Rates for Pilotage on the Great Lakes, 8115-8132 [E7-3061]

Download as PDF Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Rules and Regulations 8115 APPENDIX A OF PART 1611—LEGAL SERVICES CORPORATION 2006 POVERTY GUIDELINES * 48 Contiguous States and the District of Columbia Size of household 1 ............................................................................................................................................. 2 ............................................................................................................................................. 3 ............................................................................................................................................. 4 ............................................................................................................................................. 5 ............................................................................................................................................. 6 ............................................................................................................................................. 7 ............................................................................................................................................. 8 ............................................................................................................................................. For each additional member of the household in excess of 8, add: .................................... $12,763 17,113 21,463 25,813 30,163 34,513 38,863 43,213 4,350 Alaska $15,963 21,400 26,838 32,275 37,713 43,150 48,588 54,025 5,438 Hawaii $14,688 19,688 24,688 29,688 34,688 39,688 44,688 49,688 5,000 * The figures in this table represent 125% of the poverty guidelines by household size as determined by the Department of Health and Human Services. REFERENCE CHART—200% OF DHHS FEDERAL POVERTY GUIDELINES 48 Contiguous States and the District of Columbia Size of household 1 ............................................................................................................................................. 2 ............................................................................................................................................. 3 ............................................................................................................................................. 4 ............................................................................................................................................. 5 ............................................................................................................................................. 6 ............................................................................................................................................. 7 ............................................................................................................................................. 8 ............................................................................................................................................. For each additional member of the household in excess of 8, add: .................................... Victor M. Fortuno, Vice President for Legal Affairs, General Counsel & Corporate Secretary. [FR Doc. E7–3074 Filed 2–22–07; 8:45 am] BILLING CODE 7050–01–P DEPARTMENT OF HOMELAND SECURITY Coast Guard 46 CFR Part 401 [USCG–2006–24414] RIN 1625–AB05 Rates for Pilotage on the Great Lakes Coast Guard, DHS. Interim rule with request for comments. AGENCY: jlentini on PROD1PC65 with RULES ACTION: SUMMARY: The Coast Guard is updating the rates for pilotage service on the Great Lakes for the 2007 navigation season. This increases pilotage rates an average of 22.62% across all three pilotage districts over the last ratemaking that was completed in April of 2006. Annual reviews of pilotage rates are required by law to ensure that sufficient revenues are generated to cover the annual projected allowable expenses, target pilot compensation, VerDate Aug<31>2005 17:15 Feb 22, 2007 Jkt 211001 and returns on investment of the pilot associations. The Coast Guard requests public comment on its calculation of these rate increases. DATES: This interim rule is effective March 26, 2007. Comments and related material must reach the Docket Management Facility on or before April 24, 2007. ADDRESSES: You may submit comments identified by Coast Guard docket number USCG–2006–24414 to the Docket Management Facility at the U.S. Department of Transportation. To avoid duplication, please use only one of the following methods: (1) Web site: http://dms.dot.gov. (2) Mail: Docket Management Facility, U.S. Department of Transportation, 400 Seventh Street SW., Washington, DC 20590–0001. (3) Fax: 202–493–2251. (4) Delivery: Room PL–401 on the Plaza level of the Nassif Building, 400 Seventh Street SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The telephone number is 202–366– 9329. (5) Federal eRulemaking Portal: http://www.regulations.gov. FOR FURTHER INFORMATION CONTACT: For questions on this interim rule, call Mr. Michael Sakaio, Program Analyst, Office PO 00000 Frm 00029 Fmt 4700 Sfmt 4700 $20,420 27,380 34,340 41,300 48,260 55,220 62,180 69,140 6,960 Alaska $25,540 34,240 42,940 51,640 60,340 69,040 77,740 86,440 8,700 Hawaii $23,500 31,500 39,500 47,500 55,500 63,500 71,500 79,500 8000 of Great Lakes Pilotage, Commandant (CG–3PWM), U.S. Coast Guard, at 202– 372–1538, by fax 202–372–1929, or by e-mail at michael.sakaio@uscg.mil. For questions on viewing or submitting material to the docket, call Renee V. Wright, Chief, Dockets, Department of Transportation, telephone 202–493– 0402. SUPPLEMENTARY INFORMATION: Table of Contents I. Public Participation and Request for Comments II. Background III. Discussion of Comments and Changes IV. Discussion of the Interim Rule A. Pilotage Rate Changes—Summarized B. Calculating the Rate Adjustment Step 1: Calculating the Base Period Total Economic Cost (Cost per Bridge Hour by Area for the Base Period) Step 2. Calculating the Expense Multiplier Step 3. Calculating the new annual ‘‘projection of target pilot compensation’’ using the same procedures found in Step 2 of Appendix A to 46 CFR part 404 Step 4: Increase the new total target pilot compensation in Step 3 by the expense multiplier in Step 2 Step 5(a): Adjust the result in Step 4, as required, for inflation or deflation Step 5(b): Calculate Projected Total Economic Costs Step 6: Divide the Result in Step 5(b) by Projected Bridge Hours to Determine E:\FR\FM\23FER1.SGM 23FER1 8116 Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Rules and Regulations Total Unit Costs (Adjusted Cost per Bridge Hour by Area) Step 7: Divide prospective unit costs in Step 6 by the base period unit costs in Step 1 Step 8: Adjust the base period rates by the percentage change in unit costs in Step 7 V. Regulatory Evaluation A. Small Entities B. Assistance for Small Entities C. Collection of Information D. Federalism E. Unfunded Mandates Reform Act F. Taking of Private Property G. Civil Justice Reform H. Protection of Children I. Indian Tribal Governments J. Energy Effects K. Technical Standards L. Environment VI. Regulatory Text jlentini on PROD1PC65 with RULES SUPPLEMENTARY INFORMATION: I. Public Participation and Request for Comments We invite public comment on our calculation of the rate increases made in this interim rule, specifically with respect to Step 3 of the methodology. All comments received will be posted, without change, to http://dms.dot.gov and will include any personal information you have provided. We have an agreement with the Department of Transportation (DOT) to use the Docket Management Facility. Please see DOT’s ‘‘Privacy Act’’ paragraph below. Submitting comments: If you submit a comment, please include your name and address, identify the docket number for this rulemaking (USCG–2006–24414), indicate the specific section of this document to which each comment applies, and give the reason for each comment. You may submit your comments and material by electronic means, mail, fax, or delivery to the Docket Management Facility at the address under ADDRESSES; but please submit your comments and material by only one means. If you submit them by mail or delivery, submit them in an unbound format, no larger than 81⁄2 by 11 inches, suitable for copying and electronic filing. If you submit them by mail and would like to know that they reached the Facility, please enclose a stamped, self-addressed postcard or envelope. We will consider all comments and material received during the comment period. We may change this rule in view of them. Viewing comments and documents: To view comments, as well as documents mentioned in this preamble as being available in the docket, go to http://dms.dot.gov at any time, click on ‘‘Simple Search,’’ enter the last five digits of the docket number for this rulemaking, and click on ‘‘Search.’’ You VerDate Aug<31>2005 17:15 Feb 22, 2007 Jkt 211001 may also visit the Docket Management Facility in room PL–401 on the Plaza level of the Nassif Building, 400 Seventh Street SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. Privacy Act: Anyone can search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review the Department of Transportation’s Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477), or you may visit http://dms.dot.gov. Public Meeting: We do not now plan to hold a public meeting. But you may submit a request for one to the Docket Management Facility at the address under ADDRESSES explaining why one 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. II. Background The Great Lakes Pilotage Act of 1960, codified in Title 46, Chapter 93, of the United States Code (U.S.C.), requires foreign-flag vessels and U.S.-flag vessels in foreign trade to use federal Great Lakes registered pilots while transiting the St. Lawrence Seaway and the Great Lakes system. 46 U.S.C. 9302, 9308. The Coast Guard is responsible for administering this pilotage program, which includes setting rates for pilotage service. The Coast Guard pilotage regulations require annual reviews of pilotage rates and the creation of a new rate at least once every five years, or sooner, if annual reviews show a need. 46 CFR part 404. 46 U.S.C. 9303(f) requires these reviews and, where deemed appropriate, adjustments be established by March 1 of every season. To assist in calculating pilotage rates, the three Great Lakes pilotage associations are required to submit to the Coast Guard annual financial statements prepared by certified public accounting firms. In addition, every fifth year, in connection with the full ratemaking, the Coast Guard contracts with an independent accounting firm to conduct audits of the accounts and records of the pilotage associations and to submit financial reports relevant to the ratemaking process. In those years when a full ratemaking is conducted, the Coast Guard generates the pilotage rates using Appendix A to 46 CFR Part 404. Between the five-year full ratemaking intervals, the Coast Guard PO 00000 Frm 00030 Fmt 4700 Sfmt 4700 annually reviews the pilotage rates using Appendix C to 46 CFR Part 404, and adjusts rates as appropriate. The last full ratemaking was published in the Federal Register on April 3, 2006 (71 FR 16501). On July 13, 2006, we published a Notice of Proposed Rulemaking (NPRM; 71 FR 39629), thus beginning the first annual review and adjustment following that full ratemaking. By law, this review must be completed by March 1, 2007. III. Discussion of Comments and Changes The Coast Guard received four comments in response to the July 2006 NPRM. One comment was received from the American Maritime Officers’ (AMO) union, two comments were received from the Lakes Pilots’ Association (LPA), and one comment was received from the legal representative of the pilots’ associations. This last commenter prefaced his discussion of several issues by stating that ‘‘the pilots are willing to have the Coast Guard defer action on [these issues] to the earliest possible time at which they will not delay the issuance of the updated rate pursuant to the current NPRM proceeding.’’ We agree that timely completion of this annual rate update is of paramount importance. Contract modifications. All four comments stated that AMO union contracts with one or more of the shipping companies on the Great Lakes had changed prior to the publication of the NPRM on July 13, 2006, and requested that the final rule reflect this change. After reviewing the submissions and researching the issue to confirm the accuracy of the comments, the Coast Guard has concluded that these comments are partially correct. The AMO union contracts with six shipping companies on the Great Lakes. On August 1, 2003, the union negotiated collective bargaining agreements with these six companies establishing, among other things, wages and benefits for mariners effective until July 31, 2006. Three of those companies, based on our research, have subsequently entered into Memorandums of Understanding dated July 23, 2004, March 11, 2005, and May 1, 2005, extending the termination dates of these collective bargaining agreements to July 31, 2007, and modifying the wage and benefit portions of the underlying collective bargaining agreements. These modifications initially became effective May 1, 2005, with additional modifications becoming effective August 1, 2005. The remaining three companies have not signed Memorandums of Understanding E:\FR\FM\23FER1.SGM 23FER1 jlentini on PROD1PC65 with RULES Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Rules and Regulations extending and modifying the collective bargaining agreements. Accordingly, they continue to operate under the terms of the original 2003 contracts previously used by the Coast Guard to approximate first mates wages and benefits. The Coast Guard agrees that, since these contract modifications went into effect prior to the date the NPRM was published, weight should be given to these updated contracts. However, the Coast Guard also believes that to properly approximate current first mates wages and benefits, we must also give consideration to the August 1, 2003, AMO union contracts that remain in effect with three of the six shipping companies. Accordingly, we have calculated first mates wages and benefits under both versions of the AMO union contracts and, using the deadweight tonnage (mid-summer capacity tonnage) of vessels operating under each of these contracts, apportioned target pilot compensation based on the percentage of tonnage represented by each of the contracts to arrive at a weighted average target pilot compensation. This calculation is discussed in greater detail under Step 3 of this Appendix C Ratemaking Methodology. We specifically request public comment on this calculation. Calculation of projected bridge hours. One commenter pointed out that we rounded up the bridge hour projections shown in Step 2.B of the Appendix A calculations for the 2006 final rule and in Step 3 of the Appendix C calculations for this rulemaking’s NPRM. The commenter stated, correctly, that this was a departure from our past practice, and that the resulting artificial overstatement of traffic projections lowers rates. Because we now agree with this comment, we have corrected Step 3 in our Appendix C computations, to show actual projected bridge hours rather than rounded-up projections. This affects subsequent computations made under Appendix C, and raises rates an average of 3% over what we proposed in the NPRM. We also note by this commenter’s remark that the impact of our error was most notable in District One, which has suffered the cessation of fast ferry service that accounted for 1,144 projected bridge hours in the 2006 ratemaking. This interim rule removes those hours from the District One projection. Delay and detention. One commenter alleged that our 2006 ratemaking ‘‘changes, without explanation’’ our ‘‘longstanding practice’’ of counting ‘‘delay and detention’’ hours in the pilots’’ workload, and that this VerDate Aug<31>2005 17:15 Feb 22, 2007 Jkt 211001 rulemaking’s NPRM perpetuates this alleged error. The comment is incorrect. 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. The Appendix A, Step 2.B definition of bridge hours as the ‘‘number of hours a pilot is aboard a vessel providing basic pilotage service’’ has never changed. We have consistently and publicly stated that this excludes detention, delay, or travel time: See, for example, 65 FR 55206 at 55208 (Sep. 13, 2000), 66 FR 36484 (Jul. 12, 2001). In 2002, we reiterated this policy at the same time as we acknowledged a possible inadvertent departure from the policy in 2001. 67 FR 47464 (Jul. 19, 2002). The policy has been expressed and followed in all our ratemaking documents since 2002. The commenter further cited Rear Admiral J. Timothy Riker’s March 4, 2003 report on Great Lakes pilotage, in which he recommended including delay and detention in calculating bridge hours. The commenter expressed concern over the ‘‘slow pace’’ of the Coast Guard’s response to the Riker report and asked us to implement its recommendations promptly. The report can be found at http://dms.dot.gov, under Docket USCG–2002–13191 where it appears as item 85. The Riker report presented a series of recommendations for Coast Guard consideration. We are, and have been, actively engaged in reviewing these recommendations. This will be the subject of a separate Federal Register notice. 150% factor for designated waters. One commenter alleged that we have improperly calculated target pilot compensation for pilots servicing designated waters. The Coast Guard’s standard practice under Appendix A, Step 2.A(1) and (2), is to calculate this compensation by multiplying first mates wages by 150%, and then adding benefits. The commenter believes that, instead, we should multiply the total of first mates wages and benefits by 150%. The rationale for the Coast Guard’s method of calculation was given in the Saint Lawrence Seaway Development Corporation’s 1997 final rule (62 FR 5917, 5920; Feb. 10, 1997). Further discussion can be found in the docket for the 1997 rule; see http:// www.dms.dot.gov, Docket SLSDC– 1996–1781, item 22. This issue was the subject of litigation between the Lakes Pilots Association and the Coast Guard. In an unpublished Memorandum Opinion (Lakes Pilots’ Association v. United States Coast PO 00000 Frm 00031 Fmt 4700 Sfmt 4700 8117 Guard, Civil Action No. 01–1721(RBW); Apr. 4, 2003), which we have placed in the docket for this rulemaking, the U.S. District Court for the District of Columbia upheld the Coast Guard’s interpretation of the applicable regulations and the method used to calculate target pilot compensation for pilots servicing designated waters. It is the Coast Guard’s view that this matter has been resolved by the court’s decision. Rate adjustment with Canada. One commenter stated that U.S. pilotage rates must be identical to rates charged by the Canadian pilotage authority, in keeping with provisions of the January 18, 1977 Memorandum of Arrangements (MOA) regarding Great Lakes pilotage, which was signed by the U.S. Secretary of Transportation and the Canadian Minister of Transport, and which remains in effect. Paragraph 7 of the MOA states that ‘‘the Secretary and the Minister will arrange for the establishment of regulations imposing identical rates, charges and any other conditions or terms being annexed hereto from time to time as a Rate Supplement and to be deemed as part of this Memorandum of Arrangements’’ (emphasis added). The MOA is enforceable only between the two sovereign nations that are party to it. No private right of action is created by which individuals might seek to enforce the MOA for their own benefit. This comment is beyond the scope of this rulemaking, which merely applies existing U.S. regulations. Those regulations reflect the MOA, in that they allow for rate adjustment after U.S. consultation with Canada, but they do not automatically adjust U.S. rates to reflect Canadian rates, nor do they require U.S. rates to be identical to Canadian rates. We infer that the commenter’s intent is to encourage consultation between the U.S. and Canada so that rates will be made identical. Due to vast differences in the pilotage systems and ratemaking methodologies of the two nations, and to frequent economic fluctuations that affect the two nations dissimilarly, it may not be practicable, or desirable from the perspective of the U.S. pilots, to set identical rates. However, we have been discussing with the Canadian Great Lakes Pilotage Authority ways to achieve rate parity. IV. Discussion of the Interim Rule A. Pilotage Rate Changes—Summarized This interim rule adjusts the rates for Federal pilots on the Great Lakes, contained in 46 CFR 401.405, 401.407, and 401.410, in accordance with E:\FR\FM\23FER1.SGM 23FER1 8118 Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Rules and Regulations Appendix C of 46 CFR part 404. Using this methodology, the rate adjustment results in an average increase of 22.62% across all Districts over the last pilotage rate adjustment. Fourteen and seventenths percent (14.7%) of the increase is attributable to increases in wages and benefits contained in the most recent American Maritime Officers’ union contracts that were not included in the NPRM; 5% of the increase is attributable to increased traffic projections based upon changes in traffic levels between 2005 and 2006; 3% of the increase is attributable to adjustments made in the rate computation returning projected bridge hours to unrounded values; and 0.5% of the increase is attributable to non-wage inflation. 2007 AREA RATE CHANGES If pilotage service is required in: Area Area Area Area Area Area Area 1 2 4 5 6 7 8 (Designated waters) ..... (Undesignated waters) (Undesignated waters) (Designated waters) ..... (Undesignated waters) (Designated waters) ..... (Undesignated waters) Then the percentage increases over the current rate is: 21.04 29.51 22.07 25.32 14.97 18.33 27.08 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)’’ have been increased by 22.62%. These changes are the same in every Area. B. Calculating the Rate Adjustment The ratemaking analyses and methodology contained in Appendix C to 46 CFR part 404 comprises eight steps. These steps are: 1. Calculating the Base Period Total Economic Cost (Cost Per Bridge Hour by Area for the Base Period); 2. Calculating the Expense Multiplier; 3. Calculating the Annual Projection of Target Pilot Compensation; 4. Increasing the Projected Pilot Compensation in Step 3 by the Expense Multiplier; 5. Adjusting the Result for Inflation or Deflation; 6. Dividing the Result in Step 5 by Projected Bridge Hours to Determine Total Unit Costs (Adjusted Cost per Bridge Hour by Area); 7. Dividing Prospective Unit Costs (Total Unit Cost) in Step 6 by the Base Period Unit Costs in Step 1; and 8. Adjusting 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 last full ratemaking, as indicated in the April 3, 2006 final rule. Target pilot compensation is calculated based upon the most recent contracts between the American Maritime Officers’(AMO) union and vessel owners and operators on the Great Lakes. Bridge hour projections for the 2007 season are based on historical data and data provided by the St. Lawrence Seaway Development Corporation. Bridge hours are the number of hours a pilot is aboard a vessel providing pilotage service and do not include delay, detention, or travel time. All documents and records used in this rate calculation mentioned in this preamble as being available in the docket have been placed in the public docket for this rulemaking and are available for review at the addresses listed under ADDRESSES. Some values may not total exactly due to format rounding for presentation in charts and explanations in this section. The rounding does not affect the integrity or truncate the real value of all calculations in the ratemaking methodology described below. Step 1: Calculating the Base Period Total Economic Cost (Cost per Bridge Hour by Area for the Base Period) The base period numbers used in all calculations are those that were set by the last full ratemaking in 2006. The data used for this first step is obtained from the 2006 final rule’s tables containing the base operating expense, base target pilot compensation, and base return element computations. This first step requires that we calculate the total economic cost for the base period by taking from these tables, and adding together, the recognized expenses, the total cost of target pilot compensation, and the return element in each Area. We then take this sum and divide it by the total bridge hours used in each Area in setting the base period rates. This calculation gives us the cost of providing pilotage service per bridge hour by Area for the base period. The following tables summarize the Step 1 computations: TABLE 1.—BASE PERIOD TOTAL ECONOMIC COST (COST PER BRIDGE HOUR)—DISTRICT ONE Area 1 St. Lawrence River Area 2 Lake Ontario Total district one Base Operating Expenses ........................................................................................................... Base Target Pilot compensation ................................................................................................. Base Return Element 1 ................................................................................................................ $368,186 +$1,207,209 +$8,087 $372,911 +$725,848 +$10,185 $741,097 +1,933,057 +$18,272 Subtotal ........................................................................................................................................ =$1,583,482 =$1,108,944 =$2,692,426 Base Bridge Hours ...................................................................................................................... Base Cost per Bridge Hour ......................................................................................................... ÷6,000 =$263.91 ÷9,000 =$123.22 ÷15,000 =$179.50 1 The return element is defined at Appendix B to 46 CFR part 404 as the sum of net income and interest expense. The return element can be considered the sum of the return to equity capital (net increase), and the return to debt (the interest expense). TABLE 2.—BASE PERIOD TOTAL ECONOMIC COST (COST PER BRIDGE HOUR)—DISTRICT TWO jlentini on PROD1PC65 with RULES Area 4 Lake Erie Base Operating Expenses ........................................................................................................... Base Target Pilot compensation ................................................................................................. Base Return Element .................................................................................................................. VerDate Aug<31>2005 17:15 Feb 22, 2007 Jkt 211001 PO 00000 Frm 00032 Fmt 4700 Sfmt 4700 $427,333 +$725,848 +$20,354 E:\FR\FM\23FER1.SGM 23FER1 Area 5 Southeast Shoal to Port Huron, MI $632,117 +$1,408,410 +$24,275 Total district two $1,059,450 +$2,134,258 +$44,629 8119 Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Rules and Regulations TABLE 2.—BASE PERIOD TOTAL ECONOMIC COST (COST PER BRIDGE HOUR)—DISTRICT TWO—Continued Area 4 Lake Erie Area 5 Southeast Shoal to Port Huron, MI Total district two Subtotal ........................................................................................................................................ =$1,173,535 =$2,064,802 =$3,238,337 Base Bridge Hours ...................................................................................................................... Base Cost per Bridge Hour ......................................................................................................... ÷9,000 =$130.39 ÷7,000 =$294.97 ÷16,000 =$202.40 TABLE 3.—BASE PERIOD TOTAL ECONOMIC COST (COST PER BRIDGE HOUR)—DISTRICT THREE Area 6 Lakes Huron and Michigan Area 7 St. Mary’s River Area 8 Lake Superior Total district three Base Operating Expenses ............................................................................... Base Target Pilot compensation ..................................................................... Base Return Element ...................................................................................... $693,924 +$1,451,696 +$25,283 $271,563 +$804,806 +$9,768 $433,484 +$1,016,187 +$15,451 $1,398,971 +$3,272,689 +$50,502 Subtotal ............................................................................................................ =$2,170,903 =$1,086,137 =$1,465,122 =$4,722,162 Base Bridge Hours .......................................................................................... Base Cost per Bridge Hour ............................................................................. ÷18,000 =$120.61 ÷4,000 =$271.53 ÷12,600 =$116.28 ÷34,600 =$136.48 Step 2. Calculating the Expense Multiplier The expense multiplier is the ratio of both the base operating expenses and the base return element to the base target pilot compensation by Area. This step requires that we add together 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. The following tables show the calculations: 1. EXPENSE MULTIPLIER FOR DISTRICT ONE Area 1 St. Lawrence River Area 2 Lake Ontario Total district one Base Operating Expense ............................................................................................................. Base Return Element .................................................................................................................. $368,186 +$8,087 $372,911 +$10,185 $741,097 +$18,272 Subtotal ........................................................................................................................................ =$376,273 =$383,096 =$759,369 Base Target Pilot Compensation ................................................................................................. Expense Multiplier ....................................................................................................................... ÷$1,207,209 =.31169 ÷$725,848 =.52779 ÷$1,933,057 =.39283 2. EXPENSE MULTIPLIER FOR DISTRICT TWO Area 4 Lake Erie Area 5 Southeast Shoal to Port Huron, MI Total district two Base Operating Expense ............................................................................................................. Base Return Element .................................................................................................................. $427,333 +$20,354 $632,117 +$24,275 $1,059,450 +$44,629 Subtotal ........................................................................................................................................ =$447,687 =$656,392 =$1,104,079 Base Target Pilot Compensation ................................................................................................. Expense Multiplier ....................................................................................................................... ÷$725,848 =.61678 ÷$1,408,410 =.46605 ÷$2,134,258 =.51731 3. EXPENSE MULTIPLIER FOR DISTRICT THREE jlentini on PROD1PC65 with RULES Area 6 Lakes Huron and Michigan Area 7 St. Mary’s River Area 8 Lake Superior Total district three Base Operating Expense ................................................................................. Base Return Element ...................................................................................... $693,924 +$25,283 $271,563 +$9,768 $433,484 +$15,451 $1,398,971 +$50,502 Subtotal ............................................................................................................ =$719,207 =$281,331 =$448,935 =$1,449,473 Base Target Pilot Compensation ..................................................................... ÷$1,451,696 ÷$804,806 ÷$1,016,187 ÷$3,272,689 VerDate Aug<31>2005 17:15 Feb 22, 2007 Jkt 211001 PO 00000 Frm 00033 Fmt 4700 Sfmt 4700 E:\FR\FM\23FER1.SGM 23FER1 8120 Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Rules and Regulations 3. EXPENSE MULTIPLIER FOR DISTRICT THREE Area 6 Lakes Huron and Michigan Expense Multiplier ........................................................................................... Step 3. Calculating the New Annual ‘‘Projection of Target Pilot Compensation’’ Using the Same Procedures Found in Step 2 of Appendix A to 46 CFR Part 404 Step 2 of Appendix A requires the Director of Great Lakes Pilotage to: 1. Determine the new target rate of compensation; 2. Determine the new number of pilots needed in each pilotage Area; and 3. Multiply new target compensation by the new number of pilots needed to project total new target pilot compensation needed in each Area. Each step is detailed as follows: 1. Determination of New Target Pilot Compensation Target pilot compensation for pilots providing services in undesignated waters approximates the average annual compensation for first mates on U.S. Great Lakes vessels. Target pilot compensation for pilots providing services in designated waters approximates the average annual compensation for masters on U.S. Great Lakes vessels. The Office of Great Lakes Pilotage has consistently calculated compensation for masters on the Great Lakes by first multiplying first mates’ salaries by 150% and then adding =.49543 benefits, since this is the best approximation of the average annual compensation for masters. For this interim rule, the average annual compensation for first mates has been partially revised, based on comments to the docket, and confirming research performed by the Coast Guard, to reflect changes in the AMO union contracts on the Great Lakes. The AMO union contracts with six shipping companies on the Great Lakes. On August 1, 2003, the union negotiated collective bargaining agreements with these six companies establishing, among other things, wages and benefits for mariners effective until July 31, 2006. Three of those companies, based on our research, have subsequently entered into Memorandums of Understanding dated July 23, 2004, March 11, 2005 and May 1, 2005, extending the termination dates of these collective bargaining agreements to July 31, 2007, and modifying the wage and benefit portions of the underlying collective bargaining agreements. These modifications initially became effective May 1, 2005, with additional modifications becoming effective August 1, 2005. The remaining three companies have not signed Memorandums of Understanding Area 7 St. Mary’s River =.34956 Area 8 Lake Superior =.44178 Total district three =.44290 extending and modifying the collective bargaining agreements and they, accordingly, continue to operate under the terms of the original 2003 contracts the Coast Guard previously used to approximate first mates’ wages and benefits. In light of the foregoing and to effectuate these changes, the Coast Guard has calculated target pilot compensation under both versions of the AMO union contracts and, using the deadweight tonnages (mid-summer capacity) of vessels operating under each of these contracts, apportioned target pilot compensation based on the percentage of tonnage represented by each of the contracts, to arrive at a weighted average target pilot compensation accurately approximating compensation of first mates on the Great Lakes. We specifically request public comment on this calculation. The following tables (1, 2, and 3) summarize how target pilot compensation is determined for undesignated and designated waters based on the AMO union contracts in effect on August 1, 2003. Data from these AMO union contracts were used in the NPRM published on July 13, 2006. TABLE 1.—WAGES (First mate) pilots on undesignated waters (Master) pilots on designated waters $226.96 (Daily Rate) × 54 (Days) ........................................................................................................................... $12,256 N/A Monthly Total × 9 Months = Total Wages ........................................................................................................ Wages: $226.96 (Daily Rate) × 54 × 1.5 ................................................................................................................ 110,303 N/A N/A 18,384 Monthly Total × 9 Months = Total Wages ........................................................................................................ N/A 165,454 (First mate) pilots on undesignated waters (Master) pilots on designated waters Employer Contribution—401(K) Plan ...................................................................................................................... Clerical ..................................................................................................................................................................... Health ....................................................................................................................................................................... Pension .................................................................................................................................................................... $612.79 +$340.44 +$2,512.51 +$1,283.10 $919.19 +$340.44 +$2,512.51 +$1,283.10 Monthly Total Benefits ...................................................................................................................................... =$4,748.84 =$5,055.24 Monthly component TABLE 2.—BENEFITS jlentini on PROD1PC65 with RULES Monthly component VerDate Aug<31>2005 17:15 Feb 22, 2007 Jkt 211001 PO 00000 Frm 00034 Fmt 4700 Sfmt 4700 E:\FR\FM\23FER1.SGM 23FER1 Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Rules and Regulations 8121 TABLE 2.—BENEFITS (First mate) pilots on undesignated waters Monthly component Monthly Total Benefits × 9 months ........................................................................................................... (Master) pilots on designated waters =$42,740 =$45,497 TABLE 3.—WAGES AND BENEFITS (First Mate) pilots on undesignated waters (Master) pilots on designated waters Wages ...................................................................................................................................................................... Benefits .................................................................................................................................................................... $110,303 +$42,740 $165,454 +$45,497 Total Wages and Benefits ................................................................................................................................ =$153,042 =$210,951 Under the AMO union contracts in effect on August 1, 2003, the monthly component for wages is derived by multiplying the daily rate of pay by 54 days, instead of 30 days, based upon the following formulation provided by the AMO union: a. Average Working Days per month— 30.5. b. Vacation Days per month—15.0. c. Weekend Days per month—4.0. d. Holidays per month—1.5. e. Bonus per month—3.0. Monthly Multiplier—54.0. Additionally, we use a nine-month multiplier in computing annual wages and benefits because the season is nine months in duration, not 12 months. Effective August 1, 2002, the matching benefit increased to 50% for each participating 401(k) employee up to a maximum of 5% of a participating employee’s compensation. For purposes of this benefit, the AMO union contracts interpret ‘‘employee compensation’’ to mean base wages. District Two has a pension plan, while District Three has a 401(k) plan. District One does not provide either a 401(k) or pension plan for its members. Therefore, to conform to the 401(k) matching benefit provision under the AMO union contracts, pilot compensation for Districts Two and Three is increased. The increase in undesignated waters is $5,515.20 and for designated waters is $8,272.80 per pilot. These increases are 5% of compensation, respectively. District One does not administer any form of 401(k) or retirement plan. At the recommendation of the independent accountant, the Coast Guard has determined that the District One pilots should receive the same employer matching benefits as Districts Two and Three. Accordingly, the compensation base of District One is adjusted to include an amount equivalent to an employer’s contribution under the AMO 401(k) matching plan, which increases pilot compensation in undesignated waters by $5,515.20 and for designated waters by $8,272.80 per pilot. The following tables (4, 5, and 6) summarize how target pilot compensation is determined for undesignated and designated waters under the modified AMO union contracts effective August 1, 2005: TABLE 4.—WAGES (First Mate) pilots on undesignated waters Monthly component (Master) pilots on designated waters $279.55 (Daily Wage Rate) × 49.5 (Days) .............................................................................................................. $13,838 N/A Monthly Total × 9 Months = Total Wages ........................................................................................................ $279.55 (Daily Wage Rate) × 49.5 (Days) X 1.5 .................................................................................................... 124,540 N/A N/A $20,757 Monthly Total × 9 Months = Total Wages ........................................................................................................ N/A 186,809 TABLE 5.—BENEFITS (First Mate) pilots on undesignated waters jlentini on PROD1PC65 with RULES Monthly component (Master) pilots on designated waters Employer Contribution—401(K) Plan ...................................................................................................................... Clerical ..................................................................................................................................................................... Health ....................................................................................................................................................................... Pension .................................................................................................................................................................... $691.89 N/A 2,512.51 1,981.53 $1,037.83 N/A 2,512.51 1,981.53 Monthly Total Benefits ...................................................................................................................................... 5,185.92 5,531.86 Monthly Total Benefits × 9 ........................................................................................................................ 46,673 49,787 VerDate Aug<31>2005 17:15 Feb 22, 2007 Jkt 211001 PO 00000 Frm 00035 Fmt 4700 Sfmt 4700 E:\FR\FM\23FER1.SGM 23FER1 8122 Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Rules and Regulations TABLE 6.—TOTAL WAGES AND BENEFITS (First Mate) pilots on undesignated waters (Master) pilots on designated waters Wages ...................................................................................................................................................................... Benefits .................................................................................................................................................................... $124,540 46,673 $186,809 49,787 Total Wages and Benefits ................................................................................................................................ 171,213 236,596 Under the modified AMO union contracts effective August 1, 2005, the daily wage rate was a flat $279.55. This daily wage rate is multiplied by a new monthly multiplier component of 49.5, instead of the 54 days used under the August 1, 2003, AMO union contracts, based upon the following formulation provided by the AMO union: a. Average Working Days per month— 30.5. b. Vacation Days per month—16.0. c. Bonus per month—3.0. Monthly Multiplier—49.5. Additionally, we use a nine-month multiplier in computing annual wages and benefits because the season is nine months in duration, not 12 months. Benefits under the modified AMO union contracts include a health contribution rate of $55.22 per man-day and a pension plan contribution rate of $43.55 per man-day. The AMO 401K employer matching rate remained at 5% of compensation (wages) while the clerical contributions were eliminated. To accurately reflect the compensation received by masters and mates serving on the Great Lakes, we have taken a weighted average of wages and benefits under the two sets of AMO union contracts. The following tables (7, 8, 9, and 10) show how this operation was performed. TABLE 7.—TOTAL WAGES AND BENEFITS BY AMO UNION CONTRACTS Unmodified AMO union contracts eff: August 1, 2003 Total Wages and Benefits for Designated Waters .................................................................................................. Total Wages and Benefits for Un-Designated Waters ............................................................................................ $210,951 153,042 Modified AMO union contracts eff: August 1, 2005 $236,596 171,213 TABLE 8.—DEADWEIGHT TONNAGE BY AMO UNION CONTRACT Great Lakes vessel operators Unmodified AMO union contracts eff: August 1, 2003 Modified AMO union contracts eff: August 1, 2005 American Steamship Company ............................................................................................................................... Central Marine Logistics (Formerly Inland/ISPAT, Inc) ........................................................................................... Oglebay Norton Marine Services ............................................................................................................................ HMC Ship Management .......................................................................................................................................... Key Lakes, Inc (Formerly USS Great Lakes Fleet) ................................................................................................ Interlake Leasing III ................................................................................................................................................. ........................ ........................ ........................ 12,656 303,145 64,960 664,215 96,544 0 ........................ ........................ ........................ Total Tonnage by each AMO contract ............................................................................................................. 380,761 760,759 Percent Tonnage by each AMO contract ................................................................................................................ 380,761 ÷ 1,141,520 = 33.3556% 760,759 ÷ 1,141,520 = 66.6444% TABLE 9.—WEIGHTED AVERAGE WAGES AND BENEFITS BASED ON AMO UNION CONTRACTS Unmodified AMO union contract eff: August 1, 2003 jlentini on PROD1PC65 with RULES Weighted Wages and Benefits (Designated Waters) .............................................................................................. Weighted Wages and Benefits (Un-Designated Waters) ........................................................................................ VerDate Aug<31>2005 17:15 Feb 22, 2007 Jkt 211001 PO 00000 Frm 00036 Fmt 4700 Sfmt 4700 E:\FR\FM\23FER1.SGM 23FER1 $210,953 × .333556 = $70,364 $153,042 × .333556 = $51,048 Modified AMO union contract eff: August 1, 2005 $236,600 × .666444 = $157,678 $171,213 × .666444 = $114,104 Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Rules and Regulations 8123 TABLE 10.—TOTAL WEIGHTED AVERAGE WAGES AND BENEFITS Designated waters Un-designated waters August 1, 2003 Contract .......................................................................................................................................... August 1, 2005 Contract .......................................................................................................................................... $70,364 157,678 $51,048 114,104 Total Weighted Wages and Benefits ................................................................................................................ 228,042 165,152 In calculating the average wages and benefits used in determining target pilot compensation, we first determine the total wages and benefits for designated and undesignated waters under each of the two sets of AMO union contracts (Table 7). Next, we add the total gross deadweight tonnage of vessels under each version of the AMO contracts and calculate the percentage of tonnage represented under each version (Table 8). Based on these calculations, we have estimated current total tonnage at approximately 1.2 million. Of this total, approximately 66% of the tonnage is controlled by shipping companies operating under the modified AMO union contracts, and approximately 33% of the tonnage is controlled by shipping companies operating under the unmodified AMO union contracts. Next, we take the total wages and benefits for designated and undesignated waters under the unmodified AMO union contracts (Table 3) and multiply by approximately 33% and we take the total wages and benefits for designated and undesignated waters under the modified AMO union contract (Table 6) and multiply these by approximately 66%. The results of these computations are added together to arrive at the weighted average target pilot compensation (Table 10). 2. Determination of New Number of Pilots Needed The number of pilots needed in each Area of designated waters is established by dividing the total projected number of bridge hours for that Area by 1,000. The number of pilots needed in each Area of undesignated waters is established by dividing the total number of projected bridge hours for that Area by 1,800. Under the ratemaking methodology, a pilot in designated waters must work 1,000 bridge hours per season to earn projected target pilot compensation. In undesignated waters a pilot must work 1,800 bridge hours to earn target pilot compensation. A bridge hour is defined as an hour of time in which a pilot is aboard a vessel providing basic pilotage service. Dividing the total projected number of bridge hours per Area by the number of bridge hours a pilot needs to work to earn target pilot compensation yields the number of pilots that will be needed in each area to service vessel traffic. Projected bridge hours are based on the vessel traffic that pilots are expected to serve. As previously discussed, the Coast Guard has adjusted the bridge hour calculations contained in the NPRM to reflect actual projected hours for each Area as opposed to the rounded bridge hours previously used to correct for overestimations of projected revenue, expenses, and returns on investment. The Coast Guard has also revised upward its projection of traffic for the 2007 navigation season based upon data received showing an upward trend in tonnage moved within the system, and increases in both vessel transits and bridge hours between 2004 and 2006. The revised projections are made based upon historical data, recent data obtained from the St. Lawrence Seaway Development Corporation, and relevant information provided by pilots and industry. The data analyzed by the Coast Guard has been conflicting. It consists of changes in annual tonnage throughput, numbers of vessel transits, and changing bridge hour requirements from 1999 through 2006. Despite the conflicting data, measurable increases in traffic have occurred between 2004 and 2006 in Area 1 (St. Lawrence Seaway), Area 2 (Lake Ontario), and Area 4 (Lake Erie). No discernable increases have occurred in the remaining Areas. Depending how the data is analyzed the results vary significantly. A regression analysis performed for the period 1999 to 2006 shows that while traffic has fluctuated over this period of time, current levels of traffic are about equal to average long term traffic loads. If just recent bridge hour data is analyzed, however, it appears that traffic has increased approximately 13% in Area 1, 19% in Area 2, and 4% in Area 4 between 2005 and 2006. Based upon the data available to us, we project that these traffic levels will continue into the 2007 season. Accordingly, we have adjusted projected bridge hour totals to reflect these recent trends in traffic. As previously indicated, the bridge hour projection appearing in the NPRM for Area 2 of District One was reduced to reflect unrounded projected bridge hour numbers and reduced again by 1144 bridge hours reflecting the loss of traffic due to the fast ferry going out of business. After performing these adjustments, the 19% projected increase in traffic was applied. The following table, ‘‘Number of Pilots Needed,’’ shows the projection of bridge hours by area and the calculation of the number of pilots needed in each Area for the 2007 navigation season rounded to the next whole pilot: NUMBER OF PILOTS NEEDED Projected 2007 bridge hours jlentini on PROD1PC65 with RULES Pilotage area AREA AREA AREA AREA AREA AREA AREA 1 2 4 5 6 7 8 ........................................................................................................................................ ........................................................................................................................................ ........................................................................................................................................ ........................................................................................................................................ ........................................................................................................................................ ........................................................................................................................................ ........................................................................................................................................ VerDate Aug<31>2005 17:15 Feb 22, 2007 Jkt 211001 PO 00000 Frm 00037 Fmt 4700 Sfmt 4700 5,661 7,993 8,490 6,395 18,000 3,863 11,390 E:\FR\FM\23FER1.SGM 23FER1 Divided by bridge-hour target 1,000 1,800 1,800 1,000 1,800 1,000 1,800 Pilots needed 6 5 5 7 10 4 7 8124 Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Rules and Regulations NUMBER OF PILOTS NEEDED—Continued Projected 2007 bridge hours Divided by bridge-hour target ........................ ........................ Pilotage area Total Pilots Needed .............................................................................................................. 3. Projection of New Total Target Pilot Compensation 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 by the target pilot Pilots needed 44 compensation for pilots working in that Area. The results for each pilotage Area are set out as follows: DISTRICT ONE Area 1 St. Lawrence River Projection of target pilot compensation ....................................................................................... $1,368,253 Area 2 Lake Ontario $825,760 Total district one $2,194,013 DISTRICT TWO Area 4 Lake Erie Projection of target pilot compensation ....................................................................................... $825,760 Area 5 Southeast Shoal to Port Huron, MI $1,596,295 Total district two $2,422,055 DISTRICT THREE Area 6 Lakes Huron and Michigan Projection of target pilot compensation ........................................................... Step 4: Increase the New Total Target Pilot Compensation in Step 3 by the Expense Multiplier in Step 2 The increase in Step 4 refers to the proportional increase of operating $1,651,520 Area 7 St. Mary’s River $912,168 Area 8 Lake Superior $1,156,064 Total district three $3,719,752 expense when new total target pilot compensation is multiplied by the expense multiplier. The calculations for Step 4 appear as follows: DISTRICT ONE Area 1 St. Lawrence River Area 2 Lake Ontario Total district one Pilot Compensation ...................................................................................................................... Expense Multiplier ....................................................................................................................... $1,368,253 × 31169 $825,760 × 52779 $2,194,013 × 39283 Projected Increase in Operating Expense ........................................................................... =$426,468 =$435,829 =$861,881 DISTRICT TWO Area 4 Lake Erie Area 5 southeast Shoal to Port Huron, MI Total district two jlentini on PROD1PC65 with RULES Pilot Compensation ...................................................................................................................... Expense Multiplier ....................................................................................................................... $825,760 × 61678 $1,596,295 × 46605 $2,422,055 × 51731 Projected increase in Operating Expense ............................................................................ =$509,310 =$743,956 =$1,252,960 VerDate Aug<31>2005 17:15 Feb 22, 2007 Jkt 211001 PO 00000 Frm 00038 Fmt 4700 Sfmt 4700 E:\FR\FM\23FER1.SGM 23FER1 Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Rules and Regulations 8125 DISTRICT THREE Area 6 Lakes Huron and Michigan Area 7 St. Mary’s River Area 8 Lake Superior Total district three Pilot Compensation .......................................................................................... Expense Multiplier ........................................................................................... $1,651,520 × 49543 $912,168 × 34956 $1,156,064 × 44178 $3,719,752 × 44290 Projected Increase in Operating Expense ................................................ =$818,205 =$318,861 =$510,730 =$1,647,478 Step 5(a): Adjust the Result in Step 4, as Required, for Inflation or Deflation The calculations for Step 5(a) appear below. Inflation rates were obtained from the U.S. Department of Labor, Bureau of Labor Statistics, ‘‘Midwest Economy—Consumer Prices,’’ using the years 2004 to 2005 annual average in the amount of 3.2% per year. DISTRICT ONE Area 1 St. Lawrence River Area 2 Lake Ontario Total district one Projected Increase in Operating Expense ................................................................................... Inflation Rate ................................................................................................................................ $426,468 × 1.032 $435,829 × 1.032 $861,881 × 1.032 Adjusted Projected Increase in Operating Expense ............................................................ =$440,115 =$449,776 =$889,461 DISTRICT TWO Area 4 Lake Erie Area 5 Southeast Shoal to Port Huron, MI Total district two Projected Increase in Operating Expense ................................................................................... Inflation Rate ................................................................................................................................ $509,310 × 1.032 $743,956 × 1.032 $1,252,960 × 1.032 Adjusted Projected Increase in Operating Expense ............................................................ =$525,608 =$767,763 =$1,293,055 DISTRICT THREE Area 6 Lakes Huron and Michigan Area 7 St. Mary’s River Area 8 Lake Superior Total district three Projected Increase in Operating Expense ....................................................... Inflation Rate .................................................................................................... $818,205 × 1.032 $318,861 × 1.032 $510,730 × 1.032 $1,647,478 × 1.032 Adjusted Projected Increase in Operating Expense ................................ =$844,388 =$329,065 =$527,074 =$1,700,197 Step 5(b): Calculate Projected Total Economic Costs After the inflation adjustments are made to the Operating Expenses in Step 5(a), the adjusted amount (Adjusted Projected Increase in Operating Expense) is added to the New Total Target Pilot Compensation, as determined in Step 3, to arrive at a Projected Total Economic Cost. The Total Economic Cost is necessary to determine the Total Unit Cost in Step 6. The calculations for Step 5(b) appear as follows: DISTRICT ONE Area 1 St. Lawrence River Area 2 Lake Ontario Total district one jlentini on PROD1PC65 with RULES Adjusted Projected Increase in Operating Expense ................................................................... Projected Target Pilot Compensation .......................................................................................... $440,115 +$1,368,253 $449,776 +$825,760 $889,461 +$2,194,013 Projected Total Economic Cost ............................................................................................ =$1,808,368 =$1,275,535 =$3,083,474 VerDate Aug<31>2005 17:15 Feb 22, 2007 Jkt 211001 PO 00000 Frm 00039 Fmt 4700 Sfmt 4700 E:\FR\FM\23FER1.SGM 23FER1 8126 Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Rules and Regulations DISTRICT TWO Area 4 Lake Erie Area 5 Southeast Shoal to Port Huron, MI Total district two Adjusted Projected Increase in Operating Expense ................................................................... Projected Target Pilot Compensation .......................................................................................... $525,608 +$825,760 $767,763 +$1,596,295 $1,293,055 +$2,422,055 Projected Total Economic Cost ............................................................................................ =$1,351,368 =$2,364,058 =$3,715,109 DISTRICT THREE Area 6 Lakes Huron and Michigan Area 7 St. Mary’s River Area 8 Lake Superior Total district three Adjusted Projected Increase in Operating Expense ........................................ Projected Target Pilot Compensation .............................................................. $844,388 +$1,651,520 $329,065 +$912,168 $527,074 +$1,156,064 $1,700,197 +$3,719,752 Projected Total Economic Cost ................................................................ =$2,495,907 =$1,241,233 =$1,683,138 =$5,419,949 Step 6: Divide the Result in Step 5(b) by Projected Bridge Hours to Determine Total Unit Costs (Adjusted Cost per Bridge Hour by Area) DISTRICT ONE Area 1 St. Lawrence River Area 2 Lake Ontario Total district one Projected Total Economic Costs ................................................................................................. Projected Bridge Hours ............................................................................................................... $1,808,368 ÷5,661 $1,275,535 ÷7,993 $3,083,474 ÷13,654 Total Unit Costs .................................................................................................................... =$319.44 =$159.58 =$225.83 DISTRICT TWO Area 4 Lake Erie Area 5 Southeast Shoal to Port Huron, MI Total district two Projected Total Economic Costs ................................................................................................. Projected Bridge Hours ............................................................................................................... $1,351,368 ÷8,490 $2,364,058 ÷6,395 $3,715,109 ÷14,885 Total Unit Costs .................................................................................................................... =$159.17 =$369.67 =$249.59 DISTRICT THREE Area 6 Lakes Huron and Michigan Area 7 St. Mary’s River Area 8 Lake Superior Total district three $2,495,907 ÷18,000 $1,241,233 ÷3,863 $1,683,138 ÷11,390 $5,419,949 ÷33,253 Total Unit Costs ........................................................................................ jlentini on PROD1PC65 with RULES Projected Total Economic Costs ..................................................................... Projected Bridge Hours ................................................................................... =$138.66 =$321.31 =$147.77 =$162.99 Step 7: Divide Prospective Unit Costs in Step 6 by the Base Period Unit Costs in Step 1 This step calculates the percent change in unit cost from the base period to the prospective unit cost. VerDate Aug<31>2005 17:15 Feb 22, 2007 Jkt 211001 PO 00000 Frm 00040 Fmt 4700 Sfmt 4700 E:\FR\FM\23FER1.SGM 23FER1 Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Rules and Regulations 8127 DISTRICT ONE Area 1 St. Lawrence River Area 2 Lake Ontario Total district one Prospective Unit Cost (Total Unit Cost) ...................................................................................... Base Period Unit Cost ................................................................................................................. $319.44 ÷$263.91 $159.58 ÷$123.22 $225.83 ÷$179.50 Percentage Change in Unit Cost (Rate Adjustment) ........................................................... =1.2104 =1.2951 =1.2581 DISTRICT TWO Area 4 Lake Erie Area 5 Southeast Shoal to Port Huron, MI Total district two Prospective Unit Cost (Total Unit Cost) ...................................................................................... Base Period Unit Cost ................................................................................................................. $159.17 ÷$130.39 $369.67 ÷$294.97 $249.59 ÷$202.40 Percentage Change in Unit Cost (Rate Adjustment) ........................................................... =1.2207 =1.2532 =1.2332 DISTRICT THREE Area 6 Lakes Huron and Michigan Area 7 St. Mary’s River Area 8 Lake Superior Total district three Prospective Unit Cost (Total Unit Cost) .......................................................... Base Period Unit Cost ..................................................................................... $138.66 ÷$120.61 $321.31 ÷$271.53 $147.77 ÷$116.28 $162.99 ÷$136.48 Percentage Change in Unit Cost (Rate Adjustment) ............................... =1.1497 =1.1833 =1.2708 =1.1943 Step 8: Adjust the Base Period Rates by the Percentage Change in Unit Costs in Step 7 The ‘‘Percentage Change in Unit Cost’’ in Step 7 represents the percentage change or rate adjustment that will be applied to existing base period rates and charges in Subpart D of 46 CFR part 401. The average increase in rates overall three Districts is 22.62% above the 2006 final rule. The rate adjustments are summarized by Areas in the following table. The actual adjustments are shown in the proposed amendments to regulatory text that follow this preamble. Each of the Area rates listed in part 401 has been adjusted according to this table. Results are rounded to nearest whole dollar. 2007 AREA RATE CHANGES jlentini on PROD1PC65 with RULES If pilotage service is required in: Area Area Area Area Area Area Area 1 2 4 5 6 7 8 (Designated waters) ..... (Undesignated waters) (Undesignated waters) (Designated waters) ..... (Undesignated waters) (Designated waters) ..... (Undesignated waters) VerDate Aug<31>2005 17:15 Feb 22, 2007 Then the percentage increases over the current rate is: 21.04 29.51 22.07 25.32 14.97 18.33 27.08 Jkt 211001 V. Regulatory Evaluation Executive Order 12866, ‘‘Regulatory Planning and Review,’’ 58 FR 51735, October 4, 1993, requires a determination whether a regulatory action is ‘‘significant’’ and therefore subject to review by the Office of Management and Budget (OMB) and subject to the requirements of the Executive Order. This rulemaking is not significant under Executive Order 12866 and has been reviewed by OMB. 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 review, we are adjusting the pilotage rates for the 2007 shipping season to generate sufficient revenue to cover allowable expenses, target pilot compensation, and returns on investment. This interim rule implements a 22.62% average rate adjustment for the Great Lakes system over the rate adjustment found in the 2006 final rule. This adjustment has increased from the proposed 6% published in the NPRM due to changes made to address public PO 00000 Frm 00041 Fmt 4700 Sfmt 4700 comments. (See the ‘‘Discussion of Comments and Changes’’ section for a discussion of the changes made from public comments.) The additional consideration of the wage and benefit increases under three of six union contracts, updating the inflation index, and modifying the projected bridge hours all added to the increased rate adjustment. Changes to AMO union contracts contributed the largest part of the change by increasing the target pilot compensation, resulting in the higher rate adjustment for the interim rule. (See the ‘‘Calculating the Rate Adjustment’’ section of this rulemaking for a detailed explanation of the ratemaking methodology). These adjustments to Great Lakes pilotage rates meet the requirements set forth in 46 CFR part 404 for similar compensation levels between Great Lakes pilots and industry. They also include adjustments for inflation and changes in association expenses to maintain these compensation levels. The increase in pilotage rates will be an additional cost for shippers to transit the Great Lakes system. This interim rule results in a distributional effect that transfers payments (income) from vessel owners and operators to the Great Lakes’ pilot associations through Coast Guard regulated pilotage rates. The shippers affected by these rate adjustments are those owners and E:\FR\FM\23FER1.SGM 23FER1 8128 Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Rules and Regulations 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. There is no minimum tonnage limit or exemption for these vessels. However, the Coast Guard issued a policy position several years ago stating that the statute applies only to commercial vessels and not to recreational vessels. Owners and operators of other vessels that are not affected by this interim rule, such as recreational boats and vessels only operating within the Great Lakes system, may elect to purchase pilotage services. However, this election is voluntary and does not affect the Coast Guard’s calculation of the rate increase and is not a part of our estimated national cost to shippers. We reviewed a sample of pilot source forms, which are the forms used to record pilotage transactions on vessels, and discovered very few cases of U.S. Great Lakes vessels (i.e., domestic vessels without registry operating only in the Great Lakes) that purchased pilotage services. There was one case where the vessel operator purchased pilotage service in District One to presumably leave the Great Lakes system. We assume some vessel owners and operators may also choose to purchase pilotage services if their vessels are carrying hazardous substances or were navigating the Great Lakes system with inexperienced personnel. Based on information from the Coast Guard Office of Great Lakes Pilotage, we have determined that these vessels voluntarily chose to use pilots and, therefore, are exempt from pilotage requirements. We updated our estimates of affected vessels for the interim rule by using recent vessel characteristics, documentation, and arrival data. We used 2004–2005 vessel arrival data from the National Vessel Movement Center (NVMC) and the Coast Guard’s Marine Inspection, Safety, and Law Enforcement (MISLE) system to estimate the average annual number of vessels affected by the rate adjustment to be 269 vessels that journey into the Great Lakes system. These vessels entered the Great Lakes by transiting through or in part of at least one of the three pilotage Districts before leaving the Great Lakes system. These vessels often make more than one distinct stop docking, offloading, and onloading at facilities in Great Lakes ports. Of the total trips for the 269 vessels, there were approximately 1,040 annual U.S. port arrivals before the vessels left the Great Lakes system, based on 2004–2005 vessel data from the NVMC and MISLE. We used district pilotage revenues from the independent accountant’s reports of the Districts’ financial statements to estimate the additional cost to shippers of the rate adjustments in this interim rule. These revenues represent the direct and indirect pilotage costs that shippers must pay for pilotage services in order to transit their vessels in the Great Lakes. Table 1 shows historical pilotage revenues by District. TABLE 1.—DISTRICT REVENUES ($U.S.) Year 1998 1999 2000 2001 2002 District one ................................................................................................................. ................................................................................................................. ................................................................................................................. ................................................................................................................. ................................................................................................................. 2,127,577 2,009,180 1,890,779 1,676,578 1,686,655 District two District three 3,202,374 2,727,688 2,947,798 2,375,779 2,089,348 4,026,802 3,599,993 4,036,354 3,657,756 3,460,560 Total 9,356,753 8,336,861 8,874,931 7,710,113 7,236,563 Source: Annual independent accountant’s reports of the Districts to the Coast Guard’s Office of Great Lake Pilotage. While the revenues have decreased over time, the Coast Guard adjusts pilotage rates to achieve a target pilot compensation similar to masters and first mates working on U.S. vessels engaged in the Great Lakes trade. Table 2 details the revenue adjustment from the 2006 full rate adjustment final rule (71 FR 16501). This interim rule uses the total adjusted revenue from the 2006 final rule as a baseline to estimate the revenue needed for the 2007 shipping season. TABLE 2.—REVENUES FROM THE 2006 FULL RATE ADJUSTMENT ($U.S.) 1 District District one 2002 District Revenues ................................................................................... 2006 Projected Revenue ................................................................................. 2006 Total Adjusted Revenue ......................................................................... 1,686,655 2,231,940 2,643,732 District two 2,089,348 2,375,920 3,125,036 District three 3,460,560 3,908,363 4,722,162 Total 2 7,236,563 8,516,223 10,490,930 1 For the calculation of the 2006 projected and adjusted pilotage revenues, see the ‘‘Discussion of Rule’’ section of the 2006 final rule published in the Federal Register (71 FR 16501). 2 Some values may not total due to rounding. jlentini on PROD1PC65 with RULES We estimate the additional cost of the rate adjustment in this rule to be the difference between the total revenue needed based on the 2006 rate adjustment and the rate adjustment (change) revenue in this interim rule. These revenue values and adjustments are described and calculated in the ‘‘Calculating the Rate Adjustment’’ section of this rulemaking. Table 3 compares projected and adjusted revenues and costs of the rule to industry by district. TABLE 3.—REVENUES, RATE ADJUSTMENT FACTORS AND ADDITIONAL COST OF THIS RULE ($U.S.) District District one Total Adjusted Revenue 2 ................................................................................ VerDate Aug<31>2005 17:15 Feb 22, 2007 Jkt 211001 PO 00000 Frm 00042 Fmt 4700 Sfmt 4700 2,643,732 District two 3,125,036 E:\FR\FM\23FER1.SGM 23FER1 District three 4,722,162 Total 1 10,490,930 Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Rules and Regulations 8129 TABLE 3.—REVENUES, RATE ADJUSTMENT FACTORS AND ADDITIONAL COST OF THIS RULE ($U.S.)—Continued District District one Proposed Rate Change 3 ................................................................................. Revenue Needed 4 ........................................................................................... Additional Revenue or Cost of this Rulemaking 5 ........................................... 1.2581 3,326,079 682,347 District two 1.2332 3,853,794 728,758 District three 1.1943 5,639,678 917,516 Total 1 1.2262 12,819,552 2,328,622 1 Some 2 Total 3 See values may not total due to rounding. adjusted revenue = ‘2002 base revenue’ + ‘2006 final rule rate adjustment revenue’. step 7 of the ‘‘Calculating the Rate Adjustment’’ section of this rule. We used the districts’ percent change in unit costs for the rate jlentini on PROD1PC65 with RULES change. 4 Revenue needed = ‘total adjusted revenue’ × ‘proposed rate change’. 5 Additional revenue or cost of this rule = ’revenue needed’¥‘total adjusted revenue’. After applying the rate change in this interim rule, the resulting difference between the revenue projected and the revenue needed is the annual cost to shippers from this interim rule. This figure will be equivalent to the total additional payments that shippers will make for pilotage services from this interim rule. The annual cost of the rate adjustment in this interim rule to shippers is approximately $2.3 million (nondiscounted). To calculate an exact cost per vessel is difficult because of the variation in vessel types, routes, port arrivals, commodity carriage, time of season, conditions during navigation, and preferences for the extent of pilotage services on designated and undesignated portions of the Great Lakes system. Some owners and operators will pay more and some will pay less depending on the distance and port arrivals of their vessels’ trips. However, the annual cost reported above does capture all of the additional cost the shippers face as a result of the rate adjustment in this interim rule. In addition to the annual reviews and possible partial rate adjustment, the Coast Guard is required to determine and, if necessary, perform a full adjustment of Great Lakes pilotage rates at a minimum of once every five years. Due to the frequency of the rate adjustments, we estimated the total cost to shippers of the rate adjustments in this interim rule over a five-year period instead of a ten-year period. The total five-year (2007–2011) present value cost estimate of this interim rule to shippers is $10.2 million discounted at a 7% discount rate and $11.0 million discounted at a 3% discount rate. For the calculation of the total fiveyear present value cost estimate, we chose not to discount first-year costs and instead began discounting in the second year, because we anticipate that industry will most likely begin to incur costs immediately upon publication of this interim rule during the 2007 Great Lakes shipping season which is generally less than a calendar year. We also considered a middle-of-year VerDate Aug<31>2005 17:15 Feb 22, 2007 Jkt 211001 discounting process to account for the payments occurring over the course of the year but the difference was small considering the overall cost of the interim rule. The cost to shippers of this interim rule is minimal compared with the travel cost shippers save when they use the Great Lakes system. The alternative to Great Lakes waterborne transportation is to choose coastal delivery, such as East Coast and Gulf Coast ports that are more expensive, and extra-modal transportation overland, which is far less practical and has additional transportation costs for all commodity groups. See the docket for this rulemaking, USCG–2006–24414, for an assessment of alternatives to Great Lakes waterborne transportation and the associated costs entitled ‘‘Analysis of Great Lakes Pilotage Costs on Great Lakes Shipping and the Potential Impact of Pilotage Rate Increases’’ (October 1, 2004). A. Small Entities Under the Regulatory Flexibility Act (5 U.S.C. 601–612), we have considered whether this interim rule has 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. We expect entities affected by the interim rule would be classified under the North American Industry Classification System (NAICS) code subsector 483—Water Transportation, which includes one or all of the following 6-digit NAICS codes for freight transportation: 483111—Deep Sea Freight Transportation, 483113— Coastal and Great Lakes Freight Transportation, and 483211—Inland Water Freight Transportation. According to the Small Business Administration’s definition, a U.S. company with these NAICS codes and PO 00000 Frm 00043 Fmt 4700 Sfmt 4700 employing less than 500 employees is considered a small entity. For the interim rule, we reviewed recent company size and ownership data from 2004–2005 Coast Guard MISLE data and public and proprietary business revenue and size data. We found that large foreign-owned shipping conglomerates or their subsidiaries owned or operated all vessels engaged in foreign trade on the Great Lakes. We found one U.S. company operating vessels engaged in foreign trade in the Great Lakes system that was owned by a large foreign company between 2004– 2005. 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 interim rule that will receive the additional revenues from the rate adjustment. These are the three pilot associations that are the only entities providing 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. However, they are not adversely impacted with the additional costs of the rate adjustments, but instead receive the additional revenue benefits for operating expenses and pilot compensation. Therefore, the Coast Guard certifies under 5 U.S.C. § 605(b) that this interim rule does not have a significant economic impact on a substantial number of U.S. small entities. If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this interim rule will have a significant economic impact on it, please submit a comment to the Docket Management Facility at the address under ADDRESSES. In your comment, explain why you think it qualifies and how and to what degree this rule will economically affect it. E:\FR\FM\23FER1.SGM 23FER1 8130 Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Rules and Regulations B. 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 interim rule so that they could better evaluate its effects on them and participate in the rulemaking. If the interim rule affects your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please call Mike Sakaio, Office of Great Lakes Pilotage, (CG– 3PWM–2), U.S. Coast Guard, telephone 202–372–1538 or send him e-mail at Michael.Sakaio@uscg.mil. The Coast Guard will not retaliate against small entities that question or complain about this interim 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). 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. E. 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 or more in any one year. Though this interim rule will not result in such expenditure, we do discuss the effects of this rule elsewhere in this preamble. F. Taking of Private Property This rule does not effect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights. G. Civil Justice Reform This interim 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. C. Collection of Information H. Protection of Children Under the Paperwork Reduction Act (44 U.S.C.3501–3520), the Office of Management and Budget (OMB) reviews each rule that contains a collection of information requirement to determine whether the practical value of the information is worth the burden imposed by its collection. Collection of information requirements include reporting, record keeping, notification, and other similar requirements. This interim rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520). It does not change the burden in the collection currently approved by the Office of Management and Budget (OMB) under OMB Control Number 1625–0086, Great Lakes Pilotage Methodology. We have analyzed this interim rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. It is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children. jlentini on PROD1PC65 with RULES D. 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 interim rule under that Order and have determined that it does not have VerDate Aug<31>2005 17:15 Feb 22, 2007 Jkt 211001 I. Indian Tribal Governments This interim 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. J. Energy Effects We have analyzed this interim 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 PO 00000 Frm 00044 Fmt 4700 Sfmt 4700 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. K. Technical Standards The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies. This interim rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards. L. Environment We have analyzed this interim rule under Commandant Instruction M16475.lD and Department of Homeland Security Management Directive 5100.1, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321–4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this interim rule is categorically excluded, under figure 2–1, paragraph (34)(a), of the Instruction, from further environmental documentation. Paragraph 34(a) pertains to minor regulatory changes that are editorial or procedural in nature. This interim rule adjusts rates in accordance with applicable statutory and regulatory mandates. List of Subjects in 46 CFR Part 404 Administrative practice and procedure, Great Lakes, Navigation (water), Penalties, Reporting and recordkeeping requirements, Seamen. For the reasons set forth in the preamble, the Coast Guard amends part 401 of title 46 of the Code of Federal Regulations as follows: I E:\FR\FM\23FER1.SGM 23FER1 8131 Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Rules and Regulations PART 401—GREAT LAKES PILOTAGE REGULATIONS 1. The authority citation for part 401 continues to read as follows: Security Delegation No. 0170.1 46 CFR 401.105 also issued under the authority of 44 U.S.C. 3507. I I Authority: 46 U.S.C. 2104(a), 6101, 7701, 8105, 9303, 9304; Department of Homeland * * * * * (a) Area 1 (Designated Waters): 2. In § 401.405, revise paragraphs (a) and (b), including the footnote to Table (a), to read as follows: Service St. Lawrence River Basic Pilotage ........................................................................................... Each Lock Transited ................................................................................. Harbor Movage ......................................................................................... 1 The § 401.405 Basic rates and charges on the St. Lawrence River and Lake Ontario. $13 per Kilometer or $23 per mile 1 $288 1 $943 1 minimum basic rate for assignment of a pilot in the St. Lawrence River is $629, and the maximum basic rate for a through trip is $2,761. (b) Area 2 (Undesignated Waters): Service Lake Ontario Six-Hour Period ............................................................................................................................................................................. Docking or Undocking ................................................................................................................................................................... 3. In § 401.407, revise paragraphs (a) and (b), including the footnote to Table (b), to read as follows: I § 401.407 Basic rates and charges on Lake Erie and the navigable waters from Southeast Shoal to Port Huron, MI. * * * * $477 455 (a) Area 4 (Undesignated Waters): * Lake Erie (east of Southeast Shoal) Service Six-Hour Period Docking or ......................................................................................................................... Undocking .................................................................................................................................................... Any Point on the Niagara River below the Black Rock Lock ...................................................................... Buffalo $641 494 N/A $641 494 1,261 (b) Area 5 (Designated Waters): Southeast Shoal Any point on or in Toledo or any port on Lake Erie west of Southeast Shoal. Port Huron Change ................................................................................................. Point ......................................................................................................... St. Clair River ........................................................................................... Detroit or Windsor or the Detroit River .................................................... Detroit Pilot Boat ...................................................................................... 1 When Toledo or any point on Lake Erie west of Southeast Shoal $1,699 $2,206 2,223 2,223 1,004 N/A $1,699 1,729 2,223 N/A N/A 1 3,428 1 2,959 Detroit pilot boat $1,004 1 2,959 Detroit River N/A 2,206 1,699 1,699 1,229 N/A 1,229 1,004 2,223 2,223 pilots are not changed at the Detroit Pilot Boat. 4. In § 401.410, revise paragraphs (a), (b), and (c) to read as follows: I § 401.410 Basic rates and charges on Lakes Huron, Michigan, and Superior, and the St. Mary’s River. * * * * (a) Area 6 (Undesignated Waters): * Lakes Huron and Michigan Service Six-Hour Period ............................................................................................................................................................................. Docking or Undocking ................................................................................................................................................................... jlentini on PROD1PC65 with RULES St. Clair River $479 455 (b) Area 7 (Designated Waters): Area De Tour Gros Cap ................................................................................................................................................. VerDate Aug<31>2005 17:15 Feb 22, 2007 Jkt 211001 PO 00000 Frm 00045 Fmt 4700 Sfmt 4700 E:\FR\FM\23FER1.SGM $1,718 23FER1 Gros cap N/A Any harbor N/A 8132 Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Rules and Regulations Area De Tour Algoma Steel Corporation Wharf at Sault Ste. Marie Ontario ................................................................ Any point in Sault Ste. Marie, Ontario, except the Algoma Steel Corporation Wharf ............................ Sault Ste. Marie, MI ................................................................................................................................. Harbor Movage ........................................................................................................................................ Gros cap 1,718 1,440 1,440 N/A Any harbor $647 647 647 N/A N/A N/A N/A $647 (c) Area 8 (Undesignated Waters): Service Lake Superior Six-Hour Period ............................................................................................................................................................................. Docking or Undocking ................................................................................................................................................................... § 401.420 [Amended] 5. In § 401.420— a. In paragraph (a), remove the number ‘‘$70’’ and add, in its place, the number ‘‘$86’’; and remove the number ‘‘$1,100’’ and add, in its place, the number ‘‘$1,349’’. I b. In paragraph (b), remove the number ‘‘$70’’ and add, in its place, the number ‘‘$86’’; and remove the number ‘‘$1,100’’ and add, in its place, the number ‘‘$1,349’’. I c. In paragraph (c)(1), remove the number ‘‘$416’’ and add, in its place, the number ‘‘$510’’; in paragraph (c)(3), remove the number ‘‘$70’’ and add, in its place, the number ‘‘$86’’; and, also in paragraph (c)(3), remove the number ‘‘$1,100’’ and add, in its place, the number ‘‘$1,349’’. I I § 401.428 [Amended] were published in the Federal Register on October 27, 2000. This document announces the effective date of these published rules. DATES: The amendment to § 15.525 (b) and (e) published at 68 FR 19746, April 22, 2003, became effective on April 5, 2006. FOR FURTHER INFORMATION CONTACT: Nancy J. Brooks, Office of Engineering and Technology, Policy and Rules Division, (202) 418–2454. SUPPLEMENTARY INFORMATION: On April 5, 2006, the Office of Management and Budget (OMB) approved the information collection requirements contained in Section 15.525 (a) and (e), pursuant to OMB Control No. 3060–1015. Accordingly, the information collection requirements contained in these rules became effective on April 5, 2006. Federal Communications Commission. Marlene H. Dortch, Secretary. [FR Doc. E7–3060 Filed 2–22–07; 8:45 am] 6. In § 401.428, remove the number ‘‘$424’’ and add, in its place, the number ‘‘$520’’. I Dated: February 7, 2007. C.E. Bone, Rear Admiral, U.S. Coast Guard, Assistant Commandant for Prevention. [FR Doc. E7–3061 Filed 2–22–07; 8:45 am] BILLING CODE 6712–01–P DEPARTMENT OF COMMERCE BILLING CODE 4910–15–P National Oceanic and Atmospheric Administration FEDERAL COMMUNICATIONS COMMISSION 50 CFR Part 679 [Docket No. 060216044–6044–01; I.D. 022007A] 47 CFR Part 15 [ET Docket No. 98–153; FCC 03–33] Ultra-Wideband Transmission Systems Federal Communications Commission. ACTION: Final rule; announcement of effective date. Fisheries of the Exclusive Economic Zone Off Alaska; Pollock in Statistical Area 630 of the Gulf of Alaska jlentini on PROD1PC65 with RULES AGENCY: AGENCY: SUMMARY: The Commission adopted new rules on the labeling of digital television receivers and other consumer electronics receiving devices. Certain rules contained new modified information collection requirements and SUMMARY: NMFS is reopening directed fishing for pollock in Statistical Area 630 of the Gulf of Alaska (GOA) for 48 hours. This action is necessary to allow VerDate Aug<31>2005 17:15 Feb 22, 2007 Jkt 211001 National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Temporary rule; modification of a closure; request for comments. PO 00000 Frm 00046 Fmt 4700 Sfmt 4700 $464 441 full harvest of the A season allowance of the 2007 total allowable catch (TAC) of pollock specified for Statistical Area 630 of the GOA. DATES: Effective 1200 hrs, Alaska local time (A.l.t.), February 20, 2007, through 1200 hrs, A.l.t., February 22, 2007. Comments must be received at the following address no later than 4:30 p.m., A.l.t., March 7, 2007. ADDRESSES: Send comments to Sue Salveson, Assistant Regional Administrator, Sustainable Fisheries Division, Alaska Region, NMFS, Attn: Ellen Sebastian. Comments may be submitted by: • Mail to: P.O. Box 21668, Juneau, AK 99802; • Hand delivery to the Federal Building, 709 West 9th Street, Room 420A, Juneau, Alaska; • Fax to 907–586–7557; • E-mail to 630pollock1@noaa.gov and include in the subject line of the e-mail comment the document identifier: ‘‘g63plkro3’’ (E-mail comments, with or without attachments, are limited to 5 megabytes); or • Webform at the Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions at that site for submitting comments. FOR FURTHER INFORMATION CONTACT: Jennifer Hogan, 907–586–7228. SUPPLEMENTARY INFORMATION: NMFS manages the groundfish fishery in the GOA exclusive economic zone according to the Fishery Management Plan for Groundfish of the Gulf of Alaska (FMP) prepared by the North Pacific Fishery Management Council under authority of the MagnusonStevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679. NMFS closed the directed fishery for pollock in Statistical Area 630 of the GOA under § 679.20(d)(1)(iii) on January 22, 2007 (72 FR 2793, January 23, 2007). The fishery was subsequently E:\FR\FM\23FER1.SGM 23FER1

Agencies

[Federal Register Volume 72, Number 36 (Friday, February 23, 2007)]
[Rules and Regulations]
[Pages 8115-8132]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-3061]


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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

46 CFR Part 401

[USCG-2006-24414]
RIN 1625-AB05


Rates for Pilotage on the Great Lakes

AGENCY: Coast Guard, DHS.

ACTION: Interim rule with request for comments.

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SUMMARY: The Coast Guard is updating the rates for pilotage service on 
the Great Lakes for the 2007 navigation season. This increases pilotage 
rates an average of 22.62% across all three pilotage districts over the 
last ratemaking that was completed in April of 2006. Annual reviews of 
pilotage rates are required by law to ensure that sufficient revenues 
are generated to cover the annual projected allowable expenses, target 
pilot compensation, and returns on investment of the pilot 
associations. The Coast Guard requests public comment on its 
calculation of these rate increases.

DATES: This interim rule is effective March 26, 2007. Comments and 
related material must reach the Docket Management Facility on or before 
April 24, 2007.

ADDRESSES: You may submit comments identified by Coast Guard docket 
number USCG-2006-24414 to the Docket Management Facility at the U.S. 
Department of Transportation. To avoid duplication, please use only one 
of the following methods:
    (1) Web site: http://dms.dot.gov.
    (2) Mail: Docket Management Facility, U.S. Department of 
Transportation, 400 Seventh Street SW., Washington, DC 20590-0001.
    (3) Fax: 202-493-2251.
    (4) Delivery: Room PL-401 on the Plaza level of the Nassif 
Building, 400 Seventh Street SW., Washington, DC, between 9 a.m. and 5 
p.m., Monday through Friday, except Federal holidays. The telephone 
number is 202-366-9329.
    (5) Federal eRulemaking Portal: http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: For questions on this interim rule, 
call Mr. Michael Sakaio, Program Analyst, Office of Great Lakes 
Pilotage, Commandant (CG-3PWM), U.S. Coast Guard, at 202-372-1538, by 
fax 202-372-1929, or by e-mail at michael.sakaio@uscg.mil. For 
questions on viewing or submitting material to the docket, call Renee 
V. Wright, Chief, Dockets, Department of Transportation, telephone 202-
493-0402.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Public Participation and Request for Comments
II. Background
III. Discussion of Comments and Changes
IV. Discussion of the Interim Rule
    A. Pilotage Rate Changes--Summarized
    B. Calculating the Rate Adjustment
    Step 1: Calculating the Base Period Total Economic Cost (Cost 
per Bridge Hour by Area for the Base Period)
    Step 2. Calculating the Expense Multiplier
    Step 3. Calculating the new annual ``projection of target pilot 
compensation'' using the same procedures found in Step 2 of Appendix 
A to 46 CFR part 404
    Step 4: Increase the new total target pilot compensation in Step 
3 by the expense multiplier in Step 2
    Step 5(a): Adjust the result in Step 4, as required, for 
inflation or deflation
    Step 5(b): Calculate Projected Total Economic Costs
    Step 6: Divide the Result in Step 5(b) by Projected Bridge Hours 
to Determine

[[Page 8116]]

Total Unit Costs (Adjusted Cost per Bridge Hour by Area)
    Step 7: Divide prospective unit costs in Step 6 by the base 
period unit costs in Step 1
    Step 8: Adjust the base period rates by the percentage change in 
unit costs in Step 7
V. Regulatory Evaluation
    A. Small Entities
    B. Assistance for Small Entities
    C. Collection of Information
    D. Federalism
    E. Unfunded Mandates Reform Act
    F. Taking of Private Property
    G. Civil Justice Reform
    H. Protection of Children
    I. Indian Tribal Governments
    J. Energy Effects
    K. Technical Standards
    L. Environment
VI. Regulatory Text

SUPPLEMENTARY INFORMATION: 

I. Public Participation and Request for Comments

    We invite public comment on our calculation of the rate increases 
made in this interim rule, specifically with respect to Step 3 of the 
methodology. All comments received will be posted, without change, to 
http://dms.dot.gov and will include any personal information you have 
provided. We have an agreement with the Department of Transportation 
(DOT) to use the Docket Management Facility. Please see DOT's ``Privacy 
Act'' paragraph below.
    Submitting comments: If you submit a comment, please include your 
name and address, identify the docket number for this rulemaking (USCG-
2006-24414), indicate the specific section of this document to which 
each comment applies, and give the reason for each comment. You may 
submit your comments and material by electronic means, mail, fax, or 
delivery to the Docket Management Facility at the address under 
ADDRESSES; but please submit your comments and material by only one 
means. If you submit them by mail or delivery, submit them in an 
unbound format, no larger than 8\1/2\ by 11 inches, suitable for 
copying and electronic filing. If you submit them by mail and would 
like to know that they reached the Facility, please enclose a stamped, 
self-addressed postcard or envelope. We will consider all comments and 
material received during the comment period. We may change this rule in 
view of them.
    Viewing comments and documents: To view comments, as well as 
documents mentioned in this preamble as being available in the docket, 
go to http://dms.dot.gov at any time, click on ``Simple Search,'' enter 
the last five digits of the docket number for this rulemaking, and 
click on ``Search.'' You may also visit the Docket Management Facility 
in room PL-401 on the Plaza level of the Nassif Building, 400 Seventh 
Street SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through 
Friday, except Federal holidays.
    Privacy Act: Anyone can search the electronic form of all comments 
received into any of our dockets by the name of the individual 
submitting the comment (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc.). You may review the 
Department of Transportation's Privacy Act Statement in the Federal 
Register published on April 11, 2000 (65 FR 19477), or you may visit 
http://dms.dot.gov.
    Public Meeting: We do not now plan to hold a public meeting. But 
you may submit a request for one to the Docket Management Facility at 
the address under ADDRESSES explaining why one 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.

II. Background

    The Great Lakes Pilotage Act of 1960, codified in Title 46, Chapter 
93, of the United States Code (U.S.C.), requires foreign-flag vessels 
and U.S.-flag vessels in foreign trade to use federal Great Lakes 
registered pilots while transiting the St. Lawrence Seaway and the 
Great Lakes system. 46 U.S.C. 9302, 9308. The Coast Guard is 
responsible for administering this pilotage program, which includes 
setting rates for pilotage service.
    The Coast Guard pilotage regulations require annual reviews of 
pilotage rates and the creation of a new rate at least once every five 
years, or sooner, if annual reviews show a need. 46 CFR part 404. 46 
U.S.C. 9303(f) requires these reviews and, where deemed appropriate, 
adjustments be established by March 1 of every season.
    To assist in calculating pilotage rates, the three Great Lakes 
pilotage associations are required to submit to the Coast Guard annual 
financial statements prepared by certified public accounting firms. In 
addition, every fifth year, in connection with the full ratemaking, the 
Coast Guard contracts with an independent accounting firm to conduct 
audits of the accounts and records of the pilotage associations and to 
submit financial reports relevant to the ratemaking process. In those 
years when a full ratemaking is conducted, the Coast Guard generates 
the pilotage rates using Appendix A to 46 CFR Part 404. Between the 
five-year full ratemaking intervals, the Coast Guard annually reviews 
the pilotage rates using Appendix C to 46 CFR Part 404, and adjusts 
rates as appropriate.
    The last full ratemaking was published in the Federal Register on 
April 3, 2006 (71 FR 16501). On July 13, 2006, we published a Notice of 
Proposed Rulemaking (NPRM; 71 FR 39629), thus beginning the first 
annual review and adjustment following that full ratemaking. By law, 
this review must be completed by March 1, 2007.

III. Discussion of Comments and Changes

    The Coast Guard received four comments in response to the July 2006 
NPRM. One comment was received from the American Maritime Officers' 
(AMO) union, two comments were received from the Lakes Pilots' 
Association (LPA), and one comment was received from the legal 
representative of the pilots' associations. This last commenter 
prefaced his discussion of several issues by stating that ``the pilots 
are willing to have the Coast Guard defer action on [these issues] to 
the earliest possible time at which they will not delay the issuance of 
the updated rate pursuant to the current NPRM proceeding.'' We agree 
that timely completion of this annual rate update is of paramount 
importance.
    Contract modifications. All four comments stated that AMO union 
contracts with one or more of the shipping companies on the Great Lakes 
had changed prior to the publication of the NPRM on July 13, 2006, and 
requested that the final rule reflect this change. After reviewing the 
submissions and researching the issue to confirm the accuracy of the 
comments, the Coast Guard has concluded that these comments are 
partially correct.
    The AMO union contracts with six shipping companies on the Great 
Lakes. On August 1, 2003, the union negotiated collective bargaining 
agreements with these six companies establishing, among other things, 
wages and benefits for mariners effective until July 31, 2006. Three of 
those companies, based on our research, have subsequently entered into 
Memorandums of Understanding dated July 23, 2004, March 11, 2005, and 
May 1, 2005, extending the termination dates of these collective 
bargaining agreements to July 31, 2007, and modifying the wage and 
benefit portions of the underlying collective bargaining agreements. 
These modifications initially became effective May 1, 2005, with 
additional modifications becoming effective August 1, 2005. The 
remaining three companies have not signed Memorandums of Understanding

[[Page 8117]]

extending and modifying the collective bargaining agreements. 
Accordingly, they continue to operate under the terms of the original 
2003 contracts previously used by the Coast Guard to approximate first 
mates wages and benefits.
    The Coast Guard agrees that, since these contract modifications 
went into effect prior to the date the NPRM was published, weight 
should be given to these updated contracts. However, the Coast Guard 
also believes that to properly approximate current first mates wages 
and benefits, we must also give consideration to the August 1, 2003, 
AMO union contracts that remain in effect with three of the six 
shipping companies. Accordingly, we have calculated first mates wages 
and benefits under both versions of the AMO union contracts and, using 
the deadweight tonnage (mid-summer capacity tonnage) of vessels 
operating under each of these contracts, apportioned target pilot 
compensation based on the percentage of tonnage represented by each of 
the contracts to arrive at a weighted average target pilot 
compensation. This calculation is discussed in greater detail under 
Step 3 of this Appendix C Ratemaking Methodology. We specifically 
request public comment on this calculation.
    Calculation of projected bridge hours. One commenter pointed out 
that we rounded up the bridge hour projections shown in Step 2.B of the 
Appendix A calculations for the 2006 final rule and in Step 3 of the 
Appendix C calculations for this rulemaking's NPRM. The commenter 
stated, correctly, that this was a departure from our past practice, 
and that the resulting artificial overstatement of traffic projections 
lowers rates. Because we now agree with this comment, we have corrected 
Step 3 in our Appendix C computations, to show actual projected bridge 
hours rather than rounded-up projections. This affects subsequent 
computations made under Appendix C, and raises rates an average of 3% 
over what we proposed in the NPRM. We also note by this commenter's 
remark that the impact of our error was most notable in District One, 
which has suffered the cessation of fast ferry service that accounted 
for 1,144 projected bridge hours in the 2006 ratemaking. This interim 
rule removes those hours from the District One projection.
    Delay and detention. One commenter alleged that our 2006 ratemaking 
``changes, without explanation'' our ``longstanding practice'' of 
counting ``delay and detention'' hours in the pilots'' workload, and 
that this rulemaking's NPRM perpetuates this alleged error.
    The comment is incorrect. 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. The Appendix A, Step 2.B definition of bridge hours 
as the ``number of hours a pilot is aboard a vessel providing basic 
pilotage service'' has never changed. We have consistently and publicly 
stated that this excludes detention, delay, or travel time: See, for 
example, 65 FR 55206 at 55208 (Sep. 13, 2000), 66 FR 36484 (Jul. 12, 
2001). In 2002, we reiterated this policy at the same time as we 
acknowledged a possible inadvertent departure from the policy in 2001. 
67 FR 47464 (Jul. 19, 2002). The policy has been expressed and followed 
in all our ratemaking documents since 2002.
    The commenter further cited Rear Admiral J. Timothy Riker's March 
4, 2003 report on Great Lakes pilotage, in which he recommended 
including delay and detention in calculating bridge hours. The 
commenter expressed concern over the ``slow pace'' of the Coast Guard's 
response to the Riker report and asked us to implement its 
recommendations promptly. The report can be found at http://
dms.dot.gov, under Docket USCG-2002-13191 where it appears as item 85.
    The Riker report presented a series of recommendations for Coast 
Guard consideration. We are, and have been, actively engaged in 
reviewing these recommendations. This will be the subject of a separate 
Federal Register notice.
    150% factor for designated waters. One commenter alleged that we 
have improperly calculated target pilot compensation for pilots 
servicing designated waters. The Coast Guard's standard practice under 
Appendix A, Step 2.A(1) and (2), is to calculate this compensation by 
multiplying first mates wages by 150%, and then adding benefits. The 
commenter believes that, instead, we should multiply the total of first 
mates wages and benefits by 150%. The rationale for the Coast Guard's 
method of calculation was given in the Saint Lawrence Seaway 
Development Corporation's 1997 final rule (62 FR 5917, 5920; Feb. 10, 
1997). Further discussion can be found in the docket for the 1997 rule; 
see http://www.dms.dot.gov, Docket SLSDC-1996-1781, item 22.
    This issue was the subject of litigation between the Lakes Pilots 
Association and the Coast Guard. In an unpublished Memorandum Opinion 
(Lakes Pilots' Association v. United States Coast Guard, Civil Action 
No. 01-1721(RBW); Apr. 4, 2003), which we have placed in the docket for 
this rulemaking, the U.S. District Court for the District of Columbia 
upheld the Coast Guard's interpretation of the applicable regulations 
and the method used to calculate target pilot compensation for pilots 
servicing designated waters. It is the Coast Guard's view that this 
matter has been resolved by the court's decision.
    Rate adjustment with Canada. One commenter stated that U.S. 
pilotage rates must be identical to rates charged by the Canadian 
pilotage authority, in keeping with provisions of the January 18, 1977 
Memorandum of Arrangements (MOA) regarding Great Lakes pilotage, which 
was signed by the U.S. Secretary of Transportation and the Canadian 
Minister of Transport, and which remains in effect. Paragraph 7 of the 
MOA states that ``the Secretary and the Minister will arrange for the 
establishment of regulations imposing identical rates, charges and any 
other conditions or terms being annexed hereto from time to time as a 
Rate Supplement and to be deemed as part of this Memorandum of 
Arrangements'' (emphasis added). The MOA is enforceable only between 
the two sovereign nations that are party to it. No private right of 
action is created by which individuals might seek to enforce the MOA 
for their own benefit.
    This comment is beyond the scope of this rulemaking, which merely 
applies existing U.S. regulations. Those regulations reflect the MOA, 
in that they allow for rate adjustment after U.S. consultation with 
Canada, but they do not automatically adjust U.S. rates to reflect 
Canadian rates, nor do they require U.S. rates to be identical to 
Canadian rates. We infer that the commenter's intent is to encourage 
consultation between the U.S. and Canada so that rates will be made 
identical. Due to vast differences in the pilotage systems and 
ratemaking methodologies of the two nations, and to frequent economic 
fluctuations that affect the two nations dissimilarly, it may not be 
practicable, or desirable from the perspective of the U.S. pilots, to 
set identical rates. However, we have been discussing with the Canadian 
Great Lakes Pilotage Authority ways to achieve rate parity.

IV. Discussion of the Interim Rule

A. Pilotage Rate Changes--Summarized

    This interim rule adjusts the rates for Federal pilots on the Great 
Lakes, contained in 46 CFR 401.405, 401.407, and 401.410, in accordance 
with

[[Page 8118]]

Appendix C of 46 CFR part 404. Using this methodology, the rate 
adjustment results in an average increase of 22.62% across all 
Districts over the last pilotage rate adjustment. Fourteen and seven-
tenths percent (14.7%) of the increase is attributable to increases in 
wages and benefits contained in the most recent American Maritime 
Officers' union contracts that were not included in the NPRM; 5% of the 
increase is attributable to increased traffic projections based upon 
changes in traffic levels between 2005 and 2006; 3% of the increase is 
attributable to adjustments made in the rate computation returning 
projected bridge hours to unrounded values; and 0.5% of the increase is 
attributable to non-wage inflation.

                         2007 Area Rate Changes
------------------------------------------------------------------------
                                                               Then the
                                                              percentage
                                                              increases
            If pilotage service is required in:                over the
                                                               current
                                                               rate is:
------------------------------------------------------------------------
Area 1 (Designated waters).................................        21.04
Area 2 (Undesignated waters)...............................        29.51
Area 4 (Undesignated waters)...............................        22.07
Area 5 (Designated waters).................................        25.32
Area 6 (Undesignated waters)...............................        14.97
Area 7 (Designated waters).................................        18.33
Area 8 (Undesignated waters)...............................        27.08
------------------------------------------------------------------------

    Rates for ``Cancellation, delay or interruption in rendering 
services (Sec.  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 (Sec.  401.428)'' have been increased by 
22.62%. These changes are the same in every Area.

B. Calculating the Rate Adjustment

    The ratemaking analyses and methodology contained in Appendix C to 
46 CFR part 404 comprises eight steps. These steps are:
    1. Calculating the Base Period Total Economic Cost (Cost Per Bridge 
Hour by Area for the Base Period);
    2. Calculating the Expense Multiplier;
    3. Calculating the Annual Projection of Target Pilot Compensation;
    4. Increasing the Projected Pilot Compensation in Step 3 by the 
Expense Multiplier;
    5. Adjusting the Result for Inflation or Deflation;
    6. Dividing the Result in Step 5 by Projected Bridge Hours to 
Determine Total Unit Costs (Adjusted Cost per Bridge Hour by Area);
    7. Dividing Prospective Unit Costs (Total Unit Cost) in Step 6 by 
the Base Period Unit Costs in Step 1; and
    8. Adjusting 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 last full ratemaking, as indicated in the April 3, 2006 final rule. 
Target pilot compensation is calculated based upon the most recent 
contracts between the American Maritime Officers'(AMO) union and vessel 
owners and operators on the Great Lakes. Bridge hour projections for 
the 2007 season are based on historical data and data provided by the 
St. Lawrence Seaway Development Corporation. Bridge hours are the 
number of hours a pilot is aboard a vessel providing pilotage service 
and do not include delay, detention, or travel time. All documents and 
records used in this rate calculation mentioned in this preamble as 
being available in the docket have been placed in the public docket for 
this rulemaking and are available for review at the addresses listed 
under ADDRESSES.
    Some values may not total exactly due to format rounding for 
presentation in charts and explanations in this section. The rounding 
does not affect the integrity or truncate the real value of all 
calculations in the ratemaking methodology described below.
Step 1: Calculating the Base Period Total Economic Cost (Cost per 
Bridge Hour by Area for the Base Period)
    The base period numbers used in all calculations are those that 
were set by the last full ratemaking in 2006. The data used for this 
first step is obtained from the 2006 final rule's tables containing the 
base operating expense, base target pilot compensation, and base return 
element computations. This first step requires that we calculate the 
total economic cost for the base period by taking from these tables, 
and adding together, the recognized expenses, the total cost of target 
pilot compensation, and the return element in each Area. We then take 
this sum and divide it by the total bridge hours used in each Area in 
setting the base period rates. This calculation gives us the cost of 
providing pilotage service per bridge hour by Area for the base period.
    The following tables summarize the Step 1 computations:

                 Table 1.--Base Period Total Economic Cost (Cost Per Bridge Hour)--District One
----------------------------------------------------------------------------------------------------------------
                                                                    Area 1 St.      Area 2 Lake   Total district
                                                                  Lawrence River      Ontario           one
----------------------------------------------------------------------------------------------------------------
Base Operating Expenses.........................................        $368,186        $372,911        $741,097
Base Target Pilot compensation..................................     +$1,207,209       +$725,848      +1,933,057
Base Return Element \1\.........................................         +$8,087        +$10,185        +$18,272
                                                                 -----------------------------------------------
Subtotal........................................................     =$1,583,482     =$1,108,944     =$2,692,426
                                                                 -----------------------------------------------
Base Bridge Hours...............................................          /6,000          /9,000         /15,000
Base Cost per Bridge Hour.......................................        =$263.91        =$123.22        =$179.50
----------------------------------------------------------------------------------------------------------------
\1\ The return element is defined at Appendix B to 46 CFR part 404 as the sum of net income and interest
  expense. The return element can be considered the sum of the return to equity capital (net increase), and the
  return to debt (the interest expense).


                 Table 2.--Base Period Total Economic Cost (Cost Per Bridge Hour)--District Two
----------------------------------------------------------------------------------------------------------------
                                                                                      Area 5
                                                                    Area 4 Lake      Southeast    Total district
                                                                       Erie        Shoal to Port        two
                                                                                     Huron, MI
----------------------------------------------------------------------------------------------------------------
Base Operating Expenses.........................................        $427,333        $632,117      $1,059,450
Base Target Pilot compensation..................................       +$725,848     +$1,408,410     +$2,134,258
Base Return Element.............................................        +$20,354        +$24,275        +$44,629
                                                                 -----------------------------------------------

[[Page 8119]]

 
Subtotal........................................................     =$1,173,535     =$2,064,802     =$3,238,337
                                                                 -----------------------------------------------
Base Bridge Hours...............................................          /9,000          /7,000         /16,000
Base Cost per Bridge Hour.......................................        =$130.39        =$294.97        =$202.40
----------------------------------------------------------------------------------------------------------------


                Table 3.--Base Period Total Economic Cost (Cost Per Bridge Hour)--District Three
----------------------------------------------------------------------------------------------------------------
                                                   Area 6 Lakes
                                                     Huron and      Area 7 St.      Area 8 Lake   Total district
                                                     Michigan      Mary's River      Superior          three
----------------------------------------------------------------------------------------------------------------
Base Operating Expenses.........................        $693,924        $271,563        $433,484      $1,398,971
Base Target Pilot compensation..................     +$1,451,696       +$804,806     +$1,016,187     +$3,272,689
Base Return Element.............................        +$25,283         +$9,768        +$15,451        +$50,502
                                                 ---------------------------------------------------------------
Subtotal........................................     =$2,170,903     =$1,086,137     =$1,465,122     =$4,722,162
                                                 ---------------------------------------------------------------
Base Bridge Hours...............................         /18,000          /4,000         /12,600         /34,600
Base Cost per Bridge Hour.......................        =$120.61        =$271.53        =$116.28        =$136.48
----------------------------------------------------------------------------------------------------------------

Step 2. Calculating the Expense Multiplier
    The expense multiplier is the ratio of both the base operating 
expenses and the base return element to the base target pilot 
compensation by Area. This step requires that we add together 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. The following tables show the calculations:

                                      1. Expense Multiplier for District One
----------------------------------------------------------------------------------------------------------------
                                                                    Area 1 St.      Area 2 Lake   Total district
                                                                  Lawrence River      Ontario           one
----------------------------------------------------------------------------------------------------------------
Base Operating Expense..........................................        $368,186        $372,911        $741,097
Base Return Element.............................................         +$8,087        +$10,185        +$18,272
                                                                 -----------------------------------------------
Subtotal........................................................       =$376,273       =$383,096       =$759,369
                                                                 -----------------------------------------------
Base Target Pilot Compensation..................................     /$1,207,209       /$725,848     /$1,933,057
Expense Multiplier..............................................         =.31169         =.52779         =.39283
----------------------------------------------------------------------------------------------------------------


                                     2. Expense Multiplier for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                      Area 5
                                                                    Area 4 Lake      Southeast    Total district
                                                                       Erie        Shoal to Port        two
                                                                                     Huron, MI
----------------------------------------------------------------------------------------------------------------
Base Operating Expense..........................................        $427,333        $632,117      $1,059,450
Base Return Element.............................................        +$20,354        +$24,275        +$44,629
                                                                 -----------------------------------------------
Subtotal........................................................       =$447,687       =$656,392     =$1,104,079
                                                                 -----------------------------------------------
Base Target Pilot Compensation..................................       /$725,848     /$1,408,410     /$2,134,258
Expense Multiplier..............................................         =.61678         =.46605         =.51731
----------------------------------------------------------------------------------------------------------------


                                     3. Expense Multiplier for District Three
----------------------------------------------------------------------------------------------------------------
                                                   Area 6 Lakes
                                                     Huron and      Area 7 St.      Area 8 Lake   Total district
                                                     Michigan      Mary's River      Superior          three
----------------------------------------------------------------------------------------------------------------
Base Operating Expense..........................        $693,924        $271,563        $433,484      $1,398,971
Base Return Element.............................        +$25,283         +$9,768        +$15,451        +$50,502
                                                 ---------------------------------------------------------------
Subtotal........................................       =$719,207       =$281,331       =$448,935     =$1,449,473
                                                 ---------------------------------------------------------------
Base Target Pilot Compensation..................     /$1,451,696       /$804,806     /$1,016,187     /$3,272,689

[[Page 8120]]

 
Expense Multiplier..............................         =.49543         =.34956         =.44178         =.44290
----------------------------------------------------------------------------------------------------------------

Step 3. Calculating the New Annual ``Projection of Target Pilot 
Compensation'' Using the Same Procedures Found in Step 2 of Appendix A 
to 46 CFR Part 404
    Step 2 of Appendix A requires the Director of Great Lakes Pilotage 
to:
    1. Determine the new target rate of compensation;
    2. Determine the new number of pilots needed in each pilotage Area; 
and
    3. Multiply new target compensation by the new number of pilots 
needed to project total new target pilot compensation needed in each 
Area.
    Each step is detailed as follows:
1. Determination of New Target Pilot Compensation
    Target pilot compensation for pilots providing services in 
undesignated waters approximates the average annual compensation for 
first mates on U.S. Great Lakes vessels. Target pilot compensation for 
pilots providing services in designated waters approximates the average 
annual compensation for masters on U.S. Great Lakes vessels. The Office 
of Great Lakes Pilotage has consistently calculated compensation for 
masters on the Great Lakes by first multiplying first mates' salaries 
by 150% and then adding benefits, since this is the best approximation 
of the average annual compensation for masters.
    For this interim rule, the average annual compensation for first 
mates has been partially revised, based on comments to the docket, and 
confirming research performed by the Coast Guard, to reflect changes in 
the AMO union contracts on the Great Lakes. The AMO union contracts 
with six shipping companies on the Great Lakes. On August 1, 2003, the 
union negotiated collective bargaining agreements with these six 
companies establishing, among other things, wages and benefits for 
mariners effective until July 31, 2006. Three of those companies, based 
on our research, have subsequently entered into Memorandums of 
Understanding dated July 23, 2004, March 11, 2005 and May 1, 2005, 
extending the termination dates of these collective bargaining 
agreements to July 31, 2007, and modifying the wage and benefit 
portions of the underlying collective bargaining agreements. These 
modifications initially became effective May 1, 2005, with additional 
modifications becoming effective August 1, 2005. The remaining three 
companies have not signed Memorandums of Understanding extending and 
modifying the collective bargaining agreements and they, accordingly, 
continue to operate under the terms of the original 2003 contracts the 
Coast Guard previously used to approximate first mates' wages and 
benefits.
    In light of the foregoing and to effectuate these changes, the 
Coast Guard has calculated target pilot compensation under both 
versions of the AMO union contracts and, using the deadweight tonnages 
(mid-summer capacity) of vessels operating under each of these 
contracts, apportioned target pilot compensation based on the 
percentage of tonnage represented by each of the contracts, to arrive 
at a weighted average target pilot compensation accurately 
approximating compensation of first mates on the Great Lakes. We 
specifically request public comment on this calculation.
    The following tables (1, 2, and 3) summarize how target pilot 
compensation is determined for undesignated and designated waters based 
on the AMO union contracts in effect on August 1, 2003. Data from these 
AMO union contracts were used in the NPRM published on July 13, 2006.

                             Table 1.--Wages
------------------------------------------------------------------------
                                           (First mate)       (Master)
                                             pilots on       pilots on
            Monthly component              undesignated     designated
                                              waters          waters
------------------------------------------------------------------------
$226.96 (Daily Rate) x 54 (Days)........         $12,256             N/A
                                         -------------------------------
    Monthly Total x 9 Months = Total             110,303             N/A
     Wages..............................
Wages: $226.96 (Daily Rate) x 54 x 1.5..             N/A          18,384
                                         -------------------------------
    Monthly Total x 9 Months = Total                 N/A         165,454
     Wages..............................
------------------------------------------------------------------------


                            Table 2.--Benefits
------------------------------------------------------------------------
                                           (First mate)       (Master)
                                             pilots on       pilots on
            Monthly component              undesignated     designated
                                              waters          waters
------------------------------------------------------------------------
Employer Contribution--401(K) Plan......         $612.79         $919.19
Clerical................................        +$340.44        +$340.44
Health..................................      +$2,512.51      +$2,512.51
Pension.................................      +$1,283.10      +$1,283.10
                                         -------------------------------
    Monthly Total Benefits..............      =$4,748.84      =$5,055.24
                                         -------------------------------

[[Page 8121]]

 
        Monthly Total Benefits x 9              =$42,740        =$45,497
         months.........................
------------------------------------------------------------------------


                      Table 3.--Wages and Benefits
------------------------------------------------------------------------
                                           (First Mate)      (Master)
                                             pilots on       pilots on
                                           undesignated     designated
                                              waters          waters
------------------------------------------------------------------------
Wages...................................        $110,303        $165,454
Benefits................................        +$42,740        +$45,497
                                         -------------------------------
    Total Wages and Benefits............       =$153,042       =$210,951
------------------------------------------------------------------------

    Under the AMO union contracts in effect on August 1, 2003, the 
monthly component for wages is derived by multiplying the daily rate of 
pay by 54 days, instead of 30 days, based upon the following 
formulation provided by the AMO union:
    a. Average Working Days per month--30.5.
    b. Vacation Days per month--15.0.
    c. Weekend Days per month--4.0.
    d. Holidays per month--1.5.
    e. Bonus per month--3.0.
    Monthly Multiplier--54.0.
    Additionally, we use a nine-month multiplier in computing annual 
wages and benefits because the season is nine months in duration, not 
12 months.
    Effective August 1, 2002, the matching benefit increased to 50% for 
each participating 401(k) employee up to a maximum of 5% of a 
participating employee's compensation. For purposes of this benefit, 
the AMO union contracts interpret ``employee compensation'' to mean 
base wages. District Two has a pension plan, while District Three has a 
401(k) plan. District One does not provide either a 401(k) or pension 
plan for its members. Therefore, to conform to the 401(k) matching 
benefit provision under the AMO union contracts, pilot compensation for 
Districts Two and Three is increased. The increase in undesignated 
waters is $5,515.20 and for designated waters is $8,272.80 per pilot. 
These increases are 5% of compensation, respectively.
    District One does not administer any form of 401(k) or retirement 
plan. At the recommendation of the independent accountant, the Coast 
Guard has determined that the District One pilots should receive the 
same employer matching benefits as Districts Two and Three.
    Accordingly, the compensation base of District One is adjusted to 
include an amount equivalent to an employer's contribution under the 
AMO 401(k) matching plan, which increases pilot compensation in 
undesignated waters by $5,515.20 and for designated waters by $8,272.80 
per pilot.
    The following tables (4, 5, and 6) summarize how target pilot 
compensation is determined for undesignated and designated waters under 
the modified AMO union contracts effective August 1, 2005:

                             Table 4.--Wages
------------------------------------------------------------------------
                                           (First Mate)      (Master)
                                             pilots on       pilots on
            Monthly component              undesignated     designated
                                              waters          waters
------------------------------------------------------------------------
$279.55 (Daily Wage Rate) x 49.5 (Days).         $13,838             N/A
                                         -------------------------------
    Monthly Total x 9 Months = Total             124,540             N/A
     Wages..............................
$279.55 (Daily Wage Rate) x 49.5 (Days)              N/A         $20,757
 X 1.5..................................
                                         -------------------------------
    Monthly Total x 9 Months = Total                 N/A         186,809
     Wages..............................
------------------------------------------------------------------------


                           Table 5.--Benefits
------------------------------------------------------------------------
                                           (First Mate)      (Master)
                                             pilots on       pilots on
            Monthly component              undesignated     designated
                                              waters          waters
------------------------------------------------------------------------
Employer Contribution--401(K) Plan......         $691.89       $1,037.83
Clerical................................             N/A             N/A
Health..................................        2,512.51        2,512.51
Pension.................................        1,981.53        1,981.53
                                         -------------------------------
    Monthly Total Benefits..............        5,185.92        5,531.86
                                         -------------------------------
        Monthly Total Benefits x 9......          46,673          49,787
------------------------------------------------------------------------


[[Page 8122]]


                   Table 6.--Total Wages and Benefits
------------------------------------------------------------------------
                                           (First Mate)      (Master)
                                             pilots on       pilots on
                                           undesignated     designated
                                              waters          waters
------------------------------------------------------------------------
Wages...................................        $124,540        $186,809
Benefits................................          46,673          49,787
                                         -------------------------------
    Total Wages and Benefits............         171,213         236,596
------------------------------------------------------------------------

    Under the modified AMO union contracts effective August 1, 2005, 
the daily wage rate was a flat $279.55. This daily wage rate is 
multiplied by a new monthly multiplier component of 49.5, instead of 
the 54 days used under the August 1, 2003, AMO union contracts, based 
upon the following formulation provided by the AMO union:
    a. Average Working Days per month--30.5.
    b. Vacation Days per month--16.0.
    c. Bonus per month--3.0.
    Monthly Multiplier--49.5.
    Additionally, we use a nine-month multiplier in computing annual 
wages and benefits because the season is nine months in duration, not 
12 months.
    Benefits under the modified AMO union contracts include a health 
contribution rate of $55.22 per man-day and a pension plan contribution 
rate of $43.55 per man-day. The AMO 401K employer matching rate 
remained at 5% of compensation (wages) while the clerical contributions 
were eliminated.
    To accurately reflect the compensation received by masters and 
mates serving on the Great Lakes, we have taken a weighted average of 
wages and benefits under the two sets of AMO union contracts. The 
following tables (7, 8, 9, and 10) show how this operation was 
performed.

        Table 7.--Total Wages and Benefits by AMO Union Contracts
------------------------------------------------------------------------
                                                           Modified  AMO
                                          Unmodified AMO       union
                                               union      contracts eff:
                                          contracts eff:     August 1,
                                          August 1, 2003       2005
------------------------------------------------------------------------
Total Wages and Benefits for Designated         $210,951        $236,596
 Waters.................................
Total Wages and Benefits for Un-                 153,042         171,213
 Designated Waters......................
------------------------------------------------------------------------


           Table 8.--Deadweight Tonnage by AMO Union Contract
------------------------------------------------------------------------
                                                           Modified  AMO
                                          Unmodified AMO       union
      Great Lakes vessel operators             union      contracts eff:
                                          contracts eff:     August 1,
                                          August 1, 2003       2005
------------------------------------------------------------------------
American Steamship Company..............  ..............         664,215
Central Marine Logistics (Formerly        ..............          96,544
 Inland/ISPAT, Inc).....................
Oglebay Norton Marine Services..........  ..............               0
HMC Ship Management.....................          12,656  ..............
Key Lakes, Inc (Formerly USS Great Lakes         303,145  ..............
 Fleet).................................
Interlake Leasing III...................          64,960  ..............
                                         -------------------------------
    Total Tonnage by each AMO contract..         380,761         760,759
                                         -------------------------------
Percent Tonnage by each AMO contract....       380,761 /       760,759 /
                                             1,141,520 =     1,141,520 =
                                                33.3556%        66.6444%
------------------------------------------------------------------------


    Table 9.--Weighted Average Wages and Benefits Based on AMO Union
                                Contracts
------------------------------------------------------------------------
                                          Unmodified AMO   Modified  AMO
                                          union contract       union
                                          eff: August 1,   contract eff:
                                               2003       August 1, 2005
------------------------------------------------------------------------
Weighted Wages and Benefits (Designated         $210,953        $236,600
 Waters)................................       x .333556       x .666444
                                               = $70,364      = $157,678
Weighted Wages and Benefits (Un-                $153,042        $171,213
 Designated Waters).....................       x .333556       x .666444
                                               = $51,048      = $114,104
------------------------------------------------------------------------


[[Page 8123]]


          Table 10.--Total Weighted Average Wages and Benefits
------------------------------------------------------------------------
                                            Designated     Un-designated
                                              waters          waters
------------------------------------------------------------------------
August 1, 2003 Contract.................         $70,364         $51,048
August 1, 2005 Contract.................         157,678         114,104
                                         -------------------------------
    Total Weighted Wages and Benefits...         228,042         165,152
------------------------------------------------------------------------

    In calculating the average wages and benefits used in determining 
target pilot compensation, we first determine the total wages and 
benefits for designated and undesignated waters under each of the two 
sets of AMO union contracts (Table 7). Next, we add the total gross 
deadweight tonnage of vessels under each version of the AMO contracts 
and calculate the percentage of tonnage represented under each version 
(Table 8). Based on these calculations, we have estimated current total 
tonnage at approximately 1.2 million. Of this total, approximately 66% 
of the tonnage is controlled by shipping companies operating under the 
modified AMO union contracts, and approximately 33% of the tonnage is 
controlled by shipping companies operating under the unmodified AMO 
union contracts.
    Next, we take the total wages and benefits for designated and 
undesignated waters under the unmodified AMO union contracts (Table 3) 
and multiply by approximately 33% and we take the total wages and 
benefits for designated and undesignated waters under the modified AMO 
union contract (Table 6) and multiply these by approximately 66%. The 
results of these computations are added together to arrive at the 
weighted average target pilot compensation (Table 10).
2. Determination of New Number of Pilots Needed
    The number of pilots needed in each Area of designated waters is 
established by dividing the total projected number of bridge hours for 
that Area by 1,000. The number of pilots needed in each Area of 
undesignated waters is established by dividing the total number of 
projected bridge hours for that Area by 1,800. Under the ratemaking 
methodology, a pilot in designated waters must work 1,000 bridge hours 
per season to earn projected target pilot compensation. In undesignated 
waters a pilot must work 1,800 bridge hours to earn target pilot 
compensation. A bridge hour is defined as an hour of time in which a 
pilot is aboard a vessel providing basic pilotage service.
    Dividing the total projected number of bridge hours per Area by the 
number of bridge hours a pilot needs to work to earn target pilot 
compensation yields the number of pilots that will be needed in each 
area to service vessel traffic. Projected bridge hours are based on the 
vessel traffic that pilots are expected to serve.
    As previously discussed, the Coast Guard has adjusted the bridge 
hour calculations contained in the NPRM to reflect actual projected 
hours for each Area as opposed to the rounded bridge hours previously 
used to correct for overestimations of projected revenue, expenses, and 
returns on investment. The Coast Guard has also revised upward its 
projection of traffic for the 2007 navigation season based upon data 
received showing an upward trend in tonnage moved within the system, 
and increases in both vessel transits and bridge hours between 2004 and 
2006. The revised projections are made based upon historical data, 
recent data obtained from the St. Lawrence Seaway Development 
Corporation, and relevant information provided by pilots and industry.
    The data analyzed by the Coast Guard has been conflicting. It 
consists of changes in annual tonnage throughput, numbers of vessel 
transits, and changing bridge hour requirements from 1999 through 2006. 
Despite the conflicting data, measurable increases in traffic have 
occurred between 2004 and 2006 in Area 1 (St. Lawrence Seaway), Area 2 
(Lake Ontario), and Area 4 (Lake Erie). No discernable increases have 
occurred in the remaining Areas. Depending how the data is analyzed the 
results vary significantly. A regression analysis performed for the 
period 1999 to 2006 shows that while traffic has fluctuated over this 
period of time, current levels of traffic are about equal to average 
long term traffic loads. If just recent bridge hour data is analyzed, 
however, it appears that traffic has increased approximately 13% in 
Area 1, 19% in Area 2, and 4% in Area 4 between 2005 and 2006. Based 
upon the data available to us, we project that these traffic levels 
will continue into the 2007 season. Accordingly, we have adjusted 
projected bridge hour totals to reflect these recent trends in traffic.
    As previously indicated, the bridge hour projection appearing in 
the NPRM for Area 2 of District One was reduced to reflect unrounded 
projected bridge hour numbers and reduced again by 1144 bridge hours 
reflecting the loss of traffic due to the fast ferry going out of 
business. After performing these adjustments, the 19% projected 
increase in traffic was applied.
    The following table, ``Number of Pilots Needed,'' shows the 
projection of bridge hours by area and the calculation of the number of 
pilots needed in each Area for the 2007 navigation season rounded to 
the next whole pilot:

                                             Number of Pilots Needed
----------------------------------------------------------------------------------------------------------------
                                                                                    Divided by
                          Pilotage area                           Projected 2007    bridge-hour    Pilots needed
                                                                   bridge hours       target
----------------------------------------------------------------------------------------------------------------
AREA 1..........................................................           5,661           1,000               6
AREA 2..........................................................           7,993           1,800               5
AREA 4..........................................................           8,490           1,800               5
AREA 5..........................................................           6,395           1,000               7
AREA 6..........................................................          18,000           1,800              10
AREA 7..........................................................           3,863           1,000               4
AREA 8..........................................................          11,390           1,800               7
                                                                 -----------------------------------------------

[[Page 8124]]

 
    Total Pilots Needed.........................................  ..............  ..............              44
----------------------------------------------------------------------------------------------------------------

3. Projection of New Total Target Pilot Compensation
    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 by the target pilot compensation for pilots working 
in that Area.
    The results for each pilotage Area are set out as follows:

                                                  District One
----------------------------------------------------------------------------------------------------------------
                                                                    Area 1 St.      Area 2 Lake   Total district
                                                                  Lawrence River      Ontario           one
----------------------------------------------------------------------------------------------------------------
Projection of target pilot compensation.........................      $1,368,253        $825,760      $2,194,013
----------------------------------------------------------------------------------------------------------------


                                                  District Two
----------------------------------------------------------------------------------------------------------------
                                                                                      Area 5
                                                                    Area 4 Lake      Southeast    Total district
                                                                       Erie        Shoal to Port        two
                                                                                     Huron, MI
----------------------------------------------------------------------------------------------------------------
Projection of target pilot compensation.........................        $825,760      $1,596,295      $2,422,055
----------------------------------------------------------------------------------------------------------------


                                                 District Three
----------------------------------------------------------------------------------------------------------------
                                                   Area 6 Lakes
                                                     Huron and      Area 7 St.      Area 8 Lake   Total district
                                                     Michigan      Mary's River      Superior          three
----------------------------------------------------------------------------------------------------------------
Projection of target pilot compensation.........      $1,651,520        $912,168      $1,156,064      $3,719,752
----------------------------------------------------------------------------------------------------------------

Step 4: Increase the New Total Target Pilot Compensation in Step 3 by 
the Expense Multiplier in Step 2
    The increase in Step 4 refers to the proportional increase of 
operating expense when new total target pilot compensation is 
multiplied by the expense multiplier. The calculations for Step 4 
appear as follows:

                                                  District One
----------------------------------------------------------------------------------------------------------------
                                                                    Area 1 St.      Area 2 Lake   Total district
                                                                  Lawrence River      Ontario           one
----------------------------------------------------------------------------------------------------------------
Pilot Compensation..............................................      $1,368,253        $825,760      $2,194,013
Expense Multiplier..............................................         x 31169         x 52779         x 39283
                                                                 -----------------------------------------------
    Projected Increase in Operating Expense.....................       =$426,468       =$435,829       =$861,881
----------------------------------------------------------------------------------------------------------------


                                                  District Two
----------------------------------------------------------------------------------------------------------------
                                                                                      Area 5
                                                                    Area 4 Lake      southeast    Total district
                                                                       Erie        Shoal to Port        two
                                                                                     Huron, MI
----------------------------------------------------------------------------------------------------------------
Pilot Compensation..............................................        $825,760      $1,596,295      $2,422,055
Expense Multiplier..............................................         x 61678         x 46605         x 51731
                                                                 -----------------------------------------------
    Projected increase in Operating Expense.....................       =$509,310       =$743,956     =$1,252,960
----------------------------------------------------------------------------------------------------------------


[[Page 8125]]


                                                 District Three
----------------------------------------------------------------------------------------------------------------
                                                   Area 6 Lakes
                                                     Huron and      Area 7 St.      Area 8 Lake   Total district
                                                     Michigan      Mary's River      Superior          three
----------------------------------------------------------------------------------------------------------------
Pilot Compensation..............................      $1,651,520        $912,168      $1,156,064      $3,719,752
Expense Multiplier..............................         x 49543         x 34956         x 44178         x 44290
                                                 ---------------------------------------------------------------
    Projected Increase in Operating Expense.....       =$818,205       =$318,861       =$510,730     =$1,647,478
----------------------------------------------------------------------------------------------------------------

Step 5(a): Adjust the Result in Step 4, as Required, for Inflation or 
Deflation
    The calculations for Step 5(a) appear below. Inflation rates were 
obtained from the U.S. Department of Labor, Bureau of Labor Statistics, 
``Midwest Economy--Consumer Prices,'' using the years 2004 to 2005 
annual average in the amount of 3.2% per year.

                                                  District One
----------------------------------------------------------------------------------------------------------------
                                                      Area 1 St.      Area 2 Lake   Total district
                                                    Lawrence River      Ontario           one
--------------------------------------------------------------------------------------------------
Projected Increase in Operating Expense...........        $426,468        $435,829        $861,881
Inflation Rate.........