Document ID: USCG-2011-0328-0001
Agency: uscg
Document Type: Proposed Rule
Title: NPRM:  2012 Rates for Pilotage on Great Lakes (Federal Register Publication)
Posted Date: 2011-08-04T04:00Z

[Federal Register Volume 76, Number 150 (Thursday, August 4, 2011)]
[Proposed Rules]
[Pages 47095-47114]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-19746]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

46 CFR Part 401

[USCG-2011-0328]
RIN 1625-AB70

2012 Rates for Pilotage on the Great Lakes

AGENCY: Coast Guard, DHS.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Coast Guard proposes adjustments to the rates for pilotage 
services on the Great Lakes, which were last amended in February 2011. 
The proposed adjustments would establish new base rates and are made in 
accordance with a required full ratemaking procedure. They result in an 
average decrease of approximately 4 percent from the rates established 
in February 2011. This rulemaking promotes the Coast Guard's strategic 
goal of maritime safety.

DATES: Comments and related material must be submitted on or before 
October 3, 2011.

ADDRESSES: You may submit comments identified by docket number USCG-
2011-0328 using any one of the following methods:
    (1) Federal eRulemaking Portal: http://www.regulations.gov.
    (2) Fax: 202-493-2251.
    (3) Mail: Docket Management Facility (M-30), U.S. Department of 
Transportation, West Building Ground Floor, Room W12-140, 1200 New 
Jersey Avenue, SE., Washington, DC 20590-0001.
    (4) Hand delivery: Same as mail address above, between 9 a.m. and 5 
p.m., Monday through Friday, except Federal holidays. The telephone 
number is 202-366-9329.
    To avoid duplication, please use only one of these four methods. 
See the ``Public Participation and Request for Comments'' portion of 
the SUPPLEMENTARY INFORMATION section below for instructions on 
submitting comments.

FOR FURTHER INFORMATION CONTACT: If you have questions on this proposed 
rule, call or e-mail Mr. Todd Haviland, Management & Program Analyst, 
Office of Great Lakes Pilotage, Commandant (CG-5522), Coast Guard; 
telephone 202-372-2037, e-mail Todd.A.Haviland@uscg.mil, or fax 202-
372-1909. If you have questions on viewing or submitting material to 
the docket, call Renee V. Wright, Program Manager, Docket Operations, 
telephone 202-366-9826.

SUPPLEMENTARY INFORMATION: 

Table of Contents for Preamble

I. Public Participation and Request for Comments
    A. Submitting Comments
    B. Viewing Comments and Documents
    C. Privacy Act
    D. Public Meeting
II. Abbreviations
III. Basis and Purpose
IV. Background
V. Discussion of Proposed Rule
    A. Summary
    B. Discussion of Methodology
VI. Regulatory Analyses
    A. Executive Order 12866 and Executive Order 13563
    B. Small Entities
    C. Assistance for Small Entities
    D. Collection of Information
    E. Federalism
    F. Unfunded Mandates Reform Act
    G. Taking of Private Property
    H. Civil Justice Reform
    I. Protection of Children
    J. Indian Tribal Governments
    K. Energy Effects
    L. Technical Standards
    M. Environment

I. Public Participation and Request for Comments

    We encourage you to participate in this rulemaking by submitting 
comments and related materials. All comments received will be posted 
without change to http://www.regulations.gov and will include any 
personal information you have provided.

A. Submitting Comments

    If you submit a comment, please include the docket number for this 
rulemaking (USCG-2011-0328), indicate the specific section of this 
document to which each comment applies, and provide a reason for each 
suggestion or recommendation. You may submit your comments and material 
online or by fax, mail, or hand delivery, but please use only one of 
these means. We recommend that you include your name and a mailing 
address, an e-mail address, or a phone number in the body of your 
document so that we can contact you if we have questions regarding your 
submission.
    To submit your comment online, go to http://www.regulations.gov, 
click on the ``submit a comment'' box, which will then become 
highlighted in blue. In the ``Document Type'' drop down menu select 
``Proposed Rule'' and insert ``USCG-2011-0328'' in the ``Keyword'' box. 
Click ``Search'' then click on the balloon shape in the ``Actions'' 
column. If you submit your comments by mail or hand delivery, submit 
them in an unbound format, no larger than 8[frac12] by 11 inches, 
suitable for copying and electronic filing. If you submit comments by 
mail and would like to know that they reached the Facility, please 
enclose a stamped, self-addressed postcard or envelope.
    We will consider all comments and material received during the 
comment period and may change this proposed rule based on your 
comments.

B. Viewing Comments and Documents

    To view comments, as well as documents mentioned in this preamble 
as being available in the docket, go to http://www.regulations.gov, 
click on the ``read comments'' box, which will then become highlighted 
in blue. In the ``Keyword'' box insert ``USCG-2011-0328'' and click 
``Search.'' Click the ``Open Docket Folder'' in the ``Actions'' column. 
If you do not have access to the internet, you may view the docket 
online by visiting the Docket Management Facility in Room W12-140 on 
the ground floor of the Department of Transportation West Building, 
1200 New Jersey Avenue, SE., Washington, DC 20590, between 9 a.m. and 5 
p.m., Monday through Friday, except Federal holidays. We have an 
agreement with the Department of Transportation to use the Docket 
Management Facility.

C. Privacy Act

    Anyone can search the electronic form of comments received into any 
of our dockets by the name of the individual submitting the comment (or 
signing the comment, if submitted on behalf of an association, 
business, labor union, etc.). You may review a Privacy Act notice 
regarding our public dockets in the January 17, 2008 issue of the 
Federal Register (73 FR 3316).

D. Public Meeting

    We do not now plan to hold a public meeting. But you may submit a 
request for one to the docket using one of the methods specified under 
ADDRESSES. In your request, explain why you believe a public meeting 
would be beneficial. If we determine that one would aid this 
rulemaking, we will hold one at a time and place announced by a later 
notice in the Federal Register.

[[Page 47096]]

II. Abbreviations

AMOU American Maritime Officers Union.
CFR Code of Federal Regulations.
CPI Consumer Price Index.
FR Federal Register.
NAICS North American Industry Classification System.
NPRM Notice of proposed rulemaking.
OMB Office of Management and Budget.
ROI Return on Investment.
Sec.  Section symbol.
U.S.C. United States Code.

III. Basis and Purpose

    The basis of this rulemaking is the Great Lakes Pilotage Act of 
1960 (``the Act'') (46 U.S.C. Chapter 93), which requires U.S. vessels 
operating ``on register''\1\ and foreign vessels to use U.S. registered 
pilots while transiting the U.S. waters of the St. Lawrence Seaway and 
the Great Lakes system. 46 U.S.C. 9302(a)(1). The Act requires the 
Secretary of Homeland Security to ``prescribe by regulation rates and 
charges for pilotage services, giving consideration to the public 
interest and the costs of providing the services.'' Rates must be 
established or reviewed and adjusted each year, not later than March 1. 
Base rates must be established by a full ratemaking at least once every 
5 years, and in years when base rates are not established they must be 
reviewed and adjusted if necessary. 46 U.S.C. 9303(f). The Secretary's 
duties and authority under the Act have been delegated to the Coast 
Guard. Department of Homeland Security Delegation No. 0170.1, paragraph 
(92)(f). Coast Guard regulations implementing the Act appear in parts 
401 through 404 of Title 46, Code of Federal Regulations (CFR). 
Procedures for use in establishing base rates appear in 46 CFR part 
404, Appendix A, and procedures for annual review and adjustment of 
existing base rates appear in 46 CFR part 404, Appendix C.
---------------------------------------------------------------------------

    \1\ ``On register'' means that the vessel's certificate of 
documentation has been endorsed with a registry endorsement, and 
therefore, may be employed in foreign trade or trade with Guam, 
American Samoa, Wake, Midway, or Kingman Reef. 46 U.S.C. 12105, 46 
CFR 67.17.
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    The purpose of this rulemaking is to establish new base pilotage 
rates, using the 46 CFR part 404, Appendix A, methodology.

IV. Background

    The vessels affected by this rulemaking are engaged in foreign 
trade upon the U.S. waters of the Great Lakes. U.S. and Canadian 
``Lakers,'' \2\ which account for most commercial shipping on the Great 
Lakes, are not affected. 46 U.S.C. 9302.
---------------------------------------------------------------------------

    \2\ A ``Laker'' is a commercial cargo vessel especially designed 
for and generally limited to use on the Great Lakes.
---------------------------------------------------------------------------

    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. We also do not 
control the actual compensation that pilots receive. The actual 
compensation is determined by each of the three district associations, 
which use different compensation practices.
    District One, consisting of Areas 1 and 2, includes all U.S. waters 
of the St. Lawrence River and Lake Ontario. District Two, consisting of 
Areas 4 and 5, includes all U.S. waters of Lake Erie, the Detroit 
River, Lake St. Clair, and the St. Clair River. District Three, 
consisting of Areas 6, 7, and 8, includes all U.S. waters of the St. 
Mary's River, Sault Ste. Marie Locks, and Lakes Michigan, Huron, and 
Superior. Area 3 is the Welland Canal, which is serviced exclusively by 
the Canadian Great Lakes Pilotage Authority and, accordingly, is not 
included in the U.S. rate structure. Areas 1, 5, and 7 have been 
designated by Presidential Proclamation, pursuant to the Act, to be 
waters in which pilots must at all times be fully engaged in the 
navigation of vessels in their charge. Areas 2, 4, 6, and 8 have not 
been so designated because they are open bodies of water. While working 
in those undesignated areas, pilots must only ``be on board and 
available to direct the navigation of the vessel at the discretion of 
and subject to the customary authority of the master.'' 46 U.S.C. 
9302(a)(1)(B).
    This rulemaking is a full ratemaking to establish new base pilotage 
rates, using the 46 CFR part 404, Appendix A, methodology. Among other 
things, the Appendix A methodology requires us to review detailed pilot 
association financial information, and we contract with independent 
accountants to assist in that review. The last full ratemaking 
established the current base rates in 2006 (final rule, 71 FR 16501, 
April 3, 2006). Following the 2006 full ratemaking, and for the first 
time since 1996 when the 46 CFR part 404 Appendix A and Appendix C 
methodologies were established, we began a series of five annual 
Appendix C rate reviews and adjustments, each of which produced overall 
rate increases. The most recent Appendix C annual review was concluded 
on February 4, 2011 (76 FR 6351) and adjusts pilotage rates effective 
August 1, 2011.
    We intended to establish new base rates within 5 years of the 2006 
full ratemaking, or by March 1, 2011. However, an initial independent 
accountant's report on pilot association financial information was 
incomplete and inadequate, and could not be used for ratemaking. The 
resulting need to contract with a new independent accountant pushed 
this Appendix A ratemaking back a year, as we previously informed the 
public in 2009 and 2010 annual review rulemaking documents. 74 FR 56153 
at 56154 (October 30, 2009), 75 FR 51191 at 51192 (August 19, 2010). We 
have now completed our review of the second independent accountant's 
2009 pilot financial report. The comments by the pilot associations on 
that report and the independent accountant's final findings are 
discussed in our document entitled ``Summary--Independent Accountant's 
Report on Pilot Association Expenses, with Pilot Association Comments 
and Accountant's Responses,'' which appears in the docket.

V. Discussion of Proposed Rule

A. Summary

    We propose establishing new base pilotage rates in accordance with 
the methodology outlined in Appendix A to 46 CFR Part 404. The proposed 
new rates would be established by March 1, 2012 and effective August 1, 
2012. They would average approximately 4 percent less, overall, than 
the February 2011 rate adjustments. Table 1 shows the proposed percent 
change for the new rates for each area. 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), would also decrease by 4 percent in all areas.

                  Table 1--Summary of Rate Adjustments
------------------------------------------------------------------------
                                                        Then the percent
                                                         decrease over
         If pilotage service is required in:           the current  rate
                                                              is:
------------------------------------------------------------------------
Area 1 (Designated waters)...........................              -1.74
Area 2 (Undesignated waters).........................              -9.09
Area 4 (Undesignated waters).........................              -3.64
Area 5 (Designated waters)...........................              -2.84

[[Page 47097]]

 
Area 6 (Undesignated waters).........................              -3.73
Area 7 (Designated waters)...........................              -3.08
Area 8 (Undesignated waters).........................              -5.08
------------------------------------------------------------------------

B. Discussion of Methodology

    Appendix A provides seven steps, with sub-steps, for calculating 
rate adjustments. The following discussion describes those steps and 
sub-steps and includes tables showing how we have applied them to the 
2009 detailed pilot financial information.
    Step 1: Projection of Operating Expenses. In this step, we project 
the amount of vessel traffic annually. Based upon that projection, we 
forecast the amount of fair and reasonable operating expenses that 
pilotage rates should recover.
    Step 1.A: Submission of Financial Information. This sub-step 
requires each pilot association to provide us with detailed financial 
information in accordance with 46 CFR part 403. The associations 
complied with this requirement, supplying 2009 financial information in 
2010.
    Step 1.B: Determination of Recognizable Expenses. This sub-step 
requires us to determine which reported association expenses will be 
recognized for ratemaking purposes, using the guidelines shown in 46 
CFR 404.5. We contracted with an independent accountant to review the 
reported expenses and submit findings recommending which reported 
expenses should be recognized. The accountant also reviewed which 
reported expenses should be adjusted prior to recognition, or if they 
should be denied for ratemaking purposes. The independent accountant 
made preliminary findings; they were sent to the pilot associations, 
and the pilot associations reviewed and commented on the preliminary 
findings. Then, the independent accountant made final findings. The 
Coast Guard Director of Great Lakes Pilotage reviewed and accepted 
those final findings, resulting in the determination of recognizable 
expenses. The preliminary findings, the associations' comments on those 
findings, and the final findings are all discussed in the ``Summary--
Independent Accountant's Report on Pilot Association Expenses, with 
Pilot Association Comments and Accountant's Responses,'' which appears 
in the docket. Tables 2 through 4 show each association's recognized 
expenses.

                                  Table 2--Recognized Expenses for District One
----------------------------------------------------------------------------------------------------------------
                                                                      Area 1          Area 2
                                                                 --------------------------------
                   Reported expenses for 2009                      St. Lawrence                        Total
                                                                       River       Lake Ontario
----------------------------------------------------------------------------------------------------------------
Pilot Costs:
    Pilot subsistence/travel....................................        $164,782        $131,436        $296,218
    License insurance...........................................         $28,428         $18,952         $47,380
    Other.......................................................            $980            $857          $1,837
Pilot Boat and Dispatch Expenses:
    Pilot boat expense..........................................        $101,612         $82,506        $184,118
Administrative Expenses:
    Legal.......................................................         $10,450          $8,685         $19,135
    Depreciation/auto leasing/other.............................          $8,917          $7,283         $16,200
    Dues and subscriptions......................................         $13,717         $10,678         $24,395
    Bad debt expense............................................          $9,302          $1,004         $10,306
    Utilities...................................................            $478            $346            $824
    Accounting/professional fees................................          $2,182          $1,818          $4,000
    Bookkeeping and Administration..............................         $77,730         $66,121        $143,851
    Other.......................................................            $762            $582          $1,344
                                                                 -----------------------------------------------
        Total recognizable......................................        $419,340        $330,268        $749,608
Adjustments:
    Other Pilot Costs:
    Pilotage Subsistence/Travel.................................        ($4,624)        ($3,641)        ($8,265)
    Payroll taxes...............................................         $48,508         $38,204         $86,712
    Other.......................................................          ($589)          ($463)        ($1,052)
Administrative Expenses:
    Legal.......................................................          ($270)          ($212)          ($482)
    Dues and subscriptions......................................       ($13,647)       ($10,748)       ($24,395)
    Bad debt expense............................................        ($5,765)        ($4,540)       ($10,305)
    Other.......................................................          ($120)           ($94)          ($214)
                                                                 -----------------------------------------------
        Total adjustments.......................................         $23,495         $18,504         $41,999
                                                                 ===============================================
            Total Expenses......................................        $442,835        $348,772        $791,607
----------------------------------------------------------------------------------------------------------------

                                  Table 3--Recognized Expenses for District Two
----------------------------------------------------------------------------------------------------------------
                                                                      Area 4          Area 5
                                                                 --------------------------------
                    Reported expenses for 2009                                       Southeast         Total
                                                                     Lake Erie     Shoal to Port
                                                                                     Huron, MI
----------------------------------------------------------------------------------------------------------------
Pilot Costs:

[[Page 47098]]

 
    Pilot subsistence/travel....................................         $67,580        $101,371        $168,951
    License insurance...........................................          $6,254          $9,380         $15,634
    Payroll taxes...............................................         $19,453         $43,770         $63,223
    Other.......................................................         $12,697         $28,662         $41,359
Pilot Boat and Dispatch Expenses:
    Pilot boat expense..........................................         $28,026        $179,577        $207,603
    Dispatch expense............................................         $12,975              $0         $12,975
    Payroll taxes...............................................              $0          $7,154          $7,154
Administrative Expenses:
    Legal.......................................................         $30,052         $45,079         $75,131
    Office Rent.................................................         $30,275         $45,413         $75,688
    Insurance...................................................         $10,408         $15,611         $26,019
    Employee benefits...........................................         $26,483         $39,725         $66,208
    Payroll taxes...............................................          $3,821          $5,731          $9,552
    Other taxes.................................................          $9,815         $14,723         $24,538
    Depreciation/auto leasing/other.............................         $27,383         $41,075         $68,458
    Interest....................................................         $16,314         $24,471         $40,785
    Dues and subscriptions......................................          $4,450          $6,675         $11,125
    Salaries....................................................         $12,164         $18,245         $30,409
    Accounting/professional fees................................         $43,071         $64,607        $107,678
    Bookkeeping and administration..............................          $9,400         $14,100         $23,500
    Other.......................................................          $9,427         $14,140         $23,567
                                                                 -----------------------------------------------
        Total recognizable......................................        $380,048        $719,509      $1,099,557
Adjustments:
    Other Pilot Costs:
        Pilotage Subsistence/Travel.............................        ($1,338)        ($2,533)        ($3,871)
Pilot Boat and Dispatch Expenses:
    Pilot boat expense..........................................          $2,907          $5,504          $8,411
Administrative Expenses:
    Legal.......................................................        ($4,915)        ($9,305)       ($14,220)
    Employee benefits...........................................          $1,177          $2,228          $3,405
    Other taxes.................................................          ($238)          ($450)          ($688)
    Depreciation/auto leasing/other.............................          $2,398          $4,540          $6,938
    Interest....................................................       ($10,379)       ($19,649)       ($30,028)
    Dues and subscriptions......................................        ($3,807)        ($7,208)       ($11,015)
    Salaries....................................................            $417            $789          $1,206
    Other.......................................................          ($833)        ($1,577)        ($2,410)
                                                                 -----------------------------------------------
        Total adjustments.......................................       ($14,611)       ($27,661)       ($42,272)
                                                                 ===============================================
            Total Expenses......................................        $365,437        $691,848      $1,057,285
----------------------------------------------------------------------------------------------------------------

                                 Table 4--Recognized Expenses for District Three
----------------------------------------------------------------------------------------------------------------
                                                      Area 6          Area 7          Area 8
                                                 ------------------------------------------------
           Reported expenses for 2009               Lakes Huron     St. Mary's                         Total
                                                   and Michigan        River       Lake Superior
----------------------------------------------------------------------------------------------------------------
Pilot Costs:
    Pilot subsistence/travel....................        $144,081         $75,501         $95,005        $314,587
    License insurance...........................         $10,577          $5,543          $6,975         $23,095
    Other.......................................          $1,025            $537            $675          $2,237
Pilot Boat and Dispatch Expenses:
    Pilot boat costs............................        $156,031         $81,763        $102,885        $340,679
    Dispatch expense............................         $46,365         $24,296         $30,572        $101,233
    Payroll taxes...............................          $5,846          $3,064          $3,855         $12,765
Administrative Expenses:
    Legal.......................................         $16,462          $8,626         $10,855         $35,943
    Office Rent.................................          $4,534          $2,376          $2,990          $9,900
    Insurance...................................          $6,730          $3,527          $4,438         $14,695
    Employee benefits...........................         $50,668         $26,551         $33,410        $110,629
    Payroll taxes...............................          $4,774          $2,502          $3,148         $10,424
    Other taxes.................................         $11,599          $6,078          $7,648         $25,325
    Depreciation/auto leasing...................         $17,396          $9,116         $11,471         $37,983
    Interest....................................          $2,417          $1,267          $1,594          $5,278
    Dues and subscriptions......................         $15,594          $8,172         $10,283         $34,049

[[Page 47099]]

 
    Utilities...................................         $15,182          $7,956         $10,011         $33,149
    Salaries....................................         $35,110         $18,398         $23,151         $76,659
    Accounting/professional fees................          $8,588          $4,500          $5,663         $18,751
    Other.......................................          $6,852          $3,591          $4,518         $14,961
                                                 ---------------------------------------------------------------
        Total Recognizable......................        $559,831        $293,364        $369,147      $1,222,342
Adjustments:
    Other Pilot Costs:
        Pilotage Subsistence/Travel.............        ($1,102)          ($578)          ($727)        ($2,407)
        Payroll taxes...........................         $28,842         $15,114         $19,018         $62,973
        Other...................................          ($196)          ($103)          ($129)          ($428)
Pilot Boat and Dispatch Expenses:
    Dispatch costs..............................        ($3,367)        ($1,764)        ($2,220)        ($7,352)
Administrative Expenses:
    Legal.......................................        ($1,447)          ($758)          ($954)        ($3,159)
    Employee benefits...........................        ($1,380)          ($723)          ($910)        ($3,013)
    Depreciation/auto leasing/other.............            $599            $314            $395          $1,307
    Dues and subscriptions......................       ($15,594)        ($8,172)       ($10,283)       ($34,049)
    Other.......................................          ($528)          ($277)          ($348)        ($1,153)
                                                 ---------------------------------------------------------------
        Total Adjustments.......................          $5,825          $3,053          $3,841         $12,719
                                                 ===============================================================
            Total Expenses......................        $565,656        $296,417        $372,988      $1,235,061
----------------------------------------------------------------------------------------------------------------

    Step 1.C: Adjustment for Inflation or Deflation. In this sub-step 
we project rates of inflation or deflation for the succeeding 
navigation season. Because we used 2009 financial information, the 
``succeeding navigation season'' for this ratemaking is 2010. We based 
our inflation adjustment of 2 percent on the 2010 change in the 
Consumer Price Index (CPI) for the North Central Region of the United 
States, which can be found at: http://www.bls.gov/xg_shells/ro5xg01.htm. This adjustment appears in Tables 5 through 7.

 
                                   Table 5--Inflation Adjustment, District One
----------------------------------------------------------------------------------------------------------------
                                                            Area 1               Area 2
                                                       ----------------     ----------------
            Reported expenses for 2009                   St. Lawrence                                  Total
                                                             River            Lake Ontario
----------------------------------------------------------------------------------------------------------------
    Total Expenses...............................             $442,835             $348,772             $791,607
2010 change in the Consumer Price Index (CPI) for   x              .02   x              .02   x              .02
 the North Central Region of the United States...
Inflation Adjustment.............................   =           $8,857   =           $6,975   =          $15,832
----------------------------------------------------------------------------------------------------------------

                                   Table 6--Inflation Adjustment, District Two
----------------------------------------------------------------------------------------------------------------
                                                            Area 4               Area 5
                                                       ----------------     ----------------
            Reported expenses for 2009                                          Southeast              Total
                                                           Lake Erie          shoal to Port
                                                                                Huron, MI
----------------------------------------------------------------------------------------------------------------
    Total Expenses...............................             $365,437             $691,848           $1,057,285
2010 change in the Consumer Price Index (CPI) for   x              .02   x              .02   x              .02
 the North Central Region of the United States...
Inflation Adjustment.............................   =           $7,309   =          $13,837   =          $21,146
----------------------------------------------------------------------------------------------------------------

                                                      Table 7--Inflation Adjustment, District Three
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Area 6               Area 7               Area 8
                                                                          ----------------     ----------------     ----------------
                      Reported expenses for 2009                             Lakes Huron          St. Mary's                                   Total
                                                                            and Michigan             River            Lake Superior
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Expenses......................................................             $565,656             $296,417             $372,988           $1,235,061
2010 change in the Consumer Price Index (CPI) for the North Central    x              .02   x              .02   x              .02   x              .02
 Region of the United States........................................

[[Page 47100]]

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

    Step 1.D: Projection of Operating Expenses. The final sub-step of 
Step 1 is to project the operating expenses for each pilotage area, on 
the basis of the preceding sub-steps and any other foreseeable 
circumstances that could affect the accuracy of the projection. Because 
we are not now aware of any such circumstances, the projected operating 
expenses are based exclusively on the calculations from sub-steps 1.A 
through 1.C. Tables 8 through 10 show these projections.

                               Table 8--Projected Operating Expenses, District One
----------------------------------------------------------------------------------------------------------------
                                                            Area 1               Area 2
                                                       ----------------     ----------------
            Reported expenses for 2009                   St. Lawrence                                  Total
                                                             River            Lake Ontario
----------------------------------------------------------------------------------------------------------------
Total Expenses...................................             $442,835             $348,772             $791,607
Inflation Adjustment 2%..........................   +           $8,857   +           $6,975   +          $15,832
                                                  --------------------------------------------------------------
Total projected expenses for 2012 pilotage season   =         $451,691   =         $355,748   =         $807,439
----------------------------------------------------------------------------------------------------------------

                               Table 9--Projected Operating Expenses, District Two
----------------------------------------------------------------------------------------------------------------
                                                            Area 4               Area 5
                                                       ----------------     ----------------
            Reported Expenses for 2009                                          Southeast              Total
                                                           Lake Erie          Shoal to Port
                                                                                Huron, MI
----------------------------------------------------------------------------------------------------------------
Total Expenses...................................             $365,437             $691,848           $1,057,285
Inflation Adjustment 2%..........................   +           $7,309   +          $13,837   +          $21,146
                                                  --------------------------------------------------------------
    Total projected expenses for 2012 pilotage      =         $372,746   =         $705,685   =       $1,078,431
     season......................................
----------------------------------------------------------------------------------------------------------------

                                                 Table 10--Projected Operating Expenses, District Three
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Area 6               Area 7               Area 8
                                                                          ----------------     ----------------     ----------------
                     Reported Expenses for 2009                              Lakes Huron          St. Mary's                                   Total
                                                                            and Michigan             River            Lake Superior
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Expenses......................................................             $565,656             $296,417             $372,988           $1,235,061
Inflation Adjustment 2%.............................................   +          $11,313   +           $5,928   +           $7,460   +          $24,701
                                                                     -----------------------------------------------------------------------------------
    Total projected expenses for 2012 pilotage season...............   =         $576,969   =         $302,345   =         $380,448   =       $1,259,762
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Step 2: Projection of Target Pilot Compensation. In Step 2, we 
project the annual amount of target pilot compensation that pilotage 
rates should provide in each area. These projections are based on our 
latest information on the conditions that will prevail in 2012.
    Step 2.A: Determination of Target Rate of Compensation. We first 
explained the methodology we have consistently used for this step in 
the interim rule for our last Appendix A ratemaking (68 FR 69564 at 
69571 col. 3; December 12, 2003), and most recently restated this 
explanation in our 2011 Appendix C final rule (76 FR 6351 at 6354 col. 
3; February 4, 2011). Target pilot compensation for pilots in 
undesignated waters approximates the average annual compensation for 
first mates on U.S. Great Lakes vessels. Compensation is determined 
based on the most current union contracts and includes wages and 
benefits received by first mates. We calculate target pilot 
compensation for pilots on designated waters by multiplying the average 
first mates' wages by 150 percent and then adding the average first 
mates' benefits.
    The most current union contracts available to us are American 
Maritime Officers Union (AMOU) contracts with three U.S. companies 
engaged in Great Lakes shipping. There are two separate AMOU contracts 
available--we refer to them as Agreements A and B and apportion the 
compensation provided by each agreement according to the percentage of 
tonnage represented by companies under each agreement. Agreement A 
applies to vessels operated by Key Lakes, Inc., and Agreement B applies 
to all vessels operated by American Steamship Co. and Mittal Steel USA, 
Inc.
    Agreements A and B both expire on July 31, 2011 and AMOU does not 
expect to conclude an agreement on new contracts in time for us to 
incorporate them in this ratemaking. However, we can project based on 
past

[[Page 47101]]

contract increases and on the current contracts that any new contracts 
would provide for annual 3 percent wage increases. Under Agreement A, 
we project that the daily wage rate would increase from $278.73 to 
$287.09. Under Agreement B, the daily wage rate would increase from 
$343.59 to $353.90.
    Because we are interested in annual compensation, we must convert 
these daily rates. Agreements A and B both use monthly multipliers to 
convert daily rates into monthly figures that represent actual working 
days and vacation, holiday, weekend, or bonus days. The monthly 
multiplier for Agreement A is 54.5 days and the monthly multiplier for 
Agreement B is 49.5 days. We multiply the monthly figures by 9, which 
represents the average length (in months) of the Great Lakes shipping 
season. Table 11 shows our calculations.

                   Table 11--Projected Wage Components
------------------------------------------------------------------------
                                             Pilots on       Pilots on
            Monthly component              undesignated     designated
                                              waters          waters
------------------------------------------------------------------------
Agreement A:
    $287.09 daily rate x 54.5 days......         $15,646         $23,470
    Monthly total x 9 months = total             140,818         211,226
     wages..............................
Agreement B:
    $353.90 daily rate x 49.5 days......          17,518          26,277
    Monthly total x 9 months = total             157,662         236,494
     wages..............................
------------------------------------------------------------------------

    Based on increases over the 5-year history of the current 
contracts, we project that both Agreements A and B will increase their 
health benefits contributions and leave 401K-plan and pension 
contributions unchanged. On average, health benefits contribution rates 
have increased 10 percent annually. Thus, we project that both 
Agreements A and B will increase this benefit from $97.64 to $107.40 
per day. The multiplier that both agreements use to calculate monthly 
benefits from daily rates, is currently 45.5 days, and we project that 
will remain unchanged. We use a 9-month multiplier to calculate the 
annual value of these benefits. Table 12 shows our calculations.

                 Table 12--Projected Benefits Components
------------------------------------------------------------------------
                                             Pilots on       Pilots on
            Monthly component              undesignated     designated
                                              waters          waters
------------------------------------------------------------------------
Agreement A:
    Employer contribution, 401K plan             $782.32       $1,173.48
     (Monthly wages x 5%)...............
    Pension = $33.35 x 45.5 days........        1,517.43        1,517.43
    Health = $107.40 x 45.5 days........        4,886.70        4,886.70
    Monthly total benefits..............        7,186.45        7,577.61
    Monthly total benefits x 9 months...          64,678          68,198
Agreement B:
    Employer contribution, 401K plan              875.90        1,313.85
     (Monthly wages x 5%)...............
    Pension = $43.55 x 45.5 days........        1,981.53        1,981.53
    Health = $107.40 x 45.5 days........        4,886.70        4,886.70
    Monthly total benefits..............        7,744.13        8,182.08
    Monthly total benefits x 9 months...          69,697          73,639
------------------------------------------------------------------------

    Table 13 combines our projected wage and benefit components of 
annual target pilot compensation.

       Table 13--Projected Wage and Benefits Components, Combined
------------------------------------------------------------------------
                                             Pilots on       Pilots on
                                           undesignated     designated
                                              waters          waters
------------------------------------------------------------------------
Agreement A:
    Wages...............................        $140,818        $211,226
    Benefits............................          64,678          68,198
                                         -------------------------------
        Total...........................         205,496         279,425
Agreement B:
    Wages...............................         157,662         236,494
    Benefits............................          69,697          73,639
                                         -------------------------------
        Total...........................         227,360         310,132
------------------------------------------------------------------------

[[Page 47102]]

    Agreements A and B affect three companies. Of the tonnage operating 
under those three companies, approximately 30 percent operates under 
Agreement A and approximately 70 percent operates under Agreement B. 
Table 14 provides detail.

                                                   Table 14--Shipping Tonnage Apportioned by Contract
--------------------------------------------------------------------------------------------------------------------------------------------------------
                  Company                                         Agreement A                                            Agreement B
--------------------------------------------------------------------------------------------------------------------------------------------------------
American Steamship Company.................  .....................................................  815,600
Mittal Steel USA, Inc......................  .....................................................  38,826
Key Lakes, Inc.............................  361,385..............................................  ....................................................
                                            ------------------------------------------------------------------------------------------------------------
    Total tonnage, each agreement..........  361,385..............................................  854,426
Percent tonnage, each agreement............  361,395 / 1,215,811 = 29.7238%.......................  854,426 / 1,215,811 = 70.2962%
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We use the percentages from Table 14 to apportion the projected 
wage and benefit components from Table 13. This gives us a single 
tonnage-weighted set of figures. Table 15 shows our calculations.

         Table 15--Tonnage-Weighted Wage and Benefit Components
------------------------------------------------------------------------
                                      Undesignated          Designated
                                         waters               waters
------------------------------------------------------------------------
Agreement A:
    Total wages and benefits..  ...        $205,496  ...        $279,425
    Percent tonnage...........   x         29.7238%   x         29.7238%
                               -----------------------------------------
        Total.................   =          $61,081   =          $83,056
Agreement B:
    Total wages and benefits..  ...        $227,360  ...        $310,132
    Percent tonnage...........   x         70.2762%   x         70.2762%
                               -----------------------------------------
        Total.................   =         $159,780   =         $217,949
Projected Target Rate of
 Compensation:
    Agreement A total weighted  ...         $61,081  ...         $83,056
     average wages and
     benefits.................
    Agreement B total weighted   +         $159,780   +         $217,949
     average wages and
     benefits.................
                               -----------------------------------------
        Total.................   =         $220,861   =         $301,005
------------------------------------------------------------------------

    Step 2.B: Determination of Number of Pilots Needed. Subject to 
adjustment by the Coast Guard Director of Great Lakes Pilotage to 
ensure uninterrupted service or for other reasonable circumstances, we 
determine the number of pilots needed for ratemaking purposes in each 
area by dividing projected bridge hours for each area, by either 1,000 
(designated waters) or 1,800 (undesignated waters). We round the 
mathematical results and express our determination as whole pilots.
    ``Bridge hours are the number of hours a pilot is aboard a vessel 
providing pilotage service,'' 46 CFR part 404, Appendix A, Step 2.B(1). 
For that reason and as we explained most recently in the 2011 
ratemaking's final rule, we do not include, and never have included, 
pilot delay or detention in calculating bridge hours. See 76 FR 6351 at 
6352 col. 3 (February 4, 2011). Projected bridge hours are based on the 
vessel traffic that pilots are expected to serve. We use historical 
data, input from the pilots and industry, periodicals and trade 
magazines, and information from conferences to project demand for 
pilotage services for the coming year.
    In our 2011 final rule, we determined that 38 pilots would be 
needed for ratemaking purposes. We have determined that 38 remains the 
proper number to use for ratemaking purposes in 2012. This includes 5 
pilots in Area 2, where rounding up alone would result in only 4 
pilots. For the same reasons we explained at length in the final rule 
for the 2008 ratemaking, 74 FR 220 at 221-22 (January 5, 2009), we have 
determined that this adjustment is essential for ensuring uninterrupted 
pilotage service in Area 2. Table 16 shows the bridge hours we project 
will be needed for each area and our calculations to determine the 
number of whole pilots needed for ratemaking purposes.

                                        Table 16--Number of Pilots Needed
----------------------------------------------------------------------------------------------------------------
                                                       Divided by  1,000
                                                      (designated waters)          Calculated
         Pilotage area          Projected  2012            or  1,800            value of  pilot   Pilots needed
                                 bridge  hours           (undesignated               demand        (total = 38)
                                                            waters)
----------------------------------------------------------------------------------------------------------------
AREA 1 (Designated Waters)....           5,114    /                1,000    =            5.114                6
AREA 2 (Undesignated Waters)..           5,401    /                1,800    =            3.001                5
AREA 4 (Undesignated Waters)..           6,680    /                1,800    =            3.711                4
AREA 5 (Designated Waters)....           5,002    /                1,000    =            5.002                6
AREA 6 (Undesignated Waters)..          11,187    /                1,800    =            6.215                7

[[Page 47103]]

 
AREA 7 (Designated Waters)....           3,160    /                1,000    =            3.160                4
AREA 8 (Undesignated Waters)..           9,353    /                1,800    =            5.196                6
----------------------------------------------------------------------------------------------------------------

    Step 2.C: Projection of Target Pilot Compensation. In Table 17 we 
project total target pilot compensation separately for each area, by 
multiplying the number of pilots needed in each area, as shown in Table 
16, by the target pilot compensation shown in Table 15.

                            Table 17--Projection of Target Pilot Compensation by Area
----------------------------------------------------------------------------------------------------------------
                                                                               Target rate           Projected
                    Pilotage area                       Pilots needed           of pilot           target pilot
                                                         (total = 38)         compensation         compensation
----------------------------------------------------------------------------------------------------------------
AREA 1 (Designated Waters)...........................               6    x         $301,005   =       $1,806,030
AREA 2 (Undesignated Waters).........................               5    x          220,861   =        1,104,304
AREA 4 (Undesignated Waters).........................               4    x          220,861   =          883,443
AREA 5 (Designated Waters)...........................               6    x          301,005   =        1,806,030
AREA 6 (Undesignated Waters).........................               7    x          220,861   =        1,546,026
AREA 7 (Designated Waters)...........................               4    x          301,005   =        1,204,020
AREA 8 (Undesignated Waters).........................               6    x          220,861   =        1,325,165
----------------------------------------------------------------------------------------------------------------

    Step 3 and 3.A: Projection of Revenue. In this step, we project the 
revenue that would be received in 2012 if demand for pilotage services 
matches the bridge hours we projected in Table 16, and 2011 pilotage 
rates were left unchanged. Table 18 shows this calculation.

                                     Table 18--Projection of Revenue by Area
----------------------------------------------------------------------------------------------------------------
                                                                                                     Revenue
                   Pilotage area                      Projected 2012        2011 pilotage         projection for
                                                       bridge hours             rates                  2012
----------------------------------------------------------------------------------------------------------------
AREA 1 (Designated Waters).........................           5,114    x          $451.38    =       $2,308,357
AREA 2 (Undesignated Waters).......................           5,401    x           298.98    =        1,614,791
AREA 4 (Undesignated Waters).......................           6,680    x           196.19    =        1,310,549
AREA 5 (Designated Waters).........................           5,002    x           519.89    =        2,600,490
AREA 6 (Undesignated Waters).......................          11,187    x           199.12    =        2,227,555
AREA 7 (Designated Waters).........................           3,160    x           495.54    =        1,565,906
AREA 8 (Undesignated Waters).......................           9,353    x           193.72    =        1,811,863
                                                    ------------------------------------------------------------
    Total..........................................  ...............  ...  ...............  ...      13,439,512
----------------------------------------------------------------------------------------------------------------

    Step 4: Calculation of Investment Base. This step calculates each 
association's investment base, the recognized capital investment in the 
assets employed by the association required to support pilotage 
operations. This step uses a formula set out in 46 CFR part 404, 
Appendix B. The first part of the formula identifies each association's 
total sources of funds. Tables 19 through 21 follow the formula up to 
that point.

             Table 19--Total Sources of Funds, District One
------------------------------------------------------------------------
                                         Area 1               Area 2
------------------------------------------------------------------------
Recognized Assets:
    Total Current Assets......  ...        $233,316  ...        $174,705
    Total Current Liabilities.   -           20,091   -           15,044
    Current Notes Payable.....   +                0   +                0
    Total Property and           +                0   +                0
     Equipment (NET)..........
    Land......................   -                0   -                0
    Total Other Assets........   +                0   +                0
                               -----------------------------------------
        Total Recognized         =          213,225   =          159,661
         Assets...............
Non-Recognized Assets:
    Total Investments and        +                0   +                0
     Special Funds............
                               -----------------------------------------

[[Page 47104]]

 
        Total Non-Recognized     =                0   =                0
         Assets...............
Total Assets:
    Total Recognized Assets...  ...         213,225  ...         159,661
    Total Non-Recognized         +                0   +                0
     Assets...................
                               -----------------------------------------
        Total Assets..........   =          213,225   =          159,661
Recognized Sources of Funds:
    Total Stockholder Equity..  ...         213,225  ...         159,661
    Long-Term Debt............   +                0   +                0
    Current Notes Payable.....   +                0   +                0
    Advances from Affiliated     +                0   +                0
     Companies................
    Long-Term Obligations--      +                0   +                0
     Capital Leases...........
                               -----------------------------------------
        Total Recognized         =          213,225   =          159,661
         Sources..............
Non-Recognized Sources of
 Funds:
    Pension Liability.........  ...               0  ...               0
    Other Non-Current            +                0   +                0
     Liabilities..............
    Deferred Federal Income      +                0   +                0
     Taxes....................
    Other Deferred Credits....   +                0   +                0
                               -----------------------------------------
        Total Non-Recognized     =                0   =                0
         Sources..............
Total Sources of Funds:
    Total Recognized Sources..  ...         213,225  ...         159,661
    Total Non-Recognized         +                0   +                0
     Sources..................
                               -----------------------------------------
        Total Sources of Funds   =          213,225   =          159,661
------------------------------------------------------------------------

             Table 20--Total Sources of Funds, District Two
------------------------------------------------------------------------
                                         Area 4               Area 5
------------------------------------------------------------------------
Recognized Assets:
    Total Current Assets......  ...        $228,212  ...        $515,150
    Total Current Liabilities.   -          214,412   -          484,000
    Current Notes Payable.....   +           23,063   +           52,061
    Total Property and           +          321,550   +          725,847
     Equipment (NET)..........
    Land......................   -          269,122   -          607,500
    Total Other Assets........   +                0   +                0
                               -----------------------------------------
        Total Recognized         =           89,290   =          201,559
         Assets...............
Non-Recognized Assets:
    Total Investments and        +                0   +                0
     Special Funds............
                               -----------------------------------------
        Total Non-Recognized     =                0   =                0
         Assets...............
Total Assets:
    Total Recognized Assets...  ...          89,290  ...         201,559
    Total Non-Recognized         +                0   +                0
     Assets...................
                               -----------------------------------------
        Total Assets..........   =           89,290   =          201,559
Recognized Sources of Funds:
    Total Stockholder Equity..  ...          53,061  ...         119,778
    Long-Term Debt............   +          282,288   +          637,220
    Current Notes Payable.....   +           23,063   +           52,061
    Advances from Affiliated     +                0   +                0
     Companies................
    Long-Term Obligations--      +                0   +                0
     Capital Leases...........
                               -----------------------------------------
        Total Recognized         =          358,413   =          809,058
         Sources..............
Non-Recognized Sources of
 Funds:
    Pension Liability.........  ...               0  ...               0
    Other Non-Current            +                0   +                0
     Liabilities..............
    Deferred Federal Income      +                0   +                0
     Taxes....................
    Other Deferred Credits....   +                0   +                0
                               -----------------------------------------
        Total Non-Recognized     =                0   =                0
         Sources..............
Total Sources of Funds:
    Total Recognized Sources..  ...         358,413  ...         809,058
    Total Non-Recognized         +                0   +                0
     Sources..................
                               -----------------------------------------
        Total Sources of Funds   =          358,413   =          809,058
------------------------------------------------------------------------

[[Page 47105]]

                                Table 21--Total Sources of Funds, District Three
----------------------------------------------------------------------------------------------------------------
                                                                      Area 6             Area 7          Area 8
----------------------------------------------------------------------------------------------------------------
Recognized Assets:
    Total Current Assets...................................  ...        $439,799  ...    230,463  ...    289,999
    Total Current Liabilities..............................   -          $61,507   -      32,231   -      40,557
    Current Notes Payable..................................   +          $13,525   +       7,087   +       8,918
    Total Property and Equipment...........................   +          $42,019   +      22,019   +      27,707
    (NET)..................................................
    Land...................................................   -               $0   -           0   -           0
    Total Other Assets.....................................   +             $343   +         180   +         227
                                                            ----------------------------------------------------
        Total Recognized Assets............................   =         $434,180   =     227,518   =     286,293
Non-Recognized Assets:
    Total Investments and Special Funds....................   +                0   +           0   +           0
                                                            ----------------------------------------------------
        Total Non-Recognized Assets........................   =                0   =           0   =           0
Total Assets:
    Total Recognized Assets................................  ...         434,180  ...    227,518  ...    286,293
    Total Non-Recognized Assets............................   +                0   +           0   +           0
    Total Assets...........................................   =          434,180   =     227,518   =     286,293
Recognized Sources of Funds:
    Total Stockholder Equity...............................  ...         417,721  ...    218,893  ...    275,441
    Long-Term Debt.........................................   +            2,934   +       1,537   +       1,935
    Current Notes Payable..................................   +           13,525   +       7,087   +       8,918
    Advances from Affiliated Companies.....................   +                0   +           0   +           0
    Long-Term Obligations--Capital Leases..................   +                0   +           0   +           0
                                                            ----------------------------------------------------
        Total Recognized Sources...........................   =          434,180   =     227,518   =     286,293
Non-Recognized Sources of Funds:
    Pension Liability......................................  ...               0  ...          0  ...          0
    Other Non-Current Liabilities..........................   +                0   +           0   +           0
    Deferred Federal Income Taxes..........................   +                0   +           0   +           0
    Other Deferred Credits.................................   +                0   +           0   +           0
                                                            ----------------------------------------------------
        Total Non-Recognized Sources.......................   =                0   =           0   =           0
Total Sources of Funds:
    Total Recognized Sources...............................  ...         434,180  ...    227,518  ...    286,293
    Total Non-Recognized Sources...........................   +                0   +           0   +           0
                                                            ----------------------------------------------------
        Total Sources of Funds.............................   =          434,180   =     227,518   =     286,293
----------------------------------------------------------------------------------------------------------------

    Tables 19-21 relate to the second part of the formula for 
calculating the investment base. The second part establishes a ratio 
between recognized sources of funds and total sources of funds. Since 
no non-recognized sources of funds (sources we do not recognize as 
required to support pilotage operations) exist for any of the pilot 
associations for this year's rulemaking, the ratio between recognized 
sources of funds and total sources of funds is ``1:1'' (or a multiplier 
of ``1'') in all cases. Table 22 applies the multiplier of ``1,'' and 
shows that the investment base for each association equals its total 
recognized assets. Table 22 also expresses these results by area, 
because area results will be needed in subsequent steps.

                                                     Table 22--Investment Base by Area and District
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                            Multiplier
                                                                               Total        Recognized     Total sources     (ratio of      Investment
                        District                               Area         recognized      sources of     of funds ($)    recognized to   base ($) \1\
                                                                            assets ($)       funds ($)                    total sources)
--------------------------------------------------------------------------------------------------------------------------------------------------------
One.....................................................               1         213,225         213,225         213,225               1         213,225
                                                                       2         159,661         159,661         159,661               1         159,661
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................  ..............  ..............  ..............  ..............  ..............         372,886
Two \2\.................................................               4          89,290         358,413         358,413               1          89,290
                                                                       5         201,559         809,058         809,058               1         201,559
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................  ..............  ..............  ..............  ..............  ..............         290,849
Three...................................................               6         434,180         434,180         434,180               1         434,180
                                                                       7         227,518         227,518         227,518               1         227,518
                                                                       8         286,293         286,293         286,293               1         286,293
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................  ..............  ..............  ..............  ..............  ..............         947,991
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Note: ``Investment base'' = ``Total recognized assets'' x ``Multiplier (ratio of recognized to total sources)''

[[Page 47106]]

 
\2\ Note: The pilot associations that provide pilotage services in Districts One and Three operate as partnerships. The pilot association that provides
  pilotage service for District Two operates as a corporation. Per table 20, Total Recognized Assets do not equal Total Sources of Funds due to the
  level of long-term debt in District Two.

    Step 5: Determination of Target Rate of Return. We determine a 
market-equivalent return on investment (ROI) that will be allowed for 
the recognized net capital invested in each association by its members. 
We do not recognize capital that is unnecessary or unreasonable for 
providing pilotage services. There are no non-recognized investments in 
this year's calculations. The allowed ROI is based on the preceding 
year's average annual rate of return for new issues of high-grade 
corporate securities.
    For 2010, the year preceding this year, the allowed ROI was a 
little more than 4.94 percent, based on the average rate of return that 
year on Moody's AAA corporate bonds which can be found at: http://research.stlouisfed.org/fred2/series/AAA/downloaddata?cid=119.
    Step 6: Adjustment Determination. The first sub-step in the 
adjustment determination requires an initial calculation, applying a 
formula described in Appendix A. The formula uses the results from 
Steps 1, 2, 3, and 4 to project the ROI that can be expected in each 
area, if no further adjustments are made. This calculation is shown in 
Tables 23 through 25.

             Table 23--Projected ROI, Areas in District One
------------------------------------------------------------------------
                                         Area 1               Area 2
------------------------------------------------------------------------
Revenue (from step 3).........   +       $2,308,357   +       $1,614,791
Operating Expenses (from step    -         $451,691   -         $355,748
 1)...........................
Pilot Compensation (from step    -       $1,806,030   -       $1,104,304
 2)...........................
Operating Profit/(Loss).......   =          $50,636   =         $154,739
Interest Expense (from audits)   -               $0   -               $0
Earnings Before Tax...........   =          $50,636   =         $154,739
Federal Tax Allowance.........   -               $0   -               $0
Net Income....................   =          $50,636   =         $154,739
Return Element (Net Income +    ...         $50,636  ...        $154,739
 Interest)....................
Investment Base (from step 4).   /         $213,225   /         $159,661
Projected Return on Investment   =             0.24   =             0.97
------------------------------------------------------------------------

             Table 24--Projected ROI, Areas in District Two
------------------------------------------------------------------------
                                         Area 4               Area 5
------------------------------------------------------------------------
Revenue (from step 3).........   +       $1,310,549   +       $2,600,490
Operating Expenses (from step    -         $372,746   -         $705,685
 1)...........................
Pilot Compensation (from step    -         $883,443   -       $1,806,030
 2)...........................
Operating Profit/(Loss).......   =          $54,360   =          $88,775
Interest Expense (from audits)   -           $3,302   -           $7,455
Earnings Before Tax...........   =          $51,058   =          $81,321
Federal Tax Allowance.........   -           $2,210   -           $4,990
Net Income....................   =          $48,847   =          $76,331
Return Element (Net Income +    ...         $52,150  ...         $83,786
 Interest)....................
Investment Base (from step 4).   /          $89,290   /         $201,559
Projected Return on Investment   =             0.58   =             0.42
------------------------------------------------------------------------

                                Table 25--Projected ROI, Areas in District Three
----------------------------------------------------------------------------------------------------------------
                                                            Area 6               Area 7               Area 8
----------------------------------------------------------------------------------------------------------------
Revenue (from step 3)............................   +       $2,227,555   +       $1,565,906   +       $1,811,863
Operating Expenses (from step 1).................   -         $576,969   -         $302,345   -         $380,448
Pilot Compensation (from step 2).................   -       $1,546,026   -       $1,204,020   -       $1,325,165
Operating Profit/(Loss)..........................   =         $104,560   =          $59,542   =         $106,250
Interest Expense (from audits)...................   -           $2,417   -           $1,267   -           $1,594
Earnings Before Tax..............................   =         $102,143   =          $58,275   =         $104,656
Federal Tax Allowance............................   -               $0   -               $0   -               $0
Net Income.......................................   =         $102,143   =          $58,275   =         $104,656
Return Element (Net Income + Interest)...........  ...        $104,560  ...         $59,542  ...        $106,250
Investment Base (from step 4)....................   /         $434,180   /         $227,518   /         $286,293
Projected Return on Investment...................   =             0.24   =             0.26   =             0.37
----------------------------------------------------------------------------------------------------------------

    The second sub-step required for Step 6 compares the results of 
Tables 23 through 25 with the target ROI (approximately 4.94 percent) 
we obtained in Step 5 to determine if an adjustment to the base 
pilotage rate is necessary. Table 26 shows this comparison for each 
area.

[[Page 47107]]

                                            Table 26--Comparison of Projected ROI and Target ROI, by Area\1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Area 1          Area 2          Area 4          Area 5          Area 6          Area 7          Area 8
                                         ---------------------------------------------------------------------------------------------------------------
                                                                                             Southeast
                                           St. Lawrence    Lake Ontario      Lake Erie     shoal to Port    Lakes Huron     St. Mary's    Lake  Superior
                                               River                                         Huron, MI     and Michigan        River
--------------------------------------------------------------------------------------------------------------------------------------------------------
Projected return on investment..........           0.237           0.969           0.584           0.416           0.241           0.262           0.371
Target return on investment.............           0.049           0.049           0.049           0.049           0.049           0.049           0.049
Difference in return on investment......           0.188           0.920           0.535           0.366           0.191           0.212           0.322
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Note: Decimalization and rounding of the target ROI affects the display in this table but does not affect our calculations, which are based on the
  actual figure.

    Because Table 26 shows a significant difference between the 
projected and target ROIs, an adjustment to the base pilotage rates is 
necessary. Step 6 now requires us to determine the pilotage revenues 
that are needed to make the target return on investment equal to the 
projected return on investment. This calculation is shown in Table 27. 
It adjusts the investment base we used in Step 4, multiplying it by the 
target ROI from Step 5, and applies the result to the operating 
expenses and target pilot compensation determined in Steps 1 and 2.

                                                 Table 27--Revenue Needed To Recover Target ROI, by Area
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Investment
                                                         Operating          Target pilot        base (step  4)
                    Pilotage area                        expenses           compensation            x 4.94%            Federal tax        Revenue needed
                                                         (step 1)             (step 2)            (target ROI           allowance
                                                                                                    step 5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
AREA 1 (Designated Waters)..........................        $451,691   +       $1,806,030   +          $10,540   +   ..............   =       $2,268,262
AREA 2 (Undesignated Waters)........................         355,748   +        1,104,304   +            7,893   +   ..............   =        1,467,944
AREA 4 (Undesignated Waters)........................         372,746   +          883,443   +            4,414   +           $2,210   =        1,262,813
AREA 5 (Designated Waters)..........................         705,685   +        1,806,030   +            9,964   +            4,990   =        2,526,668
AREA 6 (Undesignated Waters)........................         576,969   +        1,546,026   +           21,463   +   ..............   =        2,144,458
AREA 7 (Designated Waters)..........................         302,345   +        1,204,020   +           11,247   +   ..............   =        1,517,612
AREA 8 (Undesignated Waters)........................         380,448   +        1,325,165   +           14,152   +   ..............   =        1,719,765
                                                     ---------------------------------------------------------------------------------------------------
    Total...........................................       3,145,632   +     9,675,016.97   +           79,673   +            7,200   =       12,907,522
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The ``revenue needed'' column of Table 27 is less than the revenue 
we projected in Table 18. For purposes of transparency, we verify Table 
27's calculations by rerunning the first part of Step 6, using the 
``revenue needed'' from Table 27 instead of the Table 18 revenue 
projections we used in Tables 23 through 25. Tables 28 through 30 show 
that attaining the Table 27 ``revenue needed'' is sufficient to recover 
target ROI.

     Table 28--Balancing Revenue Needed and Target ROI, District One
------------------------------------------------------------------------
                                              Area 1            Area 2
------------------------------------------------------------------------
Revenue Needed......................   +    $2,268,262   +    $1,467,944
Operating Expenses (from step 1)....   -      $451,691   -      $355,748
Pilot Compensation (from step 2)....   -    $1,806,030   -    $1,104,304
Operating Profit/(Loss).............   =       $10,540   =        $7,893
Interest Expense (from audits)......   -            $0   -            $0
Earnings Before Tax.................   =       $10,540   =        $7,893
Federal Tax Allowance...............   -            $0   -            $0
Net Income..........................   =       $10,540   =        $7,893
Return Element (Net Income +          ...      $10,540  ...       $7,893
 Interest)..........................
Investment Base (from step 4).......   /      $213,225   /      $159,661
Return on Investment................   =        0.0494   =        0.0494
------------------------------------------------------------------------

     Table 29--Balancing Revenue Needed and Target ROI, District Two
------------------------------------------------------------------------
                                              Area 4            Area 5
------------------------------------------------------------------------
Revenue Needed......................   +    $1,262,813   +    $2,526,668
Operating Expenses (from step 1)....   -      $372,746   -      $705,685
Pilot Compensation (from step 2)....   -      $883,443   -    $1,806,030
Operating Profit/(Loss).............   =        $6,624   =       $14,953
Interest Expense (from audits)......   -        $3,302   -        $7,455

[[Page 47108]]

 
Earnings Before Tax.................   =        $3,322   =        $7,499
Federal Tax Allowance...............   -        $2,210   -        $4,990
Net Income..........................   =        $1,112   =        $2,509
Return Element (Net Income +          ...       $4,414  ...       $9,964
 Interest)..........................
Investment Base (from step 4).......   /       $89,290   /      $201,559
Return on Investment................   =        0.0494   =        0.0494
------------------------------------------------------------------------

                        Table 30--Balancing Revenue Needed and Target ROI, District Three
----------------------------------------------------------------------------------------------------------------
                                                                    Area 6            Area 7            Area 8
----------------------------------------------------------------------------------------------------------------
Revenue Needed............................................   +    $2,144,458   +    $1,517,612   +    $1,719,765
Operating Expenses (from step 1)..........................   -      $576,969   -      $302,345   -      $380,448
Pilot Compensation (from step 2)..........................   -    $1,546,026   -    $1,204,020   -    $1,325,165
Operating Profit/(Loss)...................................   =       $21,463   =       $11,247   =       $14,152
Interest Expense (from audits)............................   -        $2,417   -        $1,267   -        $1,594
Earnings Before Tax.......................................   =       $19,046   =        $9,980   =       $12,558
Federal Tax Allowance.....................................   -            $0   -            $0   -            $0
Net Income................................................   =       $19,046   =        $9,980   =       $12,558
Return Element (Net Income + Interest)....................  ...      $21,463  ...      $11,247  ...      $14,152
Investment Base (from step 4).............................   /      $434,180   /      $227,518   /      $286,293
Return on Investment......................................   =        0.0494   =        0.0494   =        0.0494
----------------------------------------------------------------------------------------------------------------

    Step 7: Adjustment of Pilotage Rates. Finally, and subject to 
negotiation with Canada or adjustment for other supportable 
circumstances, we calculate rate adjustments by dividing the Step 6 
revenue needed (Table 27) by the Step 3 revenue projection (Table 18), 
to give us a rate multiplier for each area. Tables 31 through 33 show 
these calculations.

            Table 31--Rate Multiplier, Areas in District One
------------------------------------------------------------------------
                                       Area 1  St.         Area 2  Lake
    Ratemaking projections           Lawrence River           Ontario
------------------------------------------------------------------------
Revenue Needed (from step 6)..  ...      $2,268,262  ...      $1,467,944
Revenue (from step 3).........   /       $2,308,357   /       $1,614,791
Rate Multiplier...............   =            0.983   =            0.909
------------------------------------------------------------------------

            Table 32--Rate Multiplier, Areas in District Two
------------------------------------------------------------------------
                                                                Area 5
                                                              Southeast
       Ratemaking projections                 Area 4           shoal to
                                            Lake Erie        Port Huron,
                                                                  MI
------------------------------------------------------------------------
Revenue Needed (from step 6)........  ...   $1,262,813  ...   $2,526,668
Revenue (from step 3)...............   /    $1,310,549   /    $2,600,490
Rate Multiplier.....................   =         0.964   =         0.972
------------------------------------------------------------------------

                               Table 33--Rate Multiplier, Areas in District Three
----------------------------------------------------------------------------------------------------------------
                                                                 Area 6
                                                              Lakes Huron       Area 7  St.        Area 8  Lake
                 Ratemaking projections                           and              Mary's            Superior
                                                                Michigan           River
----------------------------------------------------------------------------------------------------------------
Revenue Needed (from step 6)...........................  ...   $2,144,458  ...   $1,517,612  ...      $1,719,765
Revenue (from step 3)..................................   /    $2,227,555   /    $1,565,906   /       $1,811,863
Rate Multiplier........................................   =         0.963   =         0.969   =            0.949
----------------------------------------------------------------------------------------------------------------

    We calculate a rate multiplier for adjusting the basic rates and 
charges described in 46 CFR 401.420 and 401.428 and applicable in all 
Areas. We divide total revenue needed (Step 6, Table 27) by total 
projected revenue (Step 3 & 3A, Table 18). Our proposed rate changes 
for 46 CFR 401.420 and 401.428 reflect the multiplication of the rates 
we established for those sections in our 2011 final rule, by the rate 
multiplier shown as the result of our calculation in Table 34.

[[Page 47109]]

 Table 34--Rate Multiplier for Basic Rates and Charges in 46 CFR 401.420
                               and 401.428
------------------------------------------------------------------------
               Ratemaking projections
------------------------------------------------------------------------
Total revenue needed (from step 6).................  ...     $12,907,522
Total revenue (from step 3)........................   /      $13,439,512
Rate Multiplier....................................   =            0.960
------------------------------------------------------------------------

    We multiply the existing rates we established in our 2011 final 
rule by the rate multipliers from Tables 31 through 33, to calculate 
the Area by Area rate changes we propose for 2012. Tables 35 through 37 
show these calculations.

                     Table 35--Proposed Adjustment of Pilotage Rates, Areas in District One
----------------------------------------------------------------------------------------------------------------
                                                                                                       Adjusted
                                                               2011 Rate              Rate            rate  for
                                                                                   multiplier            2012
----------------------------------------------------------------------------------------------------------------
Area 1--St. Lawrence River:
    Basic Pilotage........................................       $18.36/km,   x         0.983    =    $18.04/km,
                                                                   32.50/mi                                31.94
    Each lock transited...................................              407   x         0.983    =           400
    Harbor movage.........................................            1,333   x         0.983    =         1,310
    Minimum basic rate, St. Lawrence River................              889   x         0.983    =           874
    Maximum rate, through trip............................            3,901   x         0.983    =         3,833
Area 2--Lake Ontario:
    6 hour period.........................................              893   x         0.909    =           812
    Docking or undocking..................................              852   x         0.909    =           775
----------------------------------------------------------------------------------------------------------------

                     Table 36--Proposed Adjustment of Pilotage Rates, Areas in District Two
----------------------------------------------------------------------------------------------------------------
                                                                                                       Adjusted
                                                     2011 Rate                        Rate             rate for
                                                                                   multiplier            2012
----------------------------------------------------------------------------------------------------------------
Area 4--Lake Erie:
    6 hour period.................................         $791               x         0.964    =          $762
    Docking or undocking..........................          609               x         0.964    =           587
    Any point on Niagara River below Black Rock           1,554               x         0.964    =         1,497
     Lock.........................................
Area 5--Southeast Shoal to Port Huron, MI between
 any point on or in:
    Toledo or any point on Lake Erie W. of                3,102               x         0.972    =         3,014
     Southeast Shoal & Detroit River..............
    Toledo or any point on Lake Erie W. of                2,389               x         0.972    =         2,321
     Southeast Shoal & Detroit Pilot Boat.........
    Port Huron Change Point & Southeast Shoal             4,162               x         0.972    =         4,044
     (when pilots are not changed at the Detroit
     Pilot Boat)..................................
    Port Huron Change Point & Toledo or any point         4,821               x         0.972    =         4,684
     on Lake Erie W. of Southeast Shoal (when
     pilots are not changed at the Detroit Pilot
     Boat)........................................
    Port Huron Change Point & Detroit River.......        3,126               x         0.972    =         3,037
    Port Huron Change Point & Detroit Pilot Boat..        2,432               x         0.972    =         2,363
    Port Huron Change Point & St. Clair River.....        1,729               x         0.972    =         1,680
    St. Clair River...............................        1,412               x         0.972    =         1,372
    St. Clair River & Southeast Shoal (when pilots        4,162               x         0.972    =         4,044
     are not changed at the Detroit Pilot Boat)...
    St. Clair River & Detroit River/Detroit Pilot         3,126               x         0.972    =         3,037
     Boat.........................................
    Detroit, Windsor, or Detroit River............        1,412               x         0.972    =         1,372
    Detroit, Windsor, or Detroit River & Southeast        2,389               x         0.972    =         2,321
     Shoal........................................
    Detroit, Windsor, or Detroit River & Toledo or        3,102               x         0.972    =         3,014
     any point on Lake Erie W. of Southeast Shoal.
    Detroit, Windsor, or Detroit River & St. Clair        3,126               x         0.972    =         3,037
     River........................................
    Detroit Pilot Boat & Southeast Shoal..........        1,729               x         0.972    =         1,680
----------------------------------------------------------------------------------------------------------------

Table 37--Proposed Adjustment of Pilotage Rates, Areas in District Three
------------------------------------------------------------------------
                                                                Adjusted
                              2011 Rate          Rate           rate for
                                                iplier            2012
------------------------------------------------------------------------
Area 6--Lakes Huron and
 Michigan:
    6 hour period...........       $688   x       0.963    =        $662
    Docking or undocking....        653   x       0.963    =         629
Area 7--St. Mary's River
 between any point on or in:
    Gros Cap & De Tour......      2,650   x       0.969    =       2,568
    Algoma Steel Corp.            2,650   x       0.969    =       2,568
     Wharf, Sault Ste.
     Marie, Ont. & De Tour..
    Algoma Steel Corp.              998   x       0.969    =         967
     Wharf, Sault Ste.
     Marie, Ont. & Gros Cap.
    Any point in Sault St.        2,221   x       0.969    =       2,153
     Marie, Ont., except the
     Algoma Steel Corp.
     Wharf & De Tour........

[[Page 47110]]

 
    Any point in Sault St.          998   x       0.969    =         967
     Marie, Ont., except the
     Algoma Steel Corp.
     Wharf & Gros Cap.......
    Sault Ste. Marie, MI &        2,221   x       0.969    =       2,153
     De Tour................
    Sault Ste. Marie, MI &          998   x       0.969    =         967
     Gros Cap...............
    Harbor movage...........        998   x       0.969    =         967
Area 8--Lake Superior:
    6 hour period...........        608   x       0.949    =         577
                                   $578   x       0.949    =        $549
------------------------------------------------------------------------

VI. Regulatory Analyses

    We developed this proposed 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. Executive Order 12866 and Executive Order 13563

    Executive Orders 13563 and 12866 direct agencies to assess the 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule is not a ``significant regulatory action'' under 
section 3(f) of Executive Order 12866 and has not been reviewed by the 
Office of Management and Budget.
    A draft Regulatory Assessment follows.
    The Coast Guard is required to review and adjust pilotage rates on 
the Great Lakes annually. See Parts III and IV of this preamble for 
detailed discussions of the Coast Guard's legal basis and purpose for 
this rulemaking and for background information on Great Lakes pilotage 
ratemaking. Based on our annual review for this proposed rulemaking, we 
are adjusting the pilotage rates for the 2012 shipping season to 
generate sufficient revenue to cover allowable expenses, target pilot 
compensation, and returns on investment. The rate adjustments in this 
proposed rule would, if codified, lead to a cost savings in all seven 
areas and all three districts with an estimated cost savings to 
shippers of approximately $1 million across all three districts.
    The proposed rule would apply the 46 CFR part 404, Appendix A, full 
ratemaking methodology and decrease Great Lakes pilotage rates, on 
average, approximately 4 percent overall from the current rates set in 
the 2011 final rule. The Appendix A methodology is discussed and 
applied in detail in Part V of this preamble. Among other factors 
described in Part V, it reflects audited 2009 financial data from the 
pilotage associations (the most recent year available for auditing), 
projected association expenses, and regional inflation or deflation. 
The last full Appendix A ratemaking was concluded in 2006 and used 
financial data from the 2002 base accounting year. The last annual rate 
review, conducted under 46 CFR part 404, Appendix C, was completed 
early in 2011.
    In general, we expect an increase in pilotage rates for a certain 
area to result in additional costs for shippers using pilotage services 
in that area, while a decrease would result in a cost reduction or 
savings for shippers in that area. The shippers affected by these rate 
adjustments are those owners and operators of domestic vessels 
operating on register (employed in foreign trade) and owners and 
operators of foreign vessels on a route within the Great Lakes system. 
These owners and operators must have pilots or pilotage service as 
required by 46 U.S.C. 9302. There is no minimum tonnage limit or 
exemption for these vessels. The Coast Guard's interpretation is that 
the statute applies only to commercial vessels and not to recreational 
vessels.
    Owners and operators of other vessels that are not affected by this 
rule, such as recreational boats and vessels 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 and is not a part of our estimated national 
cost to shippers. Coast Guard sampling of pilot data suggests there are 
very few U.S. domestic vessels, without registry and operating only in 
the Great Lakes that voluntarily purchase pilotage services.
    We used 2008-2010 vessel arrival data from the Coast Guard's Marine 
Information for Safety and Law Enforcement (MISLE) system to estimate 
the average annual number of vessels affected by the rate adjustment to 
be 204 vessels that journey into the Great Lakes system. These vessels 
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 204 vessels, there were approximately 319 annual U.S. 
port arrivals before the vessels left the Great Lakes system, based on 
2008-2010 vessel data from MISLE.
    The impact of the rate adjustment to shippers is estimated from the 
District pilotage revenues. These revenues represent the direct and 
indirect costs (``economic costs'') that shippers must pay for pilotage 
services. The Coast Guard sets rates so that revenues equal the 
estimated cost of pilotage.
    We estimate the additional impact (costs or savings) of the rate 
adjustment in this proposed rule to be the difference between the total 
projected revenue needed to cover costs in 2012 based on the 2011 rate 
adjustment and the total projected revenue needed to cover costs in 
2012 as set forth in this proposed rule. Table 38 details additional 
costs or savings by area and district.

[[Page 47111]]

            Table 38--Rate Adjustment and Additional Impact of the Proposed Rule by Area and District
                                             [$U.S.; Non-discounted]
----------------------------------------------------------------------------------------------------------------
                                                                                                    Additional
                                                                     Projected       Projected       costs or
                                                                  revenue needed  revenue needed    savings of
                                                                    in 2011 \*\    in 2012 \**\    this proposed
                                                                                                       rule
----------------------------------------------------------------------------------------------------------------
Area 1..........................................................      $2,348,516      $2,268,262       ($80,255)
Area 2..........................................................       1,689,246       1,467,944       (221,302)
                                                                 -----------------------------------------------
    Total, District One.........................................       4,037,763       3,736,206       (301,557)
----------------------------------------------------------------------------------------------------------------
Area 4..........................................................       1,436,140       1,262,813       (173,326)
Area 5..........................................................       2,649,876       2,526,668       (123,208)
                                                                 -----------------------------------------------
    Total, District Two.........................................       4,086,016       3,789,481       (296,534)
----------------------------------------------------------------------------------------------------------------
Area 6..........................................................       2,311,006       2,144,458       (166,548)
Area 7..........................................................       1,614,974       1,517,612        (97,362)
Area 8..........................................................       1,904,237       1,719,765       (184,472)
                                                                 -----------------------------------------------
    Total, District Three.......................................       5,830,218       5,381,835       (448,383)
----------------------------------------------------------------------------------------------------------------
\*\ These 2011 estimates are detailed in Table 16 of the 2011 final rule (76 FR 6351).
\**\ These 2012 estimates are detailed in Table 27 of this rulemaking.
Some values may not total due to rounding.
``Additional Revenue or Cost of this Rulemaking'' = ``Revenue needed in 2012'' minus; ``Revenue needed in
  2011.''

    After applying the rate change in this proposed rule, the resulting 
difference between the projected revenue in 2011 and the projected 
revenue in 2012 is the annual impact to shippers from this rule. This 
figure would be equivalent to the total additional payments or savings 
that shippers would incur for pilotage services from this proposed 
rule. As discussed earlier, we consider a reduction in payments to be a 
cost savings.
    The impact of the rate adjustment in this proposed rule to shippers 
varies by area and district. The rate adjustments would lead to a cost 
savings in all seven areas and all three districts, with affected 
shippers operating in District One, District Two, and District Three 
experiencing savings of $302,000, $297,000, and $448,000, respectively 
(values rounded). To calculate an exact cost or savings per vessel is 
difficult because of the variation in vessel types, routes, port 
arrivals, commodity carriage, time of season, conditions during 
navigation, and preferences for the extent of pilotage services on 
designated and undesignated portions of the Great Lakes system. Some 
owners and operators would pay more and some would pay less depending 
on the distance and port arrivals of their vessels' trips. However, the 
additional savings reported above does capture the adjustment the 
shippers would experience as a result of the rate adjustment in this 
proposed rule. As Table 38 indicates, shippers operating in all areas 
would experience an annual savings due to this rulemaking. The overall 
impact of the proposed rule would be a cost savings to shippers of 
approximately $1 million across all three districts.
    The effects of a rate adjustment on costs and savings vary by year 
and area. A decrease in projected expenses for individual areas or 
districts is common in past pilotage rate adjustments. Most recently, 
in the 2011 ratemaking, District Three experienced a decrease in 
projected expenses due to an adjustment in bridge hours from the 2010 
final rule; that led to a savings for that district and yielded a net 
savings for the system.
    This proposed rulemaking would allow the U.S. Coast Guard to meet 
the statutory requirements to review the rates for pilotage services on 
the Great Lakes--ensuring proper pilot compensation.

B. Small Entities

    Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have 
considered whether this proposed 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 the 
following 6-digit NAICS codes for freight transportation: 483111--Deep 
Sea Freight Transportation, 483113--Coastal and Great Lakes Freight 
Transportation, and 483211--Inland Water Freight Transportation. 
According to the Small Business Administration's definition, a U.S. 
company with these NAICS codes and employing less than 500 employees is 
considered a small entity.
    For the proposed rule, we reviewed recent company size and 
ownership data from 2008-2010 Coast Guard MISLE data and business 
revenue and size data provided by publicly available sources such as 
MANTA and Reference USA. We found that large, mostly foreign-owned, 
shipping conglomerates or their subsidiaries owned or operated all 
vessels engaged in foreign trade on the Great Lakes. We assume that new 
industry entrants would be comparable in ownership and size to these 
shippers.
    There are three U.S. entities affected by the proposed rule that 
receive revenue from pilotage services. These are the three pilot 
associations that provide and manage pilotage services within the Great 
Lakes districts. Two of the associations operate as partnerships and 
one operates as a corporation. These associations are designated 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 proposed rule because all associations 
receive enough revenue to balance the projected expenses

[[Page 47112]]

associated with the projected number of bridge hours and pilots.
    Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that 
this proposed rule would not have a significant economic impact on a 
substantial number of small entities. If you think that your business, 
organization, or governmental jurisdiction qualifies as a small entity 
and that this proposed rule would have a significant economic impact on 
it, please submit a comment to the Docket Management Facility at the 
address under ADDRESSES. In your comment, explain why you think it 
qualifies, as well as how and to what degree this proposed rule would 
economically affect it.

C. Assistance for Small Entities

    Under section 213(a) of the Small Business Regulatory Enforcement 
Fairness Act of 1996 (Pub. L. 104-121), we want to assist small 
entities in understanding this proposed rule so that they can better 
evaluate its effects on them and participate in the rulemaking. If the 
proposed rule would affect your small business, organization, or 
governmental jurisdiction and you have questions concerning its 
provisions or options for compliance, please consult Mr. Todd Haviland, 
Management & Program Analyst, Office of Great Lakes Pilotage, 
Commandant (CG-5522), Coast Guard; telephone 202-372-2037, e-mail 
Todd.A.Haviland@uscg.mil, or fax 202-372-1909. The Coast Guard will not 
retaliate against small entities that question or complain about this 
rule or any policy or action of the Coast Guard.
    Small businesses may send comments on the actions of Federal 
employees who enforce, or otherwise determine compliance with, Federal 
regulations to the Small Business and Agriculture Regulatory 
Enforcement Ombudsman and the Regional Small Business Regulatory 
Fairness Boards. The Ombudsman evaluates these actions annually and 
rates each agency's responsiveness to small business. If you wish to 
comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR 
(1-888-734-3247).

D. Collection of Information

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

E. Federalism

    A rule has implications for federalism under Executive Order 13132, 
Federalism, if it has a substantial direct effect on State or local 
governments and would either preempt State law or impose a substantial 
direct cost of compliance on them. We have analyzed this proposed rule 
under that Order and have determined that it does not have implications 
for federalism because States are expressly prohibited by 46 U.S.C. 
9306 from regulating pilotage on the Great Lakes.

F. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) 
requires Federal agencies to assess the effects of their discretionary 
regulatory actions. In particular, the Act addresses actions that may 
result in the expenditure by a State, local, or tribal government, in 
the aggregate, or by the private sector of $100,000,000 (adjusted for 
inflation) or more in any one year. Though this proposed 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 proposed rule would not cause a taking of private property or 
otherwise have taking implications under Executive Order 12630, 
Governmental Actions and Interference with Constitutionally Protected 
Property Rights.

H. Civil Justice Reform

    This proposed 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 proposed rule under Executive Order 13045, 
Protection of Children from Environmental Health Risks and Safety 
Risks. This rule is not an economically significant rule and would not 
create an environmental risk to health or risk to safety that might 
disproportionately affect children.

J. Indian Tribal Governments

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

K. Energy Effects

    We have analyzed this proposed 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 proposed rule does not use technical standards. 
Therefore, we did not consider the use of voluntary consensus 
standards.

M. Environment

    We have analyzed this proposed 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 made a preliminary determination that this action is one of a 
category of actions that do not individually or cumulatively have a 
significant effect on the human environment. A preliminary 
environmental analysis checklist supporting this determination is 
available in the docket where indicated under the ``Public 
Participation and Request for Comments'' section of this preamble. 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

[[Page 47113]]

procedural in nature. This proposed rule adjusts rates in accordance 
with applicable statutory and regulatory mandates. We seek any comments 
or information that may lead to the discovery of a significant 
environmental impact from this proposed rule.

List of Subjects in 46 CFR Part 401

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

    For the reasons discussed in the preamble, the Coast Guard proposes 
to amend 46 CFR part 401 as follows:

PART 401--GREAT LAKES PILOTAGE REGULATIONS

    1. The authority citation for part 401 continues to read as 
follows:

    Authority:  46 U.S.C. 2104(a), 6101, 7701, 8105, 9303, 9304; 
Department of Homeland Security Delegation No. 0170.1; 46 CFR 
401.105 also issued under the authority of 44 U.S.C. 3507.

    2. In Sec.  401.405, revise paragraphs (a) and (b) 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......................  $18.04 per kilometer or $31.94 per
                                       mile.\1\
Each Lock Transited.................  $400.\1\
Harbor Movage.......................  $1,310 \1\
------------------------------------------------------------------------
\1\ The minimum basic rate for assignment of a pilot in the St. Lawrence
  River is $874, and the maximum basic rate for a through trip is
  $3,833.

     (b) Area 2 (Undesignated Waters):

------------------------------------------------------------------------
                                                                  Lake
                           Service                              Ontario
------------------------------------------------------------------------
Six-Hour Period..............................................       $812
Docking or Undocking.........................................        775
------------------------------------------------------------------------

    3. In Sec.  401.407, revise paragraphs (a) and (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...............................         $762         $762
Docking or Undocking..........................          587          587
Any Point on the Niagara River................  ...........  ...........
Below the Black Rock Lock.....................          N/A        1,497
------------------------------------------------------------------------

     (b) Area 5 (Designated Waters):

----------------------------------------------------------------------------------------------------------------
                                                           Toledo or  any
                                                           point on  Lake
             Any point on or in                Southeast    Erie west of     Detroit      Detroit     St. Clair
                                                 shoal        southeast       River      pilot boat     River
                                                                shoal
----------------------------------------------------------------------------------------------------------------
Toledo or any port on Lake Erie west of            $2,321          $1,372       $3,014       $2,321          N/A
 Southeast Shoal............................
Port Huron Change Point.....................    \1\ 4,044       \1\ 4,684        3,037        2,363        1,680
St. Clair River.............................    \1\ 4,044             N/A        3,037        3,037        1,372
Detroit or Windsor or the Detroit River.....        2,321           3,014        1,372          N/A        3,037
Detroit Pilot Boat..........................        1,680           2,321          N/A          N/A        3,037
----------------------------------------------------------------------------------------------------------------
\1\ When pilots are not changed at the Detroit Pilot Boat.

    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.........................................            $662
Docking or Undocking....................................             629
------------------------------------------------------------------------

     (b) Area 7 (Designated Waters):

------------------------------------------------------------------------
               Area                  De tour      Gros cap    Any harbor
------------------------------------------------------------------------
Gros Cap.........................       $2,568          N/A          N/A
Algoma Steel Corporation Wharf at        2,568         $967          N/A
 Sault Ste. Marie, Ontario.......
Any point in Sault Ste. Marie,           2,153          967          N/A
 Ontario, except the Algoma Steel
 Corporation Wharf...............
Sault Ste. Marie, MI.............        2,153          967          N/A
Harbor Movage....................          N/A          N/A         $967
------------------------------------------------------------------------

     (c) Area 8 (Undesignated Waters):

------------------------------------------------------------------------
                                                                  Lake
                           Service                              Superior
------------------------------------------------------------------------
Six-Hour Period..............................................       $577
Docking or Undocking.........................................        549
------------------------------------------------------------------------

[[Page 47114]]

Sec.  401.420  [Amended]

    5. Amend Sec.  401.420 as follows:
    a. In paragraph (a), remove the text ``$127'' and add, in its 
place, the text ``$122''; and remove the text ``$1,989'' and add, in 
its place, the text ``$1,910'';
    b. In paragraph (b), remove the text ``$127'' and add, in its 
place, the text ``$122''; and remove the text ``$1,989'' and add, in 
its place, the text ``$1,910''; and
    c. In paragraph (c)(1), remove the text ``$751'' and add, in its 
place, the text ``$721''; and in paragraph (c)(3), remove the text 
``$127'' and add, in its place, the text ``$122'', and remove the text 
``$1,989'' and add, in its place, the text ``$1,910''.

Sec.  401.428  [Amended]

    6. In Sec.  401.428, remove the text ``$766'' and add, in its 
place, the text ``$736''.

    Dated: July 27, 2011.
Dana A. Goward,
Director Marine Transportation Systems Management, U.S. Coast Guard.
[FR Doc. 2011-19746 Filed 8-3-11; 8:45 am]
BILLING CODE 9110-04-P