Source: https://www.federalregister.gov/documents/2011/08/04/2011-19746/2012-rates-for-pilotage-on-the-great-lakes
Timestamp: 2018-09-20 00:16:39
Document Index: 103472257

Matched Legal Cases: ['arts 401', 'art 404', 'art 404', 'art 404', 'art 404', 'art 404', 'art 403', 'art 404', 'art 404', 'art 404', '§\u2009401', '§\u2009401', '§\u2009401']

Federal Register :: 2012 Rates for Pilotage on the Great Lakes
A Proposed Rule by the Coast Guard on 08/04/2011
Comments and related material must be submitted on or before October 3, 2011.
76 FR 47095
47095-47114 (20 pages)
USCG-2011-0328
1625-AB70
2011-19746
Great Lakes Pilotage Rates - 2012 Annual Review and Adjustment
Signed Permit Application
SDEV Check to Cummins-LPA
Patch Contract (Signed by Patch)
Office Mortage & Tax Documents
New Pilot Boat Mortgage
Meeting - Great Lakes Pilotage 10/18/2011
Lakes Pilots Commitment Letter
Itemized Bill from Cummings Bridge
Insurance for New Pilot Boat
https://www.federalregister.gov/d/2011-19746 https://www.federalregister.gov/d/2011-19746
The Coast Guard proposes adjustments to the rates for pilotage services on the Great Lakes, which were last amended in February 2011. The proposed adjustments would establish new base rates and are made in accordance with a required full ratemaking procedure. They result in an average decrease of approximately 4 percent from the rates established in February 2011. This rulemaking promotes the Coast Guard's strategic goal of maritime safety.
You may submit comments identified by docket number USCG-2011-0328 using any one of the following methods:
If you have questions on this proposed rule, call or e-mail Mr. Todd Haviland, Management & Program Analyst, Office of Great Lakes Pilotage, Commandant (CG-5522), Coast Guard; telephone 202-372-2037, e-mail Todd.A.Haviland@uscg.mil, or fax 202-372-1909. If you have questions on viewing or submitting material to the docket, call Renee V. Wright, Program Manager, Docket Operations, telephone 202-366-9826.
If you submit a comment, please include the docket number for this rulemaking (USCG-2011-0328), indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation. You may submit your comments and material online or by fax, mail, or hand delivery, but please use only one of these means. We recommend that you include your name and a mailing address, an e-mail address, or a phone number in the body of your document so that we can contact you if we have questions regarding your submission.
To submit your comment online, go to http://www.regulations.gov, click on the “submit a comment” box, which will then become highlighted in blue. In the “Document Type” drop down menu select “Proposed Rule” and insert “USCG-2011-0328” in the “Keyword” box. Click “Search” then click on the balloon shape in the “Actions” column. If you submit your comments by mail or hand delivery, submit them in an unbound format, no larger than 8½ 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.
To view comments, as well as documents mentioned in this preamble as being available in the docket, go to http://www.regulations.gov, click on the “read comments” box, which will then become highlighted in blue. In the “Keyword” box insert “USCG-2011-0328” and click “Search.” Click the “Open Docket Folder” in the “Actions” column. If you do not have access to the internet, you may view the docket online by visiting the Docket Management Facility in Room W12-140 on the ground floor of the Department of Transportation West Building, 1200 New Jersey Avenue, SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. We have an agreement with the Department of Transportation to use the Docket Management Facility.
We do not now plan to hold a public meeting. But you may submit a request for one to the docket using one of the methods specified under ADDRESSES. In your request, explain why you believe a public meeting would be beneficial. If we determine that one would aid this rulemaking, we will hold one at a time and place announced by a later notice in the Federal Register.Start Printed Page 47096
AMOU American Maritime Officers Union.
CPI Consumer Price Index.
NAICS North American Industry Classification System.
ROI Return on Investment.
§ Section symbol.
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.
The U.S. waters of the Great Lakes and the St. Lawrence Seaway are divided into three pilotage districts. Pilotage in each district is provided by an association certified by the Coast Guard Director of Great Lakes Pilotage to operate a pilotage pool. It is important to note that, while we set rates, we do not control the actual number of pilots an association maintains, so long as the association is able to provide safe, efficient, and reliable pilotage service. We also do not control the actual compensation that pilots receive. The actual compensation is determined by each of the three district associations, which use different compensation practices.
District One, consisting of Areas 1 and 2, includes all U.S. waters of the St. Lawrence River and Lake Ontario. District Two, consisting of Areas 4 and 5, includes all U.S. waters of Lake Erie, the Detroit River, Lake St. Clair, and the St. Clair River. District Three, consisting of Areas 6, 7, and 8, includes all U.S. waters of the St. Mary's River, Sault Ste. Marie Locks, and Lakes Michigan, Huron, and Superior. Area 3 is the Welland Canal, which is serviced exclusively by the Canadian Great Lakes Pilotage Authority and, accordingly, is not included in the U.S. rate structure. Areas 1, 5, and 7 have been designated by Presidential Proclamation, pursuant to the Act, to be waters in which pilots must at all times be fully engaged in the navigation of vessels in their charge. Areas 2, 4, 6, and 8 have not been so designated because they are open bodies of water. While working in those undesignated areas, pilots must only “be on board and available to direct the navigation of the vessel at the discretion of and subject to the customary authority of the master.” 46 U.S.C. 9302(a)(1)(B).
This rulemaking is a full ratemaking to establish new base pilotage rates, using the 46 CFR part 404, Appendix A, methodology. Among other things, the Appendix A methodology requires us to review detailed pilot association financial information, and we contract with independent accountants to assist in that review. The last full ratemaking established the current base rates in 2006 (final rule, 71 FR 16501, April 3, 2006). Following the 2006 full ratemaking, and for the first time since 1996 when the 46 CFR part 404 Appendix A and Appendix C methodologies were established, we began a series of five annual Appendix C rate reviews and adjustments, each of which produced overall rate increases. The most recent Appendix C annual review was concluded on February 4, 2011 (76 FR 6351) and adjusts pilotage rates effective August 1, 2011.
We intended to establish new base rates within 5 years of the 2006 full ratemaking, or by March 1, 2011. However, an initial independent accountant's report on pilot association financial information was incomplete and inadequate, and could not be used for ratemaking. The resulting need to contract with a new independent accountant pushed this Appendix A ratemaking back a year, as we previously informed the public in 2009 and 2010 annual review rulemaking documents. 74 FR 56153 at 56154 (October 30, 2009), 75 FR 51191 at 51192 (August 19, 2010). We have now completed our review of the second independent accountant's 2009 pilot financial report. The comments by the pilot associations on that report and the independent accountant's final findings are discussed in our document entitled “Summary—Independent Accountant's Report on Pilot Association Expenses, with Pilot Association Comments and Accountant's Responses,” which appears in the docket.
We propose establishing new base pilotage rates in accordance with the methodology outlined in Appendix A to 46 CFR Part 404. The proposed new rates would be established by March 1, 2012 and effective August 1, 2012. They would average approximately 4 percent less, overall, than the February 2011 rate adjustments. Table 1 shows the proposed percent change for the new rates for each area. Rates for cancellation, delay, or interruption in rendering services (46 CFR 401.420) and basic rates and charges for carrying a U.S. pilot beyond the normal change point, or for boarding at other than the normal boarding point (46 CFR 401.428), would also decrease by 4 percent in all areas.
Then the percent decrease over the current rate is:
Area 1 (Designated waters) −1.74
Area 2 (Undesignated waters) −9.09
Area 4 (Undesignated waters) −3.64
Area 5 (Designated waters) −2.84
Start Printed Page 47097
Area 6 (Undesignated waters) −3.73
Area 7 (Designated waters) −3.08
Area 8 (Undesignated waters) −5.08
Appendix A provides seven steps, with sub-steps, for calculating rate adjustments. The following discussion describes those steps and sub-steps and includes tables showing how we have applied them to the 2009 detailed pilot financial information.
Step 1: Projection of Operating Expenses. In this step, we project the amount of vessel traffic annually. Based upon that projection, we forecast the amount of fair and reasonable operating expenses that pilotage rates should recover.
Step 1.A: Submission of Financial Information. This sub-step requires each pilot association to provide us with detailed financial information in accordance with 46 CFR part 403. The associations complied with this requirement, supplying 2009 financial information in 2010.
Step 1.B: Determination of Recognizable Expenses. This sub-step requires us to determine which reported association expenses will be recognized for ratemaking purposes, using the guidelines shown in 46 CFR 404.5. We contracted with an independent accountant to review the reported expenses and submit findings recommending which reported expenses should be recognized. The accountant also reviewed which reported expenses should be adjusted prior to recognition, or if they should be denied for ratemaking purposes. The independent accountant made preliminary findings; they were sent to the pilot associations, and the pilot associations reviewed and commented on the preliminary findings. Then, the independent accountant made final findings. The Coast Guard Director of Great Lakes Pilotage reviewed and accepted those final findings, resulting in the determination of recognizable expenses. The preliminary findings, the associations' comments on those findings, and the final findings are all discussed in the “Summary—Independent Accountant's Report on Pilot Association Expenses, with Pilot Association Comments and Accountant's Responses,” which appears in the docket. Tables 2 through 4 show each association's recognized expenses.
Reported expenses for 2009
Pilot subsistence/travel $164,782 $131,436 $296,218
License insurance $28,428 $18,952 $47,380
Other $980 $857 $1,837
Pilot boat expense $101,612 $82,506 $184,118
Legal $10,450 $8,685 $19,135
Depreciation/auto leasing/other $8,917 $7,283 $16,200
Dues and subscriptions $13,717 $10,678 $24,395
Bad debt expense $9,302 $1,004 $10,306
Utilities $478 $346 $824
Accounting/professional fees $2,182 $1,818 $4,000
Bookkeeping and Administration $77,730 $66,121 $143,851
Other $762 $582 $1,344
Total recognizable $419,340 $330,268 $749,608
Pilotage Subsistence/Travel ($4,624) ($3,641) ($8,265)
Payroll taxes $48,508 $38,204 $86,712
Other ($589) ($463) ($1,052)
Legal ($270) ($212) ($482)
Dues and subscriptions ($13,647) ($10,748) ($24,395)
Bad debt expense ($5,765) ($4,540) ($10,305)
Other ($120) ($94) ($214)
Total adjustments $23,495 $18,504 $41,999
Total Expenses $442,835 $348,772 $791,607
Start Printed Page 47098
Pilot subsistence/travel $67,580 $101,371 $168,951
License insurance $6,254 $9,380 $15,634
Payroll taxes $19,453 $43,770 $63,223
Other $12,697 $28,662 $41,359
Pilot boat expense $28,026 $179,577 $207,603
Dispatch expense $12,975 $0 $12,975
Payroll taxes $0 $7,154 $7,154
Legal $30,052 $45,079 $75,131
Office Rent $30,275 $45,413 $75,688
Insurance $10,408 $15,611 $26,019
Employee benefits $26,483 $39,725 $66,208
Payroll taxes $3,821 $5,731 $9,552
Other taxes $9,815 $14,723 $24,538
Depreciation/auto leasing/other $27,383 $41,075 $68,458
Interest $16,314 $24,471 $40,785
Dues and subscriptions $4,450 $6,675 $11,125
Salaries $12,164 $18,245 $30,409
Accounting/professional fees $43,071 $64,607 $107,678
Bookkeeping and administration $9,400 $14,100 $23,500
Other $9,427 $14,140 $23,567
Total recognizable $380,048 $719,509 $1,099,557
Pilotage Subsistence/Travel ($1,338) ($2,533) ($3,871)
Pilot boat expense $2,907 $5,504 $8,411
Legal ($4,915) ($9,305) ($14,220)
Employee benefits $1,177 $2,228 $3,405
Other taxes ($238) ($450) ($688)
Depreciation/auto leasing/other $2,398 $4,540 $6,938
Interest ($10,379) ($19,649) ($30,028)
Dues and subscriptions ($3,807) ($7,208) ($11,015)
Salaries $417 $789 $1,206
Other ($833) ($1,577) ($2,410)
Total adjustments ($14,611) ($27,661) ($42,272)
Total Expenses $365,437 $691,848 $1,057,285
Pilot subsistence/travel $144,081 $75,501 $95,005 $314,587
License insurance $10,577 $5,543 $6,975 $23,095
Other $1,025 $537 $675 $2,237
Pilot boat costs $156,031 $81,763 $102,885 $340,679
Dispatch expense $46,365 $24,296 $30,572 $101,233
Payroll taxes $5,846 $3,064 $3,855 $12,765
Legal $16,462 $8,626 $10,855 $35,943
Office Rent $4,534 $2,376 $2,990 $9,900
Insurance $6,730 $3,527 $4,438 $14,695
Employee benefits $50,668 $26,551 $33,410 $110,629
Payroll taxes $4,774 $2,502 $3,148 $10,424
Other taxes $11,599 $6,078 $7,648 $25,325
Depreciation/auto leasing $17,396 $9,116 $11,471 $37,983
Interest $2,417 $1,267 $1,594 $5,278
Dues and subscriptions $15,594 $8,172 $10,283 $34,049
Start Printed Page 47099
Utilities $15,182 $7,956 $10,011 $33,149
Salaries $35,110 $18,398 $23,151 $76,659
Accounting/professional fees $8,588 $4,500 $5,663 $18,751
Other $6,852 $3,591 $4,518 $14,961
Total Recognizable $559,831 $293,364 $369,147 $1,222,342
Pilotage Subsistence/Travel ($1,102) ($578) ($727) ($2,407)
Payroll taxes $28,842 $15,114 $19,018 $62,973
Other ($196) ($103) ($129) ($428)
Dispatch costs ($3,367) ($1,764) ($2,220) ($7,352)
Legal ($1,447) ($758) ($954) ($3,159)
Employee benefits ($1,380) ($723) ($910) ($3,013)
Depreciation/auto leasing/other $599 $314 $395 $1,307
Dues and subscriptions ($15,594) ($8,172) ($10,283) ($34,049)
Other ($528) ($277) ($348) ($1,153)
Total Adjustments $5,825 $3,053 $3,841 $12,719
Total Expenses $565,656 $296,417 $372,988 $1,235,061
Step 1.C: Adjustment for Inflation or Deflation. In this sub-step we project rates of inflation or deflation for the succeeding navigation season. Because we used 2009 financial information, the “succeeding navigation season” for this ratemaking is 2010. We based our inflation adjustment of 2 percent on the 2010 change in the Consumer Price Index (CPI) for the North Central Region of the United States, which can be found at: http://www.bls.gov/​xg_​shells/​ro5xg01.htm. This adjustment appears in Tables 5 through 7.
2010 change in the Consumer Price Index (CPI) for the North Central Region of the United States × .02 × .02 × .02
Inflation Adjustment = $8,857 = $6,975 = $15,832
Inflation Adjustment = $7,309 = $13,837 = $21,146
2010 change in the Consumer Price Index (CPI) for the North Central Region of the United States × .02 × .02 × .02 × .02
Start Printed Page 47100
Inflation Adjustment = $11,313 = $5,928 = $7,460 = $24,701
Step 1.D: Projection of Operating Expenses. The final sub-step of Step 1 is to project the operating expenses for each pilotage area, on the basis of the preceding sub-steps and any other foreseeable circumstances that could affect the accuracy of the projection. Because we are not now aware of any such circumstances, the projected operating expenses are based exclusively on the calculations from sub-steps 1.A through 1.C. Tables 8 through 10 show these projections.
Inflation Adjustment 2% + $8,857 + $6,975 + $15,832
Total projected expenses for 2012 pilotage season = $451,691 = $355,748 = $807,439
Inflation Adjustment 2% + $7,309 + $13,837 + $21,146
Total projected expenses for 2012 pilotage season = $372,746 = $705,685 = $1,078,431
Inflation Adjustment 2% + $11,313 + $5,928 + $7,460 + $24,701
Total projected expenses for 2012 pilotage season = $576,969 = $302,345 = $380,448 = $1,259,762
Step 2: Projection of Target Pilot Compensation. In Step 2, we project the annual amount of target pilot compensation that pilotage rates should provide in each area. These projections are based on our latest information on the conditions that will prevail in 2012.
Step 2.A: Determination of Target Rate of Compensation. We first explained the methodology we have consistently used for this step in the interim rule for our last Appendix A ratemaking (68 FR 69564 at 69571 col. 3; December 12, 2003), and most recently restated this explanation in our 2011 Appendix C final rule (76 FR 6351 at 6354 col. 3; February 4, 2011). Target pilot compensation for pilots in undesignated waters approximates the average annual compensation for first mates on U.S. Great Lakes vessels. Compensation is determined based on the most current union contracts and includes wages and benefits received by first mates. We calculate target pilot compensation for pilots on designated waters by multiplying the average first mates' wages by 150 percent and then adding the average first mates' benefits.
Agreements A and B both expire on July 31, 2011 and AMOU does not expect to conclude an agreement on new contracts in time for us to incorporate them in this ratemaking. However, we can project based on past Start Printed Page 47101contract increases and on the current contracts that any new contracts would provide for annual 3 percent wage increases. Under Agreement A, we project that the daily wage rate would increase from $278.73 to $287.09. Under Agreement B, the daily wage rate would increase from $343.59 to $353.90.
$287.09 daily rate × 54.5 days $15,646 $23,470
Monthly total × 9 months = total wages 140,818 211,226
$353.90 daily rate × 49.5 days 17,518 26,277
Monthly total × 9 months = total wages 157,662 236,494
Based on increases over the 5-year history of the current contracts, we project that both Agreements A and B will increase their health benefits contributions and leave 401K-plan and pension contributions unchanged. On average, health benefits contribution rates have increased 10 percent annually. Thus, we project that both Agreements A and B will increase this benefit from $97.64 to $107.40 per day. The multiplier that both agreements use to calculate monthly benefits from daily rates, is currently 45.5 days, and we project that will remain unchanged. We use a 9-month multiplier to calculate the annual value of these benefits. Table 12 shows our calculations.
Employer contribution, 401K plan (Monthly wages × 5%) $782.32 $1,173.48
Pension = $33.35 × 45.5 days 1,517.43 1,517.43
Health = $107.40 × 45.5 days 4,886.70 4,886.70
Monthly total benefits 7,186.45 7,577.61
Monthly total benefits × 9 months 64,678 68,198
Employer contribution, 401K plan (Monthly wages × 5%) 875.90 1,313.85
Pension = $43.55 × 45.5 days 1,981.53 1,981.53
Monthly total benefits 7,744.13 8,182.08
Monthly total benefits × 9 months 69,697 73,639
Wages $140,818 $211,226
Benefits 64,678 68,198
Total 205,496 279,425
Wages 157,662 236,494
Benefits 69,697 73,639
Total 227,360 310,132
Start Printed Page 47102
Agreements A and B affect three companies. Of the tonnage operating under those three companies, approximately 30 percent operates under Agreement A and approximately 70 percent operates under Agreement B. Table 14 provides detail.
Percent tonnage, each agreement 361,395 ÷ 1,215,811 = 29.7238% 854,426 ÷ 1,215,811 = 70.2962%
Total wages and benefits $205,496 $279,425
Total = $61,081 = $83,056
Total wages and benefits $227,360 $310,132
Total = $159,780 = $217,949
Projected Target Rate of Compensation:
Agreement A total weighted average wages and benefits $61,081 $83,056
Agreement B total weighted average wages and benefits + $159,780 + $217,949
Total = $220,861 = $301,005
Step 2.B: Determination of Number of Pilots Needed. Subject to adjustment by the Coast Guard Director of Great Lakes Pilotage to ensure uninterrupted service or for other reasonable circumstances, we determine the number of pilots needed for ratemaking purposes in each area by dividing projected bridge hours for each area, by either 1,000 (designated waters) or 1,800 (undesignated waters). We round the mathematical results and express our determination as whole pilots.
“Bridge hours are the number of hours a pilot is aboard a vessel providing pilotage service,” 46 CFR part 404, Appendix A, Step 2.B(1). For that reason and as we explained most recently in the 2011 ratemaking's final rule, we do not include, and never have included, pilot delay or detention in calculating bridge hours. See 76 FR 6351 at 6352 col. 3 (February 4, 2011). Projected bridge hours are based on the vessel traffic that pilots are expected to serve. We use historical data, input from the pilots and industry, periodicals and trade magazines, and information from conferences to project demand for pilotage services for the coming year.
In our 2011 final rule, we determined that 38 pilots would be needed for ratemaking purposes. We have determined that 38 remains the proper number to use for ratemaking purposes in 2012. This includes 5 pilots in Area 2, where rounding up alone would result in only 4 pilots. For the same reasons we explained at length in the final rule for the 2008 ratemaking, 74 FR 220 at 221-22 (January 5, 2009), we have determined that this adjustment is essential for ensuring uninterrupted pilotage service in Area 2. Table 16 shows the bridge hours we project will be needed for each area and our calculations to determine the number of whole pilots needed for ratemaking purposes.
Projected 2012 bridge hours
AREA 1 (Designated Waters) 5,114 ÷ 1,000 = 5.114 6
AREA 2 (Undesignated Waters) 5,401 ÷ 1,800 = 3.001 5
AREA 4 (Undesignated Waters) 6,680 ÷ 1,800 = 3.711 4
AREA 5 (Designated Waters) 5,002 ÷ 1,000 = 5.002 6
AREA 6 (Undesignated Waters) 11,187 ÷ 1,800 = 6.215 7
Start Printed Page 47103
AREA 7 (Designated Waters) 3,160 ÷ 1,000 = 3.160 4
AREA 8 (Undesignated Waters) 9,353 ÷ 1,800 = 5.196 6
AREA 1 (Designated Waters) 6 × $301,005 = $1,806,030
AREA 2 (Undesignated Waters) 5 × 220,861 = 1,104,304
AREA 4 (Undesignated Waters) 4 × 220,861 = 883,443
AREA 5 (Designated Waters) 6 × 301,005 = 1,806,030
AREA 6 (Undesignated Waters) 7 × 220,861 = 1,546,026
AREA 7 (Designated Waters) 4 × 301,005 = 1,204,020
AREA 8 (Undesignated Waters) 6 × 220,861 = 1,325,165
Step 3 and 3.A: Projection of Revenue. In this step, we project the revenue that would be received in 2012 if demand for pilotage services matches the bridge hours we projected in Table 16, and 2011 pilotage rates were left unchanged. Table 18 shows this calculation.
2011 pilotage rates
Revenue projection for 2012
AREA 1 (Designated Waters) 5,114 × $451.38 = $2,308,357
AREA 2 (Undesignated Waters) 5,401 × 298.98 = 1,614,791
AREA 4 (Undesignated Waters) 6,680 × 196.19 = 1,310,549
AREA 5 (Designated Waters) 5,002 × 519.89 = 2,600,490
AREA 6 (Undesignated Waters) 11,187 × 199.12 = 2,227,555
AREA 7 (Designated Waters) 3,160 × 495.54 = 1,565,906
AREA 8 (Undesignated Waters) 9,353 × 193.72 = 1,811,863
Total 13,439,512
Total Current Assets $233,316 $174,705
Total Current Liabilities − 20,091 − 15,044
Total Property and Equipment (NET) + 0 + 0
Total Recognized Assets = 213,225 = 159,661
Start Printed Page 47104
Total Recognized Assets 213,225 159,661
Total Assets = 213,225 = 159,661
Total Stockholder Equity 213,225 159,661
Long-Term Debt + 0 + 0
Total Recognized Sources = 213,225 = 159,661
Total Recognized Sources 213,225 159,661
Total Sources of Funds = 213,225 = 159,661
Total Current Assets $228,212 $515,150
Total Current Liabilities − 214,412 − 484,000
Current Notes Payable + 23,063 + 52,061
Total Property and Equipment (NET) + 321,550 + 725,847
Land − 269,122 − 607,500
Total Recognized Assets = 89,290 = 201,559
Total Recognized Assets 89,290 201,559
Total Assets = 89,290 = 201,559
Total Stockholder Equity 53,061 119,778
Long-Term Debt + 282,288 + 637,220
Total Recognized Sources = 358,413 = 809,058
Total Recognized Sources 358,413 809,058
Total Sources of Funds = 358,413 = 809,058
Start Printed Page 47105
Total Current Assets $439,799 230,463 289,999
Total Current Liabilities − $61,507 − 32,231 − 40,557
Current Notes Payable + $13,525 + 7,087 + 8,918
Total Property and Equipment (NET) + $42,019 + 22,019 + 27,707
Land − $0 − 0 − 0
Total Other Assets + $343 + 180 + 227
Total Recognized Assets = $434,180 = 227,518 = 286,293
Total Recognized Assets 434,180 227,518 286,293
Total Assets = 434,180 = 227,518 = 286,293
Total Stockholder Equity 417,721 218,893 275,441
Long-Term Debt + 2,934 + 1,537 + 1,935
Current Notes Payable + 13,525 + 7,087 + 8,918
Total Recognized Sources = 434,180 = 227,518 = 286,293
Total Recognized Sources 434,180 227,518 286,293
Total Sources of Funds = 434,180 = 227,518 = 286,293
Tables 19-21 relate to the second part of the formula for calculating the investment base. The second part establishes a ratio between recognized sources of funds and total sources of funds. Since no non-recognized sources of funds (sources we do not recognize as required to support pilotage operations) exist for any of the pilot associations for this year's rulemaking, the ratio between recognized sources of funds and total sources of funds is “1:1” (or a multiplier of “1”) in all cases. Table 22 applies the multiplier of “1,” and shows that the investment base for each association equals its total recognized assets. Table 22 also expresses these results by area, because area results will be needed in subsequent steps.
One 1 213,225 213,225 213,225 1 213,225
2 159,661 159,661 159,661 1 159,661
Total 372,886
Two 2 4 89,290 358,413 358,413 1 89,290
5 201,559 809,058 809,058 1 201,559
Total 290,849
Three 6 434,180 434,180 434,180 1 434,180
7 227,518 227,518 227,518 1 227,518
8 286,293 286,293 286,293 1 286,293
Total 947,991
1 Note: “Investment base” = “Total recognized assets” × “Multiplier (ratio of recognized to total sources)”Start Printed Page 47106
2 Note: The pilot associations that provide pilotage services in Districts One and Three operate as partnerships. The pilot association that provides pilotage service for District Two operates as a corporation. Per table 20, Total Recognized Assets do not equal Total Sources of Funds due to the level of long-term debt in District Two.
Step 5: Determination of Target Rate of Return. We determine a market-equivalent return on investment (ROI) that will be allowed for the recognized net capital invested in each association by its members. We do not recognize capital that is unnecessary or unreasonable for providing pilotage services. There are no non-recognized investments in this year's calculations. The allowed ROI is based on the preceding year's average annual rate of return for new issues of high-grade corporate securities.
For 2010, the year preceding this year, the allowed ROI was a little more than 4.94 percent, based on the average rate of return that year on Moody's AAA corporate bonds which can be found at: http://research.stlouisfed.org/​fred2/​series/​AAA/​downloaddata?​cid=​119.
Revenue (from step 3) + $2,308,357 + $1,614,791
Operating Expenses (from step 1) − $451,691 − $355,748
Pilot Compensation (from step 2) − $1,806,030 − $1,104,304
Operating Profit/(Loss) = $50,636 = $154,739
Interest Expense (from audits) − $0 − $0
Earnings Before Tax = $50,636 = $154,739
Net Income = $50,636 = $154,739
Return Element (Net Income + Interest) $50,636 $154,739
Investment Base (from step 4) ÷ $213,225 ÷ $159,661
Projected Return on Investment = 0.24 = 0.97
Revenue (from step 3) + $1,310,549 + $2,600,490
Operating Expenses (from step 1) − $372,746 − $705,685
Pilot Compensation (from step 2) − $883,443 − $1,806,030
Operating Profit/(Loss) = $54,360 = $88,775
Interest Expense (from audits) − $3,302 − $7,455
Earnings Before Tax = $51,058 = $81,321
Federal Tax Allowance − $2,210 − $4,990
Net Income = $48,847 = $76,331
Return Element (Net Income + Interest) $52,150 $83,786
Investment Base (from step 4) ÷ $89,290 ÷ $201,559
Projected Return on Investment = 0.58 = 0.42
Revenue (from step 3) + $2,227,555 + $1,565,906 + $1,811,863
Operating Expenses (from step 1) − $576,969 − $302,345 − $380,448
Pilot Compensation (from step 2) − $1,546,026 − $1,204,020 − $1,325,165
Operating Profit/(Loss) = $104,560 = $59,542 = $106,250
Interest Expense (from audits) − $2,417 − $1,267 − $1,594
Earnings Before Tax = $102,143 = $58,275 = $104,656
Net Income = $102,143 = $58,275 = $104,656
Return Element (Net Income + Interest) $104,560 $59,542 $106,250
Investment Base (from step 4) ÷ $434,180 ÷ $227,518 ÷ $286,293
Projected Return on Investment = 0.24 = 0.26 = 0.37
The second sub-step required for Step 6 compares the results of Tables 23 through 25 with the target ROI (approximately 4.94 percent) we obtained in Step 5 to determine if an adjustment to the base pilotage rate is necessary. Table 26 shows this comparison for each area.Start Printed Page 47107
Table 26—Comparison of Projected ROI and Target ROI, by Area1
Projected return on investment 0.237 0.969 0.584 0.416 0.241 0.262 0.371
Target return on investment 0.049 0.049 0.049 0.049 0.049 0.049 0.049
Difference in return on investment 0.188 0.920 0.535 0.366 0.191 0.212 0.322
Investment base (step 4) × 4.94% (target ROI step 5)
AREA 1 (Designated Waters) $451,691 + $1,806,030 + $10,540 + = $2,268,262
AREA 2 (Undesignated Waters) 355,748 + 1,104,304 + 7,893 + = 1,467,944
AREA 4 (Undesignated Waters) 372,746 + 883,443 + 4,414 + $2,210 = 1,262,813
AREA 5 (Designated Waters) 705,685 + 1,806,030 + 9,964 + 4,990 = 2,526,668
AREA 6 (Undesignated Waters) 576,969 + 1,546,026 + 21,463 + = 2,144,458
AREA 7 (Designated Waters) 302,345 + 1,204,020 + 11,247 + = 1,517,612
AREA 8 (Undesignated Waters) 380,448 + 1,325,165 + 14,152 + = 1,719,765
Total 3,145,632 + 9,675,016.97 + 79,673 + 7,200 = 12,907,522
The “revenue needed” column of Table 27 is less than the revenue we projected in Table 18. For purposes of transparency, we verify Table 27's calculations by rerunning the first part of Step 6, using the “revenue needed” from Table 27 instead of the Table 18 revenue projections we used in Tables 23 through 25. Tables 28 through 30 show that attaining the Table 27 “revenue needed” is sufficient to recover target ROI.
Revenue Needed + $2,268,262 + $1,467,944
Operating Profit/(Loss) = $10,540 = $7,893
Earnings Before Tax = $10,540 = $7,893
Net Income = $10,540 = $7,893
Return Element (Net Income + Interest) $10,540 $7,893
Return on Investment = 0.0494 = 0.0494
Revenue Needed + $1,262,813 + $2,526,668
Operating Profit/(Loss) = $6,624 = $14,953
Start Printed Page 47108
Earnings Before Tax = $3,322 = $7,499
Net Income = $1,112 = $2,509
Return Element (Net Income + Interest) $4,414 $9,964
Revenue Needed + $2,144,458 + $1,517,612 + $1,719,765
Operating Profit/(Loss) = $21,463 = $11,247 = $14,152
Earnings Before Tax = $19,046 = $9,980 = $12,558
Net Income = $19,046 = $9,980 = $12,558
Return Element (Net Income + Interest) $21,463 $11,247 $14,152
Return on Investment = 0.0494 = 0.0494 = 0.0494
Revenue Needed (from step 6) $2,268,262 $1,467,944
Revenue (from step 3) ÷ $2,308,357 ÷ $1,614,791
Rate Multiplier = 0.983 = 0.909
Area 5 Southeast shoal to Port Huron, MI
Revenue Needed (from step 6) $1,262,813 $2,526,668
Revenue (from step 3) ÷ $1,310,549 ÷ $2,600,490
Rate Multiplier = 0.964 = 0.972
Revenue Needed (from step 6) $2,144,458 $1,517,612 $1,719,765
Revenue (from step 3) ÷ $2,227,555 ÷ $1,565,906 ÷ $1,811,863
Rate Multiplier = 0.963 = 0.969 = 0.949
We calculate a rate multiplier for adjusting the basic rates and charges described in 46 CFR 401.420 and 401.428 and applicable in all Areas. We divide total revenue needed (Step 6, Table 27) by total projected revenue (Step 3 & 3A, Table 18). Our proposed rate changes for 46 CFR 401.420 and 401.428 reflect the multiplication of the rates we established for those sections in our 2011 final rule, by the rate multiplier shown as the result of our calculation in Table 34.Start Printed Page 47109
Total revenue needed (from step 6) $12,907,522
Total revenue (from step 3) ÷ $13,439,512
Rate Multiplier = 0.960
We multiply the existing rates we established in our 2011 final rule by the rate multipliers from Tables 31 through 33, to calculate the Area by Area rate changes we propose for 2012. Tables 35 through 37 show these calculations.
Area 1—St. Lawrence River:
Basic Pilotage $18.36/km, 32.50/mi × 0.983 = $18.04/km, 31.94
Each lock transited 407 × 0.983 = 400
Harbor movage 1,333 × 0.983 = 1,310
Minimum basic rate, St. Lawrence River 889 × 0.983 = 874
Maximum rate, through trip 3,901 × 0.983 = 3,833
Area 2—Lake Ontario:
6 hour period 893 × 0.909 = 812
Docking or undocking 852 × 0.909 = 775
Area 4—Lake Erie:
6 hour period $791 × 0.964 = $762
Docking or undocking 609 × 0.964 = 587
Any point on Niagara River below Black Rock Lock 1,554 × 0.964 = 1,497
Area 5—Southeast Shoal to Port Huron, MI between any point on or in:
Toledo or any point on Lake Erie W. of Southeast Shoal & Detroit River 3,102 × 0.972 = 3,014
Toledo or any point on Lake Erie W. of Southeast Shoal & Detroit Pilot Boat 2,389 × 0.972 = 2,321
Port Huron Change Point & Southeast Shoal (when pilots are not changed at the Detroit Pilot Boat) 4,162 × 0.972 = 4,044
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) 4,821 × 0.972 = 4,684
Port Huron Change Point & Detroit River 3,126 × 0.972 = 3,037
Port Huron Change Point & Detroit Pilot Boat 2,432 × 0.972 = 2,363
Port Huron Change Point & St. Clair River 1,729 × 0.972 = 1,680
St. Clair River 1,412 × 0.972 = 1,372
St. Clair River & Southeast Shoal (when pilots are not changed at the Detroit Pilot Boat) 4,162 × 0.972 = 4,044
St. Clair River & Detroit River/Detroit Pilot Boat 3,126 × 0.972 = 3,037
Detroit, Windsor, or Detroit River 1,412 × 0.972 = 1,372
Detroit, Windsor, or Detroit River & Southeast Shoal 2,389 × 0.972 = 2,321
Detroit, Windsor, or Detroit River & Toledo or any point on Lake Erie W. of Southeast Shoal 3,102 × 0.972 = 3,014
Detroit, Windsor, or Detroit River & St. Clair River 3,126 × 0.972 = 3,037
Detroit Pilot Boat & Southeast Shoal 1,729 × 0.972 = 1,680
Rate iplier
Area 6—Lakes Huron and Michigan:
6 hour period $688 × 0.963 = $662
Docking or undocking 653 × 0.963 = 629
Area 7—St. Mary's River between any point on or in:
Gros Cap & De Tour 2,650 × 0.969 = 2,568
Algoma Steel Corp. Wharf, Sault Ste. Marie, Ont. & De Tour 2,650 × 0.969 = 2,568
Algoma Steel Corp. Wharf, Sault Ste. Marie, Ont. & Gros Cap 998 × 0.969 = 967
Any point in Sault St. Marie, Ont., except the Algoma Steel Corp. Wharf & De Tour 2,221 × 0.969 = 2,153
Start Printed Page 47110
Any point in Sault St. Marie, Ont., except the Algoma Steel Corp. Wharf & Gros Cap 998 × 0.969 = 967
Sault Ste. Marie, MI & De Tour 2,221 × 0.969 = 2,153
Sault Ste. Marie, MI & Gros Cap 998 × 0.969 = 967
Harbor movage 998 × 0.969 = 967
Area 8—Lake Superior:
6 hour period 608 × 0.949 = 577
$578 x 0.949 = $549
Executive Orders 13563 and 12866 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866 and has not been reviewed by the Office of Management and Budget.
The Coast Guard is required to review and adjust pilotage rates on the Great Lakes annually. See Parts III and IV of this preamble for detailed discussions of the Coast Guard's legal basis and purpose for this rulemaking and for background information on Great Lakes pilotage ratemaking. Based on our annual review for this proposed rulemaking, we are adjusting the pilotage rates for the 2012 shipping season to generate sufficient revenue to cover allowable expenses, target pilot compensation, and returns on investment. The rate adjustments in this proposed rule would, if codified, lead to a cost savings in all seven areas and all three districts with an estimated cost savings to shippers of approximately $1 million across all three districts.
The proposed rule would apply the 46 CFR part 404, Appendix A, full ratemaking methodology and decrease Great Lakes pilotage rates, on average, approximately 4 percent overall from the current rates set in the 2011 final rule. The Appendix A methodology is discussed and applied in detail in Part V of this preamble. Among other factors described in Part V, it reflects audited 2009 financial data from the pilotage associations (the most recent year available for auditing), projected association expenses, and regional inflation or deflation. The last full Appendix A ratemaking was concluded in 2006 and used financial data from the 2002 base accounting year. The last annual rate review, conducted under 46 CFR part 404, Appendix C, was completed early in 2011.
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 estimate the additional impact (costs or savings) of the rate adjustment in this proposed rule to be the difference between the total projected revenue needed to cover costs in 2012 based on the 2011 rate adjustment and the total projected revenue needed to cover costs in 2012 as set forth in this proposed rule. Table 38 details additional costs or savings by area and district.Start Printed Page 47111
Projected revenue needed in 2011 *
Projected revenue needed in 2012 **
Area 1 $2,348,516 $2,268,262 ($80,255)
Area 2 1,689,246 1,467,944 (221,302)
Total, District One 4,037,763 3,736,206 (301,557)
Area 4 1,436,140 1,262,813 (173,326)
Area 5 2,649,876 2,526,668 (123,208)
Total, District Two 4,086,016 3,789,481 (296,534)
Area 6 2,311,006 2,144,458 (166,548)
Area 7 1,614,974 1,517,612 (97,362)
Area 8 1,904,237 1,719,765 (184,472)
Total, District Three 5,830,218 5,381,835 (448,383)
* These 2011 estimates are detailed in Table 16 of the 2011 final rule (76 FR 6351).
** These 2012 estimates are detailed in Table 27 of this rulemaking.
“Additional Revenue or Cost of this Rulemaking” = “Revenue needed in 2012” minus; “Revenue needed in 2011.”
After applying the rate change in this proposed rule, the resulting difference between the projected revenue in 2011 and the projected revenue in 2012 is the annual impact to shippers from this rule. This figure would be equivalent to the total additional payments or savings that shippers would incur for pilotage services from this proposed rule. As discussed earlier, we consider a reduction in payments to be a cost savings.
The impact of the rate adjustment in this proposed rule to shippers varies by area and district. The rate adjustments would lead to a cost savings in all seven areas and all three districts, with affected shippers operating in District One, District Two, and District Three experiencing savings of $302,000, $297,000, and $448,000, respectively (values rounded). To calculate an exact cost or savings per vessel is difficult because of the variation in vessel types, routes, port arrivals, commodity carriage, time of season, conditions during navigation, and preferences for the extent of pilotage services on designated and undesignated portions of the Great Lakes system. Some owners and operators would pay more and some would pay less depending on the distance and port arrivals of their vessels' trips. However, the additional savings reported above does capture the adjustment the shippers would experience as a result of the rate adjustment in this proposed rule. As Table 38 indicates, shippers operating in all areas would experience an annual savings due to this rulemaking. The overall impact of the proposed rule would be a cost savings to shippers of approximately $1 million across all three districts.
The effects of a rate adjustment on costs and savings vary by year and area. A decrease in projected expenses for individual areas or districts is common in past pilotage rate adjustments. Most recently, in the 2011 ratemaking, District Three experienced a decrease in projected expenses due to an adjustment in bridge hours from the 2010 final rule; that led to a savings for that district and yielded a net savings for the system.
There are three U.S. entities affected by the proposed rule that receive revenue from pilotage services. These are the three pilot associations that provide and manage pilotage services within the Great Lakes districts. Two of the associations operate as partnerships and one operates as a corporation. These associations are designated the same NAICS industry classification and small entity size standards described above, but they have far fewer than 500 employees—approximately 65 total employees combined. We expect no adverse impact to these entities from this proposed rule because all associations receive enough revenue to balance the projected expenses Start Printed Page 47112associated with the projected number of bridge hours and pilots.
Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule so that they can better evaluate its effects on them and participate in the rulemaking. If the proposed rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please consult Mr. Todd Haviland, Management & Program Analyst, Office of Great Lakes Pilotage, Commandant (CG-5522), Coast Guard; telephone 202-372-2037, e-mail Todd.A.Haviland@uscg.mil, or fax 202-372-1909. The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.
A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this proposed rule under that Order and have determined that it does not have implications for federalism because States are expressly prohibited by 46 U.S.C. 9306 from regulating pilotage on the Great Lakes.
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 Start Printed Page 47113procedural 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.
2. In § 401.405, revise paragraphs (a) and (b) to read as follows:
Basic Pilotage $18.04 per kilometer or $31.94 per mile.1
Each Lock Transited $400.1
Harbor Movage $1,310 1
1 The minimum basic rate for assignment of a pilot in the St. Lawrence River is $874, and the maximum basic rate for a through trip is $3,833.
Six-Hour Period $812
Docking or Undocking 775
3. In § 401.407, revise paragraphs (a) and (b) to read as follows:
Six-Hour Period $762 $762
Docking or Undocking 587 587
Any Point on the Niagara River
Below the Black Rock Lock N/A 1,497
Toledo or any port on Lake Erie west of Southeast Shoal $2,321 $1,372 $3,014 $2,321 N/A
Port Huron Change Point 1 4,044 1 4,684 3,037 2,363 1,680
St. Clair River 1 4,044 N/A 3,037 3,037 1,372
Detroit or Windsor or the Detroit River 2,321 3,014 1,372 N/A 3,037
Detroit Pilot Boat 1,680 2,321 N/A N/A 3,037
Basic rates and charges on Lakes Huron, Michigan, and Superior, and the St Mary's River.
Six-Hour Period $662
Docking or Undocking 629
Gros Cap $2,568 N/A N/A
Algoma Steel Corporation Wharf at Sault Ste. Marie, Ontario 2,568 $967 N/A
Any point in Sault Ste. Marie, Ontario, except the Algoma Steel Corporation Wharf 2,153 967 N/A
Sault Ste. Marie, MI 2,153 967 N/A
Harbor Movage N/A N/A $967
Six-Hour Period $577
Docking or Undocking 549
Start Printed Page 47114
a. In paragraph (a), remove the text “$127” and add, in its place, the text “$122”; and remove the text “$1,989” and add, in its place, the text “$1,910”;
b. In paragraph (b), remove the text “$127” and add, in its place, the text “$122”; and remove the text “$1,989” and add, in its place, the text “$1,910”; and
c. In paragraph (c)(1), remove the text “$751” and add, in its place, the text “$721”; and in paragraph (c)(3), remove the text “$127” and add, in its place, the text “$122”, and remove the text “$1,989” and add, in its place, the text “$1,910”.
6. In § 401.428, remove the text “$766” and add, in its place, the text “$736”.
[FR Doc. 2011-19746 Filed 8-3-11; 8:45 am]