[Federal Register Volume 74, Number 138 (Tuesday, July 21, 2009)]
[Rules and Regulations]
[Pages 35812-35825]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-17229]


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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

46 CFR Part 401

[Docket No. USCG-2008-1126]
RIN 1625-AB29


2009 Rates for Pilotage on the Great Lakes

AGENCY: Coast Guard, DHS.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Coast Guard is increasing the rates for pilotage service 
on the Great Lakes by an average of 10.77% over the rates that took 
effect February 4, 2009. This increase reflects an August 1, 2009, 
increase in benchmark contractual wages and benefits, as well as an 
increase in the ratio of pilots to ``bridge hours.'' The Coast Guard 
intends the final rule to generate sufficient revenue to cover 
allowable expenses, target pilot compensation, and returns on 
investment. The final rule promotes the Coast Guard strategic goal of 
maritime safety.

DATES: This final rule is effective August 1, 2009.

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-2008-1126 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 at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: For questions on this final rule, 
please call Mr. Paul Wasserman, Chief, Great Lakes Pilotage Branch, 
Commandant (CG-54122), U.S. Coast Guard, at 202-372-1535, by fax 202-
372-1929, or e-mail <a href="/cdn-cgi/l/email-protection#7e2e1f0b12503350291f0d0d1b0c131f103e0b0d1d1950131712"><span class="__cf_email__" data-cfemail="d181b0a4bdff9cff86b0a2a2b4a3bcb0bf91a4a2b2b6ffbcb8bd">[email protected]</span></a>. For questions on viewing 
or submitting material to the docket, call Renee V. Wright, Chief, 
Dockets, Department of Transportation, telephone 202-493-0402.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Abbreviations
II. Effective Date
III. Background
IV. Discussion of Comments
V. Discussion of the Final Rule
VI. Regulatory Evaluation
    A. Small Entities
    B. Assistance for Small Entities
    C. Collection of Information
    D. Federalism
    E. Unfunded Mandates Reform Act
    F. Taking of Private Property
    G. Civil Justice Reform
    H. Protection of Children
    I. Indian Tribal Governments
    J. Energy Effects
    K. Technical Standards
    L. Environment

I. Abbreviations

AMOU American Maritime Officer Union
GLPAC Great Lakes Pilotage Advisory Committee
MISLE Coast Guard Marine Inspection, Safety, and Law Enforcement system
MOA Memorandum of Agreement
NAICS North American Industry Classification System
NPRM Notice of Proposed Rulemaking
NTTAA National Technology Transfer and Advancement Act
OMB Office of Management and Budget

II. Effective Date

    This final rule takes effect August 1, 2009. Under 5 U.S.C. 553(d), 
we find good cause for this final rule to take effect less than 30 days 
after publication. The Great Lakes Pilotage Act of 1960, as amended by 
Public Law 109-241, section 302, requires the Coast Guard to review and 
adjust the Great Lakes pilotage rates annually by March 1. We could not 
issue this final rule until some months after that date due to the time 
needed to review and resolve comments received on the proposed rule. We 
nonetheless need to issue the final rule before the August 1, 2009, 
increase in benchmark contractual wages and benefits that necessitates 
this year's rate adjustment. Under these circumstances, publication of 
the final rule 30 days or more in advance of the August 1 benchmark 
increase is impracticable. The regulated community well understands the 
significance of the August benchmark increase and anticipates that the 
final rule will take effect not later than August 1. Therefore, we find 
that delay of the final rule's effective date beyond August 1, 2009, 
would be unnecessary, and contrary to the public interest in timely 
rate increases.

III. Background

    We published a notice of proposed rulemaking on April 24, 2009 
(NPRM, 74 FR 18669). The NPRM proposed an average 9.41% increase.
    This rulemaking increases Great Lakes pilotage rates in accord with 
the methodology contained in Coast Guard regulations in 46 CFR Parts 
401-404. Our regulations implement the Great Lakes Pilotage Act of 
1960, 46 U.S.C. Chapter 93, which requires foreign-flag vessels engaged 
in foreign trade to use Federally registered Great Lakes pilots while 
transiting the St. Lawrence Seaway and the Great Lakes system, and 
which requires the Secretary of Homeland Security to ``prescribe by 
regulation rates and charges for pilotage services, giving 
consideration to the public interest and the costs of providing the 
services.'' 46 U.S.C. 9303(f).
    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, while we set rates, we do not control the actual number of 
pilots an association maintains, so long as the association is able to 
provide safe, efficient, and reliable pilotage service, nor do we 
control the actual compensation that pilots receive. This is determined 
by each of the three District associations, which use different 
compensation practices.
    District One, consisting of Areas 1 and 2, includes all U.S. waters 
of the St. Lawrence River and Lake Ontario. District Two, consisting of 
Areas 4 and 5, includes all U.S. waters of Lake Erie, the Detroit 
River, Lake St. Clair, and the St. Clair River. District Three, 
consisting of Areas 6, 7, and 8, includes all U.S. waters of the St. 
Mary's River, Sault Ste. Marie Locks, and Lakes Michigan, Huron, and 
Superior. Area 3 is the Welland Canal, which is serviced exclusively by 
the Canadian Great Lakes Pilotage Authority and, accordingly, is not 
included in the U.S. rate structure. Areas 1, 5, and 7 have been 
designated by Presidential Proclamation, pursuant to the Great Lakes 
Pilotage Act of 1960, 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. Under the Great Lakes Pilotage Act of 1960, pilots assigned to 
vessels in these areas are only required to ``be on board and available 
to direct the navigation of

[[Page 35813]]

the vessel at the discretion of and subject to the customary authority 
of the master.'' 46 U.S.C. 9302(a)(1)(B).
    Our pilotage regulations require annual reviews of pilotage rates 
and the setting of new rates at least once every five years, or sooner, 
if annual reviews show a need. 46 CFR 404.1. To assist in calculating 
pilotage rates, the pilotage associations are required to submit annual 
financial statements prepared by certified public accounting firms. In 
addition, every fifth year, in connection with the mandatory rate 
adjustment, we contract with an independent accounting firm to conduct 
a full audit of the accounts and records of the pilotage associations 
and prepare and submit financial reports relevant to the ratemaking 
process. In those years when a full ratemaking is conducted, we 
generate the pilotage rates using Appendix A to 46 CFR Part 404. The 
last Appendix A review was concluded in 2006 (71 FR 16501, Apr. 3, 
2006). Between the five-year full ratemaking intervals, we annually 
review the pilotage rates using Appendix C to Part 404, and adjust 
rates when deemed appropriate. We conducted Appendix C reviews in 2007 
and 2008, and increased rates in both years. The 2008 final rule was 
published January 5, 2009 (74 FR 220), and took effect on February 4, 
2009. We define the terms and formulas used in Appendix A and Appendix 
C in Appendix B to Part 404.
    This final rule concludes the annual Appendix C rate review for 
2009, and increases rates by an average of 10.77% over the rates that 
took effect February 4, 2009.

IV. Discussion of Comments

    We received four comments during the NPRM public comment period.
    Timeliness. Three commenters, including a pilots' association, 
pointed out that 46 U.S.C. 9303(f), as amended by Public Law 109-241, 
sec. 302, requires us to review and, if necessary, establish adjusted 
pilotage rates by March 1 of each year, in order to provide critical 
information before the start of the annual Great Lakes shipping season, 
usually in early spring. These commenters point out that we have not 
met the March 1, 2009, deadline for this year's review. We acknowledge 
this and future compliance is a Coast Guard priority. In 2007 and 2008, 
we mitigated the impact of delay by ensuring that interim rules were in 
place at the opening of the shipping season. In letters dated April 24, 
2007, and March 3, 2008, the pilots' associations expressed their 
appreciation to the Coast Guard for these efforts. In 2009, publishing 
a rule at the beginning of the shipping season was not possible, but we 
hope to mitigate the impact of delay by issuing the final rule so that 
it takes effect on August 1, 2009, when the benchmark contract increase 
that accounts for a meaningful portion of this year's rate adjustment 
takes effect.
    ``Pilots needed'' and rounding. One commenter said that, in 
calculating the number of pilots needed in each Area, we should always 
round the result of our mathematical calculations up to the nearest 
``whole pilot,'' and another commenter criticized the imprecision of 
the language we used in the NPRM to describe our rounding. We agree 
with this latter comment and have revised our language in this final 
rule.
    We acknowledge that in recent years we have usually rounded the 
results of the mathematical calculation used to determine the number of 
``pilots needed,'' pursuant to our discretionary authority ``to make 
adjustments to these numbers to ensure uninterrupted pilotage service 
in each area, or for other reasonable circumstances.'' 46 CFR Part 404, 
Appendix A, Step 2.B (also applicable in Appendix C calculations). This 
rounding has never been performed as a matter of policy, nor do we 
adopt it as policy now. In fact, our current ratemaking methodology 
requires no rounding whatsoever, and until 2006, what rounding we 
applied was merely up or down to the nearest tenth of a whole number: 
see, e.g., our December 12, 2003 (68 FR 69564) and March 10, 2005 (70 
FR 12082) interim rules.
    In the April 3, 2006 final rule (71 FR 16501), we acknowledged nine 
public comments in favor of rounding to whole numbers and approved the 
use of that process for that rule. However, we did not actually apply 
that methodology in the 2006 final rule. The mathematical result of our 
2006 calculations was a whole number in each of the seven Areas, 
because we rounded the bridge hour projections (not pilot numbers) that 
year.
    In the 2007 interim rule (72 FR 8115, Feb. 23, 2007), we agreed 
with a public commenter that the rounding of bridge hour projections in 
2006 was a departure from past practice and agreed to use unrounded 
bridge hour projections. We also rounded the mathematical results of 
our pilots-needed calculations up to the next whole number in all six 
Areas where rounding was needed. These calculations were unchanged in 
the 2007 final rule (72 FR 53158, Sep. 18, 2007).
    In 2008, the March 21, 2008 interim rule (73 FR 15092) adopted 
without change the calculations proposed in the February 1, 2008 NPRM 
(73 FR 6085). Mathematical results of pilots-needed calculations were 
rounded up in all six Areas where rounding was needed. However, we 
introduced three adjustments in the 2008 final rule (74 FR 220, Jan. 5, 
2009). These adjustments responded to public comments that pointed out 
that the NPRM and interim rule overstated the bridge hour projections 
for Areas 2, 4, and 5.
    The first adjustment reduced projected bridge hours in Area 2 from 
7,993 to 5,650, but kept the ``pilots needed'' for Area 2 at five, one 
more than would have been indicated by rounding up the mathematical 
result (5,650/1,800 = 3.14, rounded up = 4). We exercised our 
discretion to do so because ``experience has demonstrated the need for 
at least five pilots in that Area,'' a need that we discussed in detail 
in the final rule at 74 FR 221.
    Second, in Area 4, we reduced projected bridge hours from 8,490 to 
7,320, and rounded the mathematical result (7,320/1,800 = 4.07) down to 
four pilots needed. Third, in Area 5, we reduced projected bridge hours 
from 6,395 to 5,097, and rounded the mathematical result (5,097/1,000 = 
5.10) up to six pilots. We exercised our discretion in these two Areas 
``because the District 2 Pilots' Association has routinely operated 
with an average of one less pilot than is authorized under the rate and 
for the last season and a half with two fewer pilots than authorized. 
Accordingly, a reduction of one pilot per Area reflects actual 
practice.'' 74 FR at 222. We might also have observed that pilots in 
one Area frequently operate in other Areas as well, that District Two 
comprises both Areas 4 and 5, and that the minimal downward adjustment 
from 4.07 to 4 in Area 4 should therefore be balanced against the more 
substantial rounding up, from 5.10 to 6, in Area 5.
    We acknowledge that the determination of pilots needed is an issue 
of concern to many, and that some might wish to see the formula for 
that determination modified to require ``rounding up'' in all 
instances. We observe that the ratemaking formula was never designed to 
produce anything more than a useful model for subsequent calculations. 
It could be argued that the model worked best without rounding, or with 
only limited rounding, for example because rounding up inflates pilot 
numbers and makes it less likely that pilots will be able to reach 
their target compensation. We defer consideration of such arguments 
until they can be made and considered in the context of an overall 
review of our ratemaking methodology. Until

[[Page 35814]]

then, we intend to apply the pilots-needed calculations much as we have 
done since 2007.
    Data for bridge hour projections. One commenter said we failed to 
consult industry in projecting 2009 vessel traffic, and that our bridge 
hour projections for 2009 (i.e., the projection of hours pilots are 
aboard vessels providing pilotage service) should have been based on 
2008 figures rather than on 2007 figures. To meet the statutory 
deadline for establishing rates by March 1, 2009, we began preparing 
the 2009 NPRM long before actual data for 2008 was available. Although 
our practice has not been to document every contact with industry or 
pilots, our regulations and our ratemaking methodology presuppose 
frequent informal contacts between the Director of Great Lakes 
Pilotage, industry, and pilots. The information received through those 
contacts is submitted for public comment in our NPRM. In this case, our 
use of 2007 figures for 2009, instead of waiting for 2008 figures, was 
based on 2008 informal discussions with pilot and industry 
representatives that endorsed the continued use of 2007 figures, with 
some modifications. Those modifications were explained in the April 
2009 NPRM.
    We agree with one commenter who said that the NPRM did not 
adequately explain the difference in Area 6 and Area 7 base period 
bridge hours (18,000 and 3,863, respectively), and the 2009 projected 
bridge hours for those Areas (13,406 and 3,259, respectively). Areas 6 
and 7 experienced a significant decrease in 2007 actual bridge hours, 
from 2007 projections. Therefore, the 2009 projections for those Areas 
reflects their actual 2007 bridge hours, and then further reduces those 
figures by an additional 10% in each Area.
    One commenter said we should adjust Area 1 projected bridge hours 
to more accurately reflect anticipated traffic for the 2009 shipping 
season, as we did for areas 2, 4, and 5 in the 2008 final rule and as 
we proposed for District Three in the 2009 NPRM. We agree and, in this 
final rule, we are reducing the projected bridge hours for Area 1 from 
5661 to 5203. We are also adjusting District Three bridge hours as 
indicated in the NPRM.
    Class 4 vessels. One commenter said that our pilotage rates for 
Class 4 vessels are 15% higher than Canadian rates. This may be true, 
but in the past year the difference has been less than 1%, but has 
varied subsequently due to fluctuations in the relative value of U.S. 
and Canadian currency.
    Miscellaneous. Three commenters took issue with various aspects of 
our ratemaking methodology. These comments are beyond the scope of this 
rulemaking, which applies the methodology as it exists today, but we 
address two points briefly here. One commenter petitioned the Coast 
Guard to review our formula for setting benchmark compensation levels 
of Great Lakes vessel masters. We deny that petition because we have 
previously conducted the requested review and believe the formula is 
correct: a supporting memorandum appears in the docket for this 
rulemaking as USCG-2008-1126-0017. The same commenter criticized us for 
not yet adopting the recommendations of Rear Admiral Timothy J. Riker's 
2003 report on Great Lakes bridge hours. We decline to adopt the Riker 
Report recommendations in full because we do not think the Report 
adequately accounted for the difference between a Great Lakes pilot's 
active, on call, work life during a portion of the year and the work 
life of an office-based 40 hour per week worker through a 52-week year.
    We acknowledge that through the years, both pilots and industry 
have indicated concerns about aspects of our ratemaking methodology. 
Some of those concerns are described in communications that we received 
between January 2009, when we published the 2008 final rule, and April 
2009, when we published the 2009 NPRM. Those communications appear in 
the docket for this rulemaking as supplemental material. To obtain a 
more comprehensive understanding of these concerns, we have decided to 
publish a notice focusing on our ratemaking methodology, and requesting 
public comments. That notice appears elsewhere in today's Federal 
Register. We will refer the comments we receive to the Great Lakes 
Pilotage Advisory Committee, which Congress established to advise the 
Coast Guard on significant policy decisions relating to Great Lakes 
pilotage.

V. Discussion of the Final Rule

A. Summary

    We are increasing pilotage rates in accordance with the methodology 
outlined in Appendix C to 46 CFR Part 404, by increasing rates an 
average 10.77% over the 2008 final rule. This final rule puts into 
place, with two modifications, the rate changes we proposed in the 
April 24, 2009 NPRM. The first modification adjusts projected bridge 
hours in Area 1 as discussed in part IV of this preamble. The second 
modification updates the ship tonnage percentages under the AMO union 
contracts. This second modification accounts for only 0.36% of the 
overall rate increase.

                     Table 1--2009 Area Rate Changes
------------------------------------------------------------------------
                                                      Then the proposed
                                                    percentage increases
        If pilotage service is required in:           over the current
                                                          rate is:
------------------------------------------------------------------------
Area 1 (designated waters)........................                 13.43
Area 2 (undesignated waters)......................                  4.79
Area 4 (undesignated waters)......................                  4.90
Area 5 (designated waters)........................                  4.48
Area 6 (undesignated waters)......................                 12.52
Area 7 (designated waters)........................                 23.64
Area 8 (undesignated waters)......................                  2.52
Overall rate change (percentage change in overall                  10.77
 prospective unit costs/base unit costs; see Table
 18)..............................................
------------------------------------------------------------------------

    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), have been increased by 
10.77% in all Areas.

B. Calculating the Rate Adjustment

    The Appendix C ratemaking calculation involves eight steps:
    Step 1: Calculate the total economic costs for the base period 
(i.e., pilot

[[Page 35815]]

compensation expense plus all other recognized expenses plus the return 
element) and divide by the total bridge hours used in setting the base 
period rates;
    Step 2: Calculate the ``expense multiplier,'' the ratio of other 
expenses and the return element to pilot compensation for the base 
period;
    Step 3: Calculate an annual ``projection of target pilot 
compensation'' using the same procedures found in Step 2 of Appendix A;
    Step 4: Increase the projected pilot compensation in Step 3 by the 
expense multiplier in Step 2;
    Step 5: Adjust the result in Step 4, as required, for inflation or 
deflation;
    Step 6: Divide the result in Step 5 by projected bridge hours to 
determine total unit costs;
    Step 7: Divide prospective unit costs in Step 6 by the base period 
unit costs in Step 1; and
    Step 8: Adjust the base period rates by the percentage changes in 
unit cost in Step 7.
    The base data used to calculate each of the eight steps comes from 
the 2008 final rule, published in January 2009. We also used the most 
recent union contracts between the American Maritime Officers Union 
(AMOU) and vessel owners and operators on the Great Lakes, which we 
received on August 16, 2007, to determine target pilot compensation. 
Bridge hour projections for the 2009 season have been obtained from 
historical data, pilots, and industry. All documents and records used 
in this rate calculation have been placed in the public docket for this 
rulemaking and are available for review at the addresses listed under 
ADDRESSES.
    Some values may not total exactly due to format rounding for 
presentation in charts and explanations in this section. The rounding 
does not affect the integrity or truncate the real value of the 
calculations in the ratemaking methodology described below.
    Step 1: Calculate the total economic cost for the base period. The 
calculations in Step 1 are unchanged from the NPRM, but are repeated 
for your convenience.
    In this step, for each Area, we divide total economic costs for the 
base period by the total bridge hours used in setting the base period 
rates, to yield the base cost per bridge hour. Total base period 
economic costs include pilot compensation expenses, plus all other 
recognized expenses, plus the return element. The calculations 
providing the total base period economic costs for each Area are 
summarized in Table 16 of the 2008 final rule. Total bridge hours used 
in setting the base period rates were calculated in Table 13 of the 
2008 final rule. Tables 2 through 4 summarize the Step 1 calculations:

                           Table 2--Total Economic Cost for Base Period, District One
----------------------------------------------------------------------------------------------------------------
                                                                  Area 1 St.      Area 2 Lake     Total District
                                                               Lawrence  River      Ontario            One
----------------------------------------------------------------------------------------------------------------
Total base period economic costs.............................       $2,078,551       $1,474,806       $3,553,357
Base bridge hours............................................          / 5,661          / 5,650         / 11,311
Base cost per bridge hour....................................        = $367.17        = $261.03        = $314.15
----------------------------------------------------------------------------------------------------------------


                           Table 3--Total Economic Cost for Base Period, District Two
----------------------------------------------------------------------------------------------------------------
                                                                                     Area 5
                                                                 Area 4 Lake    Southeast Shoal   Total District
                                                                     Erie       to  Port Huron,        Two
                                                                                       MI
----------------------------------------------------------------------------------------------------------------
Total base period economic costs.............................       $1,251,203       $2,334,169       $3,585,372
Base bridge hours............................................          / 7,320          / 5,097         / 12,417
Base cost per bridge hour....................................        = $170.93        = $457.95        = $288.75
----------------------------------------------------------------------------------------------------------------


                          Table 4--Total Economic Cost for Base Period, District Three
----------------------------------------------------------------------------------------------------------------
                                                Area 6 Lakes
                                                 Huron  and       Area 7 St.      Area 8 Lake     Total District
                                                  Michigan       Mary's River       Superior          Three
----------------------------------------------------------------------------------------------------------------
Total base period economic costs............       $2,884,724       $1,427,515       $1,944,032       $6,256,273
Base bridge hours...........................         / 18,000          / 3,863         / 11,390         / 33,253
Base cost per bridge hour...................        = $160.26        = $369.54        = $170.68        = $188.14
----------------------------------------------------------------------------------------------------------------

    Step 2. Calculate the expense multiplier. The calculations in Step 
2 are unchanged from the NPRM, but are repeated for your convenience.
    In this step, for each Area, we calculate an expense multiplier by 
dividing the base operating expense, shown in Table 16, Column B of the 
2008 final rule, by base pilot compensation, shown in Table 16, Column 
C of the 2008 final rule. Tables 5 through 7 show the Step 2 
calculations.

                                    Table 5--Expense Multiplier, District One
----------------------------------------------------------------------------------------------------------------
                                                                  Area 1 St.      Area 2 Lake     Total District
                                                                Lawrence River      Ontario            One
----------------------------------------------------------------------------------------------------------------
Base operating expense.......................................         $516,138         $529,046       $1,045,185

[[Page 35816]]

 
Base target pilot compensation...............................     / $1,562,413       / $945,760     / $2,508,173
Expense multiplier...........................................         = .33035         = .55939         = .41671
----------------------------------------------------------------------------------------------------------------


                                    Table 6--Expense Multiplier, District Two
----------------------------------------------------------------------------------------------------------------
                                                                                     Area 5
                                                                 Area 4 Lake    Southeast Shoal   Total District
                                                                     Erie       to  Port Huron,        Two
                                                                                       MI
----------------------------------------------------------------------------------------------------------------
Base operating expense.......................................         $494,595         $771,756       $1,266,351
Base target pilot compensation...............................       / $756,608     / $1,562,413     / $2,319,021
Expense multiplier...........................................         = .65370         = .49395         = .54607
----------------------------------------------------------------------------------------------------------------


                                   Table 7--Expense Multiplier, District Three
----------------------------------------------------------------------------------------------------------------
                                                Area 6 Lakes
                                                 Huron  and       Area 7 St.      Area 8 Lake     Total District
                                                  Michigan       Mary's River       Superior          Three
----------------------------------------------------------------------------------------------------------------
Base operating expense......................         $993,207         $385,906         $619,968       $1,999,081
Base target pilot compensation..............     / $1,891,520     / $1,041,609     / $1,324,064     / $4,257,193
Expense multiplier..........................         = .52508         = .37049         = .46823         = .46958
----------------------------------------------------------------------------------------------------------------

    Step 3. Calculate annual projection of target pilot compensation. 
Step 3 calculations have been modified since the NPRM. In this step, we 
determine the new target rate of compensation and the new number of 
pilots needed in each pilotage Area, to determine the new target pilot 
compensation for each Area.
    (a) Determine new target rate of compensation. Target pilot 
compensation is based on the average annual compensation of first mates 
and masters on U.S. Great Lakes vessels. Compensation includes wages 
and benefits. For pilots in undesignated waters, we approximate the 
first mates' compensation and, in designated waters, we approximate the 
master's compensation (first mates' wages multiplied by 150% plus 
benefits). To determine first mates' and masters' average annual 
compensation, we use data from the most recent AMOU contracts with the 
U.S. companies engaged in Great Lakes shipping. Where different AMOU 
agreements apply to different companies, we apportion the compensation 
provided by each agreement according to the percentage of tonnage 
represented by companies under each agreement.
    There are two current AMOU contracts. In our April 2009 NPRM, we 
stated that vessels operated by the American Steamship Co. and Inland 
Lakes Management Co. (acquired in 2008 by Mittal Steel USA, Inc.) 
operate under ``Agreement A,'' and that Key Lakes, Inc. and Mittal 
Steel USA, Inc. vessels (other than the Inland Lakes vessels acquired 
by Mittal) operate under ``Agreement B.'' However, as of May 2009, 
Agreement A applies only to Key Lakes, Inc. vessels, and Agreement B 
applies to all vessels operated by American Steamship Co. and Mittal 
Steel USA, Inc.
    Both Agreement A and Agreement B provide for a 3% wage increase 
effective August 1, 2009. Under Agreement A, the daily wage rate will 
be increased from $255.28 to $262.73. Under Agreement B, the daily wage 
rate will be increased from $314.42 to $323.86.
    To calculate monthly wages, we apply Agreement A and Agreement B 
monthly multipliers of 54.5 and 49.5, respectively, to the daily rate. 
Agreement A's 54.5 multiplier represents 30.5 average working days, 
15.5 vacation days, 4 days for four weekends, 3 bonus days, and 1.5 
holidays. Agreement B's 49.5 multiplier represents 30.5 average working 
days, 16 vacation days, and 3 bonus days.
    To calculate average annual compensation, we multiply monthly 
figures by 9 months, the length of the Great Lakes shipping season.
    Table 8, which is unchanged from the NPRM, shows new wage 
calculations based on Agreements A and B effective August 1, 2009.

                             Table 8--Wages
------------------------------------------------------------------------
                                                            Pilots on
                                           Pilots on        designated
           Monthly component              undesignated        waters
                                             waters       (undesignated
                                                             x 150%)
------------------------------------------------------------------------
Agreement A:
    $262.73 daily rate x 54.5 days....          $14,319          $21,478
Agreement A:
    Monthly total x 9 months = total            128,870          193,305
     wages............................
Agreement B:
    $323.86 daily rate x 49.5 days....           16,031           24,046
Agreement B:

[[Page 35817]]

 
    Monthly total x 9 months = total            144,278          216,417
     wages............................
------------------------------------------------------------------------

    Both Agreements A and B include a health benefits contribution rate 
of $80.69 effective August 1, 2009. Agreement A includes a pension plan 
contribution rate of $33.35 per man-day. Agreement B includes a pension 
plan contribution rate of $43.55 per man-day. Both Agreements A and B 
provide a 401K employer matching rate, 5% of the wage rate. Neither 
Agreement A nor Agreement B includes a clerical contribution that 
appeared in earlier contracts. Per the AMOU, the multiplier used to 
calculate monthly benefits is 45.5 days.
    Table 9, which is unchanged from the NPRM, shows new benefit 
calculations based on Agreements A and B, effective August 1, 2009.

                            Table 9--Benefits
------------------------------------------------------------------------
                                           Pilots on        Pilots on
           Monthly component              undesignated      designated
                                             waters           waters
------------------------------------------------------------------------
Agreement A:
    Employer contribution, 401(K) plan          $715.95        $1,073.92
     (Monthly Wages x 5%).............
    Pension = $33.35 x 45.5 days......         1,517.43         1,517.43
    Health = $80.69 x 45.5 days.......         3,671.40         3,671.40
Agreement B:
    Employer contribution, 401(K) plan           801.54         1,202.32
     (Monthly Wages x 5%).............
    Pension = $43.55 x 45.5 days......         1,981.53         1,981.53
    Health = $80.69 x 45.5 days.......         3,671.40         3,671.40
Agreement A:
    Monthly total benefits............       = 5,904.77       = 6,262.74
Agreement A:
    Monthly total benefits x 9 months.         = 53,143         = 56,365
Agreement B:
    Monthly total benefits............       = 6,454.46       = 6,855.24
Agreement B:
    Monthly total benefits x 9 months.         = 58,090         = 61,697
------------------------------------------------------------------------

    Table 10, which is unchanged from the NPRM, totals the wages and 
benefits under each agreement.

                   Table 10--Total Wages and Benefits
------------------------------------------------------------------------
                                           Pilots on        Pilots on
                                          undesignated      designated
                                             waters           waters
------------------------------------------------------------------------
Agreement A: Wages....................         $128,870         $193,305
Agreement A: Benefits.................         + 53,143         + 56,365
                                       ---------------------------------
    Agreement A: Total................        = 182,013        = 249,670
                                       ---------------------------------
Agreement B: Wages....................          144,278          216,417
Agreement B: Benefits.................         + 58,090         + 61,697
                                       ---------------------------------
    Agreement B: Total................        = 202,368        = 278,114
------------------------------------------------------------------------

    Table 11, as it appeared in the NPRM, has been revised to reflect 
the change in the distribution of vessels operating under Agreements A 
and B as of May 2009. It shows that approximately 30% of U.S. Great 
Lakes shipping deadweight tonnage operates under Agreement A, with the 
remaining 70% operating under Agreement B.

             Table 11--Deadweight Tonnage by AMOU Agreement
------------------------------------------------------------------------
                Company                   Agreement A      Agreement B
------------------------------------------------------------------------
American Steamship Company............  ...............          815,600

[[Page 35818]]

 
Mittal Steel USA, Inc.................  ...............           38,826
Key Lakes, Inc........................          361,385  ...............
                                       ---------------------------------
    Total tonnage, each agreement.....          361,385          854,426
                                       ---------------------------------
        Percent tonnage, each                 361,385 /        854,426 /
         agreement....................      1,215,811 =      1,215,811 =
                                               29.7238%         70.2762%
------------------------------------------------------------------------

    Table 12, as it appeared in the NPRM, has been modified. It applies 
the percentage of tonnage represented by each agreement to the wages 
and benefits provided by each agreement, to determine the projected 
target rate of compensation on a tonnage-weighted basis.

                            Table 12--Projected Target Rate of Compensation, Weighted
----------------------------------------------------------------------------------------------------------------
                                                                  Undesignated waters       Designated waters
----------------------------------------------------------------------------------------------------------------
AGREEMENT A:
    Total wages and benefits x percent tonnage................        $182,013 x 29.72%        $249,670 x 29.72%
                                                                              = $54,101                = $74,211
AGREEMENT B:
    Total wages and benefits x percent tonnage................      $202,368 x 70.28% =        $278,114 x 70.28%
                                                                               $142,217               = $195,448
                                                               -------------------------------------------------
    Total weighted average wages and benefits = projected            $54,101 + $142,217       $74,211 + $195,448
     target rate of compensation..............................               = $196,318               = $269,659
----------------------------------------------------------------------------------------------------------------

     (b) Determine number of pilots needed. Subject to discretionary 
adjustment by the Director of Great Lakes Pilotage to ensure 
uninterrupted service or for other reasonable circumstances, we 
determine the number of pilots needed in each Area by dividing each 
Area's projected bridge hours, either by 1,000 (designated waters) or 
by 1,800 (undesignated waters). The resulting number is rounded either 
up or down based upon the needs of commerce at the discretion of the 
Director.
    Bridge hours are the number of hours a pilot is aboard a vessel 
providing pilotage service. Projected bridge hours are based on the 
vessel traffic that pilots are expected to serve. Based on historical 
data and information provided by pilots and industry, the Coast Guard 
projects the same bridge hours for Areas 2, 4, 5, and 8 in 2009 as were 
projected in the 2008 final rule. As discussed in Part IV of this 
preamble, we are reducing projected bridge hours for Areas 1, 6, and 7. 
With these reductions, we are reducing the number of pilots in Area 6 
by two.
    Table 13, as it appeared in the NPRM, has been modified to reflect 
the reductions in Areas 1, 6, and 7 bridge hour projections. Table 13 
shows the projected bridge hours needed for each Area, and the total 
number of pilots needed after dividing those figures either by 1,000 or 
1,800 and, for the purposes of this rulemaking only, rounding up to the 
next whole pilot, with two exceptions. In Area 2 we round up from 3.14 
to 5, and in Area 4 we round down from 4.07 to 4, for the reasons 
discussed in the 2008 final rule.

                                        Table 13--Number of Pilots Needed
----------------------------------------------------------------------------------------------------------------
                                                                           Divided by 1,000
                                                                              (designated
                    Pilotage area                       Projected 2009     waters) or 1,800      Pilots needed
                                                         bridge hours        (undesignated       (total = 40)
                                                                                waters)
----------------------------------------------------------------------------------------------------------------
Area 1..............................................               5,203               1,000                   6
Area 2..............................................               5,650               1,800                   5
Area 4..............................................               7,320               1,800                   4
Area 5..............................................               5,097               1,000                   6
Area 6..............................................              13,406               1,800                   8
Area 7..............................................               3,259               1,000                   4
Area 8..............................................              11,630               1,800                   7
----------------------------------------------------------------------------------------------------------------

     (c) Determine the projected target pilot compensation for each 
Area. We project new total target pilot compensation separately for 
each pilotage Area, by multiplying the number of pilots needed in each 
Area (see Table 13) by the projected target rate of compensation (see 
Table 12) for pilots working in that Area. Table 14 (modified from NPRM 
version) shows this calculation.

[[Page 35819]]



                                  Table 14--Projected Target Pilot Compensation
----------------------------------------------------------------------------------------------------------------
                                                    Pilots needed     Multiplied by target    Projected target
                 Pilotage Area                      (total = 40)      rate of compensation   pilot compensation
----------------------------------------------------------------------------------------------------------------
Area 1........................................                     6            x $269,659            $1,617,955
Area 2........................................                     5             x 196,318               981,589
                                               -----------------------------------------------------------------
    Total, District One.......................                    11  ....................             2,599,544
----------------------------------------------------------------------------------------------------------------
Area 4........................................                     4             x 196,318               785,271
Area 5........................................                     6             x 269,659             1,617,955
                                               -----------------------------------------------------------------
    Total, District Two.......................                    10  ....................             2,403,226
----------------------------------------------------------------------------------------------------------------
Area 6........................................                     8             x 196,318             1,570,542
Area 7........................................                     4             x 269,659             1,078,637
Area 8........................................                     7             x 196,318             1,374,224
                                               -----------------------------------------------------------------
    Total, District Three.....................                    19  ....................             4,023,403
----------------------------------------------------------------------------------------------------------------

    Step 4: Increase the projected pilot compensation in Step 3 by the 
expense multiplier in Step 2. Step 4 calculations have been modified 
since the NPRM. This step yields a projected increase in operating 
costs necessary to support the increased projected pilot compensation. 
Table 15 (modified from NPRM version) shows this calculation.

                                      Table 15--Projected Operating Expense
----------------------------------------------------------------------------------------------------------------
                                                  Projected target        Multiplied by     Projected  operating
                 Pilotage area                   pilot compensation    expense multiplier         expense*
----------------------------------------------------------------------------------------------------------------
Area 1........................................            $1,617,955              x .33035              $534,487
Area 2........................................               981,589              x .55939               549,089
                                               -----------------------------------------------------------------
    Total, District One.......................             2,599,544              x .41671             1,083,260
----------------------------------------------------------------------------------------------------------------
Area 4........................................               785,271              x .65370               513,332
Area 5........................................             1,617,955              x .49395               799,192
                                               -----------------------------------------------------------------
    Total, District Two.......................             2,403,226              x .54607             1,312,333
----------------------------------------------------------------------------------------------------------------
Area 6........................................             1,570,542              x .52508               824,666
Area 7........................................             1,078,637              x .37049               399,625
Area 8........................................             1,374,224              x .46823               643,454
                                               -----------------------------------------------------------------
    Total, District Three.....................             4,023,403              x .46958             1,889,298
----------------------------------------------------------------------------------------------------------------
*Unique expense multipliers are used to calculate projected operating expense for all areas and districts, and
  as such, projected operating expense for Districts One, Two and Three may not equal the sum of the projected
  operating expense for the areas.

    Step 5: Adjust the result in Step 4, as required, for inflation or 
deflation, and calculate projected total economic cost. Step 5 
calculations have been modified since the NPRM. Based on data from the 
U.S. Department of Labor's Bureau of Labor Statistics, we have 
multiplied the results in Step 4 by a 1.027 inflation factor, 
reflecting an average inflation rate of 2.7% in ``Midwest Economy--
Consumer Prices'' between 2006 and 2007, the latest years for which 
data are available. Table 16 (modified from NPRM version) shows this 
calculation and the projected total economic cost.

                                                         Table 16--Projected Total Economic Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            B. Increase,
                                                                      A. Projected          multiplied by     C. Projected  target   D. Projected total
                          Pilotage area                             operating expense   inflation factor  (=   pilot  compensation   economic cost  (= B
                                                                                             A x 1.027)                                     + C)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 1..........................................................              $534,487              $548,918            $1,617,955            $2,166,873
Area 2..........................................................               549,089               563,914               981,589             1,545,503
                                                                 ---------------------------------------------------------------------------------------
    Total, District One.........................................             1,083,260             1,112,508             2,599,544            *3,712,052
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 4..........................................................               513,332               527,192               785,271             1,312,463
Area 5..........................................................               799,192               820,770             1,617,955             2,438,725
                                                                 ---------------------------------------------------------------------------------------
    Total, District Two.........................................             1,312,333             1,347,766             2,403,226            *3,750,992
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 6..........................................................               824,666               846,932             1,570,542             2,417,474
Area 7..........................................................               399,625               410,415             1,078,637             1,489,052

[[Page 35820]]

 
Area 8..........................................................               643,454               660,828             1,374,224             2,035,052
                                                                 ---------------------------------------------------------------------------------------
    Total, District Three.......................................             1,889,298             1,940,310             4,023,403            *5,963,713
--------------------------------------------------------------------------------------------------------------------------------------------------------
*Unique expense multipliers are used to calculate projected operating expense for all areas and districts, and as such, projected total economic cost
  for Districts One, Two and Three may not equal the sum of the projected total economic cost for the areas.

    Step 6: Divide the result in Step 5 by projected bridge hours to 
determine total unit costs. Step 6 calculations have been modified 
since the NPRM. Table 17 (modified from NPRM version) shows this 
calculation.

                                           Table 17--Total Unit Costs
----------------------------------------------------------------------------------------------------------------
                                                                                                 Prospective
                  Pilotage area                     A. Projected total   B. Projected 2009    (total) unit costs
                                                      economic cost        bridge  hours       (A divided by B)
----------------------------------------------------------------------------------------------------------------
Area 1...........................................           $2,166,873                5,203              $416.47
Area 2...........................................            1,545,503                5,650               273.54
                                                  --------------------------------------------------------------
    Total, District One..........................            3,712,052               10,853               342.03
----------------------------------------------------------------------------------------------------------------
Area 4...........................................            1,312,463                7,320               179.30
Area 5...........................................            2,438,725                5,097               478.46
                                                  --------------------------------------------------------------
    Total, District Two..........................            3,750,992               12,417               302.09
----------------------------------------------------------------------------------------------------------------
Area 6...........................................            2,417,474               13,406               180.33
Area 7...........................................            1,489,052                3,259               456.90
Area 8...........................................            2,035,052               11,630               174.98
                                                  --------------------------------------------------------------
    Total, District Three........................            5,963,713               28,295               210.77
                                                  ==============================================================
        Overall..................................           13,426,758               51,565               260.39
----------------------------------------------------------------------------------------------------------------

    Step 7: Divide prospective unit costs (total unit costs) in Step 6 
by the base period unit costs in Step 1. Step 7 calculations have been 
modified since the NPRM. Table 18 (modified from NPRM version) shows 
this calculation, which expresses the percentage change between the 
total unit costs and the base unit costs. The results, for each Area, 
are identical with the percentage increases listed in Table 1.

                             Table 18--Percentage Change, Prospective in Unit Costs
----------------------------------------------------------------------------------------------------------------
                                                                                                C. Percentage
                                                                                              change from  base
                  Pilotage area                       A. Prospective       B. Base period     (A divided  by B;
                                                        unit costs           unit costs       result  expressed
                                                                                               as  percentage)
----------------------------------------------------------------------------------------------------------------
Area 1...........................................              $416.47              $367.17                13.43
Area 2...........................................               273.54               261.03                 4.79
                                                  --------------------------------------------------------------
    Total, District One..........................               342.03               314.15                 8.87
----------------------------------------------------------------------------------------------------------------
Area 4...........................................               179.30               170.93                 4.90
Area 5...........................................               478.46               457.95                 4.48
                                                  --------------------------------------------------------------
    Total, District Two..........................               302.09               288.75                 4.62
----------------------------------------------------------------------------------------------------------------
Area 6...........................................               180.33               160.26                12.52
Area 7...........................................               456.90               369.54                23.64
Area 8...........................................               174.98               170.68                 2.52
                                                  --------------------------------------------------------------
    Total, District Three........................               210.77               188.14                12.03
                                                  ==============================================================
        Overall..................................               260.39               235.08                10.77
----------------------------------------------------------------------------------------------------------------


[[Page 35821]]

    Step 8: Adjust the base period rates by the percentage change in 
unit costs in Step 7. Step 8 calculations have been modified since the 
NPRM. Table 19 (modified from NPRM version) shows this calculation.

                    Table 19--Base Period Rates Adjusted by Percentage Change in Unit Costs*
----------------------------------------------------------------------------------------------------------------
                                                                                                   D. Adjusted
                                             A. Base period    B. Percentage     C. Increase in    rate (A + C,
                 Pilotage                         rate        change in  unit   base rate  (A x     rounded to
                                                                   costs              B%)         nearest cent)
----------------------------------------------------------------------------------------------------------------
Area 1....................................  ...............     13.43 (1.1343)
    --Basic pilotage......................       $14.94/km,  .................        $2.00/km,       $16.95/km,
                                                  $26.44/mi                            $3.55/mi        $29.99/mi
    --Each lock transited.................           331.03  .................            44.44           375.47
    --Harbor movage.......................         1,083.89  .................           145.52         1,229.41
    --Minimum basic rate, St. Lawrence               722.98  .................            97.07           820.04
     River................................
    --Maximum rate, through trip..........         3,173.51  .................           426.07         3,599.58
Area 2....................................  ...............      4.79 (1.0479)  ...............  ...............
    --6-hr. period........................           780.23  .................            37.40           817.63
    --Docking or undocking................           744.24  .................            35.68           779.92
Area 4....................................  ...............      4.90 (1.0490)  ...............  ...............
    --6-hr. period........................           688.35  .................            33.70           722.05
    --Docking or undocking................           530.49  .................            25.97           556.46
    --Any point on Niagara River below             1,354.15  .................            66.30         1,420.45
     Black Rock Lock......................
Area 5 between any point on or in.........  ...............      4.48 (1.0448)  ...............  ...............
    --Toledo or any point on Lake Erie W.          1,243.75  .................            55.71         1,299.46
     of Southeast Shoal...................
    --Toledo or any point on Lake Erie W.          2,104.72  .................            94.28         2,198.99
     of Southeast Shoal & Southeast Shoal.
    --Toledo or any point on Lake Erie W.          2,732.79  .................           122.41         2,855.20
     of Southeast Shoal & Detroit River...
    --Toledo or any point on Lake Erie W.          2,104.72  .................            94.28         2,198.99
     of Southeast Shoal & Detroit Pilot
     Boat.................................
    --Port Huron Change Point & Southeast          3,665.60  .................           164.20         3,829.80
     Shoal (when pilots are not changed at
     the Detroit Pilot Boat)..............
    --Port Huron Change Point & Toledo or          4,246.60  .................           190.22         4,436.82
     any point on Lake Erie W. of
     Southeast Shoal (when pilots are not
     changed at the Detroit Pilot Boat)...
    --Port Huron Change Point & Detroit            2,753.85  .................           123.36         2,877.20
     River................................
    --Port Huron Change Point & Detroit            2,141.88  .................            95.94         2,237.82
     Pilot Boat...........................
    --Port Huron Change Point & St. Clair          1,522.48  .................            68.20         1,590.68
     River................................
    --St. Clair River.....................         1,243.75  .................            55.71         1,299.46
    --St. Clair River & Southeast Shoal            3,665.60  .................           164.20         3,829.80
     (when pilots are not changed at the
     Detroit Pilot Boat)..................
    --St. Clair River & Detroit River/             2,753.85  .................           123.36         2,877.20
     Detroit Pilot Boat...................
    --Detroit, Windsor, or Detroit River..         1,243.75  .................            55.71         1,299.46
    --Detroit, Windsor, or Detroit River &         2,104.72  .................            94.28         2,198.99
     Southeast Shoal......................
    --Detroit, Windsor, or Detroit River &         2,732.79  .................           122.41         2,855.20
     Toledo or any point on Lake Erie W.
     of Southeast Shoal...................
    --Detroit, Windsor, or Detroit River &         2,753.85  .................           123.36         2,877.20
     St. Clair River......................
    --Detroit Pilot Boat & Southeast Shoal         1,522.48  .................            68.20         1,590.68
    --Detroit Pilot Boat & Toledo or any           2,104.72  .................            94.28         2,198.99
     point on Lake Erie W. of Southeast
     Shoal................................
    --Detroit Pilot Boat & St. Clair River         2,753.85  .................           123.36         2,877.20
Area 6....................................  ...............     12.52 (1.1252)  ...............  ...............
    --6-hr. period........................           553.62  .................            69.31           622.93
    --Docking or undocking................           525.88  .................            65.84           591.72
Area 7 between any point on or in.........  ...............     23.64 (1.2364)  ...............  ...............
    --Gros Cap & De Tour..................         1,975.83  .................           467.15         2,442.98
    --Algoma Steel Corp. Wharf, Sault Ste.         1,975.83  .................           467.15         2,442.98
     Marie, Ont. & De Tour................
    --Algoma Steel Corp. Wharf, Sault Ste.           744.10  .................           175.93           920.03
     Marie, Ont. & Gros Cap...............
    --Any point in Sault Ste. Marie, Ont.,         1,656.11  .................           391.55         2,047.67
     except the Algoma Steel Corp. Wharf &
     De Tour..............................
    --Any point in Sault Ste. Marie, Ont.,           744.10  .................           175.93           920.03
     except the Algoma Steel Corp. Wharf &
     Gros Cap.............................
    --Sault Ste. Marie, MI & De Tour......         1,656.11  .................           391.55         2,047.67
    --Sault Ste. Marie, MI & Gros Cap.....           744.10  .................           175.93           920.03
    --Harbor movage.......................           744.10  .................           175.93           920.03
Area 8....................................  ...............      2.52 (1.0252)  ...............  ...............
    --6-hr. period........................           535.92  .................            13.51           549.44
    --Docking or undocking................           509.36  .................            12.84           522.20
----------------------------------------------------------------------------------------------------------------
Rates for ``Cancellation, delay or interruption in rendering services ( Sec.   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 (Sec.   401.428)'' are not reflected in this table but have been increased by 10.77% across all
  areas.


[[Page 35822]]

VI. Regulatory Analyses

    We developed this rule after considering numerous statutes and 
executive orders related to rulemaking. Below, we summarize our 
analyses based on 13 of these statutes or executive orders.

A. Regulatory Planning and Review

    Executive Order 12866, ``Regulatory Planning and Review,'' 58 FR 
51735, October 4, 1993, requires a determination whether a regulatory 
action is ``significant'' and therefore subject to review by the Office 
of Management and Budget (OMB) and subject to the requirements of the 
Executive Order. This rulemaking is not significant under Executive 
Order 12866 and will not be reviewed by OMB.
    The Coast Guard is required to conduct an annual review of pilotage 
rates on the Great Lakes and, if necessary, adjust these rates to align 
compensation levels between Great Lakes pilots and industry. See the 
``Background and Purpose'' section for a detailed explanation of the 
legal authority and requirements for the Coast Guard to conduct an 
annual review and provide possible adjustments of pilotage rates on the 
Great Lakes. Based on our annual review for this rulemaking, we are 
adjusting the pilotage rates for the 2009 shipping season to generate 
sufficient revenue to cover allowable expenses, target pilot 
compensation, and returns on investment.
    This rule will implement a 10.77% overall rate adjustment for the 
Great Lakes system over the current rate as adjusted in the 2008 final 
rule. These adjustments to Great Lakes pilotage rates meet the 
requirements set forth in 46 CFR part 404 for similar compensation 
levels between Great Lakes pilots and industry. They also include 
adjustments for inflation and changes in association expenses to 
maintain these compensation levels.
    In general, we expect an increase in pilotage rates for a certain 
area to result in additional costs for shippers using pilotage services 
in that area, while a decrease would result in a cost reduction or 
savings for shippers in that area. This rule will result in a 
distributional effect that transfers payments (income) from affected 
shippers (vessel owners and operators) to the Great Lakes' pilot 
associations through Coast Guard regulated pilotage rates.
    The shippers affected by these rate adjustments are those owners 
and operators of domestic vessels operating on register (employed in 
the 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. However, the 
Coast Guard issued a policy position several years ago stating that the 
statute applies only to commercial vessels and not to recreational 
vessels.
    Owners and operators of other vessels that are not affected by this 
rule, such as recreational boats and vessels only operating within the 
Great Lakes system, may elect to purchase pilotage services. However, 
this election is voluntary and does not affect the Coast Guard's 
calculation of the rate increase and is not a part of our estimated 
national cost to shippers.
    We reviewed a sample of pilot source forms, which are the forms 
used to record pilotage transactions on vessels, and discovered very 
few cases of U.S. Great Lakes vessels (i.e., domestic vessels without 
registry operating only in the Great Lakes) that purchased pilotage 
services. We assume some vessel owners and operators may also choose to 
purchase pilotage services if their vessels are carrying hazardous 
substances or were navigating the Great Lakes system with inexperienced 
personnel. Based on information from the Coast Guard Office of Great 
Lakes Pilotage, we have determined that these vessels voluntarily chose 
to use pilots and, therefore, are exempt from pilotage requirements.
    We used 2006-2007 vessel arrival data from the Coast Guard's Marine 
Inspection, Safety, and Law Enforcement system (MISLE) to estimate the 
average annual number of vessels affected by the rate adjustment to be 
208 vessels that journey into the Great Lakes system. These vessels 
entered the Great Lakes by transiting through or in part of at least 
one of the three pilotage Districts before leaving the Great Lakes 
system. These vessels often make more than one distinct stop, docking, 
loading, and unloading at facilities in Great Lakes ports. Of the total 
trips for the 208 vessels, there were approximately 923 annual U.S. 
port arrivals before the vessels left the Great Lakes system, based on 
2006-2007 vessel data from MISLE.
    The impact of the rate adjustment to shippers is estimated from the 
district pilotage revenues. These revenues represent the direct and 
indirect costs (``economic costs'') that shippers must pay for pilotage 
services. The Coast Guard sets rates so that revenues equal the 
estimated cost of pilotage.
    We estimate the additional impact (costs or savings) of the rate 
adjustment in this final rule to be the difference between the total 
projected revenue needed to cover costs based on the 2008 rate 
adjustment and the total projected revenue needed to cover costs in 
this final rule for 2009. Table 20 details additional costs or savings 
by area and district.

          Table 20--Rate Adjustment and Additional Impact of The Final Rule ($U.S.; Non-Discounted) \1\
----------------------------------------------------------------------------------------------------------------
                                                  Total                             Total          Additional
                                                projected      Proposed rate      projected      revenue or cost
                                               expenses in         change        expenses in         of this
                                                   2008                            2009 \3\      rulemaking \2\
----------------------------------------------------------------------------------------------------------------
Area 1.....................................       $2,078,551           1.0425        2,166,873          $88,322
Area 2.....................................        1,474,806           1.0479        1,545,503           70,697
                                            --------------------------------------------------------------------
    Total, District One....................        3,553,357           1.0447        3,712,052          158,695
----------------------------------------------------------------------------------------------------------------
Area 4.....................................        1,251,203           1.0490        1,312,463           61,260
Area 5.....................................        2,334,169           1.0448        2,438,725          104,556
                                            --------------------------------------------------------------------
    Total, District Two....................        3,585,372           1.0462        3,750,992          165,620
----------------------------------------------------------------------------------------------------------------
Area 6.....................................        2,884,724           0.8380        2,417,474         (467,250)
Area 7.....................................        1,427,515           1.0431        1,489,052           61,537
Area 8.....................................        1,944,032           1.0468        2,035,052           91,020
                                            --------------------------------------------------------------------

[[Page 35823]]

 
    Total, District Three..................        6,256,273           0.9532        5,963,713         (292,560)
----------------------------------------------------------------------------------------------------------------
\1\ Some values may not total due to rounding.
\2\ Additional Revenue or Cost of this Rulemaking = `Total Projected Expenses in 2009' - `Total Projected
  Expenses in 2008'.
\3\ `Total Projected Expenses in 2009' and `Additional Revenue or Cost of this Rulemaking' for Districts One,
  Two and Three differ from the sum of the area totals due to the use of unique multipliers, as mentioned in
  Step 5 under `Calculating the Rate Adjustment'.

    After applying the rate change in this rule, the resulting 
difference between the projected revenue in 2008 and the projected 
revenue in 2009 is the annual impact to shippers from this rule. This 
figure will be equivalent to the total additional payments or savings 
that shippers will incur for pilotage services from this rule. As 
discussed earlier, we consider a reduction in payments to be a cost 
savings.
    The impact of the rate adjustment in this rule to shippers varies 
by area and district. The annual costs of the rate adjustments in 
Districts 1 and 2 are approximately $159,000 and $166,000, 
respectively, while District 3 will experience an annual savings of 
approximately $293,000. 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 will pay less depending on 
the distance and port arrivals of their vessels' trips. However, the 
annual cost or savings reported above does capture all of the 
additional cost the shippers face as a result of the rate adjustment in 
this rule.
    As Table 20 indicates, all areas will experience an increased 
annual cost due to this rulemaking except Area 6, which will experience 
a savings. The projected savings for Area 6 is approximately $467,000. 
This will cause a net savings for District 3, and is due to a decrease 
in actual bridge hours in Area 6 from 2008 to 2009. This decrease in 
bridge hours led to a decrease in the number of pilots needed, from 10 
pilots in 2008 to 8 pilots in 2009. This decrease in the number of 
pilots would reduce the projected revenue needed to cover costs of 
pilotage services in Area 6.
    The effects of a rate adjustment on costs and savings vary by year 
and area. A decrease in projected expenses for individual areas or 
districts is common in past pilotage rate adjustments. Most recently, 
in the 2008 Final Rule, District 2 experienced a decrease in projected 
expenses due to an adjustment in bridge hours from the 2008 Interim 
Rule, which led to a savings for that district. However, this savings 
was not large enough to outweigh the costs to the other districts.
    The overall impact of the final rule will be an additional cost to 
shippers of $32,000 across all three districts. This differs from the 
estimated cost savings of $15,000 in the NPRM due to the projected 
changes in bridge hours in Area 1,\1\ as well as the change in the 
distribution of vessels operating under Agreements A and B as of May 
2009. We explained these two differences from the NPRM in our Part IV 
discussion of public comments on bridge hour projection data, and in 
our Part V.B discussion of Step 3(b) rate calculations. These two 
changes since the NPRM resulted in increased projected expenses, 
accounting for the overall increased cost to shippers of the final 
rule.
---------------------------------------------------------------------------

    \1\ When a decrease in traffic is not accompanied by a reduction 
in pilots, as in this case, projected pilot compensation and other 
expenses do not decrease. As such, revenue must increase to meet 
these expenses, which can only be accomplished through rate 
increases.
---------------------------------------------------------------------------

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 entities affected by the proposed rule would be 
classified under the North American Industry Classification System 
(NAICS) code subsector 483--Water Transportation, which includes one or 
all of 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 this rule, we reviewed recent company size and ownership data 
from 2006-2007 MISLE data and business revenue and size data provided 
by Reference USA and Dunn and Bradstreet. We were able to gather 
revenue and size data or link the entities to large shipping 
conglomerates for 22 of the 24 affected entities in the United States. 
We found that large, mostly foreign-owned, shipping conglomerates or 
their subsidiaries owned or operated all vessels engaged in foreign 
trade on the Great Lakes. We assume that new industry entrants will be 
comparable in ownership and size to these shippers.
    There are three U.S. entities affected by the 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 classified with the 
same NAICS industry classification and small entity size standards 
described above, but they have far fewer than 500 employees: 
approximately 65 total employees combined. We expect no adverse impact 
to these entities from this rule since all associations receive enough 
revenue to balance the projected expenses associated with the projected 
number of bridge hours and pilots.
    Therefore, the Coast Guard has determined that this rule will not 
have a significant economic impact on a substantial number of small 
entities under 5 U.S.C. 605(b).

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 the rule so that they could better evaluate 
its effects on them and participate in the rulemaking. The

[[Page 35824]]

Coast Guard will not retaliate against small entities that question or 
complain about this rule or any policy or action of the Coast Guard.
    Small businesses may send comments on the actions of Federal 
employees who enforce, or otherwise determine compliance with, Federal 
regulations to the Small Business and Agriculture Regulatory 
Enforcement Ombudsman and the Regional Small Business Regulatory 
Fairness Boards. The Ombudsman evaluates these actions annually and 
rates each agency's responsiveness to small business. If you wish to 
comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR 
(1-888-734-3247).

D. Collection of Information

    This rule calls for no new collection of information under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). This rule does 
not change the burden in the collection currently approved by the 
Office of Management and Budget (OMB) under OMB Control Number 1625-
0086, Great Lakes Pilotage Methodology.

E. Federalism

    A rule has implications for federalism under Executive Order 13132, 
Federalism, if it has a substantial direct effect on State or local 
governments and would either preempt State law or impose a substantial 
direct cost of compliance on them. We have analyzed this rule under 
that Order and have determined that it does not have implications for 
federalism because there are no similar State regulations, and the 
States do not have the authority to regulate and adjust rates for 
pilotage services in the Great Lakes system.

F. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) 
requires Federal agencies to assess the effects of their discretionary 
regulatory actions. In particular, the Act addresses actions that may 
result in the expenditure by a State, local, or Tribal government, in 
the aggregate, or by the private sector of $100,000,000 or more in any 
one year. Though this rule would not result in such expenditure, we do 
discuss the effects of this rule elsewhere in this preamble.

G. Taking of Private Property

    This rule would not affect a taking of private property or 
otherwise have taking implications under Executive Order 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 Executive Order 12988, Civil Justice Reform, to minimize litigation, 
eliminate ambiguity, and reduce burden.

I. Protection of Children

    We have analyzed this rule under Executive Order 13045, Protection 
of Children from Environmental Health Risks and Safety Risks. This rule 
is not an economically significant rule and does not create an 
environmental risk to health or risk to safety that may 
disproportionately affect children.

J. Indian Tribal Governments

    This rule does not have Tribal implications under Executive Order 
13175, Consultation and Coordination with Indian Tribal Governments, 
because it does not have a substantial direct effect on one or more 
Indian Tribes, on the relationship between the Federal Government and 
Indian Tribes, or on the distribution of power and responsibilities 
between the Federal Government and Indian Tribes.

K. Energy Effects

    We have analyzed this rule under Executive Order 13211, Actions 
Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use. We have determined that it is not a ``significant 
energy action'' under that order because it is not a ``significant 
regulatory action'' under Executive Order 12866 and is not likely to 
have a significant adverse effect on the supply, distribution, or use 
of energy. The Administrator of the Office of Information and 
Regulatory Affairs has not designated it as a significant energy 
action. Therefore, it does not require a Statement of Energy Effects 
under Executive Order 13211.

L. Technical Standards

    The National Technology Transfer and Advancement Act (NTTAA) (15 
U.S.C. 272 note) directs agencies to use voluntary consensus standards 
in their regulatory activities unless the agency provides Congress, 
through the Office of Management and Budget, with an explanation of why 
using these standards would be inconsistent with applicable law or 
otherwise impractical. Voluntary consensus standards are technical 
standards (e.g., specifications of materials, performance, design, or 
operation; test methods; sampling procedures; and related management 
systems practices) that are developed or adopted by voluntary consensus 
standards bodies. This rule does not use technical standards. 
Therefore, we did not consider the use of voluntary consensus 
standards.

M. Environment

    We have analyzed this rule under Department of Homeland Security 
Management Directive 023-01 and Commandant Instruction M16475.lD, which 
guide the Coast Guard in complying with the National Environmental 
Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded 
that this action is one of a category of actions which do not 
individually or cumulatively have a significant effect on the human 
environment. This rule is categorically excluded under section 2.B.2, 
figure 2-1, paragraph (34)(a) of the Instruction. Paragraph 34(a) 
pertains to minor regulatory changes that are editorial or procedural 
in nature. This rule adjusts rates in accordance with applicable 
statutory and regulatory mandates. An environmental analysis checklist 
and a categorical exclusion determination are available in the docket 
where indicated under ADDRESSES.

List of Subjects in 46 CFR Part 401

    Administrative practice and procedure, Great Lakes, Navigation 
(water), Penalties, Reporting and recordkeeping requirements, Seamen.

0
For the reasons discussed in the preamble, the Coast Guard amends 46 
CFR Part 401 as follows:

PART 401--GREAT LAKES PILOTAGE REGULATIONS

0
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.

0
2. In Sec.  401.405, revise paragraphs (a) and (b), including the 
footnote to Table (a), to read as follows:


Sec.  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....................  $16.95 per kilometer or $29.99 per
                                     mile.\1\
Each Lock Transited...............  $375.\1\
Harbor Movage.....................  $1,229.\1\
------------------------------------------------------------------------
\1\ The minimum basic rate for assignment of a pilot in the St. Lawrence
  River is $820, and the maximum basic rate for a through trip is
  $3,599.

    (b) Area 2 (Undesignated Waters):

[[Page 35825]]



------------------------------------------------------------------------
                         Service                           Lake Ontario
------------------------------------------------------------------------
Six-Hour Period.........................................            $818
Docking or Undocking....................................             780
------------------------------------------------------------------------

* * * * *
0
3. In Sec.  401.407 revise paragraphs (a) and (b), including the 
footnote to Table (b), to read as follows:


Sec.  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):

------------------------------------------------------------------------
                                                 Lake Erie
                                                  (east of
                    Service                      Southeast     Buffalo
                                                   Shoal)
------------------------------------------------------------------------
Six-Hour Period...............................         $722         $722
Docking or Undocking..........................          557          557
Any Point on the Niagara River below the Black          N/A        1,420
 Rock Lock....................................
------------------------------------------------------------------------

     (b) Area 5 (Designated Waters):

----------------------------------------------------------------------------------------------------------------
                                                   Toledo or any
                                                   point on Lake
       Any point on or in            Southeast     Erie west of    Detroit River   Detroit pilot     St. Clair
                                       Shoal         Southeast                         boat            River
                                                       Shoal
----------------------------------------------------------------------------------------------------------------
Toledo or any port on Lake Erie           $2,199          $1,299          $2,855          $2,199             N/A
 west of Southeast Shoal........
Port Huron Change Point.........       \1\ 3,829       \1\ 4,436           2,877           2,237           1,591
St. Clair River.................       \1\ 3,829             N/A           2,877           2,877           1,299
Detroit or Windsor or the                  2,198           2,855           1,299             N/A           2,877
 Detroit River..................
Detroit Pilot Boat..............           1,590           2,199             N/A             N/A           2,877
----------------------------------------------------------------------------------------------------------------
\1\ When pilots are not changed at the Detroit Pilot Boat.

0
4. In Sec.  401.410, revise paragraphs (a), (b), and (c) to read as 
follows:


Sec.  401.410  Basic rates and charges on Lakes Huron, Michigan, and 
Superior, and the St. Mary's River.

* * * * *
    (a) Area 6 (Undesignated Waters):

------------------------------------------------------------------------
                                                            Lakes Huron
                         Service                           and Michigan
------------------------------------------------------------------------
Six-Hour Period.........................................            $623
Docking or Undocking....................................             592
------------------------------------------------------------------------

     (b) Area 7 (Designated Waters):

----------------------------------------------------------------------------------------------------------------
                              Area                                    De Tour        Gros Cap       Any harbor
----------------------------------------------------------------------------------------------------------------
Gros Cap........................................................          $2,443             N/A             N/A
Algoma Steel Corporation Wharf at Sault Ste. Marie Ontario......           2,443             920             N/A
Any point in Sault Ste. Marie, Ontario, except the Algoma Steel            2,048             920             N/A
 Corporation Wharf..............................................
Sault Ste. Marie, MI............................................           2,048             920             N/A
Harbor Movage...................................................             N/A             N/A            $920
----------------------------------------------------------------------------------------------------------------

     (c) Area 8 (Undesignated Waters):

------------------------------------------------------------------------
                         Service                           Lake Superior
------------------------------------------------------------------------
Six-Hour Period.........................................            $549
Docking or Undocking....................................             522
------------------------------------------------------------------------

Sec.  401.420  [Amended]

0
5. In Sec.  401.420--
0
a. In paragraph (a), remove the number ``$102'' and add, in its place, 
the number ``$113''; and remove the number ``$1,604'' and add, in its 
place, the number ``$1,777''.
0
b. In paragraph (b), remove the number ``$102'' and add, in its place, 
the number ``$113''; and remove the number ``$1,604'' and add, in its 
place, the number ``$1,777''.
0
c. In paragraph (c)(1), remove the number ``$606'' and add, in its 
place, the number ``$671''; in paragraph (c)(3), remove the number 
``$102'' and add, in its place, the number ``$113''; and, also in 
paragraph (c)(3), remove the number ``$1,604'' and add, in its place, 
the number ``$1,777''.


Sec.  401.428  [Amended]

0
6. In Sec.  401.428, remove the number ``$618'' and add, in its place, 
the number ``$684''.

    Dated: July 13, 2009.
Kevin S. Cook,
Rear Admiral, U.S. Coast Guard, Director of Prevention Policy.
[FR Doc. E9-17229 Filed 7-20-09; 8:45 am]
BILLING CODE 4910-15-P


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