Document ID: USCG-2013-0534-0001
Agency: uscg
Document Type: Proposed Rule
Title: NPRM:  Great Lakes Pilotage Rates: 2014 Annual Review and Adjustment (Federal Register Publication)
Posted Date: 2013-08-08T04:00Z

[Federal Register Volume 78, Number 153 (Thursday, August 8, 2013)]
[Proposed Rules]
[Pages 48374-48397]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-19209]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

46 CFR Part 401

[USCG-2013-0534]
1625-AC07

Great Lakes Pilotage Rates--2014 Annual Review and Adjustment

AGENCY: Coast Guard, DHS.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Coast Guard proposes rate adjustments for pilotage 
services on the Great Lakes, which were last amended in February 2013. 
The proposed adjustments would establish new base rates and are made in 
accordance with a full ratemaking procedure. The proposed update 
reflects the Coast Guard exercising the discretion provided by Step 7 
of the Appendix A methodology. The result is an upward adjustment to 
match the rate increase of the Canadian Great Lakes Pilotage Authority. 
We also propose adjusting weighting factors used to determine rates for 
vessels of different size, providing a procedure for temporary 
surcharges, and including dues paid to the American Pilots Association. 
This notice of proposed rulemaking promotes the Coast Guard's strategic 
goal of maritime safety.

DATES: Comments and related material must either be submitted to our 
online docket via http://www.regulations.gov on or before October 7, 
2013 or reach the Docket Management Facility by that date.

ADDRESSES: You may submit comments identified by docket number USCG-
2013-0534 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.

[[Page 48375]]

FOR FURTHER INFORMATION CONTACT: If you have questions on this proposed 
rule, call or email Mr. Todd Haviland, Director, Great Lakes Pilotage, 
Commandant (CG-WWM-2), Coast Guard; telephone 202-372-2037, email 
Todd.A.Haviland@uscg.mil, or fax 202-372-1914. If you have questions on 
viewing or submitting material to the docket, call Ms. Barbara 
Hairston, 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. Regulatory Planning and Review
    B. Small Entities
    C. Assistance for Small Entities
    D. Collection of Information
    E. Federalism
    F. Unfunded Mandates Reform Act
    G. Taking of Private Property
    H. Civil Justice Reform
    I. Protection of Children
    J. Indian Tribal Governments
    K. Energy Effects
    L. Technical Standards
    M. Environment

I. 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-2013-0534), 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 email 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 and 
insert ``USCG-2013-0534'' in the ``Search'' box. Click on ``Submit a 
Comment'' in the ``Actions'' column. If you submit your comments by 
mail or hand delivery, submit them in an unbound format, no larger than 
8\1/2\ 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 notice of proposed rulemaking (NPRM) 
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, 
insert ``USCG-2013-0534'' 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.

II. Abbreviations

AMOU American Maritime Officers Union
APA American Pilots Association
CFR Code of Federal Regulations
CPA Certified public accountant
CPI Consumer Price Index
E.O. Executive Order
FR Federal Register
GLPAC Great Lakes Pilotage Advisory Committee
MISLE Marine Information for Safety and Law Enforcement
MOA Memorandum of Arrangements
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 NPRM is the Great Lakes Pilotage Act of 1960 
(``the Act'') (46 U.S.C. Chapter 93), which requires U.S. vessels 
operating ``on register'' \1\ and foreign vessels to use U.S. or 
Canadian registered pilots while transiting the U.S. waters of the St. 
Lawrence Seaway and the Great Lakes system. 46 U.S.C. 9302(a)(1). The 
Act requires the Secretary to ``prescribe by regulation rates and 
charges for pilotage services, giving consideration to the public 
interest and the costs of providing the services.'' 46 U.S.C. 9303(f). 
Rates must be established or reviewed and adjusted each year, not later 
than March 1. Base rates must be established by a full ratemaking at 
least once every 5 years, and in years when base rates are not 
established, they must be reviewed and, if necessary, adjusted. 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.
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    \1\ ``On register'' means that the vessel's certificate of 
documentation has been endorsed with a registry endorsement, and 
therefore, may be employed in foreign trade or trade with Guam, 
American Samoa, Wake, Midway, or Kingman Reef. 46 U.S.C. 12105, 46 
CFR 67.17.
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    The purpose of this NPRM is to establish new base pilotage rates, 
using the methodology found in 46 CFR part 404, Appendix A.

IV. Background

    The vessels affected by this NPRM are those engaged in foreign 
trade upon the U.S. waters of the Great Lakes. United

[[Page 48376]]

States and Canadian ``lakers,'' \2\ which account for most commercial 
shipping on the Great Lakes, are not affected. 46 U.S.C. 9302.
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    \2\ A ``laker'' is a commercial cargo vessel especially designed 
for and generally limited to use on the Great Lakes.
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    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. Also, we do not 
control the actual compensation that pilots receive. The actual 
compensation is determined by each of the three district associations, 
which use different compensation practices.
    District One, consisting of Areas 1 and 2, includes all U.S. waters 
of the St. Lawrence River and Lake Ontario. District Two, consisting of 
Areas 4 and 5, includes all U.S. waters of Lake Erie, the Detroit 
River, Lake St. Clair, and the St. Clair River. District Three, 
consisting of Areas 6, 7, and 8, includes all U.S. waters of the St. 
Mary's River, Sault Ste. Marie Locks, and Lakes Michigan, Huron, and 
Superior. Area 3 is the Welland Canal, which is serviced exclusively by 
the Canadian Great Lakes Pilotage Authority and, accordingly, is not 
included in the United States rate structure. Areas 1, 5, and 7 have 
been designated by Presidential Proclamation, pursuant to the Act, to 
be waters in which pilots must, at all times, be fully engaged in the 
navigation of vessels in their charge. Areas 2, 4, 6, and 8 have not 
been so designated because they are open bodies of water. While working 
in those undesignated areas, pilots must only ``be on board and 
available to direct the navigation of the vessel at the discretion of 
and subject to the customary authority of the master.'' 46 U.S.C. 
9302(a)(1)(B).
    This NPRM is a full ratemaking to establish new base pilotage 
rates, using the methodology found in 46 CFR part 404, Appendix A. The 
last full ratemaking established the current base rates in 2013 (78 FR 
13521; Feb. 28, 2013). Among other things, the Appendix A methodology 
requires us to review detailed pilot association financial information, 
and we contract with independent accountants to assist in that review. 
We have now completed our review of the independent accountants' 2011 
financial reports. The comments by the pilot associations on those 
reports and the independent accountants' 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, 2014, and effective August 
1, 2014. Our arithmetical calculations under Steps 1 through 6 of 
Appendix A would result in an average 10.74 percent rate decrease. This 
rate decrease is not the result of increased efficiencies in providing 
pilotage services but rather is a result of recent downward changes to 
American Maritime Officers Union (AMOU) contracts. Therefore, we will 
exercise the discretion outlined in Step 7 and increase rates by 2.5 
percent to match the Canadian Great Lakes Pilotage Authority's rate 
adjustment. We will provide additional discussion when we explain our 
Step 7 adjustment of pilot rates. Table 1 shows the proposed percent 
change for the new rates for each area.
    Secondly, we propose to adjust United States weighting factors in 
this NPRM to match Canadian weighting factors. At its February 2013 
meeting, the Great Lakes Pilotage Advisory Committee (GLPAC) 
unanimously recommended (Resolution 13-01, which can be viewed at 
www.faca.gov \3\) that the Coast Guard align United States weighting 
factors with those adopted by Canada in 2008. Weighting factors are 
multipliers based on the size of a ship and are used in determining 
actual charges for pilotage service. Matching the Canadian weighting 
factors would provide greater parity between the United States and 
Canada and reduce billing confusion between the two countries, both of 
which are important Federal Government concerns, as emphasized by 
recent Executive Order (E.O.) 13609, ``Promoting International 
Regulatory Cooperation'' (77 FR 26413; May 4, 2012). These weighting 
factors are applied to the charges for pilotage service; they are not 
used in the ratemaking methodology nor are they related to the annual 
changes in benchmark union contracts that determine target pilot 
compensation. Because this adjustment would in no way be connected with 
the benchmark contract changes that take effect on August 1, 2014, we 
propose making the adjustment effective March 1, 2014, to eliminate the 
disparity between U.S. and Canadian pilotage systems that has existed 
since 2008. Based on historic traffic levels, we believe this weighting 
factor adjustment will increase U.S. pilot association revenues by 
approximately 6 to 7.5 percent.
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    \3\ Resolution 13-01, a summary, and a transcript of the GLPAC 
meeting are available at this Web site.
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    Next, we propose to include dues paid to the American Pilots 
Association (APA) by the three districts as an allowable expense that 
is necessary and reasonable for the safe conduct of pilotage on the 
Great Lakes. We are committed to a safe and efficient pilotage system 
on the Great Lakes and the APA, as the trade association for all 
pilotage groups across the United States, has worked diligently with 
the Coast Guard and the associations to share best practices and 
facilitate the development of training plans for the U.S. Great Lakes 
Registered Pilots. Fifteen percent of the APA dues are used for 
lobbying and will be excluded, because lobbying expenses are 
prohibited. Previously, APA dues were excluded from the ratemaking 
process because they were deemed unnecessary for pilot licensure. While 
it remains true APA membership is not needed for licensure, we now 
believe that the APA's commitment to safety, professional development, 
and the sharing of best practices warrants the inclusion of APA dues as 
a necessary and reasonable expense.
    Finally, we propose adding a new regulation that would allow the 
Coast Guard to authorize temporary surcharges under the authority of 46 
U.S.C. 9303(f) and in the interest of safe, efficient, and reliable 
pilotage. 46 U.S.C. 9303(f) allows the Secretary to ``prescribe by 
regulation rates and charges for pilotage services, giving 
consideration to the public interest and the costs of providing the 
services.'' Temporary surcharges would be imposed when the surcharges 
serve the public interest by enabling the pilot associations to take on 
expenses in the interest of providing safe and reliable pilotage. Among 
the situations we think might warrant the imposition of a surcharge 
would be an association's need to acquire new capital assets or new 
technology, and the need to train pilots in the proper use of new 
assets or technology. Under our proposal, a given surcharge will not 
exceed 1 year in length and must be proposed for public comment prior 
to application. We propose using this new procedure to impose a 
temporary 3 percent surcharge

[[Page 48377]]

to traffic in District One to compensate pilots for $48,995 that the 
District One pilots' association spent on training in 2012. Normally, 
this expense would not be recognized and reflected in pilotage rates 
until the 2015 annual ratemaking. By authorizing a surcharge now, we 
would accelerate the reimbursement for necessary and reasonable 
training expenses. This procedure will allow the associations to 
recover these expenses the year after they are incurred instead of 
waiting three years. We conducted several meetings with the pilot 
association presidents to discuss training and they would be more 
willing to participate in training if the expenses were fully 
recognized the following year. The surcharge would be authorized for 
the duration of the 2014 shipping season, which begins in March 2014. 
This merely accelerates the payment for these improvements, which fall 
within historically-approved reimbursable items. At the end of the 2014 
shipping season, we will account for the monies the surcharge generate 
and make adjustments (debits/credits) to the operating expenses for the 
following year. We will also ensure that these accelerated training 
expenses are removed from the expenses of future rulemakings.
    We encourage all Great Lakes pilots to renew training on a 5-10 
year basis that includes these topics, which are essential for 
providing safe, efficient, and reliable pilotage service:
     Radar observer certification;
     Bridge resource management;
     Requirements of the International Convention on Standards 
of Training, Certification and Watchkeeping for Seafarers, 1978, as 
amended;
     Legal aspects of pilotage;
     Fatigue training as recommended by the National 
Transportation Safety Board; and
     Basic and emergency ship handling simulator/manned models 
training. The Coast Guard is pleased that District One pilots sought 
portions of this training. We encourage District Two and District Three 
pilots to seek similar training, which we are willing to review for 
inclusion in the rate on a case-by-case basis.
    All figures in the tables that follow are based on calculations 
performed either by an independent accountant or by the Director's \4\ 
staff. In both cases, those calculations were performed using common 
commercial computer programs. Decimalization and rounding of the 
audited and calculated data affects the display in these tables but 
does not affect the calculations. The calculations are based on the 
actual figure that rounds values for presentation in the tables.
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    \4\ ``Director'' is the Coast Guard Director, Great Lakes 
Pilotage, which is used throughout this NPRM.

     Table 1--Summary of Rate Adjustments Based on Step 7 Discretion
------------------------------------------------------------------------
                                                               Then the
                                                               percent
            If pilotage service is required in:              change over
                                                             the current
                                                               rate is:
------------------------------------------------------------------------
Area 1 (Designated waters).................................         2.50
Area 2 (Undesignated waters)...............................         2.50
Area 4 (Undesignated waters)...............................         2.50
Area 5 (Designated waters).................................         2.50
Area 6 (Undesignated waters)...............................         2.50
Area 7 (Designated waters).................................         2.50
Area 8 (Undesignated waters)...............................         2.50
------------------------------------------------------------------------

B. Discussion of Methodology

    The Appendix A methodology provides seven steps, with sub-steps, 
for calculating rate adjustments. The following discussion describes 
those steps and sub-steps, and includes tables showing how we have 
applied them to the 2011 financial information supplied by the pilots 
association.
    Step 1: Projection of Operating Expenses. In this step, we project 
the amount of vessel traffic annually. Based on that projection, we 
forecast the amount of necessary and reasonable operating expenses that 
pilotage rates should recover.
    Step 1.A: Submission of Financial Information. This sub-step 
requires each pilot association to provide us with detailed financial 
information in accordance with 46 CFR part 403. The associations 
complied with this requirement, supplying 2011 financial information in 
2012. This is the most current and complete data set we have available.
    Step 1.B: Determination of Recognizable Expenses. This sub-step 
requires us to determine which reported association expenses will be 
recognized for ratemaking purposes, using the guidelines shown in 46 
CFR 404.5. We contracted with an independent accountant to review the 
reported expenses and submit findings recommending which reported 
expenses should be recognized. The accountant also reviewed which 
reported expenses should be adjusted prior to recognition or disallowed 
for ratemaking purposes. The accountant's preliminary findings were 
sent to the pilot associations, they reviewed and commented on those 
findings, and the accountant then finalized the findings. The Director 
reviewed and accepted the final findings, resulting in the 
determination of recognizable expenses. The preliminary findings, the 
associations' comments on those findings, and the final findings are 
all discussed in the ``Summary--Independent Accountant's Report on 
Pilot Association Expenses, with Pilot Association Comments and 
Accountant's Responses,'' which appears in the docket. Tables 2 through 
4 show each association's recognized expenses.

                                  Table 2--Recognized Expenses for District One
----------------------------------------------------------------------------------------------------------------
                                                                 Area 1            Area 2
                                                           ------------------------------------
                Reported expenses for 2011                    St. Lawrence                            Total
                                                                  River         Lake Ontario
----------------------------------------------------------------------------------------------------------------
Operating Expenses:
Other Pilotage Costs:
    Pilot subsistence/Travel..............................          $234,724          $156,246          $390,970
    License insurance.....................................                 0                 0                 0
    Payroll taxes.........................................            61,483            47,611           109,094
    Other.................................................               837               588             1,425
                                                           -----------------------------------------------------
        Total Other Pilotage Costs........................           297,044           204,445           501,489
Pilot Boat and Dispatch Costs:

[[Page 48378]]

 
    Pilot boat expense....................................           111,772            76,904           188,676
    Dispatch expense......................................                 0                 0                 0
    Payroll taxes.........................................             8,611             5,925            14,536
                                                           -----------------------------------------------------
        Total Pilot and Dispatch Costs....................           120,383            82,829           203,212
Administrative Expenses:
    Legal.................................................            10,592             6,922            17,514
    Insurance.............................................            23,780            16,492            40,272
    Employee benefits.....................................            21,282            14,645            35,927
    Payroll taxes.........................................             5,032             3,463             8,495
    Other taxes...........................................             5,042             3,470             8,512
    Travel................................................               756               520             1,276
    Depreciation/Auto leasing/Other.......................            38,252            26,319            64,571
    Interest..............................................            18,484            12,718            31,202
    Dues and subscriptions................................             9,180             9,180            18,360
    Utilities.............................................             4,314             2,941             7,255
    Salaries..............................................            50,718            34,897            85,615
    Accounting/Professional fees..........................             5,752             3,428             9,180
    Pilot Training........................................             4,200             2,277             6,477
    Other.................................................             9,959             6,880            16,839
                                                           -----------------------------------------------------
        Total Administrative Expenses.....................           207,343           144,152           351,495
                                                           -----------------------------------------------------
        Total Operating Expenses..........................           624,770           431,426         1,056,196
Proposed Adjustments (Independent certified public
 accountant (CPA):
Operating Expenses:
Other Pilot Costs:
    Pilotage subsistence/Travel...........................           (2,492)           (1,714)           (4,206)
    Payroll taxes.........................................            12,883             8,864            21,747
                                                           -----------------------------------------------------
        Total Other Pilotage Costs........................            10,391             7,150            17,541
                                                           -----------------------------------------------------
        TOTAL CPA ADJUSTMENTS.............................            10,391             7,150            17,541
                                                           -----------------------------------------------------
            Total Operating Expenses......................           635,161           438,576         1,073,737
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Note: Numbers may not total due to rounding.

                                  Table 3--Recognized Expenses for District Two
----------------------------------------------------------------------------------------------------------------
                                                                 Area 4            Area 5
                                                           ------------------------------------
                Reported expenses for 2011                                     Southeast Shoal        Total
                                                                Lake Erie      to Port Huron,
                                                                                     MI
----------------------------------------------------------------------------------------------------------------
Operating Expenses:
Other Pilotage Costs:
    Pilot subsistence/Travel..............................           $79,250          $118,874          $198,124
    License insurance.....................................             6,168             9,252            15,420
    Payroll taxes.........................................            36,676            55,013            91,689
    Other.................................................            23,560            35,341            58,901
                                                           -----------------------------------------------------
        Total Other Pilotage Costs........................           145,654           218,480           364,134
Pilot Boat and Dispatch Costs:
    Pilot boat expense....................................           104,955           157,432           262,387
    Dispatch expense......................................             6,060             9,090            15,150
    Employee Benefits.....................................            40,419            60,628           101,047
    Payroll taxes.........................................             7,135            10,703            17,838
                                                           -----------------------------------------------------
        Total Pilot and Dispatch Costs....................           158,569           237,853           396,422
Administrative Expenses:
    Legal.................................................            37,520            56,281            93,801
    Office rent...........................................            26,275            39,413            65,688
    Insurance.............................................            10,672            16,009            26,681
    Employee benefits.....................................            16,365            24,548            40,913
    Payroll taxes.........................................             4,446             6,668            11,114
    Other taxes...........................................            14,273            21,409            35,682
    Depreciation/Auto leasing/Other.......................            15,604            23,407            39,011
    Interest..............................................             2,772             4,159             6,931
    Dues and subscriptions................................             7,069            10,603            17,672

[[Page 48379]]

 
    Utilities.............................................            15,410            23,115            38,525
    Salaries..............................................            39,874            59,810            99,684
    Accounting/Professional fees..........................            12,110            18,164            30,274
    Pilot Training........................................                 0                 0                 0
    Other.................................................             8,860            13,291            22,151
                                                           -----------------------------------------------------
        Total Administrative Expenses.....................           211,250           316,877           528,127
                                                           -----------------------------------------------------
        Total Operating Expenses:.........................           515,473           773,210         1,288,683
Proposed Adjustments (Independent CPA):
Operating Expenses:
Other Pilotage Costs:
    Pilot subsistence/Travel..............................           (2,598)           (3,896)           (6,494)
    Other.................................................             (566)             (850)           (1,416)
                                                           -----------------------------------------------------
        Total Other Pilotage Costs........................           (3,164)           (4,746)           (7,910)
Pilot Boat and Dispatch Costs:
    Employee benefits.....................................             (100)             (150)             (249)
                                                           -----------------------------------------------------
        Total Pilot Boat and Dispatch Costs...............             (100)             (150)             (249)
Administrative Expenses:
    Employee benefits.....................................              (25)              (38)              (63)
                                                           -----------------------------------------------------
        Total Administrative Expenses.....................              (25)              (38)              (63)
                                                           -----------------------------------------------------
        TOTAL CPA ADJUSTMENTS.............................           (3,289)           (4,933)           (8,222)
                                                           -----------------------------------------------------
            Total Operating Expenses......................           512,184           768,277         1,280,461
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

                                 Table 4--Recognized Expenses for District Three
----------------------------------------------------------------------------------------------------------------
                                               Area 6            Area 7            Area 8
                                         ------------------------------------------------------
       Reported expenses for 2011          Lakes Huron and                                            Total
                                              Michigan      St. Mary's River    Lake Superior
----------------------------------------------------------------------------------------------------------------
Operating Expenses:
Other Pilotage Costs:
    Pilot subsistence/Travel............           196,529            72,789            94,625           363,943
    License insurance...................            10,157             3,762             4,891            18,810
    Payroll taxes.......................            63,803            23,631            30,720           118,153
    Other...............................             2,184               809             1,052             4,045
                                         -----------------------------------------------------------------------
        Total Other Pilotage Costs......           272,673           100,991           131,288           504,951
Pilot Boat and Dispatch Costs:
    Pilot boat expense..................           243,077            90,028           117,037           450,142
    Dispatch expense....................            87,059            32,244            41,917           161,221
    Payroll taxes.......................             9,607             3,558             4,626            17,791
                                         -----------------------------------------------------------------------
        Total Pilot Boat and Dispatch              339,743           125,830           163,580           629,154
         Costs..........................
Administrative Expenses:
    Legal...............................            12,138             4,495             5,844            22,477
    Office rent.........................             5,346             1,980             2,574             9,900
    Insurance...........................             7,451             2,760             3,587            13,798
    Employee benefits...................            73,230            27,122            35,259           135,611
    Payroll taxes.......................             6,154             2,279             2,963            11,396
    Other taxes.........................            19,339             7,163             9,311            35,813
    Depreciation/Auto leasing...........            34,341            12,719            16,534            63,594
    Interest............................             2,682               993             1,291             4,966
    Dues and subscriptions..............            11,016             5,508             7,344            23,868
    Utilities...........................            19,723             7,305             9,496            36,524
    Salaries............................            55,772            20,656            26,853           103,281
    Accounting/Professional fees........            13,419             4,970             6,461            24,850
    Pilot Training......................               516               191               248               955
    Other...............................             5,394             1,998             2,597             9,989
                                         -----------------------------------------------------------------------
        Total Administrative Expenses...           266,521           100,139           130,362           497,022
                                         -----------------------------------------------------------------------

[[Page 48380]]

 
        Total Operating Expenses........           878,937           326,960           425,230         1,631,127
Proposed Adjustments (Independent CPA):
Operating Expenses:
Other Pilotage Costs:
    Payroll taxes.......................            22,446             8,313            10,807            41,566
                                         -----------------------------------------------------------------------
        Total Other Pilotage Costs......            22,446             8,313            10,807            41,566
Administrative Expenses:
    Other Taxes.........................           (1,613)             (598)             (777)           (2,988)
    Depreciation/Auto leasing...........           (7,707)           (2,854)           (3,711)          (14,272)
    Other...............................             (610)             (226)             (294)           (1,130)
                                         -----------------------------------------------------------------------
        Total Administrative Expenses...           (9,930)           (3,678)           (4,782)          (18,390)
                                         -----------------------------------------------------------------------
        TOTAL CPA ADJUSTMENTS...........            12,516             4,635             6,025            23,176
                                         -----------------------------------------------------------------------
            Total Operating Expenses....           891,453           331,595           431,255         1,654,303
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

    Step 1.C: Adjustment for Inflation or Deflation. In this sub-step, 
we project rates of inflation or deflation for the succeeding 
navigation season. Because we used 2011 financial information, the 
``succeeding navigation season'' for this ratemaking is 2012. We based 
our inflation adjustment of 2 percent on the 2012 change in the 
Consumer Price Index (CPI) for the Midwest Region of the United States, 
which can be found at: http://www.bls.gov/xg_shells/ro5xg01.htm. This 
adjustment appears in Tables 5 through 7.

                                   Table 5--Inflation Adjustment, District One
----------------------------------------------------------------------------------------------------------------
                                                       Area 1                 Area 2
                                                 ------------------     ------------------
         Reported expenses for 2011                 St. Lawrence                                      Total
                                                        River              Lake Ontario
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses:..................  ...          $635,161  ...          $438,576  ...        $1,073,737
2012 change in the CPI for the Midwest        x                .02   x                .02   x                .02
 Region of the United States...............
Inflation Adjustment.......................   =            $12,703   =             $8,772   =            $21,475
----------------------------------------------------------------------------------------------------------------

                                   Table 6--Inflation Adjustment, District Two
----------------------------------------------------------------------------------------------------------------
                                                       Area 4                 Area 5
                                                 ------------------     ------------------
         Reported expenses for 2011                                       Southeast Shoal             Total
                                                      Lake Erie           to Port Huron,
                                                                                MI
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses:..................  ...          $512,184  ...          $768,277  ...        $1,280,461
2012 change in the CPI for the Midwest        x                .02   x                .02   x                .02
 Region of the United States...............
Inflation Adjustment.......................   =            $10,244   =            $15,366   =            $25,609
----------------------------------------------------------------------------------------------------------------

                                                      Table 7--Inflation Adjustment, District Three
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Area 6                 Area 7                 Area 8
                                                                  ------------------     ------------------     ------------------
                 Reported expenses for 2011                         Lakes Huron and                                                           Total
                                                                       Michigan           St. Mary's River         Lake Superior
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses:...................................  ...          $891,453  ...          $331,595  ...          $431,255  ...        $1,654,303
2012 change in the CPI for the Midwest Region of the United    x                .02   x                .02   x                .02   x                .02
 States.....................................................
Inflation Adjustment........................................   =            $17,829   =             $6,632   =             $8,625   =            $33,086
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Step 1.D: Projection of Operating Expenses. In this final sub-step 
of Step 1, we project the operating expenses for each pilotage area on 
the basis of the preceding sub-steps and any other foreseeable 
circumstances that could affect the accuracy of the projection. We are 
not aware of any such foreseeable circumstances that now exist in 
District One.
    For District One, the projected operating expenses are based on the 
calculations from Steps 1.A through 1.C. Table 8 shows these 
projections.

[[Page 48381]]

                               Table 8--Projected Operating Expenses, District One
----------------------------------------------------------------------------------------------------------------
                                                       Area 1                 Area 2
                                                 ------------------     ------------------
         Reported expenses for 2011                 St. Lawrence                                      Total
                                                        River              Lake Ontario
----------------------------------------------------------------------------------------------------------------
Total operating expenses...................  ...          $635,161  ...          $438,576  ...        $1,073,737
Inflation adjustment 2.0%..................   +            $12,703   +             $8,772   +            $21,475
                                            --------------------------------------------------------------------
    Total projected expenses for 2014         =           $647,864   =           $447,348   =         $1,095,212
     pilotage season.......................
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

    In District Two, Federal taxes of $12,000 are accounted for in Step 
6 (Federal Tax Allowance). The projected operating expenses are based 
on the calculations from Steps 1.A through 1.C and Federal taxes. Table 
9 shows these projections.

                               Table 9--Projected Operating Expenses, District Two
----------------------------------------------------------------------------------------------------------------
                                                       Area 4                 Area 5
                                                 ------------------     ------------------
         Reported expenses for 2011                                       Southeast Shoal             Total
                                                      Lake Erie           to Port Huron,
                                                                                MI
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses...................  ...          $512,184  ...          $768,277  ...        $1,280,461
Inflation adjustment 2.0%..................   +            $10,244   +            $15,366   +            $25,609
Director's adjustment and foreseeable
 circumstances
Federal taxes (accounted for in Step 6)....   +           ($4,800)   +           ($7,200)   +          ($12,000)
                                            --------------------------------------------------------------------
    Total projected expenses for 2014         =           $517,627   =           $776,442   =         $1,294,070
     pilotage season.......................
----------------------------------------------------------------------------------------------------------------

    Currently, we are not aware of any foreseeable circumstances for 
District Three. Its projected operating expenses are based on the 
calculations from Steps 1.A through 1.C. Table 10 shows these 
projections.

                                                 Table 10--Projected Operating Expenses, District Three
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Area 6                 Area 7                 Area 8
                                                                  ------------------     ------------------     ------------------
                 Reported expenses for 2011                         Lakes Huron and                                                           Total
                                                                       Michigan           St. Mary's River         Lake Superior
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total expenses..............................................  ...          $891,453  ...          $331,595  ...          $431,255  ...        $1,654,303
Inflation adjustment 2.0%...................................   +            $17,829   +             $6,632   +             $8,625   +            $33,086
                                                             -------------------------------------------------------------------------------------------
    Total projected expenses for 2014 pilotage season.......   =           $909,282   =           $338,227   =           $439,880   =         $1,687,389
--------------------------------------------------------------------------------------------------------------------------------------------------------

    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 2014.
    Step 2.A: Determination of Target Rate of Compensation. Target 
pilot compensation for pilots in undesignated waters approximates the 
average annual compensation for first mates on U.S. Great Lakes 
vessels. Compensation is determined based on the most current union 
contracts and includes wages and benefits received by first mates. We 
calculate target pilot compensation 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 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, 2016. The AMOU has set 
the daily aggregate rate--including the daily wage rate, vacation pay, 
pension plan contributions, and medical plan contributions effective 
August 1, 2014 as follows: (1) In undesignated waters, $612.20 for 
Agreement A and $604.64 for Agreement B; and (2) In designated waters, 
$842.63 for Agreement A and $829.40 for Agreement B.
    Because we are interested in annual compensation, we must convert 
these daily rates. We use a 270-day multiplier which reflects an 
average 30-day month, over the 9 months of the average shipping season. 
Table 11 shows our calculations using the 270-day multiplier.

[[Page 48382]]

          Table 11--Projected Annual Aggregate Rate Components
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Aggregate Rate--Wages and Vacation, Pension, and Medical Benefits Pilots
                         on undesignated waters
------------------------------------------------------------------------
Agreement A:
    $612.20 daily rate x 270 days.........                    165,294.00
Agreement B:
    $604.64 daily rate x 270 days.........                    163,252.80
------------------------------------------------------------------------
                       Pilots on designated waters
------------------------------------------------------------------------
Agreement A:
    $842.63 daily rate x 270 days.........                    227,510.10
Agreement B:
    $829.40 daily rate x 270 days.........                    223,938.00
------------------------------------------------------------------------

    We apportion the compensation provided by each agreement according 
to the percentage of tonnage represented by companies under each 
agreement. Agreement A applies to vessels operated by Key Lakes, Inc., 
representing approximately 30 percent of tonnage, and Agreement B 
applies to all vessels operated by American Steamship Co. and Mittal 
Steel USA, Inc., representing approximately 70 percent of tonnage. 
Table 12 provides details.

                               Table 12--Shipping Tonnage Apportioned by Contract
----------------------------------------------------------------------------------------------------------------
                     Company                                Agreement A                     Agreement B
----------------------------------------------------------------------------------------------------------------
American Steamship Company......................  ..............................                         815,600
Mittal Steel USA, Inc...........................  ..............................                          38,826
Key Lakes, Inc..................................                         361,385  ..............................
                                                 ---------------------------------------------------------------
    Total tonnage, each agreement...............                         361,385                         854,426
                                                 ---------------------------------------------------------------
        Percent tonnage, each agreement.........  361,385 / 1,215,811 = 29.7238%  854,426 / 1,215,811 = 70.2762%
----------------------------------------------------------------------------------------------------------------

    We use the percentages from Table 12 to apportion the projected 
compensation from Table 11. This gives us a single tonnage-weighted set 
of figures. Table 13 shows our calculations.

                             Table 13--Tonnage-weighted Wage and Benefit Components
----------------------------------------------------------------------------------------------------------------
                                                                           Undesignated            Designated
                                                                              waters                 waters
----------------------------------------------------------------------------------------------------------------
Agreement A:
    Total wages and benefits......................................  ...       $165,294.00  ...       $227,510.10
    Percent tonnage...............................................   x           29.7238%   x           29.7238%
                                                                   ---------------------------------------------
        Total.....................................................   =            $49,132   =            $67,625
Agreement B:
    Total wages and benefits......................................  ...       $163,252.80  ...       $223,938.00
    Percent tonnage...............................................   x           70.2762%   x           70.2762%
                                                                   ---------------------------------------------
        Total.....................................................   =           $114,728   =           $157,375
Projected Target Rate of Compensation:
    Agreement A total weighted average wages and benefits.........  ...           $49,132  ...           $67,625
    Agreement B total weighted average wages and benefits.........   +           $114,728   +           $157,375
                                                                   ---------------------------------------------
        Total.....................................................   =           $163,860   =           $225,000
----------------------------------------------------------------------------------------------------------------

    Step 2.B: Determination of the Number of Pilots Needed. Subject to 
adjustment by the Director to ensure uninterrupted service or for other 
reasonable circumstances, we determine the number of pilots needed for 
ratemaking purposes in each area by dividing projected bridge hours for 
each area, by either 1,000 (designated waters) or 1,800 (undesignated 
waters) bridge hours. 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 (76 FR 6351 at 6352 col. 3 (Feb. 4, 2011)), we 
do not include, and never have included, pilot delay, detention, or 
cancellation in calculating bridge hours. Projected bridge hours are 
based on the vessel traffic that pilots are expected to serve. We use 
historical data, input from the pilots and industry, periodicals and 
trade magazines, and information from conferences to project demand for 
pilotage services for the coming year.
    In our 2013 final rule, we determined that 38 pilots would be 
needed for ratemaking purposes. We have

[[Page 48383]]

determined that District 3 has two excess billets that remain unfilled 
and that current and projected traffic levels do not support the 
retention of these unfilled billets. For 2014, we project 36 pilots is 
the proper number to use for ratemaking purposes. We are removing one 
pilot from each of the undesignated waters of District Three (one each 
from Area 6 and Area 8). The total pilot authorization strength 
includes five pilots in Area 2, where rounding up alone would result in 
only four pilots. For the same reasons we explained at length in the 
2008 ratemaking final rule (74 FR 220 at 221-22 (Jan. 5, 2009)) we have 
determined that this adjustment is essential for ensuring uninterrupted 
pilotage service in Area 2. Table 14 shows the bridge hours we project 
will be needed for each area and our calculations to determine the 
number of whole pilots needed for ratemaking purposes.

                                        Table 14--Number of Pilots Needed
----------------------------------------------------------------------------------------------------------------
                                                       Divided by 1,000
                                                          (designated
         Pilotage area           Projected 2014        waters) or 1,800       Calculated value    Pilots needed
                                  bridge hours           (undesignated         of pilot demand    (total = 36)
                                                            waters)
----------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters)....             5,116   /              1,000   =              5.116                 6
Area 2 (Undesignated waters)..             5,429   /              1,800   =              3.016                 5
Area 4 (Undesignated waters)..             5,814   /              1,800   =              3.230                 4
Area 5 (Designated waters)....             5,052   /              1,000   =              5.052                 6
Area 6 (Undesignated waters)..             9,611   /              1,800   =              5.339                 6
Area 7 (Designated waters)....             3,023   /              1,000   =              3.023                 4
Area 8 (Undesignated waters)..             7,540   /              1,800   =              4.189                 5
----------------------------------------------------------------------------------------------------------------

    Step 2.C: Projection of Target Pilot Compensation. In Table 15, we 
project total target pilot compensation separately for each area by 
multiplying the number of pilots needed in each area, as shown in Table 
14, by the target pilot compensation shown in Table 13.

                            Table 15--Projection of Target Pilot Compensation by Area
----------------------------------------------------------------------------------------------------------------
                                                                          Target rate of        Projected target
                  Pilotage area                     Pilots needed              pilot                  pilot
                                                     (total= 36)           compensation           compensation
----------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters)......................                 6   x           $225,000   =         $1,349,999
Area 2 (Undesignated waters)....................                 5   x           $163,860   =           $819,298
Area 4 (Undesignated waters)....................                 4   x           $163,860   =           $655,438
Area 5 (Designated waters)......................                 6   x           $225,000   =         $1,349,999
Area 6 (Undesignated waters)....................                 6   x           $163,860   =           $983,157
Area 7 (Designated waters)......................                 4   x           $225,000   =           $899,999
Area 8 (Undesignated waters)....................                 5   x           $163,860   =           $819,298
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

    Steps 3 and 3.A: Projection of Revenue. In Steps 3 and 3.A., we 
project the revenue that would be received in 2014 if demand for 
pilotage services matches the bridge hours we projected in Table 14, 
and if 2012 pilotage rates are left unchanged. Table 16 shows this 
calculation.

                                     Table 16--Projection of Revenue by Area
----------------------------------------------------------------------------------------------------------------
                                                                                                     Revenue
                  Pilotage area                    Projected 2014          2013 Pilotage         projection for
                                                    bridge hours               rates                  2013
----------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters)......................             5,116   x            $460.97   =         $2,358,327
Area 2 (Undesignated waters)....................             5,429   x            $284.84   =         $1,546,373
Area 4 (Undesignated waters)....................             5,814   x            $205.27   =         $1,193,426
Area 5 (Designated waters)......................             5,052   x            $508.91   =         $2,571,038
Area 6 (Undesignated waters)....................             9,611   x            $199.95   =         $1,921,756
Area 7 (Designated waters)......................             3,023   x            $482.94   =         $1,459,929
Area 8 (Undesignated waters)....................             7,540   x            $186.67   =         $1,407,490
                                                 ---------------------------------------------------------------
    Total.......................................  ................  ...  ................  ...      $12,458,339
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

    Step 4: Calculation of Investment Base. In this step, we calculate 
each association's investment base, which is the recognized capital 
investment in the assets employed by the association 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 17 through 19 follow the 
formula up to that point.

[[Page 48384]]

                                 Table 17--Total Sources of Funds, District One
----------------------------------------------------------------------------------------------------------------
                                                                              Area 1                 Area 2
----------------------------------------------------------------------------------------------------------------
Recognized Assets:
    Total Current Assets..........................................  ...          $669,895  ...          $460,921
    Total Current Liabilities.....................................   -            $54,169   -            $37,271
    Current Notes Payable.........................................   +            $24,746   +            $17,026
    Total Property and Equipment (NET)............................   +           $369,024   +           $253,907
    Land..........................................................   -            $13,054   -             $8,981
    Total Other Assets............................................   +                 $0   +                 $0
                                                                   ---------------------------------------------
        Total Recognized Assets:..................................   =           $996,442   =           $685,602
Non-Recognized Assets
    Total Investments and Special Funds...........................   +             $6,243   +             $4,295
                                                                   ---------------------------------------------
        Total Non-Recognized Assets:..............................   =             $6,243   =             $4,295
Total Assets
    Total Recognized Assets.......................................  ...          $996,442  ...          $685,602
    Total Non-Recognized Assets...................................   +             $6,243   +             $4,295
                                                                   ---------------------------------------------
        Total Assets:.............................................   =         $1,002,685   =           $689,897
Recognized Sources of Funds
    Total Stockholder Equity......................................  ...          $647,677  ...          $445,633
    Long-Term Debt................................................   +           $318,571   +           $219,193
    Current Notes Payable.........................................   +            $24,746   +            $17,026
    Advances from Affiliated Companies............................   +                 $0   +                 $0
    Long-Term Obligations--Capital Leases.........................   +                 $0   +                 $0
                                                                   ---------------------------------------------
        Total Recognized Sources:.................................   =           $990,994   =           $681,852
Non-Recognized Sources of Funds
    Pension Liability.............................................  ...                $0  ...                $0
    Other Non-Current Liabilities.................................   +                 $0   +                 $0
    Deferred Federal Income Taxes.................................   +                 $0   +                 $0
    Other Deferred Credits........................................   +                 $0   +                 $0
                                                                   ---------------------------------------------
        Total Non-Recognized Sources:.............................   =                 $0   =                 $0
Total Sources of Funds
    Total Recognized Sources......................................  ...          $990,994  ...          $681,852
    Total Non-Recognized Sources..................................   +                 $0   +                 $0
        Total Sources of Funds:...................................   =           $990,994   =           $681,852
----------------------------------------------------------------------------------------------------------------

                                 Table 18--Total Sources of Funds, District Two
----------------------------------------------------------------------------------------------------------------
                                                                              Area 4                 Area 5
----------------------------------------------------------------------------------------------------------------
Recognized Assets:
    Total Current Assets..........................................  ...          $454,465  ...          $681,697
    Total Current Liabilities.....................................   -           $409,366   -           $614,048
    Current Notes Payable.........................................   +            $25,822   +            $38,734
    Total Property and Equipment (NET)............................   +           $420,422   +           $630,632
    Land..........................................................   -                 $0   -                 $0
    Total Other Assets............................................   +            $60,195   +            $90,293
                                                                   ---------------------------------------------
        Total Recognized Assets...................................   =           $551,538   =           $827,308
Non-Recognized Assets:                                                                          ................
    Total Investments and Special Funds...........................   +                 $0   +                 $0
        Total Non-Recognized Assets...............................   =                 $0   =                 $0
Total Assets:
    Total Recognized Assets.......................................  ...          $551,538  ...          $827,308
    Total Non-Recognized Assets...................................   +                 $0   +                 $0
                                                                   ---------------------------------------------
        Total Assets..............................................   =           $551,538   =           $827,308
Recognized Sources of Funds:
    Total Stockholder Equity......................................  ...           $89,537  ...          $134,305
    Long-Term Debt................................................   +           $410,357   +           $615,535
    Current Notes Payable.........................................   +            $25,822   +            $38,734
    Advances from Affiliated Companies............................   +                 $0   +                 $0
    Long-Term Obligations--Capital Leases.........................   +                 $0   +                 $0
                                                                   ---------------------------------------------
        Total Recognized Sources..................................   =           $525,716   =           $788,574
Non-Recognized Sources of Funds:
    Pension Liability.............................................  ...                $0  ...                $0
    Other Non-Current Liabilities.................................   +                 $0   +                 $0
    Deferred Federal Income Taxes.................................   +                 $0   +                 $0

[[Page 48385]]

 
    Other Deferred Credits........................................   +                 $0   +                 $0
                                                                   ---------------------------------------------
        Total Non-Recognized Sources..............................   =                 $0   =                 $0
Total Sources of Funds:
    Total Recognized Sources......................................  ...          $525,716  ...          $788,574
    Total Non-Recognized Sources..................................   +                 $0   +                 $0
                                                                   ---------------------------------------------
        Total Sources of Funds....................................   =           $525,716   =           $788,574
----------------------------------------------------------------------------------------------------------------

                                Table 19--Total Sources of Funds, District Three
----------------------------------------------------------------------------------------------------------------
                                                       Area 6                 Area 7                 Area 8
----------------------------------------------------------------------------------------------------------------
Recognized Assets:
    Total Current Assets...................  ...          $658,934  ...          $244,050  ...          $317,265
    Total Current Liabilities..............   -            $64,869   -            $24,025   -            $31,233
    Current Notes Payable..................   +             $3,869   +             $1,433   +             $1,863
    Total Property and Equipment (NET).....   +            $21,905   +             $8,113   +            $10,547
    Land...................................   -                 $0   -                 $0   -                 $0
    Total Other Assets.....................   +               $540   +               $200   +               $260
                                            --------------------------------------------------------------------
        Total Recognized Assets............   =           $620,379   =           $229,771   =           $298,702
Non-Recognized Assets:
    Total Investments and Special Funds....   +                 $0   +                 $0   +                 $0
                                            --------------------------------------------------------------------
        Total Non-Recognized Assets........   =                 $0   =                 $0   =                 $0
Total Assets:
    Total Recognized Assets................  ...          $620,379  ...          $229,771  ...          $298,702
    Total Non-Recognized Assets............   +                 $0   +                 $0   +                 $0
                                            --------------------------------------------------------------------
        Total Assets.......................   =           $620,379   =           $229,771   =           $298,702
Recognized Sources of Funds:
    Total Stockholder Equity...............  ...          $606,164  ...          $224,505  ...          $291,857
    Long-Term Debt.........................   +             $6,478   +             $2,399   +             $3,119
    Current Notes Payable..................   +             $3,869   +             $1,433   +             $1,863
    Advances from Affiliated Companies.....   +                 $0   +                 $0   +                 $0
    Long-Term Obligations--Capital Leases..   +                 $0   +                 $0   +                 $0
                                            --------------------------------------------------------------------
        Total Recognized Sources...........   =           $616,511   =           $228,337   =           $296,839
Non-Recognized Sources of Funds:
    Pension Liability......................  ...                $0  ...                $0  ...                $0
    Other Non-Current......................   +                 $0   +                 $0   +                 $0
    Liabilities............................
    Deferred Federal Income................   +                 $0   +                 $0   +                 $0
    Taxes..................................
    Other Deferred Credits.................   +                 $0   +                 $0   +                 $0
                                            --------------------------------------------------------------------
        Total Non-Recognized Sources.......   =                 $0   =                 $0   =                 $0
Total Sources of Funds:
    Total Recognized Sources...............  ...          $616,511  ...          $228,337  ...          $296,839
    Total Non-Recognized Sources...........   +                 $0   +                 $0   +                 $0
                                            --------------------------------------------------------------------
        Total Sources of Funds.............   =           $616,511   =           $228,337   =           $296,839
----------------------------------------------------------------------------------------------------------------

    Tables 17 through 19 also relate to the second part of the formula 
for calculating the investment base. The second part establishes a 
ratio between recognized sources of funds and total sources of funds. 
Since 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 20 applies the multiplier of 1 and shows that 
the investment base for each association equals its total recognized 
assets. Table 20 also expresses these results by area, because area 
results will be needed in subsequent steps.

[[Page 48386]]

                                                     Table 20--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         996,442         990,994         990,994               1         996,442
                                                                       2         685,602         681,852         681,852               1         685,602
                                                         -----------------------------------------------------------------------------------------------
    TOTAL...............................................  ..............  ..............  ..............  ..............  ..............       1,682,044
Two \2\.................................................               4         551,538         525,716         525,716               1         551,538
                                                                       5         827,308         788,574         788,574               1         827,308
                                                         -----------------------------------------------------------------------------------------------
    TOTAL...............................................  ..............  ..............  ..............  ..............  ..............       1,378,846
Three...................................................               6         620,379         616,511         616,511               1         620,379
                                                                       7         229,771         228,337         228,337               1         229,771
                                                                       8         298,702         296,839         296,839               1         298,702
                                                         -----------------------------------------------------------------------------------------------
    TOTAL...............................................  ..............  ..............  ..............  ..............  ..............       1,148,852
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ ``Investment base'' = ``Total recognized assets'' x ``Multiplier (ratio of recognized to total sources)''.
\2\ 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.

    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 2012, the preceding year, the allowed ROI was 
3.67 percent, based on the average rate of return for that year on 
Moody's AAA corporate bonds, which can be found at: http://research.stlouisfed.org/fred2/series/AAA/downloaddata?cid=119.
    Step 6: Adjustment Determination. The first part of the adjustment 
determination requires an initial calculation, applying a formula 
described in Appendix A. The formula uses the results from Steps 1, 2, 
3, and 4 to project the ROI that can be expected in each area if no 
further adjustments are made. This calculation is shown in Tables 21 
through 23.

                                 Table 21--Projected ROI, Areas in District One
----------------------------------------------------------------------------------------------------------------
                                                                              Area 1                 Area 2
----------------------------------------------------------------------------------------------------------------
Revenue (from Step 3).............................................  ...        $2,358,327  ...        $1,546,373
Operating Expenses (from Step 1)..................................   -           $647,864   -           $447,348
Pilot Compensation (from Step 2)..................................   -         $1,349,999   -           $819,298
Operating Profit/(Loss)...........................................   =           $360,464   =           $279,728
Interest Expense (from audits)....................................   -            $18,484   -            $12,718
Earnings Before Tax...............................................   =           $341,980   =           $267,010
Federal Tax Allowance.............................................   -                 $0   -                 $0
Net Income........................................................   =           $341,980   =           $267,010
Return Element (Net Income + Interest)............................  ...          $360,464  ...          $279,728
Investment Base (from Step 4).....................................   /           $996,442   /           $685,602
Projected Return on Investment....................................   =             0.3618   =             0.4080
----------------------------------------------------------------------------------------------------------------

                                 Table 22--Projected ROI, Areas in District Two
----------------------------------------------------------------------------------------------------------------
                                                                              Area 4                 Area 5
----------------------------------------------------------------------------------------------------------------
Revenue (from Step 3).............................................  ...        $1,193,426  ...        $2,571,038
Operating Expenses (from Step 1)..................................   -           $517,627   -           $776,442
Pilot Compensation (from Step 2)..................................   -           $655,438   -         $1,349,999
Operating Profit/(Loss)...........................................   =            $20,361   =           $444,597
Interest Expense (from audits)....................................   -             $2,772   -             $4,159
Earnings Before Tax...............................................   =            $17,589   =           $440,438
Federal Tax Allowance.............................................   -             $4,800   -             $7,200
Net Income........................................................   =            $12,789   =           $433,238
Return Element (Net Income + Interest)............................  ...           $15,561  ...          $437,397
Investment Base (from Step 4).....................................   /           $551,538   /           $827,308
Projected Return on Investment....................................   =             0.0282   =             0.5287
----------------------------------------------------------------------------------------------------------------

                                Table 23--Projected ROI, Areas in District Three
----------------------------------------------------------------------------------------------------------------
                                                       Area 6                 Area 7                 Area 8
----------------------------------------------------------------------------------------------------------------
Revenue (from Step 3)......................  ...        $1,921,756  ...        $1,459,929  ...        $1,407,490

[[Page 48387]]

 
Operating Expenses (from Step 1)...........   -           $909,282   -           $338,227   -           $439,880
Pilot Compensation (from Step 2)...........   -           $983,157   -           $899,999   -           $819,298
Operating Profit/(Loss)....................   =            $29,317   =           $221,703   =           $148,312
Interest Expense (from audits).............   -             $2,682   -               $993   -             $1,291
Earnings Before Tax........................   =            $26,635   =           $220,710   =           $147,021
Federal Tax Allowance......................   -                 $0   -                 $0   -                 $0
Net Income.................................   =            $26,635   =           $220,710   =           $147,021
Return Element (Net Income + Interest).....  ...           $29,317  ...          $221,703  ...          $148,312
Investment Base (from Step 4)..............   /            620,379   /           $229,771   /           $298,702
Projected Return on Investment.............   =             0.0473   =             0.9649   =             0.4965
----------------------------------------------------------------------------------------------------------------

    The second part required for Step 6 compares the results of Tables 
21 through 23 with the target ROI (3.67 percent) we obtained in Step 5 
to determine if an adjustment to the base pilotage rate is necessary. 
Table 24 shows this comparison for each area.

                                            Table 24--Comparison of Projected ROI and Target ROI, by 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..........          0.3618          0.4080          0.0282          0.5287          0.0473          0.9649          0.4965
Target return on investment.............          0.0367          0.0367          0.0367          0.0367          0.0367          0.0367          0.0367
Difference in return on investment......          0.3251          0.3713        (0.0085)          0.4920          0.0106          0.9282          0.4598
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Note: Decimalization and rounding of the target ROI affects the display in this table but does not affect our calculations, which are based on the
  actual figure.

    Because Table 24 shows a significant difference between the 
projected and target ROIs, an adjustment to the base pilotage rates is 
necessary. Step 6 now requires us to determine the pilotage revenues 
that are needed to make the target return on investment equal to the 
projected return on investment. This calculation is shown in Table 25. 
It adjusts the investment base we used in Step 4, multiplying it by the 
target ROI from Step 5, and applies the result to the operating 
expenses and target pilot compensation determined in Steps 1 and 2.

                                                 Table 25--Revenue Needed To Recover Target ROI, By Area
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Investment
                                                         Operating          Target pilot        base  (Step 4)
                    Pilotage area                     expenses (Step        compensation            x 3.67%            Federal tax        Revenue needed
                                                            1)                (Step 2)            (Target ROI           allowance
                                                                                                    Step 5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters)..........................        $647,864   +       $1,349,999   +          $36,569   +               $0   =       $2,034,432
Area 2 (Undesignated waters)........................         447,348   +          819,298   +           25,162   +                0   =        1,291,807
Area 4 (Undesignated waters)........................         517,627   +          655,438   +           20,241   +            4,800   =        1,198,107
Area 5 (Designated waters)..........................         776,442   +        1,349,999   +           30,362   +            7,200   =        2,164,003
Area 6 (Undesignated waters)........................         909,282   +          983,157   +           22,768   +                0   =        1,915,207
Area 7 (Designated waters)..........................         338,227   +          899,999   +            8,433   +                0   =        1,246,659
Area 8 (Undesignated waters)........................         439,880   +          819,298   +           10,962   +                0   =        1,270,140
                                                     ---------------------------------------------------------------------------------------------------
    Total...........................................       4,076,671   +        6,877,187   +          154,498   +           12,000   =       11,120,355
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The ``Revenue Needed'' column of Table 25 is more than the revenue 
we projected in Table 16. For purposes of transparency, we verify the 
calculations in Table 25 by rerunning the formula in the first part of 
Step 6, using the revenue needed from Table 25 instead of the Table 16 
revenue projections we used in Tables 21 through 23. Tables 26 through 
28 show that attaining the Table 25 revenue needed is sufficient to 
recover target ROI.

[[Page 48388]]

                         Table 26--Balancing Revenue Needed and Target ROI, District One
----------------------------------------------------------------------------------------------------------------
                                                                              Area 1                 Area 2
----------------------------------------------------------------------------------------------------------------
Revenue Needed....................................................  ...        $2,034,432  ...        $1,291,807
Operating Expenses (from Step 1)..................................   -            647,864   -            447,348
Pilot Compensation (from Step 2)..................................   -          1,349,999   -            819,298
Operating Profit/(Loss)...........................................   =             36,569   =             25,162
Interest Expense (from audits)....................................   -             18,484   -             12,718
Earnings Before Tax...............................................   =             18,085   =             12,444
Federal Tax Allowance.............................................   -                  0   -                  0
Net Income........................................................   =             18,085   =             12,444
Return Element (Net Income + Interest)............................  ...            36,569  ...            25,162
Investment Base (from Step 4).....................................   /            996,442   /            685,602
Return on Investment..............................................   =             0.0367   =             0.0367
----------------------------------------------------------------------------------------------------------------

                         Table 27--Balancing Revenue Needed and Target ROI, District Two
----------------------------------------------------------------------------------------------------------------
                                                                              Area 4                 Area 5
----------------------------------------------------------------------------------------------------------------
Revenue Needed....................................................   +         $1,198,107   +         $2,164,003
Operating Expenses (from Step 1)..................................   -            517,627   -            776,442
Pilot Compensation (from Step 2)..................................   -            655,438   -          1,349,999
Operating Profit/(Loss)...........................................   =             25,041   =             37,562
Interest Expense (from audits)....................................   -              2,772   -              4,159
Earnings Before Tax...............................................   =             22,269   =             33,403
Federal Tax Allowance.............................................   -              4,800   -              7,200
Net Income........................................................   =             17,469   =             26,203
Return Element (Net Income + Interest)............................  ...            20,241  ...            30,362
Investment Base (from Step 4).....................................   /            551,538   /            827,308
Return on Investment..............................................   =             0.0367   =             0.0367
----------------------------------------------------------------------------------------------------------------

                        Table 28--Balancing Revenue Needed and Target ROI, District Three
----------------------------------------------------------------------------------------------------------------
                                                       Area 6                 Area 7                 Area 8
----------------------------------------------------------------------------------------------------------------
Revenue Needed.............................   +         $1,915,207   +         $1,246,659   +         $1,270,140
Operating Expenses (from Step 1)...........   -           $909,282   -           $338,227   -           $439,880
Pilot Compensation (from Step 2)...........   -           $983,157   -           $899,999   -           $819,298
Operating Profit/(Loss)....................   =            $22,768   =             $8,433   =            $10,962
Interest Expense (from audits).............   -             $2,682   -               $993   -             $1,291
Earnings Before Tax........................   =            $20,086   =             $7,440   =             $9,671
Federal Tax Allowance......................   -                 $0   -                 $0   -                 $0
Net Income.................................   =            $20,086   =             $7,440   =             $9,671
Return Element (Net Income + Interest).....  ...           $22,768  ...            $8,433  ...           $10,962
Investment Base (from Step 4)..............   /           $620,379   /           $229,771   /           $298,702
Return on Investment.......................   =             0.0367   =             0.0367   =             0.0367
----------------------------------------------------------------------------------------------------------------

    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 25) by the Step 3 revenue projection (Table 16), 
to give us a rate multiplier for each area. Tables 29 through 31 show 
these calculations.

                                Table 29--Rate Multiplier, Areas in District One
----------------------------------------------------------------------------------------------------------------
                                                                              Area 1                 Area 2
                                                                        ------------------     -----------------
                      Ratemaking projections                               St. Lawrence
                                                                               River              Lake Ontario
----------------------------------------------------------------------------------------------------------------
Revenue Needed (from Step 6)......................................  ...        $2,034,432  ...        $1,291,807
Revenue (from Step 3).............................................   /         $2,358,327   /         $1,546,373
Rate Multiplier...................................................   =             0.8627   =             0.8354
----------------------------------------------------------------------------------------------------------------

                                Table 30--Rate Multiplier, Areas in District Two
----------------------------------------------------------------------------------------------------------------
                                                                              Area 4                 Area 5
                                                                        ------------------     -----------------
                      Ratemaking projections                                                     Southeast Shoal
                                                                             Lake Erie           to Port Huron,
                                                                                                       MI
----------------------------------------------------------------------------------------------------------------
Revenue Needed (from Step 6)......................................  ...        $1,198,107  ...        $2,164,003

[[Page 48389]]

 
Revenue (from Step 3).............................................   /         $1,193,426   /         $2,571,038
Rate Multiplier...................................................   =             1.0039   =             0.8417
----------------------------------------------------------------------------------------------------------------

                               Table 31--Rate Multiplier, Areas in District Three
----------------------------------------------------------------------------------------------------------------
                                                       Area 6                 Area 7                 Area 8
                                                 ------------------     ------------------     -----------------
           Ratemaking projections                  Lakes Huron and
                                                      Michigan           St. Mary's River         Lake Superior
----------------------------------------------------------------------------------------------------------------
Revenue Needed (from Step 6)...............  ...        $1,915,207  ...        $1,246,659  ...        $1,270,140
Revenue (from Step 3)......................   /         $1,921,756   /         $1,459,929   /         $1,407,490
Rate Multiplier............................   =             0.9966   =             0.8539   =             0.9024
----------------------------------------------------------------------------------------------------------------

    We calculate a rate multiplier for adjusting the basic rates and 
charges described in 46 CFR 401.420 and 401.428, and it is applicable 
in all areas. We divide total revenue needed (Step 6, Table 25) by 
total projected revenue (Steps 3 and 3.A, Table 16). Table 32 shows 
this calculation.

 Table 32--Rate Multiplier for Basic Rates and Charges in 46 CFR 401.420
                               and 401.428
------------------------------------------------------------------------
                Ratemaking projections
------------------------------------------------------------------------
Total Revenue Needed (from Step 6)...................  ...   $11,120,355
Total revenue (from Step 3)..........................   /    $12,458,339
Rate Multiplier......................................   =         0.8926
------------------------------------------------------------------------

    This table shows that 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 decrease by 10.74 percent in all areas.
    Without further action, the existing rates we established in our 
2013 final rule would then be multiplied by the rate multipliers from 
Tables 29 through 31 to calculate the area by area rate changes for 
2014. The resulting 2014 rates, on average, would then be decreased 
approximately 11 percent from the 2013 rates. This decrease is not due 
to increased efficiencies in pilotage services but rather a result of 
recent significant downward adjustments to AMOU contracts. We declined 
to impose this decrease because financial data from one of the 
associations indicates that such a rate decrease would make it 
difficult for it to continue funding operations and may even cause it 
to fold. Further, the decrease would have an adverse effect on 
providing safe, efficient, and reliable pilotage in the other two 
pilotage districts as well. Finally, our Memorandum of Arrangements 
(MOA) with Canada calls for comparable pilotage rates between the two 
countries and we have proposed matching our rates to the Canadian rate, 
which has actually increased by 2.5 percent this year. Our 
discretionary authority under Step 7 must be ``based on requirements of 
the Memorandum of Arrangements between the United States and Canada, 
and other supportable circumstances that may be appropriate.'' The MOA 
call for comparable United States and Canadian rates, and the rates 
would not be comparable if United States rates for 2014 decrease by 
approximately 11 percent, while Canadian rates for 2014 increase by 2.5 
percent. ``Other supportable circumstances'' we have for exercising our 
discretion include recent E.O. 13609, ``Promoting International 
Regulatory Cooperation,'' which calls on Federal agencies to eliminate 
``unnecessary differences'' between U.S. and foreign regulations (77 FR 
26413; May 4, 2012; sec. 1), and the risk that a substantial rate 
decrease would jeopardize the ability of the three pilotage 
associations to provide safe, efficient, and reliable pilotage service.
    Therefore, we propose relying on the discretionary authority we 
have under Step 7 to further adjust rates so that they match those 
adopted by the Canadian Great Lakes Pilotage Authority for 2014. Table 
33 compares the impact, area by area, that an average decrease of 11 
percent would have, relative to the impact each area would experience 
if United States rates match those of the Canadian GLPA.
    A Coast Guard contractor is currently preparing a comprehensive 
study of our Great Lakes Pilotage ratemaking methodology, which is 
scheduled to be completed later in 2013. The study will address 
possible alternatives to the use of AMOU contracts as benchmarks for 
pilot compensation. We welcome any recommendations from GLPAC or the 
public on that issue.

                                Table 33--Impact of Exercising Step 7 Discretion
----------------------------------------------------------------------------------------------------------------
                                                                 Percent change in rate   Percent change in rate
                             Area                               without exercising Step  with exercise of Step 7
                                                                      7 discretion              discretion
----------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters)....................................                   -13.73                     2.50
Area 2 (Undesignated waters)..................................                   -16.46                     2.50
Area 4 (Undesignated waters)..................................                     0.39                     2.50
Area 5 (Designated waters)....................................                   -15.83                     2.50
Area 6 (Undesignated waters)..................................                    -0.34                     2.50
Area 7 (Designated waters)....................................                   -14.61                     2.50

[[Page 48390]]

 
Area 8 (Undesignated waters)..................................                    -9.76                     2.50
----------------------------------------------------------------------------------------------------------------

    The following tables reflect our proposed rate adjustments of 2.5 
percent across all areas.
    Tables 34 through 36 show these calculations.

                     Table 34--Proposed adjustment of Pilotage Rates, Areas in District One
----------------------------------------------------------------------------------------------------------------
                                                                                                  Adjusted rate
                                                      2013 Rate           Rate multiplier           for 2014
----------------------------------------------------------------------------------------------------------------
                                           Area 1--St. Lawrence River
----------------------------------------------------------------------------------------------------------------
Basic Pilotage..................................        $18.75/km,   x              1.025   =         $19.22/km,
                                                         $33.19/mi                                     $34.02/mi
Each lock transited.............................              $416   x              1.025   =               $426
Harbor movage...................................            $1,361   x              1.025   =             $1,395
Minimum basic rate, St. Lawrence River..........              $908   x              1.025   =               $931
Maximum rate, through trip......................            $3,984   x              1.025   =             $4,084
----------------------------------------------------------------------------------------------------------------
                                              Area 2--Lake Ontario
----------------------------------------------------------------------------------------------------------------
6-hour period...................................              $851   x              1.025   =               $872
Docking or undocking............................              $812   x              1.025   =               $832
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

    In addition to the proposed rate charges in Table 34, and for the 
reasons we discussed in the Summary section of Part V of this preamble, 
we propose adding the authority to impose surcharges in the governing 
regulations and, under that new regulation, we propose authorizing 
District One to implement a temporary supplemental 3 percent charge on 
each source form (the ``bill'' for pilotage service) for the duration 
of the 2014 shipping season, which begins in March 2014. The Canadian 
Great Lakes Pilotage Authority (GLPA) has used an 18 percent surcharge 
without disrupting traffic. As a result, we have concluded that a 3 
percent surcharge will not disrupt traffic. District One must provide 
us with monthly status reports once this surcharge becomes effective 
for the duration of the 2014 shipping season, which begins in March 
2014. We will exclude these training expenses from future rates.

                     Table 35--Proposed Adjustment of Pilotage Rates, Areas in District Two
----------------------------------------------------------------------------------------------------------------
                                                                                                  Adjusted rate
                                                      2013 Rate           Rate multiplier           for 2014
----------------------------------------------------------------------------------------------------------------
                                                Area 4--Lake Erie
----------------------------------------------------------------------------------------------------------------
6-hour period...................................               828   x              1.025   =                849
Docking or undocking............................               637   x              1.025   =                653
Any point on Niagara River below Black Rock Lock             1,626   x              1.025   =              1,667
----------------------------------------------------------------------------------------------------------------
                      Area 5--Southeast Shoal to Port Huron, MI between any point on or in
----------------------------------------------------------------------------------------------------------------
Toledo or any point on Lake Erie W. of Southeast             1,382   x              1.025   =              1,417
 Shoal..........................................
Toledo or any point on Lake Erie W. of Southeast             2,339   x              1.025   =              2,397
 Shoal & Southeast Shoal........................
Toledo or any point on Lake Erie W. of Southeast             3,037   x              1.025   =              3,113
 Shoal & Detroit River..........................
Toledo or any point on Lake Erie W. of Southeast             2,339   x              1.025   =              2,397
 Shoal & Detroit Pilot Boat.....................
Port Huron Change Point & Southeast Shoal (when              4,074   x              1.025   =              4,176
 pilots are not changed at the Detroit Pilot
 Boat)..........................................
Port Huron Change Point & Toledo or any point on             4,719   x              1.025   =              4,837
 Lake Erie W. of Southeast Shoal (when pilots
 are not changed at the Detroit Pilot Boat).....
Port Huron Change Point & Detroit River.........             3,060   x              1.025   =              3,137
Port Huron Change Point & Detroit Pilot Boat....             2,381   x              1.025   =              2,441
Port Huron Change Point & St. Clair River.......             1,693   x              1.025   =              1,735
St. Clair River.................................             1,382   x              1.025   =              1,417
St. Clair River & Southeast Shoal (when pilots               4,074   x              1.025   =              4,176
 are not changed at the Detroit Pilot Boat).....
St. Clair River & Detroit River/Detroit Pilot                3,060   x              1.025   =              3,137
 Boat...........................................
Detroit, Windsor, or Detroit River..............             1,382   x              1.025   =              1,417
Detroit, Windsor, or Detroit River & Southeast               2,339   x              1.025   =              2,397
 Shoal..........................................

[[Page 48391]]

 
Detroit, Windsor, or Detroit River & Toledo or               3,037   x              1.025   =              3,113
 any point on Lake Erie W. of Southeast Shoal...
Detroit, Windsor, or Detroit River & St. Clair               3,060   x              1.025   =              3,137
 River..........................................
Detroit Pilot Boat & Southeast Shoal............             1,693   x              1.025   =              1,735
Detroit Pilot Boat & Toledo or any point on Lake             2,339   x              1.025   =              2,397
 Erie W. of Southeast Shoal.....................
Detroit Pilot Boat & St. Clair River............             3,060   x              1.025   =              3,137
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

                    Table 36--Proposed Adjustment of Pilotage Rates, Areas in District Three
----------------------------------------------------------------------------------------------------------------
                                                                                                  Adjusted rate
                                                     2013 Rate           Rate multiplier            for 2014
----------------------------------------------------------------------------------------------------------------
                                        Area 6--Lakes Huron and Michigan
----------------------------------------------------------------------------------------------------------------
6-hour Period..................................              $691   x              1.025    =               $708
Docking or undocking...........................              $656   x              1.025    =               $672
----------------------------------------------------------------------------------------------------------------
                               Area 7--St. Mary's River between any point on or in
----------------------------------------------------------------------------------------------------------------
Gros Cap & De Tour.............................            $2,583   x              1.025    =             $2,648
Algoma Steel Corp. Wharf, Sault Ste. Marie,                $2,583   x              1.025    =             $2,648
 Ont. & De Tour................................
Algoma Steel Corp. Wharf, Sault. Ste. Marie,                 $973   x              1.025    =               $997
 Ont. & Gros Cap...............................
Any point in Sault St. Marie, Ont., except the             $2,165   x              1.025    =             $2,219
 Algoma Steel Corp. Wharf & De Tour............
Any point in Sault St. Marie, Ont., except the               $973   x              1.025    =               $997
 Algoma Steel Corp. Wharf & Gros Cap...........
Sault Ste. Marie, MI & De Tour.................            $2,165   x              1.025    =             $2,219
Sault Ste. Marie, MI & Gros Cap................              $973   x              1.025    =               $997
Harbor movage..................................              $973   x              1.025    =               $997
----------------------------------------------------------------------------------------------------------------
                                              Area 8--Lake Superior
----------------------------------------------------------------------------------------------------------------
6-hour period..................................              $586   x              1.025    =               $601
Docking or undocking...........................              $557   x              1.025    =               $571
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

VI. Regulatory Analyses

    We developed this proposed rule after considering numerous statutes 
and E.O.s related to rulemaking. Below we summarize our analyses based 
on these statutes or E.O.s.

A. Regulatory Planning and Review

    Executive Orders 12866 (``Regulatory Planning and Review'') and 
13563 (``Improving Regulation and Regulatory Review'') direct agencies 
to assess the costs and benefits of available regulatory alternatives 
and, if regulation is necessary, to select regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety effects, distributive impacts, and equity). 
Executive Order 13563 emphasizes the importance of quantifying both 
costs and benefits, of reducing costs, of harmonizing rules, and of 
promoting flexibility.
    This proposed rule is not a ``significant regulatory action'' under 
section 3(f) of E.O. 12866. Accordingly, the NPRM has not been reviewed 
by the Office of Management and Budget (OMB).
    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 2014 shipping season to 
generate sufficient revenue to cover allowable expenses, and to target 
pilot compensation and returns on pilot associations' investments. The 
rate adjustments in this proposed rule would, if codified, lead to a 
cost in District One and cost savings in Districts Two and Three. The 
cost savings that would accrue to Districts Two and Three would 
outweigh the cost to District One, which would result in an estimated 
annual cost savings to shippers of approximately $817,983 across all 
three districts.\5\
---------------------------------------------------------------------------

    \5\ Despite increasing Great Lakes pilotage rates, on average, 
by approximately 2.5 percent from the current rates set in the 2013 
final rule, we estimate a net cost savings across all three 
districts as a result of an expected decrease in the demand for 
pilotage services from the previous year.
---------------------------------------------------------------------------

    In addition to the overall cost savings that would accrue to all 
three districts as a result of the rate adjustments, we propose 
authorizing District One to implement a temporary supplemental 3 
percent surcharge to traffic in District One in order to recover 
training expenses from 2012. This temporary surcharge would be 
authorized for the duration of the 2014 shipping season, which begins 
in March. We estimate that this would generate $120,070. At the end of 
the 2014 shipping season, we will account for the monies the surcharge 
generates and make adjustments (debits/credits) to the operating 
expenses for the following year.\6\
---------------------------------------------------------------------------

    \6\ Assuming our estimate is correct, we would credit District 
One shippers $71,075 in order to account for the difference between 
the total surcharges collected ($120,070) and the actual training 
expenses incurred ($48,995).

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

[[Page 48392]]

    Therefore, this proposed rule is expected to result in a cost 
savings to shippers of approximately $697,914 across all three 
districts.\7\
---------------------------------------------------------------------------

    \7\ Total cost savings across all three districts is equal to 
the cost savings from rate changes plus a temporary surcharge to 
traffic in District One.
---------------------------------------------------------------------------

    A regulatory assessment follows.
    The proposed rule would apply the 46 CFR part 404, Appendix A, full 
ratemaking methodology, including the exercise of our discretion to 
increase Great Lakes pilotage rates, on average, approximately 2.5 
percent overall from the current rates set in the 2013 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 2011 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 2013 and used financial data from the 2010 
base accounting year. The last annual rate review, conducted under 46 
CFR part 404, Appendix C, was completed early in 2011.
    The shippers affected by these rate adjustments are those owners 
and operators of domestic vessels operating on register (employed in 
foreign trade) and owners and operators of foreign vessels on a route 
within the Great Lakes system. These owners and operators must have 
pilots or pilotage service as required by 46 U.S.C. 9302. There is no 
minimum tonnage limit or exemption for these vessels. The 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 
proposed rule, such as recreational boats and vessels operating only 
within the Great Lakes system, may elect to purchase pilotage services. 
However, this election is voluntary and does not affect our calculation 
of the rate and is not a part of our estimated national cost to 
shippers. Our sampling of pilot data suggests that there are very few 
U.S. domestic vessels that do not have registry and operate only in the 
Great Lakes that voluntarily purchase pilotage services.
    We used 2010-2012 vessel arrival data from the Coast Guard's Marine 
Information for Safety and Law Enforcement (MISLE) system to estimate 
the average annual number of vessels affected by the rate adjustment. 
Using that period, we found that approximately 128 vessels journeyed 
into the Great Lakes system annually. These vessels entered the Great 
Lakes by transiting at least one of the three pilotage districts before 
leaving the Great Lakes system. These vessels often make more than one 
distinct stop, docking, loading, and unloading at facilities in Great 
Lakes ports. Of the total trips for the 128 vessels, there were 
approximately 353 annual U.S. port arrivals before the vessels left the 
Great Lakes system, based on 2010-2012 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 for these services.
    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 2014, based on the 2013 rate 
adjustment, and the total projected revenue needed to cover costs in 
2014, as set forth in this proposed rule, plus any temporary surcharges 
authorized by the Coast Guard. Table 37 details projected revenue 
needed to cover costs in 2014 after making the discretionary adjustment 
to pilotage rates as discussed in Step 7 of Part VI of this preamble. 
Table 38 summarizes the derivation for calculating the 3 percent 
surcharge on District One traffic as discussed in Step 7 of Part VI of 
this preamble. Table 39 details the additional costs or savings by area 
and district as a result of the rate adjustments and the temporary 
surcharge to District One traffic.

                                                     Table 37--Rate Adjustment by Area and District
                                                                 [$U.S.; Non-discounted]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                       Projected revenue
                                                             2013 Pilotage     Rate change \9\     2014 Pilotage      Projected 2014     needed in 2014
                                                               rates \8\                             rates \10\     bridge hours \11\         \12\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 1...................................................            $460.97             1.0250            $472.50              5,116         $2,417,285
Area 2...................................................             284.84             1.0250             291.96              5,429          1,585,032
                                                          ----------------------------------------------------------------------------------------------
    Total, District One..................................  .................  .................  .................  .................          4,002,318
Area 4...................................................             205.27             1.0250             210.40              5,814          1,223,262
Area 5...................................................             508.91             1.0250             521.64              5,052          2,635,314
                                                          ----------------------------------------------------------------------------------------------
    Total, District Two..................................  .................  .................  .................  .................          3,858,576
Area 6...................................................             199.95             1.0250             204.95              9,611          1,969,800
Area 7...................................................             482.94             1.0250             495.01              3,023          1,496,427
Area 8...................................................             186.67             1.0250             191.34              7,540          1,442,677
                                                          ----------------------------------------------------------------------------------------------
    Total, District Three................................  .................  .................  .................  .................          4,908,904
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Some values may not total due to rounding.
\8\ These 2013 estimates are described in Table 16 of this NPRM.
\9\ The estimated rate changes are described in Table 33 of this NPRM.
\10\ 2014 Pilotage Rates = 2013 Pilotage Rates x Rate Change.
\11\ These 2014 estimates are detailed in Table 14 of this NPRM.
\12\ Projected Revenue needed in 2014 = 2014 Pilotage Rates x Projected 2014 Bridge Hours.

[[Page 48393]]

                                   Table 38--Derivation of Temporary Surcharge
----------------------------------------------------------------------------------------------------------------
                                                                         Area 1                   Area 2
----------------------------------------------------------------------------------------------------------------
Projected Revenue Needed in 2014 \13\.........................               $2,417,285               $1,585,032
Surcharge Rate................................................                       3%                       3%
Surcharge Raised..............................................                  $72,519                  $47,551
                                                               -------------------------------------------------
    Total Surcharge...........................................  .......................                 $120,070
----------------------------------------------------------------------------------------------------------------
\13\ These estimates are described in Table 37 of this NPRM.

                           Table 39--Impact of the Proposed Rule by Area and District
                                             [$U.S: Non-discounted]
----------------------------------------------------------------------------------------------------------------
                                                                                                Additional costs
                                      Projected revenue  Projected revenue      Temporary        or savings of
                                        needed in 2013     needed in 2014     surcharge \15\     this proposed
                                             \14\                                                     rule
----------------------------------------------------------------------------------------------------------------
Area 1..............................         $2,404,424         $2,417,285            $72,519            $85,380
Area 2..............................          1,569,160          1,585,032             47,551             63,423
    Total, District One.............          3,973,584          4,002,318            120,070            148,803
Area 4..............................          1,398,694          1,223,262  .................          (175,432)
Area 5..............................          2,596,484          2,635,314  .................             38,830
    Total, District Two.............          3,995,178          3,858,576  .................          (136,602)
Area 6..............................          2,281,673          1,969,800  .................          (311,873)
Area 7..............................          1,556,517          1,496,427  .................           (60,090)
Area 8..............................          1,780,829          1,442,677  .................          (338,152)
    Total, District Three...........          5,619,019          4,908,904  .................          (710,115)
----------------------------------------------------------------------------------------------------------------
* Some values may not total due to rounding.
\14\ These 2013 estimates are described in Table 27 of the 2013 NPRM.
\15\ These estimates are described in Table 38 of this NPRM.

    After applying the discretionary rate change in this NPRM, the 
resulting difference between the projected revenue in 2013 and the 
projected revenue in 2014 is the annual impact to shippers from this 
proposed rule. This figure is 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 discretionary rate adjustment in this proposed 
rule to shippers varies by area and district. The discretionary rate 
adjustments would lead to affected shippers operating in District One 
experiencing total cost increases of $28,733.56, and affected shippers 
operating in District Two and District Three experiencing total cost 
savings of $136,601.82 and $710,115.00, respectively. The savings that 
accrue to shippers operating in District Two and District Three are the 
result of an expected decrease in the demand for pilotage services.
    In addition to the rate adjustments, District One would also incur 
a temporary surcharge of 3 percent to traffic for the duration of the 
2014 season in order to recover training expenses incurred from 2012. 
We estimate that this surcharge would generate $120,070. At the end of 
the 2014 shipping season, we will account for the monies the surcharge 
generates and make adjustments (debits/credits) to the operating 
expenses for the following year.\16\
---------------------------------------------------------------------------

    \16\ Assuming our estimate is correct, we would credit District 
One shippers $71,075 at the end of the 2014 season in order to 
account for the difference between the total surcharges collected 
($120,070) and the actual training expenses incurred by District One 
pilots ($48,995).
---------------------------------------------------------------------------

    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 the number of port arrivals of their vessels' trips. 
However, the additional savings reported earlier in this NPRM does 
capture the adjustment the shippers would experience as a result of the 
proposed rate adjustment. The overall impact of this NPRM would be a 
cost savings to shippers of approximately $697,914 across all three 
districts.
    This proposed rule would allow the Coast Guard to meet the 
statutory requirements to review the rates for pilotage services on the 
Great Lakes, thus ensuring proper pilot compensation.
    Alternatively, if we imposed the new rates based on the new 
contract data from AMOU, there would be an approximately 11 percent 
decrease in rates across the system. This would have a larger effect on 
industry, moving from a proposed cost savings of approximately $697,914 
to a cost savings of approximately $2,367,640. Table 40 details 
projected revenue needed to cover costs in 2014 if the discretionary 
adjustment to pilotage rates as discussed in Step 7 of Part VI of this 
preamble is not made. Table 41 details the additional costs or savings 
by area and district as a result of this alternative proposal.
---------------------------------------------------------------------------

    \17\ These 2014 estimates are detailed in Table 14 of this NPRM.

[[Page 48394]]

                                               Table 40--Alternative Rate Adjustment by Area and District
                                                                 [$U.S.; Non-discounted]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             2013 Pilotage                         2014 Pilotage      Projected 2014   Projected revenue
                                                                 rates           Rate change           rates        bridge hours \17\    needed in 2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 1...................................................            $460.97             0.8627            $397.66              5,116         $2,034,432
Area 2...................................................             284.84             0.8354             237.95              5,429          1,291,807
    Total, District One..................................  .................  .................  .................  .................          3,326,239
Area 4...................................................             205.27             1.0039             206.07              5,814          1,198,107
Area 5...................................................             508.91             0.8417             428.35              5,052          2,164,002
    Total, District Two..................................  .................  .................  .................  .................          3,362,109
Area 6...................................................             199.95             0.9966             199.27              9,611          1,915,207
Area 7...................................................             482.94             0.8539             412.39              3,023          1,246,659
Area 8...................................................             186.67             0.9024             168.45              7,540          1,270,140
    Total, District Three................................  .................  .................  .................  .................          4,432,006
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Some values may not total due to rounding.

                          Table 41--Alternative Impact of the Rule by Area and District
                                             [$U.S.; Non-discounted]
----------------------------------------------------------------------------------------------------------------
                                                                                                Additional costs
                                      Projected revenue  Projected revenue      Temporary        or savings of
                                        needed in 2013     needed in 2014     surcharge \18\     this proposed
                                             (A)                (B)                (C)           rule (B-A) + C
----------------------------------------------------------------------------------------------------------------
Area 1..............................         $2,404,424         $2,034,432            $61,033         ($308,959)
Area 2..............................          1,569,160          1,291,807             38,754          (238,599)
    Total, District One.............          3,973,584          3,326,239             99,787          (547,558)
Area 4..............................          1,398,694          1,198,107  .................          (200,587)
Area 5..............................          2,596,484          2,164,002  .................          (432,482)
    Total, District Two.............          3,995,178          3,362,109  .................          (633,069)
Area 6..............................          2,281,673          1,915,207  .................          (366,466)
Area 7..............................          1,556,517          1,246,659  .................          (309,858)
Area 8..............................          1,780,829          1,270,140  .................          (510,689)
    Total, District Three...........          5,619,019          4,432,006  .................        (1,187,013)
----------------------------------------------------------------------------------------------------------------
* Some values may not total due to rounding.

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

    \18\ The temporary surcharge generated under this alternative is 
expected to be less than under the proposed alternative. This is a 
result of a substantial decrease in projected revenue due to the 
lower Projected Pilotage Rates for 2014 under this alternative.
---------------------------------------------------------------------------

    We reject this alternative because a substantial rate decrease 
would jeopardize the ability of the three pilotage associations to 
provide safe, efficient, and reliable pilotage service as well as 
violate the Memorandum of Arrangements, which calls for the United 
States' and Canada's pilotage rates to be comparable. See our 
discussion of Step 7 in Part VI of this preamble for further 
explanation.

B. Small Entities

    Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have 
considered whether this 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 that 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 2010-2012 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, 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 with 
the same NAICS industry classification and small-entity size standards 
described above, but they have fewer than 500 employees; combined, they 
have approximately 65 total employees. We expect no adverse impact to 
these entities from this proposed rule because all associations receive 
enough revenue to balance the projected expenses associated with the 
projected number of bridge hours and pilots.
    Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that 
this 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

[[Page 48395]]

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, 
Director, Great Lakes Pilotage, Commandant (CG-WWM-2), Coast Guard; 
telephone 202-372-2037, email Todd.A.Haviland@uscg.mil, or fax 202-372-
1914. 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 
proposed rule would not change the burden in the collection currently 
approved by the OMB under OMB Control Number 1625-0086, Great Lakes 
Pilotage Methodology.

E. Federalism

    A rule has implications for federalism under Executive Order 13132, 
Federalism, if it has a substantial direct effect on the States, on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. We have analyzed this rule under that Order and have 
determined that it is consistent with the fundamental federalism 
principles and preemption requirements described in Executive Order 
13132. Our analysis is explained below.
    Congress directed the Coast Guard to establish ``rates and charges 
for pilotage services.'' 46 U.S.C. 9303(f). This regulation is issued 
pursuant to that statute and is preemptive of state law as outlined in 
46 U.S.C. 9306. Under 46 U.S.C. 9306, a ``State or political 
subdivision of a State may not regulate or impose any requirement on 
pilotage on the Great Lakes.'' As a result, States or local governments 
are prohibited from regulating within this category. Therefore, the 
rule is consistent with the principles of federalism and preemption 
requirements in Executive Order 13132.
    While it is well settled that States may not regulate in categories 
in which Congress intended the Coast Guard to be the sole source of a 
vessel's obligations, the Coast Guard recognizes the key role that 
State and local governments may have in making regulatory 
determinations. Additionally, for rules with implications and 
preemptive effect, Executive Order 13132 specifically directs agencies 
to consult with State and local governments during the rulemaking 
process.
    Therefore, the Coast Guard invites State and local governments and 
their representative national organizations to indicate their desire 
for participation and consultation in this rulemaking process by 
submitting comments to this NPRM. In accordance with Executive Order 
13132, the Coast Guard will provide a federalism impact statement to 
document: (1) The extent of the Coast Guard's consultation with State 
and local officials who submit comments to this proposed rule; (2) a 
summary of the nature of any concerns raised by State or local 
governments and the Coast Guard's position thereon; and (3) a statement 
of the extent to which the concerns of State and local officials have 
been met. We will also report to the Office of Management and Budget 
any written communications with the States.

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 discuss the effects of this proposed 
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 E.O. 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 E.O. 12988, Civil Justice Reform, to minimize litigation, 
eliminate ambiguity, and reduce burden.

I. Protection of Children

    We have analyzed this proposed rule under E.O. 13045, Protection of 
Children from Environmental Health Risks and Safety Risks. This 
proposed 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 E.O. 
13175, Consultation and Coordination with Indian Tribal Governments, 
because it would not have a substantial direct effect on one or more 
Indian tribes, on the relationship between the Federal Government and 
Indian tribes, or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes.

K. Energy Effects

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

L. Technical Standards

    The National Technology Transfer and Advancement Act (15 U.S.C. 272 
note) directs agencies to use voluntary consensus standards in their 
regulatory activities unless the agency provides Congress, through the 
OMB, with an explanation of why using these standards would be 
inconsistent with applicable law or otherwise impractical. Voluntary 
consensus standards are technical standards (e.g., specifications of 
materials, performance, design, or operation; test methods; sampling 
procedures; and related management

[[Page 48396]]

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 (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 proposed rule is 
categorically excluded under section 2.B.2, figure 2-1, paragraph 34(a) 
of the Instruction. Paragraph 34(a) pertains to minor regulatory 
changes that are editorial or procedural in nature. This 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

0
1. The authority citation for part 401 continues to read as follows:

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

0
2. In Sec.  401.400, revise paragraph (b) to read as follows:

Sec.  401.400  Calculation of pilotage units and determination of 
weighting factor.

* * * * *
    (b) Weighting Factor Table:

------------------------------------------------------------------------
                                                              Weighting
                  Range of pilotage units                      factor
------------------------------------------------------------------------
0-49......................................................          1.0
50-159....................................................          1.15
160-189...................................................          1.30
190-and over..............................................          1.45
------------------------------------------------------------------------

* * * * *
0
3. Add new Sec.  401.401 to read as follows:

Sec.  401.401  Surcharges.

    To facilitate safe, efficient, and reliable pilotage, and for good 
cause, the Director may authorize surcharges on any rate or charge 
authorized by this subpart. Surcharges must be proposed for prior 
public comment and may not be authorized for more than one year.
0
4. In Sec.  401.405, revise paragraphs (a) and (b), including the 
footnote to Table (a), to read as follows:

Sec.  401.405  Basic rates and charges on the St. Lawrence River and 
Lake Ontario.

* * * * *
    (a) Area 1 (Designated Waters):

------------------------------------------------------------------------
               Service                        St. Lawrence River
------------------------------------------------------------------------
Basic Pilotage......................  $19.22 per kilometer or $34.02 per
                                       mile \1\.
Each Lock Transited.................  426 \1\.
Harbor Movage.......................  1,395 \1\.
------------------------------------------------------------------------
\1\ The minimum basic rate for assignment of a pilot in the St. Lawrence
  River is $931, and the maximum basic rate for a through trip is
  $4,084.

    (b) Area 2 (Undesignated Waters):

------------------------------------------------------------------------
                         Service                           Lake Ontario
------------------------------------------------------------------------
6-hour Period...........................................            $872
Docking or Undocking....................................             832
------------------------------------------------------------------------

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

Sec.  401.407  Basic rates and charges on Lake Erie and the navigable 
waters from Southeast Shoal to Port Huron, MI.

* * * * *
    (a) Area 4 (Undesignated Waters):

------------------------------------------------------------------------
                                                 Lake Erie
                                                  (east of
                    Service                      Southeast     Buffalo
                                                   Shoal)
------------------------------------------------------------------------
6-hour Period.................................         $849         $849
Docking or Undocking..........................          653          653
Any point on the Niagara River below the Black          N/A        1,667
 Rock Lock....................................
------------------------------------------------------------------------

    (b) Area 5 (Designated Waters):

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Toledo or any
                                                                                point on Lake                         Detroit Pilot
                    Any point on or in                      Southeast Shoal      Erie west of      Detroit River           Boat         St. Clair River
                                                                               Southeast Shoal
--------------------------------------------------------------------------------------------------------------------------------------------------------
Toledo or any port on Lake Erie west of Southeast Shoal..             $2,397             $1,417             $3,113             $2,397                N/A
Port Huron Change Point..................................          \1\ 4,176          \1\ 4,837              3,137              2,441              1,735
St. Clair River..........................................          \1\ 4,176                N/A              3,137              3,137              1,417
Detroit or Windsor or the Detroit River..................              2,397              3,113              1,417                N/A              3,137
Detroit Pilot Boat.......................................              1,735              2,397                N/A                N/A              3,137
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ When pilots are not changed at the Detroit Pilot Boat.

0
6. 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
------------------------------------------------------------------------
6-hour Period...........................................            $708
Docking or Undocking....................................             672
------------------------------------------------------------------------

    (b) Area 7 (Designated Waters):

[[Page 48397]]

----------------------------------------------------------------------------------------------------------------
                              Area                                    De Tour        Gros Cap       Any harbor
----------------------------------------------------------------------------------------------------------------
Gros Cap........................................................          $2,648             N/A             N/A
Algoma Steel Corporation Wharf at Sault Ste. Marie, Ontario.....           2,648             997             N/A
Any point in Sault Ste. Marie, Ontario, except the Algoma Steel            2,219             997             N/A
 Corporation Wharf..............................................
Sault Ste. Marie, MI............................................           2,219             997             N/A
Harbor Movage...................................................             N/A             N/A            $997
----------------------------------------------------------------------------------------------------------------

    (c) Area 8 (Undesignated Waters):

------------------------------------------------------------------------
                        Service                           Lake Superior
------------------------------------------------------------------------
6-hour Period..........................................             $601
Docking or Undocking...................................              571
------------------------------------------------------------------------

Sec.  401.420  [Amended]

0
7. Amend Sec.  401.420 as follows:
0
a. In paragraph (a), remove the text ``$126'' and add, in its place, 
the text ``$129''; and remove the text ``$1,972'' and add, in its 
place, the text ``$2,021'';
0
b. In paragraph (b), remove the text ``$126'' and add, in its place, 
the text ``$129''; and remove the text ``$1,972'' and add, in its 
place, the text ``$2,021''; and
0
c. In paragraph (c)(1), remove the text ``$744'' and add, in its place, 
the text ``$763''; and in paragraph (c)(3), remove the text ``$126'' 
and add, in its place, the text ``$129'', and remove the text 
``$1,972'' and add, in its place, the text ``$2,021''.

Sec.  401.428  [Amended]

0
8. In Sec.  401.428, remove the text ``$744'' and add, in its place, 
the text ``$763''.

    Dated: July 31, 2013.
Rajiv Khandpur,
Acting Director, Marine Transportation Systems Management, U.S. Coast 
Guard.
[FR Doc. 2013-19209 Filed 8-7-13; 8:45 am]
BILLING CODE 9110-04-P