2009 Rates for Pilotage on the Great Lakes, 35812-35825 [E9-17229]

Download as PDF 35812 Federal Register / Vol. 74, No. 138 / Tuesday, July 21, 2009 / Rules and Regulations Dated: July 7, 2009. Deborah S. Ingram, Acting Deputy Assistant Administrator for Mitigation, Mitigation Directorate. [FR Doc. E9–17211 Filed 7–20–09; 8:45 am] BILLING CODE 9110–12–P DEPARTMENT OF HOMELAND SECURITY Coast Guard 46 CFR Part 401 [Docket No. USCG–2008–1126] RIN 1625–AB29 2009 Rates for Pilotage on the Great Lakes erowe on DSK5CLS3C1PROD with RULES SUMMARY: The Coast Guard is increasing the rates for pilotage service on the Great Lakes by an average of 10.77% over the rates that took effect February 4, 2009. This increase reflects an August 1, 2009, increase in benchmark contractual wages and benefits, as well as an increase in the ratio of pilots to ‘‘bridge hours.’’ The Coast Guard intends the final rule to generate sufficient revenue to cover allowable expenses, target pilot compensation, and returns on investment. The final rule promotes the Coast Guard strategic goal of maritime safety. DATES: This final rule is effective August 1, 2009. ADDRESSES: Comments and material received from the public, as well as documents mentioned in this preamble as being available in the docket, are part of docket USCG–2008–1126 and are available for inspection or copying at the Docket Management Facility (M–30), U.S. Department of Transportation, West Building Ground Floor, Room W12–140, 1200 New Jersey Avenue, SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. You may also find this docket on the Internet at https://www.regulations.gov. FOR FURTHER INFORMATION CONTACT: For questions on this final rule, please call Mr. Paul Wasserman, Chief, Great Lakes Pilotage Branch, Commandant (CG– 54122), U.S. Coast Guard, at 202–372– 1535, by fax 202–372–1929, or e-mail Paul.M.Wasserman@uscg.mil. For questions on viewing or submitting material to the docket, call Renee V. Wright, Chief, Dockets, Department of Transportation, telephone 202–493– 0402. 15:23 Jul 20, 2009 Jkt 217001 Table of Contents I. Abbreviations II. Effective Date III. Background IV. Discussion of Comments V. Discussion of the Final Rule VI. 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 I. Abbreviations Coast Guard, DHS. ACTION: Final rule. AGENCY: VerDate Nov<24>2008 SUPPLEMENTARY INFORMATION: AMOU American Maritime Officer Union GLPAC Great Lakes Pilotage Advisory Committee MISLE Coast Guard Marine Inspection, Safety, and Law Enforcement system MOA Memorandum of Agreement NAICS North American Industry Classification System NPRM Notice of Proposed Rulemaking NTTAA National Technology Transfer and Advancement Act OMB Office of Management and Budget II. Effective Date This final rule takes effect August 1, 2009. Under 5 U.S.C. 553(d), we find good cause for this final rule to take effect less than 30 days after publication. The Great Lakes Pilotage Act of 1960, as amended by Public Law 109–241, section 302, requires the Coast Guard to review and adjust the Great Lakes pilotage rates annually by March 1. We could not issue this final rule until some months after that date due to the time needed to review and resolve comments received on the proposed rule. We nonetheless need to issue the final rule before the August 1, 2009, increase in benchmark contractual wages and benefits that necessitates this year’s rate adjustment. Under these circumstances, publication of the final rule 30 days or more in advance of the August 1 benchmark increase is impracticable. The regulated community well understands the significance of the August benchmark increase and anticipates that the final rule will take effect not later than August 1. Therefore, we find that delay of the final rule’s effective date beyond August 1, 2009, would be unnecessary, and contrary to the public interest in timely rate increases. PO 00000 Frm 00046 Fmt 4700 Sfmt 4700 III. Background We published a notice of proposed rulemaking on April 24, 2009 (NPRM, 74 FR 18669). The NPRM proposed an average 9.41% increase. This rulemaking increases Great Lakes pilotage rates in accord with the methodology contained in Coast Guard regulations in 46 CFR Parts 401–404. Our regulations implement the Great Lakes Pilotage Act of 1960, 46 U.S.C. Chapter 93, which requires foreign-flag vessels engaged in foreign trade to use Federally registered Great Lakes pilots while transiting the St. Lawrence Seaway and the Great Lakes system, and which requires the Secretary of Homeland Security to ‘‘prescribe by regulation rates and charges for pilotage services, giving consideration to the public interest and the costs of providing the services.’’ 46 U.S.C. 9303(f). The U.S. waters of the Great Lakes and the St. Lawrence Seaway are divided into three pilotage Districts. Pilotage in each District is provided by an association certified by the Coast Guard Director of Great Lakes Pilotage to operate a pilotage pool. It is important to note that, while we set rates, we do not control the actual number of pilots an association maintains, so long as the association is able to provide safe, efficient, and reliable pilotage service, nor do we control the actual compensation that pilots receive. This is determined by each of the three District associations, which use different compensation practices. District One, consisting of Areas 1 and 2, includes all U.S. waters of the St. Lawrence River and Lake Ontario. District Two, consisting of Areas 4 and 5, includes all U.S. waters of Lake Erie, the Detroit River, Lake St. Clair, and the St. Clair River. District Three, consisting of Areas 6, 7, and 8, includes all U.S. waters of the St. Mary’s River, Sault Ste. Marie Locks, and Lakes Michigan, Huron, and Superior. Area 3 is the Welland Canal, which is serviced exclusively by the Canadian Great Lakes Pilotage Authority and, accordingly, is not included in the U.S. rate structure. Areas 1, 5, and 7 have been designated by Presidential Proclamation, pursuant to the Great Lakes Pilotage Act of 1960, to be waters in which pilots must at all times be fully engaged in the navigation of vessels in their charge. Areas 2, 4, 6, and 8 have not been so designated because they are open bodies of water. Under the Great Lakes Pilotage Act of 1960, pilots assigned to vessels in these areas are only required to ‘‘be on board and available to direct the navigation of E:\FR\FM\21JYR1.SGM 21JYR1 Federal Register / Vol. 74, No. 138 / Tuesday, July 21, 2009 / Rules and Regulations erowe on DSK5CLS3C1PROD with RULES the vessel at the discretion of and subject to the customary authority of the master.’’ 46 U.S.C. 9302(a)(1)(B). Our pilotage regulations require annual reviews of pilotage rates and the setting of new rates at least once every five years, or sooner, if annual reviews show a need. 46 CFR 404.1. To assist in calculating pilotage rates, the pilotage associations are required to submit annual financial statements prepared by certified public accounting firms. In addition, every fifth year, in connection with the mandatory rate adjustment, we contract with an independent accounting firm to conduct a full audit of the accounts and records of the pilotage associations and prepare and submit financial reports relevant to the ratemaking process. In those years when a full ratemaking is conducted, we generate the pilotage rates using Appendix A to 46 CFR Part 404. The last Appendix A review was concluded in 2006 (71 FR 16501, Apr. 3, 2006). Between the five-year full ratemaking intervals, we annually review the pilotage rates using Appendix C to Part 404, and adjust rates when deemed appropriate. We conducted Appendix C reviews in 2007 and 2008, and increased rates in both years. The 2008 final rule was published January 5, 2009 (74 FR 220), and took effect on February 4, 2009. We define the terms and formulas used in Appendix A and Appendix C in Appendix B to Part 404. This final rule concludes the annual Appendix C rate review for 2009, and increases rates by an average of 10.77% over the rates that took effect February 4, 2009. IV. Discussion of Comments We received four comments during the NPRM public comment period. Timeliness. Three commenters, including a pilots’ association, pointed out that 46 U.S.C. 9303(f), as amended by Public Law 109–241, sec. 302, requires us to review and, if necessary, establish adjusted pilotage rates by March 1 of each year, in order to provide critical information before the start of the annual Great Lakes shipping season, usually in early spring. These commenters point out that we have not met the March 1, 2009, deadline for this year’s review. We acknowledge this and future compliance is a Coast Guard priority. In 2007 and 2008, we mitigated the impact of delay by ensuring that interim rules were in place at the opening of the shipping season. In letters dated April 24, 2007, and March 3, 2008, the pilots’ associations expressed their appreciation to the Coast Guard for these efforts. In 2009, publishing a rule at the beginning of the VerDate Nov<24>2008 15:23 Jul 20, 2009 Jkt 217001 shipping season was not possible, but we hope to mitigate the impact of delay by issuing the final rule so that it takes effect on August 1, 2009, when the benchmark contract increase that accounts for a meaningful portion of this year’s rate adjustment takes effect. ‘‘Pilots needed’’ and rounding. One commenter said that, in calculating the number of pilots needed in each Area, we should always round the result of our mathematical calculations up to the nearest ‘‘whole pilot,’’ and another commenter criticized the imprecision of the language we used in the NPRM to describe our rounding. We agree with this latter comment and have revised our language in this final rule. We acknowledge that in recent years we have usually rounded the results of the mathematical calculation used to determine the number of ‘‘pilots needed,’’ pursuant to our discretionary authority ‘‘to make adjustments to these numbers to ensure uninterrupted pilotage service in each area, or for other reasonable circumstances.’’ 46 CFR Part 404, Appendix A, Step 2.B (also applicable in Appendix C calculations). This rounding has never been performed as a matter of policy, nor do we adopt it as policy now. In fact, our current ratemaking methodology requires no rounding whatsoever, and until 2006, what rounding we applied was merely up or down to the nearest tenth of a whole number: see, e.g., our December 12, 2003 (68 FR 69564) and March 10, 2005 (70 FR 12082) interim rules. In the April 3, 2006 final rule (71 FR 16501), we acknowledged nine public comments in favor of rounding to whole numbers and approved the use of that process for that rule. However, we did not actually apply that methodology in the 2006 final rule. The mathematical result of our 2006 calculations was a whole number in each of the seven Areas, because we rounded the bridge hour projections (not pilot numbers) that year. In the 2007 interim rule (72 FR 8115, Feb. 23, 2007), we agreed with a public commenter that the rounding of bridge hour projections in 2006 was a departure from past practice and agreed to use unrounded bridge hour projections. We also rounded the mathematical results of our pilotsneeded calculations up to the next whole number in all six Areas where rounding was needed. These calculations were unchanged in the 2007 final rule (72 FR 53158, Sep. 18, 2007). In 2008, the March 21, 2008 interim rule (73 FR 15092) adopted without change the calculations proposed in the PO 00000 Frm 00047 Fmt 4700 Sfmt 4700 35813 February 1, 2008 NPRM (73 FR 6085). Mathematical results of pilots-needed calculations were rounded up in all six Areas where rounding was needed. However, we introduced three adjustments in the 2008 final rule (74 FR 220, Jan. 5, 2009). These adjustments responded to public comments that pointed out that the NPRM and interim rule overstated the bridge hour projections for Areas 2, 4, and 5. The first adjustment reduced projected bridge hours in Area 2 from 7,993 to 5,650, but kept the ‘‘pilots needed’’ for Area 2 at five, one more than would have been indicated by rounding up the mathematical result (5,650/1,800 = 3.14, rounded up = 4). We exercised our discretion to do so because ‘‘experience has demonstrated the need for at least five pilots in that Area,’’ a need that we discussed in detail in the final rule at 74 FR 221. Second, in Area 4, we reduced projected bridge hours from 8,490 to 7,320, and rounded the mathematical result (7,320/1,800 = 4.07) down to four pilots needed. Third, in Area 5, we reduced projected bridge hours from 6,395 to 5,097, and rounded the mathematical result (5,097/1,000 = 5.10) up to six pilots. We exercised our discretion in these two Areas ‘‘because the District 2 Pilots’ Association has routinely operated with an average of one less pilot than is authorized under the rate and for the last season and a half with two fewer pilots than authorized. Accordingly, a reduction of one pilot per Area reflects actual practice.’’ 74 FR at 222. We might also have observed that pilots in one Area frequently operate in other Areas as well, that District Two comprises both Areas 4 and 5, and that the minimal downward adjustment from 4.07 to 4 in Area 4 should therefore be balanced against the more substantial rounding up, from 5.10 to 6, in Area 5. We acknowledge that the determination of pilots needed is an issue of concern to many, and that some might wish to see the formula for that determination modified to require ‘‘rounding up’’ in all instances. We observe that the ratemaking formula was never designed to produce anything more than a useful model for subsequent calculations. It could be argued that the model worked best without rounding, or with only limited rounding, for example because rounding up inflates pilot numbers and makes it less likely that pilots will be able to reach their target compensation. We defer consideration of such arguments until they can be made and considered in the context of an overall review of our ratemaking methodology. Until E:\FR\FM\21JYR1.SGM 21JYR1 35814 Federal Register / Vol. 74, No. 138 / Tuesday, July 21, 2009 / Rules and Regulations then, we intend to apply the pilotsneeded calculations much as we have done since 2007. Data for bridge hour projections. One commenter said we failed to consult industry in projecting 2009 vessel traffic, and that our bridge hour projections for 2009 (i.e., the projection of hours pilots are aboard vessels providing pilotage service) should have been based on 2008 figures rather than on 2007 figures. To meet the statutory deadline for establishing rates by March 1, 2009, we began preparing the 2009 NPRM long before actual data for 2008 was available. Although our practice has not been to document every contact with industry or pilots, our regulations and our ratemaking methodology presuppose frequent informal contacts between the Director of Great Lakes Pilotage, industry, and pilots. The information received through those contacts is submitted for public comment in our NPRM. In this case, our use of 2007 figures for 2009, instead of waiting for 2008 figures, was based on 2008 informal discussions with pilot and industry representatives that endorsed the continued use of 2007 figures, with some modifications. Those modifications were explained in the April 2009 NPRM. We agree with one commenter who said that the NPRM did not adequately explain the difference in Area 6 and Area 7 base period bridge hours (18,000 and 3,863, respectively), and the 2009 projected bridge hours for those Areas (13,406 and 3,259, respectively). Areas 6 and 7 experienced a significant decrease in 2007 actual bridge hours, from 2007 projections. Therefore, the 2009 projections for those Areas reflects their actual 2007 bridge hours, and then further reduces those figures by an additional 10% in each Area. One commenter said we should adjust Area 1 projected bridge hours to more accurately reflect anticipated traffic for the 2009 shipping season, as we did for areas 2, 4, and 5 in the 2008 final rule and as we proposed for District Three in the 2009 NPRM. We agree and, in this final rule, we are reducing the projected bridge hours for Area 1 from 5661 to 5203. We are also adjusting District Three bridge hours as indicated in the NPRM. Class 4 vessels. One commenter said that our pilotage rates for Class 4 vessels are 15% higher than Canadian rates. This may be true, but in the past year the difference has been less than 1%, but has varied subsequently due to fluctuations in the relative value of U.S. and Canadian currency. Miscellaneous. Three commenters took issue with various aspects of our ratemaking methodology. These comments are beyond the scope of this rulemaking, which applies the methodology as it exists today, but we address two points briefly here. One commenter petitioned the Coast Guard to review our formula for setting benchmark compensation levels of Great Lakes vessel masters. We deny that petition because we have previously conducted the requested review and believe the formula is correct: a supporting memorandum appears in the docket for this rulemaking as USCG– 2008–1126–0017. The same commenter criticized us for not yet adopting the recommendations of Rear Admiral Timothy J. Riker’s 2003 report on Great Lakes bridge hours. We decline to adopt the Riker Report recommendations in full because we do not think the Report adequately accounted for the difference between a Great Lakes pilot’s active, on call, work life during a portion of the year and the work life of an office-based 40 hour per week worker through a 52week year. We acknowledge that through the years, both pilots and industry have indicated concerns about aspects of our ratemaking methodology. Some of those concerns are described in communications that we received between January 2009, when we published the 2008 final rule, and April 2009, when we published the 2009 NPRM. Those communications appear in the docket for this rulemaking as supplemental material. To obtain a more comprehensive understanding of these concerns, we have decided to publish a notice focusing on our ratemaking methodology, and requesting public comments. That notice appears elsewhere in today’s Federal Register. We will refer the comments we receive to the Great Lakes Pilotage Advisory Committee, which Congress established to advise the Coast Guard on significant policy decisions relating to Great Lakes pilotage. V. Discussion of the Final Rule A. Summary We are increasing pilotage rates in accordance with the methodology outlined in Appendix C to 46 CFR Part 404, by increasing rates an average 10.77% over the 2008 final rule. This final rule puts into place, with two modifications, the rate changes we proposed in the April 24, 2009 NPRM. The first modification adjusts projected bridge hours in Area 1 as discussed in part IV of this preamble. The second modification updates the ship tonnage percentages under the AMO union contracts. This second modification accounts for only 0.36% of the overall rate increase. TABLE 1—2009 AREA RATE CHANGES Then the proposed percentage increases over the current rate is: If pilotage service is required in: erowe on DSK5CLS3C1PROD with RULES Area 1 (designated waters) ..................................................................................................................................................... Area 2 (undesignated waters) ................................................................................................................................................. Area 4 (undesignated waters) ................................................................................................................................................. Area 5 (designated waters) ..................................................................................................................................................... Area 6 (undesignated waters) ................................................................................................................................................. Area 7 (designated waters) ..................................................................................................................................................... Area 8 (undesignated waters) ................................................................................................................................................. Overall rate change (percentage change in overall prospective unit costs/base unit costs; see Table 18) .......................... Rates for cancellation, delay, or interruption in rendering services (46 CFR 401.420), and basic rates and charges for carrying a U.S. pilot beyond the normal change point, or for boarding VerDate Nov<24>2008 15:23 Jul 20, 2009 Jkt 217001 at other than the normal boarding point (46 CFR 401.428), have been increased by 10.77% in all Areas. PO 00000 Frm 00048 Fmt 4700 Sfmt 4700 13.43 4.79 4.90 4.48 12.52 23.64 2.52 10.77 B. Calculating the Rate Adjustment The Appendix C ratemaking calculation involves eight steps: Step 1: Calculate the total economic costs for the base period (i.e., pilot E:\FR\FM\21JYR1.SGM 21JYR1 Federal Register / Vol. 74, No. 138 / Tuesday, July 21, 2009 / Rules and Regulations compensation expense plus all other recognized expenses plus the return element) and divide by the total bridge hours used in setting the base period rates; Step 2: Calculate the ‘‘expense multiplier,’’ the ratio of other expenses and the return element to pilot compensation for the base period; Step 3: Calculate an annual ‘‘projection of target pilot compensation’’ using the same procedures found in Step 2 of Appendix A; Step 4: Increase the projected pilot compensation in Step 3 by the expense multiplier in Step 2; Step 5: Adjust the result in Step 4, as required, for inflation or deflation; Step 6: Divide the result in Step 5 by projected bridge hours to determine total unit costs; Step 7: Divide prospective unit costs in Step 6 by the base period unit costs in Step 1; and Step 8: Adjust the base period rates by the percentage changes in unit cost in Step 7. The base data used to calculate each of the eight steps comes from the 2008 final rule, published in January 2009. We also used the most recent union contracts between the American Maritime Officers Union (AMOU) and vessel owners and operators on the Great Lakes, which we received on August 16, 2007, to determine target pilot compensation. Bridge hour projections for the 2009 season have been obtained from historical data, pilots, and industry. All documents and records used in this rate calculation have been placed in the public docket for this rulemaking and are available for review at the addresses listed under ADDRESSES. Some values may not total exactly due to format rounding for presentation in charts and explanations in this section. The rounding does not affect the 35815 integrity or truncate the real value of the calculations in the ratemaking methodology described below. Step 1: Calculate the total economic cost for the base period. The calculations in Step 1 are unchanged from the NPRM, but are repeated for your convenience. In this step, for each Area, we divide total economic costs for the base period by the total bridge hours used in setting the base period rates, to yield the base cost per bridge hour. Total base period economic costs include pilot compensation expenses, plus all other recognized expenses, plus the return element. The calculations providing the total base period economic costs for each Area are summarized in Table 16 of the 2008 final rule. Total bridge hours used in setting the base period rates were calculated in Table 13 of the 2008 final rule. Tables 2 through 4 summarize the Step 1 calculations: TABLE 2—TOTAL ECONOMIC COST FOR BASE PERIOD, DISTRICT ONE Area 1 St. Lawrence River Total base period economic costs ......................................................................................... Base bridge hours ................................................................................................................. Base cost per bridge hour ..................................................................................................... Area 2 Lake Ontario $2,078,551 ÷ 5,661 = $367.17 $1,474,806 ÷ 5,650 = $261.03 Total District One $3,553,357 ÷ 11,311 = $314.15 TABLE 3—TOTAL ECONOMIC COST FOR BASE PERIOD, DISTRICT TWO Area 4 Lake Erie Total base period economic costs ......................................................................................... Base bridge hours ................................................................................................................. Base cost per bridge hour ..................................................................................................... Area 5 Southeast Shoal to Port Huron, MI $1,251,203 ÷ 7,320 = $170.93 $2,334,169 ÷ 5,097 = $457.95 Total District Two $3,585,372 ÷ 12,417 = $288.75 TABLE 4—TOTAL ECONOMIC COST FOR BASE PERIOD, DISTRICT THREE Area 6 Lakes Huron and Michigan Total base period economic costs ........................................................... Base bridge hours ................................................................................... Base cost per bridge hour ....................................................................... erowe on DSK5CLS3C1PROD with RULES Step 2. Calculate the expense multiplier. The calculations in Step 2 are unchanged from the NPRM, but are repeated for your convenience. $2,884,724 ÷ 18,000 = $160.26 In this step, for each Area, we calculate an expense multiplier by dividing the base operating expense, shown in Table 16, Column B of the 2008 final rule, by base pilot Area 7 St. Mary’s River $1,427,515 ÷ 3,863 = $369.54 Area 8 Lake Superior $1,944,032 ÷ 11,390 = $170.68 Total District Three $6,256,273 ÷ 33,253 = $188.14 compensation, shown in Table 16, Column C of the 2008 final rule. Tables 5 through 7 show the Step 2 calculations. TABLE 5—EXPENSE MULTIPLIER, DISTRICT ONE Area 1 St. Lawrence River Base operating expense ........................................................................................................ VerDate Nov<24>2008 15:23 Jul 20, 2009 Jkt 217001 PO 00000 Frm 00049 Fmt 4700 Sfmt 4700 $516,138 E:\FR\FM\21JYR1.SGM 21JYR1 Area 2 Lake Ontario $529,046 Total District One $1,045,185 35816 Federal Register / Vol. 74, No. 138 / Tuesday, July 21, 2009 / Rules and Regulations TABLE 5—EXPENSE MULTIPLIER, DISTRICT ONE—Continued Area 1 St. Lawrence River Base target pilot compensation ............................................................................................. Expense multiplier ................................................................................................................. Area 2 Lake Ontario ÷ $1,562,413 = .33035 ÷ $945,760 = .55939 Total District One ÷ $2,508,173 = .41671 TABLE 6—EXPENSE MULTIPLIER, DISTRICT TWO Area 4 Lake Erie Base operating expense ........................................................................................................ Base target pilot compensation ............................................................................................. Expense multiplier ................................................................................................................. Area 5 Southeast Shoal to Port Huron, MI $494,595 ÷ $756,608 = .65370 $771,756 ÷ $1,562,413 = .49395 Total District Two $1,266,351 ÷ $2,319,021 = .54607 TABLE 7—EXPENSE MULTIPLIER, DISTRICT THREE Area 6 Lakes Huron and Michigan Base operating expense .......................................................................... Base target pilot compensation ............................................................... Expense multiplier ................................................................................... Step 3. Calculate annual projection of target pilot compensation. Step 3 calculations have been modified since the NPRM. In this step, we determine the new target rate of compensation and the new number of pilots needed in each pilotage Area, to determine the new target pilot compensation for each Area. (a) Determine new target rate of compensation. Target pilot compensation is based on the average annual compensation of first mates and masters on U.S. Great Lakes vessels. Compensation includes wages and benefits. For pilots in undesignated waters, we approximate the first mates’ compensation and, in designated waters, we approximate the master’s compensation (first mates’ wages multiplied by 150% plus benefits). To determine first mates’ and masters’ average annual compensation, we use data from the most recent AMOU contracts with the U.S. companies $993,207 ÷ $1,891,520 = .52508 Area 7 St. Mary’s River $385,906 ÷ $1,041,609 = .37049 engaged in Great Lakes shipping. Where different AMOU agreements apply to different companies, we apportion the compensation provided by each agreement according to the percentage of tonnage represented by companies under each agreement. There are two current AMOU contracts. In our April 2009 NPRM, we stated that vessels operated by the American Steamship Co. and Inland Lakes Management Co. (acquired in 2008 by Mittal Steel USA, Inc.) operate under ‘‘Agreement A,’’ and that Key Lakes, Inc. and Mittal Steel USA, Inc. vessels (other than the Inland Lakes vessels acquired by Mittal) operate under ‘‘Agreement B.’’ However, as of May 2009, Agreement A applies only to Key Lakes, Inc. vessels, and Agreement B applies to all vessels operated by American Steamship Co. and Mittal Steel USA, Inc. Both Agreement A and Agreement B provide for a 3% wage increase effective Area 8 Lake Superior $619,968 ÷ $1,324,064 = .46823 Total District Three $1,999,081 ÷ $4,257,193 = .46958 August 1, 2009. Under Agreement A, the daily wage rate will be increased from $255.28 to $262.73. Under Agreement B, the daily wage rate will be increased from $314.42 to $323.86. To calculate monthly wages, we apply Agreement A and Agreement B monthly multipliers of 54.5 and 49.5, respectively, to the daily rate. Agreement A’s 54.5 multiplier represents 30.5 average working days, 15.5 vacation days, 4 days for four weekends, 3 bonus days, and 1.5 holidays. Agreement B’s 49.5 multiplier represents 30.5 average working days, 16 vacation days, and 3 bonus days. To calculate average annual compensation, we multiply monthly figures by 9 months, the length of the Great Lakes shipping season. Table 8, which is unchanged from the NPRM, shows new wage calculations based on Agreements A and B effective August 1, 2009. TABLE 8—WAGES Pilots on undesignated waters erowe on DSK5CLS3C1PROD with RULES Monthly component Agreement A: $262.73 daily rate × 54.5 days ..................................................................................................................... Agreement A: Monthly total × 9 months = total wages ....................................................................................................... Agreement B: $323.86 daily rate × 49.5 days ..................................................................................................................... Agreement B: VerDate Nov<24>2008 15:23 Jul 20, 2009 Jkt 217001 PO 00000 Frm 00050 Fmt 4700 Sfmt 4700 E:\FR\FM\21JYR1.SGM 21JYR1 Pilots on designated waters (undesignated × 150%) $14,319 $21,478 128,870 193,305 16,031 24,046 Federal Register / Vol. 74, No. 138 / Tuesday, July 21, 2009 / Rules and Regulations 35817 TABLE 8—WAGES—Continued Pilots on undesignated waters Monthly component Monthly total × 9 months = total wages ....................................................................................................... Both Agreements A and B include a health benefits contribution rate of $80.69 effective August 1, 2009. Agreement A includes a pension plan contribution rate of $33.35 per man-day. Agreement B includes a pension plan contribution rate of $43.55 per man-day. Both Agreements A and B provide a 401K employer matching rate, 5% of the wage rate. Neither Agreement A nor Agreement B includes a clerical contribution that appeared in earlier contracts. Per the AMOU, the multiplier 144,278 Pilots on designated waters (undesignated × 150%) 216,417 used to calculate monthly benefits is 45.5 days. Table 9, which is unchanged from the NPRM, shows new benefit calculations based on Agreements A and B, effective August 1, 2009. TABLE 9—BENEFITS Pilots on undesignated waters Monthly component Agreement A: Employer contribution, 401(K) plan (Monthly Wages × 5%) ........................................................................ Pension = $33.35 × 45.5 days ..................................................................................................................... Health = $80.69 × 45.5 days ........................................................................................................................ Agreement B: Employer contribution, 401(K) plan (Monthly Wages × 5%) ........................................................................ Pension = $43.55 × 45.5 days ..................................................................................................................... Health = $80.69 × 45.5 days ........................................................................................................................ Agreement A: Monthly total benefits ................................................................................................................................... Agreement A: Monthly total benefits × 9 months ................................................................................................................ Agreement B: Monthly total benefits ................................................................................................................................... Agreement B: Monthly total benefits × 9 months ................................................................................................................ Pilots on designated waters $715.95 1,517.43 3,671.40 $1,073.92 1,517.43 3,671.40 801.54 1,981.53 3,671.40 1,202.32 1,981.53 3,671.40 = 5,904.77 = 6,262.74 = 53,143 = 56,365 = 6,454.46 = 6,855.24 = 58,090 = 61,697 Table 10, which is unchanged from the NPRM, totals the wages and benefits under each agreement. TABLE 10—TOTAL WAGES AND BENEFITS Pilots on undesignated waters Pilots on designated waters $128,870 + 53,143 $193,305 + 56,365 Agreement A: Total ...................................................................................................................................... = 182,013 = 249,670 Agreement B: Wages .......................................................................................................................................... Agreement B: Benefits ......................................................................................................................................... 144,278 + 58,090 216,417 + 61,697 Agreement B: Total ...................................................................................................................................... erowe on DSK5CLS3C1PROD with RULES Agreement A: Wages .......................................................................................................................................... Agreement A: Benefits ......................................................................................................................................... = 202,368 = 278,114 Table 11, as it appeared in the NPRM, has been revised to reflect the change in the distribution of vessels operating under Agreements A and B as of May 2009. It shows that approximately 30% of U.S. Great Lakes shipping deadweight tonnage operates under Agreement A, with the remaining 70% operating under Agreement B. TABLE 11—DEADWEIGHT TONNAGE BY AMOU AGREEMENT Company Agreement A American Steamship Company ........................................................................................................................... .......................... VerDate Nov<24>2008 15:23 Jul 20, 2009 Jkt 217001 PO 00000 Frm 00051 Fmt 4700 Sfmt 4700 E:\FR\FM\21JYR1.SGM 21JYR1 Agreement B 815,600 35818 Federal Register / Vol. 74, No. 138 / Tuesday, July 21, 2009 / Rules and Regulations TABLE 11—DEADWEIGHT TONNAGE BY AMOU AGREEMENT—Continued Company Agreement A Agreement B Mittal Steel USA, Inc ........................................................................................................................................... Key Lakes, Inc ..................................................................................................................................................... .......................... 361,385 38,826 .......................... Total tonnage, each agreement ................................................................................................................... 361,385 854,426 Percent tonnage, each agreement ........................................................................................................ 361,385 ÷ 1,215,811 = 29.7238% 854,426 ÷ 1,215,811 = 70.2762% Table 12, as it appeared in the NPRM, has been modified. It applies the percentage of tonnage represented by each agreement to the wages and benefits provided by each agreement, to determine the projected target rate of compensation on a tonnage-weighted basis. TABLE 12—PROJECTED TARGET RATE OF COMPENSATION, WEIGHTED Undesignated waters AGREEMENT A: Total wages and benefits × percent tonnage ................................................................... $182,013 × 29.72% = $54,101 $249,670 × 29.72% = $74,211 $202,368 × 70.28% = $142,217 $278,114 × 70.28% = $195,448 $54,101 + $142,217 = $196,318 AGREEMENT B: Total wages and benefits × percent tonnage ................................................................... $74,211 + $195,448 = $269,659 Total weighted average wages and benefits = projected target rate of compensation ... (b) Determine number of pilots needed. Subject to discretionary adjustment by the Director of Great Lakes Pilotage to ensure uninterrupted service or for other reasonable circumstances, we determine the number of pilots needed in each Area by dividing each Area’s projected bridge hours, either by 1,000 (designated waters) or by 1,800 (undesignated waters). The resulting number is rounded either up or down based upon the needs of commerce at the discretion of the Director. Designated waters Bridge hours are the number of hours a pilot is aboard a vessel providing pilotage service. Projected bridge hours are based on the vessel traffic that pilots are expected to serve. Based on historical data and information provided by pilots and industry, the Coast Guard projects the same bridge hours for Areas 2, 4, 5, and 8 in 2009 as were projected in the 2008 final rule. As discussed in Part IV of this preamble, we are reducing projected bridge hours for Areas 1, 6, and 7. With these reductions, we are reducing the number of pilots in Area 6 by two. Table 13, as it appeared in the NPRM, has been modified to reflect the reductions in Areas 1, 6, and 7 bridge hour projections. Table 13 shows the projected bridge hours needed for each Area, and the total number of pilots needed after dividing those figures either by 1,000 or 1,800 and, for the purposes of this rulemaking only, rounding up to the next whole pilot, with two exceptions. In Area 2 we round up from 3.14 to 5, and in Area 4 we round down from 4.07 to 4, for the reasons discussed in the 2008 final rule. TABLE 13—NUMBER OF PILOTS NEEDED Pilotage area erowe on DSK5CLS3C1PROD with RULES Area Area Area Area Area Area Area 1 2 4 5 6 7 8 .................................................................................................................. .................................................................................................................. .................................................................................................................. .................................................................................................................. .................................................................................................................. .................................................................................................................. .................................................................................................................. (c) Determine the projected target pilot compensation for each Area. We project new total target pilot compensation separately for each VerDate Nov<24>2008 15:23 Jul 20, 2009 Jkt 217001 Divided by 1,000 (designated waters) or 1,800 (undesignated waters) Projected 2009 bridge hours 5,203 5,650 7,320 5,097 13,406 3,259 11,630 pilotage Area, by multiplying the number of pilots needed in each Area (see Table 13) by the projected target rate of compensation (see Table 12) for PO 00000 Frm 00052 Fmt 4700 Sfmt 4700 Pilots needed (total = 40) 1,000 1,800 1,800 1,000 1,800 1,000 1,800 pilots working in that Area. Table 14 (modified from NPRM version) shows this calculation. E:\FR\FM\21JYR1.SGM 21JYR1 6 5 4 6 8 4 7 Federal Register / Vol. 74, No. 138 / Tuesday, July 21, 2009 / Rules and Regulations 35819 TABLE 14—PROJECTED TARGET PILOT COMPENSATION Pilots needed (total = 40) Pilotage Area Multiplied by target rate of compensation Projected target pilot compensation Area 1 ...................................................................................................... Area 2 ...................................................................................................... 6 5 × $269,659 × 196,318 $1,617,955 981,589 Total, District One ............................................................................. 11 .................................... 2,599,544 Area 4 ...................................................................................................... Area 5 ...................................................................................................... 4 6 × 196,318 × 269,659 785,271 1,617,955 Total, District Two ............................................................................. 10 .................................... 2,403,226 Area 6 ...................................................................................................... Area 7 ...................................................................................................... Area 8 ...................................................................................................... 8 4 7 × 196,318 × 269,659 × 196,318 1,570,542 1,078,637 1,374,224 Total, District Three .......................................................................... 19 .................................... 4,023,403 Step 4: Increase the projected pilot compensation in Step 3 by the expense multiplier in Step 2. Step 4 calculations have been modified since the NPRM. This step yields a projected increase in operating costs necessary to support the increased projected pilot compensation. Table 15 (modified from NPRM version) shows this calculation. TABLE 15—PROJECTED OPERATING EXPENSE Projected target pilot compensation Pilotage area Multiplied by expense multiplier Projected operating expense* Area 1 ...................................................................................................... Area 2 ...................................................................................................... $1,617,955 981,589 × .33035 × .55939 $534,487 549,089 Total, District One ............................................................................. 2,599,544 × .41671 1,083,260 Area 4 ...................................................................................................... Area 5 ...................................................................................................... 785,271 1,617,955 × .65370 × .49395 513,332 799,192 Total, District Two ............................................................................. 2,403,226 × .54607 1,312,333 Area 6 ...................................................................................................... Area 7 ...................................................................................................... Area 8 ...................................................................................................... 1,570,542 1,078,637 1,374,224 × .52508 × .37049 × .46823 824,666 399,625 643,454 Total, District Three .......................................................................... 4,023,403 × .46958 1,889,298 *Unique expense multipliers are used to calculate projected operating expense for all areas and districts, and as such, projected operating expense for Districts One, Two and Three may not equal the sum of the projected operating expense for the areas. Step 5: Adjust the result in Step 4, as required, for inflation or deflation, and calculate projected total economic cost. Step 5 calculations have been modified since the NPRM. Based on data from the U.S. Department of Labor’s Bureau of Labor Statistics, we have multiplied the results in Step 4 by a 1.027 inflation factor, reflecting an average inflation rate of 2.7% in ‘‘Midwest Economy— Consumer Prices’’ between 2006 and 2007, the latest years for which data are available. Table 16 (modified from NPRM version) shows this calculation and the projected total economic cost. TABLE 16—PROJECTED TOTAL ECONOMIC COST A. Projected operating expense Pilotage area B. Increase, multiplied by inflation factor (= A × 1.027) C. Projected target pilot compensation D. Projected total economic cost (= B + C) $534,487 549,089 $548,918 563,914 $1,617,955 981,589 $2,166,873 1,545,503 Total, District One ..................................... erowe on DSK5CLS3C1PROD with RULES Area 1 .............................................................. Area 2 .............................................................. 1,083,260 1,112,508 2,599,544 *3,712,052 Area 4 .............................................................. Area 5 .............................................................. 513,332 799,192 527,192 820,770 785,271 1,617,955 1,312,463 2,438,725 Total, District Two ..................................... 1,312,333 1,347,766 2,403,226 *3,750,992 Area 6 .............................................................. Area 7 .............................................................. 824,666 399,625 846,932 410,415 1,570,542 1,078,637 2,417,474 1,489,052 VerDate Nov<24>2008 15:23 Jul 20, 2009 Jkt 217001 PO 00000 Frm 00053 Fmt 4700 Sfmt 4700 E:\FR\FM\21JYR1.SGM 21JYR1 35820 Federal Register / Vol. 74, No. 138 / Tuesday, July 21, 2009 / Rules and Regulations TABLE 16—PROJECTED TOTAL ECONOMIC COST—Continued B. Increase, multiplied by inflation factor (= A × 1.027) A. Projected operating expense Pilotage area C. Projected target pilot compensation D. Projected total economic cost (= B + C) Area 8 .............................................................. 643,454 660,828 1,374,224 2,035,052 Total, District Three .................................. 1,889,298 1,940,310 4,023,403 *5,963,713 *Unique expense multipliers are used to calculate projected operating expense for all areas and districts, and as such, projected total economic cost for Districts One, Two and Three may not equal the sum of the projected total economic cost for the areas. Step 6: Divide the result in Step 5 by projected bridge hours to determine total unit costs. Step 6 calculations have been modified since the NPRM. Table 17 (modified from NPRM version) shows this calculation. TABLE 17—TOTAL UNIT COSTS B. Projected 2009 bridge hours A. Projected total economic cost Pilotage area Prospective (total) unit costs (A divided by B) Area 1 ............................................................................................................ Area 2 ............................................................................................................ $2,166,873 1,545,503 5,203 5,650 $416.47 273.54 Total, District One ................................................................................... 3,712,052 10,853 342.03 Area 4 ............................................................................................................ Area 5 ............................................................................................................ 1,312,463 2,438,725 7,320 5,097 179.30 478.46 Total, District Two ................................................................................... 3,750,992 12,417 302.09 Area 6 ............................................................................................................ Area 7 ............................................................................................................ Area 8 ............................................................................................................ 2,417,474 1,489,052 2,035,052 13,406 3,259 11,630 180.33 456.90 174.98 Total, District Three ................................................................................ 5,963,713 28,295 210.77 Overall ............................................................................................. 13,426,758 51,565 260.39 Step 7: Divide prospective unit costs (total unit costs) in Step 6 by the base period unit costs in Step 1. Step 7 calculations have been modified since the NPRM. Table 18 (modified from NPRM version) shows this calculation, which expresses the percentage change between the total unit costs and the base unit costs. The results, for each Area, are identical with the percentage increases listed in Table 1. TABLE 18—PERCENTAGE CHANGE, PROSPECTIVE IN UNIT COSTS A. Prospective unit costs Pilotage area B. Base period unit costs C. Percentage change from base (A divided by B; result expressed as percentage) $416.47 273.54 $367.17 261.03 13.43 4.79 Total, District One ................................................................................... 342.03 314.15 8.87 Area 4 ............................................................................................................ Area 5 ............................................................................................................ 179.30 478.46 170.93 457.95 4.90 4.48 Total, District Two ................................................................................... erowe on DSK5CLS3C1PROD with RULES Area 1 ............................................................................................................ Area 2 ............................................................................................................ 302.09 288.75 4.62 Area 6 ............................................................................................................ Area 7 ............................................................................................................ Area 8 ............................................................................................................ 180.33 456.90 174.98 160.26 369.54 170.68 12.52 23.64 2.52 Total, District Three ................................................................................ 210.77 188.14 12.03 Overall ............................................................................................. 260.39 235.08 10.77 VerDate Nov<24>2008 15:23 Jul 20, 2009 Jkt 217001 PO 00000 Frm 00054 Fmt 4700 Sfmt 4700 E:\FR\FM\21JYR1.SGM 21JYR1 Federal Register / Vol. 74, No. 138 / Tuesday, July 21, 2009 / Rules and Regulations Step 8: Adjust the base period rates by the percentage change in unit costs in Step 7. Step 8 calculations have been modified since the NPRM. Table 19 35821 (modified from NPRM version) shows this calculation. TABLE 19—BASE PERIOD RATES ADJUSTED BY PERCENTAGE CHANGE IN UNIT COSTS* C. Increase in base rate (A × B%) D. Adjusted rate (A + C, rounded to nearest cent) .............................. .............................. .............................. .............................. 4.79 (1.0479) .............................. .............................. 4.90 (1.0490) .............................. .............................. .............................. 4.48 (1.0448) .............................. $2.00/km, $3.55/mi 44.44 145.52 97.07 426.07 .......................... 37.40 35.68 .......................... 33.70 25.97 66.30 .......................... 55.71 $16.95/km, $29.99/mi 375.47 1,229.41 820.04 3,599.58 .......................... 817.63 779.92 .......................... 722.05 556.46 1,420.45 .......................... 1,299.46 2,104.72 .............................. 94.28 2,198.99 2,732.79 .............................. 122.41 2,855.20 2,104.72 .............................. 94.28 2,198.99 3,665.60 .............................. 164.20 3,829.80 4,246.60 2,753.85 2,141.88 1,522.48 1,243.75 .............................. .............................. .............................. .............................. .............................. 190.22 123.36 95.94 68.20 55.71 4,436.82 2,877.20 2,237.82 1,590.68 1,299.46 3,665.60 2,753.85 1,243.75 2,104.72 .............................. .............................. .............................. .............................. 164.20 123.36 55.71 94.28 3,829.80 2,877.20 1,299.46 2,198.99 2,732.79 2,753.85 1,522.48 .............................. .............................. .............................. 122.41 123.36 68.20 2,855.20 2,877.20 1,590.68 2,104.72 2,753.85 .......................... 553.62 525.88 .......................... 1,975.83 1,975.83 744.10 .............................. .............................. 12.52 (1.1252) .............................. .............................. 23.64 (1.2364) .............................. .............................. .............................. 94.28 123.36 .......................... 69.31 65.84 .......................... 467.15 467.15 175.93 2,198.99 2,877.20 .......................... 622.93 591.72 .......................... 2,442.98 2,442.98 920.03 1,656.11 .............................. 391.55 2,047.67 744.10 1,656.11 744.10 744.10 .......................... 535.92 509.36 .............................. .............................. .............................. .............................. 2.52 (1.0252) .............................. .............................. 175.93 391.55 175.93 175.93 .......................... 13.51 12.84 920.03 2,047.67 920.03 920.03 .......................... 549.44 522.20 A. Base period rate B. Percentage change in unit costs Area 1 .................................................................................................. —Basic pilotage ............................................................................ erowe on DSK5CLS3C1PROD with RULES Pilotage .......................... $14.94/km, $26.44/mi 331.03 1,083.89 722.98 3,173.51 .......................... 780.23 744.24 .......................... 688.35 530.49 1,354.15 .......................... 1,243.75 13.43 (1.1343) .............................. —Each lock transited ................................................................... —Harbor movage ......................................................................... —Minimum basic rate, St. Lawrence River .................................. —Maximum rate, through trip ....................................................... Area 2 .................................................................................................. —6-hr. period ................................................................................ —Docking or undocking ............................................................... Area 4 .................................................................................................. —6-hr. period ................................................................................ —Docking or undocking ............................................................... —Any point on Niagara River below Black Rock Lock ................ Area 5 between any point on or in ...................................................... —Toledo or any point on Lake Erie W. of Southeast Shoal ....... —Toledo or any point on Lake Erie W. of Southeast Shoal & Southeast Shoal ........................................................................ —Toledo or any point on Lake Erie W. of Southeast Shoal & Detroit River .............................................................................. —Toledo or any point on Lake Erie W. of Southeast Shoal & Detroit Pilot Boat ....................................................................... —Port Huron Change Point & Southeast Shoal (when pilots are not changed at the Detroit Pilot Boat) ...................................... —Port Huron Change Point & Toledo or any point on Lake Erie W. of Southeast Shoal (when pilots are not changed at the Detroit Pilot Boat) ...................................................................... —Port Huron Change Point & Detroit River ................................ —Port Huron Change Point & Detroit Pilot Boat ......................... —Port Huron Change Point & St. Clair River .............................. —St. Clair River ............................................................................ —St. Clair River & Southeast Shoal (when pilots are not changed at the Detroit Pilot Boat) ............................................ —St. Clair River & Detroit River/Detroit Pilot Boat ...................... —Detroit, Windsor, or Detroit River .............................................. —Detroit, Windsor, or Detroit River & Southeast Shoal .............. —Detroit, Windsor, or Detroit River & Toledo or any point on Lake Erie W. of Southeast Shoal ............................................. —Detroit, Windsor, or Detroit River & St. Clair River .................. —Detroit Pilot Boat & Southeast Shoal ....................................... —Detroit Pilot Boat & Toledo or any point on Lake Erie W. of Southeast Shoal ........................................................................ —Detroit Pilot Boat & St. Clair River ........................................... Area 6 .................................................................................................. —6-hr. period ................................................................................ —Docking or undocking ............................................................... Area 7 between any point on or in ...................................................... —Gros Cap & De Tour ................................................................. —Algoma Steel Corp. Wharf, Sault Ste. Marie, Ont. & De Tour —Algoma Steel Corp. Wharf, Sault Ste. Marie, Ont. & Gros Cap —Any point in Sault Ste. Marie, Ont., except the Algoma Steel Corp. Wharf & De Tour ............................................................. —Any point in Sault Ste. Marie, Ont., except the Algoma Steel Corp. Wharf & Gros Cap .......................................................... —Sault Ste. Marie, MI & De Tour ................................................ —Sault Ste. Marie, MI & Gros Cap .............................................. —Harbor movage ......................................................................... Area 8 .................................................................................................. —6-hr. period ................................................................................ —Docking or undocking ............................................................... Rates for ‘‘Cancellation, delay or interruption in rendering services ( § 401.420)’’ and ‘‘Basic Rates and charges for carrying a U.S. pilot beyond the normal change point, or for boarding at other than the normal boarding point (§ 401.428)’’ are not reflected in this table but have been increased by 10.77% across all areas. VerDate Nov<24>2008 17:04 Jul 20, 2009 Jkt 217001 PO 00000 Frm 00055 Fmt 4700 Sfmt 4700 E:\FR\FM\21JYR1.SGM 21JYR1 35822 Federal Register / Vol. 74, No. 138 / Tuesday, July 21, 2009 / Rules and Regulations VI. Regulatory Analyses We developed this rule after considering numerous statutes and executive orders related to rulemaking. Below, we summarize our analyses based on 13 of these statutes or executive orders. A. Regulatory Planning and Review 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 will not be 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 and Purpose’’ section for a detailed explanation of the legal authority and requirements for the Coast Guard to conduct an annual review and provide possible adjustments of pilotage rates on the Great Lakes. Based on our annual review for this rulemaking, we are adjusting the pilotage rates for the 2009 shipping season to generate sufficient revenue to cover allowable expenses, target pilot compensation, and returns on investment. This rule will implement a 10.77% overall rate adjustment for the Great Lakes system over the current rate as adjusted in the 2008 final rule. These adjustments to Great Lakes pilotage rates meet the requirements set forth in 46 CFR part 404 for similar compensation levels between Great Lakes pilots and industry. They also include adjustments for inflation and changes in association expenses to maintain these compensation levels. In general, we expect an increase in pilotage rates for a certain area to result in additional costs for shippers using pilotage services in that area, while a decrease would result in a cost reduction or savings for shippers in that area. This rule will result in a distributional effect that transfers payments (income) from affected shippers (vessel owners and operators) to the Great Lakes’ pilot associations through Coast Guard regulated pilotage rates. The shippers affected by these rate adjustments are those owners and operators of domestic vessels operating on register (employed in the foreign trade) and owners and operators of foreign vessels on a route within the Great Lakes system. These owners and operators must have pilots or pilotage service as required by 46 U.S.C. 9302. 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 rule, such as recreational boats and vessels only operating within the Great Lakes system, may elect to purchase pilotage services. However, this election is voluntary and does not affect the Coast Guard’s calculation of the rate increase and is not a part of our estimated national cost to shippers. We reviewed a sample of pilot source forms, which are the forms used to record pilotage transactions on vessels, and discovered very few cases of U.S. Great Lakes vessels (i.e., domestic vessels without registry operating only in the Great Lakes) that purchased pilotage services. We assume some vessel owners and operators may also choose to purchase pilotage services if their vessels are carrying hazardous substances or were navigating the Great Lakes system with inexperienced personnel. Based on information from the Coast Guard Office of Great Lakes Pilotage, we have determined that these vessels voluntarily chose to use pilots and, therefore, are exempt from pilotage requirements. We used 2006–2007 vessel arrival data from the Coast Guard’s Marine Inspection, Safety, and Law Enforcement system (MISLE) to estimate the average annual number of vessels affected by the rate adjustment to be 208 vessels that journey into the Great Lakes system. These vessels entered the Great Lakes by transiting through or in part of at least one of the three pilotage Districts before leaving the Great Lakes system. These vessels often make more than one distinct stop, docking, loading, and unloading at facilities in Great Lakes ports. Of the total trips for the 208 vessels, there were approximately 923 annual U.S. port arrivals before the vessels left the Great Lakes system, based on 2006–2007 vessel data from MISLE. The impact of the rate adjustment to shippers is estimated from the district pilotage revenues. These revenues represent the direct and indirect costs (‘‘economic costs’’) that shippers must pay for pilotage services. The Coast Guard sets rates so that revenues equal the estimated cost of pilotage. We estimate the additional impact (costs or savings) of the rate adjustment in this final rule to be the difference between the total projected revenue needed to cover costs based on the 2008 rate adjustment and the total projected revenue needed to cover costs in this final rule for 2009. Table 20 details additional costs or savings by area and district. TABLE 20—RATE ADJUSTMENT AND ADDITIONAL IMPACT OF THE FINAL RULE ($U.S.; NON-DISCOUNTED) 1 Total projected expenses in 2008 Proposed rate change Total projected expenses in 2009 3 Additional revenue or cost of this rulemaking 2 $2,078,551 1,474,806 1.0425 1.0479 2,166,873 1,545,503 $88,322 70,697 Total, District One ........................................................................... 3,553,357 1.0447 3,712,052 158,695 Area 4 .................................................................................................... Area 5 .................................................................................................... erowe on DSK5CLS3C1PROD with RULES Area 1 .................................................................................................... Area 2 .................................................................................................... 1,251,203 2,334,169 1.0490 1.0448 1,312,463 2,438,725 61,260 104,556 Total, District Two ........................................................................... 3,585,372 1.0462 3,750,992 165,620 Area 6 .................................................................................................... Area 7 .................................................................................................... Area 8 .................................................................................................... 2,884,724 1,427,515 1,944,032 0.8380 1.0431 1.0468 2,417,474 1,489,052 2,035,052 (467,250) 61,537 91,020 VerDate Nov<24>2008 15:23 Jul 20, 2009 Jkt 217001 PO 00000 Frm 00056 Fmt 4700 Sfmt 4700 E:\FR\FM\21JYR1.SGM 21JYR1 Federal Register / Vol. 74, No. 138 / Tuesday, July 21, 2009 / Rules and Regulations 35823 TABLE 20—RATE ADJUSTMENT AND ADDITIONAL IMPACT OF THE FINAL RULE ($U.S.; NON-DISCOUNTED) 1—Continued Total projected expenses in 2008 Total, District Three ........................................................................ Proposed rate change 6,256,273 0.9532 Total projected expenses in 2009 3 5,963,713 Additional revenue or cost of this rulemaking 2 (292,560) 1 Some erowe on DSK5CLS3C1PROD with RULES values may not total due to rounding. 2 Additional Revenue or Cost of this Rulemaking = ‘Total Projected Expenses in 2009’ ¥ ‘Total Projected Expenses in 2008’. 3 ‘Total Projected Expenses in 2009’ and ‘Additional Revenue or Cost of this Rulemaking’ for Districts One, Two and Three differ from the sum of the area totals due to the use of unique multipliers, as mentioned in Step 5 under ‘Calculating the Rate Adjustment’. After applying the rate change in this rule, the resulting difference between the projected revenue in 2008 and the projected revenue in 2009 is the annual impact to shippers from this rule. This figure will be equivalent to the total additional payments or savings that shippers will incur for pilotage services from this rule. As discussed earlier, we consider a reduction in payments to be a cost savings. The impact of the rate adjustment in this rule to shippers varies by area and district. The annual costs of the rate adjustments in Districts 1 and 2 are approximately $159,000 and $166,000, respectively, while District 3 will experience an annual savings of approximately $293,000. To calculate an exact cost or savings per vessel is difficult because of the variation in vessel types, routes, port arrivals, commodity carriage, time of season, conditions during navigation, and preferences for the extent of pilotage services on designated and undesignated portions of the Great Lakes system. Some owners and operators will pay more and some will pay less depending on the distance and port arrivals of their vessels’ trips. However, the annual cost or savings reported above does capture all of the additional cost the shippers face as a result of the rate adjustment in this rule. As Table 20 indicates, all areas will experience an increased annual cost due to this rulemaking except Area 6, which will experience a savings. The projected savings for Area 6 is approximately $467,000. This will cause a net savings for District 3, and is due to a decrease in actual bridge hours in Area 6 from 2008 to 2009. This decrease in bridge hours led to a decrease in the number of pilots needed, from 10 pilots in 2008 to 8 pilots in 2009. This decrease in the number of pilots would reduce the projected revenue needed to cover costs of pilotage services in Area 6. The effects of a rate adjustment on costs and savings vary by year and area. A decrease in projected expenses for individual areas or districts is common in past pilotage rate adjustments. Most recently, in the 2008 Final Rule, District VerDate Nov<24>2008 15:23 Jul 20, 2009 Jkt 217001 2 experienced a decrease in projected expenses due to an adjustment in bridge hours from the 2008 Interim Rule, which led to a savings for that district. However, this savings was not large enough to outweigh the costs to the other districts. The overall impact of the final rule will be an additional cost to shippers of $32,000 across all three districts. This differs from the estimated cost savings of $15,000 in the NPRM due to the projected changes in bridge hours in Area 1,1 as well as the change in the distribution of vessels operating under Agreements A and B as of May 2009. We explained these two differences from the NPRM in our Part IV discussion of public comments on bridge hour projection data, and in our Part V.B discussion of Step 3(b) rate calculations. These two changes since the NPRM resulted in increased projected expenses, accounting for the overall increased cost to shippers of the final rule. B. Small Entities Under the Regulatory Flexibility Act (5 U.S.C. 601–612), we have considered whether this rule would have a significant economic impact on a substantial number of small entities. The term ‘‘small entities’’ comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000 people. We expect entities affected by the proposed rule would be classified under the North American Industry Classification System (NAICS) code subsector 483—Water Transportation, which includes one or all of the following 6-digit NAICS codes for freight transportation: 483111—Deep Sea Freight Transportation, 483113— Coastal and Great Lakes Freight 1 When a decrease in traffic is not accompanied by a reduction in pilots, as in this case, projected pilot compensation and other expenses do not decrease. As such, revenue must increase to meet these expenses, which can only be accomplished through rate increases. PO 00000 Frm 00057 Fmt 4700 Sfmt 4700 Transportation, and 483211—Inland Water Freight Transportation. According to the Small Business Administration’s definition, a U.S. company with these NAICS codes and employing less than 500 employees is considered a small entity. For this rule, we reviewed recent company size and ownership data from 2006–2007 MISLE data and business revenue and size data provided by Reference USA and Dunn and Bradstreet. We were able to gather revenue and size data or link the entities to large shipping conglomerates for 22 of the 24 affected entities in the United States. We found that large, mostly foreign-owned, shipping conglomerates or their subsidiaries owned or operated all vessels engaged in foreign trade on the Great Lakes. We assume that new industry entrants will be comparable in ownership and size to these shippers. There are three U.S. entities affected by the rule that receive revenue from pilotage services. These are the three pilot associations that provide and manage pilotage services within the Great Lakes districts. Two of the associations operate as partnerships and one operates as a corporation. These associations are classified with the same NAICS industry classification and small entity size standards described above, but they have far fewer than 500 employees: approximately 65 total employees combined. We expect no adverse impact to these entities from this rule since all associations receive enough revenue to balance the projected expenses associated with the projected number of bridge hours and pilots. Therefore, the Coast Guard has determined that this rule will not have a significant economic impact on a substantial number of small entities under 5 U.S.C. 605(b). C. Assistance for Small Entities Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104–121), we offered to assist small entities in understanding the rule so that they could better evaluate its effects on them and participate in the rulemaking. The E:\FR\FM\21JYR1.SGM 21JYR1 35824 Federal Register / Vol. 74, No. 138 / Tuesday, July 21, 2009 / Rules and Regulations Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard. Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency’s responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1–888–REG–FAIR (1–888–734–3247). D. Collection of Information This rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501– 3520). This rule does not change the burden in the collection currently approved by the Office of Management and Budget (OMB) under OMB Control Number 1625–0086, Great Lakes Pilotage Methodology. E. Federalism A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this rule under that Order and have determined that it does not have implications for federalism because there are no similar State regulations, and the States do not have the authority to regulate and adjust rates for pilotage services in the Great Lakes system. F. Unfunded Mandates Reform Act The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531–1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or Tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this rule would not result in such expenditure, we do discuss the effects of this rule elsewhere in this preamble. erowe on DSK5CLS3C1PROD with RULES G. Taking of Private Property This rule would not affect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights. VerDate Nov<24>2008 15:23 Jul 20, 2009 Jkt 217001 H. Civil Justice Reform This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. I. Protection of Children We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children. J. Indian Tribal Governments This rule does not have Tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian Tribes, on the relationship between the Federal Government and Indian Tribes, or on the distribution of power and responsibilities between the Federal Government and Indian Tribes. K. Energy Effects We have analyzed this rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a ‘‘significant energy action’’ under that order because it is not a ‘‘significant regulatory action’’ under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. The Administrator of the Office of Information and Regulatory Affairs has not designated it as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211. L. Technical Standards The National Technology Transfer and Advancement Act (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 rule does not use technical standards. Therefore, we did PO 00000 Frm 00058 Fmt 4700 Sfmt 4700 not consider the use of voluntary consensus standards. M. Environment We have analyzed this rule under Department of Homeland Security Management Directive 023–01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321–4370f), and have concluded that this action is one of a category of actions which do not individually or cumulatively have a significant effect on the human environment. This rule is categorically excluded under section 2.B.2, figure 2– 1, paragraph (34)(a) of the Instruction. Paragraph 34(a) pertains to minor regulatory changes that are editorial or procedural in nature. This rule adjusts rates in accordance with applicable statutory and regulatory mandates. An environmental analysis checklist and a categorical exclusion determination are available in the docket where indicated under ADDRESSES. List of Subjects in 46 CFR Part 401 Administrative practice and procedure, Great Lakes, Navigation (water), Penalties, Reporting and recordkeeping requirements, Seamen. ■ For the reasons discussed in the preamble, the Coast Guard amends 46 CFR Part 401 as follows: PART 401—GREAT LAKES PILOTAGE REGULATIONS 1. The authority citation for part 401 continues to read as follows: ■ Authority: 46 U.S.C. 2104(a), 6101, 7701, 8105, 9303, 9304; Department of Homeland Security Delegation No. 0170.1; 46 CFR 401.105 also issued under the authority of 44 U.S.C. 3507. 2. In § 401.405, revise paragraphs (a) and (b), including the footnote to Table (a), to read as follows: ■ § 401.405 Basic rates and charges on the St. Lawrence River and Lake Ontario. * * * * * (a) Area 1 (Designated Waters): Service Basic Pilotage ...... Each Lock Transited. Harbor Movage .... St. Lawrence River $16.95 per kilometer or $29.99 per mile.1 $375.1 $1,229.1 1 The minimum basic rate for assignment of a pilot in the St. Lawrence River is $820, and the maximum basic rate for a through trip is $3,599. (b) Area 2 (Undesignated Waters): E:\FR\FM\21JYR1.SGM 21JYR1 35825 Federal Register / Vol. 74, No. 138 / Tuesday, July 21, 2009 / Rules and Regulations Service Lake Ontario Six-Hour Period .................... Docking or Undocking .......... $818 780 § 401.407 Basic rates and charges on Lake Erie and the navigable waters from Southeast Shoal to Port Huron, MI. * * * * * ■ 3. In § 401.407 revise paragraphs (a) and (b), including the footnote to Table (b), to read as follows: * * * * (a) Area 4 (Undesignated Waters): * Lake Erie (east of Southeast Shoal) Service Six-Hour Period Docking or Undocking ..... 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 557 § 401.410 Basic rates and charges on Lakes Huron, Michigan, and Superior, and the St. Mary’s River. Toledo or any point on Lake Erie west of Southeast Shoal $2,199 1 4,436 1 3,829 N/A 2,855 2,199 2,198 1,590 Detroit pilot boat Detroit River $2,855 2,877 2,877 1,299 N/A St. Clair River $2,199 2,237 2,877 N/A N/A N/A 1,591 1,299 2,877 2,877 * * Lakes Huron and Michigan Service Six-Hour Period .................... $623 * Docking or Undocking .......... Service Lake Superior § 401.428 Six-Hour Period .................... Docking or Undocking .......... $549 522 [Amended] 5. In § 401.420— ■ a. In paragraph (a), remove the number ‘‘$102’’ and add, in its place, the number ‘‘$113’’; and remove the number ‘‘$1,604’’ and add, in its place, the number ‘‘$1,777’’. ■ b. In paragraph (b), remove the number ‘‘$102’’ and add, in its place, the number ‘‘$113’’; and remove the number ‘‘$1,604’’ and add, in its place, the number ‘‘$1,777’’. ■ c. In paragraph (c)(1), remove the number ‘‘$606’’ and add, in its place, the number ‘‘$671’’; in paragraph (c)(3), remove the number ‘‘$102’’ and add, in its place, the number ‘‘$113’’; and, also in paragraph (c)(3), remove the number ■ VerDate Nov<24>2008 15:23 Jul 20, 2009 Jkt 217001 [Amended] 592 (b) Area 7 (Designated Waters): De Tour ‘‘$1,604’’ and add, in its place, the number ‘‘$1,777’’. (c) Area 8 (Undesignated Waters): Lakes Huron and Michigan Service Gros Cap ..................................................................................................................................... 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 ............................................................................................................................ erowe on DSK5CLS3C1PROD with RULES 1,420 (b) Area 5 (Designated Waters): $1,299 1 3,829 Area § 401.420 N/A 557 (a) Area 6 (Undesignated Waters): 4. In § 401.410, revise paragraphs (a), (b), and (c) to read as follows: * $722 Any Point on the Niagara River below the Black Rock Lock ............... Buffalo pilots are not changed at the Detroit Pilot Boat. ■ * $722 Southeast Shoal Any point on or in Buffalo Lake Erie (east of Southeast Shoal) Service Gros Cap $2,443 2,443 2,048 2,048 N/A Any harbor N/A 920 920 920 N/A N/A N/A N/A N/A $920 DEPARTMENT OF DEFENSE Defense Acquisition Regulations System 6. In § 401.428, remove the number ‘‘$618’’ and add, in its place, the number ‘‘$684’’. 48 CFR Part 212 Dated: July 13, 2009. Kevin S. Cook, Rear Admiral, U.S. Coast Guard, Director of Prevention Policy. [FR Doc. E9–17229 Filed 7–20–09; 8:45 am] Defense Federal Acquisition Regulation Supplement; Acquisition of Commercial Items (DFARS Case 2008– D011) ■ BILLING CODE 4910–15–P PO 00000 RIN 0750–AG23 AGENCY: Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Interim rule; correction. SUMMARY: DoD is making a correction to the interim rule published at 74 FR 34263 on July 15, 2009, which amended the Defense Federal Acquisition Regulation Supplement (DFARS) to address the conditions under which a time-and-materials or labor-hour contract may be used for the acquisition Frm 00059 Fmt 4700 Sfmt 4700 E:\FR\FM\21JYR1.SGM 21JYR1

Agencies

[Federal Register Volume 74, Number 138 (Tuesday, July 21, 2009)]
[Rules and Regulations]
[Pages 35812-35825]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-17229]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

46 CFR Part 401

[Docket No. USCG-2008-1126]
RIN 1625-AB29

2009 Rates for Pilotage on the Great Lakes

AGENCY: Coast Guard, DHS.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Coast Guard is increasing the rates for pilotage service
on the Great Lakes by an average of 10.77% over the rates that took
effect February 4, 2009. This increase reflects an August 1, 2009,
increase in benchmark contractual wages and benefits, as well as an
increase in the ratio of pilots to ``bridge hours.'' The Coast Guard
intends the final rule to generate sufficient revenue to cover
allowable expenses, target pilot compensation, and returns on
investment. The final rule promotes the Coast Guard strategic goal of
maritime safety.

DATES: This final rule is effective August 1, 2009.

ADDRESSES: Comments and material received from the public, as well as
documents mentioned in this preamble as being available in the docket,
are part of docket USCG-2008-1126 and are available for inspection or
copying at the Docket Management Facility (M-30), U.S. Department of
Transportation, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue, SE., Washington, DC 20590, between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal holidays. You may also find this
docket on the Internet at https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: For questions on this final rule,
please call Mr. Paul Wasserman, Chief, Great Lakes Pilotage Branch,
Commandant (CG-54122), U.S. Coast Guard, at 202-372-1535, by fax 202-
372-1929, or e-mail Paul.M.Wasserman@uscg.mil. For questions on viewing
or submitting material to the docket, call Renee V. Wright, Chief,
Dockets, Department of Transportation, telephone 202-493-0402.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Abbreviations
II. Effective Date
III. Background
IV. Discussion of Comments
V. Discussion of the Final Rule
VI. 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

I. Abbreviations

AMOU American Maritime Officer Union
GLPAC Great Lakes Pilotage Advisory Committee
MISLE Coast Guard Marine Inspection, Safety, and Law Enforcement system
MOA Memorandum of Agreement
NAICS North American Industry Classification System
NPRM Notice of Proposed Rulemaking
NTTAA National Technology Transfer and Advancement Act
OMB Office of Management and Budget

II. Effective Date

This final rule takes effect August 1, 2009. Under 5 U.S.C. 553(d),
we find good cause for this final rule to take effect less than 30 days
after publication. The Great Lakes Pilotage Act of 1960, as amended by
Public Law 109-241, section 302, requires the Coast Guard to review and
adjust the Great Lakes pilotage rates annually by March 1. We could not
issue this final rule until some months after that date due to the time
needed to review and resolve comments received on the proposed rule. We
nonetheless need to issue the final rule before the August 1, 2009,
increase in benchmark contractual wages and benefits that necessitates
this year's rate adjustment. Under these circumstances, publication of
the final rule 30 days or more in advance of the August 1 benchmark
increase is impracticable. The regulated community well understands the
significance of the August benchmark increase and anticipates that the
final rule will take effect not later than August 1. Therefore, we find
that delay of the final rule's effective date beyond August 1, 2009,
would be unnecessary, and contrary to the public interest in timely
rate increases.

III. Background

We published a notice of proposed rulemaking on April 24, 2009
(NPRM, 74 FR 18669). The NPRM proposed an average 9.41% increase.
This rulemaking increases Great Lakes pilotage rates in accord with
the methodology contained in Coast Guard regulations in 46 CFR Parts
401-404. Our regulations implement the Great Lakes Pilotage Act of
1960, 46 U.S.C. Chapter 93, which requires foreign-flag vessels engaged
in foreign trade to use Federally registered Great Lakes pilots while
transiting the St. Lawrence Seaway and the Great Lakes system, and
which requires the Secretary of Homeland Security to ``prescribe by
regulation rates and charges for pilotage services, giving
consideration to the public interest and the costs of providing the
services.'' 46 U.S.C. 9303(f).
The U.S. waters of the Great Lakes and the St. Lawrence Seaway are
divided into three pilotage Districts. Pilotage in each District is
provided by an association certified by the Coast Guard Director of
Great Lakes Pilotage to operate a pilotage pool. It is important to
note that, while we set rates, we do not control the actual number of
pilots an association maintains, so long as the association is able to
provide safe, efficient, and reliable pilotage service, nor do we
control the actual compensation that pilots receive. This is determined
by each of the three District associations, which use different
compensation practices.
District One, consisting of Areas 1 and 2, includes all U.S. waters
of the St. Lawrence River and Lake Ontario. District Two, consisting of
Areas 4 and 5, includes all U.S. waters of Lake Erie, the Detroit
River, Lake St. Clair, and the St. Clair River. District Three,
consisting of Areas 6, 7, and 8, includes all U.S. waters of the St.
Mary's River, Sault Ste. Marie Locks, and Lakes Michigan, Huron, and
Superior. Area 3 is the Welland Canal, which is serviced exclusively by
the Canadian Great Lakes Pilotage Authority and, accordingly, is not
included in the U.S. rate structure. Areas 1, 5, and 7 have been
designated by Presidential Proclamation, pursuant to the Great Lakes
Pilotage Act of 1960, to be waters in which pilots must at all times be
fully engaged in the navigation of vessels in their charge. Areas 2, 4,
6, and 8 have not been so designated because they are open bodies of
water. Under the Great Lakes Pilotage Act of 1960, pilots assigned to
vessels in these areas are only required to ``be on board and available
to direct the navigation of

[[Page 35813]]

the vessel at the discretion of and subject to the customary authority
of the master.'' 46 U.S.C. 9302(a)(1)(B).
Our pilotage regulations require annual reviews of pilotage rates
and the setting of new rates at least once every five years, or sooner,
if annual reviews show a need. 46 CFR 404.1. To assist in calculating
pilotage rates, the pilotage associations are required to submit annual
financial statements prepared by certified public accounting firms. In
addition, every fifth year, in connection with the mandatory rate
adjustment, we contract with an independent accounting firm to conduct
a full audit of the accounts and records of the pilotage associations
and prepare and submit financial reports relevant to the ratemaking
process. In those years when a full ratemaking is conducted, we
generate the pilotage rates using Appendix A to 46 CFR Part 404. The
last Appendix A review was concluded in 2006 (71 FR 16501, Apr. 3,
2006). Between the five-year full ratemaking intervals, we annually
review the pilotage rates using Appendix C to Part 404, and adjust
rates when deemed appropriate. We conducted Appendix C reviews in 2007
and 2008, and increased rates in both years. The 2008 final rule was
published January 5, 2009 (74 FR 220), and took effect on February 4,
2009. We define the terms and formulas used in Appendix A and Appendix
C in Appendix B to Part 404.
This final rule concludes the annual Appendix C rate review for
2009, and increases rates by an average of 10.77% over the rates that
took effect February 4, 2009.

IV. Discussion of Comments

We received four comments during the NPRM public comment period.
Timeliness. Three commenters, including a pilots' association,
pointed out that 46 U.S.C. 9303(f), as amended by Public Law 109-241,
sec. 302, requires us to review and, if necessary, establish adjusted
pilotage rates by March 1 of each year, in order to provide critical
information before the start of the annual Great Lakes shipping season,
usually in early spring. These commenters point out that we have not
met the March 1, 2009, deadline for this year's review. We acknowledge
this and future compliance is a Coast Guard priority. In 2007 and 2008,
we mitigated the impact of delay by ensuring that interim rules were in
place at the opening of the shipping season. In letters dated April 24,
2007, and March 3, 2008, the pilots' associations expressed their
appreciation to the Coast Guard for these efforts. In 2009, publishing
a rule at the beginning of the shipping season was not possible, but we
hope to mitigate the impact of delay by issuing the final rule so that
it takes effect on August 1, 2009, when the benchmark contract increase
that accounts for a meaningful portion of this year's rate adjustment
takes effect.
``Pilots needed'' and rounding. One commenter said that, in
calculating the number of pilots needed in each Area, we should always
round the result of our mathematical calculations up to the nearest
``whole pilot,'' and another commenter criticized the imprecision of
the language we used in the NPRM to describe our rounding. We agree
with this latter comment and have revised our language in this final
rule.
We acknowledge that in recent years we have usually rounded the
results of the mathematical calculation used to determine the number of
``pilots needed,'' pursuant to our discretionary authority ``to make
adjustments to these numbers to ensure uninterrupted pilotage service
in each area, or for other reasonable circumstances.'' 46 CFR Part 404,
Appendix A, Step 2.B (also applicable in Appendix C calculations). This
rounding has never been performed as a matter of policy, nor do we
adopt it as policy now. In fact, our current ratemaking methodology
requires no rounding whatsoever, and until 2006, what rounding we
applied was merely up or down to the nearest tenth of a whole number:
see, e.g., our December 12, 2003 (68 FR 69564) and March 10, 2005 (70
FR 12082) interim rules.
In the April 3, 2006 final rule (71 FR 16501), we acknowledged nine
public comments in favor of rounding to whole numbers and approved the
use of that process for that rule. However, we did not actually apply
that methodology in the 2006 final rule. The mathematical result of our
2006 calculations was a whole number in each of the seven Areas,
because we rounded the bridge hour projections (not pilot numbers) that
year.
In the 2007 interim rule (72 FR 8115, Feb. 23, 2007), we agreed
with a public commenter that the rounding of bridge hour projections in
2006 was a departure from past practice and agreed to use unrounded
bridge hour projections. We also rounded the mathematical results of
our pilots-needed calculations up to the next whole number in all six
Areas where rounding was needed. These calculations were unchanged in
the 2007 final rule (72 FR 53158, Sep. 18, 2007).
In 2008, the March 21, 2008 interim rule (73 FR 15092) adopted
without change the calculations proposed in the February 1, 2008 NPRM
(73 FR 6085). Mathematical results of pilots-needed calculations were
rounded up in all six Areas where rounding was needed. However, we
introduced three adjustments in the 2008 final rule (74 FR 220, Jan. 5,
2009). These adjustments responded to public comments that pointed out
that the NPRM and interim rule overstated the bridge hour projections
for Areas 2, 4, and 5.
The first adjustment reduced projected bridge hours in Area 2 from
7,993 to 5,650, but kept the ``pilots needed'' for Area 2 at five, one
more than would have been indicated by rounding up the mathematical
result (5,650/1,800 = 3.14, rounded up = 4). We exercised our
discretion to do so because ``experience has demonstrated the need for
at least five pilots in that Area,'' a need that we discussed in detail
in the final rule at 74 FR 221.
Second, in Area 4, we reduced projected bridge hours from 8,490 to
7,320, and rounded the mathematical result (7,320/1,800 = 4.07) down to
four pilots needed. Third, in Area 5, we reduced projected bridge hours
from 6,395 to 5,097, and rounded the mathematical result (5,097/1,000 =
5.10) up to six pilots. We exercised our discretion in these two Areas
``because the District 2 Pilots' Association has routinely operated
with an average of one less pilot than is authorized under the rate and
for the last season and a half with two fewer pilots than authorized.
Accordingly, a reduction of one pilot per Area reflects actual
practice.'' 74 FR at 222. We might also have observed that pilots in
one Area frequently operate in other Areas as well, that District Two
comprises both Areas 4 and 5, and that the minimal downward adjustment
from 4.07 to 4 in Area 4 should therefore be balanced against the more
substantial rounding up, from 5.10 to 6, in Area 5.
We acknowledge that the determination of pilots needed is an issue
of concern to many, and that some might wish to see the formula for
that determination modified to require ``rounding up'' in all
instances. We observe that the ratemaking formula was never designed to
produce anything more than a useful model for subsequent calculations.
It could be argued that the model worked best without rounding, or with
only limited rounding, for example because rounding up inflates pilot
numbers and makes it less likely that pilots will be able to reach
their target compensation. We defer consideration of such arguments
until they can be made and considered in the context of an overall
review of our ratemaking methodology. Until

[[Page 35814]]

then, we intend to apply the pilots-needed calculations much as we have
done since 2007.
Data for bridge hour projections. One commenter said we failed to
consult industry in projecting 2009 vessel traffic, and that our bridge
hour projections for 2009 (i.e., the projection of hours pilots are
aboard vessels providing pilotage service) should have been based on
2008 figures rather than on 2007 figures. To meet the statutory
deadline for establishing rates by March 1, 2009, we began preparing
the 2009 NPRM long before actual data for 2008 was available. Although
our practice has not been to document every contact with industry or
pilots, our regulations and our ratemaking methodology presuppose
frequent informal contacts between the Director of Great Lakes
Pilotage, industry, and pilots. The information received through those
contacts is submitted for public comment in our NPRM. In this case, our
use of 2007 figures for 2009, instead of waiting for 2008 figures, was
based on 2008 informal discussions with pilot and industry
representatives that endorsed the continued use of 2007 figures, with
some modifications. Those modifications were explained in the April
2009 NPRM.
We agree with one commenter who said that the NPRM did not
adequately explain the difference in Area 6 and Area 7 base period
bridge hours (18,000 and 3,863, respectively), and the 2009 projected
bridge hours for those Areas (13,406 and 3,259, respectively). Areas 6
and 7 experienced a significant decrease in 2007 actual bridge hours,
from 2007 projections. Therefore, the 2009 projections for those Areas
reflects their actual 2007 bridge hours, and then further reduces those
figures by an additional 10% in each Area.
One commenter said we should adjust Area 1 projected bridge hours
to more accurately reflect anticipated traffic for the 2009 shipping
season, as we did for areas 2, 4, and 5 in the 2008 final rule and as
we proposed for District Three in the 2009 NPRM. We agree and, in this
final rule, we are reducing the projected bridge hours for Area 1 from
5661 to 5203. We are also adjusting District Three bridge hours as
indicated in the NPRM.
Class 4 vessels. One commenter said that our pilotage rates for
Class 4 vessels are 15% higher than Canadian rates. This may be true,
but in the past year the difference has been less than 1%, but has
varied subsequently due to fluctuations in the relative value of U.S.
and Canadian currency.
Miscellaneous. Three commenters took issue with various aspects of
our ratemaking methodology. These comments are beyond the scope of this
rulemaking, which applies the methodology as it exists today, but we
address two points briefly here. One commenter petitioned the Coast
Guard to review our formula for setting benchmark compensation levels
of Great Lakes vessel masters. We deny that petition because we have
previously conducted the requested review and believe the formula is
correct: a supporting memorandum appears in the docket for this
rulemaking as USCG-2008-1126-0017. The same commenter criticized us for
not yet adopting the recommendations of Rear Admiral Timothy J. Riker's
2003 report on Great Lakes bridge hours. We decline to adopt the Riker
Report recommendations in full because we do not think the Report
adequately accounted for the difference between a Great Lakes pilot's
active, on call, work life during a portion of the year and the work
life of an office-based 40 hour per week worker through a 52-week year.
We acknowledge that through the years, both pilots and industry
have indicated concerns about aspects of our ratemaking methodology.
Some of those concerns are described in communications that we received
between January 2009, when we published the 2008 final rule, and April
2009, when we published the 2009 NPRM. Those communications appear in
the docket for this rulemaking as supplemental material. To obtain a
more comprehensive understanding of these concerns, we have decided to
publish a notice focusing on our ratemaking methodology, and requesting
public comments. That notice appears elsewhere in today's Federal
Register. We will refer the comments we receive to the Great Lakes
Pilotage Advisory Committee, which Congress established to advise the
Coast Guard on significant policy decisions relating to Great Lakes
pilotage.

V. Discussion of the Final Rule

A. Summary

We are increasing pilotage rates in accordance with the methodology
outlined in Appendix C to 46 CFR Part 404, by increasing rates an
average 10.77% over the 2008 final rule. This final rule puts into
place, with two modifications, the rate changes we proposed in the
April 24, 2009 NPRM. The first modification adjusts projected bridge
hours in Area 1 as discussed in part IV of this preamble. The second
modification updates the ship tonnage percentages under the AMO union
contracts. This second modification accounts for only 0.36% of the
overall rate increase.

Table 1--2009 Area Rate Changes
------------------------------------------------------------------------
Then the proposed
percentage increases
If pilotage service is required in: over the current
rate is:
------------------------------------------------------------------------
Area 1 (designated waters)........................ 13.43
Area 2 (undesignated waters)...................... 4.79
Area 4 (undesignated waters)...................... 4.90
Area 5 (designated waters)........................ 4.48
Area 6 (undesignated waters)...................... 12.52
Area 7 (designated waters)........................ 23.64
Area 8 (undesignated waters)...................... 2.52
Overall rate change (percentage change in overall 10.77
prospective unit costs/base unit costs; see Table
18)..............................................
------------------------------------------------------------------------

Rates for cancellation, delay, or interruption in rendering
services (46 CFR 401.420), and basic rates and charges for carrying a
U.S. pilot beyond the normal change point, or for boarding at other
than the normal boarding point (46 CFR 401.428), have been increased by
10.77% in all Areas.

B. Calculating the Rate Adjustment

The Appendix C ratemaking calculation involves eight steps:
Step 1: Calculate the total economic costs for the base period
(i.e., pilot

[[Page 35815]]

compensation expense plus all other recognized expenses plus the return
element) and divide by the total bridge hours used in setting the base
period rates;
Step 2: Calculate the ``expense multiplier,'' the ratio of other
expenses and the return element to pilot compensation for the base
period;
Step 3: Calculate an annual ``projection of target pilot
compensation'' using the same procedures found in Step 2 of Appendix A;
Step 4: Increase the projected pilot compensation in Step 3 by the
expense multiplier in Step 2;
Step 5: Adjust the result in Step 4, as required, for inflation or
deflation;
Step 6: Divide the result in Step 5 by projected bridge hours to
determine total unit costs;
Step 7: Divide prospective unit costs in Step 6 by the base period
unit costs in Step 1; and
Step 8: Adjust the base period rates by the percentage changes in
unit cost in Step 7.
The base data used to calculate each of the eight steps comes from
the 2008 final rule, published in January 2009. We also used the most
recent union contracts between the American Maritime Officers Union
(AMOU) and vessel owners and operators on the Great Lakes, which we
received on August 16, 2007, to determine target pilot compensation.
Bridge hour projections for the 2009 season have been obtained from
historical data, pilots, and industry. All documents and records used
in this rate calculation have been placed in the public docket for this
rulemaking and are available for review at the addresses listed under
ADDRESSES.
Some values may not total exactly due to format rounding for
presentation in charts and explanations in this section. The rounding
does not affect the integrity or truncate the real value of the
calculations in the ratemaking methodology described below.
Step 1: Calculate the total economic cost for the base period. The
calculations in Step 1 are unchanged from the NPRM, but are repeated
for your convenience.
In this step, for each Area, we divide total economic costs for the
base period by the total bridge hours used in setting the base period
rates, to yield the base cost per bridge hour. Total base period
economic costs include pilot compensation expenses, plus all other
recognized expenses, plus the return element. The calculations
providing the total base period economic costs for each Area are
summarized in Table 16 of the 2008 final rule. Total bridge hours used
in setting the base period rates were calculated in Table 13 of the
2008 final rule. Tables 2 through 4 summarize the Step 1 calculations:

Table 2--Total Economic Cost for Base Period, District One
----------------------------------------------------------------------------------------------------------------
Area 1 St. Area 2 Lake Total District
Lawrence River Ontario One
----------------------------------------------------------------------------------------------------------------
Total base period economic costs............................. $2,078,551 $1,474,806 $3,553,357
Base bridge hours............................................ / 5,661 / 5,650 / 11,311
Base cost per bridge hour.................................... = $367.17 = $261.03 = $314.15
----------------------------------------------------------------------------------------------------------------

Table 3--Total Economic Cost for Base Period, District Two
----------------------------------------------------------------------------------------------------------------
Area 5
Area 4 Lake Southeast Shoal Total District
Erie to Port Huron, Two
MI
----------------------------------------------------------------------------------------------------------------
Total base period economic costs............................. $1,251,203 $2,334,169 $3,585,372
Base bridge hours............................................ / 7,320 / 5,097 / 12,417
Base cost per bridge hour.................................... = $170.93 = $457.95 = $288.75
----------------------------------------------------------------------------------------------------------------

Table 4--Total Economic Cost for Base Period, District Three
----------------------------------------------------------------------------------------------------------------
Area 6 Lakes
Huron and Area 7 St. Area 8 Lake Total District
Michigan Mary's River Superior Three
----------------------------------------------------------------------------------------------------------------
Total base period economic costs............ $2,884,724 $1,427,515 $1,944,032 $6,256,273
Base bridge hours........................... / 18,000 / 3,863 / 11,390 / 33,253
Base cost per bridge hour................... = $160.26 = $369.54 = $170.68 = $188.14
----------------------------------------------------------------------------------------------------------------

Step 2. Calculate the expense multiplier. The calculations in Step
2 are unchanged from the NPRM, but are repeated for your convenience.
In this step, for each Area, we calculate an expense multiplier by
dividing the base operating expense, shown in Table 16, Column B of the
2008 final rule, by base pilot compensation, shown in Table 16, Column
C of the 2008 final rule. Tables 5 through 7 show the Step 2
calculations.

Table 5--Expense Multiplier, District One
----------------------------------------------------------------------------------------------------------------
Area 1 St. Area 2 Lake Total District
Lawrence River Ontario One
----------------------------------------------------------------------------------------------------------------
Base operating expense....................................... $516,138 $529,046 $1,045,185

[[Page 35816]]

Base target pilot compensation............................... / $1,562,413 / $945,760 / $2,508,173
Expense multiplier........................................... = .33035 = .55939 = .41671
----------------------------------------------------------------------------------------------------------------

Table 6--Expense Multiplier, District Two
----------------------------------------------------------------------------------------------------------------
Area 5
Area 4 Lake Southeast Shoal Total District
Erie to Port Huron, Two
MI
----------------------------------------------------------------------------------------------------------------
Base operating expense....................................... $494,595 $771,756 $1,266,351
Base target pilot compensation............................... / $756,608 / $1,562,413 / $2,319,021
Expense multiplier........................................... = .65370 = .49395 = .54607
----------------------------------------------------------------------------------------------------------------

Table 7--Expense Multiplier, District Three
----------------------------------------------------------------------------------------------------------------
Area 6 Lakes
Huron and Area 7 St. Area 8 Lake Total District
Michigan Mary's River Superior Three
----------------------------------------------------------------------------------------------------------------
Base operating expense...................... $993,207 $385,906 $619,968 $1,999,081
Base target pilot compensation.............. / $1,891,520 / $1,041,609 / $1,324,064 / $4,257,193
Expense multiplier.......................... = .52508 = .37049 = .46823 = .46958
----------------------------------------------------------------------------------------------------------------

Step 3. Calculate annual projection of target pilot compensation.
Step 3 calculations have been modified since the NPRM. In this step, we
determine the new target rate of compensation and the new number of
pilots needed in each pilotage Area, to determine the new target pilot
compensation for each Area.
(a) Determine new target rate of compensation. Target pilot
compensation is based on the average annual compensation of first mates
and masters on U.S. Great Lakes vessels. Compensation includes wages
and benefits. For pilots in undesignated waters, we approximate the
first mates' compensation and, in designated waters, we approximate the
master's compensation (first mates' wages multiplied by 150% plus
benefits). To determine first mates' and masters' average annual
compensation, we use data from the most recent AMOU contracts with the
U.S. companies engaged in Great Lakes shipping. Where different AMOU
agreements apply to different companies, we apportion the compensation
provided by each agreement according to the percentage of tonnage
represented by companies under each agreement.
There are two current AMOU contracts. In our April 2009 NPRM, we
stated that vessels operated by the American Steamship Co. and Inland
Lakes Management Co. (acquired in 2008 by Mittal Steel USA, Inc.)
operate under ``Agreement A,'' and that Key Lakes, Inc. and Mittal
Steel USA, Inc. vessels (other than the Inland Lakes vessels acquired
by Mittal) operate under ``Agreement B.'' However, as of May 2009,
Agreement A applies only to Key Lakes, Inc. vessels, and Agreement B
applies to all vessels operated by American Steamship Co. and Mittal
Steel USA, Inc.
Both Agreement A and Agreement B provide for a 3% wage increase
effective August 1, 2009. Under Agreement A, the daily wage rate will
be increased from $255.28 to $262.73. Under Agreement B, the daily wage
rate will be increased from $314.42 to $323.86.
To calculate monthly wages, we apply Agreement A and Agreement B
monthly multipliers of 54.5 and 49.5, respectively, to the daily rate.
Agreement A's 54.5 multiplier represents 30.5 average working days,
15.5 vacation days, 4 days for four weekends, 3 bonus days, and 1.5
holidays. Agreement B's 49.5 multiplier represents 30.5 average working
days, 16 vacation days, and 3 bonus days.
To calculate average annual compensation, we multiply monthly
figures by 9 months, the length of the Great Lakes shipping season.
Table 8, which is unchanged from the NPRM, shows new wage
calculations based on Agreements A and B effective August 1, 2009.

Table 8--Wages
------------------------------------------------------------------------
Pilots on
Pilots on designated
Monthly component undesignated waters
waters (undesignated
x 150%)
------------------------------------------------------------------------
Agreement A:
$262.73 daily rate x 54.5 days.... $14,319 $21,478
Agreement A:
Monthly total x 9 months = total 128,870 193,305
wages............................
Agreement B:
$323.86 daily rate x 49.5 days.... 16,031 24,046
Agreement B:

[[Page 35817]]

Monthly total x 9 months = total 144,278 216,417
wages............................
------------------------------------------------------------------------

Both Agreements A and B include a health benefits contribution rate
of $80.69 effective August 1, 2009. Agreement A includes a pension plan
contribution rate of $33.35 per man-day. Agreement B includes a pension
plan contribution rate of $43.55 per man-day. Both Agreements A and B
provide a 401K employer matching rate, 5% of the wage rate. Neither
Agreement A nor Agreement B includes a clerical contribution that
appeared in earlier contracts. Per the AMOU, the multiplier used to
calculate monthly benefits is 45.5 days.
Table 9, which is unchanged from the NPRM, shows new benefit
calculations based on Agreements A and B, effective August 1, 2009.

Table 9--Benefits
------------------------------------------------------------------------
Pilots on Pilots on
Monthly component undesignated designated
waters waters
------------------------------------------------------------------------
Agreement A:
Employer contribution, 401(K) plan $715.95 $1,073.92
(Monthly Wages x 5%).............
Pension = $33.35 x 45.5 days...... 1,517.43 1,517.43
Health = $80.69 x 45.5 days....... 3,671.40 3,671.40
Agreement B:
Employer contribution, 401(K) plan 801.54 1,202.32
(Monthly Wages x 5%).............
Pension = $43.55 x 45.5 days...... 1,981.53 1,981.53
Health = $80.69 x 45.5 days....... 3,671.40 3,671.40
Agreement A:
Monthly total benefits............ = 5,904.77 = 6,262.74
Agreement A:
Monthly total benefits x 9 months. = 53,143 = 56,365
Agreement B:
Monthly total benefits............ = 6,454.46 = 6,855.24
Agreement B:
Monthly total benefits x 9 months. = 58,090 = 61,697
------------------------------------------------------------------------

Table 10, which is unchanged from the NPRM, totals the wages and
benefits under each agreement.

Table 10--Total Wages and Benefits
------------------------------------------------------------------------
Pilots on Pilots on
undesignated designated
waters waters
------------------------------------------------------------------------
Agreement A: Wages.................... $128,870 $193,305
Agreement A: Benefits................. + 53,143 + 56,365
---------------------------------
Agreement A: Total................ = 182,013 = 249,670
---------------------------------
Agreement B: Wages.................... 144,278 216,417
Agreement B: Benefits................. + 58,090 + 61,697
---------------------------------
Agreement B: Total................ = 202,368 = 278,114
------------------------------------------------------------------------

Table 11, as it appeared in the NPRM, has been revised to reflect
the change in the distribution of vessels operating under Agreements A
and B as of May 2009. It shows that approximately 30% of U.S. Great
Lakes shipping deadweight tonnage operates under Agreement A, with the
remaining 70% operating under Agreement B.

Table 11--Deadweight Tonnage by AMOU Agreement
------------------------------------------------------------------------
Company Agreement A Agreement B
------------------------------------------------------------------------
American Steamship Company............ ............... 815,600

[[Page 35818]]

Mittal Steel USA, Inc................. ............... 38,826
Key Lakes, Inc........................ 361,385 ...............
---------------------------------
Total tonnage, each agreement..... 361,385 854,426
---------------------------------
Percent tonnage, each 361,385 / 854,426 /
agreement.................... 1,215,811 = 1,215,811 =
29.7238% 70.2762%
------------------------------------------------------------------------

Table 12, as it appeared in the NPRM, has been modified. It applies
the percentage of tonnage represented by each agreement to the wages
and benefits provided by each agreement, to determine the projected
target rate of compensation on a tonnage-weighted basis.

Table 12--Projected Target Rate of Compensation, Weighted
----------------------------------------------------------------------------------------------------------------
Undesignated waters Designated waters
----------------------------------------------------------------------------------------------------------------
AGREEMENT A:
Total wages and benefits x percent tonnage................ $182,013 x 29.72% $249,670 x 29.72%
= $54,101 = $74,211
AGREEMENT B:
Total wages and benefits x percent tonnage................ $202,368 x 70.28% = $278,114 x 70.28%
$142,217 = $195,448
-------------------------------------------------
Total weighted average wages and benefits = projected $54,101 + $142,217 $74,211 + $195,448
target rate of compensation.............................. = $196,318 = $269,659
----------------------------------------------------------------------------------------------------------------

(b) Determine number of pilots needed. Subject to discretionary
adjustment by the Director of Great Lakes Pilotage to ensure
uninterrupted service or for other reasonable circumstances, we
determine the number of pilots needed in each Area by dividing each
Area's projected bridge hours, either by 1,000 (designated waters) or
by 1,800 (undesignated waters). The resulting number is rounded either
up or down based upon the needs of commerce at the discretion of the
Director.
Bridge hours are the number of hours a pilot is aboard a vessel
providing pilotage service. Projected bridge hours are based on the
vessel traffic that pilots are expected to serve. Based on historical
data and information provided by pilots and industry, the Coast Guard
projects the same bridge hours for Areas 2, 4, 5, and 8 in 2009 as were
projected in the 2008 final rule. As discussed in Part IV of this
preamble, we are reducing projected bridge hours for Areas 1, 6, and 7.
With these reductions, we are reducing the number of pilots in Area 6
by two.
Table 13, as it appeared in the NPRM, has been modified to reflect
the reductions in Areas 1, 6, and 7 bridge hour projections. Table 13
shows the projected bridge hours needed for each Area, and the total
number of pilots needed after dividing those figures either by 1,000 or
1,800 and, for the purposes of this rulemaking only, rounding up to the
next whole pilot, with two exceptions. In Area 2 we round up from 3.14
to 5, and in Area 4 we round down from 4.07 to 4, for the reasons
discussed in the 2008 final rule.

Table 13--Number of Pilots Needed
----------------------------------------------------------------------------------------------------------------
Divided by 1,000
(designated
Pilotage area Projected 2009 waters) or 1,800 Pilots needed
bridge hours (undesignated (total = 40)
waters)
----------------------------------------------------------------------------------------------------------------
Area 1.............................................. 5,203 1,000 6
Area 2.............................................. 5,650 1,800 5
Area 4.............................................. 7,320 1,800 4
Area 5.............................................. 5,097 1,000 6
Area 6.............................................. 13,406 1,800 8
Area 7.............................................. 3,259 1,000 4
Area 8.............................................. 11,630 1,800 7
----------------------------------------------------------------------------------------------------------------

(c) Determine the projected target pilot compensation for each
Area. We project new total target pilot compensation separately for
each pilotage Area, by multiplying the number of pilots needed in each
Area (see Table 13) by the projected target rate of compensation (see
Table 12) for pilots working in that Area. Table 14 (modified from NPRM
version) shows this calculation.

[[Page 35819]]

Table 14--Projected Target Pilot Compensation
----------------------------------------------------------------------------------------------------------------
Pilots needed Multiplied by target Projected target
Pilotage Area (total = 40) rate of compensation pilot compensation
----------------------------------------------------------------------------------------------------------------
Area 1........................................ 6 x $269,659 $1,617,955
Area 2........................................ 5 x 196,318 981,589
-----------------------------------------------------------------
Total, District One....................... 11 .................... 2,599,544
----------------------------------------------------------------------------------------------------------------
Area 4........................................ 4 x 196,318 785,271
Area 5........................................ 6 x 269,659 1,617,955
-----------------------------------------------------------------
Total, District Two....................... 10 .................... 2,403,226
----------------------------------------------------------------------------------------------------------------
Area 6........................................ 8 x 196,318 1,570,542
Area 7........................................ 4 x 269,659 1,078,637
Area 8........................................ 7 x 196,318 1,374,224
-----------------------------------------------------------------
Total, District Three..................... 19 .................... 4,023,403
----------------------------------------------------------------------------------------------------------------

Step 4: Increase the projected pilot compensation in Step 3 by the
expense multiplier in Step 2. Step 4 calculations have been modified
since the NPRM. This step yields a projected increase in operating
costs necessary to support the increased projected pilot compensation.
Table 15 (modified from NPRM version) shows this calculation.

Table 15--Projected Operating Expense
----------------------------------------------------------------------------------------------------------------
Projected target Multiplied by Projected operating
Pilotage area pilot compensation expense multiplier expense*
----------------------------------------------------------------------------------------------------------------
Area 1........................................ $1,617,955 x .33035 $534,487
Area 2........................................ 981,589 x .55939 549,089
-----------------------------------------------------------------
Total, District One....................... 2,599,544 x .41671 1,083,260
----------------------------------------------------------------------------------------------------------------
Area 4........................................ 785,271 x .65370 513,332
Area 5........................................ 1,617,955 x .49395 799,192
-----------------------------------------------------------------
Total, District Two....................... 2,403,226 x .54607 1,312,333
----------------------------------------------------------------------------------------------------------------
Area 6........................................ 1,570,542 x .52508 824,666
Area 7........................................ 1,078,637 x .37049 399,625
Area 8........................................ 1,374,224 x .46823 643,454
-----------------------------------------------------------------
Total, District Three..................... 4,023,403 x .46958 1,889,298
----------------------------------------------------------------------------------------------------------------
*Unique expense multipliers are used to calculate projected operating expense for all areas and districts, and
as such, projected operating expense for Districts One, Two and Three may not equal the sum of the projected
operating expense for the areas.

Step 5: Adjust the result in Step 4, as required, for inflation or
deflation, and calculate projected total economic cost. Step 5
calculations have been modified since the NPRM. Based on data from the
U.S. Department of Labor's Bureau of Labor Statistics, we have
multiplied the results in Step 4 by a 1.027 inflation factor,
reflecting an average inflation rate of 2.7% in ``Midwest Economy--
Consumer Prices'' between 2006 and 2007, the latest years for which
data are available. Table 16 (modified from NPRM version) shows this
calculation and the projected total economic cost.

Table 16--Projected Total Economic Cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
B. Increase,
A. Projected multiplied by C. Projected target D. Projected total
Pilotage area operating expense inflation factor (= pilot compensation economic cost (= B
A x 1.027) + C)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 1.......................................................... $534,487 $548,918 $1,617,955 $2,166,873
Area 2.......................................................... 549,089 563,914 981,589 1,545,503
---------------------------------------------------------------------------------------
Total, District One......................................... 1,083,260 1,112,508 2,599,544 *3,712,052
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 4.......................................................... 513,332 527,192 785,271 1,312,463
Area 5.......................................................... 799,192 820,770 1,617,955 2,438,725
---------------------------------------------------------------------------------------
Total, District Two......................................... 1,312,333 1,347,766 2,403,226 *3,750,992
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 6.......................................................... 824,666 846,932 1,570,542 2,417,474
Area 7.......................................................... 399,625 410,415 1,078,637 1,489,052

[[Page 35820]]

Area 8.......................................................... 643,454 660,828 1,374,224 2,035,052
---------------------------------------------------------------------------------------
Total, District Three....................................... 1,889,298 1,940,310 4,023,403 *5,963,713
--------------------------------------------------------------------------------------------------------------------------------------------------------
*Unique expense multipliers are used to calculate projected operating expense for all areas and districts, and as such, projected total economic cost
for Districts One, Two and Three may not equal the sum of the projected total economic cost for the areas.

Step 6: Divide the result in Step 5 by projected bridge hours to
determine total unit costs. Step 6 calculations have been modified
since the NPRM. Table 17 (modified from NPRM version) shows this
calculation.

Table 17--Total Unit Costs
----------------------------------------------------------------------------------------------------------------
Prospective
Pilotage area A. Projected total B. Projected 2009 (total) unit costs
economic cost bridge hours (A divided by B)
----------------------------------------------------------------------------------------------------------------
Area 1........................................... $2,166,873 5,203 $416.47
Area 2........................................... 1,545,503 5,650 273.54
--------------------------------------------------------------
Total, District One.......................... 3,712,052 10,853 342.03
----------------------------------------------------------------------------------------------------------------
Area 4........................................... 1,312,463 7,320 179.30
Area 5........................................... 2,438,725 5,097 478.46
--------------------------------------------------------------
Total, District Two.......................... 3,750,992 12,417 302.09
----------------------------------------------------------------------------------------------------------------
Area 6........................................... 2,417,474 13,406 180.33
Area 7........................................... 1,489,052 3,259 456.90
Area 8........................................... 2,035,052 11,630 174.98
--------------------------------------------------------------
Total, District Three........................ 5,963,713 28,295 210.77
==============================================================
Overall.................................. 13,426,758 51,565 260.39
----------------------------------------------------------------------------------------------------------------

Step 7: Divide prospective unit costs (total unit costs) in Step 6
by the base period unit costs in Step 1. Step 7 calculations have been
modified since the NPRM. Table 18 (modified from NPRM version) shows
this calculation, which expresses the percentage change between the
total unit costs and the base unit costs. The results, for each Area,
are identical with the percentage increases listed in Table 1.

Table 18--Percentage Change, Prospective in Unit Costs
----------------------------------------------------------------------------------------------------------------
C. Percentage
change from base
Pilotage area A. Prospective B. Base period (A divided by B;
unit costs unit costs result expressed
as percentage)
----------------------------------------------------------------------------------------------------------------
Area 1........................................... $416.47 $367.17 13.43
Area 2........................................... 273.54 261.03 4.79
--------------------------------------------------------------
Total, District One.......................... 342.03 314.15 8.87
----------------------------------------------------------------------------------------------------------------
Area 4........................................... 179.30 170.93 4.90
Area 5........................................... 478.46 457.95 4.48
--------------------------------------------------------------
Total, District Two.......................... 302.09 288.75 4.62
----------------------------------------------------------------------------------------------------------------
Area 6........................................... 180.33 160.26 12.52
Area 7........................................... 456.90 369.54 23.64
Area 8........................................... 174.98 170.68 2.52
--------------------------------------------------------------
Total, District Three........................ 210.77 188.14 12.03
==============================================================
Overall.................................. 260.39 235.08 10.77
----------------------------------------------------------------------------------------------------------------

[[Page 35821]]

Step 8: Adjust the base period rates by the percentage change in
unit costs in Step 7. Step 8 calculations have been modified since the
NPRM. Table 19 (modified from NPRM version) shows this calculation.

Table 19--Base Period Rates Adjusted by Percentage Change in Unit Costs*
----------------------------------------------------------------------------------------------------------------
D. Adjusted
A. Base period B. Percentage C. Increase in rate (A + C,
Pilotage rate change in unit base rate (A x rounded to
costs B%) nearest cent)
----------------------------------------------------------------------------------------------------------------
Area 1.................................... ............... 13.43 (1.1343)
--Basic pilotage...................... $14.94/km, ................. $2.00/km, $16.95/km,
$26.44/mi $3.55/mi $29.99/mi
--Each lock transited................. 331.03 ................. 44.44 375.47
--Harbor movage....................... 1,083.89 ................. 145.52 1,229.41
--Minimum basic rate, St. Lawrence 722.98 ................. 97.07 820.04
River................................
--Maximum rate, through trip.......... 3,173.51 ................. 426.07 3,599.58
Area 2.................................... ............... 4.79 (1.0479) ............... ...............
--6-hr. period........................ 780.23 ................. 37.40 817.63
--Docking or undocking................ 744.24 ................. 35.68 779.92
Area 4.................................... ............... 4.90 (1.0490) ............... ...............
--6-hr. period........................ 688.35 ................. 33.70 722.05
--Docking or undocking................ 530.49 ................. 25.97 556.46
--Any point on Niagara River below 1,354.15 ................. 66.30 1,420.45
Black Rock Lock......................
Area 5 between any point on or in......... ............... 4.48 (1.0448) ............... ...............
--Toledo or any point on Lake Erie W. 1,243.75 ................. 55.71 1,299.46
of Southeast Shoal...................
--Toledo or any point on Lake Erie W. 2,104.72 ................. 94.28 2,198.99
of Southeast Shoal & Southeast Shoal.
--Toledo or any point on Lake Erie W. 2,732.79 ................. 122.41 2,855.20
of Southeast Shoal & Detroit River...
--Toledo or any point on Lake Erie W. 2,104.72 ................. 94.28 2,198.99
of Southeast Shoal & Detroit Pilot
Boat.................................
--Port Huron Change Point & Southeast 3,665.60 ................. 164.20 3,829.80
Shoal (when pilots are not changed at
the Detroit Pilot Boat)..............
--Port Huron Change Point & Toledo or 4,246.60 ................. 190.22 4,436.82
any point on Lake Erie W. of
Southeast Shoal (when pilots are not
changed at the Detroit Pilot Boat)...
--Port Huron Change Point & Detroit 2,753.85 ................. 123.36 2,877.20
River................................
--Port Huron Change Point & Detroit 2,141.88 ................. 95.94 2,237.82
Pilot Boat...........................
--Port Huron Change Point & St. Clair 1,522.48 ................. 68.20 1,590.68
River................................
--St. Clair River..................... 1,243.75 ................. 55.71 1,299.46
--St. Clair River & Southeast Shoal 3,665.60 ................. 164.20 3,829.80
(when pilots are not changed at the
Detroit Pilot Boat)..................
--St. Clair River & Detroit River/ 2,753.85 ................. 123.36 2,877.20
Detroit Pilot Boat...................
--Detroit, Windsor, or Detroit River.. 1,243.75 ................. 55.71 1,299.46
--Detroit, Windsor, or Detroit River & 2,104.72 ................. 94.28 2,198.99
Southeast Shoal......................
--Detroit, Windsor, or Detroit River & 2,732.79 ................. 122.41 2,855.20
Toledo or any point on Lake Erie W.

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