................................................................................... 4,323,965 1,778,118 2,545,847 17 149,756 

Total ........................................................................ 10,899,506 4,511,921 6,387,585 38 168,094 

* The Coast Guard does not establish pay procedures for the pilot associations, rather we set a target rate of compensation for general compensation calculation. 

** The District Three Association actually employed 13 pilots during this timeframe; their approximate compensation per pilot is higher than this 

table depicts. Seventeen pilots were authorized in the rate. 

These figures demonstrate the 

significant shortfall in pilot 

compensation compared to an estimated 

present value of 2011 compensation (the 

last figures are not in dispute) of 

approximately $260,000. We believe 

$260,000 is a fair estimate of what pilot 

compensation should be based on 

uncontested figures from previous 

AMOU contracts. The gap of almost 

$90,000 between approximate actual 

compensation and our estimates of 

where pilot compensation should stand 

place the pilot associations in an 

untenable position. We believe it is 

imperative to act quickly to raise the 

revenue needed to sustain pilot 

association operations and compensate 

pilots in a fair and reasonable manner. 

This gap also highlights a significant 

discrepancy in the actual salaries of U.S. 

Registered Pilots compared to the 

Canadian Registered Pilots of the GLPA, 

estimated to be approximately ($US) 

250,000. We must work quickly to 

rebaseline the billing scheme and raise 

the revenue necessary to continue to 

sustain safe, efficient, and reliable 

pilotage service on the Great Lakes. We 

believe the shortfalls in revenue are 

caused by an overprojection of bridge 

hours and to a larger extent, an 

inadequate billing scheme. To this end, 

we will adjust our proposal to raise rates 

in all areas by 10 percent in a concerted 

effort to begin closing the established 

gap between compensation of U.S. and 

Canadian Registered Pilots, as well as 

the gap between actual salaries and 

previous estimates. This percentage 

increase is high enough above inflation 

to begin closing the revenue gap without 

being unduly burdensome to industry. 

We believe sustained, steady rate 

increases to close the gap are more 

responsible than a one-time action. This 

replaces our initial projections of a 2.5 

percent increase in all areas. We will 

seek to address the underlying 

methodology challenges in a future 

rulemaking. 

Therefore, we rely on the 

discretionary authority we have under 

Step 7 to further adjust rates and begin 

closing the gap between revenues 

projected by the Coast Guard and those 

collected by the pilot associations. Table 

32 compares the impact, area by area, 

that an average decrease of 12 percent 

would have, relative to the impact each 

area would experience if United States 

rates increase. 


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TABLE 32—IMPACT OF EXERCISING STEP 7 DISCRETION

Area 

Percent change in rate 

without exercising Step 

7 discretion 

Percent change in rate 

with exercise of Step 7 

discretion 

Area 1 (Designated waters) ..................................................................................................... ¥15.77 10 

Area 2 (Undesignated waters) ................................................................................................. ¥15.57 10 

Area 4 (Undesignated waters) ................................................................................................. ¥0.54 10 

Area 5 (Designated waters) ..................................................................................................... ¥16.37 10 

Area 6 (Undesignated waters) ................................................................................................. ¥5.95 10 

Area 7 (Designated waters) ..................................................................................................... ¥13.92 10 

Area 8 (Undesignated waters) ................................................................................................. ¥5.82 10 

The following tables reflect our rate 

adjustments of 10 percent across all 

areas. 

Tables 33 through 35 show these 

calculations. 

TABLE 33—ADJUSTMENT OF PILOTAGE RATES, AREAS IN DISTRICT ONE

2014 Rate Rate multiplier Adjusted rate for 2015 

Area 1 

St. Lawrence River 

Basic Pilotage ........................................................................ $19.22/km, $34.02/mi × 1.1 = $21.14/km, $37.42/mi 

Each lock Transited ............................................................... $426 × 1.1 = $469 

Harbor movage ...................................................................... 1,395 × 1.1 = 1,535 

Minimum basic rate, St. Lawrence River .............................. 931 × 1.1 = 1,024 

Maximum rate, through trip ................................................... 4,084 × 1.1 = 4,492 

Area 2 

Lake Ontario 

6-hour period ......................................................................... 872 × 1.1 = 959 

Docking or Undocking ........................................................... 832 × 1.1 = 915 

Note: Numbers may not total due to rounding. 

In addition to the rate charges in 

Table 33, as we explain in the Summary 

section of Part VI of this preamble, we 

are authorizing District One to 

implement a temporary supplemental 

10 percent charge on each source form 

(the ‘‘bill’’ for pilotage service) for the 

duration of the 2015 shipping season, 

which begins in March 2015. District 

One will be required to provide us with 

monthly status reports once this 

surcharge becomes effective for the 

duration of the 2015 shipping season. 

We will exclude these expenses from 

future rates and any surcharge surplus/ 

deficit from the 2014 season would 

impact the final authorized surcharge 

for the 2015 season. 

TABLE 34—ADJUSTMENT OF PILOTAGE RATES, AREAS IN DISTRICT TWO

2014 Rate Rate multiplier Adjusted rate 

for 2015 

Area 4 

Lake Erie 

6-hour period ......................................................................................................... $849 × 1.1 = $934 

Docking or undocking ............................................................................................ 653 × 1.1 = 718 

Any point on Niagara River below Black Rock Lock ............................................ 1,667 × 1.1 = 1,834 

Area 5 

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

Toledo or any point on Lake Erie W. of Southeast Shoal .................................... 1,417 × 1.1 = 1,559 

Toledo or any point on Lake Erie W. of Southeast Shoal & Southeast Shoal .... 2,397 × 1.1 = 2,637 

Toledo or any point on Lake Erie W. of Southeast Shoal & Detroit River ........... 3,113 × 1.1 = 3,424 

Toledo or any point on Lake Erie W. of Southeast Shoal & Detroit Pilot Boat .... 2,397 × 1.1 = 2,637 

Port Huron Change Point & Southeast Shoal (when pilots are not changed at 

the Detroit Pilot Boat) ........................................................................................ 4,176 × 1.1 = 4,594 

Port Huron Change Point & Toledo or any point on Lake Erie W. of Southeast 

Shoal (when pilots are not changed at the Detroit Pilot Boat) ......................... 4,837 × 1.1 = 5,321 

Port Huron Change Point & Detroit River ............................................................. 3,137 × 1.1 = 3,451 

Port Huron Change Point & Detroit Pilot Boat ...................................................... 2,441 × 1.1 = 2,685 

Port Huron Change Point & St. Clair River .......................................................... 1,735 × 1.1 = 1,909 

St. Clair River ........................................................................................................ 1,417 × 1.1 = 1,559 

St. Clair River & Southeast Shoal (when pilots are not changed at the Detroit 

Pilot Boat) .......................................................................................................... 4,176 × 1.1 = 4,594 

St. Clair River & Detroit River/Detroit Pilot Boat ................................................... 3,137 × 1.1 = 3,451 

Detroit, Windsor, or Detroit River .......................................................................... 1,417 × 1.1 = 1,559 

Detroit, Windsor, or Detroit River & Southeast Shoal .......................................... 2,397 × 1.1 = 2,637 


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TABLE 34—ADJUSTMENT OF PILOTAGE RATES, AREAS IN DISTRICT TWO—Continued 

2014 Rate Rate multiplier Adjusted rate 

for 2015 

Detroit, Windsor, or Detroit River & Toledo or any point on Lake Erie W. of 

Southeast Shoal ................................................................................................ 3,113 × 1.1 = 3,424 

Detroit, Windsor, or Detroit River & St. Clair River .............................................. 3,137 × 1.1 = 3,451 

Detroit Pilot Boat & Southeast Shoal .................................................................... 1,735 × 1.1 = 1,909 

Detroit Pilot Boat & Toledo or any point on Lake Erie W. of Southeast Shoal .... 2,397 × 1.1 = 2,637 

Detroit Pilot Boat & St. Clair River ........................................................................ 3,137 × 1.1 = 3,451 

Note: Numbers may not total due to rounding. 

In addition to the rate charges in 

Table 34, and for the reasons we 

discussed in the Summary section of 

Part VI of this preamble, we are 

authorizing District Two to implement a 

temporary supplemental 10 percent 

charge on each source form for the 

duration of the 2015 shipping season, 

which begins in March 2015. District 

Two will be required to provide us with 

monthly status reports once this 

surcharge becomes effective for the 

duration of the 2015 shipping season. 

We will exclude these expenses from 

future rates. 

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

2014 Rate Rate multiplier Adjusted rate 

for 2015 

Area 6 

Lakes Huron and Michigan 

6-hour Period ......................................................................................................... $708 × 1.1 = $779 

Docking or undocking ............................................................................................ 672 × 1.1 = 739 

Area 7 

St. Mary’s River between any point on or in 

Gros Cap & De Tour ............................................................................................. 2,648 × 1.1 = 2,913 

Algoma Steel Corp. Wharf, Sault Ste. Marie, Ont. & De Tour ............................. 2,648 × 1.1 = 2,913 

Algoma Steel Corp. Wharf, Sault Ste. Marie, Ont. & Gros Cap ........................... 997 × 1.1 = 1,097 

Any point in Sault Ste. Marie, Ont., except the Algoma Steel Corp. Wharf & De 

Tour .................................................................................................................... 2,219 × 1.1 = 2,441 

Any point in Sault Ste. Marie, Ont., except the Algoma Steel Corp. Wharf & 

Gros Cap ........................................................................................................... 997 × 1.1 = 1,097 

Sault Ste. Marie, MI & De Tour ............................................................................ 2,219 × 1.1 = 2,441 

Sault Ste. Marie, MI & Gros Cap .......................................................................... 997 × 1.1 = 1,097 

Harbor movage ...................................................................................................... 997 × 1.1 = 1,097 

Area 8 

Lake Superior 

6-hour period ......................................................................................................... 601 × 1.1 = 661 

Docking or undocking ............................................................................................ 571 × 1.1 = 628 

Note: Numbers may not total due to rounding. 

In addition to the rate charges in 

Table 35, and for the reasons we 

discussed in the Summary section of 

Part VI of this preamble, we are 

authorizing District Three to implement 

a temporary supplemental 10 percent 

charge on each source form for the 

duration of the 2015 shipping season, 

which begins in March 2015. District 

Three will be required to provide us 

with monthly status reports once this 

surcharge becomes effective for the 

duration of the 2015 shipping season. 

We will exclude these expenses from 

future rates. 

VII. Regulatory Analyses 

We developed this rule after 

considering numerous statutes and 

E.O.s related to rulemaking. Below we 

summarize our analyses based on these 

statutes or E.O.s. 

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 rule is not a significant 

regulatory action under section 3(f) of 

E.O. 12866 as supplemented by E.O. 

13563, and does not require an 

assessment of potential costs and 

benefits under section 6(a)(3) of E.O. 

12866. The Office of Management and 

Budget (OMB) has not reviewed it under 

E.O. 12866. Nonetheless, we developed 

an analysis of the costs and benefits of 

the rule to ascertain its probable impacts 

on industry. 

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 rulemaking and for 

background information on Great Lakes 

pilotage ratemaking. Based on our 

annual review for this rulemaking, we 

are adjusting the pilotage rates for the 

2015 shipping season to generate 

sufficient revenue to cover allowable 

expenses, and to target pilot 

compensation and returns on pilot 

associations’ investments. The rate 

adjustments in this rule will, if codified, 

lead to an increase in the cost per unit 


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4Total payments across all three districts are 

equal to the increase in payments incurred by 

shippers as a result of the rate changes plus the 

temporary surcharges applied to traffic in Districts 

One, Two, and Three. 

5 2014 Pilotage Rates are described in Table 16 of 

this rule. 

6The estimated rate changes are described in 

Table 32 of this rule. 

7 2015 Pilotage Rates—2014 Pilotage Rates × Rate 

Change. 

8Projected 2015 Bridge Hours are described in 

Table 14 of this rule. 

9Projected Revenue Needed in 2015—2015 

Pilotage Rates × Projected 2015 Bridge Hours. 

of service to shippers in all three 

districts, and result in an estimated 

annual cost increase to shippers of 

approximately $1,276,980 across all 

three districts over 2014 rates—an 

increase of 10 percent. 

In addition to the increase in 

payments that will be incurred by 

shippers in all three districts from the 

previous year as a result of the 

discretionary rate adjustments, we are 

authorizing temporary, supplemental 

surcharges to traffic across all three 

districts in order for the pilotage 

associations to recover training 

expenses and technology improvements 

that were incurred throughout the 2013 

and 2014 shipping seasons. These 

temporary surcharges will be authorized 

for the duration of the 2015 shipping 

season, which begins in March. The 

additional revenue due to the temporary 

surcharges was calculated by 

multiplying the surcharge percentage by 

the projected revenue needed in 2015 

for each district (Table 37). We estimate 

that these temporary surcharges will 

generate a combined $1,404,678 in 

revenue for the pilotage associations 

across all three districts. In District One, 

the 10 percent surcharge is expected to 

generate an additional $440,255 in 

revenue. In District Two, the 10 percent 

surcharge is expected to generate 

$424,443 in additional revenue. In 

District Three, the 10 percent surcharge 

is expected to generate an additional 

$539,979 in revenue. At the end of the 

2015 shipping season, we will account 

for the monies the surcharges generate 

and make adjustments (debits/credits) to 

the operating expenses for the following 

year. 

Therefore, after accounting for the 

implementation of the temporary 

surcharges on traffic across all three 

districts, the payments made by 

shippers during the 2015 shipping 

season are estimated to be 

approximately $2,681,657 more than the 

payments that were made in 2014.4

A regulatory assessment follows. 

The final rule applies the 46 CFR part 

404, Appendix A, full ratemaking 

methodology, including the exercise of 

our discretion to increase Great Lakes 

pilotage rates, on average, 

approximately 10 percent overall from 

the current rates set in the 2014 final 

rule. The Appendix A methodology is 

discussed and applied in detail in Part 

VI of this preamble. Among other factors 

described in Part VI, it reflects audited 

2012 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 2014 and used financial data from the 

2011 base accounting year. The last 

annual rate review, conducted under 46 

CFR part 404, Appendix C, was 

completed early in 2011. 

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. The statute 

applies only to commercial vessels and 

not to recreational vessels. 

Owners and operators of other vessels 

that are not affected by this final 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. 

We used 2011–2013 vessel arrival 

data from the Coast Guard’s Marine 

Information for Safety and Law 

Enforcement (MISLE) system to estimate 

the average annual number of vessels 

affected by the rate adjustment. Using 

that period, we found that 

approximately 114 different vessels 

journeyed into the Great Lakes system 

annually. These vessels entered the 

Great Lakes by transiting at least one of 

the three pilotage districts before 

leaving the Great Lakes system. These 

vessels often made more than one 

distinct stop, docking, loading, and 

unloading at facilities in Great Lakes 

ports. Of the total trips for the 114 

vessels, there were approximately 353 

annual U.S. port arrivals before the 

vessels left the Great Lakes system, 

based on 2011–2013 vessel data from 

MISLE. 

The impact of the rate adjustment to 

shippers is estimated from the District 

pilotage revenues. These revenues 

represent the costs that shippers must 

pay for pilotage services. The Coast 

Guard sets rates so that revenues equal 

the estimated cost of pilotage for these 

services. 

We estimate the additional impact 

(cost increases or cost decreases) of the 

rate adjustment in this rule to be the 

difference between the total projected 

revenue needed to cover costs in 2014, 

based on the 2014 rate adjustment, and 

the total projected revenue needed to 

cover costs in 2015, as set forth in this 

rule, plus any temporary surcharges 

authorized by the Coast Guard. Table 36 

details projected revenue needed to 

cover costs in 2015 after making the 

discretionary adjustment to pilotage 

rates as discussed in Step 7 of Part V of 

this preamble. Table 37 summarizes the 

derivation for calculating the revenue 

expected to be generated as a result of 

the temporary surcharges applied to 

traffic in all three districts as discussed 

in Step 7 of Part V of this preamble. 

Table 38 details the additional cost 

increases to shippers by area and 

district as a result of the rate 

adjustments and temporary surcharges 

on traffic in Districts One,Two, and 

Three. 

TABLE 36—RATE ADJUSTMENT BY AREA AND DISTRICT

[$U.S.; Non-discounted] 

2014 Pilotage 

rates 5 Rate change 6 2015 Pilotage rates 7

Projected 

2015 bridge 

hours 8

Projected 

revenue 

needed in 

2015 9

Area 1 .................................................................................. $472.50 1.10 $519.74 5,116 $2,659,014 

Area 2 .................................................................................. 291.96 1.10 321.15 5,429 1,743,536 


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10Projected revenue needed in 2014 is described 

in Table 16 of this rule. 

11Projected revenue needed in 2015 is described 

in Table 36 of this rule. 

TABLE 36—RATE ADJUSTMENT BY AREA AND DISTRICT—Continued 

[$U.S.; Non-discounted] 

2014 Pilotage 

rates 5 Rate change 6 2015 Pilotage 

rates 7

Projected 

2015 bridge 

hours 8

Projected 

revenue 

needed in 

2015 9

Total, District One ......................................................... ........................ ........................ ........................ ........................ 4,402,549 

Area 4 .................................................................................. 210.40 1.10 231.44 5,814 1,345,588 

Area 5 .................................................................................. 521.64 1.10 573.80 5,052 2,898,845 

Total, District Two ......................................................... ........................ ........................ ........................ ........................ 4,244,433 

Area 6 .................................................................................. 204.95 1.10 225.45 9,611 2,166,780 

Area 7 .................................................................................. 495.01 1.10 544.52 3,023 1,646,070 

Area 8 .................................................................................. 191.34 1.10 210.47 7,540 1,586,945 

Total, District Three ...................................................... ........................ ........................ ........................ ........................ 5,399,795 

* Some values may not total due to rounding. 

TABLE 37—DERIVATION OF TEMPORARY SURCHARGE

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

Projected Revenue 

Needed in 2015 ........ $2,659,014 $1,743,536 $1,345,588 $2,898,845 $2,166,780 $1,646,070 $1,586,945 

Surcharge Rate ............ 10% 10% 10% 10% 10% 10% 10% 

Surcharge Raised ........ $265,901 $174,354 $134,559 $289,885 $216,678 $167,607 $158,694 

Total Surcharge .... $440,255 $424,443 $539,979 

TABLE 38—IMPACT OF THE RULE BY AREA AND DISTRICT

[$U.S.; Non-discounted] 

Projected 

revenue 

needed 

in 2014 10

Projected 

revenue 

needed 

in 2015 11

Temporary 

surcharge 

Additional 

revenue or 

costs 2015 

(2015–2014) 

Total costs or 

savings of this 

final rule 

(additional 

revenue 

or costs 

2015+temporary 

surcharge) 

Area 1 ................................................................................ $2,417,285 $2,659,014 $265,901 $241,729 $507,630 

Area 2 ................................................................................ 1,585,032 1,743,536 174,354 158,503 332,857 

Total, District One ...................................................... 4,002,318 4,402,549 440,255 400,232 840,487 

Area 4 ................................................................................ 1,223,262 1,345,588 134,559 122,326 256,885 

Area 5 ................................................................................ 2,635,314 2,898,845 289,885 263,531 553,416 

Total, District Two ...................................................... 3,858,576 4,244,433 424,443 385,858 810,301 

Area 6 ................................................................................ 1,969,800 2,166,780 216,678 196,980 413,658 

Area 7 ................................................................................ 1,496,427 1,646,070 164,607 149,643 314,250 

Area 8 ................................................................................ 1,442,677 1,586,945 158,694 144,268 302,962 

Total, District Three .................................................... 4,908,904 5,399,795 539,979 490,890 1,030,870 

System Total .............................................................. 12,769,797 14,046,777 1,404,678 1,276,980 2,681,657 

* Some values may not total due to rounding. 

After applying the discretionary rate 

change in this rule, the resulting 

difference between the projected 

revenue in 2014 and the projected 

revenue in 2015 is the annual change in 

payments from shippers to pilots after 

accounting for market conditions (i.e., a 

decrease in demand for pilotage 

services) and the change to pilotage 

rates as a result of this final rule. This 

figure is equivalent to the total 

additional payments or reduction in 

payments from the previous year that 

shippers will incur for pilotage services 

from this rule. 

The impact of the discretionary rate 

adjustment on shippers varies by area 

and district in this final rule. The 

discretionary rate adjustments will lead 

to affected shippers operating in District 

One, District Two, and District Three 

experiencing an increase in payments of 

$400,232, $385,858, and $490,890, 

respectively, from the previous year. 

In addition to the rate adjustments, 

temporary surcharges on traffic in 

District One, District Two, and District 

Three will be applied for the duration 

of the 2015 season in order for the 

pilotage associations to recover training 

expenses and technology investments 

incurred during the 2013 and 2014 


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12Our projections indicate in the 2016 

rulemaking we will apply a surcharge of $112,226 

for District One shippers at the end of the 2015 

season in order to account for the difference 

between the total surcharges collected ($440,255) 

and the actual expenses incurred by the District 

One pilot association ($328,029 for training 

expenses), District Two shippers $98,614 

(calculation: $424,443 (total surcharges collected) 

minus $300,000 to train two applicant pilots and 

($25,829.80 for technology improvements)), and 

District Three shippers $213,029 (calculation: 

$539,979 (total surcharges collected) minus 

$326,950 (actual training expenses incurred)). 

13This figure is the total costs or savings of the 

final rule minus the surcharges. 

14This figure does not include the additional 

payments incurred by shippers as a result of the 

temporary surcharges applied to traffic in all three 

districts. The figure is equal to the total additional 

costs or savings of this final rule minus the 

temporary surcharges (see Table 40). 

15The estimated rate changes are described in 

Table 32 of this final rule. 

shipping seasons. We estimate that 

these surcharges will generate an 

additional $440,255, $424,443, and 

$539,979 in revenue for the pilotage 

associations in District One, District 

Two, and District Three, respectively. 

At the end of the 2015 shipping season, 

we will account for the monies the 

surcharges generate and make 

adjustments (debits/credits) to the 

operating expenses for the following 

year.12

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 will pay more and some 

would pay less, depending on the 

distance travelled and the number of 

port arrivals by their vessels. However, 

the increase in costs reported earlier in 

this rule does capture the adjustment in 

payments that shippers will experience 

from the previous year. The overall 

adjustment in payments, after taking 

into account the increase in pilotage 

rates and the addition of temporary 

surcharges will be an increase in 

payments by shippers of approximately 

$2,681,657 across all three districts. 

This rule will allow the Coast Guard 

to meet the requirements in 46 U.S. C. 

9303 to review the rates for pilotage 

services on the Great Lakes, thus 

ensuring proper pilot compensation. 

Alternatively, if we imposed the new 

rates based on the new contract data 

from AMOU, instead of using the 

discretionary rate adjustment described 

in Step 7, there would be an 

approximately 12 percent decrease in 

rates across the system. Instead of 

shippers experiencing an increase in 

payments of approximately 

$1,276,980 13 from the previous year, as 

a result of the rate adjustments, shippers 

would instead experience a reduction in 

payments of approximately 

$1,475,412.14 Table 39 details projected 

revenue needed to cover costs in 2015 

if the discretionary adjustment to 

pilotage rates as discussed in Step 7 of 

Part V of this preamble is not made. 

Table 40 details the additional costs or 

savings by area and district as a result 

of this alternative proposal. 

TABLE 39—ALTERNATIVE RATE ADJUSTMENT BY AREA AND DISTRICT

[$U.S.; Non-discounted] 

2014 Pilotage 

rates 

Rate 

change 15

2015 Pilotage 

rates 

Projected 

2015 bridge 

hours 

Projected revenue 

needed in 2015 

Area 1 ............................................................................ $472.50 0.8423 $398.00 5,116 $2,036,149 

Area 2 ............................................................................ 291.96 0.8443 246.51 5,429 1,338,302 

Total, District One ................................................... ........................ ........................ ........................ ........................ 3,374,451 

Area 4 ............................................................................ 210.40 0.9946 209.27 5,814 1,216,674 

Area 5 ............................................................................ 521.64 0.8363 436.22 5,052 2,203,805 

Total, District Two ................................................... ........................ ........................ ........................ ........................ 3,420,480 

Area 6 ............................................................................ 204.95 0.9405 192.76 9,611 1,852,580 

Area 7 ............................................................................ 495.01 0.8608 426.13 3,023 1,288,197 

Area 8 ............................................................................ 191.34 0.9418 180.20 7,540 1,358,677 

Total, District Three ................................................ ........................ ........................ ........................ ........................ 4,499,454 

System Total ........................................................... ........................ ........................ ........................ ........................ 11,294,385 

*Some values may not total due to rounding. 

TABLE 40—ALTERNATIVE IMPACT OF THE RULE BY AREA AND DISTRICT

[$U.S.; Non-discounted] 

Projected 

revenue needed 

in 2014 

Projected 

revenue needed 

in 2015 

Temporary 

surcharge 

Additional costs or 

savings of this 

rule 

Area 1 ............................................................................................ $2,417,285 $2,036,149 $203,615 ($177,521 ) 

Area 2 ............................................................................................ 1,585,032 1,338,302 133,830 (112,900 ) 

Total, District One ................................................................... 4,002,318 3,374,451 337,445 (290,421 ) 

Area 4 ............................................................................................ 1,223,262 1,216,674 121,667 115,080 

Area 5 ............................................................................................ 2,635,314 2,203,805 220,381 (211,128 ) 

Total, District Two ................................................................... 3,858,576 3,420,480 342,048 (96,048 ) 

Area 6 ............................................................................................ 1,969,800 1,852,580 185,258 68,038 

Area 7 ............................................................................................ 1,496,427 1,288,197 128,820 (79,411 ) 

Area 8 ............................................................................................ 1,442,677 1,358,677 135,868 51,868 


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TABLE 40—ALTERNATIVE IMPACT OF THE RULE BY AREA AND DISTRICT—Continued 

[$U.S.; Non-discounted] 

Projected 

revenue needed 

in 2014 

Projected 

revenue needed 

in 2015 

Temporary 

surcharge 

Additional costs or 

savings of this 

rule 

Total, District Three ................................................................ 4,908,904 4,499,454 449,945 40,495 

System Total ........................................................................... 12,769,797 11,294,385 1,129,439 (345,974 ) 

*Some values may not total due to rounding. 

We reject this alternative, however, 

because independent audits of pilot 

association revenues details a nearly $2 

million gap between Coast Guard 

revenue projections and the amount of 

revenues actually collected. A rate 

decrease would only further widen this 

disparity, and would also jeopardize the 

ability of pilotage associations to 

provide safe, efficient, and reliable 

pilotage service. A rate increase of 10 

percent in all areas will lessen the gap 

between revenues projected by the Coast 

Guard and those collected by pilot 

associations, and the gap between the 

actual salaries of U.S. Registered Pilots 

and Canadian Registered Pilots of the 

GLPA. See our discussion of Step 7 in 

Part VI of this preamble for further 

explanation. 

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 the 

final rule will 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. 

For the final rule, we reviewed recent 

company size and ownership data for 

the period 2011 through 2013 in the 

Coast Guard’s MISLE database, and we 

reviewed business revenue and size data 

provided by publicly available sources 

such as MANTA and Reference USA. 

We found that large, 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 with the 

same NAICS industry classification and 

small-entity size standards described 

above, but they have fewer than 500 

employees; combined, they have 

approximately 65 total employees. We 

expect no adverse impact to these 

entities from this rule because through 

this rulemaking, all the pilot 

associations are provided with 

additional revenue to offset some of the 

projected expenses associated with the 

projected number of bridge hours and 

pilots, and to keep them on par with 

their Canadian counterparts. 

Therefore, the Coast Guard certifies 

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

would 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 can 

better evaluate its effects on them and 

participate in the rulemaking. 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 OMB under OMB 

Control Number 1625–0086, Great Lakes 

Pilotage Methodology. 

E. Federalism 

A rule has implications for federalism 

under E.O. 13132, Federalism, if it has 

a substantial direct effect on the States, 

on the relationship between the national 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. We have analyzed 

this rule under that order and have 

determined that it is consistent with the 

fundamental federalism principles and 

preemption requirements described in 

E.O. 13132. Our analysis is explained 

below. 

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 

specified 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.’’ As a result, States 

or local governments are expressly 

prohibited from regulating within this 

category. Therefore, this rule is 

consistent with the principles of 

federalism and preemption 

requirements in E.O. 13132. 

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 


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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 

would not result in such expenditure, 

we 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 E.O. 12630, 

Governmental Actions and Interference 

with Constitutionally Protected Property 

Rights. 

H. Civil Justice Reform 

This rule meets applicable standards 

in sections 3(a) and 3(b)(2) of E.O. 

12988, Civil Justice Reform, to minimize 

litigation, eliminate ambiguity, and 

reduce burden. 

I. Protection of Children 

We have analyzed this rule under E.O. 

13045, Protection of Children from 

Environmental Health Risks and Safety 

Risks. This rule is not an economically 

significant rule and would not create an 

environmental risk to health or risk to 

safety that might disproportionately 

affect children. 

J. Indian Tribal Governments 

This rule does not have tribal 

implications under E.O. 13175, 

Consultation and Coordination with 

Indian Tribal Governments, because it 

would 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 E.O. 

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 E.O. 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 E.O. 

13211. 

L. Technical Standards 

The National Technology Transfer 

and Advancement Act (15 U.S.C. 272, 

note) directs agencies to use voluntary 

consensus standards in their regulatory 

activities unless the agency provides 

Congress, through the OMB, 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 (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. A final 

environmental analysis checklist 

supporting this determination is 

available in the docket where indicated 

under the ADDRESSES section of this 

preamble. This final rule involves 

regulations that are editorial or 

procedural and fall under section 2.B.2, 

figure 2–1, paragraph (34)(a) of the 

Instruction. 

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: 

Title 46—Shipping 

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 ........... $21.13 per kilometer 

or $37.42 per mile.1

Each Lock Transited $469.1

Harbor Movage ......... $1,535.1

1The minimum basic rate for assignment of 

a pilot in the St. Lawrence River is $1,024, 

and the maximum basic rate for a through trip 

is $4,492. 

(b) Area 2 (Undesignated Waters): 

Service Lake Ontario 

6-hour Period .................... $959 

Docking or Undocking ...... 915 

■ 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): 

Service 

Lake Erie (East 

of 

Southeast Shoal) 

Buffalo 

6-hour Period ................................................................................................................................................... $934 $934 

Docking or Undocking ..................................................................................................................................... 718 718 

Any point on the Niagara River below the Black Rock Lock .......................................................................... N/A 1,834 

(b) Area 5 (Designated Waters): 


rmajette on DSK2VPTVN1PROD with RULES
Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations 10389 

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 $2,637 $1,559 $3,424 $2,637 N/A 

Port Huron Change Point .................................................... 1 4,594 1 5,321 3,451 2,685 1,909 

St. Clair River ....................................................................... 1 4,594 N/A 3,451 3,451 1,559 

Detroit or Windsor or the Detroit River ................................ 2,637 3,424 1,559 N/A 3,451 

Detroit Pilot Boat .................................................................. 1,909 2,637 N/A N/A 3,451 

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 

6-hour Period .................... $779 

Service Lakes Huron and 

Michigan 

Docking or Undocking ...... 739 

(b) Area 7 (Designated Waters): 

Area De tour Gros cap Any harbor 

Gros Cap ..................................................................................................................................... $2,913 N/A N/A 

Algoma Steel Corporation Wharf at Sault Ste. Marie, Ontario ................................................... 2,913 $1,097 N/A 

Any point in Sault Ste. Marie, Ontario, except the Algoma Steel Corporation Wharf ................ 2,441 1,097 N/A 

Sault Ste. Marie, MI ..................................................................................................................... 2,441 1,097 N/A 

Harbor Movage ............................................................................................................................ N/A N/A $1,097 

(c) Area 8 (Undesignated Waters): 

Service Lake Superior 

6-hour Period .................... $661 

Docking or Undocking ...... 628 

§ 401.420 [Amended] 

■ 5. Amend § 401.420 as follows: 

■ a. In paragraph (a), remove the text 

‘‘$129’’ and add, in its place, the text 

‘‘$142’’; and remove the text ‘‘$2,021’’ 

and add, in its place, the text ‘‘$2,223’’; 

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

‘‘$129’’ and add, in its place, the text 

‘‘$142’’; and remove the text ‘‘$2,021’’ 

and add, in its place, the text ‘‘$2,223’’; 

and 

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

‘‘$763’’ and add, in its place, the text 

‘‘$839’’; in paragraph (c)(3), remove the 

text ‘‘$129’’ and add, in its place, the 

text ‘‘$142’’; and remove the text 

‘‘$2,021’’ and add, in its place, the text 

‘‘$2,223’’. 

§ 401.428 [Amended] 

■ 6. In § 401.428, remove the text 

‘‘$763’’ and add, in its place, the text 

‘‘$839’’. 

Dated: February 23, 2015. 

Gary C. Rasicot, 

Director, Marine Transportation Systems, 

U.S. Coast Guard. 

[FR Doc. 2015–04036 Filed 2–25–15; 8:45 am] 

BILLING CODE 9110–04–P 

DEPARTMENT OF DEFENSE 

Defense Acquisition Regulations 

System 

48 CFR Part 212 

RIN 0750–AI50 

Defense Federal Acquisition 

Regulation Supplement: Deletion of 

Obsolete Text Relating to Acquisition 

of Commercial Items (DFARS Case 

2015–D002) 

AGENCY: Defense Acquisition 

Regulations System, Department of 

Defense (DoD). 

ACTION: Final rule. 

SUMMARY: DoD is issuing a final rule 

amending the Defense Federal 

Acquisition Regulation Supplement 

(DFARS) to delete obsolete text relating 

to acquisition of commercial items. 

DATES: Effective February 26, 2015. 

FOR FURTHER INFORMATION CONTACT: 

Janetta Brewer, telephone 571–372– 

6104. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On March 12, 2012, the DFARS was 

amended to implement a 

recommendation made by the Panel on 

Contracting Integrity and included in its 

2009 Report to Congress concerning 

compliance with the DFARS 

documentation requirements for 

commercial item determinations. 

DFARS subpart 212.1 was revised to 

require the contracting officer to 

determine that an acquisition exceeding 

$1 million and using FAR part 12 

procedures either meets the commercial 

item definition at FAR 2.101 or the 

criteria at FAR 12.102(g)(1). The DFARS 

reference to FAR 12.102(g)(1), however, 

is no longer necessary since the FAR 

criteria only apply to contracts and task 

orders entered on or before November 

24, 2013. Accordingly, DFARS 

212.102(a)(i)(A) is being revised to 

remove the statement ‘‘or meets the 

criteria at FAR 12.102(g)(1)’’. 

On November 1, 2004, DFARS subpart 

212.70 was amended to implement 

section 847 of the National Defense 

Authorization Act for Fiscal Year 2004, 

which authorized DoD to carry out a 

pilot program that permitted the use of 

streamlined contracting procedures for 

the production of items or processes 

begun as prototype projects under other 

transaction agreements. Since the 

authority for this program expired on 

September 30, 2010, the associated text 

at DFARS subpart 212.70 is being 

removed. 

II. Publication of This Final Rule for 

Public Comment Is Not Required by 

Statute 

‘‘Publication of proposed 

regulations’’, 41 U.S.C. 1707, is the 

statute which applies to the publication 

of the Federal Acquisition Regulation. 

Paragraph (a)(1) of the statute requires 

that a procurement policy, regulation, 


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