Document ID: USCG-2022-0370-0020
Agency: uscg
Document Type: Rule
Title: Great Lakes Pilotage Rates—2023 Annual Ratemaking and Review of Methodology
Posted Date: 2023-02-27T05:00Z

[Federal Register Volume 88, Number 38 (Monday, February 27, 2023)]
[Rules and Regulations]
[Pages 12226-12258]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-03212]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

46 CFR Part 401

[Docket No. USCG-2022-0370]
RIN 1625-AC82

Great Lakes Pilotage Rates--2023 Annual Ratemaking and Review of 
Methodology

AGENCY: Coast Guard, DHS.

ACTION: Final rule.

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SUMMARY: In accordance with the statutory provisions enacted by the 
Great Lakes Pilotage Act of 1960, the Coast Guard is issuing new base 
pilotage rates for the 2023 shipping season. This rule adjusts the 
pilotage rates to account for changes in district operating expenses, 
an increase in the number of pilots, and anticipated inflation. These 
changes, when combined, result in a 16-percent net increase in pilotage 
costs compared to the 2022 season.

DATES: This final rule is effective March 29, 2023.

ADDRESSES: To view documents mentioned in this preamble as being 
available in the docket, go to www.regulations.gov, type USCG-2022-0370 
in the search box and click ``Search.'' Next, in the Document Type 
column, select ``Supporting & Related Material.''

FOR FURTHER INFORMATION CONTACT: For information about this document 
call or email Mr. Brian Rogers, Commandant, Office of Waterways and 
Ocean Policy--Great Lakes Pilotage Division (CG-WWM-2), Coast Guard; 
telephone 410-360-9260, email [email protected], or fax 202-372-
1914.

SUPPLEMENTARY INFORMATION: 

Table of Contents for Preamble

I. Abbreviations
II. Executive Summary

[[Page 12227]]

III. Basis and Purpose
IV. Discussion of Comments and Changes
    A. Great Lakes Pilotage Ratemaking Methodology
    B. The Staffing Model
    C. 2023 Great Lakes Pilotage Rate
    D. Cruise Line Traffic
    E. Fair Business Practices
    G. Changes to the NPRM's Estimate for District Three Pilot 
Numbers
    F. Miscellaneous Concerns
V. Discussion of Methodological and Other Changes
VI. Individual Target Pilot Compensation Benchmark
VII. Discussion of Rate Adjustments

District One

    A. Step 1: Recognize Previous Operating Expenses
    B. Step 2: Project Operating Expenses, Adjusting for Inflation 
or Deflation
    C. Step 3: Estimate Number of Registered Pilots and Apprentice 
Pilots
    D. Step 4: Determine Target Pilot Compensation Benchmark and 
Apprentice Pilot Wage Benchmark
    E. Step 5: Project Working Capital Fund
    F. Step 6: Project Needed Revenue
    G. Step 7: Calculate Initial Base Rates
    H. Step 8: Calculate Average Weighting Factors by Area
    I. Step 9: Calculate Revised Base Rates
    J. Step 10: Review and Finalize Rates

District Two

    A. Step 1: Recognize Previous Operating Expenses
    B. Step 2: Project Operating Expenses, Adjusting for Inflation 
or Deflation
    C. Step 3: Estimate Number of Registered Pilots and Apprentice 
Pilots
    D. Step 4: Determine Target Pilot Compensation Benchmark and 
Apprentice Pilot Wage Benchmark
    E. Step 5: Project Working Capital Fund
    F. Step 6: Project Needed Revenue
    G. Step 7: Calculate Initial Base Rates
    H. Step 8: Calculate Average Weighting Factors by Area
    I. Step 9: Calculate Revised Base Rates
    J. Step 10: Review and Finalize Rates

District Three

    A. Step 1: Recognize Previous Operating Expenses
    B. Step 2: Project Operating Expenses, Adjusting for Inflation 
or Deflation
    C. Step 3: Estimate Number of Registered Pilots and Apprentice 
Pilots
    D. Step 4: Determine Target Pilot Compensation Benchmark and 
Apprentice Pilot Wage Benchmark
    E. Step 5: Project Working Capital Fund
    F. Step 6: Project Needed Revenue
    G. Step 7: Calculate Initial Base Rates
    H. Step 8: Calculate Average Weighting Factors by Area
    I. Step 9: Calculate Revised Base Rates
    J. Step 10: Review and Finalize Rates
VIII. Regulatory Analyses
    A. Regulatory Planning and Review
    B. Small Entities
    C. Assistance for Small Entities
    D. Collection of Information
    E. Federalism
    F. Unfunded Mandates
    G. Taking of Private Property
    H. Civil Justice Reform
    I. Protection of Children
    J. Indian Tribal Governments
    K. Energy Effects
    L. Technical Standards
    M. Environment

I. Abbreviations

AMOU American Maritime Officers Union
APA American Pilots' Association
BLS Bureau of Labor Statistics
CFR Code of Federal Regulations
CPA Certified public accountant
CPI Consumer Price Index
DHS Department of Homeland Security
Director U.S. Coast Guard's Director of the Great Lakes Pilotage
ECI Employment Cost Index
FOMC Federal Open Market Committee
FR Federal Register
GLPA Great Lakes Pilotage Authority (Canadian)
GLPAC Great Lakes Pilotage Advisory Committee
GLPMS Great Lakes Pilotage Management System
LPA Lakes Pilots Association
NAICS North American Industry Classification System
NPRM Notice of proposed rulemaking
OMB Office of Management and Budget
PCE Personal Consumption Expenditures
Sec.  Section
SBA Small Business Administration
SLSPA Saint Lawrence Seaway Pilotage Association
The Act The Great Lakes Pilotage Act
U.S.C. United States Code
WGLPA Western Great Lakes Pilots Association

II. Executive Summary

    In accordance with Title 46 of the United States Code (U.S.C.), 
Chapter 93,\1\ the Coast Guard regulates pilotage for oceangoing 
vessels on the Great Lakes and St. Lawrence Seaway--including setting 
the rates for pilotage services and adjusting them on an annual basis 
for the upcoming shipping season. The shipping season begins when the 
locks open in the St. Lawrence Seaway, which allows traffic access to 
and from the Atlantic Ocean. The opening of the locks varies annually, 
depending on waterway conditions, but is generally in March or April. 
The rates, which for the 2023 season range from $410 to $876 per pilot 
hour (depending on which of the specific six areas pilotage service is 
provided), are paid by shippers to the pilot associations. The three 
pilot associations, which are the exclusive U.S. source of registered 
pilots on the Great Lakes, use this revenue to cover operating 
expenses, maintain infrastructure, compensate apprentice and registered 
pilots, acquire and implement technological advances, train new 
personnel, and provide for continuing professional development.
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    \1\ 46 U.S.C. 9301-9308.
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    In accordance with statutory and regulatory requirements, the Coast 
Guard employs the ratemaking methodology introduced in 2016. Our 
ratemaking methodology calculates the revenue needed for each pilotage 
association (operating expenses, compensation for the number of pilots, 
and anticipated inflation), and then divides that amount by the 
expected demand for pilotage services over the course of the coming 
year, to produce an hourly rate. This is a 10-step methodology to 
calculate rates, which is explained in detail in the ``Discussion of 
Methodological and Other Changes'' in section V of the preamble to this 
rule.
    As part of our annual review, the Coast Guard is issuing a full 
ratemaking and establishing new pilotage rates for 2023 based on the 
existing 10-step ratemaking methodology. The Coast Guard conducted the 
last full ratemaking 5 years ago, in 2018 (83 FR 26162, June 5, 2018). 
Per Title 46 of the Code of Federal Regulations (CFR), section 
404.100(a), in this final rule, the Coast Guard's Director of the Great 
Lakes Pilotage (``the Director'') is establishing base pilotage rates 
via a full ratemaking pursuant to Sec. Sec.  404.101 through 404.110. 
The Coast Guard sets base rates to meet the goal of promoting safe, 
efficient, and reliable pilotage service on the Great Lakes by 
generating sufficient revenue for each pilotage association to 
reimburse its necessary and reasonable operating expenses, fairly 
compensate trained and rested pilots, and provide appropriate funds to 
use for improvements. A 10-year average is used when calculating 
traffic to smooth out anomalies in traffic caused by unexpected events, 
such as those caused by the COVID-19 pandemic. The Coast Guard 
estimates that this rule results in $5,172,200 of additional costs.
    Based on the ratemaking model discussed in this final rule, the 
Coast Guard is establishing the rates shown in table 1.

[[Page 12228]]

                           Table 1--Current and 2023 Pilotage Rates on the Great Lakes
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                                                                                    Final 2022      Final 2023
                     Area                                     Name                 pilotage rate   pilotage rate
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District One: Designated......................  St. Lawrence River..............            $834            $876
District One: Undesignated....................  Lake Ontario....................             568             586
District Two: Designated......................  Navigable waters from Southeast              536             601
                                                 Shoal to Port Huron, MI.
District Two: Undesignated....................  Lake Erie.......................             610             704
District Three: Designated....................  St. Mary's River................             662             834
District Three: Undesignated..................  Lakes Huron, Michigan, and                   342             410
                                                 Superior.
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    This rule affects 56 U.S. Great Lakes pilots, 6 apprentice pilots, 
3 pilot associations, and the owners and operators of an average of 285 
oceangoing vessels that transit the Great Lakes annually. This rule is 
not economically significant under Executive Order 12866 and will not 
affect the Coast Guard's budget or increase Federal spending. The 
estimated overall annual regulatory economic impact of this rate change 
is a net increase of $5,172,200 in estimated payments made by shippers 
during the 2023 shipping season. This final rule establishes the 2023 
yearly compensation for pilots on the Great Lakes at $424,398 per pilot 
(a $25,132 increase, or 6.29 percent, over their 2022 compensation). 
Because the Coast Guard must review, and, if necessary, adjust rates 
each year, the Coast Guard analyzes these as single-year costs and does 
not annualize them over 10 years. Section VIII of this preamble 
provides the regulatory impact analyses of this rule.

III. Basis and Purpose

    The legal basis of this rulemaking is 46 U.S.C. Chapter 93,\2\ 
which requires foreign merchant vessels and United States vessels 
operating ``on register'' (meaning United States vessels engaged in 
foreign trade) to use United States or Canadian pilots while transiting 
the United States waters of the St. Lawrence Seaway and the Great Lakes 
system.\3\ For U.S. Great Lakes pilots, the statute 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.'' \4\ The statute requires that rates be 
established or reviewed and adjusted each year, no later than March 
1.\5\ The statute also requires that base rates 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.\6\ The Secretary's duties and authority under 46 U.S.C. 
Chapter 93 have generally been delegated to the Coast Guard.\7\
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    \2\ 46 U.S.C. 9301-9308.
    \3\ 46 U.S.C. 9302(a)(1).
    \4\ 46 U.S.C. 9303(f).
    \5\ Id.
    \6\ Id.
    \7\ DHS Delegation No. 00170.1 (II)(92)(f), Revision No. 01.3. 
The Secretary retains the authority under Section 9307 to establish, 
and appoint members to, a Great Lakes Pilotage Advisory Committee.
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    The purpose of this rule is to issue new pilotage rates for the 
2023 shipping season. The Coast Guard believes that the new rates will 
continue to promote our goal, as outlined in 46 CFR 404.1, of promoting 
safe, efficient, and reliable pilotage service in the Great Lakes by 
generating for each pilotage association sufficient revenue to 
reimburse its necessary and reasonable operating expenses, fairly 
compensate trained and rested pilots, and provide appropriate funds to 
use for improvements.

IV. Discussion of Comments and Changes

    In response to the notice of proposed rulemaking (NPRM) for this 
ratemaking (87 FR 52870, August 30, 2022) the Coast Guard received six 
comment submissions. These submissions include one comment filed 
jointly by the Lakes Pilots Association, the Saint Lawrence Seaway 
Pilotage Association, and the Western Great Lakes Pilots Association 
(the Great Lakes Pilots' comment); one filed jointly by the Shipping 
Federation of Canada, the American Great Lakes Ports Association, and 
the United States Great Lakes Shipping Association (collectively, the 
Coalition); one from the president of the St. Lawrence Seaway Pilots' 
Association (SLSPA); one from the president of the Lakes Pilots 
Association (LPA); one from the president of the Western Great Lakes 
Pilot Association (WGLPA); and one from an individual who did not 
provide an affiliation to any stakeholder. As each of these commenters 
touched on numerous issues, for each response below, the Coast Guard 
notes which commenter raised the specific points addressed. In 
situations where multiple commenters raised similar issues, the Coast 
Guard provides one response to those issues.

A. Great Lakes Pilotage Ratemaking Methodology

    The Coalition recommended that the Coast Guard define what the term 
``necessary and reasonable'' means. In 46 CFR 404.2(b), the Coast Guard 
lists criteria to recognize an expense item as necessary and 
reasonable. In general, necessary and reasonable operating expenses are 
those with a clear business reason to operate the pilotage pool or 
provide pilotage, and for which the cost is consistent with market 
conditions and not excessive, to ensure safe and reliable pilotage 
service to foreign-flag vessels.
    The Coalition recommended the addition of a line-by-line review of 
the previous year's operating expenses in order to better shape future 
projections of operating expenses. The Coast Guard disagrees with this 
recommendation because the recommendation is already in place and 
conducted by both the Coast Guard and an independent third party. The 
Coast Guard's current practice is to receive yearly financial 
statements in April of each year from each district and compare them to 
the previous year's expenses. For transparency, we place the financial 
statements on the Coast Guard's Office of Waterways and Ocean Policy--
Great Lakes Pilotage Division website so the public can also look at 
these documents.\8\ The Coast Guard also hires an independent 
accounting firm to conduct, in conjunction with the Coast Guard, 
extensive reviews of the pilot association's financial information, 
including but not limited to variance analysis of previous operating 
expenses, which enables the Coast Guard to determine the necessity and 
reasonableness of association expenses. This practice was reviewed by 
the Government Accountability Office in 2019 and was deemed a best 
practice

[[Page 12229]]

when developing rates, as it keeps the Coast Guard impartial.
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    \8\ Financial statements can be found at https://www.dco.uscg.mil/Our-Organization/Assistant-Commandant-for-Prevention-Policy-CG-5P/Marine-Transportation-Systems-CG-5PW/Office-of-Waterways-and-Ocean-Policy/Office-of-Waterways-and-Ocean-Policy-Great-Lakes-Pilotage-Div/.
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    The Coalition recommended a reevaluation of the framework for 
pilotage operation in ``designated'' and ``undesignated'' waters. The 
Coast Guard does not have the authority to accommodate this 
recommendation. The Great Lakes Pilotage Act (``the Act'') created the 
designated and undesignated categories for the System. In undesignated 
waters, the United States- or Canadian-registered pilot must be onboard 
and available to the master. In designated waters, the pilot must be on 
the bridge and direct the navigation of the vessel. Through the Act, 
Congress bestowed the authority to classify these waters onto the 
President of the United States. Such designation can be accomplished 
only by Executive order or Presidential proclamation, which the Coast 
Guard has no authority to issue, and would only oppose if the change 
compromised maritime safety.
    The Coalition recommended that the Coast Guard make the 
compensation level of individual pilots available to the public. The 
Coast Guard disagrees with this recommendation. Compensation of 
individual pilots is not included in the expense base or methodology, 
and, therefore, we decline to add a regulatory requirement for pilot 
associations to publicly report the compensation of individual pilots. 
The Coast Guard does not use the actual earnings or average earnings; 
instead, target pilot compensation is used (described in Step 4 of the 
existing methodology), which the Coast Guard has determined to be 
reasonable and necessary. Because actual salary values are not used in 
the ratemaking, the Coast Guard believes that a requirement to report 
pilot compensation is not in the public interest or necessary to 
provide for the costs of services. Progress toward pilot retention can 
be reviewed through pilot turnover and the association's ability to 
promptly fill pilot vacancies for fully registered pilots and 
apprentice pilots.
    The Coalition recommended that the Coast Guard include an 
additional layer of review in the methodology by taking an annual look 
back at the actual revenues and comparing it with the previous year's 
projections for accuracy. The Coast Guard acknowledges the utility of 
such an exercise and already has a process during which we take the 
financial statements that are submitted annually by each District under 
46 CFR 401.320(d)(4) and compare the actual revenue reported with the 
projected revenue from the previous year's rate.
    Any substantial difference between actual and projected revenue is 
a result of incorrectly predicting vessel traffic or average vessel 
weight. The Coast Guard uses a ten-year moving average to predict 
traffic, which has been demonstrated to be sufficiently accurate over 
time while also providing a measure of rate stability that pilots and 
shippers alike can rely on.\9\ No commenter has provided a more 
accurate methodology to predict traffic.
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    \9\ See Am. Great Lake Ports Assn. v. United States Coast Guard, 
443 F. Supp. 3d 44, 64 (D.D.C. 2020), holding that ``the Coast Guard 
made an intentional choice to use a wider window for calculating the 
traffic average in order to minimize volatility. Although the agency 
acknowledged that using a ten-year moving average meant that in 
2018, Plaintiffs would have to pay more than they would have had the 
Coast Guard used a three-year moving average, the agency determined 
that the ten-year average was nonetheless preferable in order to 
smooth out historically observed spikes in traffic data. That was a 
rational choice, even if the traffic data included data from the 
period of the last recession.'' The Court also cited ``data [that] 
clearly support[ed] the Coast Guard's decision to use a ten-year 
moving average in order to prevent `dramatic swings' in rates from 
year to year.'' Am. Great Lake Ports Assn., 443 F. Supp. 3d at 65.
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    While we acknowledge the value of looking back on the accuracy of 
recent projections, such analysis is not as simple as comparing one 
number to another. First, our estimates for projected needed revenue 
are based on 3-year-old expense data, which means the analysis may not 
be as accurate as it would be if it were based on real-time expense 
data. This delay is out of the Coast Guard's control, as we must wait 
for the numbers to be audited before we receive them. Second, there is 
a necessary offset in comparing the realized revenues because they have 
to match the earlier year, when the base of expenses occurred. Lastly, 
there is prevailing inflation that occurs between when expenses are 
realized and then put into the ratemaking, and when we receive the 
realized revenue figure to compare back. These factors can cause minor 
differences between the projected and actual revenue figures and would 
need to be included in a discussion on the accuracy of past 
projections.
    The Coast Guard is amenable to including a discussion of the 
already existing ``look back'' exercise into its ratemaking process and 
would welcome feedback on where and how to do this. The Coast Guard 
encourages the Coalition to bring this matter up at the next advisory 
committee meeting, so we can see exactly how they would like this added 
to the methodology.

B. The Staffing Model

    The WGLPA made the recommendation that the Coast Guard amend the 
final rule to reflect four apprentice pilots. The Coast Guard disagrees 
with this recommendation. District Three currently has 20 full member 
pilots along with 5 apprentice pilots. According to our records, two 
apprentice pilots will become fully registered pilots at the beginning 
of the year. When these 2 apprentice pilots become full members, that 
will bring the number to 22 full member pilots. The WGLPA does not have 
any additional trainees or apprentice pilots in its training program 
and did not provide the names of any expected hires for the Coast Guard 
to consider adjusting this number. If the District would like to add an 
additional apprentice pilot to their roster for 2023, the matter can be 
discussed with the Director prior to the opening of the 2023 shipping 
season.
    The WGLPA commented that it has six pilots assigned to the 
designated area and requested that the Coast Guard adjust the rate to 
reflect six pilots, not the five pilots currently implemented in the 
rate. The Coast Guard disagrees. The Coast Guard is willing to evaluate 
potential adjustments based on specific delays or safety concerns in 
the designated area of District Three, but the commenter did not 
provide any supporting documentation for last year or this year 
demonstrating that the current split between designated and 
undesignated pilots in the staffing model is causing delays or safety 
concerns in the system. The Coast Guard did not see a significant 
enough change in bridge hours to justify the addition of a sixth pilot.
    The LPA made the comment, that they will have 16 registered pilots 
and 1 trainee pilot in District Two for the 2023 shipping season, as 
opposed to the 2 apprentice pilots listed in the NPRM. The Coast Guard 
agrees with this comment. Based on reviews from the apprentice pilot 
training evaluations for 2022, one of the two apprentice pilots 
finished the apprentice program more rapidly than anticipated. Because 
of this, the Coast Guard has determined that District Two will have 16 
registered pilots and only 1 apprentice pilot at the beginning of the 
2023 shipping season and will adjust the numbers in the rate 
accordingly.
    The LPA, WGLPA, and SLSPA all recommended that the staffing model 
increase the number of pilots in their districts. The Coast Guard 
agrees with this comment and is amenable to addressing the current 
staffing model further. A decision is necessary regarding which changes 
will be implemented to reflect the correct number of pilots needed in 
the staffing model in order to conduct safe and continuous pilotage 
service. The Coast Guard will discuss this issue with stakeholders 
throughout the year and at

[[Page 12230]]

the next GLPAC meeting so that this issue is resolved for the next 
ratemaking.
    The SLSPA commented that they will need three additional trainee 
pilots for the 2023 season to safely and reliably meet the future 
traffic demand in District One. The Coast Guard agrees to the addition 
of three trainee pilots. This addition does not have any impact on this 
ratemaking because the districts are reimbursed for trainee pilot 
expenses, via the rate, 3 calendar years after the expenses are 
incurred in Step 1 of the methodology. The Coast Guard understands that 
changes to the staffing model will need to be incorporated in the 2024 
ratemaking in order to accommodate these potential pilots in future 
rates. The Coast Guard will discuss this issue with stakeholders 
throughout the year and at the next GLPAC meeting so that this issue is 
resolved for the next ratemaking.

C. 2023 Great Lakes Pilotage Rate

    The Coalition commented on the rate, stating that rates are too 
high, landing Great Lakes pilots within the wealthiest 2 percent of 
Americans. The Coast Guard does not find this comment to be relevant to 
the proposed rates established by this rulemaking. The commenter 
provided no supporting documentation. The Coast Guard suggests that the 
commenter provide supporting documentation at a future GLPAC meeting or 
submit supporting documentation for further consideration.
    The WGLPA requested an explanation for the ``Director's 
Adjustments--Applicant Surcharge Collected'' number in table 27 of the 
NPRM. The Coast Guard placed a Director's adjustment of $122,539 in the 
NPRM and final rule. This number, $105,668.60, was derived from 
surcharges collected from vessel trips between April 6, 2020, and 
December 9, 2020, and $16,870.58, summed from vessel trips before April 
6, 2020. The Coast Guard did not authorize these surcharges.

D. Cruise Line Traffic

    The commenters were almost unanimously concerned about an explosion 
of cruise vessel traffic on the Great Lakes and the resulting impact on 
pilot demand. The Coast Guard recognizes that a blossoming cruise ship 
sector is of concern to all Great Lakes stakeholders and considered the 
concerns of each commenter in this arena. Each commenter urged the 
Coast Guard to stay abreast of this issue and to address it in the 
staffing model sooner rather than later.
    The Coast Guard understands the importance of this issue and has 
already begun studying the growth of the cruise sector traffic. At the 
September 13, 2022, GLPAC meeting, the Coast Guard addressed the issue 
of cruise ship traffic with Great Lakes stakeholders. Among the issues 
discussed was a recognition that the staffing model, which is based on 
pilot assignment cycle hours, may not be as helpful when vessels such 
as cruise ships have a different calculus of their movement.\10\ For 
example, cruise ships holding hundreds of passengers will be less 
tolerant of delays than a typical shipping vessel and will also have 
scheduled delays while passengers visit port city attractions. Another 
issue is that because of the novelty of the sector, lack of historic 
data, and COVID-19 preventing any cruise ship traffic in 2020 and 2021, 
our 10-year moving average does not capture very much cruise ship 
traffic, which could result in a systemic error.
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    \10\ See discussion on pages 4-5 of the Memorandum For the 
Record of the Sept. 13, 2022 GLPAC Meeting. The transcript is 
available in the docket at https://www.regulations.gov/document/USCG-2022-0370-0018.
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    The experts at GLPAC, having recognized these deficiencies, 
ultimately recommended that the Director use his discretion to 
accommodate cruise line traffic demand, irrespective of the current 
staffing model ceiling, if no changes to the model or ratemaking 
methodology itself are viable this year.
    The Coast Guard is committed to addressing this new demand but will 
not make changes to the staffing model without the ``robust analysis'' 
called for by GLPAC.\11\ The Coast Guard will collaborate with GLPAC to 
gather more definitive pilot hour data for the cruise ship sector, 
including ship assignment and bridge hour numbers for cruise ships in 
each District. We acknowledge that this is a sector that could be a 
permanent factor in the Great Lakes, and we are committed to finding a 
reasonable solution to increased pilot demand without disregarding this 
year's statutory deadline. In addition to the Coast Guard's future 
efforts, we encourage stakeholders to work together, as there may be 
solutions to this issue outside of this ratemaking process.
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    \11\ See discussion on pages 43-54 of the GLP Advisory Committee 
Sept. 1, 2021 Meeting Minutes, available online at https://www.regulations.gov/document/USCG-2022-0370-0009.
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    In the meantime, the Director will use his discretion, as 
recommended by GLPAC, to take measures to accommodate demand in the 
2023 season. Such measures may include hiring contract pilots or 
allowing retired pilots to return to work on a temporary basis. The 
Coast Guard encourages stakeholders to gather relevant data before the 
next meeting of the GLPAC, which will be announced in the Federal 
Register.

E. Fair Business Practices

    One commenter opposed the rate increase on the basis that it forces 
hiring a Coast Guard pilot, is creating a monopoly, and is bad for 
business. The Coast Guard disagrees. The Coast Guard does not and has 
never employed Coast Guard pilots for any trade, as the commenter 
suggests. The Coast Guard has no authority in determining market 
structures. In 46 U.S.C. 9302, Congress requires vessels to employ 
United States or Canadian registered pilots. The Coast Guard is only 
responsible for providing clear and timely regulations, policy, and 
direction to the affected population.

F. Temporary Pilot Services

    The LPA requested recuperation of operating expenses related to 
wages paid to a retired pilot, which they needed on a temporary 
registration to meet demand surges. The Coast Guard agrees with the 
recommendation and finds this is a necessary and reasonable cost 
related to the costs of providing pilotage. In addition, at the most 
recent GLPAC meeting, on September 13, 2022, the appointed members 
unanimously agreed that this expense should be an allowable operating 
expense. The Coast Guard posted a summary of the GLPAC meeting minutes, 
titled, ``GLPAC Sept 13, 2022, Meeting Memorandum for the Record USCG'' 
to the rulemaking docket, USCG-2022-0370, on September 20, 2022. A 
subsequent ``GLPAC Sept 13, 2022, Meeting Memorandum for the Record 
v2,'' posted on October 3, 2022, made unrelated corrections to Coast 
Guard statements and replaced the original September 20, 2022, version. 
The ``Memorandum for the Record'' summarizes the GLPAC discussion and 
approval of the temporary pilot wages as an operating expense. The 
Coast Guard plans to issue guidelines regarding the reimbursement of 
temporary registered pilot costs.
    The GLPAC consists of the three pilot association presidents and 
four additional members representing the ports, vessel operators, 
shippers, and labor organizations, who all concurred with adding this 
expense to meet the shipping demands for timely service. The expenses 
associated with the hiring of a temporary pilot in the operating 
expenses are included in this

[[Page 12231]]

ratemaking, in Step 1 of the methodology.

G. Bridge Hours

    The WGLPA made a comment that the number of hours for District 
Three ``Time on Task'' should be amended to reflect 3,520 hours in 
their designated area in 2020, 23,678 hours in their undesignated area 
in 2020, 2,516 hours in their designated area in 2021, and 18,286 hours 
in their undesignated area for 2021. The Coast Guard agrees with this 
comment. Previous figures, extracted from the data the Coast Guard 
received, was inaccurate. The Coast Guard has detailed this difference 
in trips in the ``SeaPro Sept 27 2022 Error Conversation Memorandum for 
the Record'', which can be found at www.regulations.gov/document/USCG-2022-0370-0019. After reviewing the updated numbers, the Coast Guard 
agrees to incorporate the commenter's submitted numbers into the 
rulemaking.

V. Discussion of Methodological and Other Changes

    The Coast Guard is using the existing ratemaking methodology for 
establishing the base rates in this full ratemaking. The Coast Guard is 
not issuing any methodological or other policy changes to the 
ratemaking within this final rule.
    According to 46 U.S.C. 9303(f), and restated in 46 CFR 404.100(a), 
the Coast Guard must establish base rates by a full ratemaking at least 
once every 5 years. The Coast Guard determined that the current base 
rate and methodology still adequately adheres to the Coast Guard's 
goals of safety through rate and compensation stability, while 
promoting recruitment and retention of qualified U.S. registered 
pilots. The Coast Guard has made several changes to the ratemaking over 
the last several years in consideration of the public interest and the 
costs of providing services. The recent changes and their impacts are 
summarized as follows.
    In the 2017 ratemaking (82 FR 41466, August 31, 2017), the Coast 
Guard modified the methodology to account for the additional revenue 
produced by the application of weighting factors (discussed in detail 
in Steps 7 through 9 for each district, in section VII of this 
preamble).
    In the 2018 ratemaking (83 FR 26162, June 5, 2018), the Coast Guard 
adopted a new approach in the methodology for the compensation 
benchmark, based upon United States mariners rather than Canadian 
working pilots.
    In the 2020 ratemaking (85 FR 20088, April 9, 2020), the Coast 
Guard revised the methodology to accurately capture all costs and 
revenues associated with Great Lakes pilotage requirements and produce 
an hourly rate that adequately and accurately compensates pilots and 
covers expenses.
    The 2021 ratemaking (86 FR 14184, March 12, 2021) changed the 
inflation calculation in Step 4, Sec.  404.104(b) for interim 
ratemakings, so that the previous year's target compensation value is 
first adjusted by actual inflation value using the Employment Cost 
Index (ECI). That change ensures that the target pilot compensation 
reimbursed to the association remains current with inflation and 
competitive with industry pay increases.
    The 2022 ratemaking (87 FR 18488, March 30, 2022) implemented an 
apprentice pilot wage benchmark in Steps 3 and 4 to provide 
predictability and stability to pilot associations training apprentice 
pilots. The 2022 final rule also codified rounding up the staffing 
model's final number to ensure the ratemaking does not undercount the 
pilot need presented by the staffing model and association 
circumstances.
    Table 2 summarizes the changes between the 2023 Ratemaking NPRM and 
this final rule.

          Table 2--Changes Between Proposed Rule and Final Rule
------------------------------------------------------------------------
                 Change                             Reasoning
------------------------------------------------------------------------
Revise number of pilots in District Two  District Two reported that one
 from 15 to 16 and adjust apprentice      of their two apprentice pilots
 pilots from 2 to 1.                      listed in the NPRM would
                                          become a fully registered
                                          pilot for the 2023 season.
Correct traffic data for District Three  District Three commented that
 to reflect discrepancy in the            the hours listed in Step 7
 assignment of bridge hours to            were incorrect and provided a
 designated and undesignated areas.       corrected sheet of traffic
                                          hours, which correctly
                                          attribute hours between the
                                          designated and undesignated
                                          areas. See further details
                                          below.
Update inflation figures...............  More recent figures were
 Updates 2021 Employment Cost     published since the Coast
 Index (ECI) inflation from 5.1%,         Guard conducted the analysis
 listed in the NPRM, to 5.7%.             for the NPRM.
 Updates 2022 Personal
 Consumption Expenditures (PCE)
 inflation from 2.7%, listed in the
 NPRM, to 4.3%.
 Updates 2023 PCE inflation
 from 2.3%, listed in the NPRM, to
 2.7%.
------------------------------------------------------------------------

    Using the corrected traffic data for 2020, the Coast Guard removed 
34 trips from District Three that occurred before March 24, 2020 (the 
opening of the 2020 season). The Coast Guard identified eight 
incorrectly specified trips with errors or missing data in the ``Area'' 
and/or ``District'' columns.\12\ With these corrections, the total 
bridge hours decreased by 500 hours for the undesignated areas and 
decreased by 162 hours for the designated areas. Similarly, for 2021, 
the Coast Guard removed 19 trips that occurred before March 21, 2021 
(the opening of the 2021 season) and identified 12 incorrectly 
specified trips with errors or missing data in the ``Area'' and/or 
``District'' columns. The 2021 total bridge hours increased by 67 hours 
for the undesignated areas and decreased by 68 hours for the designated 
area. Table 3 shows the difference between the published figures for 
bridge hours in Step 7 and the updated figures used for this final 
rule.
---------------------------------------------------------------------------

    \12\ The ``Area'' column is a written description either as Lake 
(undesignated) or River (designated), while ``District'' is the 
numerical Area, six, seven, or eight. An example of an incorrect 
specification was a trip described as Lake in the ``Area'' column, 
and area seven in the ``District'' column, meaning it was listed as 
simultaneously designated and undesignated.

[[Page 12232]]

                                        Table 3--Changes to Step 7 Bridge Hours From Proposed Rule to Final Rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                  Previously published                                                Updated                       Difference
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Undesignated     Designated     Undesignated     Designated     Undesignated     Designated
--------------------------------------------------------------------------------------------------------------------------------------------------------
2020....................................................          24,178           3,682          23,678           3,520            -500            -162
Average.................................................          21,106           2,930          21,056           2,914             -50             -16
2021....................................................          18,219           2,584          18,286           2,516              67             -68
Average.................................................          21,327           3,021          21,284           2,998             -43             -23
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Further, the Coast Guard updated Step 8, ``Average Weighting Factor 
by Area'' to reflect the changes in the number of transits by vessel 
class in each area. This includes corrections to the 8 incorrectly 
specified trips in 2020, the 12 incorrectly specified trips in 2021, 
and the general corrections from the change in bridge hours in the 
updated data provided by District Three. Table 4 details the changes by 
area and vessel class for both 2020 and 2021 which will be used in this 
final rule. The Coast Guard will not otherwise publish a correction to 
the previously published 2020 data used in the 2022 ratemaking.

                           Table 4--Changes to Step 8 From Proposed Rule to Final Rule
----------------------------------------------------------------------------------------------------------------
                                                                                Number of transits
                                                                 -----------------------------------------------
                        Area/vessel class                           Previously
                                                                     published        Updated       Difference
----------------------------------------------------------------------------------------------------------------
                                              Area 6--Undesignated
----------------------------------------------------------------------------------------------------------------
Class 1 (2021)..................................................               7               8               1
Class 2 (2020)..................................................             395             332             -63
Class 2 (2021)..................................................             261             273              12
Class 3 (2021)..................................................               7               5              -2
Class 4 (2020)..................................................             413             339             -74
Class 4 (2021)..................................................             312             356              44
----------------------------------------------------------------------------------------------------------------
                                               Area 7--Designated
----------------------------------------------------------------------------------------------------------------
Class 1 (2020)..................................................              16              15              -1
Class 1 (2021)..................................................              12              15               3
Class 2 (2020)..................................................             250             218             -32
Class 2 (2021)..................................................             128             131               3
Class 3 (2020)..................................................               4               1              -3
Class 4 (2020)..................................................             385             336             -49
Class 4 (2021)..................................................             299             258             -41
----------------------------------------------------------------------------------------------------------------
                                              Area 8--Undesignated
----------------------------------------------------------------------------------------------------------------
Class 1 (2021)..................................................               4               5               1
Class 2 (2020)..................................................             239             180             -59
Class 2 (2021)..................................................              96             124              28
Class 3 (2020)..................................................               2               1              -1
Class 4 (2020)..................................................             456             265            -191
Class 4 (2021)..................................................             182             319             137
----------------------------------------------------------------------------------------------------------------

    These refinements to the methodology continue to promote safe, 
efficient, and reliable pilotage service on the Great Lakes, and allow 
each pilotage association to generate sufficient revenue to cover its 
necessary and reasonable operating expenses, fairly compensate trained 
and rested pilots, and realize an appropriate revenue to use for 
improvements.

[[Page 12233]]

VI. Individual Target Pilot Compensation Benchmark

    The Coast Guard is issuing the target pilot compensation benchmark 
in this ratemaking at the target compensation for the ratemaking year 
2022, adjusted for inflation. In a full ratemaking year, per 46 CFR 
404.104(a), the Director determines a base individual target pilot 
compensation using a compensation benchmark in consideration of 
relevant currently available non-proprietary information. The Director 
may make necessary and reasonable adjustments to the benchmark if 
circumstances require. The compensation benchmark will be used in Step 
4 of the existing methodology. In the following interim year 
ratemakings, the base target pilot compensation will be adjusted 
annually in accordance with Sec.  404.104(b). How the Coast Guard 
arrived at this compensation benchmark is explained below.
    Prior to 2016, the Coast Guard based the compensation benchmark on 
data provided by the American Maritime Officers Union (AMOU) regarding 
its contract for first mates on the Great Lakes. However, in 2016, the 
AMOU elected to no longer provide this data to the Coast Guard. In the 
2016 ratemaking (81 FR 11907, March 7, 2016), the Coast Guard used the 
average compensation for a Canadian pilot plus a 10-percent adjustment. 
The shipping industry challenged the compensation benchmark, and the 
court found that the Coast Guard did not adequately support the 10-
percent addition to the Canadian GLPA compensation benchmark. American 
Great Lakes Ports Association v. Zukunft, 296 F.Supp. 3d 27, 48 (D.D.C. 
2017), aff'd sub nom. American Great Lakes Ports Association v. 
Schultz, 962 F.3d 510 (D.C. Cir. 2020). The Coast Guard then based the 
2018 full ratemaking compensation benchmark on data provided by the 
AMOU, regarding its contract for first mates on the Great Lakes in the 
2011 to 2015 period (83 FR 26162, June 5, 2018). The 2018 final rule 
adjusted the AMOU 2015 data for inflation using Federal Open Market 
Committee median economic projections for PCE inflation.
    In the 2020 interim year ratemaking final rule, the Coast Guard 
established its most recent pilot compensation benchmark. Given the 
lack of access to AMOU data, the Coast Guard did not rely on the AMOU 
aggregated wage and benefit information as the basis for the 
compensation benchmark. Instead, the Coast Guard adopted the 2019 
target pilot compensation (with inflation) as our compensation 
benchmark going forward. The Coast Guard stated in the 2020 final rule 
that no other United States or Canadian pilot compensation data was 
appropriate to use as a benchmark at that time. See 85 FR 20088, 20091 
(April 9, 2020). The Director determined that the ratemaking provided 
adequate compensation for pilots. In the 2020 ratemaking, the Coast 
Guard announced that the 2020 benchmark will be used for future rates. 
See 85 FR 20091 (April 9, 2020).
    Based on our experience over the past three ratemakings (2020-
2022), the Director continues to believe that the level of target pilot 
compensation for those years provided an appropriate level of 
compensation for U.S.-registered pilots. According to Sec.  404.101(a), 
the Director may make necessary and reasonable adjustments to the 
benchmark based on current information. However, current circumstances 
do not indicate that an adjustment, other than for inflation, is 
necessary. The Director bases this decision on the fact that there is 
no indication that registered pilots are resigning due to their 
compensation, or that this compensation benchmark is causing shortfalls 
in achieving reliable pilotage. The Coast Guard also does not believe 
that the pilot compensation benchmark is too high relative to the 
expertise required to perform the job. The compensation will continue 
to be adjusted annually, in accordance with published inflation rates, 
which will ensure the compensation remains competitive and current for 
upcoming years.
    Therefore, the Coast Guard is not seeking alternative benchmarks 
for target compensation at this time and, instead, will simply adjust 
the amount of target pilot compensation for inflation as our target 
compensation benchmark for 2023, as shown in Step 4. This target 
compensation benchmark approach has advanced and will continue to 
advance the Coast Guard's goals of safety through rate and compensation 
stability while also promoting recruitment and retention of qualified 
U.S. pilots.
    The compensation benchmark for 2023 is $399,266 per registered 
pilot and $143,736 per apprentice pilot, using the 2022 compensation as 
a benchmark. The Coast Guard then follows the procedure outlined in 
paragraph (b) of Sec.  404.104, which adjusts the existing compensation 
benchmark for inflation using a two-step process. First, the Coast 
Guard adjusts the 2022 target compensation benchmark of $399,266 by 3.5 
percent, for an adjusted value of $413,240. This first adjustment 
accounts for the difference in actual first quarter 2022 ECI inflation, 
which is 5.7 percent, and the 2022 PCE estimate of 2.2 
percent.13 14 The second step accounts for projected 
inflation from 2022 to 2023, which is 2.7 percent.\15\ Based on the 
projected 2023 inflation estimate, the target compensation benchmark 
for 2023 is $424,398 per pilot. The apprentice pilot wage benchmark is 
36 percent of the target pilot compensation, or $152,783 ($424,398 x 
0.36).
---------------------------------------------------------------------------

    \13\ Employment Cost Index, Total Compensation for Private 
Industry workers in Transportation and Material Moving, Annual 
Average, Series ID: CIU2010000520000A. Accessed September 29, 2022. 
https://www.bls.gov/news.release/eci.t05.htm.
    \14\ Table 1 Summary of Economic Projections, PCE Inflation June 
Projection. Accessed September 2022 https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220921.pdf.
    \15\ Table 1 Summary of Economic Projections, PCE Inflation 
December Projection. Accessed March 2022 https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220316.pdf..
---------------------------------------------------------------------------

VII. Discussion of Rate Adjustments

    In this final rule, based on the policy changes described in the 
previous section, the Coast Guard is issuing new pilotage rates for 
2023. The Coast Guard is conducting the 2023 ratemaking as a full 
ratemaking, as was done in 2018 (83 FR 26162). Thus, the Coast Guard 
adjusted the compensation benchmark following the full ratemaking year 
procedures under Sec.  404.100(a) rather than following the procedure 
for an interim ratemaking year under Sec.  404.100(b).
    This section discusses the rate changes using the ratemaking steps 
provided in 46 CFR part 404. The Coast Guard details all 10 steps of 
the ratemaking procedure for each of the 3 districts to show how the 
Coast Guard arrives at the new rates.

District One

A. Step 1: Recognize Previous Operating Expenses

    Step 1 in the ratemaking methodology requires that the Coast Guard 
review and recognize the operating expenses for the last full year for 
which figures are available (Sec.  404.101). To do so, the Coast Guard 
begins by reviewing the independent accountant's financial reports for 
each association's 2020 expenses and revenues.\16\ For accounting 
purposes, the financial reports divide expenses into designated and 
undesignated areas. For costs accrued by the pilot associations 
generally, such as employee benefits, for example, the cost is divided 
between the designated and undesignated areas on a pro rata basis.
---------------------------------------------------------------------------

    \16\ These reports are available in the docket for this 
rulemaking.
---------------------------------------------------------------------------

    In the 2020 expenses used as the basis for this rulemaking, 
districts used the term ``applicant'' to describe applicant

[[Page 12234]]

trainees and persons who will be called apprentices (applicant pilots), 
under the definition of ``apprentice pilot'', which was introduced in 
the 2022 final rule. Therefore, when describing past expenses, the term 
``applicant'' is used to match what was reported from 2020, which 
includes both applicant and apprentice pilots. The term ``apprentice'' 
is used to distinguish apprentice pilot wages and describe the impacts 
of the ratemaking going forward.
    The Coast Guard will continue to include apprentice salaries as an 
allowable expense in the 2023 ratemaking, as it is based on 2020 
operating expenses, when salaries were still an allowable expense. The 
apprentice salaries paid in the years 2020 and 2021 have not been 
reimbursed in the ratemaking as of publication of this rule. Applicant 
salaries (including applicant trainees and apprentice pilots) will 
continue to be an allowable operating expense through the 2024 
ratemaking, which uses operating expenses from 2021, when the wages for 
apprentice pilots were still authorized as operating expenses.
    Beginning with the 2025 ratemaking, apprentice pilot salaries will 
no longer be included as a 2022 operating expense, because apprentice 
pilot wages will have already been factored into the ratemaking Steps 3 
and 4 in calculation of the 2022 rates. Beginning in 2025, the 
applicant salaries' operating expenses for 2022 will consist of only 
applicant trainees (those who are not yet apprentice pilots). The 
recognized operating expenses for District One are shown in table 5.

                               Table 5--2020 Recognized Expenses for District One
----------------------------------------------------------------------------------------------------------------
                                                                                   District One
                                                                 -----------------------------------------------
                                                                    Designated     Undesignated
              Reported operating expenses for 2020               --------------------------------
                                                                   St. Lawrence                        Total
                                                                       River       Lake Ontario
----------------------------------------------------------------------------------------------------------------
Applicant Pilot Compensation:
    Salaries....................................................        $257,250        $171,500        $428,750
    Employee Benefits...........................................          13,633           9,089          22,722
    Applicant Subsistence/Travel................................          14,901           9,934          24,835
    Applicant License Insurance.................................           1,771           1,181           2,952
    Applicant Payroll Tax.......................................          20,823          13,882          34,705
                                                                 -----------------------------------------------
        Total Applicant Pilot Compensation......................         308,378         205,586         513,964
Other Pilot Cost:
    Subsistence/Travel- Pilot...................................         575,475         383,650         959,125
    Hotel/Lodging Cost..........................................          32,802          21,868          54,671
    License Insurance-Pilots....................................          45,859          30,573          76,432
    Payroll Taxes-Pilots........................................         188,318         125,546         313,864
    Other.......................................................          26,433          17,621          44,054
                                                                 -----------------------------------------------
        Total other pilotage costs..............................         868,887         579,258       1,448,145
Pilot Boat and Dispatch Costs:
    Pilot Boat Expense (Operating)..............................         325,904         217,269         543,173
    Pilot Boat Cost (D1-20-01)..................................         104,658          69,772         174,430
    Dispatch Expense............................................         139,916          93,277         233,193
    Payroll Taxes...............................................          22,930          15,287          38,217
                                                                 -----------------------------------------------
        Total Pilot and Dispatch Costs..........................         593,408         395,605         989,013
Administrative Expenses:
    Legal-General Counsel.......................................           3,124           2,083           5,207
    Legal-Shared Counsel (K&L Gates)............................          62,906          41,937         104,843
    Legal-USCG Litigation.......................................           8,793           5,862          14,655
    Insurance...................................................          35,040          23,360          58,400
    Employee Benefits...........................................           5,541           3,694           9,235
    Payroll Taxes...............................................           6,511           4,341          10,852
    Other Taxes.................................................          69,000          46,000         115,000
    Real Estate Taxes...........................................          23,298          15,532          38,830
    Travel......................................................          21,516          14,344          35,860
    Depreciation................................................         152,071         101,381         253,452
    Certified Public Accountant (CPA) Deduction (D1-19-01)......        (44,623)        (29,748)        (74,371)
    Interest....................................................          36,924          24,616          61,540
    CPA Deduction (D1-19-01)....................................        (18,710)        (12,473)        (31,183)
    American Pilots' Association (APA) Dues.....................          27,172          18,115          45,287
    Dues and Subscriptions......................................           4,080           2,720           6,800
    Utilities...................................................          15,618          10,412          26,030
    Salaries....................................................          69,848          46,565         116,413
    Accounting/Professional Fees................................           8,220           5,480          13,700
    Other.......................................................          55,213          36,809          92,022
Applicant Administrative Expense
    Pilot Training..............................................          26,787          17,858          44,645
    Supplies....................................................             481             320             801
                                                                 -----------------------------------------------
        Total Administrative Expenses...........................         568,810         379,208         948,018
----------------------------------------------------------------------------------------------------------------
Total Expenses (OpEx + Applicant + Pilot Boats + Admin +               2,339,483       1,559,657       3,899,140
 Capital).......................................................

[[Page 12235]]

 
    Director's Adjustments--Applicant Surcharge Collected.......        (10,814)         (7,209)        (18,024)
                                                                 -----------------------------------------------
    Director's Adjustments--Applicant Salaries..................        (19,379)        (12,919)        (32,298)
                                                                 -----------------------------------------------
        Total Director's Adjustments............................        (30,193)        (20,129)        (50,322)
            Total Operating Expenses (OpEx + Adjustments).......       2,309,290       1,539,528       3,848,818
----------------------------------------------------------------------------------------------------------------

B. Step 2: Project Operating Expenses, Adjusting for Inflation or 
Deflation

    In accordance with the text in Sec.  404.102, having identified the 
recognized 2020 operating expenses in Step 1, the next step is to 
estimate the current year's operating expenses by adjusting those 
expenses for inflation over the 3-year period. The Coast Guard 
calculates inflation using the BLS data from the CPI for the Midwest 
Region of the United States for the 2021 inflation rate.\17\ Because 
the BLS does not provide forecasted inflation data, the Coast Guard 
uses economic projections from the Federal Reserve for the 2022 and 
2023 inflation modification.\18\ Based on that information, the 
calculations for Step 2 are as presented in table 6.
---------------------------------------------------------------------------

    \17\ The 2021 inflation rate is available at https://data.bls.gov/pdq/SurveyOutputServlet?data_tool=dropmap&series_id=CUUR0200SA0,CUUS0200SA0. Specifically, the CPI is defined as ``All Urban Consumers (CPI-
U), All Items, 1982-4=100.'' Series CUUS0200SAO. (Downloaded 
September 2022.)
    \18\ The 2022 and 2023 inflation rates are available at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220921.pdf. We used the Core PCE Inflation June 
Projection found in table 2. (Downloaded September 2022.)

                              Table 6--Adjusted Operating Expenses for District One
----------------------------------------------------------------------------------------------------------------
                                                                                   District One
                                                                 -----------------------------------------------
                                                                    Designated     Undesignated        Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)...............................      $2,309,290      $1,539,528      $3,848,818
2021 Inflation Modification (@5.1%).............................         117,774          78,516         196,290
2022 Inflation Modification (@4.3%).............................         104,364          69,576         173,940
2023 Inflation Modification (@2.7%).............................          68,349          45,566         113,915
                                                                 -----------------------------------------------
    Adjusted 2023 Operating Expenses............................       2,599,777       1,733,186       4,332,963
----------------------------------------------------------------------------------------------------------------

C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots

    In accordance with the text in Sec.  404.103, the Coast Guard 
estimates the number of fully registered pilots in each district. The 
Coast Guard determines the number of fully registered pilots based on 
data provided by the SLSPA. Using these numbers, the Coast Guard 
estimates that there will be 18 registered pilots in 2023 in District 
One. The Coast Guard determines the number of apprentice pilots based 
on input from the district on anticipated retirements and staffing 
needs. Using these numbers, the Coast Guard estimates that there will 
be two apprentice pilots in 2023 in District One. Based on the seasonal 
staffing model discussed in the 2017 ratemaking (see 82 FR 41466 
(August 31, 2017)), a certain number of pilots are assigned to 
designated waters and a certain number to undesignated waters, as shown 
in table 7. These numbers are used to determine the amount of revenue 
needed in their respective areas.

               Table 7--Authorized Pilots for District One
------------------------------------------------------------------------
                          Item                             District One
------------------------------------------------------------------------
Maximum Number of Pilots (per Sec.   401.220(a)) *......              18
2023 Authorized Pilots (total)..........................              18
Pilots Assigned to Designated Areas.....................              10
Pilots Assigned to Undesignated Areas...................               8
2023 Apprentice Pilots..................................               2
------------------------------------------------------------------------
* For a detailed calculation, refer to the Great Lakes Pilotage Rates--
  2017 Annual Review final rule, which contains the staffing model. See
  82 FR 41466, table 6 at 41480 (August 31, 2017).

[[Page 12236]]

D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice 
Pilot Wage Benchmark

    In this step, the Coast Guard determines the total pilot 
compensation for each area. Because a full ratemaking is being issued 
this year, the Coast Guard follows the procedure outlined in paragraph 
(a) of Sec.  404.104, which requires developing a benchmark after 
considering the most relevant currently available non-proprietary 
information. In accordance with the discussion in section VI. 
``Individual Target Pilot Compensation Benchmark'' of this preamble, 
the compensation benchmark for 2023 uses the 2022 compensation of 
$399,266 per registered pilot as a base, then adjusts for inflation 
following the procedure outlined in paragraph (a) of Sec.  404.104. The 
target pilot compensation for 2023 is $424,398 per pilot. The 
apprentice pilot wage benchmark is 36 percent of the target pilot 
compensation, or $152,783 ($424,398 x 0.36).
    Next, the Coast Guard certifies that the number of pilots estimated 
for 2023 is less than or equal to the number permitted under the 
staffing model in Sec.  401.220(a). The staffing model suggests that 
the number of pilots needed is 18 pilots for District One, which is 
less than or equal to 18, the number of registered pilots provided by 
the pilot association. In accordance with Sec.  404.104(c), the Coast 
Guard uses the revised target individual compensation level to derive 
the total pilot compensation by multiplying the individual target 
compensation by the estimated number of registered pilots for District 
One, as shown in table 8. The Coast Guard estimates that the number of 
apprentice pilots with limited registration needed will be two for 
District One in the 2023 season. The total target wages for apprentices 
are allocated at 60 percent for the designated area and 40 percent for 
the undesignated area, in accordance with the allocation for operating 
expenses.

                                  Table 8--Target Compensation for District One
----------------------------------------------------------------------------------------------------------------
                                                                                   District One
                                                                 -----------------------------------------------
                                                                    Designated     Undesignated        Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation.......................................        $424,398        $424,398        $424,398
Number of Pilots................................................              10               8              18
                                                                 -----------------------------------------------
    Total Target Pilot Compensation.............................      $4,243,980      $3,395,184      $7,639,164
Target Apprentice Pilot Compensation............................        $152,783        $152,783        $152,783
Number of Apprentice Pilots.....................................  ..............  ..............               2
                                                                 -----------------------------------------------
    Total Target Apprentice Pilot Compensation..................        $183,340        $122,227        $305,567
----------------------------------------------------------------------------------------------------------------

E. Step 5: Project Working Capital Fund

    Next, the Coast Guard calculates the working capital fund revenues 
needed for each area by first adding the figures for projected 
operating expenses, total pilot compensation, and total target 
apprentice pilot wage for each area and then finding the preceding 
year's average annual rate of return for new issues of high-grade 
corporate securities. Using Moody's data, the number is 2.7033 
percent.\19\ By multiplying the two figures, the Coast Guard obtains 
the working capital fund contribution for each area, as shown in table 
9.
---------------------------------------------------------------------------

    \19\ Moody's Seasoned Aaa Corporate Bond Yield, average of 2021 
monthly data. The Coast Guard uses the most recent year of complete 
data. Moody's is taken from Moody's Investors Service, which is a 
bond credit rating business of Moody's Corporation. Bond ratings are 
based on creditworthiness and risk. The rating of ``Aaa'' is the 
highest bond rating assigned with the lowest credit risk. See 
https://fred.stlouisfed.org/series/AAA. (Downloaded March 4, 2022.)

                           Table 9--Working Capital Fund Calculation for District One
----------------------------------------------------------------------------------------------------------------
                                                                                   District One
                                                                 -----------------------------------------------
                                                                    Designated     Undesignated        Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................      $2,599,777      $1,733,186      $4,332,963
Total Target Pilot Compensation (Step 4)........................       4,243,980       3,395,184       7,639,164
Total Target Apprentice Pilot Compensation (Step 4).............         183,340         122,227         305,567
                                                                 -----------------------------------------------
    Total 2023 Expenses.........................................       7,027,097       5,250,597      12,277,694
----------------------------------------------------------------------------------------------------------------
Working Capital Fund (2.7%).....................................         189,966         141,941         331,907
----------------------------------------------------------------------------------------------------------------

F. Step 6: Project Needed Revenue

    In this step, the Coast Guards adds all the expenses accrued to 
derive the total revenue needed for each area. These expenses include 
the projected operating expenses (from Step 2), the total pilot 
compensation (from Step 4), total target apprentice pilot wage, (from 
Step 4) and the working capital fund contribution (from Step 5). These 
calculations are shown in table 10.

                                    Table 10--Revenue Needed for District One
----------------------------------------------------------------------------------------------------------------
                                                                                   District One
                                                                 -----------------------------------------------
                                                                    Designated     Undesignated        Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................      $2,599,777      $1,733,186      $4,332,963

[[Page 12237]]

 
Total Target Pilot Compensation (Step 4)........................       4,243,980       3,395,184       7,639,164
Total Target Apprentice Pilot Compensation (Step 4).............         183,340         122,227         305,567
Working Capital Fund (Step 5)...................................         189,966         141,941         331,907
                                                                 -----------------------------------------------
    Total Revenue Needed........................................       7,217,063       5,392,538      12,609,601
----------------------------------------------------------------------------------------------------------------

G. Step 7: Calculate Initial Base Rates

    Having determined the revenue needed for each area in the previous 
six steps, to develop an hourly rate, the Coast Guard divides that 
number by the expected number of hours of traffic.
    Step 7 is a two-part process. The first part is calculating the 10-
year average of traffic in District One, using the total time on task 
or pilot bridge hours. To calculate the time on task for each district, 
the Coast Guard uses billing data from the GLPMS. The data is pulled 
from the system filtering by district, year, job status (including only 
closed jobs), and flagging code (including only U.S. jobs). Because 
separate figures are calculated for designated and undesignated waters, 
there are two parts for each calculation, as shown in table 11.

                 Table 11--Time on Task for District One
                                 [Hours]
------------------------------------------------------------------------
                                                     District One
                    Year                    ----------------------------
                                              Designated   Undesignated
------------------------------------------------------------------------
2021.......................................        6,188           7,871
2020.......................................        6,265           7,560
2019.......................................        8,232           8,405
2018.......................................        6,943           8,445
2017.......................................        7,605           8,679
2016.......................................        5,434           6,217
2015.......................................        5,743           6,667
2014.......................................        6,810           6,853
2013.......................................        5,864           5,529
2012.......................................        4,771           5,121
                                            ----------------------------
  Average..................................        6,386           7,135
------------------------------------------------------------------------

    Next, the Coast Guard derives the initial hourly rate by dividing 
the revenue needed by the average number of hours for each area. This 
produces an initial rate, which is necessary to produce the revenue 
needed for each area, assuming the amount of traffic is as expected. 
The calculations for District One are presented in table 12.

          Table 12--Initial Rate Calculations for District One
------------------------------------------------------------------------
                                            Designated     Undesignated
------------------------------------------------------------------------
Revenue needed (Step 6).................      $7,217,063      $5,392,538
Average time on task (hours)............           6,386           7,135
Initial rate............................           1,130             756
------------------------------------------------------------------------

H. Step 8: Calculate Average Weighting Factors by Area

    In this step, the Coast Guard calculates the average weighting 
factor for each designated and undesignated area by first collecting 
the weighting factors, set forth in 46 CFR 401.400, for each vessel 
trip. Using this database, the average weighting factor for each area 
is calculated, using the data from each vessel transit from 2014 
onward, as shown in tables 13 and 14.

                      Table 13--Average Weighting Factor for District One, Designated Areas
----------------------------------------------------------------------------------------------------------------
                                                                     Number of       Weighting       Weighted
                        Vessel class/year                            transits         factor         transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014)..................................................              31               1              31
Class 1 (2015)..................................................              41               1              41
Class 1 (2016)..................................................              31               1              31
Class 1 (2017)..................................................              28               1              28
Class 1 (2018)..................................................              54               1              54
Class 1 (2019)..................................................              72               1              72
Class 1 (2020)..................................................               8               1               8
Class 1 (2021)..................................................              10               1              10
Class 2 (2014)..................................................             285            1.15             328
Class 2 (2015)..................................................             295            1.15             339
Class 2 (2016)..................................................             185            1.15             213
Class 2 (2017)..................................................             352            1.15             405
Class 2 (2018)..................................................             559            1.15             643
Class 2 (2019)..................................................             378            1.15             435
Class 2 (2020)..................................................             560            1.15             644
Class 2 (2021)..................................................             315            1.15             362
Class 3 (2014)..................................................              50             1.3              65
Class 3 (2015)..................................................              28             1.3              36

[[Page 12238]]

 
Class 3 (2016)..................................................              50             1.3              65
Class 3 (2017)..................................................              67             1.3              87
Class 3 (2018)..................................................              86             1.3             112
Class 3 (2019)..................................................             122             1.3             159
Class 3 (2020)..................................................              67             1.3              87
Class 3 (2021)..................................................              52             1.3              68
Class 4 (2014)..................................................             271            1.45             393
Class 4 (2015)..................................................             251            1.45             364
Class 4 (2016)..................................................             214            1.45             310
Class 4 (2017)..................................................             285            1.45             413
Class 4 (2018)..................................................             393            1.45             570
Class 4 (2019)..................................................             730            1.45            1059
Class 4 (2020)..................................................             427            1.45             619
Class 4 (2021)..................................................             407            1.45             590
                                                                 -----------------------------------------------
    Total.......................................................           6,704  ..............           8,640
                                                                 -----------------------------------------------
Average weighting factor (weighted transits / number of           ..............            1.29  ..............
 transits)......................................................
----------------------------------------------------------------------------------------------------------------

                     Table 14--Average Weighting Factor for District One, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
                                                                     Number of       Weighting       Weighted
                        Vessel class/year                            transits         factor         transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014)..................................................              25               1              25
Class 1 (2015)..................................................              28               1              28
Class 1 (2016)..................................................              18               1              18
Class 1 (2017)..................................................              19               1              19
Class 1 (2018)..................................................              22               1              22
Class 1 (2019)..................................................              30               1              30
Class 1 (2020)..................................................               3               1               3
Class 1 (2021)..................................................              19               1              19
Class 2 (2014)..................................................             238            1.15             274
Class 2 (2015)..................................................             263            1.15             302
Class 2 (2016)..................................................             169            1.15             194
Class 2 (2017)..................................................             290            1.15             334
Class 2 (2018)..................................................             352            1.15             405
Class 2 (2019)..................................................             366            1.15             421
Class 2 (2020)..................................................             358            1.15             412
Class 2 (2021)..................................................             463            1.15             532
Class 3 (2014)..................................................              60             1.3              78
Class 3 (2015)..................................................              42             1.3              55
Class 3 (2016)..................................................              28             1.3              36
Class 3 (2017)..................................................              45             1.3              59
Class 3 (2018)..................................................              63             1.3              82
Class 3 (2019)..................................................              58             1.3              75
Class 3 (2020)..................................................              35             1.3              46
Class 3 (2021)..................................................              71             1.3              92
Class 4 (2014)..................................................             289            1.45             419
Class 4 (2015)..................................................             269            1.45             390
Class 4 (2016)..................................................             222            1.45             322
Class 4 (2017)..................................................             285            1.45             413
Class 4 (2018)..................................................             382            1.45             554
Class 4 (2019)..................................................             326            1.45             473
Class 4 (2020)..................................................             334            1.45             484
Class 4 (2021)..................................................             466            1.45             676
                                                                 -----------------------------------------------
    Total.......................................................           5,638  ..............           7,291
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits / number of           ..............  ..............            1.29
 transits)......................................................
----------------------------------------------------------------------------------------------------------------

I. Step 9: Calculate Revised Base Rates

    In this step, the Coast Guard revises the base rates so that the 
total cost of pilotage is equal to the revenue needed after considering 
the impact of the weighting factors. To do this, the initial base rates 
calculated in Step 7 are divided by the average weighting factors 
calculated in Step 8, as shown in table 15.

[[Page 12239]]

                                  Table 15--Revised Base Rates for District One
----------------------------------------------------------------------------------------------------------------
                                                                                                   Revised rate
                                                                                      Average      (initial rate
                              Area                                 Initial rate      weighting       average /
                                                                     (Step 7)      factor  (Step     weighting
                                                                                        8)            factor)
----------------------------------------------------------------------------------------------------------------
District One: Designated........................................          $1,130            1.29            $876
District One: Undesignated......................................             756            1.29             586
----------------------------------------------------------------------------------------------------------------

J. Step 10: Review and Finalize Rates

    In this step, the Director reviews the rates set forth by the 
staffing model and ensures that they meet the goal of ensuring safe, 
efficient, and reliable pilotage. To establish this, the Director 
considers whether the rates incorporate appropriate compensation for 
pilots to handle heavy traffic periods and whether there is a 
sufficient number of pilots to handle those heavy traffic periods. The 
Director also considers whether the rates will cover operating expenses 
and infrastructure costs, including average traffic and weighting 
factions. Based on the financial information submitted by the pilots, 
the Director is not issuing any alterations to the rates in this step. 
By means of this rule, Sec.  401.405(a)(1) and (2) are modified to 
reflect the final rates shown in table 16.

                                     Table 16--Final Rates for District One
----------------------------------------------------------------------------------------------------------------
                                                                                    Final 2022      Final 2023
                     Area                                     Name                 pilotage rate   pilotage rate
----------------------------------------------------------------------------------------------------------------
District One: Designated......................  St. Lawrence River..............            $834            $876
District One: Undesignated....................  Lake Ontario....................             568             586
----------------------------------------------------------------------------------------------------------------

District Two

A. Step 1: Recognize Previous Operating Expenses

    Step 1 in the ratemaking methodology requires that the Coast Guard 
review and recognize the operating expenses of the last full year for 
which figures are available (Sec.  404.101). To do so, the Coast Guard 
begins by reviewing the independent accountant's financial reports for 
each association's 2020 expenses and revenues.\20\ For accounting 
purposes, the financial reports divide expenses into designated and 
undesignated areas. For costs accrued by the pilot associations 
generally, such as employee benefits, for example, the cost is divided 
between the designated and undesignated areas on a pro rata basis.
---------------------------------------------------------------------------

    \20\ These reports are available in the docket for this 
rulemaking.
---------------------------------------------------------------------------

    In the 2020 expenses used as the basis for this rulemaking, 
districts used the term ``applicant'' to describe applicant trainees 
and persons who will be called apprentices (applicant pilots), under 
the definition introduced by the 2022 final rule. Therefore, when 
describing past expenses, the term ``applicant'' is used to match what 
was reported from 2020, which includes both applicant and apprentice 
pilots. The term ``apprentice'' is used to distinguish apprentice pilot 
wages and describe the impacts of the ratemaking going forward.
    The Coast Guard continues to include apprentice salaries as an 
allowable expense in the 2023 ratemaking, as it is based on 2020 
operating expenses, when salaries were still an allowable expense. The 
apprentice salaries paid in the years 2020 and 2021 have not been 
reimbursed in the ratemaking as of publication of this rule. Applicant 
salaries (including applicant trainees and apprentice pilots) will 
continue to be an allowable operating expense through the 2024 
ratemaking, which uses operating expenses from 2021, where the wages 
for apprentice pilots were still authorized as operating expenses.
    Beginning with the 2025 ratemaking, apprentice pilot salaries will 
no longer be included as a 2022 operating expense, because apprentice 
pilot wages will have already been factored into the ratemaking Steps 3 
and 4 in calculation of the 2022 rates. Beginning in 2025, the 
applicant salaries' operating expenses for 2022 will consist of only 
applicant trainees (those who are not yet apprentice pilots). The 
recognized operating expenses for District Two are shown in table 17.

                               Table 17--2020 Recognized Expenses for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                   District Two
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated
              Reported operating expenses for 2020               --------------------------------
                                                                                     Southeast         Total
                                                                     Lake Erie     Shoal to Port
                                                                                       Huron
----------------------------------------------------------------------------------------------------------------
Applicant Salaries..............................................        $101,810        $152,715        $254,525
Applicant Health Insurance......................................          12,706          19,058          31,764
Applicant Subsistence/Travel....................................           6,732          10,098          16,830
Applicant Hotel/Lodging Cost....................................           3,652           5,478           9,130

[[Page 12240]]

 
Applicant Payroll Tax...........................................           4,888           7,332          12,220
                                                                 -----------------------------------------------
    Total Applicant Cost........................................         129,788         194,681         324,469
Pilot Subsistence/Travel........................................         124,953         187,427         312,380
Hotel/Lodging Cost..............................................          40,744          61,116         101,860
License Renewal.................................................           1,606           2,409           4,015
Payroll Taxes...................................................          94,996         142,495         237,491
Insurance.......................................................           8,666          12,999          21,665
                                                                 -----------------------------------------------
    Total Other Pilotage Costs..................................         270,965         406,446         677,411
Pilot Boat and Dispatch Costs:
    Pilot Boat Cost.............................................         218,840         328,261         547,101
    Employee Benefits...........................................          92,554         138,831         231,385
    Payroll taxes...............................................          13,565          20,347          33,912
                                                                 -----------------------------------------------
        Total Pilot Boat and Dispatch Costs.....................         324,959         487,439         812,398
Administrative Expense:
    Legal--General Counsel......................................           4,016           6,024          10,040
    Legal--Shared Counsel (K&L Gates)...........................           9,898          14,846          24,744
    Legal--Shared Counsel (K&L Gates) (D2-20-01)................           3,233           4,850           8,083
    Office Rent.................................................          27,627          41,440          69,067
    Insurance...................................................          12,357          18,536          30,893
    Employee Benefits...........................................         157,650         236,476         394,126
    Payroll Taxes...............................................           5,007           7,510          12,517
    Other Taxes.................................................          43,400          65,100         108,500
    Real Estate Taxes...........................................           8,285          12,427          20,712
    Depreciation/Auto Lease/Other...............................           7,783          11,674          19,457
    Interest....................................................             114             171             285
    APA Dues....................................................          14,683          22,025          36,708
    Dues and Subscriptions......................................             819           1,229           2,048
    Utilities...................................................          18,453          27,679          46,132
    Salaries--Admin Employees...................................          50,250          75,374         125,624
    Accounting..................................................          14,360          21,540          35,900
    Pilot Training..............................................             146             219             365
    Other.......................................................          24,604          36,906          61,510
                                                                 -----------------------------------------------
        Total Administrative Expenses...........................         402,685         604,026       1,006,711
----------------------------------------------------------------------------------------------------------------
Total OpEx (Pilot Costs + Applicant Cost + Pilot Boats + Admin).       1,128,397       1,692,592       2,820,989
                                                                 ===============================================
    TOTAL DIRECTOR'S ADJUSTMENTS................................  ..............  ..............  ..............
                                                                 -----------------------------------------------
        Total Operating Expenses (OpEx + Adjustments)...........       1,128,397       1,692,592       2,820,989
----------------------------------------------------------------------------------------------------------------

B. Step 2: Project Operating Expenses, Adjusting for Inflation or 
Deflation

    In accordance with the text in Sec.  404.102, having identified the 
recognized 2020 operating expenses in Step 1, the next step is to 
estimate the current year's operating expenses by adjusting those 
expenses for inflation over the 3-year period. The Coast Guard 
calculates inflation using the BLS data from the CPI for the Midwest 
Region of the United States for the 2021 inflation rate.\21\ Because 
the BLS does not provide forecasted inflation data, economic 
projections are used from the Federal Reserve for the 2022 and 2023 
inflation modification.\22\ Based on that information, the calculations 
for Step 2 are as presented in table 18.
---------------------------------------------------------------------------

    \21\ The 2021 inflation rate is available at https://data.bls.gov/pdq/SurveyOutputServlet?data_tool=dropmap&series_id=CUUR0200SA0,CUUS0200SA0. Specifically, the CPI is defined as ``All Urban Consumers (CPI-
U), All Items, 1982-4=100.'' Series CUUS0200SAO. (Downloaded 
September 2022.)
    \22\ The 2022 and 2023 inflation rates are available at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220921.pdf. We used the Core PCE Inflation June 
Projection found in table 1. (Downloaded September 2022.)

[[Page 12241]]

                             Table 18--Adjusted Operating Expenses for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                   District Two
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)...............................      $1,128,397      $1,692,592      $2,820,989
2021 Inflation Modification (@5.1%).............................          57,548          86,322         143,870
2022 Inflation Modification (@4.3%).............................          50,996          76,493         127,489
2023 Inflation Modification (@2.7%).............................          33,397          50,096          83,493
                                                                 -----------------------------------------------
    Adjusted 2023 Operating Expenses............................       1,270,338       1,905,503       3,175,841
----------------------------------------------------------------------------------------------------------------

C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots

    In accordance with the text in Sec.  404.103, the Coast Guard 
estimates the number of fully registered pilots in each district. The 
Coast Guard determines the number of fully registered pilots based on 
data provided by the LPA. Using these numbers, the Coast Guard 
estimates that there will be 16 registered pilots in 2023 in District 
Two. The Coast Guard determines the number of apprentice pilots based 
on input from the district on anticipated retirements and staffing 
needs. Using these numbers, the Coast Guard estimates that there will 
be one apprentice pilot in 2023 in District Two. Based on the seasonal 
staffing model discussed in the 2017 ratemaking (see 82 FR 41466), a 
certain number of pilots are assigned to designated waters and a 
certain number to undesignated waters, as shown in table 19. These 
numbers are used to determine the amount of revenue needed in their 
respective areas.

              Table 19--Authorized Pilots for District Two
------------------------------------------------------------------------
                          Item                             District Two
------------------------------------------------------------------------
Maximum Number of Pilots (per Sec.   401.220(a)) *......              16
2023 Authorized Pilots (total)..........................              16
Pilots Assigned to Designated Areas.....................               6
Pilots Assigned to Undesignated Areas...................              10
2023 Apprentice Pilots..................................               1
------------------------------------------------------------------------
* For a detailed calculation, refer to the Great Lakes Pilotage Rates--
  2017 Annual Review final rule, which contains the staffing model. See
  82 FR 41466, table 6 at 41480 (August 31, 2017).

D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice 
Pilot Wage Benchmark

    In this step, the Coast Guard determines the total pilot 
compensation for each area. Because a full ratemaking is being issued 
this year, the Coast Guard follows the procedure outlined in paragraph 
(a) of Sec.  404.104, which requires developing a benchmark after 
considering the most relevant currently available non-proprietary 
information. In accordance with the discussion in section V of this 
preamble, the compensation benchmark for 2023 uses the 2022 
compensation of $399,266 per registered pilot as a base, then adjusts 
for inflation following the procedure outlined in paragraph (b) of 
Sec.  404.104. The target pilot compensation for 2023 is $424,398 per 
pilot. The apprentice pilot wage benchmark is 36 percent of the target 
pilot compensation, or $152,783 ($424,398 x 0.36).
    Next, the Coast Guard certifies that the number of pilots estimated 
for 2023 is less than or equal to the number permitted under the 
staffing model in Sec.  401.220(a). The staffing model suggests that 
the number of pilots needed is 16 pilots for District Two, which is 
less than or equal to 16, the number of registered pilots provided by 
the pilot association. In accordance with Sec.  404.104(c), the Coast 
Guard uses the revised target individual compensation level to derive 
the total pilot compensation by multiplying the individual target 
compensation by the estimated number of registered pilots for District 
Two, as shown in table 20. The Coast Guard estimates that the number of 
apprentice pilots with limited registration needed will be one for 
District Two in the 2023 season. The total target wages for apprentices 
are allocated at 60 percent for the designated area and 40 percent for 
the undesignated area, in accordance with the allocation for operating 
expenses.

                                 Table 20--Target Compensation for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                   District Two
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation.......................................        $424,398        $424,398        $424,398
Number of Pilots................................................              10               6              16
                                                                 -----------------------------------------------
    Total Target Pilot Compensation.............................      $4,243,980      $2,546,388      $6,790,368
Target Apprentice Pilot Compensation............................        $152,783        $152,783        $152,783
Number of Apprentice Pilots.....................................  ..............  ..............               1
                                                                 -----------------------------------------------
    Total Target Apprentice Pilot Compensation..................      $61,113.39      $91,669.89        $152,783
----------------------------------------------------------------------------------------------------------------

[[Page 12242]]

E. Step 5: Project Working Capital Fund

    Next, the Coast Guard calculates the working capital fund revenues 
needed for each area by first adding the figures for projected 
operating expenses, total pilot compensation, and total target 
apprentice pilot wage for each area and then finding the preceding 
year's average annual rate of return for new issues of high-grade 
corporate securities. Using Moody's data, the number is 2.7033 
percent.\23\ By multiplying the two figures, the Coast Guard obtains 
the working capital fund contribution for each area, as shown in table 
21.
---------------------------------------------------------------------------

    \23\ Moody's Seasoned Aaa Corporate Bond Yield, average of 2021 
monthly data. The Coast Guard uses the most recent year of complete 
data. Moody's is taken from Moody's Investors Service, which is a 
bond credit rating business of Moody's Corporation. Bond ratings are 
based on creditworthiness and risk. The rating of ``Aaa'' is the 
highest bond rating assigned with the lowest credit risk. See 
https://fred.stlouisfed.org/series/AAA. (Downloaded March 4, 2022.)

                           Table 21--Working Capital Fund Calculation for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                   District Two
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................      $1,270,338      $1,905,503      $3,175,841
Total Target Pilot Compensation (Step 4)........................       4,243,980       2,546,388       6,790,368
Total Target Apprentice Pilot Compensation (Step 4).............          61,113          91,670         152,783
                                                                 -----------------------------------------------
    Total 2023 Expenses.........................................       5,575,431       4,543,561      10,118,992
----------------------------------------------------------------------------------------------------------------
Working Capital Fund (2.7%).....................................         150,722         122,828         273,550
----------------------------------------------------------------------------------------------------------------

F. Step 6: Project Needed Revenue

    In this step, the Coast Guard adds all the expenses accrued to 
derive the total revenue needed for each area. These expenses include 
the projected operating expenses (from Step 2), the total pilot 
compensation (from Step 4), total target apprentice pilot wage, (from 
Step 4) and the working capital fund contribution (from Step 5). These 
calculations are shown in table 22.

                                    Table 22--Revenue Needed for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                   District Two
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................      $1,270,338      $1,905,503      $3,175,841
Total Target Pilot Compensation (Step 4)........................       4,243,980       2,546,388       6,790,368
Total Target Apprentice Pilot Compensation (Step 4).............          61,113          91,670         152,783
Working Capital Fund (Step 5)...................................         150,722         122,828         273,550
                                                                 -----------------------------------------------
    Total Revenue Needed........................................       5,726,153       4,666,389      10,392,542
----------------------------------------------------------------------------------------------------------------

G. Step 7: Calculate Initial Base Rates

    Having determined the revenue needed for each area in the previous 
six steps, to develop an hourly rate, the Coast Guard divides that 
number by the expected number of hours of traffic. Step 7 is a two-part 
process. In the first part, the Coast Guard calculates the 10-year 
average of traffic in District Two, using the total time on task or 
pilot bridge hours. To calculate the time on task for each district, 
the Coast Guard uses billing data from SeaPro, pulling the data from 
the system filtering by district, year, job status (including only 
processed jobs), and flagging code (including only U.S. jobs). Because 
separate figures are calculated for designated and undesignated waters, 
there are two parts for each calculation, as shown in table 23.

                 Table 23--Time on Task for District Two
                                 [Hours]
------------------------------------------------------------------------
                                                   District Two
                  Year                   -------------------------------
                                           Undesignated     Designated
------------------------------------------------------------------------
2021....................................           8,826           3,226
2020....................................           6,232           8,401
2019....................................           6,512           7,715
2018....................................           6,150           6,655
2017....................................           5,139           6,074
2016....................................           6,425           5,615
2015....................................           6,535           5,967
2014....................................           7,856           7,001
2013....................................           4,603           4,750
2012....................................           3,848           3,922
                                         -------------------------------
  Average...............................           6,213           5,933
------------------------------------------------------------------------

[[Page 12243]]

    Next, the Coast Guard derives the initial hourly rate by dividing 
the revenue needed by the average number of hours for each area. This 
produces an initial rate, which is necessary to produce the revenue 
needed for each area, assuming the amount of traffic is as expected. 
The calculations for District Two are presented in table 24.

          Table 24--Initial Rate Calculations for District Two
------------------------------------------------------------------------
                                           Undesignated     Designated
------------------------------------------------------------------------
Revenue needed (Step 6).................      $5,726,153      $4,666,389
Average time on task (hours)............           6,213           5,933
Initial rate............................            $922            $787
------------------------------------------------------------------------

H. Step 8: Calculate Average Weighting Factors by Area

    In this step, the Coast Guard calculate the average weighting 
factor for each designated and undesignated area by first collecting 
the weighting factors, set forth in 46 CFR 401.400, for each vessel 
trip. Using this database, the Coast Guard calculates the average 
weighting factor for each area using the data from each vessel transit 
from 2014 onward, as shown in tables 25 and 26.

                     Table 25--Average Weighting Factor for District Two, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
                                                                     Number of       Weighting       Weighted
                        Vessel class/year                            transits         factor         transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014)..................................................              31               1              31
Class 1 (2015)..................................................              35               1              35
Class 1 (2016)..................................................              32               1              32
Class 1 (2017)..................................................              21               1              21
Class 1 (2018)..................................................              37               1              37
Class 1 (2019)..................................................              54               1              54
Class 1 (2020)..................................................               1               1               1
Class 1 (2021)..................................................               7               1               7
Class 2 (2014)..................................................             356            1.15             409
Class 2 (2015)..................................................             354            1.15             407
Class 2 (2016)..................................................             380            1.15             437
Class 2 (2017)..................................................             222            1.15             255
Class 2 (2018)..................................................             123            1.15             141
Class 2 (2019)..................................................             127            1.15             146
Class 2 (2020)..................................................             165            1.15             190
Class 2 (2021)..................................................             206            1.15             237
Class 3 (2014)..................................................              20             1.3              26
Class 3 (2015)..................................................               0             1.3               0
Class 3 (2016)..................................................               9             1.3              12
Class 3 (2017)..................................................              12             1.3              16
Class 3 (2018)..................................................               3             1.3               4
Class 3 (2019)..................................................               1             1.3               1
Class 3 (2020)..................................................               1             1.3               1
Class 3 (2021)..................................................               5             1.3               7
Class 4 (2014)..................................................             636            1.45             922
Class 4 (2015)..................................................             560            1.45             812
Class 4 (2016)..................................................             468            1.45             679
Class 4 (2017)..................................................             319            1.45             463
Class 4 (2018)..................................................             196            1.45             284
Class 4 (2019)..................................................             210            1.45             305
Class 4 (2020)..................................................             201            1.45             291
Class 4 (2021)..................................................             227            1.45             329
                                                                 -----------------------------------------------
    Total.......................................................           5,019  ..............           6,592
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits / number of           ..............            1.31  ..............
 transits)......................................................
----------------------------------------------------------------------------------------------------------------

                      Table 26--Average Weighting Factor for District Two, Designated Areas
----------------------------------------------------------------------------------------------------------------
                                                                     Number of       Weighting       Weighted
                        Vessel class/year                            transits         factor         transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014)..................................................              20               1              20
Class 1 (2015)..................................................              15               1              15
Class 1 (2016)..................................................              28               1              28
Class 1 (2017)..................................................              15               1              15
Class 1 (2018)..................................................              42               1              42
Class 1 (2019)..................................................              48               1              48
Class 1 (2020)..................................................               7               1               7
Class 1 (2021)..................................................              12               1              12
Class 2 (2014)..................................................             237            1.15             273

[[Page 12244]]

 
Class 2 (2015)..................................................             217            1.15             250
Class 2 (2016)..................................................             224            1.15             258
Class 2 (2017)..................................................             127            1.15             146
Class 2 (2018)..................................................             153            1.15             176
Class 2 (2019)..................................................             281            1.15             323
Class 2 (2020)..................................................             342            1.15             393
Class 2 (2021)..................................................             240            1.15             276
Class 3 (2014)..................................................               8             1.3              10
Class 3 (2015)..................................................               8             1.3              10
Class 3 (2016)..................................................               4             1.3               5
Class 3 (2017)..................................................               4             1.3               5
Class 3 (2018)..................................................              14             1.3              18
Class 3 (2019)..................................................               1             1.3               1
Class 3 (2020)..................................................               5             1.3               7
Class 3 (2021)..................................................               2             1.3               3
Class 4 (2014)..................................................             359            1.45             521
Class 4 (2015)..................................................             340            1.45             493
Class 4 (2016)..................................................             281            1.45             407
Class 4 (2017)..................................................             185            1.45             268
Class 4 (2018)..................................................             379            1.45             550
Class 4 (2019)..................................................             403            1.45             584
Class 4 (2020)..................................................             405            1.45             587
Class 4 (2021)..................................................             268            1.45             389
                                                                 -----------------------------------------------
    Total.......................................................           4,674  ..............           6,140
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits / number of           ..............            1.31  ..............
 transits)......................................................
----------------------------------------------------------------------------------------------------------------

I. Step 9: Calculate Revised Base Rates

    In this step, the Coast Guard revises the base rates so that the 
total cost of pilotage is equal to the revenue needed after considering 
the impact of the weighting factors. To do this, the initial base rates 
calculated in Step 7 are divided by the average weighting factors 
calculated in Step 8, as shown in table 27.

                                  Table 27--Revised Base Rates for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                                   Revised rate
                                                                                      Average     (initial rate/
                              Area                                 Initial rate      weighting        average
                                                                     (Step 7)      factor  (Step     weighting
                                                                                        8)            factor)
----------------------------------------------------------------------------------------------------------------
District Two: Undesignated......................................            $922            1.31            $704
District Two: Designated........................................             787            1.31             601
----------------------------------------------------------------------------------------------------------------

J. Step 10: Review and Finalize Rates

    In this step, the Director reviews the rates set forth by the 
staffing model and ensures that they meet the goal of ensuring safe, 
efficient, and reliable pilotage. To establish this, the Director 
considers whether the rates incorporate appropriate compensation for 
pilots to handle heavy traffic periods, and whether there is a 
sufficient number of pilots to handle those heavy traffic periods. The 
Director also considers whether the rates will cover operating expenses 
and infrastructure costs and takes average traffic and weighting 
factors into consideration. Based on the financial information 
submitted by the pilots, the Director is not issuing any alterations to 
the rates in this step. By means of this rule, Sec.  401.405(a)(3) and 
(4) are modified to reflect the final rates shown in table 28.

                                     Table 28--Final Rates for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                    Final 2022      Final 2023
                     Area                                     Name                 pilotage rate   pilotage rate
----------------------------------------------------------------------------------------------------------------
District Two: Designated......................  Navigable waters from Southeast             $536            $601
                                                 Shoal to Port Huron, MI.
District Two: Undesignated....................  Lake Erie.......................             610             704
----------------------------------------------------------------------------------------------------------------

[[Page 12245]]

District Three

A. Step 1: Recognize Previous Operating Expenses

    Step 1 in the ratemaking methodology requires that the Coast Guard 
review and recognize the operating expenses of the last year for which 
figures are available (Sec.  404.101). To do so, the Coast Guard begins 
by reviewing the independent accountant's financial reports for each 
association's 2020 expenses and revenues.\24\ For accounting purposes, 
the financial reports divide expenses into designated and undesignated 
areas. For costs accrued by the pilot associations generally, such as 
employee benefits, for example, the cost is divided between the 
designated and undesignated areas on a pro rata basis.
---------------------------------------------------------------------------

    \24\ These reports are available in the docket for this 
rulemaking.
---------------------------------------------------------------------------

    In the 2020 expenses used as the basis for this rulemaking, 
districts used the term ``applicant'' to describe applicant trainees 
and persons who will be called apprentices (applicant pilots), under 
the definition introduced by the 2022 final rule. Therefore, when 
describing past expenses, the term ``applicant'' is used to match what 
was reported from 2020, which includes both applicant and apprentice 
pilots. The term ``apprentice'' is used to distinguish apprentice pilot 
wages and describe the impacts of the ratemaking going forward.
    The Coast Guard continues to include apprentice salaries as an 
allowable expense in the 2023 ratemaking, as it is based on 2020 
operating expenses, when salaries were still an allowable expense. The 
apprentice salaries paid in the years 2020 and 2021 have not been 
reimbursed in the ratemaking as of publication of this rule. Applicant 
salaries (including applicant trainees and apprentice pilots) will 
continue to be an allowable operating expense through the 2024 
ratemaking, which uses operating expenses from 2021, where the wages 
for apprentice pilots were still authorized as operating expenses.
    Beginning with the 2025 ratemaking, apprentice pilot salaries will 
no longer be included as a 2022 operating expense, because apprentice 
pilot wages will have already been factored into the ratemaking Steps 3 
and 4 in calculation of the 2022 rates. Beginning in 2025, the 
applicant salaries' operating expenses for 2022 will consist of only 
applicant trainees (those who are not yet apprentice pilots). The 
recognized operating expenses for District Three are shown in table 29.

                              Table 29--2020 Recognized Expenses for District Three
----------------------------------------------------------------------------------------------------------------
                                                                          District Three
                                                 ---------------------------------------------------------------
                                                   Undesignated     Designated     Undesignated
      Reported operating expenses for 2020       ------------------------------------------------
                                                    Lakes Huron     St. Mary's                         Total
                                                   and Michigan        River       Lake Superior
----------------------------------------------------------------------------------------------------------------
Other Pilotage Costs:
    Pilot Subsistence/Travel....................        $284,547        $118,603        $149,261        $552,411
    Hotel/Lodging Cost..........................          87,208          36,349          45,745         169,302
    License Insurance--Pilots...................          16,749           6,981           8,786          32,516
    Payroll Taxes...............................  ..............  ..............  ..............  ..............
    Payroll Tax (D3-19-01)......................         151,266          63,049          79,348         293,663
    Other.......................................           6,505           2,711           3,412          12,628
                                                 ---------------------------------------------------------------
        Total Other Pilotage Costs..............         546,275         227,693         286,552       1,060,520
Applicant Cost:
    Applicant Salaries..........................         340,677         141,998         178,705         661,380
    Applicant Benefits..........................          66,083          27,544          34,665         128,292
    Applicant Payroll Tax.......................          25,711          10,717          13,487          49,915
    Applicant Hotel/Lodging.....................          31,313          13,052          16,425          60,790
                                                 ---------------------------------------------------------------
        Total Applicant Cost....................         463,784         193,311         243,282         900,377
Pilot Boat and Dispatch costs:
    Pilot Boat Costs............................         515,075         214,689         270,187         999,951
    Dispatch Costs..............................         112,008          46,686          58,755         217,449
    Employee Benefits...........................          41,153          17,153          21,587          79,893
    Payroll Taxes...............................          16,771           6,991           8,798          32,560
                                                 ---------------------------------------------------------------
        Total Pilot Boat and Dispatch costs.....         685,007         285,519         359,327       1,329,853
Administrative Cost:
    Legal--General Counsel......................           1,921             801           1,008           3,730
    Legal--Shared Counsel (K&L Gates)...........          21,650           9,024          11,357          42,031
    Legal--Shared Counsel (K&L Gates) CPA                  3,601           1,501           1,889           6,991
     Deduction (D3-20-03).......................
    Legal--USCG Litigation......................           8,575           3,574           4,498          16,647
    Insurance...................................          18,811           7,841           9,867          36,519
    Employee Benefits...........................          80,117          33,394          42,026         155,537
    Payroll Tax.................................           8,101           3,377           4,250          15,728
    Other Taxes.................................          15,797           6,584           8,286          30,667
    Real Estate Taxes...........................           2,001             834           1,050           3,885
    Depreciation/Auto Leasing/Other.............          61,096          25,465          32,048         118,609
    Interest....................................           2,940           1,225           1,542           5,707
    APA Dues....................................          23,860           9,945          12,516          46,321
    Dues and Subscriptions......................           4,971           2,072           2,607           9,650
    Salaries....................................          50,795          21,172          26,645          98,612
    Utilities...................................          54,212          22,596          28,438         105,246

[[Page 12246]]

 
    Accounting/Professional Fees................          23,823           9,930          12,496          46,249
    Other Expenses..............................          38,507          16,050          20,199          74,756
    Other Expenses CPA Deduction (D3-18-01).....         (4,684)         (1,952)         (2,457)         (9,093)
                                                 ---------------------------------------------------------------
        Total Administrative Expenses...........         416,094         173,433         218,265         807,792
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Other Costs +                2,111,160         879,956       1,107,426       4,098,542
 Applicant Cost + Pilot Boats + Admin)..........
    Director's Adjustments--Applicant Surcharge         (63,120)        (26,309)        (33,110)       (122,539)
     Collected..................................
        Total Director's Adjustments............        (63,120)        (26,309)        (33,110)       (122,539)
                                                 ---------------------------------------------------------------
            Total Operating Expenses (OpEx +           2,048,040         853,647       1,074,316       3,976,003
             Adjustments).......................
----------------------------------------------------------------------------------------------------------------

B. Step 2: Project Operating Expenses, Adjusting for Inflation or 
Deflation

    In accordance with the text in Sec.  404.103, having identified the 
recognized 2020 operating expenses in Step 1, the next step is to 
estimate the current year's operating expenses by adjusting those 
expenses for inflation over the 3-year period. The Coast Guard 
calculates inflation using the BLS data from the CPI for the Midwest 
Region of the United States for the 2021 inflation rate.\25\ Because 
the BLS does not provide forecasted inflation data, economic 
projections are used from the Federal Reserve for the 2022 and 2023 
inflation modification.\26\ Based on that information, the calculations 
for Step 2 are as presented in table 30.
---------------------------------------------------------------------------

    \25\ The 2021 inflation rate is available at https://data.bls.gov/pdq/SurveyOutputServlet?data_tool=dropmap&series_id=CUUR0200SA0,CUUS0200SA0. Specifically, the CPI is defined as ``All Urban Consumers (CPI-
U), All Items, 1982-4=100.'' Series CUUS0200SAO. (Downloaded 
September 2022.)
    \26\ The 2022 and 2023 inflation rates are available at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220921.pdf. We used the Core PCE Inflation June 
Projection found in table 1. (Downloaded September 2022.)

                            Table 30--Adjusted Operating Expenses for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                  District Three
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)...............................      $3,122,356        $853,647      $3,976,003
2021 Inflation Modification (@5.1%).............................         159,240          43,536         202,776
2022 Inflation Modification (@4.3%).............................         141,109          38,579         179,688
2023 Inflation Modification (@2.7%).............................          92,413          25,266         117,679
                                                                 -----------------------------------------------
    Adjusted 2023 Operating Expenses............................       3,515,118         961,028       4,476,146
----------------------------------------------------------------------------------------------------------------

C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots

    In accordance with the text in Sec.  404.103, the Coast Guard 
estimate the number of registered pilots in each district. The Coast 
Guard determines the number of registered pilots based on data provided 
by the WGLPA. Using these numbers, the Coast Guard estimates that there 
will be 22 registered pilots in 2023 in District Three. The Coast Guard 
determine the number of apprentice pilots based on input from the 
district on anticipated retirements and staffing needs. Using these 
numbers, the Coast Guard estimates that there will be three apprentice 
pilots in 2023 in District Three. Based on the seasonal staffing model 
discussed in the 2017 ratemaking (see 82 FR 41466), a certain number of 
pilots are assigned to designated waters and a certain number to 
undesignated waters, as shown in table 31. These numbers are used to 
determine the amount of revenue needed in their respective areas.

             Table 31--Authorized Pilots for District Three
------------------------------------------------------------------------
                          Item                            District Three
------------------------------------------------------------------------
Maximum Number of Pilots (per Sec.   401.220(a)) *......              22
2023 Authorized Pilots (total)..........................              22
Pilots Assigned to Designated Areas.....................               5
Pilots Assigned to Undesignated Areas...................              17
2023 Apprentice Pilots..................................               3
------------------------------------------------------------------------
* For a detailed calculation, refer to the Great Lakes Pilotage Rates--
  2017 Annual Review final rule, which contains the staffing model. See
  82 FR 41466, table 6 at 41480 (August 31, 2017).

[[Page 12247]]

D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice 
Pilot Wage Benchmark

    In this step, the Coast Guard determine the total pilot 
compensation for each area. Because a full ratemaking is being issued 
this year, the Coast Guard follows the procedure outlined in paragraph 
(a) of Sec.  404.104, which requires developing a benchmark after 
considering the most relevant currently available non-proprietary 
information. In accordance with the discussion in section V of this 
preamble, the compensation benchmark for 2023 uses the 2022 
compensation of $399,266 per registered pilot as a base, then adjusts 
for inflation following the procedure outlined in paragraph (b) of 
Sec.  404.104. The target pilot compensation for 2023 is $424,398 per 
pilot. The apprentice pilot wage benchmark is 36 percent of the target 
pilot compensation, or $152,783 ($424,398 x 0.36).
    Next, the Coast Guard certifies that the number of pilots estimated 
for 2023 is less than or equal to the number permitted under the 
staffing model in Sec.  401.220(a). The staffing model suggests that 
the number of pilots needed is 22 pilots for District Three, which is 
less than or equal to 22, the number of registered pilots provided by 
the pilot association. In accordance with Sec.  404.104(c), the revised 
target individual compensation level is used to derive the total pilot 
compensation by multiplying the individual target compensation by the 
estimated number of registered pilots for District Three, as shown in 
table 32. The Coast Guard estimates that the number of apprentice 
pilots with limited registration needed will be three for District 
Three in the 2023 season. The total target wages for apprentices are 
allocated with 21 percent for the designated area, and 79 percent (52 
percent + 27 percent) for the undesignated areas, in accordance with 
the allocation for operating expenses.

                                Table 32--Target Compensation for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                  District Three
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation.......................................        $424,398        $424,398        $424,398
Number of Pilots................................................              17               5              22
                                                                 -----------------------------------------------
    Total Target Pilot Compensation.............................      $7,214,766      $2,121,990      $9,336,756
Target Apprentice Pilot Compensation............................        $152,783        $152,783        $152,783
Number of Apprentice Pilots.....................................  ..............  ..............               3
                                                                 -----------------------------------------------
    Total Target Apprentice Pilot Compensation..................        $359,942         $98,408        $458,350
----------------------------------------------------------------------------------------------------------------

E. Step 5: Project Working Capital Fund

    Next, the Coast Guard calculates the working capital fund revenues 
needed for each area by first adding the figures for projected 
operating expenses, total pilot compensation, and total target 
apprentice pilot wage for each area and then finding the preceding 
year's average annual rate of return for new issues of high-grade 
corporate securities. Using Moody's data, the number is 2.7033 
percent.\27\ By multiplying the two figures, the working capital fund 
contribution for each area is obtained, as shown in table 33.
---------------------------------------------------------------------------

    \27\ Moody's Seasoned Aaa Corporate Bond Yield, average of 2021 
monthly data. The Coast Guard uses the most recent year of complete 
data. Moody's is taken from Moody's Investors Service, which is a 
bond credit rating business of Moody's Corporation. Bond ratings are 
based on creditworthiness and risk. The rating of ``Aaa'' is the 
highest bond rating assigned with the lowest credit risk. See 
https://fred.stlouisfed.org/series/AAA. (Downloaded March 4, 2022).

                          Table 33--Working Capital Fund Calculation for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                  District Three
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................      $3,515,118        $961,028      $4,476,146
Total Target Pilot Compensation (Step 4)........................       7,214,766       2,121,990       9,336,756
Total Target Apprentice Pilot Compensation (Step 4).............         359,942          98,408         458,350
                                                                 -----------------------------------------------
    Total 2023 Expenses.........................................      11,089,826       3,181,425      14,271,252
----------------------------------------------------------------------------------------------------------------
Working Capital Fund (2.7%).....................................         299,795          86,005         385,800
----------------------------------------------------------------------------------------------------------------

F. Step 6: Project Needed Revenue

    In this step, the Coast Guard adds all the expenses accrued to 
derive the total revenue needed for each area. These expenses include 
the projected operating expenses (from Step 2), the total pilot 
compensation (from Step 4), and the working capital fund contribution 
(from Step 5). The calculations are shown in table 34.

                                   Table 34--Revenue Needed for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                  District Three
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................      $3,515,118        $961,028      $4,476,146

[[Page 12248]]

 
Total Target Pilot Compensation (Step 4)........................       7,214,766       2,121,990       9,336,756
Total Target Apprentice Pilot Compensation (Step 4).............         359,942          98,408         458,350
Working Capital Fund (Step 5)...................................         299,795          86,005         385,800
                                                                 -----------------------------------------------
    Total Revenue Needed........................................      11,389,621       3,267,430      14,657,052
----------------------------------------------------------------------------------------------------------------

G. Step 7: Calculate Initial Base Rates

    Having determined the revenue needed for each area in the previous 
six steps, to develop an hourly rate, the Coast Guard divides that 
number by the expected number of hours of traffic. Step 7 is a two-part 
process. In the first part, the 10-year average of traffic in District 
Three is calculated using the total time on task or pilot bridge hours. 
To calculate the time on task for each district, the Coast Guard uses 
billing data from SeaPro, pulling the data from the system filtering by 
district, year, job status (including only processed jobs), and 
flagging code (including only U.S. jobs). Because separate figures for 
designated and undesignated waters are calculated, there are two parts 
for each calculation, as shown in table 35.

                Table 35--Time on Task for District Three
                                 [Hours]
------------------------------------------------------------------------
                                                    District Three
                    Year                    ----------------------------
                                              Undesignated    Designated
------------------------------------------------------------------------
2021.......................................          18,286        2,516
2020.......................................          23,678        3,520
2019.......................................          24,851        3,395
2018.......................................          19,967        3,455
2017.......................................          20,955        2,997
2016.......................................          23,421        2,769
2015.......................................          22,824        2,696
2014.......................................          25,833        3,835
2013.......................................          17,115        2,631
2012.......................................          15,906        2,163
                                            ----------------------------
    Average................................          21,284        2,998
------------------------------------------------------------------------

    Next, the Coast Guard derives the initial hourly rate by dividing 
the revenue needed by the average number of hours for each area. This 
produces an initial rate, which is necessary to produce the revenue 
needed for each area, assuming the amount of traffic is as expected. 
The calculations for District Three are set forth in table 36.

         Table 36--Initial Rate Calculations for District Three
------------------------------------------------------------------------
                                           Undesignated     Designated
------------------------------------------------------------------------
Revenue needed (Step 6).................     $11,389,621      $3,267,430
Average time on task (hours)............          21,284           2,998
Initial rate............................            $535          $1,090
------------------------------------------------------------------------

H. Step 8: Calculate Average Weighting Factors by Area

    In this step, the Coast Guard calculates the average weighting 
factor for each designated and undesignated area by first collecting 
the weighting factors, set forth in 46 CFR 401.400, for each vessel 
trip. Using this database, the Coast Guard calculates the average 
weighting factor for each area using the data from each vessel transit 
from 2014 onward, as shown in tables 37 and 38.

                    Table 37--Average Weighting Factor for District Three, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
                                                                     Number of       Weighting       Weighted
                        Vessel class/year                            transits         factor         transits
----------------------------------------------------------------------------------------------------------------
Area 6:
    Class 1 (2014)..............................................              45               1              45
    Class 1 (2015)..............................................              56               1              56
    Class 1 (2016)..............................................             136               1             136
    Class 1 (2017)..............................................             148               1             148
    Class 1 (2018)..............................................             103               1             103
    Class 1 (2019)..............................................             173               1             173
    Class 1 (2020)..............................................               4               1               4
    Class 1 (2021)..............................................               8               1               8
    Class 2 (2014)..............................................             274            1.15             315
    Class 2 (2015)..............................................             207            1.15             238
    Class 2 (2016)..............................................             236            1.15             271
    Class 2 (2017)..............................................             264            1.15             304
    Class 2 (2018)..............................................             169            1.15             194
    Class 2 (2019)..............................................             279            1.15             321
    Class 2 (2020)..............................................             332            1.15             382
    Class 2 (2021)..............................................             273            1.15             314
    Class 3 (2014)..............................................              15             1.3              20

[[Page 12249]]

 
    Class 3 (2015)..............................................               8             1.3              10
    Class 3 (2016)..............................................              10             1.3              13
    Class 3 (2017)..............................................              19             1.3              25
    Class 3 (2018)..............................................               9             1.3              12
    Class 3 (2019)..............................................               9             1.3              12
    Class 3 (2020)..............................................               4             1.3               5
    Class 3 (2021)..............................................               5             1.3               7
    Class 4 (2014)..............................................             394            1.45             571
    Class 4 (2015)..............................................             375            1.45             544
    Class 4 (2016)..............................................             332            1.45             481
    Class 4 (2017)..............................................             367            1.45             532
    Class 4 (2018)..............................................             337            1.45             489
    Class 4 (2019)..............................................             334            1.45             484
    Class 4 (2020)..............................................             339            1.45             492
    Class 4 (2021)..............................................             356            1.45             516
                                                                 -----------------------------------------------
        Total for Area 6........................................           5,620  ..............           7,224
Area 8:
    Class 1 (2014)..............................................               3               1               3
    Class 1 (2015)..............................................               0               1               0
    Class 1 (2016)..............................................               4               1               4
    Class 1 (2017)..............................................               4               1               4
    Class 1 (2018)..............................................               0               1               0
    Class 1 (2019)..............................................               0               1               0
    Class 1 (2020)..............................................               1               1               1
    Class 1 (2021)..............................................               5               1               5
    Class 2 (2014)..............................................             177            1.15             204
    Class 2 (2015)..............................................             169            1.15             194
    Class 2 (2016)..............................................             174            1.15             200
    Class 2 (2017)..............................................             151            1.15             174
    Class 2 (2018)..............................................             102            1.15             117
    Class 2 (2019)..............................................             120            1.15             138
    Class 2 (2020)..............................................             180            1.15             207
    Class 2 (2021)..............................................             124            1.15             143
    Class 3 (2014)..............................................               3             1.3               4
    Class 3 (2015)..............................................               0             1.3               0
    Class 3 (2016)..............................................               7             1.3               9
    Class 3 (2017)..............................................              18             1.3              23
    Class 3 (2018)..............................................               7             1.3               9
    Class 3 (2019)..............................................               6             1.3               8
    Class 3 (2020)..............................................               1             1.3               1
    Class 3 (2021)..............................................               1             1.3               1
    Class 4 (2014)..............................................             243            1.45             352
    Class 4 (2015)..............................................             253            1.45             367
    Class 4 (2016)..............................................             204            1.45             296
    Class 4 (2017)..............................................             269            1.45             390
    Class 4 (2018)..............................................             188            1.45             273
    Class 4 (2019)..............................................             254            1.45             368
    Class 4 (2020)..............................................             265            1.45             384
    Class 4 (2021)..............................................             319            1.45             463
                                                                 -----------------------------------------------
        Total for Area 8........................................           3,252  ..............            4342
----------------------------------------------------------------------------------------------------------------
            Combined total......................................           8,872  ..............          11,566
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits/number of transits).  ..............            1.30  ..............
----------------------------------------------------------------------------------------------------------------

                     Table 38--Average Weighting Factor for District Three, Designated Areas
----------------------------------------------------------------------------------------------------------------
                                                                     Number of       Weighting       Weighted
                        Vessel class/year                            transits         factor         transits
----------------------------------------------------------------------------------------------------------------
Area 7:
    Class 1 (2014)..............................................              27               1              27
    Class 1 (2015)..............................................              23               1              23
    Class 1 (2016)..............................................              55               1              55
    Class 1 (2017)..............................................              62               1              62
    Class 1 (2018)..............................................              47               1              47
    Class 1 (2019)..............................................              45               1              45
    Class 1 (2020)..............................................              15               1              15
    Class 1 (2021)..............................................              15               1              15

[[Page 12250]]

 
    Class 2 (2014)..............................................             221            1.15             254
    Class 2 (2015)..............................................             145            1.15             167
    Class 2 (2016)..............................................             174            1.15             200
    Class 2 (2017)..............................................             170            1.15             196
    Class 2 (2018)..............................................             126            1.15             145
    Class 2 (2019)..............................................             162            1.15             186
    Class 2 (2020)..............................................             218            1.15             251
    Class 2 (2021)..............................................             131            1.15             151
    Class 3 (2014)..............................................              15             1.3              20
    Class 3 (2015)..............................................               0             1.3               0
    Class 3 (2016)..............................................               6             1.3               8
    Class 3 (2017)..............................................              14             1.3              18
    Class 3 (2018)..............................................               6             1.3               8
    Class 3 (2019)..............................................               3             1.3               4
    Class 3 (2020)..............................................               1             1.3               1
    Class 3 (2021)..............................................               2             1.3               3
    Class 4 (2014)..............................................             321            1.45             465
    Class 4 (2015)..............................................             245            1.45             355
    Class 4 (2016)..............................................             191            1.45             277
    Class 4 (2017)..............................................             234            1.45             339
    Class 4 (2018)..............................................             225            1.45             326
    Class 4 (2019)..............................................             308            1.45             447
    Class 4 (2020)..............................................             336            1.45             487
    Class 4 (2021)..............................................             258            1.45             374
                                                                 -----------------------------------------------
        Total...................................................           3,801  ..............            4970
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits/number of transits).  ..............            1.31  ..............
----------------------------------------------------------------------------------------------------------------

I. Step 9: Calculate Revised Base Rates

    In this step, the Coast Guard revises the base rates so that the 
total cost of pilotage is equal to the revenue needed after considering 
the impact of the weighting factors. To do this, the Coast Guard 
divides the initial base rates calculated in Step 7 by the average 
weighting factors calculated in Step 8, as shown in table 39.

                                 Table 39--Revised Base Rates for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                                   Revised rate
                                                                                      Average     (initial rate
                              Area                                 Initial rate      weighting        average
                                                                     (Step 7)      factor (Step      weighting
                                                                                        8)            factor)
----------------------------------------------------------------------------------------------------------------
District Three: Undesignated....................................            $535            1.30            $410
District Three: Designated......................................           1,090            1.31             834
----------------------------------------------------------------------------------------------------------------

J. Step 10: Review and Finalize Rates

    In this step, the Director reviews the rates set forth by the 
staffing model and ensures that they meet the goal of ensuring safe, 
efficient, and reliable pilotage. To establish this, the Director 
considers whether the rates incorporate appropriate compensation for 
pilots to handle heavy traffic periods and whether there is a 
sufficient number of pilots to handle those heavy traffic periods. The 
Director also considers whether the rates will cover operating expenses 
and infrastructure costs and takes average traffic and weighting 
factors into consideration. Based on this information, the Director is 
not issuing any alterations to the rates in this step. By means of this 
rule, Sec.  401.405(a)(5) and (6) are modified to reflect the final 
rates shown in table 40.

                                    Table 40--Final Rates for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                    Final 2022      Final 2023
                     Area                                     Name                 pilotage rate   pilotage rate
----------------------------------------------------------------------------------------------------------------
District Three: Designated....................  St. Mary's River................            $662            $834
District Three: Undesignated..................  Lakes Huron, Michigan, and                   342             410
                                                 Superior.
----------------------------------------------------------------------------------------------------------------

VIII. Regulatory Analyses

    The Coast Guard developed this rule after considering numerous 
statutes and Executive orders related to rulemaking. Below, the Coast 
Guard summarizes its analyses based on these statutes or Executive 
orders.

[[Page 12251]]

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.
    The Office of Management and Budget (OMB) has not designated this 
rule a significant regulatory action under section 3(f) of Executive 
Order 12866. A regulatory analysis follows.
    The purpose of this rule is to establish new base pilotage rates, 
as 46 U.S.C. 9303(f) requires that rates be established or reviewed and 
adjusted each year. The statute also requires that base rates 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. The last full ratemaking was concluded in June 
of 2018.\28\ For this ratemaking, the Coast Guard estimates an increase 
in cost of approximately $5.17 million to industry. This is 
approximately a 16-percent increase because of the change in revenue 
needed in 2023 compared to the revenue needed in 2022.
---------------------------------------------------------------------------

    \28\ Great Lakes Pilotage Rates--2018 Annual Review and 
Revisions to Methodology (83 FR 26162), published June 5, 2018.

                                    Table 41--Economic Impacts Due to Changes
----------------------------------------------------------------------------------------------------------------
                                                           Affected
             Change                   Description         population             Costs             Benefits
----------------------------------------------------------------------------------------------------------------
Rate changes....................  In accordance with  Owners and          Increase of         New rates cover an
                                   46 U.S.C. Chapter   operators of 285    $5,172,200 due to   association's
                                   93, the Coast       vessels             change in revenue   necessary and
                                   Guard is required   transiting the      needed for 2023     reasonable
                                   to review and       Great Lakes         ($37,659,195)       operating
                                   adjust base         system annually,    from revenue        expenses.
                                   pilotage rates      56 United States    needed for 2022    Promotes safe,
                                   annually.           Great Lakes         ($32,486,995) as    efficient, and
                                                       pilots, 6           shown in table 42.  reliable pilotage
                                                       apprentice                              service on the
                                                       pilots, and 3                           Great Lakes.
                                                       pilotage                               Provides fair
                                                       associations.                           compensation,
                                                                                               adequate
                                                                                               training, and
                                                                                               sufficient rest
                                                                                               periods for
                                                                                               pilots.
                                                                                              Ensures the
                                                                                               association
                                                                                               receives
                                                                                               sufficient
                                                                                               revenues to fund
                                                                                               future
                                                                                               improvements.
----------------------------------------------------------------------------------------------------------------

    The Coast Guard is required to review and adjust pilotage rates on 
the Great Lakes annually. See section III of this preamble for detailed 
discussions of the legal basis and purpose for this rulemaking. Based 
on the annual review for this rulemaking, the Coast Guard is adjusting 
the pilotage rates for the 2023 shipping season to generate sufficient 
revenues for each district to reimburse its necessary and reasonable 
operating expenses, fairly compensate properly trained and rested 
pilots, and provide an appropriate working capital fund to use for 
improvements. The result is an increase in rates for all areas in 
District One, District Two, and District Three. These changes also lead 
to a net increase in the cost of service to shippers. The change in 
per-unit cost to each individual shipper is dependent on their area of 
operation.
    A detailed discussion of the economic impact analysis follows.
Affected Population
    This rule affects United States Great Lakes pilots and apprentice 
pilots, the 3 pilot associations, and the owners and operators of 285 
oceangoing vessels that transit the Great Lakes annually on average 
from 2019 to 2021. The Coast Guard estimates that there will be 56 
registered pilots and 6 apprentice pilots during the 2023 shipping 
season. The shippers affected by these rate changes are those owners 
and operators of domestic vessels operating ``on register'' (engaged in 
foreign trade) and owners and operators of non-Canadian foreign vessels 
on routes within the Great Lakes system. These owners and operators 
must have pilots or pilotage service as required by 46 U.S.C. 9302. 
There is no minimum tonnage limit or exemption for these vessels. The 
statute applies only to commercial vessels and not to recreational 
vessels. United States-flagged vessels not operating on register, and 
Canadian ``lakers,'' which account for most commercial shipping on the 
Great Lakes, are not required by 46 U.S.C. 9302 to have pilots. 
However, these United States- and Canadian-flagged lakers may 
voluntarily choose to engage a Great Lakes registered pilot. Vessels 
that are U.S.-flagged may opt to have a pilot for varying reasons, such 
as unfamiliarity with designated waters and ports, or for insurance 
purposes.
    The Coast Guard used billing information from the years 2019 
through 2021 from the GLPMS to estimate the average annual number of 
vessels affected by the rate adjustment. The GLPMS tracks data related 
to managing and coordinating the dispatch of pilots on the Great Lakes, 
and billing in accordance with the services. As described in Step 7 of 
the ratemaking methodology, the Coast Guard uses a 10-year average to 
estimate the traffic and used 3 years of the most recent billing data 
to estimate the affected population. When 10 years of the most recent 
billing data was reviewed, the Coast Guard found the data included 
vessels that have not used pilotage services in recent years; 
therefore, using 3 years of billing data is a better representation of 
the vessel population that is currently using pilotage services and is 
impacted by this rulemaking.
    The Coast Guard found that 424 unique vessels used pilotage 
services during the years 2019 through 2021. That is, these vessels had 
a pilot dispatched to the vessel, and billing information was recorded 
in the GLPMS or SeaPro. Of these vessels, 397 were foreign-flagged 
vessels and 27 were U.S.-flagged vessels. As stated previously, U.S.-
flagged vessels not operating on register are not required to have a 
registered pilot per 46 U.S.C. 9302, but they can voluntarily choose to 
have one.
    Numerous factors affect vessel traffic, which varies from year to 
year. Therefore, rather than using the total number of vessels over the 
time period, the Coast Guard took an average of the unique vessels 
using pilotage services from the years 2019 through 2021 as the best 
representation of vessels estimated to be affected by the rates in this

[[Page 12252]]

rulemaking. From 2019 through 2021, an average of 285 vessels used 
pilotage services annually.\29\ On average, 273 of these vessels were 
foreign-flagged and 12 were U.S.-flagged vessels that voluntarily opted 
into the pilotage service (these figures are rounded averages).
---------------------------------------------------------------------------

    \29\ Some vessels entered the Great Lakes multiple times in a 
single year, affecting the average number of unique vessels using 
pilotage services in any given year.
---------------------------------------------------------------------------

Total Cost to Shippers
    The rate changes resulting from this adjustment to the rates result 
in a net increase in the cost of service to shippers. However, the 
change in per unit cost to each individual shipper is dependent on 
their area of operation.
    The Coast Guard estimates the effect of the rate changes on 
shippers by comparing the total projected revenues needed to cover 
costs in 2022 with the total projected revenues to cover costs in 2023. 
The Coast Guard sets pilotage rates so that pilot associations receive 
enough revenue to cover their necessary and reasonable expenses. 
Shippers pay these rates when they engage a pilot as required by 46 
U.S.C. 9302. Therefore, the aggregate payments of shippers to pilot 
associations are equal to the projected necessary revenues for pilot 
associations. The revenues each year represent the total costs that 
shippers must pay for pilotage services. The change in revenue from the 
previous year is the additional cost to shippers discussed in this 
rule.
    The impacts of the rate changes on shippers are estimated from the 
district pilotage projected revenues (shown in tables 10, 22, and 34 of 
this preamble). The Coast Guard estimates that for the 2023 shipping 
season, the projected revenue needed for all three districts is 
$37,659,195.
    To estimate the change in cost to shippers from this rule, the 
Coast Guard compared the 2023 total projected revenues to the 2022 
projected revenues. Because the Coast Guard reviews and prescribes 
rates for Great Lakes pilotage annually, the effects are estimated as a 
single-year cost rather than annualized over a 10-year period. In the 
2022 rulemaking, the total projected revenue needed for 2022 is 
estimated as $32,486,994.\30\ This is the best approximation of 2022 
revenues, as, at the time of publication of this rule, the Coast Guard 
does not have enough audited data available for the 2022 shipping 
season to revise these projections. Table 42 shows the revenue 
projections for 2022 and 2023 and details the additional cost increases 
to shippers by area and district as a result of the rate changes on 
traffic in Districts One, Two, and Three.
---------------------------------------------------------------------------

    \30\ 87 FR 18488, see table 42. https://www.govinfo.gov/content/pkg/FR-2022-03-30/pdf/2022-06394.pdf.

                                Table 42--Effect of the Rule by Area and District
                                         [U.S. dollars; non-discounted]
----------------------------------------------------------------------------------------------------------------
                                                                                                    Additional
                              Area                                Revenue needed  Revenue needed   costs of this
                                                                      in 2022         in 2023          rule
----------------------------------------------------------------------------------------------------------------
Total, District One.............................................     $11,791,695     $12,609,601        $817,906
Total, District Two.............................................       8,786,882      10,392,542       1,605,660
Total, District Three...........................................      11,908,418      14,657,052       2,748,633
                                                                 -----------------------------------------------
    System Total................................................      32,486,995      37,659,195       5,172,199
----------------------------------------------------------------------------------------------------------------
Note: All figures are rounded to the nearest dollar and may not sum.

    The resulting difference between the projected revenue in 2022 and 
the projected revenue in 2023 is the annual change in payments from 
shippers to pilots as a result of the rate changes by this rule. The 
effect of the rate changes to shippers will vary by area and district. 
After taking into account the change in pilotage rates, the rate 
changes will lead to affected shippers operating in District One 
experiencing an increase in payments of $817,906 over the previous 
year. District Two and District Three will experience an increase in 
payments of $1,605,660 and $2,748,633, respectively, when compared with 
2022. The overall adjustment in payments will be an increase in 
payments by shippers of $5,172,199 across all three districts (a 16-
percent increase when compared with 2022). Again, because the Coast 
Guard reviews and sets rates for Great Lakes pilotage annually, the 
impacts are estimated as single-year costs rather than being annualized 
over a 10-year period.
    Table 43 shows the difference in revenue by revenue-component from 
2022 to 2023 and presents each revenue-component as a percentage of the 
total revenue needed. In both 2022 and 2023, the largest revenue-
component was pilotage compensation (63 percent of total revenue needed 
in 2022, and 63 percent of total revenue needed in 2023), followed by 
operating expenses (31 percent of total revenue needed in 2022, and 32 
percent of total revenue needed in 2023).

                                                  Table 43--Difference in Revenue by Revenue-Component
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Percentage of                   Percentage of  Difference (2023    Percentage
                   Revenue component                    Revenue needed   total revenue  Revenue needed   total revenue    revenue- 2022     change from
                                                            in 2022     needed in 2022      in 2023     needed in 2023      revenue)       previous year
--------------------------------------------------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses...........................     $10,045,658              31     $11,984,950              32        $1,939,292              19
Total Target Pilot Compensation.......................      20,362,566              63      23,766,288              63         3,403,722              17
Total Target Apprentice Pilot Compensation............       1,293,622               4         916,700               2         (376,922)            (29)
Working Capital Fund..................................         785,149               2         991,257               3           206,108              26
                                                       -------------------------------------------------------------------------------------------------
    Total Revenue Needed..............................      32,486,995             100      37,659,195             100         5,172,199              16
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: All figures are rounded to the nearest dollar and may not sum.

[[Page 12253]]

    As stated above, the Coast Guard estimates that there will be a 
total increase in revenue needed by the pilot associations of 
$5,172,200. This represents an increase in revenue needed for target 
pilot compensation of $3,403,722, a decrease in revenue needed for 
total apprentice pilot wage benchmark of ($376,922), an increase in the 
revenue needed for adjusted operating expenses of $1,939,292, and an 
increase in the revenue needed for the working capital fund of 
$206,108. Of the $5,172,200 total change in revenue, $1,461,677 (28 
percent) results from changes in inflation, $2,052,118 (40 percent) 
results from changes in the number of pilots, ($443,258) (-9 percent) 
results from the decrease in the number of apprentice pilots, and 
$2,101,662 (41 percent) results from other changes in traffic.
    The change in revenue needed for pilot compensation, $3,403,722, is 
due to three factors: (1) The changes to adjust 2022 pilotage 
compensation to account for the difference between actual ECI inflation 
\31\ (5.7 percent) and predicted PCE inflation \32\ (2.2 percent) for 
2022; (2) an increase of two pilots in District Two and three pilots in 
District Three compared to 2022; and (3) projected inflation of 
pilotage compensation in Step 2 of the methodology, using predicted 
inflation through 2024.
---------------------------------------------------------------------------

    \31\ Employment Cost Index, Total Compensation for Private 
Industry workers in Transportation and Material Moving, Annual 
Average, Series ID: CIU2010000520000A. Accessed September 29, 2022. 
https://www.bls.gov/news.release/eci.t05.htm.
    \32\ Table 1 Summary of Economic Projections, PCE Inflation June 
Projection. Accessed September, 2022 https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220921.pdf.
---------------------------------------------------------------------------

    The target compensation is $424,398 per pilot in 2023, compared to 
$399,266 in 2022. The changes to modify the 2022 pilot compensation to 
account for the difference between predicted and actual inflation will 
increase the 2022 target compensation value by 3.5 percent. As shown in 
table 44, this inflation adjustment increases total compensation by 
$13,974 per pilot, and the total revenue needed by $782,561 when 
accounting for all 56 pilots.

  Table 44--Change in Revenue Resulting From the Change to Inflation of
                Pilot Compensation Calculation in Step 4
------------------------------------------------------------------------
 
------------------------------------------------------------------------
2022 Target Pilot Compensation..........................        $399,266
Adjusted 2022 Compensation ($399,266 x 1.035)...........         413,240
Difference between Adjusted Target 2022 Compensation and          13,974
 Target 2022 Compensation ($413,240-$399,266)...........
Increase in total Revenue for 56 Pilots ($13,974 x 56)..         782,561
------------------------------------------------------------------------
Note: All figures are rounded to the nearest dollar and may not sum.

    Similarly, table 45 shows the impact of the difference between 
predicted and actual inflation on the target apprentice pilot 
compensation benchmark. The inflation adjustment increases the 
compensation benchmark by $5,031 per apprentice pilot, and the total 
revenue needed by $30,185 when accounting for all 6 apprentice pilots.

  Table 45--Change in Revenue Resulting From the Change to Inflation of
           Apprentice Pilot Compensation Calculation in Step 4
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Target Apprentice Pilot Compensation....................        $143,736
Adjusted Compensation ($143,736 x 1.035)................         148,767
Difference between Adjusted Target Compensation and                5,031
 Target Compensation ($148,767-$143,736)................
Increase in total Revenue for Apprentices ($5,031 x 6)..          30,185
------------------------------------------------------------------------
Note: All figures are rounded to the nearest dollar and may not sum.

    As noted earlier, the Coast Guard predicts that 56 pilots will be 
needed for the 2023 season. This will be an increase of five pilots 
compared to the 2022 season. The difference reflects an increase of two 
pilots in District Two and three pilots in District Three. Table 46 
shows the increase of $2,052,118 in revenue needed solely for pilot 
compensation. As noted previously, to avoid double counting, this value 
excludes the change in revenue resulting from the change to adjust 2022 
pilotage compensation to account for the difference between actual and 
predicted inflation.

   Table 46--Change in Revenue Resulting From Increase of Five Pilots
------------------------------------------------------------------------
 
------------------------------------------------------------------------
2023 Target Compensation................................        $424,398
Total Number of New Pilots..............................               5
Total Cost of New Pilots ($424,398 x 5).................      $2,121,990
Difference between Adjusted Target 2022 Compensation and         $13,974
 Target 2022 Compensation ($413,240-$399,266)...........
Increase in total Revenue for 5 Pilots ($13,974 x 5)....         $69,872
Net Increase in total Revenue for 5 Pilots ($2,121,990-       $2,052,118
 $69,872)...............................................
------------------------------------------------------------------------
Note: All figures are rounded to the nearest dollar and may not sum.

[[Page 12254]]

    Similarly, the Coast Guard predicts that six apprentice pilots will 
be needed for the 2023 season. This will be a decrease of three 
apprentices from the 2022 season. The difference reflects a decrease of 
one apprentice for District Two and two apprentices for District Three. 
Table 47 shows the decrease of ($443,258) in revenue needed solely for 
apprentice pilot compensation. As noted previously, to avoid double 
counting, this value excludes the change in revenue resulting from the 
change to adjust 2022 apprentice pilotage compensation to account for 
the difference between actual and predicted inflation.
---------------------------------------------------------------------------

    \33\ The 2022 projected revenues are from the Great Lakes 
Pilotage Rate--2022 Annual Review and Revisions to Methodology final 
rule (86 FR 14184), tables 9, 21, and 33. The 2023 projected 
revenues are from tables 10, 22, and 34 of this final rule.

Table 47--Change in Revenue Resulting From Decrease of Three Apprentices
------------------------------------------------------------------------
 
------------------------------------------------------------------------
2023 Apprentice Target Compensation.....................        $152,783
Total Number of New Apprentices.........................             (3)
Total Cost of New Apprentices ($152,783 x -3)...........      ($458,350)
Difference between Adjusted Target 2022 Compensation and          $5,031
 Target 2022 Compensation ($148,767-$143,736)...........
Increase in total Revenue for -3 Apprentices ($5,031 [x -      ($15,092)
 3).....................................................
Net Increase in total Revenue for -3 Apprentices (-           ($443,258)
 $458,350--$15,092).....................................
------------------------------------------------------------------------
Note: All figures are rounded to the nearest dollar and may not sum.

    Another increase, $624,831, will be the result of increasing 
compensation for the 56 pilots to account for future inflation of 2.7 
percent in 2023. This will increase total compensation by $11,158 per 
pilot.

 Table 48--Change in Revenue Resulting From Inflating 2022 Compensation
                                 to 2023
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Adjusted 2022 Compensation..............................        $413,240
2023 Target Compensation ($413,240 x 1.027).............         424,398
Difference between Adjusted 2022 Compensation and Target          11,158
 2023 Compensation $424,398-$413,240)...................
Increase in total Revenue for 56 Pilots ($11,158 x 56)..         624,831
------------------------------------------------------------------------
Note: All figures are rounded to the nearest dollar and may not sum.

    Similarly, an increase of $24,101 will be the result of increasing 
compensation for the 6 apprentice pilots to account for future 
inflation of 2.7 percent in 2023. This will increase total compensation 
by $4,017 per apprentice pilot, as shown in table 49.

  Table 49--Change in Revenue Resulting From Inflating 2022 Apprentice
                       Pilot Compensation to 2023
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Adjusted 2022 Compensation..............................        $148,767
2023 Target Compensation ($424,398 x 36%)...............         152,783
Difference between Adjusted Compensation and Target                4,017
 Compensation $152,783-$148,767)........................
Increase in total Revenue for 6 Apprentices ($4,017 x 6)          24,101
------------------------------------------------------------------------
Note: All figures are rounded to the nearest dollar and may not sum.

    Table 50 presents the percentage change in revenue by area and 
revenue-component, excluding surcharges, as they are applied at the 
district level.\33\

[[Page 12255]]

                                                                                      Table 50--Difference in Revenue by Revenue-Component and Area
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Adjusted operating expenses       Total target pilot compensation      Total target apprentice pilot           Working capital fund                Total revenue needed
                                                     ------------------------------------------------------------------------            compensation            -----------------------------------------------------------------------
                                                                                                                             ------------------------------------
                                                         2022        2023     Percentage     2022        2023     Percentage                          Percentage     2022        2023     Percentage     2022        2023     Percentage
                                                                                 change                              change      2022        2023        change                              change                              change
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
District One: Designated............................  $2,419,401  $2,599,777           7  $4,165,143  $4,243,980           2    $172,483    $183,340         6.3    $163,077    $189,966          16  $6,747,621  $7,217,063         7.0
District One: Undesignated..........................   1,613,051   1,733,186           7   3,309,117   3,395,184           3     114,989     122,227         6.3     121,906     141,941          16   5,044,074   5,392,538         6.9
District Two: Undesignated..........................   1,078,929   1,270,338          18   3,366,611   4,243,980          26     172,483      61,113      (64.6)     110,101     150,722          37   4,555,641   5,726,153        25.7
District Two: Designated............................   1,618,395   1,905,503          18   2,510,585   2,546,388           1     114,989      91,670      (20.3)     102,261     122,828          20   4,231,241   4,666,389        10.3
District Three: Undesignated........................   2,603,961   3,515,118          35   6,556,746   7,214,766          10     567,756     359,942        (37)     226,880     299,795          32   9,387,588  11,389,621        21.3
District Three: Designated..........................     711,920     961,028          35   1,747,987   2,121,990          21     150,923      98,408        (35)      60,924      86,005          41   2,520,831   3,267,430        29.6
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: All figures are rounded to the nearest dollar and may not sum.

[[Page 12256]]

Benefits
    This rule allows the Coast Guard to meet the requirements in 46 
U.S.C. 9303 to review the rates for pilotage services on the Great 
Lakes. The rate changes promote safe, efficient, and reliable pilotage 
service on the Great Lakes by (1) ensuring that rates cover an 
association's operating expenses, (2) providing fair pilot 
compensation, adequate training, and sufficient rest periods for 
pilots, and (3) ensuring pilot associations produce enough revenue to 
fund future improvements. The rate changes also help recruit and retain 
pilots, which ensures a sufficient number of pilots to meet peak 
shipping demand, helping to reduce delays caused by pilot shortages.

B. Small Entities

    Under the Regulatory Flexibility Act, 5 U.S.C. 601-612, the Coast 
Guard has considered whether this rule will 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.
    For the rule, the Coast Guard reviewed recent company size and 
ownership data for the vessels identified in the GLPMS, and we reviewed 
business revenue and size data provided by publicly available sources 
such as ReferenceUSA.\34\ As described in section VIII.A of this 
preamble, the Coast Guard found that 285 unique vessels used pilotage 
services on average during the years 2019 through 2021. These vessels 
are owned by 59 entities, of which 44 are foreign entities that operate 
primarily outside the United States, and the remaining 15 entities are 
U.S. entities. The Coast Guard compared the revenue and employee data 
found in the company search to the Small Business Administration's 
(SBA) small business threshold as defined in the SBA's ``Table of Size 
Standards'' for small businesses to determine how many of these 
companies are considered small entities.\35\ Table 51 shows the North 
American Industry Classification System (NAICS) codes of the U.S. 
entities and the small entity standard size established by the SBA.
---------------------------------------------------------------------------

    \34\ See https://resource.referenceusa.com/.
    \35\ See https://www.sba.gov/document/support--table-size-standards. SBA has established a ``Table of Size Standards'' for 
small businesses that sets small business size standards by NAICS 
code. A size standard, which is usually stated in number of 
employees or average annual receipts (``revenues''), represents the 
largest size that a business (including its subsidiaries and 
affiliates) may be in order to remain classified as a small business 
for SBA and Federal contracting programs. Accessed April 2022.

         Table 51--NAICS Codes and Small Entities Size Standards
------------------------------------------------------------------------
                                                   Small entity size
       NAICS                Description                 standard
------------------------------------------------------------------------
238910.............  Site Preparation          $16,500,000.
                      Contractors.
423860.............  Transportation Equipment  150 Employees.
                      And Supplies.
425120.............  Wholesale Trade Agents    100 Employees.
                      And Brokers.
483212.............  Inland Water Passenger    500 Employees.
                      Transportation.
484230.............  Specialized Freight       $30,000.
                      (Except Used Goods)
                      Trucking.
488330.............  Navigational Services to  $41,500,000.
                      Shipping.
561510.............  Travel Agencies.........  $22,000,000.
561599.............  All Other Travel          $22,000,000.
                      Arrangement And
                      Reservation Services.
713930.............  Marinas.................  $8,000,000.
813910.............  Business Associations...  $8,000,000.
------------------------------------------------------------------------

    Of the 15 U.S. entities, 8 exceed the SBA's small business 
standards for small entities. To estimate the potential impact on the 
seven small entities, the Coast Guard used their 2021 invoice data to 
estimate their pilotage costs in 2023. Of the seven small entities, 
from 2019 to 2021, only five used pilotage services in 2021. The Coast 
Guard increased their 2021 costs to account for the changes in pilotage 
rates resulting from this rule and the Great Lakes Pilotage Rates--2021 
Annual Review and Revisions to Methodology final rule (86 FR 14184). 
The Coast Guard estimated the change in cost to these entities 
resulting from this rule by subtracting their estimated 2022 pilotage 
costs from their estimated 2023 pilotage costs and found the average 
costs to small firms will be approximately $29,311, with a range of 
$810 to $109,314. The estimated change in pilotage costs between 2022 
and 2023 was then compared with each firm's annual revenue. In all but 
one case, the impact of the change in estimated pilotage expenses were 
below 1 percent of revenues. For one uniquely small entity, the change 
in impact will be 4.19 percent of revenues, as this entity reports 
revenue approximately 10 times less than the next largest small entity.
    In addition to the owners and operators discussed previously, three 
U.S. entities that receive revenue from pilotage services will be 
affected by this rule. These are the three pilot associations that 
provide and manage pilotage services within the Great Lakes districts. 
These associations are designated with the same NAICS code as Business 
Associations \36\ with a small-entity size standard of $8,000,000. 
Based on the reported revenues from audit reports, none of the 
associations qualify as small entities.
---------------------------------------------------------------------------

    \36\ In previous rulemakings, the associations used a different 
NAICS code, 483212 Inland Water Passenger Transportation, which had 
a size standard of 500 employees and, therefore, designated the 
associations as small entities. The change in NAICS code comes from 
an update to the association's ReferenceUSA profile in February 
2022.
---------------------------------------------------------------------------

    Finally, the Coast Guard did not find any small not-for-profit 
organizations that are independently owned and operated and are not 
dominant in their fields that will be impacted by this rule. The Coast 
Guard also did not find any small governmental jurisdictions with 
populations of fewer than 50,000 people that will be impacted by this 
rule. Based on this analysis, the Coast Guard concludes this rulemaking 
will not affect a substantial number of small entities, nor have a 
significant economic impact on any of the affected entities.
    Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that 
this rule will not have a significant economic impact on a substantial 
number of small entities.

C. Assistance for Small Entities

    Under section 213(a) of the Small Business Regulatory Enforcement 
Fairness Act of 1996, Public Law 104-121, the Coast Guard offers to 
assist small entities in understanding this rule so that they can 
better evaluate its effects on them and participate in the rulemaking. 
The Coast Guard will not retaliate against small entities that question 
or complain about this rule or any policy or action of the Coast Guard.
    Small businesses may send comments on the actions of Federal 
employees who enforce, or otherwise determine compliance with, Federal 
regulations to the Small Business and Agriculture Regulatory 
Enforcement Ombudsman and the Regional Small Business Regulatory 
Fairness Boards. The Ombudsman evaluates these actions annually and 
rates each agency's responsiveness to small business. If you wish to 
comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR 
(1-888-734-3247).

[[Page 12257]]

D. Collection of Information

    This rule calls for no new collection of information nor does it 
revise an existing collection of information under the Paperwork 
Reduction Act of 1995, 44 U.S.C. 3501-3520.

E. Federalism

    A rule has implications for federalism under Executive Order 13132 
(Federalism) if it has a substantial direct effect on 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. The Coast Guard has analyzed this rule under Executive 
Order 13132 and determined that it is consistent with the fundamental 
federalism principles and preemption requirements described in 
Executive Order 13132. Our analysis follows.
    Congress directed the Coast Guard to establish ``rates and charges 
for pilotage services.'' See 46 U.S.C. 9303(f). This regulation is 
issued pursuant to that statute and is preemptive of State law as 
specified in 46 U.S.C. 9306. Under 46 U.S.C. 9306, a ``State or 
political subdivision of a State may not regulate or impose any 
requirement on pilotage on the Great Lakes.'' As a result, States or 
local governments are expressly prohibited from regulating within this 
category. Therefore, this rule is consistent with the fundamental 
federalism principles and preemption requirements described 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 federalism implications 
and preemptive effect, Executive Order 13132 specifically directs 
agencies to consult with State and local governments during the 
rulemaking process. If you believe this rule will have implications for 
federalism under Executive Order 13132, please call or email the person 
listed in the FOR FURTHER INFORMATION CONTACT section of this preamble.

F. Unfunded Mandates

    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. Although this rule will not result 
in such expenditure, the effects of this rule are discussed elsewhere 
in this preamble.

G. Taking of Private Property

    This rule will not cause a taking of private property or otherwise 
have taking implications under Executive Order 12630 (Governmental 
Actions and Interference with Constitutionally Protected Property 
Rights).

H. Civil Justice Reform

    This rule meets applicable standards in sections 3(a) and 3(b)(2) 
of Executive Order 12988 (Civil Justice Reform) to minimize litigation, 
eliminate ambiguity, and reduce burden.

I. Protection of Children

    The Coast Guard has analyzed this rule under Executive Order 13045 
(Protection of Children from Environmental Health Risks and Safety 
Risks). This rule is not an economically significant rule and will not 
create an environmental risk to health or risk to safety that might 
disproportionately affect children.

J. Indian Tribal Governments

    This rule does not have tribal implications under Executive Order 
13175 (Consultation and Coordination with Indian Tribal Governments), 
because it will 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

    The Coast Guard has analyzed this rule under Executive Order 13211 
(Actions Concerning Regulations That Significantly Affect Energy 
Supply, Distribution, or Use) and have determined that it is not a 
``significant energy action'' under that order because it is not a 
``significant regulatory action'' under Executive Order 12866 and is 
not likely to have a significant adverse effect on the supply, 
distribution, or use of energy.

L. Technical Standards

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

M. Environment

    The Coast Guard has analyzed this rule under Department of Homeland 
Security Management Directive 023-01, Rev. 1, associated implementing 
instructions, and Environmental Planning COMDTINST 5090.1 (series), 
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 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 Record of Environmental Consideration supporting 
this determination is available in the docket. For instructions on 
locating the docket, see the ADDRESSES section of this preamble. This 
rule is categorically excluded under paragraphs A3 and L54 of Appendix 
A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. Paragraph 
A3 pertains to the promulgation of rules of the following nature: (a) 
those of a strictly administrative or procedural nature; (b) those that 
implement, without substantive change, statutory or regulatory 
requirements; (c) those that implement, without substantive change, 
procedures, manuals, and other guidance documents; (d) those that 
interpret or amend an existing regulation without changing its 
environmental effect; (e) those that provide technical guidance on 
safety and security matters; and (f) those that provide guidance for 
the preparation of security plans. Paragraph L54 pertains to 
regulations which are editorial or procedural.
    This rule involves setting or adjusting the pilotage rates for the 
2023 shipping season to account for changes in district operating 
expenses, changes in the number of pilots, and anticipated inflation. 
These changes are consistent with, and promote, the Coast Guard's 
maritime safety mission.

[[Page 12258]]

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 is 
amending 46 CFR part 401 as follows:

PART 401--GREAT LAKES PILOTAGE REGULATIONS

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

    Authority: 46 U.S.C. 2103, 2104(a), 6101, 7701, 8105, 9303, 
9304; DHS Delegation No. 00170.1, Revision No. 01.3, paragraphs 
(II)(92)(a), (d), (e), (f).

0
2. Amend Sec.  401.405 by revising paragraphs (a)(1) through (6) to 
read as follows:

Sec.  401.405  Pilotage rates and charges.

    (a) * * *
    (1) The St. Lawrence River is $876;
    (2) Lake Ontario is $586;
    (3) Lake Erie is $704;
    (4) The navigable waters from Southeast Shoal to Port Huron, MI is 
$601;
    (5) Lakes Huron, Michigan, and Superior is $410; and
    (6) The St. Mary's River is $834.
* * * * *

    Dated: February 8, 2023.
W.R. Arguin,
Rear Admiral, U.S. Coast Guard, Assistant Commandant for Prevention 
Policy.
[FR Doc. 2023-03212 Filed 2-24-23; 8:45 am]
BILLING CODE 9110-04-P