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Great Lakes Pilotage: 2011 Annual Review and Adjustment

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Start Preamble

AGENCY:

Coast Guard, DHS.

ACTION:

Final rule.

SUMMARY:

The Coast Guard is increasing the rates for pilotage service on the Great Lakes to generate sufficient revenue to cover allowable expenses, target pilot compensation, and return on investment. This increase reflects a projected August 1, 2011, increase in benchmark contractual wages and benefits and an adjustment for deflation. This rule promotes the Coast Guard's strategic goal of maritime safety.

DATES:

This final rule is effective August 1, 2011.

ADDRESSES:

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-2010-0517 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 by going to http://www.regulations.gov, inserting USCG-2010-0517 in the “Keyword” box, and then clicking “Search.”

Start Further Info

FOR FURTHER INFORMATION CONTACT:

If you have questions on this rule, call or e-mail Mr. Paul Wasserman, Chief, Great Lakes Pilotage Division, Commandant (CG-5522), Coast Guard; telephone 202-372-1535, or e-mail Paul.M.Wasserman@uscg.mil. If you have questions on viewing the docket, call Renee V. Wright, Program Manager, Docket Operations, telephone 202-366-9826.

End Further Info End Preamble Start Supplemental Information

SUPPLEMENTARY INFORMATION:

Table of Contents for Preamble

I. Abbreviations

II. Regulatory History

III. Basis and Purpose

IV. Background

V. Discussion of Comments and Changes

VI. Discussion of the Final Rule

A. Summary

B. Calculating the Rate Adjustment

VII. Regulatory Analyses

A. Regulatory Planning and Review

B. Small Entities

C. Assistance for Small Entities

D. Collection of Information

E. Federalism

F. Unfunded Mandates Reform Act

G. Taking of Private Property

H. Civil Justice Reform

I. Protection of Children

J. Indian Tribal Governments

K. Energy Effects

L. Technical Standards

M. Environment

I. Abbreviations

AMOU American Maritime Officer Union

CFR Code of Federal Regulations

FR Federal Register

GLPAC Great Lakes Pilotage Advisory Committee

MISLE Marine Information for Safety, and Law Enforcement

NAICS North American Industry Classification System

NPRM Notice of Proposed Rulemaking

NTTAA National Technology Transfer and Advancement Act

U.S.C. United States Code

II. Regulatory History

On August 19, 2010, we published a notice of proposed rulemaking (NPRM) entitled “Great Lakes Pilotage Rates: 2011 Annual Review and Adjustment” in the Federal Register (75 FR 51191). We received three comments on the proposed rule. No public meeting was requested and none was held.

III. Basis and Purpose

The basis of this rulemaking is the Great Lakes Pilotage Act of 1960 (“the Act”) (46 U.S.C. chapter 93), which requires vessels engaged in foreign trade to use U.S. registered pilots while transiting the St. Lawrence Seaway and the Great Lakes system. The Act also 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). The Secretary's duties and authority under the Act have been delegated to the Coast Guard, and Coast Guard regulations implementing the Act appear in parts 401 through 404 of Title 46, Code of Federal Regulations (CFR).

The Act requires annual pilotage rate reviews to be completed by March 1 of each year, with a “full ratemaking” to establish new base rates at least once every five years. The purpose of this rulemaking is to comply with 46 U.S.C. 9303(f) by applying the ratemaking methodology described in Appendix C to 46 CFR part 404, which will satisfy the requirement for the annual pilotage rate review for 2011.

IV. Background

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 Start Printed Page 6352important 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, nor do we 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. Under the Act, pilots assigned to vessels in these areas are only required to “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).

Our pilotage regulations implement the Act's requirement for annual reviews of pilotage rates and a full ratemaking at least once every five years. 46 CFR 404.1. To assist in calculating pilotage rates, the regulations require pilotage associations to submit annual financial statements prepared by certified public accounting firms. In addition, every fifth year, in connection with the full ratemaking, 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, April 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, 2008, 2009, and 2010 and increased rates in each year. The 2010 final rule was published on February 23, 2010 (75 FR 7958) and took effect on August 1, 2010. The terms and formulas used in Appendix A and Appendix C are defined in Appendix B to Part 404.

This final rule concludes the annual Appendix C rate review for 2011 and increases rates over those that took effect August 1, 2010.

V. Discussion of Comments and Changes

We received comments from three persons during the NPRM public comment period.

Comments outside the scope of the rule. One commenter made several statements which, although they are outside the scope of this rule, require correction or clarification. The commenter said we improperly base our ratemaking calculations on union contracts, do not allow for consultation with pilots or industry, provide no meaningful opportunity for appealing decisions made by the Director, and no longer “maintain” the Great Lakes Pilotage Advisory Committee (GLPAC). The use of union contracts in calculating pilot benefits and compensation as part of the overall rate calculation is an explicit requirement of the current methodology. 46 CFR 404.5, 46 CFR part 404, App. A, step 2.A. All of our ratemakings are subject to notice and comment procedure, providing ample opportunity for input from pilots, industry, and the general public. Decisions of the Director may be appealed pursuant to 46 CFR subpart 1.03, and ultimately all Coast Guard decisions are subject to judicial review. The Coast Guard has not only taken all necessary steps to maintain GLPAC, but in recent years we have sharpened our focus on using GLPAC to provide us with the type of consultation the commenter appears to have in mind. Congress established GLPAC specifically for that purpose.

Ratemaking methodology. Two commenters recommended that we suspend any rate increase until the ratemaking methodology is reviewed and updated as needed. We requested public comments in 2009 on the need for, and content of, any change to that methodology, and we forwarded those comments to GLPAC (74 FR 35838, July 21, 2009). GLPAC has these comments under consideration, but no action can be taken before the March 1, 2011 deadline for establishing the annual rate adjustment for 2011.

Pilot dispute. One commenter recommended we suspend any rate increase until a dispute between two of the pilotage associations is resolved. The subject matter of this comment is not within the scope of this rulemaking.

Calculations. One commenter disagreed with the way we applied the methodology in calculating bridge hours and the number of pilots in Areas 4 and 5. We performed all calculations in accordance with Appendix C to Part 404. We used our forecast of bridge hour demand and the Director's discretion to determine the number of pilots. As we stated in the NPRM (75 FR at 51197), this determination applied the same reasoning we have used since the 2008 ratemaking, which was explained in the 2008 final rule (74 FR 220, 221-22, Jan. 5, 2009) and also discussed at length in the 2009 ratemaking final rule (74 FR 35812, 35813-14, Jul. 21, 2009).

One commenter said that our ratemaking is arbitrary and capricious because we count delay and detention in calculating bridge hours for Areas 6, 7, and 8 but not in Areas 4 and 5. Under Step 1 of the Appendix C methodology, we do not count pilot delay or detention in the calculation of bridge hours. No information was provided by the commenter to substantiate this claim, which runs counter to our discussion of bridge hour calculations in ratemaking documents over many years, and which repeats an allegation made in 2007 and refuted in that year's interim rule: “The Coast Guard has never considered delay, detention, or travel time to be included in the definition of bridge hours and has never knowingly included these items in its bridge hour computations.” (72 FR 8117, February 23, 2007). We did not consider delay, detention, or travel time in our bridge hour computations for this final rule.

VI. Discussion of the Final Rule

A. Summary

We are increasing pilotage rates in accordance with the methodology outlined in Appendix C to 46 CFR Part 404 effective August 1, 2011. The new rates are unchanged from what we proposed in the NPRM. Table 1 shows the new rates for each Area.

Table 1—2011 Area Rate Changes

If pilotage service is required in:Then the percentage of increase over the current rate is:
Area 1 (Designated waters)3.57%
Area 2 (Undesignated waters)3.77
Area 4 (Undesignated waters)3.75
Area 5 (Designated waters)3.52
Area 6 (Undesignated waters)4.89
Area 7 (Designated waters)3.56
Area 8 (Undesignated waters)5.26
Start Printed Page 6353

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 6.51 percent in all areas based upon the calculations appearing at Tables 19 through 21, which follow.

B. Calculating the Rate Adjustment

The Appendix C ratemaking calculation involves eight steps:

Step 1: Calculate the total economic costs for the base period (pilot compensation expense plus all other recognized expenses plus the return element, which is net income plus interest) and divide by the total bridge hours used in setting the base period rates;

Step 2: Calculate the “expense multiplier,” the ratio of other expenses, and the return element to pilot compensation for the base period;

Step 3: Calculate an annual “projection of target pilot compensation” using the same procedures found in Step 2 of Appendix A;

Step 4: Increase the projected pilot compensation in Step 3 by the expense multiplier in Step 2;

Step 5: Adjust the result in Step 4, as required, for inflation or deflation;

Step 6: Divide the result in Step 5 by projected bridge hours to determine total unit costs;

Step 7: Divide prospective unit costs in Step 6 by the base period unit costs in Step 1; and

Step 8: Adjust the base period rates by the percentage changes in unit cost in Step 7.

The base data used to calculate each of the eight steps comes from the 2010 Appendix C review. The Coast Guard also used the most recent union contracts between the American Maritime Officers Union (AMOU) and vessel owners and operators on the Great Lakes to estimate target pilot compensation. However, the current AMOU contracts expire in July 2011, and the Coast Guard has been informed that the contract negotiations will not begin until sometime after that, which is well after the pilotage statute requires that we establish a rate. Accordingly, we have reviewed the terms of both existing and past AMOU contracts and have projected, for the purpose of this ratemaking, that the AMOU contracts effective in 2011 would provide increases in compensation equal to 3%, which is the increase called for in the AMOU contracts over the past two years. We project all other benefits to remain fixed at current levels with the exception of medical plan contributions. Medical plan contributions have increased 10% per year from 2006 through 2010 in the current AMOU contracts. Thus, we forecast an increase of 10% over 2010 medical plan contributions for the AMOU contracts in 2011. Bridge hour projections for the 2011 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 rounding for presentation in charts. The rounding does not affect the integrity or truncate the actual value of all calculations in the ratemaking methodology described below.

Step 1: Calculate the total economic cost for the base period. In this step, for each area, we add the total cost of target pilot compensation, all other recognized expenses, and the return element (net income plus interest). We divide this sum by the total bridge hours for each area. The result is the cost in each area of providing pilotage service per bridge hour for the base period. Tables 2 through 4 summarize the Step 1 calculations:

Table 2—Total Economic Cost for Base Period (2010), Areas in District One

Area 1 St. Lawrence RiverArea 2 Lake Ontario
Base operating expense$578,569$590,032
Base target pilot compensation+ $1,677,397+ $1,020,120
Base return element+ $11,571+ $17,701
Subtotal= $2,267,537= $1,627,853
Base bridge hours÷ 5,203÷ 5,650
Base cost per bridge hour= $435.81= $288.12

Table 3—Total Economic Cost for Base Period (2010), Areas in District Two

Area 4 Lake ErieArea 5 Southeast Shoal to Port Huron, MI
Base operating expense$541,103$848,469
Base target pilot compensation+ $816,096+ $1,677,397
Base return element+ $27,055+ $33,939
Subtotal= $1,384,254= $2,559,805
Base bridge hours÷ 7,320÷ 5,097
Base cost per bridge hour= $189.11= $502.22
Start Printed Page 6354

Table 4—Total Economic Cost for Base Period (2010), Areas in District Three

Area 6 Lakes Huron and MichiganArea 7 St. Mary's RiverArea 8 Lake Superior
Base operating expense$877,638$428,384$691,435
Base target pilot compensation+ $1,632,191+ $1,118,265+ $1,428,167
Base return element+ $35,106+ $12,852+ $20,743
Subtotal= $2,544,935= $1,559,501= $2,140,345
Base bridge hours÷ 13,406÷ 3,259÷ 11,630
Base cost per bridge hour= $189.84= $478.52= $184.04

Step 2. Calculate the expense multiplier. In this step, for each area, we add the base operating expense and the base return element. Then we divide the sum by the base target pilot compensation to get the expense multiplier for each area. Tables 5 through 7 show the Step 2 calculations.

Table 5—Expense Multiplier, Areas in District One

Area 1 St. Lawrence RiverArea 2 Lake Ontario
Base operating expense$578,569$590,032
Base return element+ $11,571+ $17,701
Subtotal= $590,140= $607,733
Base target pilot compensation÷ $1,677,397÷ $1,020,120
Expense multiplier0.351820.59575

Table 6—Expense Multiplier, Areas in District Two

Area 4 Lake ErieArea 5 Southeast Shoal to Port Huron, MI
Base operating expense$541,103$848,469
Base return element+ $27,055+ $33,939
Subtotal= $568,158= $882,408
Base target pilot compensation÷ $816,096÷ $1,677,397
Expense multiplier0.696190.52606

Table 7—Expense Multiplier, Areas in District Three

Area 6 Lakes Huron and MichiganArea 7 St. Mary's RiverArea 8 Lake Superior
Base operating expense$877,638$428,384$691,435
Base return element+ $35,106+ $12,852+ $20,743
Subtotal= $912,744= $441,236= $712,178
Base target pilot compensation÷ $1,632,191÷ $1,118,265÷ $1,428,167
Expense multiplier0.559210.394570.49867

Step 3. Calculate annual projection of target pilot compensation. 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.

(a) Determine new target rate of compensation. Target pilot compensation is based on the average annual compensation of first mates and masters on U.S. Great Lakes vessels. For pilots in undesignated waters, we approximate the first mates' compensation and, in designated waters, we approximate the master's compensation (first mates' wages multiplied by 150% plus benefits). To determine first mates' and masters' average annual compensation, we use data from the most recent AMOU contracts with the U.S. companies engaged in Great Lakes shipping. Where Start Printed Page 6355different AMOU agreements apply to different companies, we apportion the compensation provided by each agreement according to the percentage of tonnage represented by companies under each agreement.

As of July 2010, there are two current AMOU contracts, which we designate Agreement A and Agreement B. Agreement A applies to vessels operated by Key Lakes, Inc., and Agreement B applies to all vessels operated by American Steamship Co. and Mittal Steel USA, Inc.

Both Agreement A and Agreement B will expire on July 31, 2011. Based on the discussions with AMOU officials, these contracts are not expected to be negotiated until 2011. This does not provide sufficient time to incorporate new rates into the ratemaking process for the 2011 shipping season. The Coast Guard projects that when new AMOU contracts are negotiated in 2011, they will provide for a 3% wage increase effective August 1, 2011. This is in keeping with the recent contractual wage raises under the existing union contracts. Both 2009 and 2010 saw wage raises of 3%. Under Agreement A, we project that the daily wage rate would increase from $270.61 to $278.73. Under Agreement B, the daily wage rate would be increased from $333.58 to $343.59. All other benefits and calculations for these contracts are forecasted to remain identical to the current AMOU contracts, with the exception of the health benefit plan discussed below. The pension plan contribution, which has been a fixed amount, the 401k employers matching contribution of 5% of wages, which is also a set amount, and the monthly contract multipliers are all projected to remain fixed at current AMOU levels. These benefits have not changed their numerical or percentage values over the courses of the previous AMOU agreements still in effect. We do not project that the 2011 contracts will have any impact on these fixed costs.

To calculate monthly wages, we apply Agreement A and Agreement B monthly multipliers of 54.5 and 49.5, respectively, to the daily rate. Agreement A's 54.5 multiplier represents 30.5 average working days, 15.5 vacation days, 4 days for four weekends, 3 bonus days, and 1.5 holidays. Agreement B's 49.5 multiplier represents 30.5 average working days, 16 vacation days, and 3 bonus days.

To calculate average annual compensation, we multiply monthly figures by 9 months, the length of the Great Lakes shipping season.

Table 8 shows new wage calculations based on Agreements A and B effective August 1, 2011.

Table 8—Wages

Monthly componentPilots on undesignated watersPilots on designated waters (undesignated x 150%)
Agreement A:
$278.73 daily rate × 54.5 days$15,191$22,786
Agreement A:
Monthly total × 9 months = total wages136,716205,074
Agreement B:
$343.59 daily rate × 49.5 days17,00825,511
Agreement B:
Monthly total × 9 months = total wages153,068229,602

Both Agreements A and B include a health benefits contribution rate of $88.76. On average, this benefit contribution has increased at a rate of 10% per year throughout the lives of the existing five-year contracts. Accordingly, for the purposes of the 2011 rate we project that when the new AMOU contracts are negotiated in 2011, this contribution would increase to $97.64 effective August 1, 2011. We project that Agreement A would continue to include a pension plan contribution rate of $33.35 per man-day. Agreement B would continue to include a pension plan contribution rate of $43.55 per man-day. Similarly, we expect both Agreements A and B to continue to provide a 5% 401k employer matching provision. Accordingly, for purposes of the 2011 rate, we will continue to use these values in calculating total pilot compensation. Currently, neither Agreement A nor Agreement B includes a clerical contribution that appeared in earlier contracts, and we project that this would not be a feature of any new AMOU contracts negotiated in 2011. We project that the multiplier used to calculate monthly benefits would remain the same at 45.5 days.

Table 9 shows new benefit calculations based on Agreements A and B, effective August 1, 2011.

Table 9—Benefits

Monthly componentPilots on undesignated watersPilots on designated waters
Agreement A
Employer contribution, 401k plan (Monthly Wages × 5%)$759.53$1,139.30
Pension = $33.35 × 45.5 days1,517.431,517.43
Health = $97.64 × 45.5 days4,442.624,442.62
Agreement B:
Employer contribution, 401k plan (Monthly Wages × 5%)850.381,275.57
Pension = $43.55 × 45.5 days1,981.531,981.53
Health = $97.64 × 45.5 days4,442.624,442.62
Agreement A:
Monthly total benefits= 6,719.58= 7,099.35
Start Printed Page 6356
Agreement A:
Monthly total benefits × 9 months= 60,476= 63,894
Agreement B:
Monthly total benefits= 7,274.52= 7,699.71
Agreement B:
Monthly total benefits × 9 months= 65,471= 69,297

Table 10—Total Wages and Benefits

Pilots on undesignated watersPilots on designated waters
Agreement A: Wages$136,716$205,074
Agreement A: Benefits+ 60,476+ 63,894
Agreement A: Total= 197,192= 268,968
Agreement B: Wages153,068229,602
Agreement B: Benefits+ 65,471+ 69,297
Agreement B: Total= 218,539= 298,900

Table 11 shows that approximately one third of U.S. Great Lakes shipping deadweight tonnage operates under Agreement A, with the remaining two thirds operating under Agreement B.

Table 11—Deadweight Tonnage by AMOU Agreement

CompanyAgreement AAgreement B
American Steamship Company815,600
Mittal Steel USA, Inc38,826
Key Lakes, Inc361,385
Total tonnage, each agreement361,385854,426
Percent tonnage, each agreement361,385 ÷ 1,215,811 = 29.7238%854,426 ÷ 1,215,811 = 70.2762%

Table 12 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.

Table 12—Projected Target Rate of Compensation, Weighted

Undesignated watersDesignated waters
Agreement A:
Total wages and benefits × percent tonnage$197,192 × 29.7238% = $58,613$268,968 × 29.7238% = $79,948
Agreement B:
Total wages and benefits × percent tonnage$218,539 × 70.2762% = $153,581$298,900 × 70.2762% = $210,055
Total weighted average wages and benefits = projected target rate of compensation$58,613 + $153,581 = $212,194$79,948 + $210,055 = $290,003

(b) Determine number of pilots needed. Subject to adjustment by the Coast Guard Director of Great Lakes Pilotage to ensure uninterrupted service, we determine the number of pilots needed for ratemaking purposes in each area by dividing each area's projected bridge hours, either by 1,000 (designated waters) or by 1,800 (undesignated waters).

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, we project that vessel traffic in the 2011 Start Printed Page 6357navigation season in Districts 1 and 2 would remain unchanged from the 2010 projections noted in Table 13 of the 2010 final rule. In District 3, in both Areas 6 and 8, decreasing bridge hours require the removal of two unused authorizations for pilots, one for each Area. There are no pilots currently in either of these slots and no jobs are being lost as a result of this action. The removal of these two pilot billets merely attempts to mitigate a significant downward trend across the undesignated waters of District 3. The bridge hours for the designated waters of Area 7, like Districts 1 and 2, would remain unchanged from the 2010 projections.

Table 13, below, shows the projected bridge hours needed for each area, and the total number of pilots needed for ratemaking purposes after dividing those figures either by 1,000 or 1,800. As we have done since the 2008 ratemaking, and for the reasons described in detail in the 2008 final rule (74 FR 220, 221-22, Jan. 5, 2009), we rounded up to the next whole pilot except in Area 2 where we rounded up from 3.14 to 5, and in Area 4 where we rounded down from 4.07 to 4.

Table 13—Number of Pilots Needed

Pilotage areaProjected 2011 bridge hoursDivided by 1,000 (designated waters) or 1,800 (undesignated waters)Pilots needed (total = 40)
Area 15,2031,0006
Area 25,6501,8005
Area 47,3201,8004
Area 55,0971,0006
Area 611,6061,8007
Area 73,2591,0004
Area 89,8301,8006

(c) Determine the projected target pilot compensation for each area. The projection of new total target pilot compensation is determined 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 shows this calculation.

Table 14—Projected Target Pilot Compensation

Pilotage areaPilots needed (Total = 38)Multiplied by target rate of compensationProjected target pilot compensation
Area 16× $290,003$1,740,018
Area 25× 212,1941,060,970
Area 44× 212,194848,776
Area 56× 290,0031,740,018
Area 67× 212,1941,485,357
Area 74× 290,0031,160,012
Area 86× 212,1941,273,164

Step 4: Increase the projected pilot compensation in Step 3 by the expense multiplier in Step 2. This step yields a projected increase in operating costs necessary to support the increased projected pilot compensation. Table 15 shows this calculation.

Table 15—Projected Operating Expense

Pilotage areaProjected target pilot compensationMultiplied by expense multiplierProjected operating expense
Area 1$1,740,018× 0.35182= $612,171
Area 21,060,970× 0.59575= 632,069
Area 4848,776× 0.69619= 590,909
Area 51,740,018× 0.52606= 915,350
Area 61,485,357× 0.55921= 830,633
Area 71,160,012× 0.39457= 457,708
Area 81,273,164× 0.49867= 634,883

Step 5: Adjust the result in Step 4, as required, for inflation or deflation, and calculate projected total economic cost. Based on data from the U.S. Department of Labor's Bureau of Labor Statistics available at http://www.bls.gov/​Start Printed Page 6358xg_​shells/​ro5xg01.htm, we have multiplied the results in Step 4 by a 0.994 deflation factor, reflecting an average deflation rate of 0.6% between 2008 and 2009, the latest years for which data are available. Table 16 shows this calculation and the projected total economic cost.

Table 16—Projected Total Economic Cost

Pilotage areaA. Projected operating expenseB. Increase, multiplied by deflation factor (= A × 0.994)C. Projected target pilot compensationD. Projected total economic cost (= B+C)
Area 1$612,171$608,498$1,740,018$2,348,516
Area 2632,069628,2771,060,9701,689,246
Area 4590,909587,364848,7761,436,140
Area 5915,350909,8581,740,0182,649,876
Area 6830,633825,6491,485,3572,311,006
Area 7457,708454,9621,160,0121,614,974
Area 8634,883631,0741,273,1641,904,237

Step 6: Divide the result in Step 5 by projected bridge hours to determine total unit costs. Table 17 shows this calculation.

Table 17—Total Unit Costs

Pilotage areaA. Projected total economic costB. Projected 2011 bridge hoursProspective (total) unit costs (A divided by B)
Area 1$2,348,5165,203$451.38
Area 21,689,2465,650298.98
Area 41,436,1407,320196.19
Area 52,649,8765,097519.89
Area 62,311,00611,606199.12
Area 71,614,9743,259495.54
Area 81,904,2379,830193.72

Step 7: Divide prospective unit costs (total unit costs) in Step 6 by the base period unit costs in Step 1. Table 18 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 in Unit Costs

Pilotage areaA. Prospective unit costsB. Base period unit costsC. Percentage change from base (A divided by B; result expressed as percentage)
Area 1$451.38$435.813.57
Area 2298.98288.123.77
Area 4196.19189.113.75
Area 5519.89502.223.52
Area 6199.12189.844.89
Area 7495.54478.523.56
Area 8193.72184.045.26

We use the percentage change between the prospective overall unit cost and the base overall unit cost to adjust 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). This calculation is derived from the Appendix C ratemaking methodology found at 46 CFR 404.10 and differs from the area rate calculation by using total costs and total bridge hours for all areas. Tables 19 through 21 show this calculation.Start Printed Page 6359

Table 19—Calculation of Base Period Overall Unit Cost

A. Base period (2010) overall total economic costsB. Base period (2010) overall bridge hoursC. Base period (2010) overall unit cost (A divided by B)
Sum of all Areas$14,084,23051,565$273.14

Table 20—Calculation of Projected Period Overall Unit Cost

A. Projected period (2011) overall total economic costsB. Projected period (2011) overall bridge hoursC. Base period (2011) overall unit cost (A divided by B)
Sum of all Areas$13,953,99647,965$290.92

Table 21—Percentage Change in Overall Prospective Unit Costs/Base Unit Cost

A. Prospective overall unit costB. Base period overall unit costC. Percentage change from overall base unit cost (A divided by B)
Across all Areas$290.92273.146.51%

Step 8: Adjust the base period rates by the percentage change in unit costs in Step 7. Table 22 shows this calculation.

Table 22—Base Period Rates Adjusted by Percentage Change in Unit Costs *

Pilotage areaA. Base period rateB. Percentage change in unit costs (Multiplying factor)C. Increase in base rate (A × B%)D. Adjusted rate (A + C, rounded to nearest dollar)
Area 1:3.57(1.0357)
—Basic pilotage$17.73/km, $31.38/mi$0.63/km, $1.12/mi$18.36/km, $32.50/mi
—Each lock transited$393$14.03$407
—Harbor movage$1,287$45.95$1,333
—Minimum basic rate, St. Lawrence River$858$30.63$889
—Maximum rate, through trip$3,767$134.48$3,901
Area 2:3.77(1.0377)
—6-hr. period$861$32.46$893
—Docking or undocking$821$30.95$852
Area 4:3.75(1.0375)
—6 hr. period$762$28.58$791
—Docking or undocking$587$22.01$609
—Any point on Niagara River below Black Rock Lock$1,498$56.18$1,554
Area 5 between any point on or in:3.52(1.0352)
—Toledo or any point on Lake Erie W. of Southeast Shoal$1,364$48.01$1,412
—Toledo or any point on Lake Erie W. of Southeast Shoal & Southeast Shoal$2,308$81.24$2,389
—Toledo or any point on Lake Erie W. of Southeast Shoal & Detroit River$2,997$105.49$3,102
—Toledo or any point on Lake Erie W. of Southeast Shoal & Detroit Pilot Boat$2,308$81.24$2,389
—Port Huron Change Point & Southeast Shoal (when pilots are not changed at the Detroit Pilot Boat)$4,020$141.50$4,162
Start Printed Page 6360
—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)$4,657$163.93$4,821
—Port Huron Change Point & Detroit River$3,020$106.30$3,126
—Port Huron Change Point & Detroit Pilot Boat$2,349$82.68$2,432
—Port Huron Change Point & St. Clair River$1,670$58.78$1,729
—St. Clair River$1,364$48.01$1,412
—St. Clair River & Southeast Shoal (when pilots are not changed at the Detroit Pilot Boat)$4,020$141.50$4,162
—St. Clair River & Detroit River/Detroit Pilot Boat$3,020$106.30$3,126
—Detroit, Windsor, or Detroit River$1,364$48.01$1,412
—Detroit, Windsor, or Detroit River & Southeast Shoal$2,308$81.24$2,389
—Detroit, Windsor, or Detroit River & Toledo or any point on Lake Erie W. of Southeast Shoal$2,997$105.49$3,102
—Detroit, Windsor, or Detroit River & St. Clair River$3,020$106.30$3,126
—Detroit Pilot Boat & Southeast Shoal$1,670$58.78$1,729
—Detroit Pilot Boat & Toledo or any point on Lake Erie W. of Southeast Shoal$2,308$81.24$2,389
—Detroit Pilot Boat & St. Clair River$3,020$106.30$3,126
Area 6:4.89(1.0489)
—6 hr. period$656$32.08$688
—Docking or undocking$623$30.46$653
Area 7 between any point on or in:3.56(1.0356)
—Gros Cap & De Tour$2,559$91.10$2,650
—Algoma Steel Corp. Wharf, Sault Ste. Marie, Ont. & De Tour$2,559$91.10$2,650
—Algoma Steel Corp. Wharf, Sault Ste. Marie, Ont. & Gros Cap$964$34.32$998
—Any point in Sault Ste. Marie, Ont., except the Algoma Steel Corp. Wharf & De Tour$2,145$76.36$2,221
—Any point in Sault Ste. Marie, Ont., except the Algoma Steel Corp. Wharf & Gros Cap$964$34.32$998
—Sault Ste. Marie, MI & De Tour$2,145$76.36$2,221
—Sault Ste. Marie, MI & Gros Cap$964$34.32$998
—Harbor movage$964$34.32$998
Area 8:5.26(1.0526)
—6 hr. period$578$30.40$608
—Docking or undocking$549$28.88$578
* 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 6.51% across all areas (see Table 21).

VII. Regulatory Analyses

We developed this rule after considering numerous statutes and executive orders related to rulemaking. Below, we summarize our analyses based on 13 of these statutes or executive orders.Start Printed Page 6361

A. Regulatory Planning and Review

This rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order.

We received no comments that would alter our assessment of impacts in the NPRM. We have found no additional data or information that would change our assessment of the impacts in the NPRM. We have adopted the analysis in the NPRM for this rule as final. A summary of the analysis follows:

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” 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, we are adjusting the pilotage rates for the 2011 shipping season to generate sufficient revenue to cover allowable expenses, target pilot compensation, and returns on investment.

This final rule will implement rate adjustments for the Great Lakes system over the current rates adjusted in the 2010 final rule that was published on February 23, 2010 (75 FR 7958) and took effect on August 1, 2010. 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 deflation and projected changes in association expenses to maintain these compensation levels. See “B. Calculating the Rate Adjustment” for details on these adjustments.

In general, we expect an increase in pilotage rates for a certain area to result in additional costs for shippers using pilotage services in that area, while a decrease would result in a cost reduction or savings for shippers in that area. The shippers affected by these rate adjustments are those owners and operators of domestic vessels operating on register (employed in the foreign trade) and owners and operators of foreign vessels on a route within the Great Lakes system. These owners and operators must have pilots or pilotage service as required by 46 U.S.C. 9302.

In the NPRM, we estimated the average annual number of vessels affected by the rate adjustment to be about 208 vessels. These vessels entered the Great Lakes by transiting through or in part of at least one of the pilotage areas 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 by the 208 vessels, there were an estimated 923 annual U.S. port arrivals before the vessels left the Great Lakes system, based on findings in the NPRM.

The impact of the rate adjustment to shippers is estimated from pilotage revenues. These revenues represent the costs that shippers must pay for pilotage services. The Coast Guard sets rates so that revenues equal the estimated costs of pilotage.

We estimate the additional impact (costs or savings) of the rate adjustment in this final rule to be the difference between the projected total economic cost needed to cover costs based on the 2010 rate adjustment and the projected total economic cost needed to cover costs in this final rule for 2011. Table 23 details additional costs or savings by area.

Table 23—Additional Impact of the Final Rule by Area

[$U.S.; non-discounted]

Projected total economic costs in 2010Change in projected expensesProjected total economic costs in 2011 *Additional cost or savings of this rule
Area 1$2,267,5371.0357$2,348,516$80,979
Area 21,627,8531.03771,689,24661,393
Area 41,384,2531.03751,436,14051,887
Area 52,559,8051.03522,649,87690,071
Area 62,544,9350.90812,311,006(233,929)
Area 71,559,5011.03561,614,97455,473
Area 82,140,3450.88971,904,237(236,108)
Notes to Table 23:
* The derivation of these values is detailed in Table 16.
Some values may not total due to rounding.
See “B. Calculating the Rate Adjustment” for further details on the rate adjustment methodology.
“Additional Cost or Savings of this Rule” = “Projected Total Economic Cost in 2011” minus “Projected Total Economic Cost in 2010.”

After applying the rate change in this final rule, the resulting difference between the projected total economic cost in 2010 and the projected total economic cost in 2011 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 final rule. As discussed earlier, we consider a reduction in payments to be a cost savings.

The impact of the rate adjustment in this final rule to shippers varies by area. The annual costs of the rate adjustments range from $51,887 to $90,071 for most affected areas. However, Areas 6 and 8 would experience annual cost savings of approximately $234,000 and $236,000, respectively. The annual savings is due to a projected decrease in the number of billeted pilots in Areas 6 and 8 from 2010 to 2011. This decrease in the number of pilots would reduce the projected revenue needed to cover costs of pilotage services in Areas 6 and 8.

This rate adjustment would result in a savings for Areas 6 and 8 that would outweigh the combined costs of the other areas. We measure the impact of this rule by examining the changes in costs to shippers for pilotage services. With savings in Areas 6 and 8 exceeding the combined costs in other areas, the net impact of this rule would be a cost savings for pilotage services in the Great Lakes system. The overall impact of the final rule would be a cost savings to shippers of about $130,000 if we sum across all affected areas.Start Printed Page 6362

B. Small Entities

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

In the NPRM, we certified under 5 U.S.C. 605(b) that the proposed rule would not have a significant economic impact on a substantial number of small entities. We received no public comments that would alter our certification in the NPRM. We have found no additional data or information that would change our findings in the NPRM. We have adopted the certification in the NPRM for this final rule. See the “Small Entities” section of the NPRM for additional details. A summary of the NPRM analysis follows.

We found entities affected by the rule to 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.

In the NPRM, 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 final 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 certifies under 5 U.S.C. 605(b) that this final rule will not have a significant economic impact on a substantial number of small entities.

C. Assistance for Small Entities

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (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 Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

D. Collection of Information

This rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

E. Federalism

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this rule under that Order and have determined that it does not have implications for federalism because there are no similar State regulations and the States do not have the authority to regulate and adjust rates for pilotage services in the Great Lakes system.

F. Unfunded Mandates Reform Act

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

G. Taking of Private Property

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

H. Civil Justice Reform

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

I. Protection of Children

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

J. Indian Tribal Governments

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

K. Energy Effects

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

L. Technical Standards

The National Technology Transfer and Advancement Act (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an Start Printed Page 6363explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies. This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.

M. Environment

We have analyzed this rule under Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have concluded that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule is categorically excluded under section 2.B.2, figure 2-1, paragraph (34)(a) of the Instruction. Paragraph 34(a) pertains to minor regulatory changes that are editorial or procedural in nature. This rule adjusts rates in accordance with applicable statutory and regulatory mandates. An environmental analysis checklist and a categorical exclusion determination are available in the docket where indicated under ADDRESSES.

Start List of Subjects

List of Subjects in 46 CFR Part 401

End List of Subjects

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

Start Part

PART 401—GREAT LAKES PILOTAGE REGULATIONS

End Part Start Amendment Part

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

End Amendment Part Start Authority

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

End Authority Start Amendment Part

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

End Amendment Part
Basic rates and charges on the St. Lawrence River and Lake Ontario.
* * * * *

(a) Area 1 (Designated Waters):

ServiceSt. Lawrence River
Basic pilotage$18.36 per Kilometer or $32.50 per mile.1
Each Lock Transited$407.1
Harbor Movage$1,333.1
1 The minimum basic rate for assignment of a pilot in the St. Lawrence River is $889, and the maximum basic rate for a through trip is $3,901.

(b) Area 2 (Undesignated Waters):

ServiceLake Ontario
Six-hour period$893
Docking or undocking852
Start Amendment Part

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

End Amendment Part
Basic rates and charges on Lake Erie and the navigable waters from Southeast Shoal to Port Huron, MI.
* * * * *

(a) Area 4 (Undesignated Waters):

ServiceLake Erie (East of Southeast Shoal)Buffalo
Six-hour period$791$791
Docking or undocking609609
Any Point on the Niagara River below the Black Rock LockN/A1,554

(b) Area 5 (Designated Waters):

Any point on or inSoutheast shoalToledo or any point on Lake Erie west of Southeast ShoalDetroit RiverDetroit pilot boatSt. Clair River
Toledo or any port on Lake Erie west of Southeast Shoal$2,389$1,412$3,102$2,389N/A
Port Huron Change Point1 4,1621 4,8213,1262,432$1,729
St. Clair River1 4,162N/A3,1263,1261,412
Detroit or Windsor or the Detroit River2,3893,1021,412N/A3,126
Detroit Pilot Boat1,7292,389N/AN/A3,126
1 When pilots are not changed at the Detroit Pilot Boat.
Start Amendment Part

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

End Amendment Part
Basic rates and charges on Lakes Huron, Michigan, and Superior, and the St Mary's River.
* * * * *

(a) Area 6 (Undesignated Waters):

ServiceLakes Huron and Michigan
Six-hour period$688
Docking or undocking653

(b) Area 7 (Designated Waters):

AreaDe tourGros capAny harbor
Gros Cap$2,650N/AN/A
Start Printed Page 6364
Algoma Steel Corporation Wharf at Sault Ste. Marie, Ontario$2,650$998N/A
Any point in Sault Ste. Marie, Ontario, except the Algoma Steel Corporation Wharf2,221998N/A
Sault Ste. Marie, MI2,221998N/A
Harbor MovageN/AN/A$998

(c) Area 8 (Undesignated Waters):

ServiceLake Superior
Six-Hour Period$608
Docking or Undocking578
[Amended]
Start Amendment Part

5. In § 401.420—

End Amendment Part Start Amendment Part

a. In paragraph (a), remove the text “$119” and add, in its place, the text “$127”; and remove the text “$1,867” and add, in its place, the text “$1,989”;

End Amendment Part Start Amendment Part

b. In paragraph (b), remove the text “$119” and add, in its place, the text “$127”; and remove the text “$1,867” and add, in its place, the text “$1,989”; and

End Amendment Part Start Amendment Part

c. In paragraph (c)(1), remove the text “$705” and add, in its place, the text “$751”; and in paragraph (c)(3), remove the text “$119” and add, in its place, the text “$127”, and remove the text “$1,867” and add, in its place, the text “$1,989”.

End Amendment Part
[Amended]
Start Amendment Part

6. In § 401.428, remove the text “$719” and add, in its place, the text “$766”.

End Amendment Part Start Signature

Dated: January 28, 2011.

Dana A. Goward,

Director Marine Transportation Systems Management, U.S. Coast Guard.

End Signature End Supplemental Information

[FR Doc. 2011-2456 Filed 2-3-11; 8:45 am]

BILLING CODE 9110-04-P