Rates for Pilotage on the Great Lakes, 8115-8132 [E7-3061]
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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:
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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,
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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: https://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:
https://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: For
questions on this interim rule, call Mr.
Michael Sakaio, Program Analyst, Office
PO 00000
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$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
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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
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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 https://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
https://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
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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 https://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
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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
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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
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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 https://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 https://
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
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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
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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
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Area 4 Lake
Erie
Base Operating Expenses ...........................................................................................................
Base Target Pilot compensation .................................................................................................
Base Return Element ..................................................................................................................
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$427,333
+$725,848
+$20,354
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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
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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
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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
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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
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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) ........................................................................................
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$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
........................................................................................................................................
........................................................................................................................................
........................................................................................................................................
........................................................................................................................................
........................................................................................................................................
........................................................................................................................................
........................................................................................................................................
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7,993
8,490
6,395
18,000
3,863
11,390
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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
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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
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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 ........................................................................................
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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.
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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
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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)
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Then the
percentage
increases
over the
current rate
is:
21.04
29.51
22.07
25.32
14.97
18.33
27.08
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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
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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
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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 ($U.S.) 1
District
District one
2002 District Revenues ...................................................................................
2006 Projected Revenue .................................................................................
2006 Total Adjusted Revenue .........................................................................
1,686,655
2,231,940
2,643,732
District two
2,089,348
2,375,920
3,125,036
District three
3,460,560
3,908,363
4,722,162
Total 2
7,236,563
8,516,223
10,490,930
1 For the calculation of the 2006 projected and adjusted pilotage revenues, see the ‘‘Discussion of Rule’’ section of the 2006 final rule published in the Federal Register (71 FR 16501).
2 Some values may not total due to rounding.
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We estimate the additional cost of the
rate adjustment in this rule to be the
difference between the total revenue
needed based on the 2006 rate
adjustment and the rate adjustment
(change) revenue in this interim rule.
These revenue values and adjustments
are described and calculated in the
‘‘Calculating the Rate Adjustment’’
section of this rulemaking. Table 3
compares projected and adjusted
revenues and costs of the rule to
industry by district.
TABLE 3.—REVENUES, RATE ADJUSTMENT FACTORS AND ADDITIONAL COST OF THIS RULE ($U.S.)
District
District one
Total Adjusted Revenue 2 ................................................................................
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2,643,732
District two
3,125,036
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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
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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
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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.
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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.
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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
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17:15 Feb 22, 2007
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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
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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
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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 .................................................................................................................................................
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$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
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$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: https://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
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]]>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]
=======================================================================
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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: https://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: https://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
https://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 https://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
https://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 https://
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 https://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.........
