Federal Register / Vol. 61, No. 91 / Thursday, May 9, 1996 / Rules and Regulations 21081

requirements of this subpart will now be

under the jurisdiction of Mississippi.

Since review of the pertinent

Mississippi laws, rules, and regulations

showed them to be adequate for the

implementation and enforcement of the

aforementioned category of NSPS, the

EPA hereby notifies the public that it

has delegated the authority for the

source category listed above on October

30, 1995. The Office of Management and

Budget has exempted this rule from the

requirements of section 6 of Executive

Order 12866.

Authority: This notice is issued under the

authority of sections 101, 111, and 301 of the

Clean Air Act, as Amended (42 U.S.C. 7401,

7411, and 7601).

Dated: April 24, 1996.

A. Stanley Meiburg,

Acting Regional Administrator.

[FR Doc. 96–11478 Filed 5–8–96; 8:45 am]

BILLING CODE 6560–50–P

DEPARTMENT OF TRANSPORTATION

Office of the Secretary

46 CFR Parts 403 and 404

[OST Docket No. 50248]

RIN 2105–AC21

Great Lakes Pilotage Rate

Methodology

AGENCY: Office of the Secretary, DOT.

ACTION: Final rule.

SUMMARY: The Department of

Transportation (the Department) is

responding to comments to a final rule

published April 11, 1995, establishing

new procedures and methodology for

determining Great Lakes pilotage rates

and making corresponding changes to

the financial reporting requirements

required of Great Lakes pilot

associations. Based on these comments,

the Department has made minor

changes to the rule. This final rule does

not change the existing Great Lakes

pilotage rates and charges.

EFFECTIVE DATE: This rule is effective on

June 10, 1996.

ADDRESSES: Unless otherwise indicated,

documents referred to in this preamble

are available for inspection or copying

at the office of the Docket Clerk, OST

Docket No. 50248, U.S. Department of

Transportation, 400 7th St. SW., room

PL–401, Washington, DC 20590 from 9

a.m. to 5:30 p.m., Monday through

Friday.

FOR FURTHER INFORMATION CONTACT:

Scott A. Poyer, Project Manager, St.

Lawrence Seaway Development

Corporation, 400 Seventh St. SW, Room

5421, Washington, DC 20590, 1–800–

785–2779, or Steven B. Farbman, Office

of the Assistant General Counsel for

Regulation and Enforcement, 400 7th St.

SW., room 10424, Washington, DC

20590, (202) 366–9306.

SUPPLEMENTARY INFORMATION:

Regulatory History

On December 7, 1988, the Department

of Transportation published the Great

Lakes Pilotage Study Final Report (1988

DOT Pilotage Study). The study

revealed weaknesses in accounting for

the expenses incurred by the pilot

associations and the need to formally

establish the factors used in establishing

pilotage rates. On April 25, 1990, the

Coast Guard published a final rule (55

FR 17580) establishing improved audit

requirements and general guidelines

and procedures to be followed in

ratemaking (CGD 92–072).

In May 1990, the Inspector General

(IG) for the Department of

Transportation initiated an audit of

Coast Guard oversight of Great Lakes

pilotage. The final report of the audit

(Audit of the U.S. Coast Guard’s

Oversight and Management of the Great

Lakes Pilotage Program), detailing

further issues affecting the basis for

Great Lakes pilotage rates, was issued

on December 14, 1990.

On August 2, 1991, a DOT Task Force

was formed to: (1) Develop an interim

rate adjustment; and (2) establish a new

pilotage ratemaking methodology. On

June 5, 1992, an interim rate increase

was published (CGD 89–104). The DOT

Task Force then developed a new

pilotage ratemaking methodology,

which the Coast Guard published in a

notice of proposed rulemaking (NPRM)

(59 FR 17303) dated April 12, 1994.

THE NPRM proposed to amend the

Great Lakes pilotage regulations by

establishing new procedures for

determining Great Lakes pilotage rates

and revising the financial reporting

requirements mandated for Great Lakes

pilot associations (CGD 92–072). The

NPRM also announced a public hearing

which was held in Cleveland, OH on

May 20, 1994. The comment period for

the NPRM ended on July 11, 1994.

In response to the NPRM and the

public hearing, the Coast Guard

received 31 comments and two requests

for additional public meetings to

explain the proposals contained in the

NPRM. In the Federal Register (59 FR

18774) on April 20, 1994, the Coast

Guard announced that it would conduct

two public meetings. The first public

meeting was held in Chicago, IL on May

3, 1994. The second public meeting was

held in Massena, NY on May 5, 1994.

The Coast Guard also received one

request to extend the comment period

for the NPRM. Because the comment

period for the NPRM was 90 days, the

Coast Guard and the Department

determined that there was sufficient

time to submit comments. Therefore, the

comment period was not extended.

On April 11, 1995, the Department

published a final rule with request for

comments (60 FR 18366) (1995 final

rule) establishing improved procedures

for determining Great Lakes pilotage

rates, and revised financial reporting

requirements mandated for Great Lakes

pilot associations. The comment period

ended on May 11, 1995. Although the

Coast Guard issued the NPRM under

authority delegated to the Commandant

by the Secretary, the Secretary issued

the 1995 final rule. On December 11,

1995, the Secretary transferred authority

to administer the Great Lakes Pilotage

Act of 1960 (Public Law 86–555, 46

U.S.C. 9301 et seq.) (the Act) to the

Administrator of the SLSDC.

Nevertheless, the Secretary is issuing

this final rule. Under 49 CFR 1.43(a), the

Secretary may exercise powers and

duties delegated or assigned to officials

other than the Secretary.

Several commenters requested that

the comment period for the rulemaking

be extended. Because all late-filed

comments were considered, and

because this rulemaking has already

been the subject of extensive public

comment, the Department determined

that there was sufficient time to submit

comments regarding this 1995 final rule.

Therefore, the comment period was not

extended.

Background and Purpose

Under the Act, vessels of the United

States operating on register and foreign

vessels must engage a U.S. or Canadian

registered pilot when traversing the

waters of the Great Lakes. The Act vests

the Secretary of Transportation with

responsibility for setting pilotage rates.

Section 9303(f) of the Act provides that

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.

Currently, the navigable waters of the

great Lakes are divided into eight

pilotage areas. United States registered

pilots, along with their Canadian

counterparts, provide pilotage services

in areas 1, 2, 4, 5, 6, 7, and 8. Pilotage

area 3 (the Welland Canal) is currently

a wholly-Canadian area where only

Canadian pilots provide services.

Pilotage areas 2, 4, 6, and 8 are
21082 Federal Register / Vol. 61, No. 91 / Thursday, May 9, 1996 / Rules and Regulations

‘‘undesignated waters.’’ Pilotage areas 1,

5, and 7 are ‘‘designated waters.’’ Pilots

are required to direct the navigation of

vessels in designated waters. Pilots are

required to be on board and available to

direct the navigation of vessels in

undesignated waters. The seven U.S.

pilotage areas are grouped together into

three pilotage districts. District 1

consists of areas 1 and 2. District 2

consists of areas 4 and 5. District 3

consists of areas 6, 7, and 8. Each

district has its own pilot association.

Section 9305 of the Act provides that

the Secretary of Transportation, subject

to the concurrence of the Secretary of

State, may make arrangements with the

appropriate agency of Canada to

prescribe joint or identical rates and

charges. The latest Memorandum of

Arrangements between the United

States and Canada, dated January 18,

1977, specifies that the Secretary of

Transportation of the United States of

America and the Minister of Transport

of Canada will establish regulations

imposing identical rates. A copy of this

Memorandum of Arrangements is

available in the docket and may also be

obtained by writing to Scott A. Poyer, at

the address listed under FOR FURTHER

INFORMATION CONTACT, above. In the

past, consultations between the United

States and Canada resulted in nominally

identical U.S. and Canadian rates.

However, there are differences in the

cost bases and in the operating

organizations of the U.S. and Canadian

pilots, particularly with regard to pilot

compensation. These differences need

to be takes into account in reaching

identical U.S. and Canadian rates. As a

result, the ratemaking methodology

contained in this final rule would not

translate directly into new rates, but

rather would form the basis for

proposals to be negotiated with Canada.

Discussion of Comments and Changes

The Department received nine

comments and thirteen endorsements of

one of the nine comments. Comments

came from one Great Lakes pilot

association, three Great Lakes Registered

Pilots, one professional association

representing pilots, one professional

association representing vessel

operators and steamship agents on the

Great Lakes, one labor organization, one

professional auditor, and the

comptroller of one Great Lakes pilot

association with thirteen endorsements

by individual members of that

association. Some of the comments

addressed issues that were not the

subject of the 1995 final rule. The

Department is responding only to those

comments relating to this rulemaking.

Three comments were generally

supportive of the 1995 final rule and

characterized it as an improvement over

the NPRM, but with some areas that still

need improvement. These comments

were made by one pilot group, one

professional organization representing

pilots, and one labor organization. Six

comments objected to the 1995 final

rule because it was considered to be

confusing, not viable, or not in

concurrence with the DOT IG’s

intentions. These comments were made

by one professional organization

representing vessel agents, one

professional auditor, three Great Lakes

Registered pilots, and one comptroller

of a Great Lakes pilot association with

thirteen endorsements. The Department

believes most of the methodology

presented in the 1995 final rule

represents a workable compromise

between the disparate interests

involved. Therefore, the ratemaking

methodology presented in the 1995 final

rule is substantially retained in this

final rule.

Four commenters objected to what

they perceived as the 1995 final rule’s

‘‘elimination of annual audits.’’ The two

types of audits discussed in the Great

Lakes pilotage regulations (i.e., audits

by pilot associations, and audits by the

Director) are discussed in 46 CFR

§§ 403.300(b) and 404.1(b). Commenters

believed that the amended wording of

these sections eliminated a requirement

that pilot associations and/or the

Director conduct annual audits of the

pilot associations. Commenters believed

the elimination of these annual audit

requirements would weaken financial

oversight of pilot associations and

encourage spending abuse.

In fact, the 1995 final rule did not

eliminate annual audits. Pilot

associations were still required to obtain

an annual audit by an independent

certified public accountant.

However, the Department agrees that

the wording of the audit requirements

was not as clear as it could have been.

To make this requirement more clear,

the language of section 403.300(b) has

been amended to reinforce the

requirement that pilot associations be

audited by an independent CPA every

year, and to require that the audit

results be forwarded to the Director

every year. Section 404.1(b) has been

amended to reinforce the requirement

that the Director review the annual

association audits every year, and

conduct a thorough audit of pilot

association expenses at a minimum of

once every five years.

One commenter stated that

certification of financial reports by an

association officer, as required by 46

CFR § 403.300(a)(3), is redundant and

‘‘prejudicial’’ to the association’s regular

financial reporting. The Department

does not understand how certification of

financial documents could in any way

be ‘‘prejudicial,’’ and the commenter

did not elaborate on this point. The

Department agrees that there is a certain

amount of redundancy in requiring an

association officer such as a Treasurer,

to review the work of a bookkeeper or

accountant who prepares the financial

reports. However, this redundancy is

standard procedure in most wellmanaged businesses, and is an

important safeguard against waste,

fraud, and abuse. For these reasons,

section 403.300(a)(3) is retained.

One commenter objected to section

404.5(a)(2) which requires the Director

to determine the reasonableness of pilot

association expenses by comparing

them to comparable expenses paid by

others in the maritime industry. The

commenter believes that there are no

industries on the Great Lakes

comparable to Great Lakes pilotage, as

pilotage is ‘‘vastly different’’ from other

industries. The department disagrees.

The commenter did not elaborate on

how pilotage was different from all

other industries. Pilots operate in the

same marketplace as other maritime

industries on the Great Lakes, and incur

many of the same types of expenses.

The Department does not believe there

is any basis for the claim that pilotage

expenses cannot be compared with

anything else; therefore section

404.5(a)(2) is retained.

One commenter stated that the

provisions of 46 CFR § 404.5(a)(5) are

unclear, inappropriate, and unfair. This

section requires that profits, but not

losses, from non-pilotage transactions be

included in ratemaking calculations.

The Department designed this section as

a disincentive to pilot association

speculation in non-pilotage related

businesses, since the Department does

not consider these types of transactions

to be in the public interest. As such,

section 404.5(a)(5) accomplishes its

intended objective, and is therefore

retained.

One commenter objected to 46 CFR

§ 404.5(a)(8)(ii), which provides that

lobbying expenses will not be allowed

for ratemaking purposes. The

Department has no objection to pilot

associations who wish to expend money

for lobbying purposes. However, it does

not seem reasonable to make others, i.e.,

those members of the public who pay

pilotage rates, pay for these expenses.

Therefore, section 404.5(a)(8)(ii) is

retained.

Four sets of comments from pilots and

their representatives questioned the
Federal Register / Vol. 61, No. 91 / Thursday, May 9, 1996 / Rules and Regulations 21083

methods used to compute pilot

compensation targets and pilot work

hour targets, which are used to set the

number of pilots for ratemaking

purposes. These methods are contained

in Step 2 of Appendix A to Part 404,

and section 404.5(a). This section

continues the Department policy of

maintaining income comparability

between Great Lakes Registered Pilots,

and masters/chief mates on Great Lakes

vessels, and the Department’s pilot work

hour targets of 1000 hours in designated

waters and 1800 hours in undesignated

waters. These policies were established

as a result of the 1988 DOT Pilotage

Study, which examined many

alternatives and selected the master/

chief mate targets and the work hour

targets. Commenters believed pilots

should earn more than masters/chief

mates, and/or pilots should work fewer

hours. Commenters proposed several

alternatives including income

comparability with State pilots, and

inclusion of travel time in the

calculation of pilot work hours. After

considering all the alternatives, the

Department is keeping this section of

the final rule unchanged. This is fully

consistent with the recommendation in

the 1988 DOT Pilotage Study, which

states, ‘‘The study team believes that

pilot compensation should be tied to the

local economy. The use of local masters

and mates pay scales has the important

impact of tying pilot compensation to

the regional industry pay levels. Salaries

of pilots, like those of teachers,

physicians, lawyers, and other

professionals, are tied to the

fluctuations of supply and demand for

their services in their particular locality.

In this fashion, Great Lakes pilots share

in the fortunes of the Great Lakes.’’

Commenters offered no new information

that alters this assessment. Therefore

Step 2 of Appendix A to Part 404, and

section 404.5(a) are retained.

One commenter objected to the

Return on Investment (ROI) provisions

detailed in Step 5 of Appendix A to Part

404. The commenter believed a ROI is

not applicable or feasible for Great

Lakes pilot associations because: (a)

Pilot associations have no inventory, or

investment in inventory, and accounts

receivable are systematically collected

within a 12 month period; (b) the value

of fixed assets on the organizations’

balance sheets is immaterial and all

equipment is leased from related

parties; (c) there is no stockholder’s

equity in two associations and in the

third association it is not owned by all

the pilots; and (d) the ROI would not

have a significant impact on pilotage

rates. As stated by the Department in the

1995 final rule, a return element is an

important component of cost-based rate

methodologies. Rates that have been set

without a return element have been

vulnerable to legal challenge and do not

meet the goals of the investigations and

audits that underlie this rulemaking.

Also, in order to negotiate with the

Canadians we must have rates that can

withstand scrutiny as to their

conformity to sound ratemaking

principles. The Department believes it is

only fair to allow pilots a return on the

capital they invest. If, as the commenter

asserts, it is true that pilot associations

have little or no capital investments,

then it is true that the return on these

investments will be small. However,

this does not invalidate the principle

that pilots should receive a return on

the capital they invest. Whether their

capital be small or large, individuals

who invest in a business have a right to

expect a return on that capital.

Therefore the ROI provisions of section

404.5(a)(4), step 5 of appendix A, and

the formulas contained in appendix B

are retained.

Two commenters believe the 1995

final rule should address the business

structure of pilot associations. Currently

two pilot associations are structured as

partnerships and one pilot association is

structured as a corporation. One

commenter believes that the rule should

better equalize for the differences in

association structure. The other

commenter recommends that the 1995

final rule require all associations to

adopt the same business structure. At

the present time, it is Department policy

that each pilot association should be

permitted to adopt the business

structure that best suits its needs, and it

is incumbent on each association to live

with the costs and benefits inherent in

its choice. This policy allows pilots the

freedom to run their own businesses to

the maximum extent practicable, with

no discernably negative consequences

for the public. The Department is not

aware of any abuses of this policy at the

present time. However, if it becomes

necessary to reverse this policy, this

matter would be the subject of a future

rulemaking, subject to public input and

comment.

One commenter recommends that the

Great Lakes pilotage ratemaking

methodology should be clear and easy

to implement, and any future changes to

the methodology should be made with

the participation of the pilot

associations and a committee of

independent and professional

individuals. The Department agrees.

The Department has endeavored to

make the ratemaking methodology

contained in this rule as clear and easy

as practical. In that regard, three

commenters agree that the methodology

contained in the 1995 final rule is an

improvement over the methodology

proposed in the NPRM. Any changes to

the Great Lakes pilotage ratemaking

methodology that may be the subject of

future rulemakings will involve input

and comments from the pilot

associations and other members of the

public.

Four commenters believe the 1995

final rule granted the Director of Great

Lakes Pilotage too much authority and

would allow the Director to micromanage activities of the pilot

associations of which the Director is not

sufficiently knowledgeable. The

Department disagrees. The incumbent

Director of Great Lakes Pilotage is

extremely knowledgeable of pilotage

and other maritime activities. He has

been involved in the performance of

Great Lakes Pilotage Act functions for

approximately 11 years. He is a licensed

merchant mariner, and the former Head

of the Navigation Department at the

Maritime Institute of Technology and

Graduate Studies, the advanced training

facility of the International Organization

of Masters, Mates and Pilots. Moreover,

every previous Director of Great Lakes

Pilotage has had an extensive maritime

background, as well as experience in

dealing with merchant mariners and

pilots. The position description for the

Director of Great Lakes Pilotage position

requires a substantial maritime

background. In addition, the remaining

pilotage staff have extensive maritime

backgrounds and their positions require

maritime, economic, and ratesetting

knowledge and experience. Therefore,

the sections of the 1995 final rule

related to the Director’s authority and

discretion are retained.

Two commenters believe the U.S.

Government should cease oversight of

Great Lakes Pilotage, including the

ratemaking and financial oversight

regulations contained in this

rulemaking. The Department is making

no changes pursuant to this comment.

As stated earlier, the Act requires the

Secretary to prescribe by regulation

rates and charges for pilotage services.

Executive Order 12866

This rule is a significant regulatory

action under section 3(f) of Executive

Order 12866 and has been reviewed by

the Office of Management and Budget

under that order. It is significant under

the regulatory policies and procedures

of the Department of Transportation (44

FR 11040; February 26, 1979) because

rulemaking affecting the setting of

pilotage rates has been controversial and

of significant interest to the public.
21084 Federal Register / Vol. 61, No. 91 / Thursday, May 9, 1996 / Rules and Regulations

The Department expects the economic

impact of this rule to be minimal. This

rule does not represent a significant

departure from the current ratemaking

process, and there are no expected

increases in costs. Therefore, a full

regulatory evaluation is not necessary.

Small Entities

Under the Regulatory Flexibility Act

(5 U.S.C. 601 et seq.), the Department

must consider whether this final rule

will have a significant economic impact

on a substantial number of small

entities. ‘‘Small entities’’ include

independently owned and operated

small businesses that are not dominant

in their field and that otherwise qualify

as ‘‘small business concerns’’ under

section 3 of the Small Business Act (15

U.S.C. 632). One commenter believes

that this rule will have a significant

economic impact on a substantial

number of small entities. However, the

commenter did not elaborate on why

this impact would occur. Since this rule

is not a major change from past

rulemaking practices, and only three

pilot associations with a total of

approximately 40 members will be

directly affected by this rule, this final

rule should have little or no impact on

small entities that pay pilotage rates or

that receive income from pilotage rates.

Because it expects the impact of this

proposal to be minimal, the Department

certifies under 5 U.S.C. 605(b) of the

Regulatory Flexibility Act (5 U.S.C. 601

et seq.) that this final rule will not have

a significant economic impact on a

substantial number of small entities.

Collection of Information

This rule contains collection-ofinformation requirements. The

Department has submitted the

requirements to the Office of

Management and Budget (OMB) for

review under section 3504(h) of the

paperwork Reduction Act (44 U.S.C.

3501 et seq.), and OMB has approved

them. The part numbers are parts 401

and 403 and the corresponding OMB

approval number is OMB Control

Number 2115–0616.

Federalism

The Department has analyzed this

final rule under the principles and

criteria contained in Executive Order

12612, and has determined that this rule

does not have sufficient federalism

implications to warrant the preparation

of a Federalism Assessment. State action

addressing pilotage regulation is

preempted by 46 U.S.C. 9306, which

provides that a State or political

subdivision of a State may not regulate

or impose any requirement on pilotage

on the Great Lakes.

Environment

The Department considered the

environmental impact of this final rule

and concluded that this rule is

categorically excluded from further

environmental documentation under

section 2.B.2 of Commandant

Instruction M16475.1B. The rule is

procedural in nature because it deals

exclusively with ratemaking and

accounting procedures. Therefore, this

is included in the categorical exclusion

in subsection 2.B.2.1,—Administrative

actions or procedural regulations and

policies which clearly do not have any

environmental impact. A Categorical

Exclusion Determination has been

placed in the docket.

List of Subjects in 46 CFR Parts 403 and

404

Administrative practice and

procedure, Great Lakes, Navigation

(water), Penalties, Reporting and

recordkeeping requirements, Seamen.

For reasons set out in the preamble,

the Department proposes to amend Parts

403 and 404 of Title 46 of the Code of

Federal Regulations as follows:

PART 403—[AMENDED]

1. The authority citation for part 403

continues to read as follows:

Authority: 46 U.S.C. 8105, 9303, 9304; 49

CFR 1.46.

2. Section 403.300(b) is revised to

read as follows:

§ 403.300 Financial reporting

requirements.

* * * * *

(b) Required Reports:

(1) By April 1 of each year, each

Association shall obtain an annual

unqualified long form audit report for

the preceding year, audited and

prepared in accordance with generally

accepted auditing standards by an

independent certified public

accountant.

(2) Each Association shall forward

their annual unqualified long form audit

report, and any associated settlement

statements, to the Director no later than

April 7 of each year.

PART 404—[AMENDED]

3. Section 404.1(b) is revised to read

as follows:

Authority: 46 U.S.C. 8105, 9303, 9304, 49

CFR 1.46.

§ 404.1 General ratemaking provisions.

* * * * *

(b) Great Lakes pilotage rates shall be

reviewed annually in accordance with

the procedures detailed in Appendix C

to this part. The Director shall review

Association audit reports annually and,

at a minimum, the Director shall

complete a thorough audit of pilot

association expenses and establish

pilotage rates in accordance with the

procedures detailed in § 404.10 of this

part at least once every five years. An

interested party or parties may also

petition the Director for a review at any

time. The petition must present a

reasonable basis for concluding that a

review may be warranted. If the Director

determines, from the information

contained in the petition, that the

existing rates may no longer be

reasonable, a full review of the pilotage

rates will be conducted. If the full

review shows that pilotage rates are

within a reasonable range of their target,

no adjustment to the rates will be

initiated.

Issued at Washington, DC this 2nd day of

May, 1996.

Federico Pen ̃ a,

Secretary of Transportation.

[FR Doc. 96–11499 Filed 5–8–96; 8:45 am]

BILLING CODE 4910–62–P

Research and Special Programs

Administration

49 CFR Parts 107, 171, 173 and 178

[Docket No. HM–207C, Amdt. Nos. 107–38,

171–141, 173–249, and 178–113]

RIN 2137–AC63

Exemption, Approval, Registration and

Reporting Procedures; Miscellaneous

Provisions

AGENCY: Research and Special Programs

Administration (RSPA), DOT.

ACTION: Final rule.

SUMMARY: In this final rule, RSPA

revises procedures for applying for

exemptions and establishes procedures

for applying for approvals, and

registering and filing reports with RSPA.

In addition, RSPA amends certain

provisions, mostly procedural, in the

Hazardous Materials Regulations. This

rulemaking action is intended to

expedite processing of applications and

to promote clarity and program

consistency. It is part of the President’s

Regulatory Reinvention Initiative to

revise all agency regulations that are in

need of reform.

DATES: Effective date: The effective date

of these amendments is October 1, 1996.

Compliance date: Voluntary

compliance with the regulations, as