Source: https://www.federalregister.gov/documents/2009/07/21/E9-17229/2009-rates-for-pilotage-on-the-great-lakes
Timestamp: 2018-07-20 19:14:54
Document Index: 513583201

Matched Legal Cases: ['arts 401', 'art 404', 'art 404', 'art 404', 'art 404', 'art 404', '§\u2009401', '§\u2009401', 'art 404', '§\u2009401']

This final rule is effective August 1, 2009.
74 FR 35812
35812-35825 (14 pages)
E9-17229
https://www.federalregister.gov/d/E9-17229 https://www.federalregister.gov/d/E9-17229
The Coast Guard is increasing the rates for pilotage service on the Great Lakes by an average of 10.77% over the rates that took effect February 4, 2009. This increase reflects an August 1, 2009, increase in benchmark contractual wages and benefits, as well as an increase in the ratio of pilots to “bridge hours.” The Coast Guard intends the final rule to generate sufficient revenue to cover allowable expenses, target pilot compensation, and returns on investment. The final rule promotes the Coast Guard strategic goal of maritime safety.
Comments and material received from the public, as well as documents mentioned in this preamble as being available in the docket, are part of docket USCG-2008-1126 and are available for inspection or copying at the Docket Management Facility (M-30), U.S. Department of Transportation, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue, SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. You may also find this docket on the Internet at http://www.regulations.gov.
For questions on this final rule, please call Mr. Paul Wasserman, Chief, Great Lakes Pilotage Branch, Commandant (CG-54122), U.S. Coast Guard, at 202-372-1535, by fax 202-372-1929, or e-mail Paul.M.Wasserman@uscg.mil. For questions on viewing or submitting material to the docket, call Renee V. Wright, Chief, Dockets, Department of Transportation, telephone 202-493-0402.
This final rule takes effect August 1, 2009. Under 5 U.S.C. 553(d), we find good cause for this final rule to take effect less than 30 days after publication. The Great Lakes Pilotage Act of 1960, as amended by Public Law 109-241, section 302, requires the Coast Guard to review and adjust the Great Lakes pilotage rates annually by March 1. We could not issue this final rule until some months after that date due to the time needed to review and resolve comments received on the proposed rule. We nonetheless need to issue the final rule before the August 1, 2009, increase in benchmark contractual wages and benefits that necessitates this year's rate adjustment. Under these circumstances, publication of the final rule 30 days or more in advance of the August 1 benchmark increase is impracticable. The regulated community well understands the significance of the August benchmark increase and anticipates that the final rule will take effect not later than August 1. Therefore, we find that delay of the final rule's effective date beyond August 1, 2009, would be unnecessary, and contrary to the public interest in timely rate increases.
We published a notice of proposed rulemaking on April 24, 2009 (NPRM, 74 FR 18669). The NPRM proposed an average 9.41% increase.
This rulemaking increases Great Lakes pilotage rates in accord with the methodology contained in Coast Guard regulations in 46 CFR Parts 401-404. Our regulations implement the Great Lakes Pilotage Act of 1960, 46 U.S.C. Chapter 93, which requires foreign-flag vessels engaged in foreign trade to use Federally registered Great Lakes pilots while transiting the St. Lawrence Seaway and the Great Lakes system, and which requires the Secretary of Homeland Security to “prescribe by regulation rates and charges for pilotage services, giving consideration to the public interest and the costs of providing the services.” 46 U.S.C. 9303(f).
District One, consisting of Areas 1 and 2, includes all U.S. waters of the St. Lawrence River and Lake Ontario. District Two, consisting of Areas 4 and 5, includes all U.S. waters of Lake Erie, the Detroit River, Lake St. Clair, and the St. Clair River. District Three, consisting of Areas 6, 7, and 8, includes all U.S. waters of the St. Mary's River, Sault Ste. Marie Locks, and Lakes Michigan, Huron, and Superior. Area 3 is the Welland Canal, which is serviced exclusively by the Canadian Great Lakes Pilotage Authority and, accordingly, is not included in the U.S. rate structure. Areas 1, 5, and 7 have been designated by Presidential Proclamation, pursuant to the Great Lakes Pilotage Act of 1960, to be waters in which pilots must at all times be fully engaged in the navigation of vessels in their charge. Areas 2, 4, 6, and 8 have not been so designated because they are open bodies of water. Under the Great Lakes Pilotage Act of 1960, pilots assigned to vessels in these areas are only required to “be on board and available to direct the navigation of Start Printed Page 35813the vessel at the discretion of and subject to the customary authority of the master.” 46 U.S.C. 9302(a)(1)(B).
Our pilotage regulations require annual reviews of pilotage rates and the setting of new rates at least once every five years, or sooner, if annual reviews show a need. 46 CFR 404.1. To assist in calculating pilotage rates, the pilotage associations are required to submit annual financial statements prepared by certified public accounting firms. In addition, every fifth year, in connection with the mandatory rate adjustment, we contract with an independent accounting firm to conduct a full audit of the accounts and records of the pilotage associations and prepare and submit financial reports relevant to the ratemaking process. In those years when a full ratemaking is conducted, we generate the pilotage rates using Appendix A to 46 CFR Part 404. The last Appendix A review was concluded in 2006 (71 FR 16501, Apr. 3, 2006). Between the five-year full ratemaking intervals, we annually review the pilotage rates using Appendix C to Part 404, and adjust rates when deemed appropriate. We conducted Appendix C reviews in 2007 and 2008, and increased rates in both years. The 2008 final rule was published January 5, 2009 (74 FR 220), and took effect on February 4, 2009. We define the terms and formulas used in Appendix A and Appendix C in Appendix B to Part 404.
This final rule concludes the annual Appendix C rate review for 2009, and increases rates by an average of 10.77% over the rates that took effect February 4, 2009.
We received four comments during the NPRM public comment period.
Timeliness. Three commenters, including a pilots' association, pointed out that 46 U.S.C. 9303(f), as amended by Public Law 109-241, sec. 302, requires us to review and, if necessary, establish adjusted pilotage rates by March 1 of each year, in order to provide critical information before the start of the annual Great Lakes shipping season, usually in early spring. These commenters point out that we have not met the March 1, 2009, deadline for this year's review. We acknowledge this and future compliance is a Coast Guard priority. In 2007 and 2008, we mitigated the impact of delay by ensuring that interim rules were in place at the opening of the shipping season. In letters dated April 24, 2007, and March 3, 2008, the pilots' associations expressed their appreciation to the Coast Guard for these efforts. In 2009, publishing a rule at the beginning of the shipping season was not possible, but we hope to mitigate the impact of delay by issuing the final rule so that it takes effect on August 1, 2009, when the benchmark contract increase that accounts for a meaningful portion of this year's rate adjustment takes effect.
“Pilots needed” and rounding. One commenter said that, in calculating the number of pilots needed in each Area, we should always round the result of our mathematical calculations up to the nearest “whole pilot,” and another commenter criticized the imprecision of the language we used in the NPRM to describe our rounding. We agree with this latter comment and have revised our language in this final rule.
We acknowledge that in recent years we have usually rounded the results of the mathematical calculation used to determine the number of “pilots needed,” pursuant to our discretionary authority “to make adjustments to these numbers to ensure uninterrupted pilotage service in each area, or for other reasonable circumstances.” 46 CFR Part 404, Appendix A, Step 2.B (also applicable in Appendix C calculations). This rounding has never been performed as a matter of policy, nor do we adopt it as policy now. In fact, our current ratemaking methodology requires no rounding whatsoever, and until 2006, what rounding we applied was merely up or down to the nearest tenth of a whole number: see, e.g., our December 12, 2003 (68 FR 69564) and March 10, 2005 (70 FR 12082) interim rules.
In the April 3, 2006 final rule (71 FR 16501), we acknowledged nine public comments in favor of rounding to whole numbers and approved the use of that process for that rule. However, we did not actually apply that methodology in the 2006 final rule. The mathematical result of our 2006 calculations was a whole number in each of the seven Areas, because we rounded the bridge hour projections (not pilot numbers) that year.
In the 2007 interim rule (72 FR 8115, Feb. 23, 2007), we agreed with a public commenter that the rounding of bridge hour projections in 2006 was a departure from past practice and agreed to use unrounded bridge hour projections. We also rounded the mathematical results of our pilots-needed calculations up to the next whole number in all six Areas where rounding was needed. These calculations were unchanged in the 2007 final rule (72 FR 53158, Sep. 18, 2007).
In 2008, the March 21, 2008 interim rule (73 FR 15092) adopted without change the calculations proposed in the February 1, 2008 NPRM (73 FR 6085). Mathematical results of pilots-needed calculations were rounded up in all six Areas where rounding was needed. However, we introduced three adjustments in the 2008 final rule (74 FR 220, Jan. 5, 2009). These adjustments responded to public comments that pointed out that the NPRM and interim rule overstated the bridge hour projections for Areas 2, 4, and 5.
The first adjustment reduced projected bridge hours in Area 2 from 7,993 to 5,650, but kept the “pilots needed” for Area 2 at five, one more than would have been indicated by rounding up the mathematical result (5,650/1,800 = 3.14, rounded up = 4). We exercised our discretion to do so because “experience has demonstrated the need for at least five pilots in that Area,” a need that we discussed in detail in the final rule at 74 FR 221.
Second, in Area 4, we reduced projected bridge hours from 8,490 to 7,320, and rounded the mathematical result (7,320/1,800 = 4.07) down to four pilots needed. Third, in Area 5, we reduced projected bridge hours from 6,395 to 5,097, and rounded the mathematical result (5,097/1,000 = 5.10) up to six pilots. We exercised our discretion in these two Areas “because the District 2 Pilots' Association has routinely operated with an average of one less pilot than is authorized under the rate and for the last season and a half with two fewer pilots than authorized. Accordingly, a reduction of one pilot per Area reflects actual practice.” 74 FR at 222. We might also have observed that pilots in one Area frequently operate in other Areas as well, that District Two comprises both Areas 4 and 5, and that the minimal downward adjustment from 4.07 to 4 in Area 4 should therefore be balanced against the more substantial rounding up, from 5.10 to 6, in Area 5.
We acknowledge that the determination of pilots needed is an issue of concern to many, and that some might wish to see the formula for that determination modified to require “rounding up” in all instances. We observe that the ratemaking formula was never designed to produce anything more than a useful model for subsequent calculations. It could be argued that the model worked best without rounding, or with only limited rounding, for example because rounding up inflates pilot numbers and makes it less likely that pilots will be able to reach their target compensation. We defer consideration of such arguments until they can be made and considered in the context of an overall review of our ratemaking methodology. Until Start Printed Page 35814then, we intend to apply the pilots-needed calculations much as we have done since 2007.
Data for bridge hour projections. One commenter said we failed to consult industry in projecting 2009 vessel traffic, and that our bridge hour projections for 2009 (i.e., the projection of hours pilots are aboard vessels providing pilotage service) should have been based on 2008 figures rather than on 2007 figures. To meet the statutory deadline for establishing rates by March 1, 2009, we began preparing the 2009 NPRM long before actual data for 2008 was available. Although our practice has not been to document every contact with industry or pilots, our regulations and our ratemaking methodology presuppose frequent informal contacts between the Director of Great Lakes Pilotage, industry, and pilots. The information received through those contacts is submitted for public comment in our NPRM. In this case, our use of 2007 figures for 2009, instead of waiting for 2008 figures, was based on 2008 informal discussions with pilot and industry representatives that endorsed the continued use of 2007 figures, with some modifications. Those modifications were explained in the April 2009 NPRM.
We agree with one commenter who said that the NPRM did not adequately explain the difference in Area 6 and Area 7 base period bridge hours (18,000 and 3,863, respectively), and the 2009 projected bridge hours for those Areas (13,406 and 3,259, respectively). Areas 6 and 7 experienced a significant decrease in 2007 actual bridge hours, from 2007 projections. Therefore, the 2009 projections for those Areas reflects their actual 2007 bridge hours, and then further reduces those figures by an additional 10% in each Area.
One commenter said we should adjust Area 1 projected bridge hours to more accurately reflect anticipated traffic for the 2009 shipping season, as we did for areas 2, 4, and 5 in the 2008 final rule and as we proposed for District Three in the 2009 NPRM. We agree and, in this final rule, we are reducing the projected bridge hours for Area 1 from 5661 to 5203. We are also adjusting District Three bridge hours as indicated in the NPRM.
Class 4 vessels. One commenter said that our pilotage rates for Class 4 vessels are 15% higher than Canadian rates. This may be true, but in the past year the difference has been less than 1%, but has varied subsequently due to fluctuations in the relative value of U.S. and Canadian currency.
Miscellaneous. Three commenters took issue with various aspects of our ratemaking methodology. These comments are beyond the scope of this rulemaking, which applies the methodology as it exists today, but we address two points briefly here. One commenter petitioned the Coast Guard to review our formula for setting benchmark compensation levels of Great Lakes vessel masters. We deny that petition because we have previously conducted the requested review and believe the formula is correct: a supporting memorandum appears in the docket for this rulemaking as USCG-2008-1126-0017. The same commenter criticized us for not yet adopting the recommendations of Rear Admiral Timothy J. Riker's 2003 report on Great Lakes bridge hours. We decline to adopt the Riker Report recommendations in full because we do not think the Report adequately accounted for the difference between a Great Lakes pilot's active, on call, work life during a portion of the year and the work life of an office-based 40 hour per week worker through a 52-week year.
We acknowledge that through the years, both pilots and industry have indicated concerns about aspects of our ratemaking methodology. Some of those concerns are described in communications that we received between January 2009, when we published the 2008 final rule, and April 2009, when we published the 2009 NPRM. Those communications appear in the docket for this rulemaking as supplemental material. To obtain a more comprehensive understanding of these concerns, we have decided to publish a notice focusing on our ratemaking methodology, and requesting public comments. That notice appears elsewhere in today's Federal Register. We will refer the comments we receive to the Great Lakes Pilotage Advisory Committee, which Congress established to advise the Coast Guard on significant policy decisions relating to Great Lakes pilotage.
We are increasing pilotage rates in accordance with the methodology outlined in Appendix C to 46 CFR Part 404, by increasing rates an average 10.77% over the 2008 final rule. This final rule puts into place, with two modifications, the rate changes we proposed in the April 24, 2009 NPRM. The first modification adjusts projected bridge hours in Area 1 as discussed in part IV of this preamble. The second modification updates the ship tonnage percentages under the AMO union contracts. This second modification accounts for only 0.36% of the overall rate increase.
Area 1 (designated waters) 13.43
Area 2 (undesignated waters) 4.79
Area 4 (undesignated waters) 4.90
Area 5 (designated waters) 4.48
Area 6 (undesignated waters) 12.52
Area 7 (designated waters) 23.64
Area 8 (undesignated waters) 2.52
Overall rate change (percentage change in overall prospective unit costs/base unit costs; see Table 18) 10.77
Rates for cancellation, delay, or interruption in rendering services (46 CFR 401.420), and basic rates and charges for carrying a U.S. pilot beyond the normal change point, or for boarding at other than the normal boarding point (46 CFR 401.428), have been increased by 10.77% in all Areas.
Step 1: Calculate the total economic costs for the base period (i.e., pilot Start Printed Page 35815compensation expense plus all other recognized expenses plus the return element) and divide by the total bridge hours used in setting the base period rates;
The base data used to calculate each of the eight steps comes from the 2008 final rule, published in January 2009. We also used the most recent union contracts between the American Maritime Officers Union (AMOU) and vessel owners and operators on the Great Lakes, which we received on August 16, 2007, to determine target pilot compensation. Bridge hour projections for the 2009 season have been obtained from historical data, pilots, and industry. All documents and records used in this rate calculation have been placed in the public docket for this rulemaking and are available for review at the addresses listed under ADDRESSES.
Some values may not total exactly due to format rounding for presentation in charts and explanations in this section. The rounding does not affect the integrity or truncate the real value of the calculations in the ratemaking methodology described below.
Step 1: Calculate the total economic cost for the base period. The calculations in Step 1 are unchanged from the NPRM, but are repeated for your convenience.
In this step, for each Area, we divide total economic costs for the base period by the total bridge hours used in setting the base period rates, to yield the base cost per bridge hour. Total base period economic costs include pilot compensation expenses, plus all other recognized expenses, plus the return element. The calculations providing the total base period economic costs for each Area are summarized in Table 16 of the 2008 final rule. Total bridge hours used in setting the base period rates were calculated in Table 13 of the 2008 final rule. Tables 2 through 4 summarize the Step 1 calculations:
Step 2. Calculate the expense multiplier. The calculations in Step 2 are unchanged from the NPRM, but are repeated for your convenience.
In this step, for each Area, we calculate an expense multiplier by dividing the base operating expense, shown in Table 16, Column B of the 2008 final rule, by base pilot compensation, shown in Table 16, Column C of the 2008 final rule. Tables 5 through 7 show the Step 2 calculations.
Base operating expense $993,207 $385,906 $619,968 $1,999,081
Expense multiplier = .52508 = .37049 = .46823 = .46958
Step 3. Calculate annual projection of target pilot compensation. Step 3 calculations have been modified since the NPRM. In this step, we determine the new target rate of compensation and the new number of pilots needed in each pilotage Area, to determine the new target pilot compensation for each Area.
There are two current AMOU contracts. In our April 2009 NPRM, we stated that vessels operated by the American Steamship Co. and Inland Lakes Management Co. (acquired in 2008 by Mittal Steel USA, Inc.) operate under “Agreement A,” and that Key Lakes, Inc. and Mittal Steel USA, Inc. vessels (other than the Inland Lakes vessels acquired by Mittal) operate under “Agreement B.” However, as of May 2009, Agreement A applies only to Key Lakes, Inc. vessels, and Agreement B applies to all vessels operated by American Steamship Co. and Mittal Steel USA, Inc.
Table 8, which is unchanged from the NPRM, shows new wage calculations based on Agreements A and B effective August 1, 2009.
$262.73 daily rate × 54.5 days $14,319 $21,478
$323.86 daily rate × 49.5 days 16,031 24,046
Table 9, which is unchanged from the NPRM, shows new benefit calculations based on Agreements A and B, effective August 1, 2009.
Health = $80.69 × 45.5 days 3,671.40 3,671.40
Table 10, which is unchanged from the NPRM, totals the wages and benefits under each agreement.
Agreement B: Total = 202,368 = 278,114
Table 11, as it appeared in the NPRM, has been revised to reflect the change in the distribution of vessels operating under Agreements A and B as of May 2009. It shows that approximately 30% of U.S. Great Lakes shipping deadweight tonnage operates under Agreement A, with the remaining 70% operating under Agreement B.
Table 12, as it appeared in the NPRM, has been modified. It applies the percentage of tonnage represented by each agreement to the wages and benefits provided by each agreement, to determine the projected target rate of compensation on a tonnage-weighted basis.
Total wages and benefits × percent tonnage $182,013 × 29.72% = $54,101 $249,670 × 29.72% = $74,211
Total wages and benefits × percent tonnage $202,368 × 70.28% = $142,217 $278,114 × 70.28% = $195,448
Total weighted average wages and benefits = projected target rate of compensation $54,101 + $142,217 = $196,318 $74,211 + $195,448 = $269,659
(b) Determine number of pilots needed. Subject to discretionary adjustment by the Director of Great Lakes Pilotage to ensure uninterrupted service or for other reasonable circumstances, we determine the number of pilots needed in each Area by dividing each Area's projected bridge hours, either by 1,000 (designated waters) or by 1,800 (undesignated waters). The resulting number is rounded either up or down based upon the needs of commerce at the discretion of the Director.
Bridge hours are the number of hours a pilot is aboard a vessel providing pilotage service. Projected bridge hours are based on the vessel traffic that pilots are expected to serve. Based on historical data and information provided by pilots and industry, the Coast Guard projects the same bridge hours for Areas 2, 4, 5, and 8 in 2009 as were projected in the 2008 final rule. As discussed in Part IV of this preamble, we are reducing projected bridge hours for Areas 1, 6, and 7. With these reductions, we are reducing the number of pilots in Area 6 by two.
Table 13, as it appeared in the NPRM, has been modified to reflect the reductions in Areas 1, 6, and 7 bridge hour projections. Table 13 shows the projected bridge hours needed for each Area, and the total number of pilots needed after dividing those figures either by 1,000 or 1,800 and, for the purposes of this rulemaking only, rounding up to the next whole pilot, with two exceptions. In Area 2 we round up from 3.14 to 5, and in Area 4 we round down from 4.07 to 4, for the reasons discussed in the 2008 final rule.
(c) Determine the projected target pilot compensation for each Area. We project new total target pilot compensation separately for each pilotage Area, by multiplying the number of pilots needed in each Area (see Table 13) by the projected target rate of compensation (see Table 12) for pilots working in that Area. Table 14 (modified from NPRM version) shows this calculation.Start Printed Page 35819
Area 1 6 × $269,659 $1,617,955
Area 2 5 × 196,318 981,589
Total, District One 11 2,599,544
Area 4 4 × 196,318 785,271
Area 5 6 × 269,659 1,617,955
Total, District Two 10 2,403,226
Area 6 8 × 196,318 1,570,542
Area 7 4 × 269,659 1,078,637
Area 8 7 × 196,318 1,374,224
Total, District Three 19 4,023,403
Step 4: Increase the projected pilot compensation in Step 3 by the expense multiplier in Step 2. Step 4 calculations have been modified since the NPRM. This step yields a projected increase in operating costs necessary to support the increased projected pilot compensation. Table 15 (modified from NPRM version) shows this calculation.
Projected operating expense*
Area 1 $1,617,955 × .33035 $534,487
Area 2 981,589 × .55939 549,089
Total, District One 2,599,544 × .41671 1,083,260
Area 4 785,271 × .65370 513,332
Area 5 1,617,955 × .49395 799,192
Total, District Two 2,403,226 × .54607 1,312,333
Area 6 1,570,542 × .52508 824,666
Area 7 1,078,637 × .37049 399,625
Area 8 1,374,224 × .46823 643,454
Total, District Three 4,023,403 × .46958 1,889,298
*Unique expense multipliers are used to calculate projected operating expense for all areas and districts, and as such, projected operating expense for Districts One, Two and Three may not equal the sum of the projected operating expense for the areas.
Step 5: Adjust the result in Step 4, as required, for inflation or deflation, and calculate projected total economic cost. Step 5 calculations have been modified since the NPRM. Based on data from the U.S. Department of Labor's Bureau of Labor Statistics, we have multiplied the results in Step 4 by a 1.027 inflation factor, reflecting an average inflation rate of 2.7% in “Midwest Economy—Consumer Prices” between 2006 and 2007, the latest years for which data are available. Table 16 (modified from NPRM version) shows this calculation and the projected total economic cost.
Area 1 $534,487 $548,918 $1,617,955 $2,166,873
Area 2 549,089 563,914 981,589 1,545,503
Total, District One 1,083,260 1,112,508 2,599,544 *3,712,052
Area 4 513,332 527,192 785,271 1,312,463
Area 5 799,192 820,770 1,617,955 2,438,725
Total, District Two 1,312,333 1,347,766 2,403,226 *3,750,992
Area 6 824,666 846,932 1,570,542 2,417,474
Area 7 399,625 410,415 1,078,637 1,489,052
Start Printed Page 35820
Area 8 643,454 660,828 1,374,224 2,035,052
Total, District Three 1,889,298 1,940,310 4,023,403 *5,963,713
*Unique expense multipliers are used to calculate projected operating expense for all areas and districts, and as such, projected total economic cost for Districts One, Two and Three may not equal the sum of the projected total economic cost for the areas.
Step 6: Divide the result in Step 5 by projected bridge hours to determine total unit costs. Step 6 calculations have been modified since the NPRM. Table 17 (modified from NPRM version) shows this calculation.
Area 1 $2,166,873 5,203 $416.47
Area 2 1,545,503 5,650 273.54
Total, District One 3,712,052 10,853 342.03
Area 4 1,312,463 7,320 179.30
Area 5 2,438,725 5,097 478.46
Total, District Two 3,750,992 12,417 302.09
Area 6 2,417,474 13,406 180.33
Area 7 1,489,052 3,259 456.90
Area 8 2,035,052 11,630 174.98
Total, District Three 5,963,713 28,295 210.77
Overall 13,426,758 51,565 260.39
Step 7: Divide prospective unit costs (total unit costs) in Step 6 by the base period unit costs in Step 1. Step 7 calculations have been modified since the NPRM. Table 18 (modified from NPRM version) shows this calculation, which expresses the percentage change between the total unit costs and the base unit costs. The results, for each Area, are identical with the percentage increases listed in Table 1.
Table 18—Percentage Change, Prospective in Unit Costs
Area 1 $416.47 $367.17 13.43
Area 2 273.54 261.03 4.79
Total, District One 342.03 314.15 8.87
Area 4 179.30 170.93 4.90
Area 5 478.46 457.95 4.48
Total, District Two 302.09 288.75 4.62
Area 6 180.33 160.26 12.52
Area 7 456.90 369.54 23.64
Area 8 174.98 170.68 2.52
Total, District Three 210.77 188.14 12.03
Overall 260.39 235.08 10.77
Step 8: Adjust the base period rates by the percentage change in unit costs in Step 7. Step 8 calculations have been modified since the NPRM. Table 19 (modified from NPRM version) shows this calculation.
D. Adjusted rate (A + C, rounded to nearest cent)
Area 1 13.43 (1.1343)
—Basic pilotage $14.94/km, $26.44/mi $2.00/km, $3.55/mi $16.95/km, $29.99/mi
—Each lock transited 331.03 44.44 375.47
—Harbor movage 1,083.89 145.52 1,229.41
—Minimum basic rate, St. Lawrence River 722.98 97.07 820.04
—Maximum rate, through trip 3,173.51 426.07 3,599.58
Area 2 4.79 (1.0479)
—6-hr. period 780.23 37.40 817.63
—Docking or undocking 744.24 35.68 779.92
Area 4 4.90 (1.0490)
—6-hr. period 688.35 33.70 722.05
—Docking or undocking 530.49 25.97 556.46
—Any point on Niagara River below Black Rock Lock 1,354.15 66.30 1,420.45
Area 5 between any point on or in 4.48 (1.0448)
—Toledo or any point on Lake Erie W. of Southeast Shoal 1,243.75 55.71 1,299.46
—Toledo or any point on Lake Erie W. of Southeast Shoal & Southeast Shoal 2,104.72 94.28 2,198.99
—Toledo or any point on Lake Erie W. of Southeast Shoal & Detroit River 2,732.79 122.41 2,855.20
—Toledo or any point on Lake Erie W. of Southeast Shoal & Detroit Pilot Boat 2,104.72 94.28 2,198.99
—Port Huron Change Point & Southeast Shoal (when pilots are not changed at the Detroit Pilot Boat) 3,665.60 164.20 3,829.80
—Port Huron Change Point & Toledo or any point on Lake Erie W. of Southeast Shoal (when pilots are not changed at the Detroit Pilot Boat) 4,246.60 190.22 4,436.82
—Port Huron Change Point & Detroit River 2,753.85 123.36 2,877.20
—Port Huron Change Point & Detroit Pilot Boat 2,141.88 95.94 2,237.82
—Port Huron Change Point & St. Clair River 1,522.48 68.20 1,590.68
—St. Clair River 1,243.75 55.71 1,299.46
—St. Clair River & Southeast Shoal (when pilots are not changed at the Detroit Pilot Boat) 3,665.60 164.20 3,829.80
—St. Clair River & Detroit River/Detroit Pilot Boat 2,753.85 123.36 2,877.20
—Detroit, Windsor, or Detroit River 1,243.75 55.71 1,299.46
—Detroit, Windsor, or Detroit River & Southeast Shoal 2,104.72 94.28 2,198.99
—Detroit, Windsor, or Detroit River & Toledo or any point on Lake Erie W. of Southeast Shoal 2,732.79 122.41 2,855.20
—Detroit, Windsor, or Detroit River & St. Clair River 2,753.85 123.36 2,877.20
—Detroit Pilot Boat & Southeast Shoal 1,522.48 68.20 1,590.68
—Detroit Pilot Boat & Toledo or any point on Lake Erie W. of Southeast Shoal 2,104.72 94.28 2,198.99
—Detroit Pilot Boat & St. Clair River 2,753.85 123.36 2,877.20
Area 6 12.52 (1.1252)
—6-hr. period 553.62 69.31 622.93
—Docking or undocking 525.88 65.84 591.72
Area 7 between any point on or in 23.64 (1.2364)
—Gros Cap & De Tour 1,975.83 467.15 2,442.98
—Algoma Steel Corp. Wharf, Sault Ste. Marie, Ont. & De Tour 1,975.83 467.15 2,442.98
—Algoma Steel Corp. Wharf, Sault Ste. Marie, Ont. & Gros Cap 744.10 175.93 920.03
—Any point in Sault Ste. Marie, Ont., except the Algoma Steel Corp. Wharf & De Tour 1,656.11 391.55 2,047.67
—Any point in Sault Ste. Marie, Ont., except the Algoma Steel Corp. Wharf & Gros Cap 744.10 175.93 920.03
—Sault Ste. Marie, MI & De Tour 1,656.11 391.55 2,047.67
—Sault Ste. Marie, MI & Gros Cap 744.10 175.93 920.03
—Harbor movage 744.10 175.93 920.03
Area 8 2.52 (1.0252)
—6-hr. period 535.92 13.51 549.44
—Docking or undocking 509.36 12.84 522.20
Rates for “Cancellation, delay or interruption in rendering services ( § 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 (§ 401.428)” are not reflected in this table but have been increased by 10.77% across all areas.
The Coast Guard is required to conduct an annual review of pilotage rates on the Great Lakes and, if necessary, adjust these rates to align compensation levels between Great Lakes pilots and industry. See the “Background and Purpose” section for a detailed explanation of the legal authority and requirements for the Coast Guard to conduct an annual review and provide possible adjustments of pilotage rates on the Great Lakes. Based on our annual review for this rulemaking, we are adjusting the pilotage rates for the 2009 shipping season to generate sufficient revenue to cover allowable expenses, target pilot compensation, and returns on investment.
This rule will implement a 10.77% overall rate adjustment for the Great Lakes system over the current rate as adjusted in the 2008 final rule. These adjustments to Great Lakes pilotage rates meet the requirements set forth in 46 CFR part 404 for similar compensation levels between Great Lakes pilots and industry. They also include adjustments for inflation and changes in association expenses to maintain these compensation levels.
In general, we expect an increase in pilotage rates for a certain area to result in additional costs for shippers using pilotage services in that area, while a decrease would result in a cost reduction or savings for shippers in that area. This rule will result in a distributional effect that transfers payments (income) from affected shippers (vessel owners and operators) to the Great Lakes' pilot associations through Coast Guard regulated pilotage rates.
Owners and operators of other vessels that are not affected by this rule, such as recreational boats and vessels only operating within the Great Lakes system, may elect to purchase pilotage services. However, this election is voluntary and does not affect the Coast Guard's calculation of the rate increase and is not a part of our estimated national cost to shippers.
We reviewed a sample of pilot source forms, which are the forms used to record pilotage transactions on vessels, and discovered very few cases of U.S. Great Lakes vessels (i.e., domestic vessels without registry operating only in the Great Lakes) that purchased pilotage services. We assume some vessel owners and operators may also choose to purchase pilotage services if their vessels are carrying hazardous substances or were navigating the Great Lakes system with inexperienced personnel. Based on information from the Coast Guard Office of Great Lakes Pilotage, we have determined that these vessels voluntarily chose to use pilots and, therefore, are exempt from pilotage requirements.
We used 2006-2007 vessel arrival data from the Coast Guard's Marine Inspection, Safety, and Law Enforcement system (MISLE) to estimate the average annual number of vessels affected by the rate adjustment to be 208 vessels that journey into the Great Lakes system. These vessels entered the Great Lakes by transiting through or in part of at least one of the three pilotage Districts before leaving the Great Lakes system. These vessels often make more than one distinct stop, docking, loading, and unloading at facilities in Great Lakes ports. Of the total trips for the 208 vessels, there were approximately 923 annual U.S. port arrivals before the vessels left the Great Lakes system, based on 2006-2007 vessel data from MISLE.
We estimate the additional impact (costs or savings) of the rate adjustment in this final rule to be the difference between the total projected revenue needed to cover costs based on the 2008 rate adjustment and the total projected revenue needed to cover costs in this final rule for 2009. Table 20 details additional costs or savings by area and district.
Table 20—Rate Adjustment and Additional Impact of The Final Rule ($U.S.; Non-Discounted) 1
Total projected expenses in 2008
Total projected expenses in 2009 3
Additional revenue or cost of this rulemaking 2
Area 1 $2,078,551 1.0425 2,166,873 $88,322
Area 2 1,474,806 1.0479 1,545,503 70,697
Total, District One 3,553,357 1.0447 3,712,052 158,695
Area 4 1,251,203 1.0490 1,312,463 61,260
Area 5 2,334,169 1.0448 2,438,725 104,556
Total, District Two 3,585,372 1.0462 3,750,992 165,620
Area 6 2,884,724 0.8380 2,417,474 (467,250)
Area 7 1,427,515 1.0431 1,489,052 61,537
Area 8 1,944,032 1.0468 2,035,052 91,020
Start Printed Page 35823
Total, District Three 6,256,273 0.9532 5,963,713 (292,560)
2 Additional Revenue or Cost of this Rulemaking = ‘Total Projected Expenses in 2009’ − ‘Total Projected Expenses in 2008’.
3 ‘Total Projected Expenses in 2009’ and ‘Additional Revenue or Cost of this Rulemaking’ for Districts One, Two and Three differ from the sum of the area totals due to the use of unique multipliers, as mentioned in Step 5 under ‘Calculating the Rate Adjustment’.
After applying the rate change in this rule, the resulting difference between the projected revenue in 2008 and the projected revenue in 2009 is the annual impact to shippers from this rule. This figure will be equivalent to the total additional payments or savings that shippers will incur for pilotage services from this rule. As discussed earlier, we consider a reduction in payments to be a cost savings.
The impact of the rate adjustment in this rule to shippers varies by area and district. The annual costs of the rate adjustments in Districts 1 and 2 are approximately $159,000 and $166,000, respectively, while District 3 will experience an annual savings of approximately $293,000. To calculate an exact cost or savings per vessel is difficult because of the variation in vessel types, routes, port arrivals, commodity carriage, time of season, conditions during navigation, and preferences for the extent of pilotage services on designated and undesignated portions of the Great Lakes system. Some owners and operators will pay more and some will pay less depending on the distance and port arrivals of their vessels' trips. However, the annual cost or savings reported above does capture all of the additional cost the shippers face as a result of the rate adjustment in this rule.
As Table 20 indicates, all areas will experience an increased annual cost due to this rulemaking except Area 6, which will experience a savings. The projected savings for Area 6 is approximately $467,000. This will cause a net savings for District 3, and is due to a decrease in actual bridge hours in Area 6 from 2008 to 2009. This decrease in bridge hours led to a decrease in the number of pilots needed, from 10 pilots in 2008 to 8 pilots in 2009. This decrease in the number of pilots would reduce the projected revenue needed to cover costs of pilotage services in Area 6.
The overall impact of the final rule will be an additional cost to shippers of $32,000 across all three districts. This differs from the estimated cost savings of $15,000 in the NPRM due to the projected changes in bridge hours in Area 1,[1] as well as the change in the distribution of vessels operating under Agreements A and B as of May 2009. We explained these two differences from the NPRM in our Part IV discussion of public comments on bridge hour projection data, and in our Part V.B discussion of Step 3(b) rate calculations. These two changes since the NPRM resulted in increased projected expenses, accounting for the overall increased cost to shippers of the final rule.
We expect entities affected by the proposed rule would be classified under the North American Industry Classification System (NAICS) code subsector 483—Water Transportation, which includes one or all of the following 6-digit NAICS codes for freight transportation: 483111—Deep Sea Freight Transportation, 483113—Coastal and Great Lakes Freight Transportation, and 483211—Inland Water Freight Transportation. According to the Small Business Administration's definition, a U.S. company with these NAICS codes and employing less than 500 employees is considered a small entity.
For this rule, we reviewed recent company size and ownership data from 2006-2007 MISLE data and business revenue and size data provided by Reference USA and Dunn and Bradstreet. We were able to gather revenue and size data or link the entities to large shipping conglomerates for 22 of the 24 affected entities in the United States. We found that large, mostly foreign-owned, shipping conglomerates or their subsidiaries owned or operated all vessels engaged in foreign trade on the Great Lakes. We assume that new industry entrants will be comparable in ownership and size to these shippers.
There are three U.S. entities affected by the rule that receive revenue from pilotage services. These are the three pilot associations that provide and manage pilotage services within the Great Lakes districts. Two of the associations operate as partnerships and one operates as a corporation. These associations are classified with the same NAICS industry classification and small entity size standards described above, but they have far fewer than 500 employees: approximately 65 total employees combined. We expect no adverse impact to these entities from this rule since all associations receive enough revenue to balance the projected expenses associated with the projected number of bridge hours and pilots.
Therefore, the Coast Guard has determined that this rule will not have a significant economic impact on a substantial number of small entities under 5 U.S.C. 605(b).
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we offered to assist small entities in understanding the rule so that they could better evaluate its effects on them and participate in the rulemaking. The Start Printed Page 35824Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.
This rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). This rule does not change the burden in the collection currently approved by the Office of Management and Budget (OMB) under OMB Control Number 1625-0086, Great Lakes Pilotage Methodology.
Basic Pilotage $16.95 per kilometer or $29.99 per mile.1
Each Lock Transited $375.1
Harbor Movage $1,229.1
1 The minimum basic rate for assignment of a pilot in the St. Lawrence River is $820, and the maximum basic rate for a through trip is $3,599.
(b) Area 2 (Undesignated Waters):Start Printed Page 35825
Six-Hour Period $818
Docking or Undocking 780
Six-Hour Period $722 $722
Docking or Undocking 557 557
Any Point on the Niagara River below the Black Rock Lock N/A 1,420
Toledo or any port on Lake Erie west of Southeast Shoal $2,199 $1,299 $2,855 $2,199 N/A
Port Huron Change Point 1 3,829 1 4,436 2,877 2,237 1,591
St. Clair River 1 3,829 N/A 2,877 2,877 1,299
Detroit or Windsor or the Detroit River 2,198 2,855 1,299 N/A 2,877
Detroit Pilot Boat 1,590 2,199 N/A N/A 2,877
Six-Hour Period $623
Docking or Undocking 592
Gros Cap $2,443 N/A N/A
Algoma Steel Corporation Wharf at Sault Ste. Marie Ontario 2,443 920 N/A
Any point in Sault Ste. Marie, Ontario, except the Algoma Steel Corporation Wharf 2,048 920 N/A
Sault Ste. Marie, MI 2,048 920 N/A
Harbor Movage N/A N/A $920
Six-Hour Period $549
Docking or Undocking 522
a. In paragraph (a), remove the number “$102” and add, in its place, the number “$113”; and remove the number “$1,604” and add, in its place, the number “$1,777”.
b. In paragraph (b), remove the number “$102” and add, in its place, the number “$113”; and remove the number “$1,604” and add, in its place, the number “$1,777”.
c. In paragraph (c)(1), remove the number “$606” and add, in its place, the number “$671”; in paragraph (c)(3), remove the number “$102” and add, in its place, the number “$113”; and, also in paragraph (c)(3), remove the number “$1,604” and add, in its place, the number “$1,777”.
6. In § 401.428, remove the number “$618” and add, in its place, the number “$684”.
1. When a decrease in traffic is not accompanied by a reduction in pilots, as in this case, projected pilot compensation and other expenses do not decrease. As such, revenue must increase to meet these expenses, which can only be accomplished through rate increases.
[FR Doc. E9-17229 Filed 7-20-09; 8:45 am]