Document ID: USCG-2012-0409-0001
Agency: uscg
Document Type: Proposed Rule
Title: NPRM:  Great Lakes Pilotage Rates, 2013 Annual Review and Adjustment (Federal Register Publication)
Posted Date: 2012-08-01T04:00Z

[Federal Register Volume 77, Number 148 (Wednesday, August 1, 2012)]
[Proposed Rules]
[Pages 45539-45558]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-18714]

=======================================================================
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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

46 CFR Part 401

[USCG-2012-0409]
RIN 1625-AB89

Great Lakes Pilotage Rates--2013 Annual Review and Adjustment

AGENCY: Coast Guard, DHS.

ACTION: Notice of proposed rulemaking.

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

SUMMARY: The Coast Guard proposes rate adjustments for pilotage 
services on the Great Lakes, which were last amended in February 2012. 
The proposed adjustments would establish new base rates and are made in 
accordance with a required full ratemaking procedure. The proposed 
update reflects changes in benchmark contractual wages and benefits and 
an adjustment for inflation. This rulemaking promotes the Coast Guard's 
strategic goal of maritime safety.

DATES: Comments and related material must either be submitted to our 
online docket via http://www.regulations.gov on or before October 1, 
2012 or reach the Docket Management Facility by that date.

ADDRESSES: You may submit comments identified by docket number USCG-
2012-0409 using any one of the following methods:
    (1) Federal eRulemaking Portal: http://www.regulations.gov.
    (2) Fax: 202-493-2251.
    (3) Mail: Docket Management Facility (M-30), U.S. Department of 
Transportation, West Building Ground Floor, Room W12-140, 1200 New 
Jersey Avenue SE., Washington, DC 20590-0001.
    (4) Hand delivery: Same as mail address above, between 9 a.m. and 5 
p.m., Monday through Friday, except Federal holidays. The telephone 
number is 202-366-9329.
    To avoid duplication, please use only one of these four methods. 
See the ``Public Participation and Request for Comments'' portion of 
the SUPPLEMENTARY INFORMATION section below for instructions on 
submitting comments.

FOR FURTHER INFORMATION CONTACT: If you have questions on this proposed 
rule, call or email Mr. Todd Haviland, Management & Program Analyst, 
Office of Great Lakes Pilotage, Commandant (CG-WWM-2), Coast Guard; 
telephone 202-372-2037, email Todd.A.Haviland@uscg.mil, or fax 202-372-
1909. If you have questions on viewing or submitting material to the 
docket, call Renee V. Wright, Program Manager, Docket Operations, 
telephone 202-366-9826.

SUPPLEMENTARY INFORMATION:

Table of Contents for Preamble

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

I. Public Participation and Request for Comments

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

A. Submitting Comments

    If you submit a comment, please include the docket number for this 
rulemaking (USCG-2012-0409), indicate the specific section of this 
document to which each comment applies, and provide a reason for each 
suggestion or recommendation. You may submit your comments and material 
online or by fax, mail, or hand delivery, but please use only one of 
these means. We recommend that you include your name and a mailing 
address, an email address, or a phone number in the body of your 
document so that we can contact you if we have questions regarding your 
submission.
    To submit your comment online, go to http://www.regulations.gov and 
insert ``USCG-2012-0409'' in the ``Search'' box. Click on ``Submit a 
Comment'' in the ``Actions'' column. If you submit your comments by 
mail or hand delivery, submit them in an unbound format, no larger than 
8\1/2\ by 11 inches, suitable for copying and electronic filing. If you 
submit comments by mail and would like to know that they reached the 
Facility, please enclose a stamped, self-addressed postcard or 
envelope.
    We will consider all comments and material received during the 
comment period and may change this proposed rule based on your 
comments.

B. Viewing Comments and Documents

    To view comments, as well as documents mentioned in this preamble 
as being available in the docket, go to http://www.regulations.gov, 
insert ``USCG-2012-0409'' and click ``Search.'' Click the ``Open Docket 
Folder'' in the ``Actions'' column. If you do not have access to the 
Internet, you may view the docket online by visiting the Docket 
Management Facility in Room W12-140 on the ground floor of the 
Department of Transportation West Building, 1200 New Jersey Avenue SE., 
Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, 
except Federal holidays. We have an agreement with the Department of 
Transportation to use the Docket Management Facility.

C. Privacy Act

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

D. Public Meeting

    We do not now plan to hold a public meeting. But you may submit a 
request for one to the docket using one of the methods specified under 
ADDRESSES. In your request, explain why you believe a public meeting 
would be beneficial. If

[[Page 45540]]

we determine that one would aid this rulemaking, we will hold one at a 
time and place announced by a later notice in the Federal Register.

II. Abbreviations

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

III. Basis and Purpose

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

    \1\ ``On register'' means that the vessel's certificate of 
documentation has been endorsed with a registry endorsement, and 
therefore, may be employed in foreign trade or trade with Guam, 
American Samoa, Wake, Midway, or Kingman Reef. 46 U.S.C. 12105, 46 
CFR 67.17.
---------------------------------------------------------------------------

    The purpose of this rulemaking is to establish new base pilotage 
rates, using the 46 CFR part 404, Appendix A, methodology.

IV. Background

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

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

    The U.S. waters of the Great Lakes and the St. Lawrence Seaway are 
divided into three pilotage districts. Pilotage in each district is 
provided by an association certified by the Coast Guard Director of 
Great Lakes Pilotage to operate a pilotage pool. It is important to 
note that, while we set rates, we do not control the actual number of 
pilots an association maintains, so long as the association is able to 
provide safe, efficient, and reliable pilotage service. Also, we do not 
control the actual compensation that pilots receive. The actual 
compensation is determined by each of the three district associations, 
which use different compensation practices.
    District One, consisting of Areas 1 and 2, includes all U.S. waters 
of the St. Lawrence River and Lake Ontario. District Two, consisting of 
Areas 4 and 5, includes all U.S. waters of Lake Erie, the Detroit 
River, Lake St. Clair, and the St. Clair River. District Three, 
consisting of Areas 6, 7, and 8, includes all U.S. waters of the St. 
Mary's River, Sault Ste. Marie Locks, and Lakes Michigan, Huron, and 
Superior. Area 3 is the Welland Canal, which is serviced exclusively by 
the Canadian Great Lakes Pilotage Authority and, accordingly, is not 
included in the U.S. rate structure. Areas 1, 5, and 7 have been 
designated by Presidential Proclamation, pursuant to the Act, to be 
waters in which pilots must at all times, be fully engaged in the 
navigation of vessels in their charge. Areas 2, 4, 6, and 8 have not 
been so designated because they are open bodies of water. While working 
in those undesignated areas, pilots must only ``be on board and 
available to direct the navigation of the vessel at the discretion of 
and subject to the customary authority of the master.'' 46 U.S.C. 
9302(a)(1)(B).
    This rulemaking is a full ratemaking to establish new base pilotage 
rates, using the 46 CFR part 404, Appendix A, methodology. The last 
full ratemaking established the current base rates in 2012 (Final Rule, 
77 FR 11752, February 28, 2012). Among other things, the Appendix A 
methodology requires us to review detailed pilot association financial 
information, and we contract with independent accountants to assist in 
that review. We have now completed our review of the independent 
accountant's 2010 financial reports. The comments by the pilot 
associations on those reports and the independent accountant's final 
findings are discussed in our document entitled ``Summary--Independent 
Accountant's Report on Pilot Association Expenses, with Pilot 
Association Comments and Accountant's Responses,'' which appears in the 
docket.

V. Discussion of Proposed Rule

A. Summary

    We propose establishing new base pilotage rates in accordance with 
the methodology outlined in Appendix A to 46 CFR part 404. The proposed 
new rates would be established by March 1, 2013 and effective August 1, 
2013. They would average approximately 1.87 percent more, overall, than 
the February 2012 rate adjustments. Table 1 shows the proposed percent 
change for the new rates for each area.
    All figures in the tables that follow are based on calculations 
performed either by an independent accountant or by the Director's 
staff. In both cases those calculations were performed using common 
commercial computer programs. Decimalization and rounding of the 
audited and calculated data affects the display in these tables but 
does not affect the calculations. The calculations are based on the 
actual figure that rounds values for presentation in the tables.

                  Table 1--Summary of Rate Adjustments
------------------------------------------------------------------------
                                                             Then the
                                                          percent change
           If pilotage service is required in:               over the
                                                           current rate
                                                                is:
------------------------------------------------------------------------
Area 1 (Designated waters)..............................          -1.41%
Area 2 (Undesignated waters)............................          -1.69
Area 4 (Undesignated waters)............................           8.87
Area 5 (Designated waters)..............................           0.95
Area 6 (Undesignated waters)............................           4.31
Area 7 (Designated waters)..............................           0.56
Area 8 (Undesignated waters)............................           1.52
------------------------------------------------------------------------

B. Discussion of Methodology

    The Appendix A methodology provides seven steps, with sub-steps, 
for calculating rate adjustments. The following discussion describes 
those steps and sub-steps and includes tables showing how we have 
applied them to the 2010 detailed pilot financial information.
    Step 1: Projection of Operating Expenses. In this step, we project 
the amount of vessel traffic annually. Based

[[Page 45541]]

upon that projection, we forecast the amount of necessary and 
reasonable operating expenses that pilotage rates should recover.
    Step 1.A: Submission of Financial Information. This sub-step 
requires each pilot association to provide us with detailed financial 
information in accordance with 46 CFR part 403. The associations 
complied with this requirement, supplying 2010 financial information in 
2011; this is the most current and complete data set we have available.
    Step 1.B: Determination of Recognizable Expenses. This sub-step 
requires us to determine which reported association expenses will be 
recognized for ratemaking purposes, using the guidelines shown in 46 
CFR 404.5. We contracted with an independent accountant to review the 
reported expenses and submit findings recommending which reported 
expenses should be recognized. The accountant also reviewed which 
reported expenses should be adjusted prior to recognition, or if they 
should not be allowed for ratemaking purposes. The independent 
accountant made preliminary findings; they were sent to the pilot 
associations, and the pilot associations reviewed and commented on the 
preliminary findings. Then, the independent accountant made final 
findings. The Coast Guard Director of Great Lakes Pilotage reviewed and 
accepted those final findings, resulting in the determination of 
recognizable expenses. The preliminary findings, the associations' 
comments on those findings, and the final findings are all discussed in 
the ``Summary--Independent Accountant's Report on Pilot Association 
Expenses, with Pilot Association Comments and Accountant's Responses,'' 
which appears in the docket. Tables 2 through 4 show each association's 
recognized expenses.

                                  Table 2--Recognized Expenses for District One
----------------------------------------------------------------------------------------------------------------
                                                                      Area 1          Area 2
                                                                 --------------------------------
                   Reported expenses for 2010                      St. Lawrence                        Total
                                                                       River       Lake Ontario
----------------------------------------------------------------------------------------------------------------
Pilot Costs:
    Other pilotage costs:
    Pilot subsistence/Travel....................................        $212,715        $167,880        $380,595
    License insurance...........................................          23,880          18,847          42,727
    Payroll taxes...............................................               0               0               0
    Other.......................................................           1,432           1,130           2,562
                                                                 -----------------------------------------------
        Total other pilotage costs..............................         238,027         187,857         425,884
Pilot Boat and Dispatch Costs:
    Pilot boat expense..........................................          95,254          75,178         170,432
    Dispatch expense............................................               0               0               0
    Payroll taxes...............................................           7,962           6,283          14,245
                                                                 -----------------------------------------------
        Total pilot and dispatch costs..........................         103,216          81,461         184,677
Administrative Expenses:
    Legal.......................................................           7,959           6,282          14,241
    Insurance...................................................          13,971          11,026          24,997
    Employee benefits...........................................          19,454          15,354          34,808
    Payroll taxes...............................................           4,816           3,801           8,617
    Other taxes.................................................           4,504           3,554           8,058
    Travel......................................................             215             169             384
    Depreciation/auto leasing/other.............................          17,440          13,765          31,205
    Interest....................................................          12,576           9,926          22,502
    Dues and subscriptions......................................          13,075          10,319          23,394
    Utilities...................................................           5,130           4,049           9,179
    Salaries....................................................          49,840          39,336          89,176
    Accounting/Professional fees................................           4,997           3,943           8,940
    Other.......................................................           9,408           7,425          16,833
----------------------------------------------------------------------------------------------------------------
    Total Administrative Expenses...............................         163,385         128,949         292,334
                                                                 -----------------------------------------------
        Total Operating Expenses................................         504,628         398,267         902,895
Proposed Adjustments (independent CPA):
Operating Expenses:
    Other Pilot Costs:
    Pilotage Subsistence/Travel.................................         (7,747)         (6,114)        (13,861)
    Payroll taxes...............................................          64,563          50,955         115,518
                                                                 -----------------------------------------------
        Total other pilotage costs..............................          56,816          44,841         101,657
Administrative Expenses:
    Legal.......................................................             799             631           1,430
    Employee benefits...........................................         (1,537)         (1,213)         (2,750)
    Dues and subscriptions......................................        (13,075)        (10,319)        (23,394)
                                                                 -----------------------------------------------
        Total Administrative Expenses...........................        (13,813)        (10,901)        (24,714)
                                                                 -----------------------------------------------
        Total CPA Adjustments...................................          43,003          33,940          76,943
                                                                 -----------------------------------------------
        Total Operating Expenses................................         547,631         432,207         979,838
----------------------------------------------------------------------------------------------------------------

[[Page 45542]]

                                  Table 3--Recognized Expenses for District Two
----------------------------------------------------------------------------------------------------------------
                                                                      Area 4          Area 5
                                                                 --------------------------------
                   Reported Expenses for 2010                                        Southeast         Total
                                                                     Lake Erie     Shoal to Port
                                                                                     Huron, MI
----------------------------------------------------------------------------------------------------------------
Operating Expenses:
    Other pilotage costs:
    Pilot subsistence/Travel....................................         $79,503        $119,254        $198,757
    License insurance...........................................           6,168           9,252          15,420
    Payroll taxes...............................................          53,457          80,186         133,643
    Other.......................................................          42,130          63,195         105,325
        Total other pilotage costs..............................         181,258         271,887         453,145
Pilot Boat and Dispatch Costs:
    Pilot boat expense..........................................         145,254         217,882         363,136
    Dispatch expense............................................           7,830          11,745          19,575
    Payroll taxes...............................................           4,056           6,084          10,140
        Total pilot and dispatch costs..........................         157,140         235,711         392,851
Administrative Expenses:
    Legal.......................................................           8,120          12,180          20,300
    Office rent.................................................          26,275          39,413          65,688
    Insurance...................................................          13,410          20,114          33,524
    Employee benefits...........................................          24,420          36,631          61,051
    Payroll taxes...............................................           2,980           4,471           7,451
    Other taxes.................................................          19,100          28,651          47,751
    Depreciation/Auto leasing/Other.............................          22,954          34,431          57,385
    Interest....................................................          14,790          22,185          36,975
    Dues and subscriptions......................................           6,200           9,300          15,500
    Utilities...................................................          12,138          18,208          30,346
    Salaries....................................................          46,611          69,917         116,528
    Accounting/Professional fees................................          14,067          21,100          35,167
    Other.......................................................          16,157          24,235          40,392
                                                                 -----------------------------------------------
        Total Administrative Expenses...........................         227,223         340,835         568,058
                                                                 -----------------------------------------------
        Total Operating Expenses................................         565,622         848,432       1,414,054
Proposed Adjustments (independent CPA):
Operating Expenses:
    Other Pilot Costs:
    Pilotage subsistence/Travel.................................         (3,999)         (5,999)         (9,998)
                                                                 -----------------------------------------------
        Total other pilotage costs..............................         (3,999)         (5,999)         (9,998)
Pilot boat and dispatch costs:
    Pilot boat expense..........................................           (767)         (1,150)         (1,917)
                                                                 -----------------------------------------------
        Total pilot boat and dispatch costs.....................           (767)         (1,150)         (1,917)
Administrative Expenses:
    Legal.......................................................           (209)           (314)           (523)
    Office rent.................................................           (809)         (1,213)         (2,022)
    Interest....................................................        (11,268)        (16,902)        (28,170)
    Dues and subscriptions......................................         (6,200)         (9,300)        (15,500)
                                                                 -----------------------------------------------
        Total Administrative Expenses...........................        (18,486)        (27,729)        (46,215)
                                                                 -----------------------------------------------
        TOTAL CPA ADJUSTMENTS...................................        (23,252)        (34,878)        (58,130)
                                                                 -----------------------------------------------
        Total Operating Expenses................................         542,369         813,554       1,355,924
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

                                 Table 4--Recognized Expenses for District Three
----------------------------------------------------------------------------------------------------------------
                                                      Area 6          Area 7          Area 8
                                                 ------------------------------------------------
           Reported expenses for 2010               Lakes Huron     St. Mary's                         Total
                                                   and Michigan        River       Lake Superior
----------------------------------------------------------------------------------------------------------------
Operating Expenses:
    Other Pilot Costs:
    Pilot subsistence/Travel....................        $170,162         $81,836        $108,514        $360,512
    License insurance...........................           9,204           4,426           5,869          19,499
    Payroll taxes...............................          27,774          13,358          17,712          58,844
    Other.......................................             630             303             402           1,335
                                                 ---------------------------------------------------------------
        Total other pilotage costs..............         207,770          99,923         132,497         440,190

[[Page 45543]]

 
Pilot Boat and Dispatch Expenses:
    Pilot boat costs............................         197,244          94,861         125,785         417,890
    Dispatch expense............................          72,550          34,891          46,266         153,707
    Payroll taxes...............................           8,068           3,880           5,145          17,093
                                                 ---------------------------------------------------------------
    Total pilot boat and dispatch costs.........         277,862         133,632         177,196         588,690
Administrative Expenses:
    Legal.......................................          28,089          13,509          17,913          59,511
    Office Rent.................................           4,673           2,247           2,980           9,900
    Insurance...................................           6,581           3,165           4,197          13,943
    Employee benefits...........................          57,942          27,866          36,950         122,758
    Payroll taxes...............................           5,709           2,746           3,641          12,096
    Other taxes.................................          15,381           7,397           9,808          32,586
    Depreciation/auto leasing...................          23,495          11,299          14,983          49,777
    Interest....................................           1,537             739             980           3,256
    Dues and subscriptions......................          13,676           6,577           8,721          28,974
    Utilities...................................          13,223           6,359           8,432          28,014
    Salaries....................................          49,802          23,951          31,759         105,512
    Accounting/professional fees................          11,894           5,720           7,585          25,199
    Other.......................................           5,574           2,681           3,555          11,810
                                                 ---------------------------------------------------------------
        Total administrative expenses...........         237,576         114,256         151,504         503,336
        Total Operating Expenses................         723,208         347,811         461,197       1,532,216
                                                 ---------------------------------------------------------------
Proposed Adjustments (independent CPA):
Other Pilot Costs:
    Payroll taxes...............................          26,213          12,606          16,716          55,535
                                                 ---------------------------------------------------------------
        Total other pilotage costs..............          26,213          12,606          16,716          55,535
Pilot Boat and Dispatch Expenses:
    Dispatch costs..............................         (2,170)         (1,044)         (1,384)         (4,598)
                                                 ---------------------------------------------------------------
        Total pilot boat and dispatch costs.....         (2,170)         (1,044)         (1,384)         (4,598)
Administrative Expenses:
    Legal.......................................         (1,454)           (699)           (927)         (3,080)
    Dues and subscriptions......................        (13,676)         (6,577)         (8,721)        (28,974)
    Other.......................................         (1,255)           (603)           (800)         (2,658)
                                                 ---------------------------------------------------------------
        Total administrative expenses...........        (16,385)         (7,879)        (10,448)        (34,712)
                                                 ---------------------------------------------------------------
        Total CPA Adjustments...................           7,658           3,683           4,884          16,225
                                                 ---------------------------------------------------------------
        Total Operating Expenses................         730,866         351,494         466,081       1,548,441
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

    Step 1.C: Adjustment for Inflation or Deflation. In this sub-step 
we project rates of inflation or deflation for the succeeding 
navigation season. Because we used 2010 financial information, the 
``succeeding navigation season'' for this ratemaking is 2011. We based 
our inflation adjustment of 3.2 percent on the 2011 change in the 
Consumer Price Index (CPI) for the Midwest Region of the United States, 
which can be found at: http://www.bls.gov/xg_shells/ro5xg01.htm. This 
adjustment appears in Tables 5 through 7.

                                   Table 5--Inflation Adjustment, District One
----------------------------------------------------------------------------------------------------------------
                                                  Area 1                    Area 2
                                             ----------------          ----------------
    Reported expenses for 2010                 St. Lawrence                                            Total
                                                   River                 Lake Ontario
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses..........  ........        $547,631  ........        $432,207  ........        $979,838
2011 change in the Consumer Price   x                   .032  x                   .032  x                   .032
 Index (CPI) for the Midwest
 Region of the United States.
Inflation Adjustment..............  =                $17,524  =                $13,831  =                $31,355
----------------------------------------------------------------------------------------------------------------

[[Page 45544]]

                                   Table 6--Inflation Adjustment, District Two
----------------------------------------------------------------------------------------------------------------
                                                  Area 4                    Area 5
                                             ----------------          ----------------
    Reported expenses for 2010                                             Southeast                   Total
                                                 Lake Erie               Shoal to Port
                                                                           Huron, MI
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses..........  ........        $542,369  ........        $813,554  ........      $1,355,924
2011 change in the Consumer Price   x                   .032  x                   .032  x                   .032
 Index (CPI) for the Midwest
 Region of the United States.
Inflation Adjustment..............  =                $17,356  =                $26,034  =                $43,390
----------------------------------------------------------------------------------------------------------------

                                  Table 7--Inflation Adjustment, District Three
----------------------------------------------------------------------------------------------------------------
                                        Area 6               Area 7               Area 8
                                   ----------------     ----------------     ----------------
  Reported expenses for 2010        Lake Huron and         St. Mary's                                  Total
                                       Michigan               River            Lake Superior
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses.....  ...        $730,866  ...        $351,494  ...        $466,081  ..      $1,548,441
2011 change in the Consumer    x              .032  x              .032  x              .032  x             .032
 Price Index (CPI) for the
 Midwest Region of the United
 States.
Inflation Adjustment.........  =           $23,388  =           $11,248  =           $14,915  =          $49,550
----------------------------------------------------------------------------------------------------------------

    Step 1.D: Projection of Operating Expenses. The final sub-step of 
Step 1 is to project the operating expenses for each pilotage area, on 
the basis of the preceding sub-steps and any other foreseeable 
circumstances that could affect the accuracy of the projection. Based 
on comments and supporting material received for the 2012 Appendix A 
NPRM, we determined that foreseeable circumstances exist in District 
One.
    Eight months of District One's pilot boat mortgage payments and 
boat insurance qualify as foreseeable circumstances. For District One, 
the projected operating expenses are based on the calculations from 
Sub-steps 1.A through 1.C and the aforementioned foreseeable 
circumstances. Table 8 shows these projections.

                               Table 8--Projected Operating Expenses, District One
----------------------------------------------------------------------------------------------------------------
                                                  Area 1                    Area 2
                                             ----------------          ----------------
    Reported expenses for 2010                 St. Lawrence                                            Total
                                                   River                 Lake Ontario
----------------------------------------------------------------------------------------------------------------
Total operating expenses..........  ........        $547,631  ........        $432,207  ........        $979,838
Inflation adjustment 3.2%.........  +                 17,524  +                 13,831  +                 31,355
Director's adjustment &
 foreseeable circumstances
    Pilot boat mortgage payments..  +                 26,429  +                 20,815  +                 47,244
    Pilot boat insurance..........  +                  7,221  +                  5,687  +                 12,908
                                   -----------------------------------------------------------------------------
        Total projected expenses    =               $598,805  =               $472,540  =             $1,071,344
         for 2012 pilotage season.
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

    During the audit for the 2013 Appendix A rulemaking, the 
independent accountant informed us that District Two applied for and 
received a Consolidated Omnibus Budget Reconciliation Act (COBRA) 
subsidy for the first and second quarter of 2010. The American Recovery 
and Reinvestment Act of 2009 provided for a temporary premium subsidy 
for COBRA continuation coverage. The amount of the COBRA insurance 
subsidy for the period 2010 was $60,460. Federal taxes of $18,400 are 
accounted for in Step 6 (Federal Tax Allowance). For District Two, the 
projected operating expenses are based on the calculations from Sub-
steps 1.A through 1.C, the COBRA subsidy, and Federal taxes. Table 9 
shows these projections.

                               Table 9--Projected Operating Expenses, District Two
----------------------------------------------------------------------------------------------------------------
                                                  Area 4                    Area 5
                                             ----------------          ----------------
    Reported expenses for 2010                                             Southeast                   Total
                                                 Lake Erie               Shoal to Port
                                                                           Huron, MI
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses..........  ........        $542,369  ........        $813,554  ........      $1,355,924
Inflation Adjustment 3.2%.........  +                 17,356  +                 26,034  +                 43,390
Director's adjustment &
 foreseeable circumstances
    American Recovery and           +               (24,184)  +               (36,276)  +               (60,460)
     Reinvestment Act Subsidy.
    Federal taxes (accounted for    +                (7,360)  +               (11,040)  +               (18,400)
     in Step 6).
                                   -----------------------------------------------------------------------------

[[Page 45545]]

 
        Total projected expenses    =               $528,182  =               $792,272  =             $1,320,454
         for 2013 pilotage season.
----------------------------------------------------------------------------------------------------------------

    Because we are not now aware of any such foreseeable circumstances 
for District 3, its projected operating expenses are based exclusively 
on the calculations from Sub-steps 1.A through 1.C. Table 10 shows 
these projections.

                             Table 10--Projected Operating Expenses, District Three
----------------------------------------------------------------------------------------------------------------
                                        Area 6               Area 7               Area 8
                                   ----------------     ----------------     ----------------
  Reported expenses for 2010          Lakes Huron          St. Mary's                                  Total
                                     and Michigan             River            Lake Superior
----------------------------------------------------------------------------------------------------------------
Total Expenses...............  ...        $730,866  ...        $351,494  ...        $466,081  ..      $1,548,441
Inflation Adjustment 3.2%....  +            23,388  +            11,248  +            14,915  +           49,550
                              ----------------------------------------------------------------------------------
    Total projected expenses   =          $754,254  =          $362,742  =          $480,996  =       $1,597,991
     for 2013 pilotage season.
----------------------------------------------------------------------------------------------------------------

    Step 2: Projection of Target Pilot Compensation. In Step 2, we 
project the annual amount of target pilot compensation that pilotage 
rates should provide in each area. These projections are based on our 
latest information on the conditions that will prevail in 2013.
    Step 2.A: Determination of Target Rate of Compensation. Target 
pilot compensation for pilots in undesignated waters approximates the 
average annual compensation for first mates on U.S. Great Lakes 
vessels. Compensation is determined based on the most current union 
contracts and includes wages and benefits received by first mates. We 
calculate target pilot compensation for pilots on designated waters by 
multiplying the average first mates' wages by 150 percent and then 
adding the average first mates' benefits.
    The most current union contracts available to us are American 
Maritime Officers Union (AMOU) contracts with three U.S. companies 
engaged in Great Lakes shipping. There are two separate AMOU contracts 
available--we refer to them as Agreements A and B and apportion the 
compensation provided by each agreement according to the percentage of 
tonnage represented by companies under each agreement. Agreement A 
applies to vessels operated by Key Lakes, Inc., and Agreement B applies 
to all vessels operated by American Steamship Co. and Mittal Steel USA, 
Inc.
    Both Agreements A and B expire on July 31, 2016. For the 2011 
Appendix C and 2012 Appendix A rulemakings we did not have the current 
contracts and projected target pilot compensation based on historic 
data. We have adjusted our projections and recalculated compensation 
based upon the new contracts. Under Agreement A, we project that the 
daily wage rate would decrease from $278.73 to $270.61. Under Agreement 
B, the daily wage rate would increase from $343.59 to $368.05.
    Because we are interested in annual compensation, we must convert 
these daily rates. Agreements A and B both use monthly multipliers to 
convert daily rates into monthly figures that represent actual working 
days and vacation, holiday, weekend, or bonus days. The monthly 
multiplier for Agreement A is 54.5 days and the monthly multiplier for 
Agreement B is 49.5 days. We multiply the monthly figures by 9, which 
represents the average length (in months) of the Great Lakes shipping 
season. Table 11 shows our calculations.

                   Table 11--Projected Wage Components
------------------------------------------------------------------------
                                             Pilots on       Pilots on
            Monthly component              undesignated     designated
                                              waters          waters
------------------------------------------------------------------------
Agreement A:
    $270.61 daily rate x 54.5 days......      $14,748.25      $22,122.38
    Monthly total x 9 months = total          132,734         199,101
     wages..............................
Agreement B:
    $368.05 daily rate x 49.5 days......       18,218.48       27,327.71
    Monthly total x 9 months = total          163,966         245,949
     wages..............................
------------------------------------------------------------------------

    Based on the contracts of both Agreements A and B, we will adjust 
their health benefits and pension contributions and leave 401K-plan 
contributions unchanged. Health benefits for Agreement A will decrease 
this benefit from $107.40 to $52.96 per day, and Agreement B will 
decrease this benefit from $107.40 to $105.61 per day. The multiplier 
that both agreements use to calculate monthly benefits from daily rates 
is currently 45.5 days, and we project that will remain unchanged. 
Agreement A eliminated pension contributions, and Agreement B increased 
the pension contribution from $43.55 to $44.61 per day. Agreements A 
and B maintained 401K plan contributions at 5 percent of the monthly 
wage. We use a 9-month multiplier to calculate the annual value

[[Page 45546]]

of these benefits. Table 12 shows our calculations.

                 Table 12--Projected Benefits Components
------------------------------------------------------------------------
                                             Pilots on       Pilots on
            Monthly component              undesignated     designated
                                              waters          waters
------------------------------------------------------------------------
Agreement A:
    Employer contribution, 401K plan             $737.41       $1,106.12
     (Monthly wages x 5%)...............
    Pension = $0.00 x 45.5 days.........            0.00            0.00
    Health = $52.96 x 45.5 days.........        2,409.68        2,409.68
    Monthly total benefits..............        3,147.09        3,515.80
    Monthly total benefits x 9 months...       28,323.81       31,642.20
Agreement B:
    Employer contribution, 401K plan              910.92        1,366.38
     (Monthly wages x 5%)...............
    Pension = $44.61 x 45.5 days........        2,029.76        2,029.76
    Health = $105.61 x 45.5 days........        4,805.26        4,805.26
    Monthly total benefits..............        7,745.94        8,201.40
    Monthly total benefits x 9 months...       69,713.46       73,812.60
------------------------------------------------------------------------

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

       Table 13--Projected Wage and Benefits Components, Combined
------------------------------------------------------------------------
                                             Pilots on       Pilots on
                                           undesignated     designated
                                              waters          waters
------------------------------------------------------------------------
Agreement A:
    Wages...............................        $132,734        $199,101
    Benefits............................          28,324          31,642
                                         -------------------------------
        Total...........................         161,058         230,744
Agreement B:
    Wages...............................         163,966         245,949
    Benefits............................          69,713          73,813
                                         -------------------------------
        Total...........................         233,680         319,762
------------------------------------------------------------------------

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

                               Table 14--Shipping Tonnage Apportioned by Contract
----------------------------------------------------------------------------------------------------------------
                 Company                              Agreement A                         Agreement B
----------------------------------------------------------------------------------------------------------------
American Steamship Company..............  ..................................                             815,600
Mittal Steel USA, Inc...................  ..................................                              38,826
Key Lakes, Inc..........................                             361,385  ..................................
                                         -----------------------------------------------------------------------
    Total tonnage, each agreement.......                             361,385                             854,426
Percent tonnage, each agreement.........      361,385 / 1,215,811 = 29.7238%      854,426 / 1,215,811 = 70.2762%
----------------------------------------------------------------------------------------------------------------

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

         Table 15--Tonnage-Weighted Wage and Benefit Components
------------------------------------------------------------------------
                                      Undesignated          Designated
                                         waters               waters
------------------------------------------------------------------------
Agreement A:
    Total wages and benefits..  ...        $161,058  ...        $230,744
    Percent tonnage...........  x          29.7238%  x          29.7238%
                               -----------------------------------------

[[Page 45547]]

 
        Total.................  =           $47,873  =           $68,586
Agreement B:
    Total wages and benefits..  ...        $233,680  ...        $319,762
    Percent tonnage...........  x          70.2762%  x          70.2762%
                               -----------------------------------------
        Total.................  =          $164,221  =          $224,717
Projected Target Rate of
 Compensation
    Agreement A total weighted  ...         $47,873  ...         $68,586
     average wages and
     benefits.
    Agreement B total weighted  +          $164,221  +          $224,717
     average wages and
     benefits.
                               -----------------------------------------
        Total.................  =          $212,094  =          $293,302
------------------------------------------------------------------------

    Step 2.B: Determination of the Number of Pilots Needed. Subject to 
adjustment by the Coast Guard Director of Great Lakes Pilotage to 
ensure uninterrupted service or for other reasonable circumstances, we 
determine the number of pilots needed for ratemaking purposes in each 
area by dividing projected bridge hours for each area, by either 1,000 
(designated waters) or 1,800 (undesignated waters) bridge hours. We 
round the mathematical results and express our determination as whole 
pilots.
    ``Bridge hours are the number of hours a pilot is aboard a vessel 
providing pilotage service,'' 46 CFR part 404, Appendix A, Step 2.B(1). 
For that reason and as we explained most recently in the 2011 
ratemaking's final rule, we do not include, and never have included, 
pilot delay, detention, or cancellation in calculating bridge hours. 
See 76 FR 6351 at 6352 col. 3 (February 4, 2011). Projected bridge 
hours are based on the vessel traffic that pilots are expected to 
serve. We use historical data, input from the pilots and industry, 
periodicals and trade magazines, and information from conferences to 
project demand for pilotage services for the coming year.
    In our 2012 final rule, we determined that 38 pilots would be 
needed for ratemaking purposes. We have determined that 38 remains the 
proper number to use for ratemaking purposes in 2013. This includes 
five pilots in Area 2, where rounding up alone would result in only 
four pilots. For the same reasons we explained at length in the final 
rule for the 2008 ratemaking, 74 FR 220 at 221-22 (January 5, 2009) 
which is available in the docket, we have determined that this 
adjustment is essential for ensuring uninterrupted pilotage service in 
Area 2. Table 16 shows the bridge hours we project will be needed for 
each area and our calculations to determine the number of whole pilots 
needed for ratemaking purposes.

                                        Table 16--Number of Pilots Needed
----------------------------------------------------------------------------------------------------------------
                                                             Divided by
                                                               1,000
                                                            (designated             Calculated
          Pilotage area           Projected 2013             waters) or           value of pilot   Pilots needed
                                   bridge hours                1,800                  demand       (total = 38)
                                                           (undesignated
                                                              waters)
----------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters)......           5,216  /                 1,000  =               5.216               6
Area 2 (Undesignated waters)....           5,509  /                 1,800  =               3.061               5
Area 4 (Undesignated waters)....           6,814  /                 1,800  =               3.785               4
Area 5 (Designated waters)......           5,102  /                 1,000  =               5.102               6
Area 6 (Undesignated waters)....          11,411  /                 1,800  =               6.339               7
Area 7 (Designated waters)......           3,223  /                 1,000  =               3.223               4
Area 8 (Undesignated waters)....           9,540  /                 1,800  =               5.300               6
----------------------------------------------------------------------------------------------------------------

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

                            Table 17--Projection of Target Pilot Compensation by Area
----------------------------------------------------------------------------------------------------------------
                                                                     Target rate of                  Projected
             Pilotage area               Pilots needed                    pilot                    target pilot
                                         (total = 38)                 compensation                 compensation
----------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters)............               6  x                  $293,302  =                $1,759,814
Area 2 (Undesignated waters)..........               5  x                   212,094  =                 1,060,469
Area 4 (Undesignated waters)..........               4  x                   212,094  =                   848,375
Area 5 (Designated waters)............               6  x                   293,302  =                 1,759,814
Area 6 (Undesignated waters)..........               7  x                   212,094  =                 1,484,657
Area 7 (Designated waters)............               4  x                   293,302  =                 1,173,209

[[Page 45548]]

 
Area 8 (Undesignated waters)..........               6  x                   212,094  =                 1,272,563
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

    Step 3 and 3.A: Projection of Revenue. In this step, we project the 
revenue that would be received in 2013 if demand for pilotage services 
matches the bridge hours we projected in Table 16, and if 2012 pilotage 
rates were left unchanged. Table 18 shows this calculation.

                                     Table 18--Projection of Revenue by Area
----------------------------------------------------------------------------------------------------------------
                                                                                                     Revenue
            Pilotage area               Projected 2013               2012 Pilotage                projection for
                                         bridge hours                    rates                         2013
----------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters)...........            5,216  ..........          $467.58  =                $2,438,897
Area 2 (Undesignated waters).........            5,509  x                    289.72  =                 1,596,067
Area 4 (Undesignated waters).........            6,814  x                    188.54  =                 1,284,712
Area 5 (Designated waters)...........            5,102  x                    504.11  =                 2,571,969
Area 6 (Undesignated waters).........           11,411  x                    191.69  =                 2,187,375
Area 7 (Designated waters)...........            3,223  x                    480.26  =                 1,547,878
Area 8 (Undesignated waters).........            9,540  x                    183.87  =                 1,754,120
                                      --------------------------------------------------------------------------
    Total............................  ...............  ..........  ...............  ..........       13,381,018
----------------------------------------------------------------------------------------------------------------

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

             Table 19--Total Sources of Funds, District One
------------------------------------------------------------------------
                                         Area 1               Area 2
------------------------------------------------------------------------
Recognized Assets:
    Total Current Assets......  ...        $681,485  ...        $537,847
    Total Current Liabilities.  -            78,005  -            61,564
    Current Notes Payable.....  +            22,168  +            17,496
    Total Property and          +           374,021  +           295,189
     Equipment (NET).
    Land......................  -            12,315  -             9,720
    Total Other Assets........  +                 0  +                 0
                               -----------------------------------------
        Total Recognized        =           987,354  =           779,248
         Assets.
Non-Recognized Assets:
    Total Investments and       +             6,103  +             4,817
     Special Funds.
                               -----------------------------------------
        Total Non-Recognized    =             6,103  =             4,817
         Assets.
Total Assets:
    Total Recognized Assets...  ...         987,354  ...         779,248
    Total Non-Recognized        +             6,103  +             4,817
     Assets.
                               -----------------------------------------
        Total Assets..........  =           993,457  =           784,065
Recognized Sources of Funds:
    Total Stockholder Equity..  ...         659,702  ...         520,656
    Long-Term Debt............  +           323,902  +           255,633
    Current Notes Payable.....  +            22,168  +            17,496
    Advances from Affiliated    +                 0  +                 0
     Companies.
    Long-Term Obligations--     +                 0  +                 0
     Capital Leases.
                               -----------------------------------------
        Total Recognized        =         1,005,772  =           793,785
         Sources.
Non-Recognized Sources of
 Funds:
    Pension Liability.........  ...               0  ...               0
    Other Non-Current           +                 0  +                 0
     Liabilities.
    Deferred Federal Income     +                 0  +                 0
     Taxes.
    Other Deferred Credits....  +                 0  +                 0
                               -----------------------------------------
        Total Non-Recognized    =                 0  =                 0
         Sources.
Total Sources of Funds:
    Total Recognized Sources..  ...       1,005,772  ...         793,785

[[Page 45549]]

 
    Total Non-Recognized        +                 0  +                 0
     Sources.
                               -----------------------------------------
        Total Sources of Funds  =         1,005,772  =           793,785
------------------------------------------------------------------------

             Table 20--Total Sources of Funds, District Two
------------------------------------------------------------------------
                                         Area 4               Area 5
------------------------------------------------------------------------
Recognized Assets:
    Total Current Assets......  ...        $454,842  ...      $1,026,731
    Total Current Liabilities.  -           449,157  -         1,013,899
    Current Notes Payable.....  +                 0  +                 0
    Total Property and          +           312,858  +           706,224
     Equipment (NET).
    Land......................  -                 0  -                 0
    Total Other Assets........  +                 0  +                 0
                               -----------------------------------------
        Total Recognized        =           318,543  =           719,056
         Assets.
Non-Recognized Assets:
    Total Investments and       +                 0  +                 0
     Special Funds.
                               -----------------------------------------
        Total Non-Recognized    =                 0  =                 0
         Assets.
Total Assets:
    Total Recognized Assets...  ...         318,543  ...         719,056
    Total Non-Recognized        +                 0  +                 0
     Assets.
                               -----------------------------------------
        Total Assets..........  =           318,543  =           719,056
Recognized Sources of Funds:
    Total Stockholder Equity..  ...          60,920  ...         137,517
    Long-Term Debt............  +           257,622  +           581,540
    Current Notes Payable.....  +                 0  +                 0
    Advances from Affiliated    +                 0  +                 0
     Companies.
    Long-Term Obligations--     +                 0  +                 0
     Capital Leases.
                               -----------------------------------------
        Total Recognized        =           318,542  =           719,057
         Sources.
Non-Recognized Sources of
 Funds:
    Pension Liability.........  ...               0  ...               0
    Other Non-Current           +                 0  +                 0
     Liabilities.
    Deferred Federal Income     +                 0  +                 0
     Taxes.
    Other Deferred Credits....  +                 0  +                 0
                               -----------------------------------------
        Total Non-Recognized    =                 0  =                 0
         Sources.
Total Sources of Funds:
    Total Recognized Sources..  ...         318,542  ...         719,057
    Total Non-Recognized        +                 0  +                 0
     Sources.
                               -----------------------------------------
        Total Sources of Funds  =           318,542  =           719,057
------------------------------------------------------------------------

                                Table 21--Total Sources of Funds, District Three
----------------------------------------------------------------------------------------------------------------
                                                  Area 6                    Area 7                    Area 8
----------------------------------------------------------------------------------------------------------------
Recognized Assets:
    Total Current Assets..........  ........      $1,009,619  ........        $485,558  ........        $643,846
    Total Current Liabilities.....  -                123,906  -                 59,590  -                 79,016
    Current Notes Payable.........  +                      0  +                      0  +                      0
    Total Property and Equipment    +                 35,709  +                 17,174  +                 22,772
     (NET).
    Land..........................  -                      0  -                      0  -                      0
    Total Other Assets............  +                    354  +                    170  +                    226
                                   -----------------------------------------------------------------------------
        Total Recognized Assets...  =                921,776  =                443,312  =                587,828
Non-Recognized Assets:
    Total Investments and Special   +                      0  +                      0  +                      0
     Funds.
                                   -----------------------------------------------------------------------------
        Total Non-Recognized        =                      0  =                      0  =                      0
         Assets.
Total Assets:
    Total Recognized Assets.......  ........         921,776  ........         443,312  ........         587,828
    Total Non-Recognized Assets...  +                      0  +                      0  +                      0
                                   -----------------------------------------------------------------------------
        Total Assets..............  =                921,776  =                443,312  =                587,828
Recognized Sources of Funds:
    Total Stockholder Equity......  ........         921,776  ........         443,321  ........         587,828

[[Page 45550]]

 
    Long-Term Debt................  +                      0  +                      0  +                      0
    Current Notes Payable.........  +                      0  +                      0  +                      0
    Advances from Affiliated......  +                      0  +                      0  +                      0
    Companies.....................
    Long-Term Obligations--Capital  +                      0  +                      0  +                      0
     Leases.
                                   -----------------------------------------------------------------------------
        Total Recognized Sources..  =                921,776  =                443,321  =                587,828
Non-Recognized Sources of Funds:
    Pension Liability.............  ........               0  ........               0  ........               0
    Other Non-Current Liabilities.  +                      0  +                      0  +                      0
    Deferred Federal Income Taxes.  +                      0  +                      0  +                      0
    Other Deferred Credits........  +                      0  +                      0  +                      0
                                   -----------------------------------------------------------------------------
        Total Non-Recognized        =                      0  =                      0  =                      0
         Sources.
Total Sources of Funds:
    Total Recognized Sources......  ........         921,776  ........         443,321  ........         587,828
    Total Non-Recognized Sources..  +                      0  +                      0  +                      0
                                   -----------------------------------------------------------------------------
        Total Sources of Funds....  =                921,776  =                443,321  =                587,828
----------------------------------------------------------------------------------------------------------------

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

                                                     Table 22--Investment Base by Area and District
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                            Multiplier
                                                                               Total        Recognized     Total sources     (ratio of      Investment
                            District                               Area     recognized      sources of     of funds  ($)   recognized to   base ($) \1\
                                                                            assets  ($)     funds  ($)                    total sources)
--------------------------------------------------------------------------------------------------------------------------------------------------------
One............................................................        1         987,354       1,005,772       1,005,772               1         987,354
                                                                       2         779,248         793,785         793,785               1         779,248
                                                                ----------------------------------------------------------------------------------------
    Total......................................................  .......  ..............  ..............  ..............  ..............       1,766,602
Two \2\........................................................        4         318,543         318,542         318,542               1         318,543
                                                                       5         719,056         719,057         719,057               1         719,056
                                                                ----------------------------------------------------------------------------------------
    Total......................................................  .......  ..............  ..............  ..............  ..............       1,037,599
Three..........................................................        6         921,776         921,776         921,776               1         921,776
                                                                       7         443,312         443,312         443,312               1         443,312
                                                                ----------------------------------------------------------------------------------------
                                                                       8         587,828         587,828         587,828               1         587,828
                                                                ----------------------------------------------------------------------------------------
    Total......................................................  .......  ..............  ..............  ..............  ..............       1,952,916
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Note: ``Investment base'' = ``Total recognized assets'' x ``Multiplier (ratio of recognized to total sources)''.
\2\ Note: The pilot associations that provide pilotage services in Districts One and Three operate as partnerships. The pilot association that provides
  pilotage service for District Two operates as a corporation.

    Step 5: Determination of Target Rate of Return. We determine a 
market-equivalent return on investment (ROI) that will be allowed for 
the recognized net capital invested in each association by its members. 
We do not recognize capital that is unnecessary or unreasonable for 
providing pilotage services. There are no non-recognized investments in 
this year's calculations. The allowed ROI is based on the preceding 
year's average annual rate of return for new issues of high-grade 
corporate securities. For 2011, the preceding year, the allowed ROI was 
a little more than 4.64 percent, based on the average rate of return 
that year on Moody's AAA corporate bonds, which can be found at: http://research.stlouisfed.org/fred2/series/AAA/downloaddata?cid=119.
    Step 6: Adjustment Determination. The first Sub-step in the 
adjustment determination requires an initial calculation, applying a 
formula described in Appendix A. The formula uses the results from 
Steps 1, 2, 3, and 4 to project the ROI that can be expected in each 
area, if no further adjustments are made. This calculation is shown in 
Tables 23 through 25.

[[Page 45551]]

             Table 23--Projected ROI, Areas in District One
------------------------------------------------------------------------
                                         Area 1               Area 2
------------------------------------------------------------------------
Revenue (from Step 3).........  +        $2,438,897  +        $1,596,067
Operating Expenses (from Step   -           598,805  -           472,540
 1).
Pilot Compensation (from Step   -         1,759,814  -         1,060,469
 2).
Operating Profit/(Loss).......  =            80,278  =            63,059
Interest Expense (from audits)  -            12,576  -             9,926
Earnings Before Tax...........  =            67,702  =            53,133
Federal Tax Allowance.........  -                 0  -                 0
Net Income....................  =            67,702  =            53,133
Return Element (Net Income +    ...          80,278  ...          63,059
 Interest).
Investment Base (from Step 4).  /           987,354  /           779,248
Projected Return on Investment  =              0.08  =              0.08
------------------------------------------------------------------------

             Table 24--Projected ROI, Areas in District Two
------------------------------------------------------------------------
                                         Area 4               Area 5
------------------------------------------------------------------------
Revenue (from Step 3).........  +        $1,284,712  +        $2,571,969
Operating Expenses (from Step   -          $528,181  -          $792,272
 1).
Pilot Compensation (from Step   -          $848,375  -        $1,759,814
 2).
Operating Profit/(Loss).......  =         ($91,845)  =           $19,883
Interest Expense (from audits)  -            $3,522  -            $5,283
Earnings Before Tax...........  =         ($95,367)  =           $14,600
Federal Tax Allowance.........  -            $7,360  -           $11,040
Net Income....................  =        ($102,727)  =            $3,560
Return Element (Net Income +    ...       ($99,205)  ...          $8,843
 Interest).
Investment Base (from Step 4).  /          $318,543  /          $719,056
Projected Return on Investment  =            (0.31)  =              0.01
------------------------------------------------------------------------

                                Table 25--Projected ROI, Areas in District Three
----------------------------------------------------------------------------------------------------------------
                                                  Area 6                    Area 7                    Area 8
----------------------------------------------------------------------------------------------------------------
Revenue (from Step 3).............  +             $2,187,375  +             $1,547,878  +             $1,754,120
Operating Expenses (from Step 1)..  -               $754,254  -               $362,742  -               $480,996
Pilot Compensation (from Step 2)..  -             $1,484,657  -             $1,173,209  -             $1,272,563
Operating Profit/(Loss)...........  =              ($51,536)  =                $11,927  =                    561
Interest Expense (from audits)....  -                 $1,537  -                   $739  -                   $980
Earnings Before Tax...............  =              ($53,073)  =                $11,188  =                 ($419)
Federal Tax Allowance.............  -                     $0  -                     $0  -                     $0
Net Income........................  =              ($53,073)  =                $11,188  =                 ($419)
Return Element (Net Income +        ........       ($51,536)  ........         $11,927  ........            $561
 Interest).
Investment Base (from Step 4).....  /               $921,776  /               $443,312  /               $587,828
Projected Return on Investment....  =                 (0.06)  =                   0.03  =                   0.00
----------------------------------------------------------------------------------------------------------------

    The second sub-step required for Step 6 compares the results of 
Tables 23 through 25 with the target ROI (approximately 4.64 percent) 
we obtained in Step 5 to determine if an adjustment to the base 
pilotage rate is necessary. Table 26 shows this comparison for each 
area.

                                            Table 26--Comparison of Projected ROI and Target ROI, by Area \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Area 1       Area 2       Area 4        Area 5        Area 6        Area 7        Area 8
                                                         -----------------------------------------------------------------------------------------------
                                                                                                    Southeast
                                                              St.          Lake                     Shoal to     Lakes Huron   St. Mary's       Lake
                                                            Lawrence     Ontario      Lake Erie    Port Huron,  and Michigan      River       Superior
                                                             River                                     MI
--------------------------------------------------------------------------------------------------------------------------------------------------------
Projected return on investment..........................        0.081        0.081       (0.288)        0.028        (0.056)        0.027         0.001
Target return on investment.............................        0.046        0.046        0.046         0.046         0.046         0.046         0.046
Difference in return on investment......................        0.035        0.035       (0.335)       (0.019)       (0.102)       (0.019)       (0.045)
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Note: Decimalization and rounding of the target ROI affects the display in this table but does not affect our calculations, which are based on the
  actual figure.

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

[[Page 45552]]

the operating expenses and target pilot compensation determined in 
Steps 1 and 2.

                                                 Table 27--Revenue Needed To Recover Target ROI, by Area
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          Investment
                                       Operating               Target pilot              base (step 4)
           Pilotage area               expenses                compensation                 x 4.64%                Federal tax            Revenue needed
                                       (Step 1)                  (Step 2)                 (target ROI               allowance
                                                                                            Step 5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters)........        $598,805  +             $1,759,814  +                $45,805  +                    $0  =            $2,404,424
Area 2 (Undesignated waters)......         472,540  +              1,060,469  +                 36,151  +                     0  =             1,569,160
Area 4 (Undesignated waters)......         528,181  +                848,375  +                 14,778  +                 7,360  =             1,398,694
Area 5 (Designated waters)........         792,272  +              1,759,814  +                 33,358  +                11,040  =             2,596,484
Area 6 (Undesignated waters)......         754,254  +              1,484,657  +                 42,763  +                     0  =             2,281,673
Area 7 (Designated waters)........         362,742  +              1,173,209  +                 20,566  +                     0  =             1,556,517
Area 8 (Undesignated waters)......         480,996  +              1,272,563  +                 27,270  +                     0  =             1,780,829
                                   ---------------------------------------------------------------------------------------------------------------------
    Total.........................       3,989,788  +              9,358,902  +                220,691  +                18,400  =            13,587,781
--------------------------------------------------------------------------------------------------------------------------------------------------------

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

     Table 28--Balancing Revenue Needed and Target ROI, District One
------------------------------------------------------------------------
                                         Area 1               Area 2
------------------------------------------------------------------------
Revenue Needed................  +        $2,404,424  +        $1,569,160
Operating Expenses (from Step   -          $598,805  -          $472,540
 1).
Pilot Compensation (from Step   -        $1,759,814  -        $1,060,469
 2).
Operating Profit/(Loss).......  =           $45,805  =           $36,151
Interest Expense (from audits)  -           $12,576  -            $9,926
Earnings Before Tax...........  =           $33,229  =           $26,225
Federal Tax Allowance.........  -                $0  -                $0
Net Income....................  =           $33,229  =           $26,225
Return Element (Net Income +    ...         $45,805  ...         $36,151
 Interest).
Investment Base (from Step 4).  /          $987,354  /          $779,248
Return on Investment..........  =            0.0464  =            0.0464
------------------------------------------------------------------------

     Table 29--Balancing Revenue Needed and Target ROI, District Two
------------------------------------------------------------------------
                                         Area 4               Area 5
------------------------------------------------------------------------
Revenue Needed................  +        $1,398,694  +        $2,596,484
Operating Expenses (from Step   -          $528,181  -          $792,272
 1).
Pilot Compensation (from Step   -          $848,375  -        $1,759,814
 2).
Operating Profit/(Loss).......  =           $22,138  =           $44,398
Interest Expense (from audits)  -            $3,522  -            $5,283
Earnings Before Tax...........  =           $18,616  =           $39,115
Federal Tax Allowance.........  -            $7,360  -           $11,040
Net Income....................  =           $11,256  =           $28,075
Return Element (Net Income +    ...         $14,778  ...         $33,358
 Interest).
Investment Base (from Step 4).  /          $318,543  /          $719,056
Return on Investment..........  =            0.0464  =            0.0464
------------------------------------------------------------------------

                        Table 30--Balancing Revenue Needed and Target ROI, District Three
----------------------------------------------------------------------------------------------------------------
                                                  Area 6                    Area 7                    Area 8
----------------------------------------------------------------------------------------------------------------
Revenue Needed....................  +             $2,281,673  +             $1,556,517  +             $1,780,829
Operating Expenses (from Step 1)..  -               $754,254  -               $362,742  -               $480,996
Pilot Compensation (from Step 2)..  -             $1,484,657  -             $1,173,209  -             $1,272,563
Operating Profit/(Loss)...........  =                $42,763  =                $20,566  =                $27,270
Interest Expense (from audits)....  -                 $1,537  -                   $739  -                   $980
Earnings Before Tax...............  =                $41,226  =                $19,827  =                $26,290
Federal Tax Allowance.............  -                     $0  -                     $0  -                     $0
Net Income........................  =                $41,226  =                $19,827  =                $26,290
Return Element (Net Income +        ........         $42,763  ........         $20,566  ........         $27,270
 Interest).
Investment Base (from Step 4).....  /               $921,776  /               $443,312  /               $587,828

[[Page 45553]]

 
Return on Investment..............  =                 0.0464  =                 0.0464  =                 0.0464
----------------------------------------------------------------------------------------------------------------

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

            Table 31--Rate Multiplier, Areas in District One
------------------------------------------------------------------------
                                         Area 1               Area 2
                                    ----------------     ---------------
    Ratemaking projections            St. Lawrence
                                          River            Lake Ontario
------------------------------------------------------------------------
Revenue Needed (from Step 6)..  ...      $2,404,424  ...      $1,569,160
Revenue (from Step 3).........  /        $2,438,897  /        $1,596,067
Rate Multiplier...............  =            0.9859  =            0.9831
------------------------------------------------------------------------

            Table 32--Rate Multiplier, Areas in District Two
------------------------------------------------------------------------
                                         Area 4               Area 5
                                    ----------------     ---------------
    Ratemaking projections                                   Southeast
                                        Lake Erie          Shoal to Port
                                                             Huron, MI
------------------------------------------------------------------------
Revenue Needed (from Step 6)..  ...      $1,398,694  ...      $2,596,484
Revenue (from Step 3).........  /        $1,284,712  /        $2,571,969
Rate Multiplier...............  =            1.0887  =            1.0095
------------------------------------------------------------------------

                               Table 33--Rate Multiplier, Areas in District Three
----------------------------------------------------------------------------------------------------------------
                                               Area 6 Lakes
      Ratemaking projections                     Huron and                Area 7 St.                Area 8 Lake
                                                 Michigan                Mary's River                Superior
----------------------------------------------------------------------------------------------------------------
Revenue Needed (from Step 6)......  ........      $2,281,673  ........      $1,556,517  ........      $1,780,829
Revenue (from Step 3).............  /             $2,187,375  /             $1,547,878  /             $1,754,120
Rate Multiplier...................  =                 1.0431  =                 1.0056  =                 1.0152
----------------------------------------------------------------------------------------------------------------

    Rates for cancellation, delay, or interruption in rendering 
services (46 CFR 401.420) and basic rates and charges for carrying a 
U.S. pilot beyond the normal change point, or for boarding at other 
than the normal boarding point (46 CFR 401.428), would increase by 1.55 
percent in all areas.
    We calculate a rate multiplier for adjusting the basic rates and 
charges described in 46 CFR 401.420 and 401.428 and applicable in all 
areas. We divide total revenue needed (Step 6, Table 27) by total 
projected revenue (Step 3 & 3A, Table 18). Our proposed rate changes 
for 46 CFR 401.420 and 401.428 reflect the multiplication of the rates 
we established for those sections in our 2012 final rule, by the rate 
multiplier shown as the result of our calculation in Table 34.

 Table 34--Rate Multiplier for Basic Rates and Charges in 46 CFR 401.420
                               and 401.428
------------------------------------------------------------------------
         Ratemaking Projections
------------------------------------------------------------------------
Total Revenue Needed (from Step 6)......  ..............     $13,587,781
Total revenue (from Step 3).............  /                  $13,381,018
Rate Multiplier.........................  =                       1.0155
------------------------------------------------------------------------

    We multiply the existing rates we established in our 2012 final 
rule by the rate multipliers from Tables 31 through 33 to calculate the 
area by area rate changes we propose for 2013. Tables 35 through 37 
show these calculations.

[[Page 45554]]

                     Table 35--Proposed Adjustment of Pilotage Rates, Areas in District One
----------------------------------------------------------------------------------------------------------------
                                                                             Rate                  Adjusted rate
                                            2012 Rate                     multiplier                 for 2013
----------------------------------------------------------------------------------------------------------------
Area 1 St. Lawrence River:
    Basic Pilotage.................  $19.02/km, $33.67/mi     x                  0.986  =             $18.75/km,
                                                                                                       $33.19/mi
    Each lock Transited............  $422                     x                  0.986  =                   $416
    Harbor movage..................  $1,381                   x                  0.986  =                 $1,361
    Minimum basic rate, St.          $921                     x                  0.986  =                   $908
     Lawrence River.
    Maximum rate, through trip.....  $4,041                   x                  0.986  =                 $3,984
Area 2 Lake Ontario:
    6-Hour period..................  $865                     x                  0.983  =                   $851
    Docking or Undocking...........  $826                     x                  0.983  =                   $812
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

                     Table 36--Proposed Adjustment of Pilotage Rates, Areas in District Two
----------------------------------------------------------------------------------------------------------------
                                                                          Rate                     Adjusted rate
                                           2012 Rate                   multiplier                    for 2013
----------------------------------------------------------------------------------------------------------------
Area 4 Lake Erie:
    6-Hour period.....................            $760  x                     1.089  =                      $828
    Docking or undocking..............             585  x                     1.089  =                       637
    Any point on Niagara River below             1,493  x                     1.089  =                     1,626
     Black Rock Lock.
Area 5 Southeast Shoal to Port Huron,
 MI between any point on or in:
    Toledo or any point on Lake Erie             1,369  x                     1.010  =                     1,382
     W. of Southeast Shoal.
    Toledo or any point on Lake Erie             2,317  x                     1.010  =                     2,339
     W. of Southeast Shoal & Southeast
     Shoal.
    Toledo or any point on Lake Erie             3,008  x                     1.010  =                     3,037
     W. of Southeast Shoal & Detroit
     River.
    Toledo or any point on Lake Erie             2,317  x                     1.010  =                     2,339
     W. of Southeast Shoal & Detroit
     Pilot Boat.
    Port Huron Change Point &                    4,036  x                     1.010  =                     4,074
     Southeast Shoal (when pilots are
     not changed at the Detroit Pilot
     Boat).
    Port Huron Change Point & Toledo             4,675  x                     1.010  =                     4,719
     or any point on Lake Erie W. of
     Southeast Shoal (when pilots are
     not changed at the Detroit Pilot
     Boat).
    Port Huron Change Point & Detroit            3,031  x                     1.010  =                     3,060
     River.
    Port Huron Change Point & Detroit            2,358  x                     1.010  =                     2,381
     Pilot Boat.
    Port Huron Change Point & St.                1,677  x                     1.010  =                     1,693
     Clair River.
    St. Clair River...................           1,369  x                     1.010  =                     1,382
    St. Clair River & Southeast Shoal            4,036  x                     1.010  =                     4,074
     (when pilots are not changed at
     the Detroit Pilot Boat).
    St. Clair River & Detroit River/             3,031  x                     1.010  =                     3,060
     Detroit Pilot Boat.
    Detroit, Windsor, or Detroit River           1,369  x                     1.010  =                     1,382
    Detroit, Windsor, or Detroit River           2,317  x                     1.010  =                     2,339
     & Southeast Shoal.
    Detroit, Windsor, or Detroit River           3,008  x                     1.010  =                     3,037
     & Toledo or any point on Lake
     Erie W. of Southeast Shoal.
    Detroit, Windsor, or Detroit River           3,031  x                     1.010  =                     3,060
     & St. Clair River.
    Detroit Pilot Boat & Southeast               1,677  x                     1.010  =                     1,693
     Shoal.
    Detroit Pilot Boat & Toledo or any           2,317  x                     1.010  =                     2,339
     point on Lake Erie W. of
     Southeast Shoal.
    Detroit Pilot Boat & St. Clair               3,031  x                     1.010  =                     3,060
     River.
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

                    Table 37--Proposed Adjustment of Pilotage Rates, Areas in District Three
----------------------------------------------------------------------------------------------------------------
                                                                          Rate                     Adjusted rate
                                           2011 Rate                   multiplier                    for 2012
----------------------------------------------------------------------------------------------------------------
Area 6 Lakes Huron and Michigan:
    6-Hour Period.....................            $662  x                     1.043  =                      $691
    Docking or undocking..............             629  x                     1.043  =                       656
Area 7 St. Mary's River between any
 point on or in:
    Gros Cap & De Tour................           2,568  x                     1.006  =                     2,583
    Algoma Steel Corp. Wharf, Sault              2,568  x                     1.006  =                     2,583
     Ste. Marie, Ont. & De Tour.
    Algoma Steel Corp. Wharf, Sault.               967  x                     1.006  =                       973
     Ste. Marie, Ont. & Gros Cap.
    Any point in Sault St. Marie,                2,153  x                     1.006  =                     2,165
     Ont., except the Algoma Steel
     Corp. Wharf & De Tour.
    Any point in Sault St. Marie,                  967  x                     1.006  =                       973
     Ont., except the Algoma Steel
     Corp. Wharf & Gros Cap.
    Sault Ste. Marie, MI & De Tour....           2,153  x                     1.006  =                     2,165
    Sault Ste. Marie, MI & Gros Cap...             967  x                     1.006  =                       973
    Harbor movage.....................             967  x                     1.006  =                       973
Area 8 Lake Superior:
    6-Hour period.....................             577  x                     1.015  =                       586

[[Page 45555]]

 
    Docking or undocking..............             549  x                     1.015  =                       557
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

VI. Regulatory Analyses

    We developed this proposed rule after considering numerous statutes 
and executive orders related to rulemaking. Below we summarize our 
analyses based on 14 of these statutes or executive orders.

A. Regulatory Planning and Review

    Executive Orders 12866 (``Regulatory Planning and Review'') and 
13563 (``Improving Regulation and Regulatory Review'') direct agencies 
to assess the costs and benefits of available regulatory alternatives 
and, if regulation is necessary, to select regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety effects, distributive impacts, and equity). 
Executive Order 13563 emphasizes the importance of quantifying both 
costs and benefits, of reducing costs, of harmonizing rules, and of 
promoting flexibility. This rule is not a ``significant regulatory 
action'' under section 3(f) of Executive Order 12866. Accordingly, the 
NPRM has not been reviewed by the Office of Management and Budget.
    A draft regulatory assessment follows.
    The Coast Guard is required to review and adjust pilotage rates on 
the Great Lakes annually. See Parts III and IV of this preamble for 
detailed discussions of the Coast Guard's legal basis and purpose for 
this rulemaking and for background information on Great Lakes pilotage 
ratemaking. Based on our annual review for this proposed rulemaking, we 
are adjusting the pilotage rates for the 2013 shipping season to 
generate sufficient revenue to cover allowable expenses, target pilot 
compensation, and returns on investment. The rate adjustments in this 
proposed rule would, if codified, lead to a cost in all three districts 
with an estimated cost to shippers of approximately $148,000 across all 
three districts.
    The proposed rule would apply the 46 CFR part 404, Appendix A, full 
ratemaking methodology and increase Great Lakes pilotage rates, on 
average, approximately 1.87 percent overall from the current rates set 
in the 2012 final rule. The Appendix A methodology is discussed and 
applied in detail in Part V of this preamble. Among other factors 
described in Part V, it reflects audited 2010 financial data from the 
pilotage associations (the most recent year available for auditing), 
projected association expenses, and regional inflation or deflation. 
The last full Appendix A ratemaking was concluded in 2011 and used 
financial data from the 2009 base accounting year. The last annual rate 
review, conducted under 46 CFR part 404, Appendix C, was completed 
early in 2011.
    In general, we expect an increase in pilotage rates for a certain 
area to result in additional costs for shippers using pilotage services 
in that area, while a decrease would result in a cost reduction or 
savings for shippers in that area. The shippers affected by these rate 
adjustments are those owners and operators of domestic vessels 
operating on register (employed in foreign trade) and owners and 
operators of foreign vessels on a route within the Great Lakes system. 
These owners and operators must have pilots or pilotage service as 
required by 46 U.S.C. 9302. There is no minimum tonnage limit or 
exemption for these vessels. The Coast Guard's interpretation is that 
the statute applies only to commercial vessels and not to recreational 
vessels.
    Owners and operators of other vessels that are not affected by this 
rule, such as recreational boats and vessels only operating within the 
Great Lakes system may elect to purchase pilotage services. However, 
this election is voluntary and does not affect the Coast Guard's 
calculation of the rate and is not a part of our estimated national 
cost to shippers. Coast Guard sampling of pilot data suggests there are 
very few U.S. domestic vessels, without registry and operating only in 
the Great Lakes that voluntarily purchase pilotage services.
    We used 2008-2010 vessel arrival data from the Coast Guard's Marine 
Information for Safety and Law Enforcement (MISLE) system to estimate 
the average annual number of vessels affected by the rate adjustment to 
be 204 vessels that journey into the Great Lakes system. These vessels 
entered the Great Lakes by transiting through or in part of at least 
one of the three pilotage districts before leaving the Great Lakes 
system. These vessels often make more than one distinct stop, docking, 
loading, and unloading at facilities in Great Lakes ports. Of the total 
trips for the 204 vessels, there were approximately 319 annual U.S. 
port arrivals before the vessels left the Great Lakes system, based on 
2008-2010 vessel data from MISLE.
    The impact of the rate adjustment to shippers is estimated from the 
District pilotage revenues. These revenues represent the direct and 
indirect costs (``economic costs'') that shippers must pay for pilotage 
services. The Coast Guard sets rates so that revenues equal the 
estimated cost of pilotage.
    We estimate the additional impact (costs or savings) of the rate 
adjustment in this proposed rule to be the difference between the total 
projected revenue needed to cover costs in 2013 based on the 2012 rate 
adjustment and the total projected revenue needed to cover costs in 
2013 as set forth in this proposed rule. Table 38 details additional 
costs or savings by area and district.

            Table 38--Rate Adjustment and Additional Impact of the Proposed Rule by Area and District
                                             [$U.S.; Non-discounted]
----------------------------------------------------------------------------------------------------------------
                                                                                                    Additional
                                                                     Projected       Projected       costs or
                                                                  revenue needed  revenue needed    savings of
                                                                     in 2012 *      in 2013 **     this proposed
                                                                                                       rule
----------------------------------------------------------------------------------------------------------------
Area 1..........................................................      $2,308,357      $2,404,424         $96,067

[[Page 45556]]

 
Area 2..........................................................       1,614,791       1,569,160        (45,631)
                                                                 -----------------------------------------------
    Total, District One.........................................       3,923,148       3,973,583          50,435
----------------------------------------------------------------------------------------------------------------
Area 4..........................................................       1,310,549       1,398,694          88,145
Area 5..........................................................       2,600,490       2,596,484         (4,006)
                                                                 -----------------------------------------------
    Total, District Two.........................................       3,911,039       3,995,178          84,139
----------------------------------------------------------------------------------------------------------------
Area 6..........................................................       2,227,555       2,281,673          54,118
Area 7..........................................................       1,565,906       1,556,517         (9,389)
Area 8..........................................................       1,811,863       1,780,829        (31,034)
                                                                 -----------------------------------------------
    Total, District Three.......................................       5,605,324       5,619,020          13,696
----------------------------------------------------------------------------------------------------------------
* These 2012 estimates are detailed in Table 18 of the 2012 final rule (76 FR 6351).
** These 2013 estimates are detailed in Table 27 of this rulemaking.
Some values may not total due to rounding.
``Additional Revenue or Cost of this Rulemaking'' = ``Revenue needed in 2012'' minus ``Revenue needed in 2011.''

    After applying the rate change in this proposed rule, the resulting 
difference between the projected revenue in 2012 and the projected 
revenue in 2013 is the annual impact to shippers from this rule. This 
figure would be equivalent to the total additional payments or savings 
that shippers would incur for pilotage services from this proposed 
rule. As discussed earlier, we consider a reduction in payments to be a 
cost savings.
    The impact of the rate adjustment in this proposed rule to shippers 
varies by area and district. The rate adjustments would lead to a cost 
in all three districts, with affected shippers operating in District 
One, District Two, and District Three experiencing costs of $50,435, 
$84,139, and $13,696, respectively. To calculate an exact cost or 
savings per vessel is difficult because of the variation in vessel 
types, routes, port arrivals, commodity carriage, time of season, 
conditions during navigation, and preferences for the extent of 
pilotage services on designated and undesignated portions of the Great 
Lakes system. Some owners and operators would pay more and some would 
pay less depending on the distance and port arrivals of their vessels' 
trips. However, the additional savings reported earlier in this NPRM 
does capture the adjustment the shippers would experience as a result 
of the proposed rate adjustment. As Table 38 indicates, shippers 
operating in all areas would experience an annual cost due to this 
rulemaking. The overall impact of the proposed rule would be a cost to 
shippers of approximately $148,270 across all three districts.
    This proposed rulemaking would allow the U.S. Coast Guard to meet 
the statutory requirements to review the rates for pilotage services on 
the Great Lakes--ensuring proper pilot compensation.

B. Small Entities

    Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have 
considered whether this proposed rule would have a significant economic 
impact on a substantial number of small entities. The term ``small 
entities'' comprises small businesses, not-for-profit organizations 
that are independently owned and operated and are not dominant in their 
fields, and governmental jurisdictions with populations of less than 
50,000 people.
    We expect entities affected by the proposed rule would be 
classified under the North American Industry Classification System 
(NAICS) code subsector 483--Water Transportation, which includes the 
following 6-digit NAICS codes for freight transportation: 483111--Deep 
Sea Freight Transportation, 483113--Coastal and Great Lakes Freight 
Transportation, and 483211--Inland Water Freight Transportation. 
According to the Small Business Administration's definition, a U.S. 
company with these NAICS codes and employing less than 500 employees is 
considered a small entity.
    For the proposed rule, we reviewed recent company size and 
ownership data from 2008-2010 Coast Guard MISLE data and business 
revenue and size data provided by publicly available sources such as 
MANTA and Reference USA. We found that large, mostly foreign-owned, 
shipping conglomerates or their subsidiaries owned or operated all 
vessels engaged in foreign trade on the Great Lakes. We assume that new 
industry entrants would be comparable in ownership and size to these 
shippers.
    There are three U.S. entities affected by the proposed rule that 
receive revenue from pilotage services. These are the three pilot 
associations that provide and manage pilotage services within the Great 
Lakes districts. Two of the associations operate as partnerships and 
one operates as a corporation. These associations are designated the 
same NAICS industry classification and small entity size standards 
described above, but they have far fewer than 500 employees; they have 
approximately 65 total employees combined. We expect no adverse impact 
to these entities from this proposed rule because all associations 
receive enough revenue to balance the projected expenses associated 
with the projected number of bridge hours and pilots.
    Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that 
this proposed rule would not have a significant economic impact on a 
substantial number of small entities. If you think that your business, 
organization, or governmental jurisdiction qualifies as a small entity 
and that this proposed rule would have a significant economic impact on 
it, please submit a comment to the Docket Management Facility at the 
address under ADDRESSES. In your

[[Page 45557]]

comment, explain why you think it qualifies, as well as how and to what 
degree this proposed rule would economically affect it.

C. Assistance for Small Entities

    Under section 213(a) of the Small Business Regulatory Enforcement 
Fairness Act of 1996 (Pub. L. 104-121), we want to assist small 
entities in understanding this proposed rule so that they can better 
evaluate its effects on them and participate in the rulemaking. If the 
proposed rule would affect your small business, organization, or 
governmental jurisdiction and you have questions concerning its 
provisions or options for compliance, please consult Mr. Todd Haviland, 
Management & Program Analyst, Office of Great Lakes Pilotage, 
Commandant (CG-WWM-2), Coast Guard; telephone 202-372-2037, email 
Todd.A.Haviland@uscg.mil, or fax 202-372-1909. The Coast Guard will not 
retaliate against small entities that question or complain about this 
rule or any policy or action of the Coast Guard.
    Small businesses may send comments on the actions of Federal 
employees who enforce, or otherwise determine compliance with, Federal 
regulations to the Small Business and Agriculture Regulatory 
Enforcement Ombudsman and the Regional Small Business Regulatory 
Fairness Boards. The Ombudsman evaluates these actions annually and 
rates each agency's responsiveness to small business. If you wish to 
comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR 
(1-888-734-3247).

D. Collection of Information

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

E. Federalism

    A rule has implications for federalism under Executive Order 13132, 
Federalism, if it has a substantial direct effect on the States, on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. We have analyzed this proposed rule under that Order and 
have determined that it does not have implications for federalism 
because States are expressly prohibited by 46 U.S.C. 9306 from 
regulating pilotage on the Great Lakes.

F. Unfunded Mandates Reform Act

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

G. Taking of Private Property

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

H. Civil Justice Reform

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

I. Protection of Children

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

J. Indian Tribal Governments

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

K. Energy Effects

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

L. Technical Standards

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

M. Environment

    We have analyzed this proposed rule under Department of Homeland 
Security Management Directive 023-01 and Commandant Instruction 
M16475.lD, which guide the Coast Guard in complying with the National 
Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and 
have made a preliminary determination that this action is one of a 
category of actions that do not individually or cumulatively have a 
significant effect on the human environment. A preliminary 
environmental analysis checklist supporting this determination is 
available in the docket where indicated under the ``Public 
Participation and Request for Comments'' section of this preamble. This 
rule is categorically excluded under section 2.B.2, figure 2-1, 
paragraph (34)(a) of the Instruction. Paragraph 34(a) pertains to minor 
regulatory changes that are editorial or procedural in nature. This 
proposed rule adjusts rates in accordance with applicable statutory and 
regulatory mandates. We seek any comments or information that may lead 
to the discovery of a significant environmental impact from this 
proposed rule.

List of Subjects in 46 CFR Part 401

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

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

[[Page 45558]]

PART 401--GREAT LAKES PILOTAGE REGULATIONS

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

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

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

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

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

------------------------------------------------------------------------
                  Service                        St. Lawrence river
------------------------------------------------------------------------
Basic Pilotage............................  \1\ $18.75 per kilometer or
                                             $33.19 per mile.
Each Lock Transited.......................  \1\ $416.
Harbor Movage.............................  \1\ $1,361.
------------------------------------------------------------------------
\1\ The minimum basic rate for assignment of a pilot in the St. Lawrence
  River is $908, and the maximum basic rate for a through trip is
  $3,984.

    (b) Area 2 (Undesignated Waters):

------------------------------------------------------------------------
                  Service                           Lake Ontario
------------------------------------------------------------------------
6-Hour Period.............................  $851
Docking or Undocking......................  812
------------------------------------------------------------------------

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

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

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

------------------------------------------------------------------------
                                                 Lake Erie
                                                  (east of
                    Service                      Southeast     Buffalo
                                                   Shoal)
------------------------------------------------------------------------
6-Hour Period.................................         $828         $828
Docking or Undocking..........................          637          637
Any point on the Niagara River below the Black          N/A        1,626
 Rock Lock....................................
------------------------------------------------------------------------

    (b) Area 5 (Designated Waters):

----------------------------------------------------------------------------------------------------------------
                                                               Toledo or
                                                               any point
                                                                on Lake
               Any point on or in                 Southeast    Erie west     Detroit      Detroit     St. Clair
                                                    Shoal          of         River      Pilot Boat     River
                                                               Southeast
                                                                 Shoal
----------------------------------------------------------------------------------------------------------------
Toledo or any port on Lake Erie west of               $2,339       $1,382       $3,037       $2,339          N/A
 Southeast Shoal...............................
Port Huron Change Point........................    \1\ 4,074    \1\ 4,719        3,060        2,339        1,693
St. Clair River................................    \1\ 4,074          N/A        3,060        3,060        1,382
Detroit or Windsor or the Detroit River........        2,339        3,037        1,382          N/A        3,060
Detroit Pilot Boat.............................        1,693        2,339          N/A          N/A        3,060
----------------------------------------------------------------------------------------------------------------
\1\ When pilots are not changed at the Detroit Pilot Boat.

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

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

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

------------------------------------------------------------------------
                                                             Lakes Huron
                          Service                                and
                                                               Michigan
------------------------------------------------------------------------
6-Hour Period..............................................         $691
Docking or Undocking.......................................          656
------------------------------------------------------------------------

     (b) Area 7 (Designated Waters):

------------------------------------------------------------------------
               Area                  De Tour      Gros Cap    Any harbor
------------------------------------------------------------------------
Gros Cap.........................       $2,583          N/A          N/A
Algoma Steel Corporation Wharf at        2,583          973          N/A
 Sault Ste. Marie, Ontario.......
Any point in Sault Ste. Marie,           2,165          973          N/A
 Ontario, except the Algoma Steel
 Corporation Wharf...............
Sault Ste. Marie, MI.............        2,165          973          N/A
Harbor Movage....................          N/A          N/A         $973
------------------------------------------------------------------------

     (c) Area 8 (Undesignated Waters):

------------------------------------------------------------------------
                                                                 Lake
                          Service                              Superior
------------------------------------------------------------------------
6-Hour Period..............................................         $586
Docking or Undocking.......................................          557
------------------------------------------------------------------------

Sec.  401.420  [Amended]

    5. Amend Sec.  401.420 as follows:
    a. In paragraph (a), remove the text ``$124'' and add, in its 
place, the text ``$126''; and remove the text ``$1,942'' and add, in 
its place, the text ``$1,972'';
    b. In paragraph (b), remove the text ``$124'' and add, in its 
place, the text ``$126''; and remove the text ``$1,942'' and add, in 
its place, the text ``$1,972''; and
    c. In paragraph (c)(1), remove the text ``$733'' and add, in its 
place, the text ``$744''; and in paragraph (c)(3), remove the text 
``$124'' and add, in its place, the text ``$126'', and remove the text 
``$1,942'' and add, in its place, the text ``$1,972''.

Sec.  401.428  [Amended]

    6. In Sec.  401.428, remove the text ``$748'' and add, in its 
place, the text ``$744''.

    Dated: July 9, 2012.
Dana A. Goward,
Director, Marine Transportation Systems Management, U.S. Coast Guard.
[FR Doc. 2012-18714 Filed 7-31-12; 8:45 am]
BILLING CODE 9110-04-P