Great Lakes Pilotage Rates-2013 Annual Review and Adjustment, 13521-13543 [2013-04321]

Download as PDF Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations B. Small Entities C. Assistance for Small Entities D. Collection of Information E. Federalism F. Unfunded Mandates Reform Act G. Taking of Private Property H. Civil Justice Reform I. Protection of Children J. Indian Tribal Governments K. Energy Effects L. Technical Standards M. Environment DEPARTMENT OF HOMELAND SECURITY Coast Guard 46 CFR Part 401 [Docket No. USCG–2012–0409] RIN 1625–AB89 Great Lakes Pilotage Rates—2013 Annual Review and Adjustment I. Abbreviations Coast Guard, DHS. ACTION: Final rule. AGENCY: The Coast Guard is adjusting the rates for pilotage services on the Great Lakes, which were last amended in February 2012. The adjustments establish new base rates and are made in accordance with a full ratemaking procedure. This rulemaking promotes the Coast Guard’s maritime safety mission. SUMMARY: This final rule is effective August 1, 2013. ADDRESSES: Comments and material received from the public, as well as any documents mentioned in this preamble as being available in the docket, are part of docket USCG–2012–0409 and are available for inspection or copying at the Docket Management Facility (M–30), U.S. Department of Transportation, West Building Ground Floor, Room W12–140, 1200 New Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. You may also find this docket on the Internet by going to https://www.regulations.gov, inserting USCG–2012–0409 in the ‘‘Keyword’’ box, and then clicking ‘‘Search.’’ FOR FURTHER INFORMATION CONTACT: If you have questions on this rule, call or email Mr. Todd Haviland, Director, Great Lakes Pilotage, Commandant (CG– WWM–2), Coast Guard; telephone 202– 372–2037, email Todd.A.Haviland@uscg.mil, or fax 202– 372–1909. If you have questions on viewing or submitting material to the docket, call Ms. Renee V. Wright, Program Manager, Docket Operations, telephone 202–366–9826. SUPPLEMENTARY INFORMATION: DATES: srobinson on DSK4SPTVN1PROD with RULES Table of Contents for Preamble I. Abbreviations II. Regulatory History III. Basis and Purpose IV. Background V. Discussion of Comments and Changes VI. Discussion of the Final Rule A. Summary B. Calculating the Rate Adjustment VII. Regulatory Analyses A. Regulatory Planning and Review VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 AMOU American Maritime Officers Union APA American Pilots’ Association CFR Code of Federal Regulations COBRA Consolidated Omnibus Budget Reconciliation Act CPA Certified Public Accountant CPI Consumer Price Index E.O. Executive Order FR Federal Register GLPA Canadian Great Lakes Pilotage Authority MISLE Marine Information for Safety and Law Enforcement NAICS North American Industry Classification System NPRM Notice of proposed rulemaking OMB Office of Management and Budget ROI Return on Investment § Section symbol SPI Seaway Pilot, Inc. U.S.C. United States Code II. Regulatory History On August 1, 2012, we published a notice of proposed rulemaking (NPRM) entitled ‘‘Great Lakes Pilotage Rates— 2013 Annual Review and Adjustment’’ in the Federal Register (77 FR 45539). We received six comments on the NPRM from four sources, including the three pilots’ associations and one District Three pilot. No public meeting was requested and none was held. III. Basis and Purpose The basis of this rulemaking is the Great Lakes Pilotage Act of 1960 (‘‘the Act’’) (46 U.S.C. Chapter 93), which requires U.S. vessels operating ‘‘on register’’ 1 and foreign vessels to use U.S. registered pilots while transiting the U.S. waters of the St. Lawrence Seaway and the Great Lakes system. 46 U.S.C. 9302(a)(1). The Act requires the Secretary of the department in which the Coast Guard is operating 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). Rates must be established or reviewed and adjusted 1 ‘‘On register’’ means that the vessel’s certificate of documentation has been endorsed with a registry endorsement, and therefore, may be employed in foreign trade or trade with Guam, American Samoa, Wake, Midway, or Kingman Reef. 46 U.S.C. 12105, 46 CFR 67.17. PO 00000 Frm 00079 Fmt 4700 Sfmt 4700 13521 each year, not later than March 1. Base rates must be established by a full ratemaking at least once every 5 years, and in years when base rates are not established they must be reviewed and adjusted if necessary. 46 U.S.C. 9303(f). The Secretary’s duties and authority under the Act have been delegated to the Coast Guard. Department of Homeland Security Delegation No. 0170.1, paragraph (92)(f). Coast Guard regulations implementing the Act appear in parts 401 through 404 of Title 46, Code of Federal Regulations (CFR). Procedures for use in establishing base rates appear in 46 CFR part 404, Appendix A, and procedures for annual review and adjustment of existing base rates appear in 46 CFR part 404, Appendix C. The purpose of this rulemaking is to establish new base pilotage rates, using the 46 CFR part 404, Appendix A, methodology. IV. Background The vessels affected by this rulemaking are engaged in foreign trade upon the U.S. waters of the Great Lakes. U.S. and Canadian ‘‘Lakers,’’ 2 which account for most commercial shipping on the Great Lakes, are not affected. 46 U.S.C. 9302. 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. Also, we do not control the actual compensation that pilots receive. The actual compensation is determined by each of the three district associations. 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. 2 A ‘‘Laker’’ is a commercial cargo vessel especially designed for and generally limited to use on the Great Lakes. E:\FR\FM\28FER1.SGM 28FER1 13522 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations srobinson on DSK4SPTVN1PROD with RULES Areas 1, 5, and 7 have been designated by Presidential Proclamation, pursuant to the Act, to be waters in which pilots must at all times be fully engaged in the navigation of vessels in their charge. Areas 2, 4, 6, and 8 have not been so designated because they are open bodies of water. While working in those undesignated areas, pilots must only ‘‘be on board and available to direct the navigation of the vessel at the discretion of and subject to the customary authority of the master.’’ 46 U.S.C. 9302(a)(1)(B). This rule is a full ratemaking to establish new base pilotage rates, using the 46 CFR part 404, Appendix A, methodology. The last full ratemaking established the current base rates in the 2012 final rule (77 FR 11752, February 28, 2012). Among other things, the Appendix A methodology requires us to review detailed pilot association financial information, and we contract with independent accountants to assist in that review. This final rule is based on the review of 2010 financial information. The associations are given time to review and comment on the preliminary reports of the independent accountants, before the review is finalized. Comments by the pilots’ associations on those reports and the independent accountant’s final findings are available in the docket. V. Discussion of Comments and Changes We received six public comments on our NPRM from four sources, the three pilotage associations and a District Three pilot. Two of the associations filed two comments each. The third association filed a single series of comments from the association president and the association’s certified public accountant. Agreement A. Two associations said we made mistakes regarding the American Maritime Officers Union (AMOU) contracts, Agreement A and Agreement B, which provide data used by the Appendix A methodology. First, the associations claimed the Agreement A health benefit should be $105.61 per day, not $52.96. Second, the associations claimed the Agreement A pension benefit should be $44.61 per day, not zero. Third, the associations claimed the Agreement A daily wage rate should be $295.94, not $270.61. Our NPRM correctly reflected the contract information that was available to us when the NPRM was published. However, as a result of these comments we reached out to AMOU to inquire if the contract that we had used was superseded. AMOU then provided us with more recent contract information. VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 However, they now treat each individual component of wage, health, and pension benefits as proprietary information and did not consent to our request to disclose this information. Instead, they provided us with a daily aggregate rate for Agreements A and B for first mates on U.S. Great Lakes vessels, and validated our Agreements A and B aggregate rate values for designated waters. These aggregate rates combine, without separately identifying, the following inputs: Daily wage rate, vacation pay, pension plan contributions, and medical plan contributions. In the past, those inputs were separately identified and we passed that information along to the public. For example, our August 2012 NPRM included Tables 11 (Projected Wage Components) and 12 (Projected Benefits Components). Now, because AMOU treats the separate inputs as proprietary information, the NPRM’s Tables 11 and 12 must be replaced in this final rule by new Table 11 (Projected Annual Rate Components), which uses the AMOU’s aggregate rates. This change in the degree of detail with which our tables display AMOU contract data does not result in any change in how those data are factored into our ratemaking methodology. Weighting factors. Weighting factors are based on the size of a ship and are used in determining actual charges for pilotage service. All three associations pointed out that Canada now uses different weighting factors than the weighting factors used by the U.S. and shown in 46 CFR 401.400(b). Canada unilaterally changed its weighting factors in 2008 to reflect an industry shift to smaller vessels so that these smaller vessels carried a more fair portion of the costs associated with pilotage on the Great Lakes. As a result, a Canadian pilot on a ‘‘1.0 factor’’ vessel now charges 15 percent more than a U.S. pilot on the same vessel. A similar comment was made during our 2010 ratemaking, and in the final rule for that ratemaking, 75 FR 7958 at 7959, col. 3 (Feb. 23, 2010), we declined to take action on the grounds that adjusting the weighting factors was beyond the scope of that rulemaking. Having made that determination in 2010, we cannot take action in this 2013 final rule, the public not having been afforded adequate notice in our August 1, 2012 NPRM that weighting factors might be under consideration for adjustment in the 2013 ratemaking. However, we agree with the associations that the U.S. should match the Canadian weighting factors, as a matter of parity and to reduce billing confusion between PO 00000 Frm 00080 Fmt 4700 Sfmt 4700 the two countries, both of which are important Federal Government concerns, as emphasized by recent Executive Order 13609, ‘‘Promoting International Regulatory Cooperation’’ (77 FR 26413, May 4, 2012). Therefore, although we will not address weighting factors in this final rule, we will do so either in the 2014 ratemaking or in a separate regulatory action. American Pilots’ Association dues. One association said we should factor into our ratemaking the dues that associations pay for membership in the American Pilots’ Association (APA) because the APA ‘‘continually collects information of value to its members [and] represents the pilotage organizations with international entities.’’ We disagree. Our position has not changed from the position taken in our last two Appendix A ratemakings, completed in 2006 (71 FR 16501 at 16507, col. 3; April 3, 2006) and 2012 (77 FR 11752 at 11755, col. 2; Feb. 28, 2012). Our regulations provide clear guidance concerning this issue and state, ‘‘[each] expense item included in the rate base is evaluated to determine if it is necessary for the provision of pilotage service, and if so, what dollar amount is reasonable for the expense.’’ 46 CFR 404.5(a)(1). Recognizable expenses must be both ‘‘reasonable and necessary for the provision of pilotage.’’ This topic is analogous to a licensure issue. Expenditures associated with obtaining and maintaining one’s pilot’s license represent ‘‘necessary’’ expenses that are recognized. Membership in a voluntary special interest association, like the APA, is not necessary for the provision of pilotage. We continue to find that American Pilots’ Association membership dues are not necessary, and thus are excluded from the rate’s operating expenses. Bridge hour projections. Two associations commented on Coast Guard procedures for projecting bridge hours, an important part of the Appendix A ratemaking methodology, and the District Three pilot commented on the negative impact on pilot revenue of over-projecting bridge hours. One association said that, in an unexplained departure from past practice, our NPRM multiplied 2011 revenue per bridge hour by projected bridge hours to arrive at projected revenue. The other association said we consistently overproject bridge hours, resulting in overprojection of revenue. We disagree with both comments. There has been no ‘‘unexplained departure from past practice’’—we have consistently followed Step 3.A of the Appendix A methodology which states: ‘‘Projected demand for pilotage service is E:\FR\FM\28FER1.SGM 28FER1 srobinson on DSK4SPTVN1PROD with RULES Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations multiplied by the existing pilotage rates for that service, to arrive at the ‘projection of revenue.’ ’’ As to overprojecting bridge hours, a concern raised by the associations and the District Three pilot, we have consistently improved our ability to project demand for pilotage services. We rely on historic data, input from pilots and industry, periodicals and trade magazines, and information from conferences to project demand for pilotage services. Both associations said we should use a ‘‘less arbitrary’’ and more accurate method to project bridge hours. This rule applies the best available information to our current methodology. However, we understand the pilots’ concern about definitions and methodologies relating to bridge hours and therefore those definitions and methodologies are currently undergoing an independent, comprehensive study and review. We anticipate the study will be completed by this summer. The results of the study will inform our assessment of whether changes to the regulations are needed, and we will publish a proposed rule updating definitions and methodologies if revisions are deemed necessary. License insurance. The District One pilots’ association said we should recognize two license insurance premium costs of $26,946 and $15,781, not $23,880 and $18,847, respectively. We disagree. The association did not raise this issue during the comment period for reviewing the independent accountant’s preliminary report and the commenter has provided no subsequent data in support of its claim that the costs are incorrectly allocated. Insurance costs. The District One pilots’ association said we should increase its insurance costs by $4,491 to recognize the association’s addition in 2011 of a fifth pilot. The association’s implication is that, under Step 1.D of the Appendix A methodology, we should adjust our projections because the fifth pilot is a ‘‘foreseeable circumstance’’ that will affect the association’s costs going forward. We disagree. The audits are based on a review of the 2010 financial statements, transactions, and documents. Therefore, the addition of a fifth pilot in 2011 would not be included in a review of the 2010 financial records. This expense will be captured and evaluated in the audit of the 2011 expenses. As we stated in the previous Appendix A ratemaking, ‘‘[we] consider significant capital expenditures and the fixed costs associated with those capital expenditures as ‘foreseeable circumstances.’ The rest of the expenses that fluctuate due to market forces and VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 the variance in demand for pilot services will be reimbursed when they are recognized in the independent accountant’s financial reports that we will use in future ratemaking.’’ (77 FR 11752 at 11755, col. 3). Therefore, we will not include this expense in the 2013 Appendix A ratemaking. Travel expenses. The District One pilots’ association said our NPRM relied on an improper extrapolation in disallowing a $13,861 travel expense. We disagree. Our independent accountant determined that the expense at issue was not incurred in 2010. Only expenses incurred in that calendar year are eligible for consideration in this year’s ratemaking. Fixed assets. The District One pilots’ association noted that virtually all of the association’s fixed assets are owned by its ‘‘corporate arm,’’ Seaway Pilot, Inc. (SPI) and claims that we erred in our calculation of the 2012 investment base. According to the pilots, we erroneously excluded $548,369 from SPI’s investment base. The pilots believe we have calculated the investment base correctly in the 2013 NPRM, but assert we have never made them whole by correcting the 2012 rate. We disagree that any corrective action is needed with respect to our 2012 calculations. As we stated in the 2012 Appendix A final rule, ‘‘[we] coordinated with the independent accountant and used the financial information provided by District One to calculate the investment base for this rulemaking,’’ and ‘‘the independent accountant’s financial reports include the investment base calculation for future rulemakings.’’ (77 FR 11752 at 11755, col. 3). We used the information that was provided to us by the association and do not see any grounds for making the suggested adjustment. The 2013 rate, as promised, includes the investment base calculation. Inflation. The District One pilots’ association said we should adjust the 2013 rate to reflect ‘‘a particularly egregious error’’ in the 2012 rate, the exclusion of an inflationary component based on the Consumer Price Index (CPI) for the years 2007 and 2008. The association also said our inflation adjustment should reflect inflation between 2010 and 2013, and that when Appendix A was created, no one foresaw how long it would take to recognize actual past financial data in new rates. We disagree. We used the 2009 association’s financial transactions to determine the allowable operating expenses for the 2012 Appendix A ratemaking. We have always calculated the inflationary portion of operating expenses in accordance with Step 1.C of PO 00000 Frm 00081 Fmt 4700 Sfmt 4700 13523 the Appendix A methodology, which states: ‘‘The inflation adjustment will be based on the preceding year’s change in the Consumer Price Index for the North Central Region of the United States.’’ We are currently engaged in a comprehensive study and review of the Appendix A methodology and will reevaluate how we take inflation into account. The possible need for changes in how we address inflation is within the scope of the previously-mentioned comprehensive study and review of our Great Lakes pilotage ratemaking methodology now underway. Payroll tax methodology. The District One pilots’ association said our NPRM’s proposed adjustment for payroll taxes would be more appropriately based on target compensation than on actual 2010 pilot earnings. We disagree. The methodology was established to reimburse a given pilot association for its expenses that are necessary, reasonable, and directly related to providing pilotage services on the Great Lakes during the shipping season. We follow 46 CFR 404.5(a)(1), which states: ‘‘Each expense item included in the rate base is evaluated to determine if it is necessary for the provision of pilotage service, and if so, what dollar amount is reasonable for that expense item.’’ We recognize that the payroll tax is a necessary expense, but we do not agree that we should use the value we calculate for target pilot compensation instead of the actual pilot compensation to determine the amount for payroll taxes. We consider it unreasonable to use a payroll tax amount other than the amount actually paid. Health insurance subsidy. The District Two pilots’ association said a $60,460 ‘‘COBRA subsidy’’ (referring to the Federal health subsidy under the Consolidated Omnibus Budget Reconciliation Act of 1985, or ‘‘COBRA’’) ‘‘should not be an adjustment to projected operating expenses, because pilot health insurance premiums are not included in the projected operating expense line item.’’ We disagree. The methodology was established to reimburse a given pilot association for its expenses that are necessary, reasonable, and directly related to providing pilotage services on the Great Lakes during the shipping season. If an association obtains funding from a separate source to reimburse it for an expense, the expense must be proportionately discounted for ratemaking purposes. We cannot oblige industry to reimburse an association for an expense that has already been reimbursed. This practice would be contrary to the public’s interest and E:\FR\FM\28FER1.SGM 28FER1 13524 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations inconsistent with prior determinations and rulemakings. The District Two pilots’ association also said it was given no opportunity to comment on a $99,993 COBRA expense reduction made in the 2012 final rule and that the 2013 rate should be adjusted to restore that amount. We disagree. We will not include the amount we excluded in the 2012 Appendix A ratemaking in the 2013 Appendix A ratemaking. The health insurance expense was accounted for in the 2012 Appendix A ratemaking, and thus the offset to that expense obtained by the pilots’ association also needed to be accounted for. The methodology was established to reimburse a given pilots’ association for its expenses that are necessary, reasonable, and directly related to providing pilotage services on the Great Lakes during a given shipping season. If an association obtains funding to reimburse it for an expense, the expense disappears for ratemaking purposes. We cannot compel industry to reimburse an association a second time for an expense that has already been reimbursed. This practice would be contrary to the public’s interest and inconsistent with prior determinations and rulemakings. VI. Discussion of the Final Rule A. Summary We are establishing new base pilotage rates in accordance with the methodology outlined in Appendix A to 46 CFR part 404. The new rates will be established by March 1, 2013 and will go into effect on August 1, 2013. Based on baseline AMOU contract information that we received after publication of our August 2012 NPRM, our arithmetical calculations under Steps 1 through 6 of Appendix A would result in an average 15.89 percent rate decrease. However, as we will discuss when we explain our Step 7 adjustment of pilot rates, this year’s rate adjustments will be what we proposed in the August 2012 NPRM, representing on average an approximately 1.87 percent increase over the February 2012 final rule’s rate adjustments. All figures in the tables that follow are based on calculations performed either by an independent accountant or by the Director of Great Lakes Pilotage’s staff. In both cases those calculations were performed using common commercial computer programs. Decimalization and rounding of the audited and calculated data affects the display in these tables but does not affect the calculations. The calculations are based on the actual figure that rounds values for presentation in the tables. Table 1 shows the percent change for the new rates for each area. TABLE 1—SUMMARY OF RATE ADJUSTMENTS Then the percent change over the current rate is: (percent) If pilotage service is required in: 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) .......................... ¥1.41 ¥1.69 8.87 0.95 4.31 0.56 1.52 B. Calculating the Rate Adjustment The Appendix A methodology provides seven steps, with sub-steps, for calculating rate adjustments. The following discussion describes those steps and sub-steps and includes tables showing how we have applied them to the 2010 detailed pilot financial information. Step 1: Projection of Operating Expenses. In this step, we project the amount of vessel traffic annually. Based upon that projection, we forecast the amount of necessary and reasonable operating expenses that pilotage rates should recover. Step 1.A: Submission of Financial Information. This sub-step requires each pilots’ association to provide us with detailed financial information in accordance with 46 CFR part 403. The associations complied with this requirement, supplying 2010 financial information in 2011; this is the most current and complete data set we have available. Step 1.B: Determination of Recognizable Expenses. This sub-step requires us to determine which reported association expenses will be recognized for ratemaking purposes, using the guidelines shown in 46 CFR 404.5. We contracted with an independent accountant to review the reported expenses and submit findings recommending which reported expenses should be recognized. The accountant also reviewed which reported expenses should be adjusted prior to recognition, or if they should not be allowed for ratemaking purposes. The independent accountant made preliminary findings, which were sent to the pilots’ associations. The pilots’ associations reviewed and commented on the preliminary findings. Then, the independent accountant made final findings. The Director reviewed and accepted those final findings, resulting in the determination of recognizable expenses. The preliminary findings, the associations’ comments on those findings, and the final findings are all available in the docket. Tables 2 through 4 show each association’s recognized expenses. TABLE 2—RECOGNIZED EXPENSES FOR DISTRICT ONE Area 1 srobinson on DSK4SPTVN1PROD with RULES Area 2 St. Lawrence River Reported expenses for 2010 Lake Ontario Total Pilot Costs: Other pilotage costs: Pilot subsistence/Travel ................................................................................................ License insurance ......................................................................................................... Payroll taxes .................................................................................................................. Other .............................................................................................................................. $212,715 23,880 0 1,432 $167,880 18,847 0 1,130 $380,595 42,727 0 2,562 Total other pilotage costs ....................................................................................... 238,027 187,857 425,884 Pilot Boat and Dispatch Costs: Pilot boat expense ................................................................................................................ Dispatch expense ................................................................................................................. 95,254 0 75,178 0 170,432 0 VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 PO 00000 Frm 00082 Fmt 4700 Sfmt 4700 E:\FR\FM\28FER1.SGM 28FER1 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations 13525 TABLE 2—RECOGNIZED EXPENSES FOR DISTRICT ONE—Continued Area 1 Area 2 St. Lawrence River Reported expenses for 2010 Lake Ontario Total Payroll taxes ......................................................................................................................... 7,962 6,283 14,245 Total pilot and dispatch costs ....................................................................................... 103,216 81,461 184,677 Administrative Expenses: Legal ..................................................................................................................................... Insurance .............................................................................................................................. Employee benefits ................................................................................................................ Payroll taxes ......................................................................................................................... Other taxes ........................................................................................................................... Travel .................................................................................................................................... Depreciation/auto leasing/other ............................................................................................ Interest .................................................................................................................................. Dues and subscriptions ........................................................................................................ Utilities .................................................................................................................................. Salaries ................................................................................................................................. Accounting/Professional fees ............................................................................................... Other ..................................................................................................................................... 7,959 13,971 19,454 4,816 4,504 215 17,440 12,576 13,075 5,130 49,840 4,997 9,408 6,282 11,026 15,354 3,801 3,554 169 13,765 9,926 10,319 4,049 39,336 3,943 7,425 14,241 24,997 34,808 8,617 8,058 384 31,205 22,502 23,394 9,179 89,176 8,940 16,833 Total Administrative Expenses ...................................................................................... 163,385 128,949 292,334 Total Operating Expenses ............................................................................................. 504,628 398,267 902,895 Proposed Adjustments (independent CPA): Operating Expenses ............................................................................................................. Other Pilot Costs .................................................................................................................. Pilotage Subsistence/Travel ................................................................................................. Payroll taxes ......................................................................................................................... ........................ ........................ (7,747) 64,563 ........................ ........................ (6,114) 50,955 ........................ ........................ (13,861) 115,518 Total other pilotage costs .............................................................................................. 56,816 44,841 101,657 Administrative Expenses: Legal ..................................................................................................................................... Employee benefits ................................................................................................................ Dues and subscriptions ........................................................................................................ 799 (1,537) (13,075) 631 (1,213) (10,319) 1,430 (2,750) (23,394) Total Administrative Expenses ...................................................................................... (13,813) (10,901) (24,714) Total CPA Adjustments ................................................................................................. 43,003 33,940 76,943 Total Operating Expenses ............................................................................................. 547,631 432,207 979,838 TABLE 3—RECOGNIZED EXPENSES FOR DISTRICT TWO Area 4 Area 5 Lake Erie Southeast Shoal to Port Huron, MI Reported expenses for 2010 Total $79,503 6,168 53,457 42,130 $119,254 9,252 80,186 63,195 $198,757 15,420 133,643 105,325 Total other pilotage costs ....................................................................................... srobinson on DSK4SPTVN1PROD with RULES Operating Expenses: Other pilotage costs: Pilot subsistence/Travel ................................................................................................ License insurance ......................................................................................................... Payroll taxes .................................................................................................................. Other .............................................................................................................................. 181,258 271,887 453,145 Pilot Boat and Dispatch Costs: Pilot boat expense ................................................................................................................ Dispatch expense ................................................................................................................. Payroll taxes ......................................................................................................................... 145,254 7,830 4,056 217,882 11,745 6,084 363,136 19,575 10,140 Total pilot and dispatch costs ....................................................................................... 157,140 235,711 392,851 Administrative Expenses: Legal ..................................................................................................................................... Office rent ............................................................................................................................. Insurance .............................................................................................................................. 8,120 26,275 13,410 12,180 39,413 20,114 20,300 65,688 33,524 VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 PO 00000 Frm 00083 Fmt 4700 Sfmt 4700 E:\FR\FM\28FER1.SGM 28FER1 13526 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations TABLE 3—RECOGNIZED EXPENSES FOR DISTRICT TWO—Continued Area 4 Area 5 Lake Erie Southeast Shoal to Port Huron, MI Reported expenses for 2010 Total Employee benefits ................................................................................................................ Payroll taxes ......................................................................................................................... Other taxes ........................................................................................................................... Depreciation/Auto leasing/Other ........................................................................................... Interest .................................................................................................................................. Dues and subscriptions ........................................................................................................ Utilities .................................................................................................................................. Salaries ................................................................................................................................. Accounting/Professional fees ............................................................................................... Other ..................................................................................................................................... 24,420 2,980 19,100 22,954 14,790 6,200 12,138 46,611 14,067 16,157 36,631 4,471 28,651 34,431 22,185 9,300 18,208 69,917 21,100 24,235 61,051 7,451 47,751 57,385 36,975 15,500 30,346 116,528 35,167 40,392 Total Administrative Expenses ...................................................................................... 227,223 340,835 568,058 Total Operating Expenses ............................................................................................. 565,622 848,432 1,414,054 Proposed Adjustments (independent CPA): Operating Expenses: Other Pilot Costs: Pilotage subsistence/Travel .......................................................................................... (3,999) (5,999) (9,998) Total other pilotage costs ....................................................................................... (3,999) (5,999) (9,998) Pilot boat and dispatch costs: Pilot boat expense ................................................................................................................ (767) (1,150) (1,917) Total pilot boat and dispatch costs ............................................................................... (767) (1,150) (1,917) Administrative Expenses: Legal ..................................................................................................................................... Office rent ............................................................................................................................. Interest .................................................................................................................................. Dues and subscriptions ........................................................................................................ (209) (809) (11,268) (6,200) (314) (1,213) (16,902) (9,300) (523) (2,022) (28,170) (15,500) Total Administrative Expenses ...................................................................................... (18,486) (27,729) (46,215) Total CPA Adjustments ................................................................................................. (23,252) (34,878) (58,130) Total Operating Expenses ............................................................................................. 542,369 813,554 1,355,924 Note: Numbers may not total due to rounding. TABLE 4—RECOGNIZED EXPENSES FOR DISTRICT THREE Area 6 Area 8 Lakes Huron and Michigan Reported Expenses for 2010 Area 7 St. Mary’s River Lake Superior Total $170,162 9,204 27,774 630 $81,836 4,426 13,358 303 $108,514 5,869 17,712 402 $360,512 19,499 58,844 1,335 Total other pilotage costs ........................................................................... 207,770 99,923 132,497 440,190 Pilot Boat and Dispatch Expenses: Pilot boat costs ......................................................................................................... Dispatch expense ..................................................................................................... Payroll taxes ............................................................................................................. srobinson on DSK4SPTVN1PROD with RULES Operating Expenses: Other Pilot Costs: Pilot subsistence/Travel .................................................................................... License insurance ............................................................................................. Payroll taxes ...................................................................................................... Other .................................................................................................................. 197,244 72,550 8,068 94,861 34,891 3,880 125,785 46,266 5,145 417,890 153,707 17,093 Total pilot boat and dispatch costs ................................................................... 277,862 133,632 177,196 588,690 Administrative Expenses: Legal ......................................................................................................................... Office Rent ................................................................................................................ Insurance .................................................................................................................. Employee benefits .................................................................................................... 28,089 4,673 6,581 57,942 13,509 2,247 3,165 27,866 17,913 2,980 4,197 36,950 59,511 9,900 13,943 122,758 VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 PO 00000 Frm 00084 Fmt 4700 Sfmt 4700 E:\FR\FM\28FER1.SGM 28FER1 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations 13527 TABLE 4—RECOGNIZED EXPENSES FOR DISTRICT THREE—Continued Area 6 Area 8 Lakes Huron and Michigan Reported Expenses for 2010 Area 7 St. Mary’s River Lake Superior Total Payroll taxes ............................................................................................................. Other taxes ............................................................................................................... Depreciation/auto leasing ......................................................................................... Interest ...................................................................................................................... Dues and subscriptions ............................................................................................ Utilities ...................................................................................................................... Salaries ..................................................................................................................... Accounting/professional fees .................................................................................... Other ......................................................................................................................... 5,709 15,381 23,495 1,537 13,676 13,223 49,802 11,894 5,574 2,746 7,397 11,299 739 6,577 6,359 23,951 5,720 2,681 3,641 9,808 14,983 980 8,721 8,432 31,759 7,585 3,555 12,096 32,586 49,777 3,256 28,974 28,014 105,512 25,199 11,810 Total administrative expenses ........................................................................... 237,576 114,256 151,504 503,336 Total Operating Expenses ................................................................................. 723,208 347,811 461,197 1,532,216 Proposed Adjustments (independent CPA): Other Pilot Costs: Payroll taxes ...................................................................................................... 26,213 12,606 16,716 55,535 Total other pilotage costs ........................................................................... 26,213 12,606 16,716 55,535 Pilot Boat and Dispatch Expenses: Dispatch costs .......................................................................................................... (2,170) (1,044) (1,384) (4,598) Total pilot boat and dispatch costs ................................................................... (2,170) (1,044) (1,384) (4,598) Administrative Expenses: Legal ......................................................................................................................... Dues and subscriptions ............................................................................................ Other ......................................................................................................................... (1,454) (13,676) (1,255) (699) (6,577) (603) (927) (8,721) (800) (3,080) (28,974) (2,658) Total administrative expenses ........................................................................... (16,385) (7,879) (10,448) (34,712) Total CPA Adjustments ..................................................................................... 7,658 3,683 4,884 16,225 Total Operating Expenses ................................................................................. 730,866 351,494 466,081 1,548,441 Note: Numbers may not total due to rounding. Step 1.C: Adjustment for Inflation or Deflation. In this sub-step we project rates of inflation or deflation for the succeeding navigation season. Because we used 2010 financial information, the ‘‘succeeding navigation season’’ for this ratemaking is 2011. We based our inflation adjustment of 3.2 percent on the 2011 change in the CPI for the Midwest Region of the United States, which can be found at: https:// www.bls.gov/xg_shells/ro5xg01.htm. This adjustment appears in Tables 5 through 7. TABLE 5—INFLATION ADJUSTMENT, DISTRICT ONE Area 1 Total Operating Expenses .................................................................. 2011 change in the Consumer Price Index (CPI) for the Midwest Region of the United States ............................................................ Inflation Adjustment ............................................................................ Area 2 St. Lawrence River Reported Expenses for 2010 Lake Ontario Total $547,631 × = .032 $17,524 $432,207 × = .032 $13,831 $979,838 × = .032 $31,355 srobinson on DSK4SPTVN1PROD with RULES TABLE 6—INFLATION ADJUSTMENT, DISTRICT TWO Area 4 Area 5 Lake Erie Southeast Shoal to Port Huron, MI Reported Expenses for 2010 Total Operating Expenses .................................................................. 2011 change in the Consumer Price Index (CPI) for the Midwest Region of the United States ............................................................ VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 PO 00000 Frm 00085 Fmt 4700 $542,369 × Sfmt 4700 .032 Total $813,554 × E:\FR\FM\28FER1.SGM .032 28FER1 $1,355,924 × .032 13528 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations TABLE 6—INFLATION ADJUSTMENT, DISTRICT TWO—Continued Area 4 Area 5 Lake Erie Southeast Shoal to Port Huron, MI Reported Expenses for 2010 Inflation Adjustment ............................................................................ = $17,356 = $26,034 Total = $43,390 TABLE 7—INFLATION ADJUSTMENT, DISTRICT THREE Area 6 Area 7 Area 8 Lakes Huron and Michigan Reported Expenses for 2010 St. Mary’s River Lake Superior Total Operating Expenses ........................ 2011 change in the Consumer Price Index (CPI) for the Midwest Region of the United States ................................... Inflation Adjustment ................................... $730,866 × = Step 1.D: Projection of Operating Expenses. The final sub-step of Step 1 is to project the operating expenses for each pilotage area, on the basis of the preceding sub-steps and any other foreseeable circumstances that could affect the accuracy of the projection. Based on comments and supporting material received for the 2012 Appendix A NPRM, we determined that foreseeable circumstances exist in District One. Eight months of District One’s pilot boat mortgage payments and boat .032 $23,388 Total $351,494 × = .032 $11,248 $466,081 × = .032 $14,915 $1,548,441 × = .032 $49,550 insurance qualify as foreseeable circumstances. For District One, the projected operating expenses are based on the calculations from Sub-steps 1.A through 1.C and the aforementioned foreseeable circumstances. Table 8 shows these projections. TABLE 8—PROJECTED OPERATING EXPENSES, DISTRICT ONE Area 1 Area 2 St. Lawrence River Reported Expenses for 2010 Lake Ontario Total Total operating expenses ................................................................... Inflation adjustment 3.2% ................................................................... Director’s adjustment & foreseeable circumstances: Pilot boat mortgage payments .................................................... Pilot boat insurance ..................................................................... + $547,631 17,524 + $432,207 13,831 + $979,838 31,355 + + 26,429 7,221 + + 20,815 5,687 + + 47,244 12,908 Total projected expenses for 2012 pilotage season ............ = $598,805 = $472,540 = $1,071,344 Note: Numbers may not total due to rounding. During the audit for the 2013 Appendix A rulemaking, the independent accountant informed us that District Two applied for and received a COBRA subsidy for the first and second quarter of 2010. The American Recovery and Reinvestment Act of 2009 provided for a temporary premium subsidy for COBRA continuation coverage. The amount of the COBRA insurance subsidy for the period 2010 was $60,460. Federal taxes of $18,400 are accounted for in Step 6 (Federal Tax Allowance). For District Two, the projected operating expenses are based on the calculations from Substeps 1.A through 1.C, the COBRA subsidy, and Federal taxes. Table 9 shows these projections. TABLE 9—PROJECTED OPERATING EXPENSES, DISTRICT TWO Area 4 Area 5 Lake Erie Southeast Shoal to Port Huron, MI srobinson on DSK4SPTVN1PROD with RULES Reported Expenses for 2010 Total Operating Expenses .................................................................. Inflation Adjustment 3.2% ................................................................... Director’s adjustment & foreseeable circumstances American Recovery and Reinvestment Act Subsidy .................. Federal taxes (accounted for in Step 6) ..................................... Total projected expenses for 2013 pilotage season ............ VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 PO 00000 Frm 00086 Fmt 4700 Total + $542,369 17,356 + $813,554 26,034 + $1,355,924 43,390 + + (24,184) (7,360) + + (36,276) (11,040) + + (60,460) (18,400) = 528,182 = 792,272 = 1,320,454 Sfmt 4700 E:\FR\FM\28FER1.SGM 28FER1 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations Because we are not now aware of any such foreseeable circumstances for District 3, its projected operating expenses are based exclusively on the 13529 calculations from Sub-steps 1.A through 1.C. Table 10 shows these projections. TABLE 10—PROJECTED OPERATING EXPENSES, DISTRICT THREE Area 6 Area 7 Area 8 Lakes Huron and Michigan Reported Expenses for 2010 St. Mary’s River Lake Superior Total Total expenses .......................................... Inflation adjustment 3.2% .......................... + $730,866 23,388 + $351,494 11,248 + $466,081 14,915 + $1,548,441 49,550 Total projected expenses for 2013 pilotage season ................................. = 754,254 = 362,742 = 480,996 = 1,597,991 Step 2: Projection of Target Pilot Compensation. In Step 2, we project the annual amount of target pilot compensation that pilotage rates should provide in each area. These projections are based on our latest information on the conditions that will prevail in 2013. Step 2.A: Determination of Target Rate of Compensation. Target pilot compensation for pilots in undesignated waters approximates the average annual compensation for first mates on U.S. Great Lakes vessels. Compensation is determined based on the most current union contracts and includes wages and benefits received by first mates. We calculate target pilot compensation for pilots on designated waters by multiplying the average first mates’ wages by 150 percent and then adding the average first mates’ benefits. In prior rulemakings, the AMOU shared the individual compensation components for first mates and the scheme for applying these components. We took each component and applied the scheme to determine a monthly value. We then multiplied this monthly value by 9 months, because the Great Lakes shipping season for pilotage lasts from around the end of March to around the end of December (approximately 9 months). We then created a table that combined all of the components to determine the target pilot compensation for a given year. As we discussed in part V of this preamble, the AMOU contract changed after we published our August 2012 NPRM. The values stipulated by AMOU that we now use are aggregates. These aggregates include the daily wage rate, vacation pay, pension plan contributions, and medical plan contributions; these represent the components we previously calculated in separate tables using the scheme outlined in the contract. Using these aggregates eliminates the need to calculate each component separately and reduces the number of tables we need to demonstrate our calculations, but otherwise it does not affect how AMOU contract data is factored into our ratemaking methodology. According to the information provided by the AMOU, new contracts will take effect August 1, 2013 and will expire July 31, 2016, and they set the following aggregate daily rates: in undesignated waters, $592.92 for Agreement A and $585.57 for Agreement B; in designated waters, $816.09 for Agreement A and $803.24 for Agreement B. Because we are interested in annual compensation, we must convert these daily rates. In past contracts, the AMOU used monthly multipliers, and we then applied those monthly multipliers over the average 9-month length of the Great Lakes shipping season to determine annual compensation. The latest AMOU contracts no longer use monthly multipliers, but instead use a 270-day multiplier which reflects an average 30day month, over the 9 months of the average shipping season. Table 11 shows our calculations using the 270day multiplier. TABLE 11—PROJECTED ANNUAL AGGREGATE RATE COMPONENTS Aggregate Rate—Wages and Vacation, Pension, and Medical Benefits Pilots on Undesignated Waters Agreement A: $592.92 daily rate × 270 days .................. Agreement B: $585.57 daily rate × 270 days .................. Agreement A: $816.09 daily rate × 270 days .................. Agreement B: $803.24 daily rate × 270 days .................. srobinson on DSK4SPTVN1PROD with RULES Agreement A American Steamship Company ........... Mittal Steel USA, Inc. ........................... Key Lakes, Inc. .................................... .................................................................................. .................................................................................. 361,385 815,600 38,826 361,385 854,426 361,385 ÷ 1,215,811 = 29.7238% 854,426 ÷ 1,215,811 = 70.2762% VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 PO 00000 Frm 00087 Fmt 4700 Agreement B Sfmt 4700 $220,334.30 $216,874.80 We apportion the compensation provided by each agreement according to the percentage of tonnage represented by companies under each agreement. Agreement A applies to vessels operated by Key Lakes, Inc., representing approximately 30 percent of tonnage, and Agreement B applies to all vessels operated by American Steamship Co. and Mittal Steel USA, Inc., representing approximately 70 percent of tonnage. Table 12 provides details. Company Percent tonnage, each agreement ...... $158,103.90 Pilots on Designated Waters TABLE 12—SHIPPING TONNAGE APPORTIONED BY CONTRACT Total tonnage, each agreement .... $160,088.40 E:\FR\FM\28FER1.SGM 28FER1 13530 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations We use the percentages from Table 12 to apportion the projected compensation from Table 11. This gives us a single tonnage-weighted set of figures. Table 13 shows our calculations. TABLE 13—TONNAGE-WEIGHTED COMPENSATION Undesignated waters Designated waters Agreement A: Total wages and benefits ...................................................................................................... Percent tonnage .................................................................................................................... × $160,088.40 29.7238% × $220,344.30 29.7238% Total ............................................................................................................................... = $47,584 = $65,495 Agreement B: Total wages and benefits ...................................................................................................... Percent tonnage .................................................................................................................... × $158,104 70.2762% × $216,875 70.2762% Total ............................................................................................................................... = $111,109 = $152,411 Projected Target Rate of Compensation: Agreement A total weighted average wages and benefits ................................................... Agreement B total weighted average wages and benefits ................................................... + $47,584 $111,109 + $65,495 $152,411 Total ............................................................................................................................... = $158,694 = $217,906 Step 2.B: Determination of the Number of Pilots Needed. Subject to adjustment by the Director to ensure uninterrupted service or for other reasonable circumstances, we determine the number of pilots needed for ratemaking purposes in each area by dividing projected bridge hours for each area, by either 1,000 (designated waters) or 1,800 (undesignated waters) bridge hours. We round the mathematical results and express our determination as whole pilots. ‘‘Bridge hours are the number of hours a pilot is aboard a vessel providing pilotage service,’’ 46 CFR part 404, Appendix A, Step 2.B(1). For that reason and as we explained most recently in the 2011 ratemaking’s final rule, we do not include, and never have included, pilot delay, detention, or cancellation in calculating bridge hours. See 76 FR 6351 at 6352 col. 3; Feb. 4, 2011. Projected bridge hours are based on the vessel traffic that pilots are expected to serve. We use historical data, input from the pilots and industry, periodicals and trade magazines, and information from conferences to project demand for pilotage services for the coming year. In our 2012 final rule, we determined that 38 pilots would be needed for ratemaking purposes. We have determined that 38 remains the proper number to use for ratemaking purposes in 2013. This includes five pilots in Area 2, where rounding up alone would result in only four pilots. For the same reasons we explained at length in the final rule for the 2008 ratemaking (74 FR 220 at 221–22 Jan. 5, 2009), which is available in the docket, we have determined that this adjustment is essential for ensuring uninterrupted pilotage service in Area 2. Table 14 shows the bridge hours we project will be needed for each area and our calculations to determine the number of whole pilots needed for ratemaking purposes. TABLE 14—NUMBER OF PILOTS NEEDED Projected 2013 bridge hours Pilotage area srobinson on DSK4SPTVN1PROD with RULES Area Area Area Area Area Area Area 1 2 4 5 6 7 8 (Designated waters) .................................................. (Undesignated waters) .............................................. (Undesignated waters) .............................................. (Designated waters) .................................................. (Undesignated waters) .............................................. (Designated waters) .................................................. (Undesignated waters) .............................................. Step 2.C: Projection of Target Pilot Compensation. In Table 15 we project VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 Divided by 1,000 (designated waters) or 1,800 (undesignated waters) 5,216 5,509 6,814 5,102 11,411 3,223 9,540 ÷ ÷ ÷ ÷ ÷ ÷ ÷ total target pilot compensation separately for each area, by multiplying PO 00000 Frm 00088 Fmt 4700 Sfmt 4700 1,000 1,800 1,800 1,000 1,800 1,000 1,800 Calculated value of pilot demand = = = = = = = 5.216 3.061 3.785 5.102 6.339 3.223 5.300 Pilots needed (total = 38) 6 5 4 6 7 4 6 the number of pilots needed in each area, as shown in Table 14, by the target pilot compensation shown in Table 13. E:\FR\FM\28FER1.SGM 28FER1 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations 13531 TABLE 15—PROJECTION OF TARGET PILOT COMPENSATION BY AREA Area Area Area Area Area Area Area 1 2 4 5 6 7 8 Target rate of pilot compensation Pilots needed (total = 38) Pilotage area (Designated waters) ............................................................................. (Undesignated waters) ......................................................................... (Undesignated waters) ......................................................................... (Designated waters) ............................................................................. (Undesignated waters) ......................................................................... (Designated waters) ............................................................................. (Undesignated waters) ......................................................................... × × × × × × × 6 5 4 6 7 4 6 Projected target pilot compensation $217,906 158,694 158,694 217,906 158,694 217,906 158,694 = = = = = = = $1,307,436 793,469 634,775 1,307,436 1,110,856 871,624 952,163 Note: Numbers may not total due to rounding. Step 3 and 3.A: Projection of Revenue. In this step, we project the revenue that would be received in 2013 if demand for pilotage services matches the bridge hours we projected in Table 14, and if 2012 pilotage rates were left unchanged. Table 16 shows this calculation. TABLE 16—PROJECTION OF REVENUE BY AREA Projected 2013 bridge hours Pilotage area Area Area Area Area Area Area Area 1 2 4 5 6 7 8 (Designated waters) ............................................................................. (Undesignated waters) ......................................................................... (Undesignated waters) ......................................................................... (Designated waters) ............................................................................. (Undesignated waters) ......................................................................... (Designated waters) ............................................................................. (Undesignated waters) ......................................................................... 5,216 5,509 6,814 5,102 11,411 3,223 9,540 Total ........................................................................................................... × × × × × × × ........................ Step 4: Calculation of Investment Base. This step calculates each association’s investment base, the recognized capital investment in the assets employed by the association required to support pilotage operations. This step uses a formula set out in 46 CFR part 404, Appendix B. The first part Revenue projection for 2013 2012 Pilotage rates $467.58 289.72 188.54 504.11 191.69 480.26 183.87 = = = = = = = $2,438,897 1,596,067 1,284,712 2,571,969 2,187,375 1,547,878 1,754,120 ........................ 13,381,018 of the formula identifies each association’s total sources of funds. Tables 17 through 19 follow the formula up to that point. TABLE 17—TOTAL SOURCES OF FUNDS, DISTRICT ONE Area 1 Recognized Assets: Total Current Assets ................................................................................................................................. Total Current Liabilities ............................................................................................................................. Current Notes Payable .............................................................................................................................. Total Property and Equipment (NET) ....................................................................................................... Land .......................................................................................................................................................... Total Other Assets .................................................................................................................................... Area 2 $681,485 78,005 22,168 374,021 12,315 0 ¥ + + ¥ + $537,847 61,564 17,496 295,189 9,720 0 Total Recognized Assets .......................................................................................................................... Non-Recognized Assets: Total Investments and Special Funds ...................................................................................................... = 987,354 = 779,248 + 6,103 + 4,817 Total Non-Recognized Assets ........................................................................................................... Total Assets: Total Recognized Assets .......................................................................................................................... Total Non-Recognized Assets .................................................................................................................. srobinson on DSK4SPTVN1PROD with RULES ¥ + + ¥ + = 6,103 = 4,817 + 987,354 6,103 + 779,248 4,817 = 993,457 = 784,065 + + + + 659,702 323,902 22,168 0 0 + + + + 520,656 255,633 17,496 0 0 = 1,005,772 = 793,785 Total Assets ....................................................................................................................................... Recognized Sources of Funds: Total Stockholder Equity ........................................................................................................................... Long-Term Debt ........................................................................................................................................ Current Notes Payable .............................................................................................................................. Advances from Affiliated Companies ........................................................................................................ Long-Term Obligations—Capital Leases .................................................................................................. Total Recognized Sources ................................................................................................................. Non-Recognized Sources of Funds: Pension Liability ........................................................................................................................................ VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 PO 00000 Frm 00089 Fmt 4700 Sfmt 4700 E:\FR\FM\28FER1.SGM 28FER1 0 0 13532 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations TABLE 17—TOTAL SOURCES OF FUNDS, DISTRICT ONE—Continued Area 1 Area 2 Other Non-Current Liabilities .................................................................................................................... Deferred Federal Income Taxes ............................................................................................................... Other Deferred Credits .............................................................................................................................. + + + 0 0 0 + + + 0 0 0 Total Non-Recognized Sources ......................................................................................................... Total Sources of Funds: Total Recognized Sources ........................................................................................................................ Total Non-Recognized Sources ................................................................................................................ Total Sources of Funds ..................................................................................................................... = 0 = 0 + = 1,005,772 0 1,005,772 + = 793.785 0 793,785 TABLE 18—TOTAL SOURCES OF FUNDS, DISTRICT TWO Area 4 Recognized Assets: Total Current Assets ................................................................................................................................. Total Current Liabilities ............................................................................................................................. Current Notes Payable .............................................................................................................................. Total Property and Equipment (NET) ....................................................................................................... Land .......................................................................................................................................................... Total Other Assets .................................................................................................................................... Area 5 ¥ + + ¥ + $454,842 449,157 0 312,858 0 0 ¥ + + ¥ + $1,026,731 1,013,899 0 706,224 0 0 Total Recognized Assets ................................................................................................................... Non-Recognized Assets: Total Investments and Special Funds ...................................................................................................... = 318,543 = 719,056 + 0 + 0 Total Non-Recognized Assets ........................................................................................................... Total Assets: Total Recognized Assets .......................................................................................................................... Total Non-Recognized Assets .................................................................................................................. = 0 = 0 + 318,543 0 + 719,056 0 = 318,543 = 719,056 + + + + 60,920 257,622 0 0 0 + + + + 137,517 581,540 0 0 0 = 318,542 = 719,057 + + + 0 0 0 0 + + + 0 0 0 0 Total Non-Recognized Sources ......................................................................................................... Total Sources of Funds: Total Recognized Sources ........................................................................................................................ Total Non-Recognized Sources ................................................................................................................ = 0 = 0 + 318,542 0 + 719,057 0 Total Sources of Funds ..................................................................................................................... = 318,542 = 719,057 Total Assets ....................................................................................................................................... Recognized Sources of Funds: Total Stockholder Equity ........................................................................................................................... Long-Term Debt ........................................................................................................................................ Current Notes Payable .............................................................................................................................. Advances from Affiliated Companies ........................................................................................................ Long-Term Obligations—Capital Leases .................................................................................................. Total Recognized Sources ................................................................................................................. Non-Recognized Sources of Funds: Pension Liability ........................................................................................................................................ Other Non-Current Liabilities .................................................................................................................... Deferred Federal Income Taxes ............................................................................................................... Other Deferred Credits .............................................................................................................................. TABLE 19—TOTAL SOURCES OF FUNDS, DISTRICT THREE srobinson on DSK4SPTVN1PROD with RULES Area 6 Area 7 Area 8 Recognized Assets: Total Current Assets .................................................................................................. Total Current Liabilities .............................................................................................. Current Notes Payable .............................................................................................. Total Property and Equipment (NET) ........................................................................ Land ........................................................................................................................... Total Other Assets ..................................................................................................... ¥ + + ¥ + $1,009,619 123,906 0 35,709 0 354 ¥ + + ¥ + $485,558 59,590 0 17,174 0 170 ¥ + + ¥ + $643,846 79,016 0 22,772 0 226 Total Recognized Assets ................................................................................... = 921,776 = 443,312 = 587,828 Non-Recognized Assets: Total Investments and Special Funds ....................................................................... + 0 + 0 + 0 Total Non-Recognized Assets ............................................................................ = 0 = 0 = 0 VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 PO 00000 Frm 00090 Fmt 4700 Sfmt 4700 E:\FR\FM\28FER1.SGM 28FER1 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations 13533 TABLE 19—TOTAL SOURCES OF FUNDS, DISTRICT THREE—Continued Area 6 Area 7 Area 8 Total Assets: Total Recognized Assets ........................................................................................... Total Non-Recognized Assets ................................................................................... + 921,776 0 + 443,312 0 + 587,828 0 Total Assets ........................................................................................................ = 921,776 = 443,312 = 587,828 Recognized Sources of Funds: Total Stockholder Equity ........................................................................................... Long-Term Debt ........................................................................................................ Current Notes Payable .............................................................................................. Advances from Affiliated Companies ........................................................................ Long-Term Obligations—Capital Leases .................................................................. + + + + 921,776 0 0 0 0 + + + + 443,312 0 0 0 0 + + + + 587,828 0 0 0 0 Total Recognized Sources ................................................................................. = 921,776 = 443,321 = 587,828 Non-Recognized Sources of Funds: Pension Liability ......................................................................................................... Other Non-Current Liabilities ..................................................................................... Deferred Federal Income Taxes ............................................................................... Other Deferred Credits .............................................................................................. + + + 0 0 0 0 + + + 0 0 0 0 + + + 0 0 0 0 Total Non-Recognized Sources ......................................................................... Total Sources of Funds: Total Recognized Sources ........................................................................................ Total Non-Recognized Sources ................................................................................ = 0 = 0 = 0 + 921,776 0 + 443,321 0 + 587,828 0 Total Sources of Funds ...................................................................................... = 921,776 = 443,321 = 587,828 Tables 17 through 19 also relate to the second part of the formula for calculating the investment base. The second part establishes a ratio between recognized sources of funds and total sources of funds. Since no nonrecognized sources of funds (sources we do not recognize as required to support pilotage operations) exist for any of the pilots’ associations for this year’s rulemaking, the ratio between recognized sources of funds and total sources of funds is ‘‘1:1’’ (or a multiplier of ‘‘1’’) in all cases. Table 20 applies the multiplier of ‘‘1,’’ and shows that the investment base for each association equals its total recognized assets. Table 20 also expresses these results by area, because area results will be needed in subsequent steps. TABLE 20—INVESTMENT BASE BY AREA AND DISTRICT District Total recognized assets ($) Area One ...................... 318,543 719,056 6 7 8 1,005,772 793,785 Investment base ($) 1 318,542 719,057 921,776 443,312 587,828 1 1 921,776 443,312 587,828 318,543 719,056 1,037,599 1 1 1 921,776 443,312 587,828 1,766,602 1 1 318,542 719,057 987,354 779,248 921,776 443,312 587,828 TOTAL 4 5 1,005,772 793,785 Multiplier (ratio of recognized to total sources) TOTAL Three .................... 987,354 779,248 Total sources of funds ($) TOTAL Two 2 .................... 1 2 Recognized sources of funds ($) 1,952,916 ‘‘Investment base’’ = ‘‘Total recognized assets’’ × ‘‘Multiplier (ratio of recognized to total sources)’’. The pilots’ associations that provide pilotage services in Districts One and Three operate as partnerships. The pilots’ association that provides pilotage service for District Two operates as a corporation. 1 Note: srobinson on DSK4SPTVN1PROD with RULES 2 Note: Step 5: Determination of Target Rate of Return. We determine a marketequivalent return on investment (ROI) that will be allowed for the recognized net capital invested in each association by its members. We do not recognize capital that is unnecessary or VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 unreasonable for providing pilotage services. There are no non-recognized investments in this year’s calculations. The allowed ROI is based on the preceding year’s average annual rate of return for new issues of high-grade corporate securities. For 2011, the PO 00000 Frm 00091 Fmt 4700 Sfmt 4700 preceding year, the allowed ROI was a little more than 4.64 percent, based on the average rate of return that year on Moody’s AAA corporate bonds, which can be found at: https://research. stlouisfed.org/fred2/series/AAA/ downloaddata?cid=119. E:\FR\FM\28FER1.SGM 28FER1 13534 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations Step 6: Adjustment Determination. The first sub-step in the adjustment determination requires an initial calculation, applying a formula described in Appendix A. The formula uses the results from Steps 1, 2, 3, and 4 to project the ROI that can be expected in each area, if no further adjustments are made. This calculation is shown in Tables 21 through 23. TABLE 21—PROJECTED ROI, AREAS IN DISTRICT ONE Area 1 Revenue (from Step 3) ..................................................................................................................................... Operating Expenses (from Step 1) .................................................................................................................. Pilot Compensation (from Step 2) .................................................................................................................... Operating Profit/(Loss) ..................................................................................................................................... Interest Expense (from audits) ......................................................................................................................... Earnings Before Tax ........................................................................................................................................ Federal Tax Allowance ..................................................................................................................................... Net Income ....................................................................................................................................................... Return Element (Net Income + Interest) .......................................................................................................... Investment Base (from Step 4) ........................................................................................................................ Projected Return on Investment ...................................................................................................................... + ¥ ¥ = ¥ = ¥ = ÷ = $2,438,897 598,805 1,307,436 532,656 12,576 520,080 0 520,080 532,656 987,354 0.54 Area 2 + ¥ ¥ = ¥ = ¥ = $1,596,067 472,540 793,469 330,059 9,926 320,133 0 320,133 330,059 779,248 0.42 ÷ = Note: Numbers may not total due to rounding. TABLE 22—PROJECTED ROI, AREAS IN DISTRICT TWO Area 4 Revenue (from Step 3) ..................................................................................................................................... Operating Expenses (from Step 1) .................................................................................................................. Pilot Compensation (from Step 2) .................................................................................................................... Operating Profit/(Loss) ..................................................................................................................................... Interest Expense (from audits) ......................................................................................................................... Earnings Before Tax ........................................................................................................................................ Federal Tax Allowance ..................................................................................................................................... Net Income ....................................................................................................................................................... Return Element (Net Income + Interest) .......................................................................................................... Investment Base (from Step 4) ........................................................................................................................ Projected Return on Investment ...................................................................................................................... + ¥ ¥ = ¥ = ¥ = ÷ = $1,284,712 528,181 634,775 121,756 3,522 118,234 0 118,234 121,756 318,543 0.38 Area 5 + ¥ ¥ = ¥ = ¥ = $2,571,969 792,272 1,307,436 472,261 5,283 466,978 0 466,978 472,261 719,056 0.66 ÷ = Note: Numbers may not total due to rounding. TABLE 23—PROJECTED ROI, AREAS IN DISTRICT THREE Area 6 Revenue (from Step 3) ..................................................................................................... Operating Expenses (from Step 1) ................................................................................... Pilot Compensation (from Step 2) .................................................................................... Operating Profit/(Loss) ...................................................................................................... Interest Expense (from audits) ......................................................................................... Earnings Before Tax ......................................................................................................... Federal Tax Allowance ..................................................................................................... Net Income ....................................................................................................................... Return Element (Net Income + Interest) .......................................................................... Investment Base (from Step 4) ........................................................................................ Projected Return on Investment ....................................................................................... + ¥ ¥ = ¥ = ¥ = ÷ = Area 7 $2,187,375 754,254 1,110,856 322,264 1,537 320,727 0 320,727 322,264 921,776 0.35 + ¥ ¥ = ¥ = ¥ = ÷ = $1,547,878 362,742 871,624 313,512 739 312,773 0 312,773 313,512 443,312 0.71 Area 8 + ¥ ¥ = ¥ = ¥ = $1,754,120 480,996 952,163 320,962 980 319,982 0 319,982 320,962 587,828 0.55 ÷ = Note: Numbers may not total due to rounding. The second sub-step required for Step 6 compares the results of Tables 21 through 23 with the target ROI (approximately 4.64 percent) we obtained in Step 5 to determine if an adjustment to the base pilotage rate is necessary. Table 24 shows this comparison for each area. TABLE 24—COMPARISON OF PROJECTED ROI AND TARGET ROI, BY AREA 1 srobinson on DSK4SPTVN1PROD with RULES Area 1 Area 2 Area 4 Area 5 Area 6 Area 7 Area 8 St. Lawrence River Lake Ontario Lake Erie Southeast Shoal to Port Huron, MI Lakes Huron and Michigan St. Mary’s River Lake Superior Projected return on investment ................... VerDate Mar<15>2010 19:07 Feb 27, 2013 0.539 Jkt 229001 0.424 PO 00000 Frm 00092 0.382 Fmt 4700 Sfmt 4700 0.657 E:\FR\FM\28FER1.SGM 0.350 28FER1 0.707 0.546 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations 13535 TABLE 24—COMPARISON OF PROJECTED ROI AND TARGET ROI, BY AREA 1—Continued Area 1 Area 2 Area 4 Area 5 Area 6 Area 7 Area 8 St. Lawrence River Lake Ontario Lake Erie Southeast Shoal to Port Huron, MI Lakes Huron and Michigan St. Mary’s River Lake Superior Target return on investment .......................... Difference in return on investment ................ 1Note: Decimalization 0.046 0.046 0.046 0.046 0.046 0.046 0.046 0.493 0.377 0.336 0.610 0.303 0.661 0.500 and rounding of the target ROI affects the display in this table but does not affect our calculations, which are based on the actual figure. Because Table 24 shows a significant difference between the projected and target ROIs, an adjustment to the base pilotage rates is necessary. Step 6 now requires us to determine the pilotage revenues that are needed to make the target return on investment equal to the projected return on investment. This calculation is shown in Table 25. It adjusts the investment base we used in Step 4, multiplying it by the target ROI from Step 5, and applies the result to the operating expenses and target pilot compensation determined in Steps 1 and 2. TABLE 25—REVENUE NEEDED TO RECOVER TARGET ROI, BY AREA Operating Expenses (Step 1) Pilotage area Area Area Area Area Area Area Area 1 2 4 5 6 7 8 Investment Base (Step 4) × 4.64 (Target ROI Step 5) Target Pilot Compensation (Step 2) Federal Tax Allowance Revenue Needed (Designated waters) ........................... (Undesignated waters) ....................... (Undesignated waters) ....................... (Designated waters) ........................... (Undesignated waters) ....................... (Designated waters) ........................... (Undesignated waters) ....................... $598,805 472,540 528,181 792,272 754,254 362,742 480,996 + + + + + + + $1,307,436 793,469 634,775 1,307,436 1,110,856 871,624 952,163 + + + + + + + $45,813 36,157 14,780 33,364 42,770 20,570 27,275 + + + + + + + $0 0 7,360 11,040 0 0 0 = = = = = = = $1,952,054 1,302,166 1,185,096 2,144,112 1,907,881 1,254,936 1,460,433 Total ......................................................... 3,989,788 + 6,977,760 + 220,730 + 18,400 = 11,206,678 The ‘‘Revenue Needed’’ column of Table 25 is less than the revenue we projected in Table 16. For purposes of transparency, we verify Table 25’s calculations by rerunning the first part of Step 6, using the revenue needed from Table 25 instead of the Table 16 revenue projections we used in Tables 21 through 23. Tables 26 through 28 show that attaining the Table 25 revenue needed is sufficient to recover target ROI. TABLE 26—BALANCING REVENUE NEEDED AND TARGET ROI, DISTRICT ONE Area 1 Revenue Needed ............................................................................................................................................. Operating Expenses (from Step 1) .................................................................................................................. Pilot Compensation (from Step 2) .................................................................................................................... Operating Profit/(Loss) ..................................................................................................................................... Interest Expense (from audits) ......................................................................................................................... Earnings Before Tax ........................................................................................................................................ Federal Tax Allowance ..................................................................................................................................... Net Income ....................................................................................................................................................... Return Element (Net Income + Interest) .......................................................................................................... Investment Base (from Step 4) ........................................................................................................................ Return on Investment ....................................................................................................................................... + ¥ ¥ = ¥ = ¥ = ÷ = $1,952,054 598,805 1,307,436 45,813 12,576 33,237 0 33,237 45,813 987,354 0.0464 Area 2 + ¥ ¥ = ¥ = ¥ = ÷ = $1,302,166 472,540 793,469 36,157 9,926 26,231 0 26,231 36,157 779,248 0.0464 TABLE 27—BALANCING REVENUE NEEDED AND TARGET ROI, DISTRICT TWO srobinson on DSK4SPTVN1PROD with RULES Area 4 Revenue Needed ............................................................................................................................................. Operating Expenses (from Step 1) .................................................................................................................. Pilot Compensation (from Step 2) .................................................................................................................... Operating Profit/(Loss) ..................................................................................................................................... Interest Expense (from audits) ......................................................................................................................... Earnings Before Tax ........................................................................................................................................ Federal Tax Allowance ..................................................................................................................................... Net Income ....................................................................................................................................................... Return Element (Net Income + Interest) .......................................................................................................... Investment Base (from Step 4) ........................................................................................................................ VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 PO 00000 Frm 00093 Fmt 4700 Sfmt 4700 E:\FR\FM\28FER1.SGM + ¥ ¥ = ¥ = ¥ = ÷ 28FER1 $1,185,096 528,181 634,775 22,140 3,522 18,616 7,360 11,258 14,780 318,543 Area 5 + ¥ ¥ = ¥ = ¥ = ÷ $2,144,112 792,272 1,307,436 44,404 5,283 39,115 11,040 28,081 33,364 719,056 13536 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations TABLE 27—BALANCING REVENUE NEEDED AND TARGET ROI, DISTRICT TWO—Continued Area 4 Return on Investment ....................................................................................................................................... = Area 5 0.0464 = 0.0464 TABLE 28—BALANCING REVENUE NEEDED AND TARGET ROI, DISTRICT THREE Area 6 Revenue Needed .............................................................................................................. Operating Expenses (from Step 1) ................................................................................... Pilot Compensation (from Step 2) .................................................................................... Operating Profit/(Loss) ...................................................................................................... Interest Expense (from audits) ......................................................................................... Earnings Before Tax ......................................................................................................... Federal Tax Allowance ..................................................................................................... Net Income ....................................................................................................................... Return Element (Net Income + Interest) .......................................................................... Investment Base (from Step 4) ........................................................................................ Return on Investment ....................................................................................................... Step 7: Adjustment of Pilotage Rates. This step calls for us to divide the Step + ¥ ¥ = ¥ = ¥ = ÷ = Area 7 $1,907,881 754,254 1,110,856 42,770 1,537 41,233 0 41,233 42,770 921,776 0.0464 6 revenue needed (Table 25) by the Step 3 revenue projection (Table 16), to give + ¥ ¥ = ¥ = ¥ = ÷ = Area 8 $1,254,936 362,742 871,624 20,570 739 19,831 0 19,831 20,570 443,312 0.0464 + ¥ ¥ = ¥ = ¥ = $1,460,433 480,996 952,163 27,275 980 26,295 0 26,295 27,275 587,828 0.0464 ÷ = us a rate multiplier for each area. Tables 29 through 31 show these calculations. TABLE 29—RATE MULTIPLIER, AREAS IN DISTRICT ONE Area 1 St. Lawrence River Ratemaking projections Revenue Needed (from Step 6) ................................................................................................... Revenue (from Step 3) ................................................................................................................. Rate Multiplier .............................................................................................................................. $1,952,046 2,438,897 0.8004 ÷ = Area 2 Lake Ontario $1,302,159 1,596,067 0.8159 ÷ = TABLE 30—RATE MULTIPLIER, AREAS IN DISTRICT TWO Area 5 Southeast Shoal to Port Huron, MI Area 4 Lake Erie Ratemaking projections Revenue Needed (from Step 6) ................................................................................................... Revenue (from Step 3) ................................................................................................................. Rate Multiplier .............................................................................................................................. $1,185,094 1,284,712 0.9225 ÷ = $2,144,106 2,571,969 0.8336 ÷ = TABLE 31—RATE MULTIPLIER, AREAS IN DISTRICT THREE Area 6 Lakes Huron and Michigan Ratemaking projections Revenue Needed (from Step 6) ......................................................... Revenue (from Step 3) ....................................................................... Rate Multiplier ..................................................................................... srobinson on DSK4SPTVN1PROD with RULES 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 ÷ = $1,907,873 2,187,375 0.8722 (46 CFR 401.428), would decrease by 16.25 percent in all areas. We then calculate a rate multiplier for adjusting the basic rates and charges described in 46 CFR 401.420 and 401.428 and applicable in all areas. We Area 7 St. Mary’s River ÷ = $1,254,932 1,547,878 0.8107 Area 8 Lake Superior $1,460,429 1,754,120 0.8326 ÷ = divide total revenue needed (Step 6, Table 25) by total projected revenue (Step 3 & 3A, Table 16). Table 32 shows this calculation. TABLE 32—RATE MULTIPLIER FOR BASIC RATES AND CHARGES IN 46 CFR 401.420 AND 401.428 Ratemaking projections Total Revenue Needed (from Step 6) ................................................................................................................... Total revenue (from Step 3) .................................................................................................................................. VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 PO 00000 Frm 00094 Fmt 4700 Sfmt 4700 E:\FR\FM\28FER1.SGM 28FER1 ÷ $11,206,638.64 $13,381,017.91 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations 13537 TABLE 32—RATE MULTIPLIER FOR BASIC RATES AND CHARGES IN 46 CFR 401.420 AND 401.428—Continued Ratemaking projections Rate Multiplier ........................................................................................................................................................ Without further action, the existing rates we established in our 2012 final rule would then be multiplied by the rate multipliers from Tables 29 through 31 to calculate the area by area rate changes for 2013. The resulting 2013 rates, on average, would then be decreased almost 16 percent from the 2012 rates, instead of increasing almost 2 percent as we proposed in our August 2012 NPRM. We decline to impose that decrease; but instead, we are relying on the discretionary authority we have under Step 7 to further adjust rates. = 0.838 Table 33 compares the impact, area by area, that an average decrease of almost 16 percent would have, relative to the impact each area will actually experience as a result of this final rule. TABLE 33—IMPACT OF EXERCISING STEP 7 DISCRETION Percent change without exercising Step 7 discretion Area Area Area Area Area Area Area Area 1 2 4 5 6 7 8 ¥19.96 ¥18.41 ¥7.75 ¥16.64 ¥12.78 ¥18.93 ¥16.74 (Designated waters) ..................................................................................................................................... (Undesignated waters) ................................................................................................................................. (Undesignated waters) ................................................................................................................................. (Designated waters) ..................................................................................................................................... (Undesignated waters) ................................................................................................................................. (Designated waters) ..................................................................................................................................... (Undesignated waters) ................................................................................................................................. Our discretionary authority under Step 7 must be ‘‘based on requirements of the Memorandum of Arrangements between the United States and Canada, and other supportable circumstances that may be appropriate.’’ The Memorandum of Arrangements calls for comparable U.S. and Canadian rates, and the rates would not be comparable if U.S. rates decrease by 16 percent, while Canadian rates for 2013 increase by 2.5 percent.3 ‘‘Other supportable circumstances’’ we have for exercising our discretion include recent Executive Order 13609, which calls on Federal agencies to eliminate ‘‘unnecessary differences’’ between U.S. and foreign regulations (77 FR 26413, sec. 1), and the possibility that a 16 percent rate decrease would jeopardize the ability of the three pilotage associations to provide safe, dependable service. (In the Percent change with exercise of Step 7 discretion ¥1.41 ¥1.69 8.87 0.95 4.31 0.56 1.52 case of one association, our examination of that association’s financial data suggests it could not survive such a rate decrease.) The following tables reflect the rate adjustments we proposed in our August 2012 NPRM. We are finalizing the values from the NPRM in this rulemaking. Tables 34 through 36 show these calculations. TABLE 34—ADJUSTMENT OF PILOTAGE RATES, AREAS IN DISTRICT ONE Rate multiplier (2013 APP A NPRM) 2012 Rate Area 1 St. Lawrence River: Basic Pilotage ............................................................................................ Each lock transited .................................................................................... Harbor movage .......................................................................................... Minimum basic rate, St. Lawrence River .................................................. Maximum rate, through trip ....................................................................... Area 2 Lake Ontario: 6-Hour period ............................................................................................ Docking or Undocking ............................................................................... Adjusted rate for 2013 $19.02/km, $33.67/mi $422 $1,381 $921 $4,041 × 0.986 = × × × × 0.986 0.986 0.986 0.986 = = = = $18.75/km, $33.19/mi $416 $1,361 $908 $3,984 $865 $826 × × 0.983 0.983 = = $851 $812 srobinson on DSK4SPTVN1PROD with RULES Note: Numbers may not total due to rounding. 3 The Canadian Great Lakes Pilotage Authority (GLPA) originally recommended a 2013 rate increase of 4 percent based on GLPA’s analysis of VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 the revenue needed to cover the costs of providing pilotage service for GLPA clients, but reduced that PO 00000 Frm 00095 Fmt 4700 Sfmt 4700 figure to 2.5 percent based in large part on our NPRM’s proposed average 1.87 percent increase. E:\FR\FM\28FER1.SGM 28FER1 13538 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations TABLE 35—ADJUSTMENT OF PILOTAGE RATES, AREAS IN DISTRICT TWO Rate multiplier (2013 APP A NPRM) 2012 Rate Area 4 Lake Erie: 6-Hour period ............................................................................................ Docking or undocking ................................................................................ Any point on Niagara River below Black Rock Lock ................................ Area 5 Southeast Shoal to Port Huron, MI between any point on or in: Toledo or any point on Lake Erie W. of Southeast Shoal ........................ 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 ............................................................ Adjusted rate for 2013 $760 $585 $1,493 × × × 1.089 1.089 1.089 = = = $828 $637 $1,626 $1,369 × 1.010 = $1,382 $2,317 $3,008 × × 1.010 1.010 = = $2,339 $3,037 $2,317 × 1.010 = $2,339 $4,036 × 1.010 = $4,074 $4,675 $3,031 $2,358 $1,677 $1,369 × × × × × 1.010 1.010 1.010 1.010 1.010 = = = = = $4,719 $3,060 $2,381 $1,693 $1,382 $4,036 $3,031 $1,369 $2,317 × × × × 1.010 1.010 1.010 1.010 = = = = $4,074 $3,060 $1,382 $2,339 $3,008 $3,031 $1,677 × × × 1.010 1.010 1.010 = = = $3,037 $3,060 $1,693 $2,317 $3,031 × × 1.010 1.010 = = $2,339 $3,060 Note: Numbers may not total due to rounding. TABLE 36—ADJUSTMENT OF PILOTAGE RATES, AREAS IN DISTRICT THREE Rate multiplier (2013 APP A NPRM) 2012 Rate Area 6 Lakes Huron and Michigan: 6-Hour Period ............................................................................................ Docking or undocking ................................................................................ Area 7 St. Mary’s River 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 St. Marie, Ont., except the Algoma Steel Corp. Wharf & De Tour .............................................................................................. Any point in Sault St. 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 Lake Superior: 6-Hour period ............................................................................................ Docking or undocking ................................................................................ Adjusted rate for 2013 $662 $629 × × 1.043 1.043 = = $691 $656 $2,568 $2,568 $967 × × × 1.006 1.006 1.006 = = = $2,583 $2,583 $973 $2,153 × 1.006 = $2,165 $967 $2,153 $967 $967 × × × × 1.006 1.006 1.006 1.006 = = = = $973 $2,165 $973 $973 $577 $549 × × 1.015 1.015 = = $586 $557 srobinson on DSK4SPTVN1PROD with RULES Note: Numbers may not total due to rounding. VII. Regulatory Analyses We developed this rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on these statutes or executive orders. A. Regulatory Planning and Review Executive Orders (E.O.) 12866 (‘‘Regulatory Planning and Review’’) VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 PO 00000 Frm 00096 Fmt 4700 Sfmt 4700 and 13563 (‘‘Improving Regulation and Regulatory Review’’) direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory E:\FR\FM\28FER1.SGM 28FER1 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule is not a ‘‘significant regulatory action’’ under section 3(f) of E.O. 12866. Accordingly, the final rule has not been reviewed by the Office of Management and Budget (OMB). Step 7 allows for discretion when making the rate. The Memorandum of Arrangements between the United States and Canada calls for comparable rates. As such, we maintain the rate increase presented in the NPRM, resulting in an estimated cost to shippers of $148,000. A regulatory assessment follows. The Coast Guard is required to review and adjust pilotage rates on the Great Lakes annually. See sections III and IV of this preamble for detailed discussions of the Coast Guard’s legal basis and purpose for this rulemaking and for background information on Great Lakes pilotage ratemaking. Based on our annual review of this rule, we are adjusting the pilotage rates for the 2013 shipping season to generate sufficient revenue to cover allowable expenses, and target pilot compensation and returns on investment. The rate adjustments in this final rule will lead to a cost in all three districts with an estimated cost to shippers of approximately $148,000 across all three districts. This rule increases Great Lakes pilotage rates, on average, approximately 1.87 percent overall from the current rates set in the 2012 final rule. This represents the same increase as proposed in the NPRM. The Appendix A methodology is discussed and applied in detail in section V of this preamble. Among other factors described in section V, it reflects audited 2010 financial data from the pilots’ associations (the most recent year available for auditing), projected association expenses, and regional inflation or deflation. The last full Appendix A ratemaking was concluded in 2011 and used financial data from the 2009 base accounting year. The last annual rate review, conducted under 46 CFR part 404, Appendix C, was completed early in 2011. 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 will result in a cost reduction or savings for shippers in that area. The shippers affected by these rate adjustments are those owners and operators of domestic vessels operating on register (employed in 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. The Coast Guard’s interpretation is 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 and is not a part of our estimated national cost to shippers. Coast Guard sampling of pilot 13539 data suggests there are very few U.S. domestic vessels, without registry and operating only in the Great Lakes that voluntarily purchase pilotage services. We used 2008–2010 vessel arrival data from the Coast Guard’s Marine Information for Safety and Law Enforcement (MISLE) system to estimate the average annual number of vessels affected by the rate adjustment to be 204 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 204 vessels, there were approximately 319 annual U.S. port arrivals before the vessels left the Great Lakes system, based on 2008–2010 vessel data from MISLE. Historically, the impact of the rate adjustment to shippers is estimated from the District pilotage revenues. These revenues represent the direct and indirect costs that shippers must pay for pilotage services. The Coast Guard sets rates so that revenues equal the estimated cost of pilotage. For this rule, we base our rate on pilotage revenues as reported for the NPRM, as discussed in step 7, despite new data provided by AMOU. We estimate the additional impact (costs or savings) of the rate adjustment in this rule to be the difference between the total projected revenue needed to cover costs in 2013 based on the 2012 rate adjustment and the total projected revenue needed to cover costs in 2013 as set forth in the NPRM. Table 37 details additional costs or savings by area and district. TABLE 37—RATE ADJUSTMENT AND ADDITIONAL IMPACT OF THE RULE BY AREA AND DISTRICT ($U.S.; NON-DISCOUNTED) srobinson on DSK4SPTVN1PROD with RULES Projected revenue needed in 2012 * Area 1 .......................................................................................................................................... Area 2 .......................................................................................................................................... Total, District One ................................................................................................................. Area 4 .......................................................................................................................................... Area 5 .......................................................................................................................................... Total, District Two ................................................................................................................. Area 6 .......................................................................................................................................... Area 7 .......................................................................................................................................... Area 8 .......................................................................................................................................... Total, District Three .............................................................................................................. Projected revenue needed in 2013 ** $2,308,357 1,614,791 3,923,148 1,310,549 2,600,490 3,911,039 2,227,555 1,565,906 1,811,863 5,605,324 $2,404,424 1,569,160 3,973,583 1,398,694 2,596,484 3,995,178 2,281,673 1,556,517 1,780,829 5,619,020 * These 2012 estimates are detailed in Table 18 of the 2012 final rule (76 FR 6351). ** These 2013 estimates are detailed in Table 27 of the NPRM for this rulemaking. Some values may not total due to rounding. ‘‘Additional Revenue or Cost of this Rulemaking’’ = ‘‘Revenue needed in 2012’’ minus ‘‘Revenue needed in 2011.’’ VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 PO 00000 Frm 00097 Fmt 4700 Sfmt 4700 E:\FR\FM\28FER1.SGM 28FER1 Additional costs or savings of this rule $96,067 (45,631) 50,435 88,145 (4,006) 84,139 54,118 (9,389) (31,034) 13,696 13540 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations After applying the rate change in this rule, the resulting difference between the projected revenue in 2012 and the projected revenue in 2013 is the annual impact to shippers from this rule. This figure would be equivalent to the total additional payments or savings that shippers would incur for pilotage services from this 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 rate adjustments lead to a cost in all three districts, with affected shippers operating in District One, District Two, and District Three experiencing costs of $50,435, $84,139, and $13,696, respectively. To calculate an exact cost or savings per vessel is difficult because of the variation in vessel types, routes, port arrivals, commodity carriage, time of season, conditions during navigation, and preferences for the extent of pilotage services on designated and undesignated portions of the Great Lakes system. Some owners and operators would pay more and some would pay less depending on the distance and port arrivals of their vessels’ trips. As Table 37 indicates, shippers operating in all Districts would experience an increased annual cost due to this rule. The overall impact of the rule would be a cost to shippers of approximately $148,000 across all three districts. This rule allows the U.S. Coast Guard to meet the statutory requirements to review the rates for pilotage services on the Great Lakes—ensuring proper pilot compensation. Alternatively, if we were to impose the new rates based on the new contract data from AMOU, there would be a nearly 16 percent decrease in rates across the system. This would have a dramatically different effect on industry, moving from a proposed cost to shippers of approximately $148,000 to a cost savings of approximately $1.7 million. Table 38 shows the difference in projected 2012 expenses as compared to projected 2013 expenses based on the new AMOU contract information. TABLE 38—ALTERNATIVE RATE ADJUSTMENT AND ADDITIONAL IMPACT OF THE RULE BY AREA AND DISTRICT ($U.S.; NONDISCOUNTED) Total projected expenses in 2012 Area 1 .............................................................................................................. Area 2 .............................................................................................................. Total, District One ..................................................................................... Area 4 .............................................................................................................. Area 5 .............................................................................................................. Total, District Two ..................................................................................... Area 6 .............................................................................................................. Area 7 .............................................................................................................. Area 8 .............................................................................................................. Total, District Three .................................................................................. All Three Districts ............................................................................................ We reject this alternative for the reasons laid out in our discussion of Step 7 in part VI of this preamble. srobinson on DSK4SPTVN1PROD with RULES 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 this rule will be classified under the North American Industry Classification System (NAICS) code subsector 483— Water Transportation, which includes the following 6-digit NAICS codes for freight transportation: 483111—Deep Sea Freight Transportation, 483113— Coastal and Great Lakes Freight Transportation, and 483211—Inland Water Freight Transportation. According to the Small Business VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 Proposed rate change Total projected expenses in 2013 $2,308,357 1,614,791 3,923,148 1,310,549 2,600,490 3,911,039 2,227,555 1,565,906 1,811,863 5,605,324 13,439,511 0.9465 1.0117 1.6086 1.0201 1.0111 1.0141 1.0184 1.0116 1.0329 1.0211 1.1404 $2,438,897 1,596,067 2,438,897 1,284,712 2,571,969 3,856,681 2,187,375 1,547,878 1,754,120 5,489,373 11,784,951 Administration’s definition, a U.S. company with these NAICS codes and employing less than 500 employees is considered a small entity. For the rule, we reviewed recent company size and ownership data from 2008–2010 Coast Guard MISLE data and business revenue and size data provided by publicly available sources such as MANTA and Reference USA. 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 would be comparable in ownership and size to these shippers. There are three U.S. entities affected by this rule that receive revenue from pilotage services. These are the three pilots’ associations that provide and manage pilotage services within the Great Lakes districts. Two of the associations operate as partnerships and one operates as a corporation. These associations are designated the same NAICS industry classification and small entity size standards described above, but they have far fewer than 500 PO 00000 Frm 00098 Fmt 4700 Sfmt 4700 Additional revenue or cost of this rulemaking $130,540 (18,724) (1,484,251) (25,837) (28,521) (54,358) (40,180) (18,028) (57,743) (115,951) (1,654,560) employees; they have approximately 65 total employees combined. We expect no adverse impact to these entities from this rule because all associations receive enough revenue to balance the projected expenses associated with the projected number of bridge hours and pilots. Additionally, while we are not required to conduct a full Regulatory Flexibility Analysis for this action, we have indicated some potential adverse impacts from alternative action in our discussion of the analysis performed under Step 7. Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that this final rule will not have a significant economic impact on a substantial number of small entities. C. Assistance for Small Entities Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104–121), we offered to assist small entities in understanding this rule so that they could better evaluate its effects on them and participate in the rulemaking. If the rule will affect your small business, E:\FR\FM\28FER1.SGM 28FER1 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please consult Mr. Todd Haviland, Director, Great Lake Pilotage, Office of Great Lakes Pilotage, Commandant (CG–WWM–2), Coast Guard; telephone 202–372–2037, email Todd.A.Haviland@uscg.mil, or fax 202– 372–1909. The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard. 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). srobinson on DSK4SPTVN1PROD with RULES D. Collection of Information This rule would call 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 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. Congress directed the Coast Guard to establish ‘‘rates and charges for pilotage services.’’ 46 U.S.C. 9303(f). This regulation is issued pursuant to that statute and is preemptive of state law as outlined in 46 U.S.C. 9306. Under 46 U.S.C. 9306, a ‘‘State or political subdivision of a State may not regulate or impose any requirement on pilotage on the Great Lakes.’’ Because States may not promulgate rules within this category, preemption is not an issue under Executive Order 13132. Additionally, President Barack Obama’s memorandum of May 20, 2009, titled ‘‘Preemption,’’ states that ‘‘preemption of State law by executive departments and agencies should be undertaken only with full consideration of the legitimate prerogatives of the States and with a sufficient legal basis for preemption.’’ To that end, when a VerDate Mar<15>2010 19:07 Feb 27, 2013 Jkt 229001 department or agency intends to preempt State law, it should do so only if justified under legal principles governing preemption, including those outlined in Executive Order 13132, and it should also include preemption provisions in the codified regulation. As currently stated in 46 CFR 401.120, states, municipalities, and other local authorities are prohibited from requiring ‘‘the use of pilots or [regulating] any aspect of pilotage in any of the waters specified in the Act.’’ Therefore, this regulation complies with the requirements of the memorandum. F. Unfunded Mandates Reform Act The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531–1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule would not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble. G. Taking of Private Property This rule will not cause a taking of private property or otherwise have taking implications under E.O. 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights. H. Civil Justice Reform This rule meets applicable standards in sections 3(a) and 3(b)(2) of E.O. 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. I. Protection of Children We have analyzed this rule under E.O. 13045, Protection of Children From Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and would 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 E.O. 13175, Consultation and Coordination With Indian Tribal Governments, because it would 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. PO 00000 Frm 00099 Fmt 4700 Sfmt 4700 13541 K. Energy Effects We have analyzed this rule under E.O. 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 E.O. 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 E.O. 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 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. 4321–4370h), and have concluded that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule adjusts rates in accordance with applicable statutory and regulatory mandates and is categorically excluded under section 2.B.2, figure 2–1, paragraph (34)(a) of the Instruction, which includes regulations that are editorial or procedural. An environmental analysis checklist and a categorical exclusion determination are available in the docket where indicated under the ADDRESSES section of this preamble. E:\FR\FM\28FER1.SGM 28FER1 13542 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations List of Subjects in 46 CFR Part 401 PART 401—GREAT LAKES PILOTAGE REGULATIONS Administrative practice and procedure, Great Lakes, Navigation (water), Penalties, Reporting and recordkeeping requirements, Seamen. 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. For the reasons discussed in the preamble, the Coast Guard amends 46 CFR part 401 as follows: 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. * Service St. Lawrence River Basic Pilotage ........................................................................................... Each Lock Transited ................................................................................. Harbor Movage ......................................................................................... 1 The * * * * (a) Area 1 (Designated Waters): $18.75 per kilometer or $33.19 per mile 1 $416 1 1,361 1 minimum basic rate for assignment of a pilot in the St. Lawrence River is $908, and the maximum basic rate for a through trip is $3,984. (b) Area 2 (Undesignated Waters): 3. In § 401.407 revise paragraphs (a) and (b), including the footnote to Table (b), to read as follows: ■ Lake Ontario Service 6-Hour Period ........................... Docking or Undocking .............. § 401.407 Basic rates and charges on Lake Erie and the navigable waters from Southeast Shoal to Port Huron, MI. * $851 812 * * * * (a) Area 4 (Undesignated Waters): Lake Erie (East of Southeast Shoal) Service 6-Hour Period .......................................................................................................................................................... Docking or Undocking ............................................................................................................................................. Any point on the Niagara River below the Black Rock Lock .................................................................................. Buffalo $828 637 N/A $828 637 1,626 (b) Area 5 (Designated Waters): Any point on or in Toledo or any port on Lake Erie west of Southeast Shoal Port Huron Change Point .................................................... St. Clair River ....................................................................... Detroit or Windsor or the Detroit River ................................ Detroit Pilot Boat .................................................................. 1 When 4. In § 401.410, revise paragraphs (a), (b), and (c) to read as follows: $1,382 1 4,719 1 4,074 N/A 3,037 2,339 2,339 1,693 St. Clair River $2,339 2,381 3,060 N/A N/A N/A 1,693 1,382 3,060 3,060 * * Lakes Huron and Michigan Service 6-Hour Period ........................... * $691 Docking or Undocking .............. 19:07 Feb 27, 2013 Jkt 229001 PO 00000 De Tour Frm 00100 Fmt 4700 Sfmt 4700 656 (b) Area 7 (Designated Waters): 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 ............................................................................................................................ VerDate Mar<15>2010 Lakes Huron and Michigan Service Area srobinson on DSK4SPTVN1PROD with RULES $3,037 3,060 3,060 1,382 N/A (a) Area 6 (Undesignated Waters): § 401.410 Basic rates and charges on Lakes Huron, Michigan, and Superior; and the St. Mary’s River. * $2,339 1 4,074 Detroit Pilot Boat Detroit River pilots are not changed at the Detroit Pilot Boat. ■ * Toledo or any point on Lake Erie west of Southeast Shoal Southeast Shoal E:\FR\FM\28FER1.SGM $2,583 2,583 2,165 2,165 N/A 28FER1 Gros cap N/A $973 973 973 N/A Any harbor N/A N/A N/A N/A $973 Federal Register / Vol. 78, No. 40 / Thursday, February 28, 2013 / Rules and Regulations 20301–3060. Telephone 571–372–6088; facsimile 571–372–6094. Lake SUPPLEMENTARY INFORMATION: This final Service Superior rule amends the DFARS as follows: 1. Corrects address of the Director, 6-Hour Period ........................... $586 Docking or Undocking .............. 557 DAR Council at 201.201–1(d)(i); 2. Corrects 204.203(b) for consistency with FAR terminology; § 401.420 [Amended] 3. Corrects terminology at ■ 5. Amend § 401.420 as follows: 204.7106(b)(2)(ii)(D) relating to contract ■ a. In paragraph (a), remove the text line items; ‘‘$124’’ and add, in its place, the text 4. Corrects text at 215.403– ‘‘$126’’; and remove the text ‘‘$1,942’’ 1(c)(1)(A)(1); and add, in its place, the text ‘‘$1,972’’; 5. Updates DFARS text at 215.404– ■ b. In paragraph (b), remove the text 71–2(e)(l)(i) by adding the word ‘‘data’’ ‘‘$124’’ and add, in its place, the text for consistency with the FAR; ‘‘$126’’; and remove the text ‘‘$1,942’’ 6. Corrects typographical error at and add, in its place, the text ‘‘$1,972’’; 215.408(2); and 7. Removes obsolete language from ■ c. In paragraph (c)(1), remove the text 225.7006–3(b) and 225.7008(b). ‘‘$733’’ and add, in its place, the text 8. Corrects typographical error at ‘‘$744’’; and in paragraph (c)(3), remove 227.7103–3(c); the text ‘‘$124’’ and add, in its place, the 9. Revises 242.302(a)(S–72); text ‘‘$126’’, and remove the text 10. Revises 242.7302 to call attention ‘‘$1,942’’ and add, in its place, the text to guidance at PGI ; ‘‘$1,972’’. 11. Corrects typographical error at 245.103–72; § 401.428 [Amended] 12. Corrects clause date and link at ■ 6. In § 401.428, remove the text 252.204–7004; ‘‘$748’’ and add, in its place, the text 13. Corrects links at 252.211–7007(a), ‘‘$744’’. 252.211–7007(d)(6), and 252.211– Dated: February 20, 2013. 7007(g)(1); Dana A. Goward, 14. Corrects clause dates at 252.212– Director, Marine Transportation Systems 7001(b)(2), 252.212–7001(b)(4), and at Management, U.S. Coast Guard. 252.212–7001(b)(26); and [FR Doc. 2013–04321 Filed 2–27–13; 8:45 am] 15. Corrects typographical error at 252.215–7000 and clarifies clause BILLING CODE 9110–04–P terminology relating to Subcontractor Certified Cost or Pricing Data. DEPARTMENT OF DEFENSE List of Subjects in 48 CFR Parts 201, 204, 215, 225, 227, 242, 245 and 252 Defense Acquisition Regulations Government procurement. System (c) Area 8 (Undesignated Waters): Manuel Quinones, Editor, Defense Acquisition Regulations System. 48 CFR Parts 201, 204, 215, 225, 227, 242, 245, and 252 Therefore, 48 CFR parts 201, 204, 215, 225, 227, 242, 245 and 252 are amended as follows: ■ 1. The authority citation for 48 CFR parts 201, 204, 215, 225, 227, 242, 245 and 252 continue to read as follows: Defense Federal Acquisition Regulation Supplement; Technical Amendments Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Final rule. AGENCY: srobinson on DSK4SPTVN1PROD with RULES Jkt 229001 [Amended] 3. Section 204.203 is amended in paragraph (b) by removing the word ‘‘clause’’ and adding the word ‘‘provision’’ in its place. ■ 204.7106 [Amended] 4. Section 204.7106 is amended in paragraph (b)(2)(ii)(D) by removing ‘‘original contract or exhibit line or subline item’’ and adding ‘‘original contract line item or subline item or exhibit line item’’ in its place. ■ PART 215—CONTRACTING BY NEGOTIATION 215.403–1 [Amended] 5. Section 215.403–1 is amended in paragraph (c)(1)(A)(1) by removing the word ‘‘information’’ and adding the word ‘‘data’’ in its place. ■ 215.404–71–2 [Amended] 6. Section 215.404–71–2 is amended in paragraph (e)(1)(i) by removing ‘‘contracting office information and reviews’’ and adding ‘‘contracting office data, information and reviews’’ in its place. ■ 215.408 [Amended] 7. Section 215.408 is amended in paragraph (2) by removing the word ‘‘award’’ and adding the word ‘‘awarded’’ in its place. ■ PART 225–FOREIGN ACQUISITION 8. Section 225.7006–3(b) is revised to read as follows: ■ 225.7006–3 Waiver. * * * * * (b) The Under Secretary of Defense (Acquisition, Technology, and Logistics) has waived the restriction for air circuit breakers manufactured in the United Kingdom. (See 225.7008.) 9. Section 225–7008(b) is revised to read as follows: ■ 225.7008 Waiver of restrictions of 10 U.S.C. 2534. 201.201–1 Effective February 28, 2013. FOR FURTHER INFORMATION CONTACT: Mr. Manuel Quinones, Defense Acquisition Regulations System, OUSD (AT&L) DPAP (DARS), Room 3B855, 3060 Defense Pentagon, Washington, DC 19:07 Feb 27, 2013 204.203 PART 201—FEDERAL ACQUISITION REGULATIONS SYSTEM DoD is making technical amendments to the Defense Federal Acquisition Regulation Supplement (DFARS) to provide needed editorial changes. VerDate Mar<15>2010 PART 204—ADMINISTRATIVE MATTERS Authority: 41 U.S.C. 1303 and 48 CFR chapter 1. SUMMARY: DATES: 13543 [Amended] 2. Section 201.201–1 paragraph (d)(i) introductory text is amended by removing ‘‘OUSD(AT&L), 3062 Defense Pentagon, Washington, DC 20301– 3062;’’ and adding ‘‘OUSD(AT&L), 3060 Defense Pentagon, Washington, DC 20301–3060;’’ in its place. ■ PO 00000 Frm 00101 Fmt 4700 Sfmt 4700 * * * * * (b) In accordance with the provisions of paragraphs (a)(1)(i) through (iii) of this section, the USD(AT&L) has waived the restrictions of 10 U.S.C. 2534(a) for certain items manufactured in the United Kingdom, including air circuit breakers for naval vessels (see 225.7006). E:\FR\FM\28FER1.SGM 28FER1

Agencies

[Federal Register Volume 78, Number 40 (Thursday, February 28, 2013)]
[Rules and Regulations]
[Pages 13521-13543]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-04321]

[[Page 13521]]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

46 CFR Part 401

[Docket No. USCG-2012-0409]
RIN 1625-AB89

Great Lakes Pilotage Rates--2013 Annual Review and Adjustment

AGENCY: Coast Guard, DHS.

ACTION: Final rule.

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SUMMARY: The Coast Guard is adjusting the rates for pilotage services
on the Great Lakes, which were last amended in February 2012. The
adjustments establish new base rates and are made in accordance with a
full ratemaking procedure. This rulemaking promotes the Coast Guard's
maritime safety mission.

DATES: This final rule is effective August 1, 2013.

ADDRESSES: Comments and material received from the public, as well as
any documents mentioned in this preamble as being available in the
docket, are part of docket USCG-2012-0409 and are available for
inspection or copying at the Docket Management Facility (M-30), U.S.
Department of Transportation, West Building Ground Floor, Room W12-140,
1200 New Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5
p.m., Monday through Friday, except Federal holidays. You may also find
this docket on the Internet by going to https://www.regulations.gov,
inserting USCG-2012-0409 in the ``Keyword'' box, and then clicking
``Search.''

FOR FURTHER INFORMATION CONTACT: If you have questions on this rule,
call or email Mr. Todd Haviland, Director, Great Lakes Pilotage,
Commandant (CG-WWM-2), Coast Guard; telephone 202-372-2037, email
Todd.A.Haviland@uscg.mil, or fax 202-372-1909. If you have questions on
viewing or submitting material to the docket, call Ms. Renee V. Wright,
Program Manager, Docket Operations, telephone 202-366-9826.

SUPPLEMENTARY INFORMATION:

Table of Contents for Preamble

I. Abbreviations
II. Regulatory History
III. Basis and Purpose
IV. Background
V. Discussion of Comments and Changes
VI. Discussion of the Final Rule
A. Summary
B. Calculating the Rate Adjustment
VII. Regulatory Analyses
A. Regulatory Planning and Review
B. Small Entities
C. Assistance for Small Entities
D. Collection of Information
E. Federalism
F. Unfunded Mandates Reform Act
G. Taking of Private Property
H. Civil Justice Reform
I. Protection of Children
J. Indian Tribal Governments
K. Energy Effects
L. Technical Standards
M. Environment

I. Abbreviations

AMOU American Maritime Officers Union
APA American Pilots' Association
CFR Code of Federal Regulations
COBRA Consolidated Omnibus Budget Reconciliation Act
CPA Certified Public Accountant
CPI Consumer Price Index
E.O. Executive Order
FR Federal Register
GLPA Canadian Great Lakes Pilotage Authority
MISLE Marine Information for Safety and Law Enforcement
NAICS North American Industry Classification System
NPRM Notice of proposed rulemaking
OMB Office of Management and Budget
ROI Return on Investment
Sec. Section symbol
SPI Seaway Pilot, Inc.
U.S.C. United States Code

II. Regulatory History

On August 1, 2012, we published a notice of proposed rulemaking
(NPRM) entitled ``Great Lakes Pilotage Rates--2013 Annual Review and
Adjustment'' in the Federal Register (77 FR 45539). We received six
comments on the NPRM from four sources, including the three pilots'
associations and one District Three pilot. No public meeting was
requested and none was held.

III. Basis and Purpose

The basis of this rulemaking is the Great Lakes Pilotage Act of
1960 (``the Act'') (46 U.S.C. Chapter 93), which requires U.S. vessels
operating ``on register'' \1\ and foreign vessels to use U.S.
registered pilots while transiting the U.S. waters of the St. Lawrence
Seaway and the Great Lakes system. 46 U.S.C. 9302(a)(1). The Act
requires the Secretary of the department in which the Coast Guard is
operating 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). Rates must be established
or reviewed and adjusted each year, not later than March 1. Base rates
must be established by a full ratemaking at least once every 5 years,
and in years when base rates are not established they must be reviewed
and adjusted if necessary. 46 U.S.C. 9303(f). The Secretary's duties
and authority under the Act have been delegated to the Coast Guard.
Department of Homeland Security Delegation No. 0170.1, paragraph
(92)(f). Coast Guard regulations implementing the Act appear in parts
401 through 404 of Title 46, Code of Federal Regulations (CFR).
Procedures for use in establishing base rates appear in 46 CFR part
404, Appendix A, and procedures for annual review and adjustment of
existing base rates appear in 46 CFR part 404, Appendix C.
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\1\ ``On register'' means that the vessel's certificate of
documentation has been endorsed with a registry endorsement, and
therefore, may be employed in foreign trade or trade with Guam,
American Samoa, Wake, Midway, or Kingman Reef. 46 U.S.C. 12105, 46
CFR 67.17.
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The purpose of this rulemaking is to establish new base pilotage
rates, using the 46 CFR part 404, Appendix A, methodology.

IV. Background

The vessels affected by this rulemaking are engaged in foreign
trade upon the U.S. waters of the Great Lakes. U.S. and Canadian
``Lakers,'' \2\ which account for most commercial shipping on the Great
Lakes, are not affected. 46 U.S.C. 9302.
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\2\ A ``Laker'' is a commercial cargo vessel especially designed
for and generally limited to use on the Great Lakes.
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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. Also, we do not
control the actual compensation that pilots receive. The actual
compensation is determined by each of the three district associations.
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.

[[Page 13522]]

Areas 1, 5, and 7 have been designated by Presidential Proclamation,
pursuant to the Act, to be waters in which pilots must at all times be
fully engaged in the navigation of vessels in their charge. Areas 2, 4,
6, and 8 have not been so designated because they are open bodies of
water. While working in those undesignated areas, pilots must only ``be
on board and available to direct the navigation of the vessel at the
discretion of and subject to the customary authority of the master.''
46 U.S.C. 9302(a)(1)(B).
This rule is a full ratemaking to establish new base pilotage
rates, using the 46 CFR part 404, Appendix A, methodology. The last
full ratemaking established the current base rates in the 2012 final
rule (77 FR 11752, February 28, 2012). Among other things, the Appendix
A methodology requires us to review detailed pilot association
financial information, and we contract with independent accountants to
assist in that review. This final rule is based on the review of 2010
financial information. The associations are given time to review and
comment on the preliminary reports of the independent accountants,
before the review is finalized. Comments by the pilots' associations on
those reports and the independent accountant's final findings are
available in the docket.

V. Discussion of Comments and Changes

We received six public comments on our NPRM from four sources, the
three pilotage associations and a District Three pilot. Two of the
associations filed two comments each. The third association filed a
single series of comments from the association president and the
association's certified public accountant.
Agreement A. Two associations said we made mistakes regarding the
American Maritime Officers Union (AMOU) contracts, Agreement A and
Agreement B, which provide data used by the Appendix A methodology.
First, the associations claimed the Agreement A health benefit
should be $105.61 per day, not $52.96. Second, the associations claimed
the Agreement A pension benefit should be $44.61 per day, not zero.
Third, the associations claimed the Agreement A daily wage rate should
be $295.94, not $270.61.
Our NPRM correctly reflected the contract information that was
available to us when the NPRM was published. However, as a result of
these comments we reached out to AMOU to inquire if the contract that
we had used was superseded. AMOU then provided us with more recent
contract information. However, they now treat each individual component
of wage, health, and pension benefits as proprietary information and
did not consent to our request to disclose this information. Instead,
they provided us with a daily aggregate rate for Agreements A and B for
first mates on U.S. Great Lakes vessels, and validated our Agreements A
and B aggregate rate values for designated waters. These aggregate
rates combine, without separately identifying, the following inputs:
Daily wage rate, vacation pay, pension plan contributions, and medical
plan contributions.
In the past, those inputs were separately identified and we passed
that information along to the public. For example, our August 2012 NPRM
included Tables 11 (Projected Wage Components) and 12 (Projected
Benefits Components). Now, because AMOU treats the separate inputs as
proprietary information, the NPRM's Tables 11 and 12 must be replaced
in this final rule by new Table 11 (Projected Annual Rate Components),
which uses the AMOU's aggregate rates. This change in the degree of
detail with which our tables display AMOU contract data does not result
in any change in how those data are factored into our ratemaking
methodology.
Weighting factors. Weighting factors are based on the size of a
ship and are used in determining actual charges for pilotage service.
All three associations pointed out that Canada now uses different
weighting factors than the weighting factors used by the U.S. and shown
in 46 CFR 401.400(b). Canada unilaterally changed its weighting factors
in 2008 to reflect an industry shift to smaller vessels so that these
smaller vessels carried a more fair portion of the costs associated
with pilotage on the Great Lakes. As a result, a Canadian pilot on a
``1.0 factor'' vessel now charges 15 percent more than a U.S. pilot on
the same vessel.
A similar comment was made during our 2010 ratemaking, and in the
final rule for that ratemaking, 75 FR 7958 at 7959, col. 3 (Feb. 23,
2010), we declined to take action on the grounds that adjusting the
weighting factors was beyond the scope of that rulemaking. Having made
that determination in 2010, we cannot take action in this 2013 final
rule, the public not having been afforded adequate notice in our August
1, 2012 NPRM that weighting factors might be under consideration for
adjustment in the 2013 ratemaking. However, we agree with the
associations that the U.S. should match the Canadian weighting factors,
as a matter of parity and to reduce billing confusion between the two
countries, both of which are important Federal Government concerns, as
emphasized by recent Executive Order 13609, ``Promoting International
Regulatory Cooperation'' (77 FR 26413, May 4, 2012). Therefore,
although we will not address weighting factors in this final rule, we
will do so either in the 2014 ratemaking or in a separate regulatory
action.
American Pilots' Association dues. One association said we should
factor into our ratemaking the dues that associations pay for
membership in the American Pilots' Association (APA) because the APA
``continually collects information of value to its members [and]
represents the pilotage organizations with international entities.'' We
disagree. Our position has not changed from the position taken in our
last two Appendix A ratemakings, completed in 2006 (71 FR 16501 at
16507, col. 3; April 3, 2006) and 2012 (77 FR 11752 at 11755, col. 2;
Feb. 28, 2012). Our regulations provide clear guidance concerning this
issue and state, ``[each] expense item included in the rate base is
evaluated to determine if it is necessary for the provision of pilotage
service, and if so, what dollar amount is reasonable for the expense.''
46 CFR 404.5(a)(1). Recognizable expenses must be both ``reasonable and
necessary for the provision of pilotage.'' This topic is analogous to a
licensure issue. Expenditures associated with obtaining and maintaining
one's pilot's license represent ``necessary'' expenses that are
recognized. Membership in a voluntary special interest association,
like the APA, is not necessary for the provision of pilotage. We
continue to find that American Pilots' Association membership dues are
not necessary, and thus are excluded from the rate's operating
expenses.
Bridge hour projections. Two associations commented on Coast Guard
procedures for projecting bridge hours, an important part of the
Appendix A ratemaking methodology, and the District Three pilot
commented on the negative impact on pilot revenue of over-projecting
bridge hours. One association said that, in an unexplained departure
from past practice, our NPRM multiplied 2011 revenue per bridge hour by
projected bridge hours to arrive at projected revenue. The other
association said we consistently over-project bridge hours, resulting
in over-projection of revenue. We disagree with both comments. There
has been no ``unexplained departure from past practice''--we have
consistently followed Step 3.A of the Appendix A methodology which
states: ``Projected demand for pilotage service is

[[Page 13523]]

multiplied by the existing pilotage rates for that service, to arrive
at the `projection of revenue.' '' As to over-projecting bridge hours,
a concern raised by the associations and the District Three pilot, we
have consistently improved our ability to project demand for pilotage
services. We rely on historic data, input from pilots and industry,
periodicals and trade magazines, and information from conferences to
project demand for pilotage services. Both associations said we should
use a ``less arbitrary'' and more accurate method to project bridge
hours. This rule applies the best available information to our current
methodology. However, we understand the pilots' concern about
definitions and methodologies relating to bridge hours and therefore
those definitions and methodologies are currently undergoing an
independent, comprehensive study and review. We anticipate the study
will be completed by this summer. The results of the study will inform
our assessment of whether changes to the regulations are needed, and we
will publish a proposed rule updating definitions and methodologies if
revisions are deemed necessary.
License insurance. The District One pilots' association said we
should recognize two license insurance premium costs of $26,946 and
$15,781, not $23,880 and $18,847, respectively. We disagree. The
association did not raise this issue during the comment period for
reviewing the independent accountant's preliminary report and the
commenter has provided no subsequent data in support of its claim that
the costs are incorrectly allocated.
Insurance costs. The District One pilots' association said we
should increase its insurance costs by $4,491 to recognize the
association's addition in 2011 of a fifth pilot. The association's
implication is that, under Step 1.D of the Appendix A methodology, we
should adjust our projections because the fifth pilot is a
``foreseeable circumstance'' that will affect the association's costs
going forward. We disagree. The audits are based on a review of the
2010 financial statements, transactions, and documents. Therefore, the
addition of a fifth pilot in 2011 would not be included in a review of
the 2010 financial records. This expense will be captured and evaluated
in the audit of the 2011 expenses. As we stated in the previous
Appendix A ratemaking, ``[we] consider significant capital expenditures
and the fixed costs associated with those capital expenditures as
`foreseeable circumstances.' The rest of the expenses that fluctuate
due to market forces and the variance in demand for pilot services will
be reimbursed when they are recognized in the independent accountant's
financial reports that we will use in future ratemaking.'' (77 FR 11752
at 11755, col. 3). Therefore, we will not include this expense in the
2013 Appendix A ratemaking.
Travel expenses. The District One pilots' association said our NPRM
relied on an improper extrapolation in disallowing a $13,861 travel
expense. We disagree. Our independent accountant determined that the
expense at issue was not incurred in 2010. Only expenses incurred in
that calendar year are eligible for consideration in this year's
ratemaking.
Fixed assets. The District One pilots' association noted that
virtually all of the association's fixed assets are owned by its
``corporate arm,'' Seaway Pilot, Inc. (SPI) and claims that we erred in
our calculation of the 2012 investment base. According to the pilots,
we erroneously excluded $548,369 from SPI's investment base. The pilots
believe we have calculated the investment base correctly in the 2013
NPRM, but assert we have never made them whole by correcting the 2012
rate. We disagree that any corrective action is needed with respect to
our 2012 calculations. As we stated in the 2012 Appendix A final rule,
``[we] coordinated with the independent accountant and used the
financial information provided by District One to calculate the
investment base for this rulemaking,'' and ``the independent
accountant's financial reports include the investment base calculation
for future rulemakings.'' (77 FR 11752 at 11755, col. 3). We used the
information that was provided to us by the association and do not see
any grounds for making the suggested adjustment. The 2013 rate, as
promised, includes the investment base calculation.
Inflation. The District One pilots' association said we should
adjust the 2013 rate to reflect ``a particularly egregious error'' in
the 2012 rate, the exclusion of an inflationary component based on the
Consumer Price Index (CPI) for the years 2007 and 2008. The association
also said our inflation adjustment should reflect inflation between
2010 and 2013, and that when Appendix A was created, no one foresaw how
long it would take to recognize actual past financial data in new
rates. We disagree. We used the 2009 association's financial
transactions to determine the allowable operating expenses for the 2012
Appendix A ratemaking. We have always calculated the inflationary
portion of operating expenses in accordance with Step 1.C of the
Appendix A methodology, which states: ``The inflation adjustment will
be based on the preceding year's change in the Consumer Price Index for
the North Central Region of the United States.'' We are currently
engaged in a comprehensive study and review of the Appendix A
methodology and will reevaluate how we take inflation into account. The
possible need for changes in how we address inflation is within the
scope of the previously-mentioned comprehensive study and review of our
Great Lakes pilotage ratemaking methodology now underway.
Payroll tax methodology. The District One pilots' association said
our NPRM's proposed adjustment for payroll taxes would be more
appropriately based on target compensation than on actual 2010 pilot
earnings. We disagree. The methodology was established to reimburse a
given pilot association for its expenses that are necessary,
reasonable, and directly related to providing pilotage services on the
Great Lakes during the shipping season. We follow 46 CFR 404.5(a)(1),
which states: ``Each expense item included in the rate base is
evaluated to determine if it is necessary for the provision of pilotage
service, and if so, what dollar amount is reasonable for that expense
item.'' We recognize that the payroll tax is a necessary expense, but
we do not agree that we should use the value we calculate for target
pilot compensation instead of the actual pilot compensation to
determine the amount for payroll taxes. We consider it unreasonable to
use a payroll tax amount other than the amount actually paid.
Health insurance subsidy. The District Two pilots' association said
a $60,460 ``COBRA subsidy'' (referring to the Federal health subsidy
under the Consolidated Omnibus Budget Reconciliation Act of 1985, or
``COBRA'') ``should not be an adjustment to projected operating
expenses, because pilot health insurance premiums are not included in
the projected operating expense line item.'' We disagree. The
methodology was established to reimburse a given pilot association for
its expenses that are necessary, reasonable, and directly related to
providing pilotage services on the Great Lakes during the shipping
season. If an association obtains funding from a separate source to
reimburse it for an expense, the expense must be proportionately
discounted for ratemaking purposes. We cannot oblige industry to
reimburse an association for an expense that has already been
reimbursed. This practice would be contrary to the public's interest
and

[[Page 13524]]

inconsistent with prior determinations and rulemakings.
The District Two pilots' association also said it was given no
opportunity to comment on a $99,993 COBRA expense reduction made in the
2012 final rule and that the 2013 rate should be adjusted to restore
that amount. We disagree. We will not include the amount we excluded in
the 2012 Appendix A ratemaking in the 2013 Appendix A ratemaking. The
health insurance expense was accounted for in the 2012 Appendix A
ratemaking, and thus the offset to that expense obtained by the pilots'
association also needed to be accounted for. The methodology was
established to reimburse a given pilots' association for its expenses
that are necessary, reasonable, and directly related to providing
pilotage services on the Great Lakes during a given shipping season. If
an association obtains funding to reimburse it for an expense, the
expense disappears for ratemaking purposes. We cannot compel industry
to reimburse an association a second time for an expense that has
already been reimbursed. This practice would be contrary to the
public's interest and inconsistent with prior determinations and
rulemakings.

VI. Discussion of the Final Rule

A. Summary

We are establishing new base pilotage rates in accordance with the
methodology outlined in Appendix A to 46 CFR part 404. The new rates
will be established by March 1, 2013 and will go into effect on August
1, 2013.
Based on baseline AMOU contract information that we received after
publication of our August 2012 NPRM, our arithmetical calculations
under Steps 1 through 6 of Appendix A would result in an average 15.89
percent rate decrease. However, as we will discuss when we explain our
Step 7 adjustment of pilot rates, this year's rate adjustments will be
what we proposed in the August 2012 NPRM, representing on average an
approximately 1.87 percent increase over the February 2012 final rule's
rate adjustments.
All figures in the tables that follow are based on calculations
performed either by an independent accountant or by the Director of
Great Lakes Pilotage's staff. In both cases those calculations were
performed using common commercial computer programs. Decimalization and
rounding of the audited and calculated data affects the display in
these tables but does not affect the calculations. The calculations are
based on the actual figure that rounds values for presentation in the
tables.
Table 1 shows the percent change for the new rates for each area.

Table 1--Summary of Rate Adjustments
------------------------------------------------------------------------
Then the percent
change over the
If pilotage service is required in: current rate is:
(percent)

------------------------------------------------------------------------
Area 1 (Designated waters)............................ -1.41
Area 2 (Undesignated waters).......................... -1.69
Area 4 (Undesignated waters).......................... 8.87
Area 5 (Designated waters)............................ 0.95
Area 6 (Undesignated waters).......................... 4.31
Area 7 (Designated waters)............................ 0.56
Area 8 (Undesignated waters).......................... 1.52
------------------------------------------------------------------------

B. Calculating the Rate Adjustment

The Appendix A methodology provides seven steps, with sub-steps,
for calculating rate adjustments. The following discussion describes
those steps and sub-steps and includes tables showing how we have
applied them to the 2010 detailed pilot financial information.
Step 1: Projection of Operating Expenses. In this step, we project
the amount of vessel traffic annually. Based upon that projection, we
forecast the amount of necessary and reasonable operating expenses that
pilotage rates should recover.
Step 1.A: Submission of Financial Information. This sub-step
requires each pilots' association to provide us with detailed financial
information in accordance with 46 CFR part 403. The associations
complied with this requirement, supplying 2010 financial information in
2011; this is the most current and complete data set we have available.
Step 1.B: Determination of Recognizable Expenses. This sub-step
requires us to determine which reported association expenses will be
recognized for ratemaking purposes, using the guidelines shown in 46
CFR 404.5. We contracted with an independent accountant to review the
reported expenses and submit findings recommending which reported
expenses should be recognized. The accountant also reviewed which
reported expenses should be adjusted prior to recognition, or if they
should not be allowed for ratemaking purposes. The independent
accountant made preliminary findings, which were sent to the pilots'
associations. The pilots' associations reviewed and commented on the
preliminary findings. Then, the independent accountant made final
findings. The Director reviewed and accepted those final findings,
resulting in the determination of recognizable expenses. The
preliminary findings, the associations' comments on those findings, and
the final findings are all available in the docket. Tables 2 through 4
show each association's recognized expenses.

Table 2--Recognized Expenses for District One
----------------------------------------------------------------------------------------------------------------
Area 1 Area 2
--------------------------------
Reported expenses for 2010 St. Lawrence Total
River Lake Ontario
----------------------------------------------------------------------------------------------------------------
Pilot Costs:
Other pilotage costs:
Pilot subsistence/Travel................................ $212,715 $167,880 $380,595
License insurance....................................... 23,880 18,847 42,727
Payroll taxes........................................... 0 0 0
Other................................................... 1,432 1,130 2,562
-----------------------------------------------
Total other pilotage costs.......................... 238,027 187,857 425,884
----------------------------------------------------------------------------------------------------------------
Pilot Boat and Dispatch Costs:
Pilot boat expense.......................................... 95,254 75,178 170,432
Dispatch expense............................................ 0 0 0

[[Page 13525]]

Payroll taxes............................................... 7,962 6,283 14,245
-----------------------------------------------
Total pilot and dispatch costs.......................... 103,216 81,461 184,677
----------------------------------------------------------------------------------------------------------------
Administrative Expenses:
Legal....................................................... 7,959 6,282 14,241
Insurance................................................... 13,971 11,026 24,997
Employee benefits........................................... 19,454 15,354 34,808
Payroll taxes............................................... 4,816 3,801 8,617
Other taxes................................................. 4,504 3,554 8,058
Travel...................................................... 215 169 384
Depreciation/auto leasing/other............................. 17,440 13,765 31,205
Interest.................................................... 12,576 9,926 22,502
Dues and subscriptions...................................... 13,075 10,319 23,394
Utilities................................................... 5,130 4,049 9,179
Salaries.................................................... 49,840 39,336 89,176
Accounting/Professional fees................................ 4,997 3,943 8,940
Other....................................................... 9,408 7,425 16,833
-----------------------------------------------
Total Administrative Expenses........................... 163,385 128,949 292,334
-----------------------------------------------
Total Operating Expenses................................ 504,628 398,267 902,895
----------------------------------------------------------------------------------------------------------------
Proposed Adjustments (independent CPA):
Operating Expenses.......................................... .............. .............. ..............
Other Pilot Costs........................................... .............. .............. ..............
Pilotage Subsistence/Travel................................. (7,747) (6,114) (13,861)
Payroll taxes............................................... 64,563 50,955 115,518
-----------------------------------------------
Total other pilotage costs.............................. 56,816 44,841 101,657
----------------------------------------------------------------------------------------------------------------
Administrative Expenses:
Legal....................................................... 799 631 1,430
Employee benefits........................................... (1,537) (1,213) (2,750)
Dues and subscriptions...................................... (13,075) (10,319) (23,394)
-----------------------------------------------
Total Administrative Expenses........................... (13,813) (10,901) (24,714)
-----------------------------------------------
Total CPA Adjustments................................... 43,003 33,940 76,943
-----------------------------------------------
Total Operating Expenses................................ 547,631 432,207 979,838
----------------------------------------------------------------------------------------------------------------

Table 3--Recognized Expenses for District Two
----------------------------------------------------------------------------------------------------------------
Area 4 Area 5
--------------------------------
Reported expenses for 2010 Southeast Total
Lake Erie Shoal to Port
Huron, MI
----------------------------------------------------------------------------------------------------------------
Operating Expenses:
Other pilotage costs:
Pilot subsistence/Travel................................ $79,503 $119,254 $198,757
License insurance....................................... 6,168 9,252 15,420
Payroll taxes........................................... 53,457 80,186 133,643
Other................................................... 42,130 63,195 105,325
-----------------------------------------------
Total other pilotage costs.......................... 181,258 271,887 453,145
----------------------------------------------------------------------------------------------------------------
Pilot Boat and Dispatch Costs:
Pilot boat expense.......................................... 145,254 217,882 363,136
Dispatch expense............................................ 7,830 11,745 19,575
Payroll taxes............................................... 4,056 6,084 10,140
-----------------------------------------------
Total pilot and dispatch costs.......................... 157,140 235,711 392,851
----------------------------------------------------------------------------------------------------------------
Administrative Expenses:
Legal....................................................... 8,120 12,180 20,300
Office rent................................................. 26,275 39,413 65,688
Insurance................................................... 13,410 20,114 33,524

[[Page 13526]]

Employee benefits........................................... 24,420 36,631 61,051
Payroll taxes............................................... 2,980 4,471 7,451
Other taxes................................................. 19,100 28,651 47,751
Depreciation/Auto leasing/Other............................. 22,954 34,431 57,385
Interest.................................................... 14,790 22,185 36,975
Dues and subscriptions...................................... 6,200 9,300 15,500
Utilities................................................... 12,138 18,208 30,346
Salaries.................................................... 46,611 69,917 116,528
Accounting/Professional fees................................ 14,067 21,100 35,167
Other....................................................... 16,157 24,235 40,392
-----------------------------------------------
Total Administrative Expenses........................... 227,223 340,835 568,058
-----------------------------------------------
Total Operating Expenses................................ 565,622 848,432 1,414,054
----------------------------------------------------------------------------------------------------------------
Proposed Adjustments (independent CPA):
Operating Expenses:
Other Pilot Costs:
Pilotage subsistence/Travel............................. (3,999) (5,999) (9,998)
-----------------------------------------------
Total other pilotage costs.......................... (3,999) (5,999) (9,998)
----------------------------------------------------------------------------------------------------------------
Pilot boat and dispatch costs:
Pilot boat expense.......................................... (767) (1,150) (1,917)
-----------------------------------------------
Total pilot boat and dispatch costs..................... (767) (1,150) (1,917)
----------------------------------------------------------------------------------------------------------------
Administrative Expenses:
Legal....................................................... (209) (314) (523)
Office rent................................................. (809) (1,213) (2,022)
Interest.................................................... (11,268) (16,902) (28,170)
Dues and subscriptions...................................... (6,200) (9,300) (15,500)
-----------------------------------------------
Total Administrative Expenses........................... (18,486) (27,729) (46,215)
-----------------------------------------------
Total CPA Adjustments................................... (23,252) (34,878) (58,130)
-----------------------------------------------
Total Operating Expenses................................ 542,369 813,554 1,355,924
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

Table 4--Recognized Expenses for District Three
----------------------------------------------------------------------------------------------------------------
Area 6 Area 7 Area 8
---------------------------------------
Reported Expenses for 2010 Lakes Huron Total
and St. Mary's Lake
Michigan River Superior
----------------------------------------------------------------------------------------------------------------
Operating Expenses:
Other Pilot Costs:
Pilot subsistence/Travel............................ $170,162 $81,836 $108,514 $360,512
License insurance................................... 9,204 4,426 5,869 19,499
Payroll taxes....................................... 27,774 13,358 17,712 58,844
Other............................................... 630 303 402 1,335
---------------------------------------------------
Total other pilotage costs...................... 207,770 99,923 132,497 440,190
----------------------------------------------------------------------------------------------------------------
Pilot Boat and Dispatch Expenses:
Pilot boat costs........................................ 197,244 94,861 125,785 417,890
Dispatch expense........................................ 72,550 34,891 46,266 153,707
Payroll taxes........................................... 8,068 3,880 5,145 17,093
---------------------------------------------------
Total pilot boat and dispatch costs................. 277,862 133,632 177,196 588,690
----------------------------------------------------------------------------------------------------------------
Administrative Expenses:
Legal................................................... 28,089 13,509 17,913 59,511
Office Rent............................................. 4,673 2,247 2,980 9,900
Insurance............................................... 6,581 3,165 4,197 13,943
Employee benefits....................................... 57,942 27,866 36,950 122,758

[[Page 13527]]

Payroll taxes........................................... 5,709 2,746 3,641 12,096
Other taxes............................................. 15,381 7,397 9,808 32,586
Depreciation/auto leasing............................... 23,495 11,299 14,983 49,777
Interest................................................ 1,537 739 980 3,256
Dues and subscriptions.................................. 13,676 6,577 8,721 28,974
Utilities............................................... 13,223 6,359 8,432 28,014
Salaries................................................ 49,802 23,951 31,759 105,512
Accounting/professional fees............................ 11,894 5,720 7,585 25,199
Other................................................... 5,574 2,681 3,555 11,810
---------------------------------------------------
Total administrative expenses....................... 237,576 114,256 151,504 503,336
---------------------------------------------------
Total Operating Expenses............................ 723,208 347,811 461,197 1,532,216
----------------------------------------------------------------------------------------------------------------
Proposed Adjustments (independent CPA):
Other Pilot Costs:
Payroll taxes....................................... 26,213 12,606 16,716 55,535
---------------------------------------------------
Total other pilotage costs...................... 26,213 12,606 16,716 55,535
----------------------------------------------------------------------------------------------------------------
Pilot Boat and Dispatch Expenses:
Dispatch costs.......................................... (2,170) (1,044) (1,384) (4,598)
---------------------------------------------------
Total pilot boat and dispatch costs................. (2,170) (1,044) (1,384) (4,598)
----------------------------------------------------------------------------------------------------------------
Administrative Expenses:
Legal................................................... (1,454) (699) (927) (3,080)
Dues and subscriptions.................................. (13,676) (6,577) (8,721) (28,974)
Other................................................... (1,255) (603) (800) (2,658)
---------------------------------------------------
Total administrative expenses....................... (16,385) (7,879) (10,448) (34,712)
---------------------------------------------------
Total CPA Adjustments............................... 7,658 3,683 4,884 16,225
---------------------------------------------------
Total Operating Expenses............................ 730,866 351,494 466,081 1,548,441
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

Step 1.C: Adjustment for Inflation or Deflation. In this sub-step
we project rates of inflation or deflation for the succeeding
navigation season. Because we used 2010 financial information, the
``succeeding navigation season'' for this ratemaking is 2011. We based
our inflation adjustment of 3.2 percent on the 2011 change in the CPI
for the Midwest Region of the United States, which can be found at:
https://www.bls.gov/xg_shells/ro5xg01.htm. This adjustment appears in
Tables 5 through 7.

Table 5--Inflation Adjustment, District One
----------------------------------------------------------------------------------------------------------------
Area 1 Area 2
---------------- ----------------
Reported Expenses for 2010 St. Lawrence Total
River Lake Ontario
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses................ $547,631 $432,207 $979,838
2011 change in the Consumer Price Index x .032 x .032 x .032
(CPI) for the Midwest Region of the
United States..........................
Inflation Adjustment.................... = $17,524 = $13,831 = $31,355
----------------------------------------------------------------------------------------------------------------

Table 6--Inflation Adjustment, District Two
----------------------------------------------------------------------------------------------------------------
Area 4 Area 5
---------------- ----------------
Reported Expenses for 2010 Southeast Total
Lake Erie Shoal to Port
Huron, MI
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses................ $542,369 $813,554 $1,355,924
2011 change in the Consumer Price Index x .032 x .032 x .032
(CPI) for the Midwest Region of the
United States..........................

[[Page 13528]]

Inflation Adjustment.................... = $17,356 = $26,034 = $43,390
----------------------------------------------------------------------------------------------------------------

Table 7--Inflation Adjustment, District Three
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 6 Area 7 Area 8
---------------- ---------------- ----------------
Reported Expenses for 2010 Lakes Huron St. Mary's Total
and Michigan River Lake Superior
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses................................ $730,866 $351,494 $466,081 $1,548,441
2011 change in the Consumer Price Index (CPI) for the x .032 x .032 x .032 x .032
Midwest Region of the United States....................
Inflation Adjustment.................................... = $23,388 = $11,248 = $14,915 = $49,550
--------------------------------------------------------------------------------------------------------------------------------------------------------

Step 1.D: Projection of Operating Expenses. The final sub-step of
Step 1 is to project the operating expenses for each pilotage area, on
the basis of the preceding sub-steps and any other foreseeable
circumstances that could affect the accuracy of the projection. Based
on comments and supporting material received for the 2012 Appendix A
NPRM, we determined that foreseeable circumstances exist in District
One.
Eight months of District One's pilot boat mortgage payments and
boat insurance qualify as foreseeable circumstances. For District One,
the projected operating expenses are based on the calculations from
Sub-steps 1.A through 1.C and the aforementioned foreseeable
circumstances. Table 8 shows these projections.

Table 8--Projected Operating Expenses, District One
----------------------------------------------------------------------------------------------------------------
Area 1 Area 2
---------------- ----------------
Reported Expenses for 2010 St. Lawrence Total
River Lake Ontario
----------------------------------------------------------------------------------------------------------------
Total operating expenses................ $547,631 $432,207 $979,838
Inflation adjustment 3.2%............... + 17,524 + 13,831 + 31,355
Director's adjustment & foreseeable
circumstances:
Pilot boat mortgage payments........ + 26,429 + 20,815 + 47,244
Pilot boat insurance................ + 7,221 + 5,687 + 12,908
-----------------------------------------------------------------------
Total projected expenses for = $598,805 = $472,540 = $1,071,344
2012 pilotage season...........
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

During the audit for the 2013 Appendix A rulemaking, the
independent accountant informed us that District Two applied for and
received a COBRA subsidy for the first and second quarter of 2010. The
American Recovery and Reinvestment Act of 2009 provided for a temporary
premium subsidy for COBRA continuation coverage. The amount of the
COBRA insurance subsidy for the period 2010 was $60,460. Federal taxes
of $18,400 are accounted for in Step 6 (Federal Tax Allowance). For
District Two, the projected operating expenses are based on the
calculations from Sub-steps 1.A through 1.C, the COBRA subsidy, and
Federal taxes. Table 9 shows these projections.

Table 9--Projected Operating Expenses, District Two
----------------------------------------------------------------------------------------------------------------
Area 4 Area 5
---------------- ----------------
Reported Expenses for 2010 Southeast Total
Lake Erie Shoal to Port
Huron, MI
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses................ $542,369 $813,554 $1,355,924
Inflation Adjustment 3.2%............... + 17,356 + 26,034 + 43,390
Director's adjustment & foreseeable
circumstances
American Recovery and Reinvestment + (24,184) + (36,276) + (60,460)
Act Subsidy........................
Federal taxes (accounted for in Step + (7,360) + (11,040) + (18,400)
6).................................
-----------------------------------------------------------------------
Total projected expenses for = 528,182 = 792,272 = 1,320,454
2013 pilotage season...........
----------------------------------------------------------------------------------------------------------------

[[Page 13529]]

Because we are not now aware of any such foreseeable circumstances
for District 3, its projected operating expenses are based exclusively
on the calculations from Sub-steps 1.A through 1.C. Table 10 shows
these projections.

Table 10--Projected Operating Expenses, District Three
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 6 Area 7 Area 8
---------------- ---------------- ----------------
Reported Expenses for 2010 Lakes Huron St. Mary's Total
and Michigan River Lake Superior
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total expenses.......................................... $730,866 $351,494 $466,081 $1,548,441
Inflation adjustment 3.2%............................... + 23,388 + 11,248 + 14,915 + 49,550
-----------------------------------------------------------------------------------------------
Total projected expenses for 2013 pilotage season... = 754,254 = 362,742 = 480,996 = 1,597,991
--------------------------------------------------------------------------------------------------------------------------------------------------------

Step 2: Projection of Target Pilot Compensation. In Step 2, we
project the annual amount of target pilot compensation that pilotage
rates should provide in each area. These projections are based on our
latest information on the conditions that will prevail in 2013.
Step 2.A: Determination of Target Rate of Compensation. Target
pilot compensation for pilots in undesignated waters approximates the
average annual compensation for first mates on U.S. Great Lakes
vessels. Compensation is determined based on the most current union
contracts and includes wages and benefits received by first mates. We
calculate target pilot compensation for pilots on designated waters by
multiplying the average first mates' wages by 150 percent and then
adding the average first mates' benefits. In prior rulemakings, the
AMOU shared the individual compensation components for first mates and
the scheme for applying these components. We took each component and
applied the scheme to determine a monthly value. We then multiplied
this monthly value by 9 months, because the Great Lakes shipping season
for pilotage lasts from around the end of March to around the end of
December (approximately 9 months). We then created a table that
combined all of the components to determine the target pilot
compensation for a given year.
As we discussed in part V of this preamble, the AMOU contract
changed after we published our August 2012 NPRM. The values stipulated
by AMOU that we now use are aggregates. These aggregates include the
daily wage rate, vacation pay, pension plan contributions, and medical
plan contributions; these represent the components we previously
calculated in separate tables using the scheme outlined in the
contract. Using these aggregates eliminates the need to calculate each
component separately and reduces the number of tables we need to
demonstrate our calculations, but otherwise it does not affect how AMOU
contract data is factored into our ratemaking methodology.
According to the information provided by the AMOU, new contracts
will take effect August 1, 2013 and will expire July 31, 2016, and they
set the following aggregate daily rates: in undesignated waters,
$592.92 for Agreement A and $585.57 for Agreement B; in designated
waters, $816.09 for Agreement A and $803.24 for Agreement B.
Because we are interested in annual compensation, we must convert
these daily rates. In past contracts, the AMOU used monthly
multipliers, and we then applied those monthly multipliers over the
average 9-month length of the Great Lakes shipping season to determine
annual compensation. The latest AMOU contracts no longer use monthly
multipliers, but instead use a 270-day multiplier which reflects an
average 30-day month, over the 9 months of the average shipping season.
Table 11 shows our calculations using the 270-day multiplier.

Table 11--Projected Annual Aggregate Rate Components
------------------------------------------------------------------------

------------------------------------------------------------------------
Aggregate Rate--Wages and Vacation, Pension, and Medical Benefits
------------------------------------------------------------------------
Pilots on Undesignated Waters
------------------------------------------------------------------------
Agreement A:
$592.92 daily rate x 270 days....................... $160,088.40
Agreement B:
$585.57 daily rate x 270 days....................... $158,103.90
------------------------------------------------------------------------
Pilots on Designated Waters
------------------------------------------------------------------------
Agreement A:
$816.09 daily rate x 270 days....................... $220,334.30
Agreement B:
1$803.24 daily rate x 270 days...................... $216,874.80
------------------------------------------------------------------------

We apportion the compensation provided by each agreement according
to the percentage of tonnage represented by companies under each
agreement. Agreement A applies to vessels operated by Key Lakes, Inc.,
representing approximately 30 percent of tonnage, and Agreement B
applies to all vessels operated by American Steamship Co. and Mittal
Steel USA, Inc., representing approximately 70 percent of tonnage.
Table 12 provides details.

Table 12--Shipping Tonnage Apportioned by Contract
----------------------------------------------------------------------------------------------------------------
Company Agreement A Agreement B
----------------------------------------------------------------------------------------------------------------
American Steamship Company....... ...................................... 815,600
Mittal Steel USA, Inc............ ...................................... 38,826
Key Lakes, Inc................... 361,385 .....................................
----------------------------------------------------------------------------------------------------------------
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%
----------------------------------------------------------------------------------------------------------------

[[Page 13530]]

We use the percentages from Table 12 to apportion the projected
compensation from Table 11. This gives us a single tonnage-weighted set
of figures. Table 13 shows our calculations.

Table 13--Tonnage-weighted Compensation
----------------------------------------------------------------------------------------------------------------
Undesignated Designated
waters waters
----------------------------------------------------------------------------------------------------------------
Agreement A:
Total wages and benefits.................................... ...... $160,088.40 $220,344.30
Percent tonnage............................................. x 29.7238% x 29.7238%
-----------------------------------------------
Total................................................... = $47,584 = $65,495
-----------------------------------------------
Agreement B:
Total wages and benefits.................................... ...... $158,104 $216,875
Percent tonnage............................................. x 70.2762% x 70.2762%
-----------------------------------------------
Total................................................... = $111,109 = $152,411
----------------------------------------------------------------------------------------------------------------
Projected Target Rate of Compensation:
Agreement A total weighted average wages and benefits....... ...... $47,584 $65,495
Agreement B total weighted average wages and benefits....... + $111,109 + $152,411
-----------------------------------------------
Total................................................... = $158,694 = $217,906
----------------------------------------------------------------------------------------------------------------

Step 2.B: Determination of the Number of Pilots Needed. Subject to
adjustment by the Director to ensure uninterrupted service or for other
reasonable circumstances, we determine the number of pilots needed for
ratemaking purposes in each area by dividing projected bridge hours for
each area, by either 1,000 (designated waters) or 1,800 (undesignated
waters) bridge hours. We round the mathematical results and express our
determination as whole pilots.
``Bridge hours are the number of hours a pilot is aboard a vessel
providing pilotage service,'' 46 CFR part 404, Appendix A, Step 2.B(1).
For that reason and as we explained most recently in the 2011
ratemaking's final rule, we do not include, and never have included,
pilot delay, detention, or cancellation in calculating bridge hours.
See 76 FR 6351 at 6352 col. 3; Feb. 4, 2011. Projected bridge hours are
based on the vessel traffic that pilots are expected to serve. We use
historical data, input from the pilots and industry, periodicals and
trade magazines, and information from conferences to project demand for
pilotage services for the coming year.
In our 2012 final rule, we determined that 38 pilots would be
needed for ratemaking purposes. We have determined that 38 remains the
proper number to use for ratemaking purposes in 2013. This includes
five pilots in Area 2, where rounding up alone would result in only
four pilots. For the same reasons we explained at length in the final
rule for the 2008 ratemaking (74 FR 220 at 221-22 Jan. 5, 2009), which
is available in the docket, we have determined that this adjustment is
essential for ensuring uninterrupted pilotage service in Area 2. Table
14 shows the bridge hours we project will be needed for each area and
our calculations to determine the number of whole pilots needed for
ratemaking purposes.

Table 14--Number of Pilots Needed
----------------------------------------------------------------------------------------------------------------
Divided by
1,000
(designated Calculated
Pilotage area Projected 2013 waters) or value of pilot Pilots needed
bridge hours 1,800 demand (total = 38)
(undesignated
waters)
----------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters)...... 5,216 / 1,000 = 5.216 6
Area 2 (Undesignated waters).... 5,509 / 1,800 = 3.061 5
Area 4 (Undesignated waters).... 6,814 / 1,800 = 3.785 4
Area 5 (Designated waters)...... 5,102 / 1,000 = 5.102 6
Area 6 (Undesignated waters).... 11,411 / 1,800 = 6.339 7
Area 7 (Designated waters)...... 3,223 / 1,000 = 3.223 4
Area 8 (Undesignated waters).... 9,540 / 1,800 = 5.300 6
----------------------------------------------------------------------------------------------------------------

Step 2.C: Projection of Target Pilot Compensation. In Table 15 we
project total target pilot compensation separately for each area, by
multiplying the number of pilots needed in each area, as shown in Table
14, by the target pilot compensation shown in Table 13.

[[Page 13531]]

Table 15--Projection of Target Pilot Compensation by Area
----------------------------------------------------------------------------------------------------------------
Target rate of Projected
Pilotage area Pilots needed pilot target pilot
(total = 38) compensation compensation
----------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters)...................... 6 x $217,906 = $1,307,436
Area 2 (Undesignated waters).................... 5 x 158,694 = 793,469
Area 4 (Undesignated waters).................... 4 x 158,694 = 634,775
Area 5 (Designated waters)...................... 6 x 217,906 = 1,307,436
Area 6 (Undesignated waters).................... 7 x 158,694 = 1,110,856
Area 7 (Designated waters)...................... 4 x 217,906 = 871,624
Area 8 (Undesignated waters).................... 6 x 158,694 = 952,163
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

Step 3 and 3.A: Projection of Revenue. In this step, we project the
revenue that would be received in 2013 if demand for pilotage services
matches the bridge hours we projected in Table 14, and if 2012 pilotage
rates were left unchanged. Table 16 shows this calculation.

Table 16--Projection of Revenue by Area
----------------------------------------------------------------------------------------------------------------
Revenue
Pilotage area Projected 2013 2012 Pilotage projection
bridge hours rates for 2013
----------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters)...................... 5,216 x $467.58 = $2,438,897
Area 2 (Undesignated waters).................... 5,509 x 289.72 = 1,596,067
Area 4 (Undesignated waters).................... 6,814 x 188.54 = 1,284,712
Area 5 (Designated waters)...................... 5,102 x 504.11 = 2,571,969
Area 6 (Undesignated waters).................... 11,411 x 191.69 = 2,187,375
Area 7 (Designated waters)...................... 3,223 x 480.26 = 1,547,878
Area 8 (Undesignated waters).................... 9,540 x 183.87 = 1,754,120
---------------------------------------------------------------
Total....................................... .............. .............. 13,381,018
----------------------------------------------------------------------------------------------------------------

Step 4: Calculation of Investment Base. This step calculates each
association's investment base, the recognized capital investment in the
assets employed by the association required to support pilotage
operations. This step uses a formula set out in 46 CFR part 404,
Appendix B. The first part of the formula identifies each association's
total sources of funds. Tables 17 through 19 follow the formula up to
that point.

Table 17--Total Sources of Funds, District One
------------------------------------------------------------------------
Area 1 Area 2
------------------------------------------------------------------------
Recognized Assets:
Total Current Assets............ ... $681,485 ... $537,847
Total Current Liabilities....... - 78,005 - 61,564
Current Notes Payable........... + 22,168 + 17,496
Total Property and Equipment + 374,021 + 295,189
(NET)..........................
Land............................ - 12,315 - 9,720
Total Other Assets.............. + 0 + 0
-----------------------------------
Total Recognized Assets......... = 987,354 = 779,248
Non-Recognized Assets:
Total Investments and Special + 6,103 + 4,817
Funds..........................
-----------------------------------
Total Non-Recognized Assets. = 6,103 = 4,817
Total Assets:
Total Recognized Assets......... ... 987,354 ... 779,248
Total Non-Recognized Assets..... + 6,103 + 4,817
-----------------------------------
Total Assets................ = 993,457 = 784,065
Recognized Sources of Funds:
Total Stockholder Equity........ ... 659,702 ... 520,656
Long-Term Debt.................. + 323,902 + 255,633
Current Notes Payable........... + 22,168 + 17,496
Advances from Affiliated + 0 + 0
Companies......................
Long-Term Obligations--Capital + 0 + 0
Leases.........................
-----------------------------------
Total Recognized Sources.... = 1,005,772 = 793,785
Non-Recognized Sources of Funds:
Pension Liability............... ... 0 ... 0

[[Page 13532]]

Other Non-Current Liabilities... + 0 + 0
Deferred Federal Income Taxes... + 0 + 0
Other Deferred Credits.......... + 0 + 0
-----------------------------------
Total Non-Recognized Sources = 0 = 0
Total Sources of Funds:
Total Recognized Sources........ ... 1,005,772 ... 793.785
Total Non-Recognized Sources.... + 0 + 0
Total Sources of Funds...... = 1,005,772 = 793,785
------------------------------------------------------------------------

Table 18--Total Sources of Funds, District Two
------------------------------------------------------------------------
Area 4 Area 5
------------------------------------------------------------------------
Recognized Assets:
Total Current Assets............ ... $454,842 ... $1,026,731
Total Current Liabilities....... - 449,157 - 1,013,899
Current Notes Payable........... + 0 + 0
Total Property and Equipment + 312,858 + 706,224
(NET)..........................
Land............................ - 0 - 0
Total Other Assets.............. + 0 + 0
-----------------------------------
Total Recognized Assets..... = 318,543 = 719,056
Non-Recognized Assets:
Total Investments and Special + 0 + 0
Funds..........................
-----------------------------------
Total Non-Recognized Assets. = 0 = 0
Total Assets:
Total Recognized Assets......... ... 318,543 ... 719,056
Total Non-Recognized Assets..... + 0 + 0
-----------------------------------
Total Assets................ = 318,543 = 719,056
Recognized Sources of Funds:
Total Stockholder Equity........ ... 60,920 ... 137,517
Long-Term Debt.................. + 257,622 + 581,540
Current Notes Payable........... + 0 + 0
Advances from Affiliated + 0 + 0
Companies......................
Long-Term Obligations--Capital + 0 + 0
Leases.........................
-----------------------------------
Total Recognized Sources.... = 318,542 = 719,057
Non-Recognized Sources of Funds:
Pension Liability............... 0 0
Other Non-Current Liabilities... + 0 + 0
Deferred Federal Income Taxes... + 0 + 0
Other Deferred Credits.......... + 0 + 0
-----------------------------------
Total Non-Recognized Sources = 0 = 0
Total Sources of Funds:
Total Recognized Sources........ ... 318,542 ... 719,057
Total Non-Recognized Sources.... + 0 + 0
-----------------------------------
Total Sources of Funds...... = 318,542 = 719,057
------------------------------------------------------------------------

Table 19--Total Sources of Funds, District Three
----------------------------------------------------------------------------------------------------------------
Area 6 Area 7 Area 8
----------------------------------------------------------------------------------------------------------------
Recognized Assets:
Total Current Assets.................................. ... $1,009,619 ... $485,558 ... $643,846
Total Current Liabilities............................. - 123,906 - 59,590 - 79,016
Current Notes Payable................................. + 0 + 0 + 0
Total Property and Equipment (NET).................... + 35,709 + 17,174 + 22,772
Land.................................................. - 0 - 0 - 0
Total Other Assets.................................... + 354 + 170 + 226
-----------------------------------------------------
Total Recognized Assets........................... = 921,776 = 443,312 = 587,828

Non-Recognized Assets:
Total Investments and Special Funds................... + 0 + 0 + 0
-----------------------------------------------------
Total Non-Recognized Assets....................... = 0 = 0 = 0

[[Page 13533]]

Total Assets:
Total Recognized Assets............................... ... 921,776 ... 443,312 ... 587,828
Total Non-Recognized Assets........................... + 0 + 0 + 0
-----------------------------------------------------
Total Assets...................................... = 921,776 = 443,312 = 587,828

Recognized Sources of Funds:
Total Stockholder Equity.............................. ... 921,776 ... 443,312 ... 587,828
Long-Term Debt........................................ + 0 + 0 + 0
Current Notes Payable................................. + 0 + 0 + 0
Advances from Affiliated Companies.................... + 0 + 0 + 0
Long-Term Obligations--Capital Leases................. + 0 + 0 + 0
-----------------------------------------------------
Total Recognized Sources.......................... = 921,776 = 443,321 = 587,828

Non-Recognized Sources of Funds:
Pension Liability..................................... ... 0 ... 0 ... 0
Other Non-Current Liabilities......................... + 0 + 0 + 0
Deferred Federal Income Taxes......................... + 0 + 0 + 0
Other Deferred Credits................................ + 0 + 0 + 0
-----------------------------------------------------
Total Non-Recognized Sources...................... = 0 = 0 = 0
Total Sources of Funds:
Total Recognized Sources.............................. ... 921,776 ... 443,321 ... 587,828
Total Non-Recognized Sources.......................... + 0 + 0 + 0
-----------------------------------------------------

Total Sources of Funds............................ = 921,776 = 443,321 = 587,828
----------------------------------------------------------------------------------------------------------------

Tables 17 through 19 also relate to the second part of the formula
for calculating the investment base. The second part establishes a
ratio between recognized sources of funds and total sources of funds.
Since no non-recognized sources of funds (sources we do not recognize
as required to support pilotage operations) exist for any of the
pilots' associations for this year's rulemaking, the ratio between
recognized sources of funds and total sources of funds is ``1:1'' (or a
multiplier of ``1'') in all cases. Table 20 applies the multiplier of
``1,'' and shows that the investment base for each association equals
its total recognized assets. Table 20 also expresses these results by
area, because area results will be needed in subsequent steps.

Table 20--Investment Base by Area and District
--------------------------------------------------------------------------------------------------------------------------------------------------------
Recognized Multiplier (ratio
District Area Total recognized sources of funds Total sources of of recognized to Investment base
assets ($) ($) funds ($) total sources) ($) \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
One................................... 1 987,354 1,005,772 1,005,772 1 987,354
2 779,248 793,785 793,785 1 779,248
-------------------------------------
TOTAL 1,766,602
-------------------------------------
Two \2\............................... 4 318,543 318,542 318,542 1 318,543
5 719,056 719,057 719,057 1 719,056
-------------------------------------
TOTAL 1,037,599
-------------------------------------
Three................................. 6 921,776 921,776 921,776 1 921,776
7 443,312 443,312 443,312 1 443,312
8 587,828 587,828 587,828 1 587,828
-------------------------------------
TOTAL 1,952,916
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Note: ``Investment base'' = ``Total recognized assets'' x ``Multiplier (ratio of recognized to total sources)''.
\2\ Note: The pilots' associations that provide pilotage services in Districts One and Three operate as partnerships. The pilots' association that
provides pilotage service for District Two operates as a corporation.

Step 5: Determination of Target Rate of Return. We determine a
market-equivalent return on investment (ROI) that will be allowed for
the recognized net capital invested in each association by its members.
We do not recognize capital that is unnecessary or unreasonable for
providing pilotage services. There are no non-recognized investments in
this year's calculations. The allowed ROI is based on the preceding
year's average annual rate of return for new issues of high-grade
corporate securities. For 2011, the preceding year, the allowed ROI was
a little more than 4.64 percent, based on the average rate of return
that year on Moody's AAA corporate bonds, which can be found at: https://research.stlouisfed.org/fred2/series/AAA/downloaddata?cid=119.

[[Page 13534]]

Step 6: Adjustment Determination. The first sub-step in the
adjustment determination requires an initial calculation, applying a
formula described in Appendix A. The formula uses the results from
Steps 1, 2, 3, and 4 to project the ROI that can be expected in each
area, if no further adjustments are made. This calculation is shown in
Tables 21 through 23.

Table 21--Projected ROI, Areas in District One
------------------------------------------------------------------------
Area 1 Area 2
------------------------------------------------------------------------
Revenue (from Step 3)............... + $2,438,897 + $1,596,067
Operating Expenses (from Step 1).... - 598,805 - 472,540
Pilot Compensation (from Step 2).... - 1,307,436 - 793,469
Operating Profit/(Loss)............. = 532,656 = 330,059
Interest Expense (from audits)...... - 12,576 - 9,926
Earnings Before Tax................. = 520,080 = 320,133
Federal Tax Allowance............... - 0 - 0
Net Income.......................... = 520,080 = 320,133
Return Element (Net Income + ... 532,656 ... 330,059
Interest)..........................
Investment Base (from Step 4)....... / 987,354 / 779,248
Projected Return on Investment...... = 0.54 = 0.42
------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

Table 22--Projected ROI, Areas in District Two
------------------------------------------------------------------------
Area 4 Area 5
------------------------------------------------------------------------
Revenue (from Step 3)............... + $1,284,712 + $2,571,969
Operating Expenses (from Step 1).... - 528,181 - 792,272
Pilot Compensation (from Step 2).... - 634,775 - 1,307,436
Operating Profit/(Loss)............. = 121,756 = 472,261
Interest Expense (from audits)...... - 3,522 - 5,283
Earnings Before Tax................. = 118,234 = 466,978
Federal Tax Allowance............... - 0 - 0
Net Income.......................... = 118,234 = 466,978
Return Element (Net Income + ... 121,756 ... 472,261
Interest)..........................
Investment Base (from Step 4)....... / 318,543 / 719,056
Projected Return on Investment...... = 0.38 = 0.66
------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

Table 23--Projected ROI, Areas in District Three
----------------------------------------------------------------------------------------------------------------
Area 6 Area 7 Area 8
----------------------------------------------------------------------------------------------------------------
Revenue (from Step 3)..................................... + $2,187,375 + $1,547,878 + $1,754,120
Operating Expenses (from Step 1).......................... - 754,254 - 362,742 - 480,996
Pilot Compensation (from Step 2).......................... - 1,110,856 - 871,624 - 952,163
Operating Profit/(Loss)................................... = 322,264 = 313,512 = 320,962
Interest Expense (from audits)............................ - 1,537 - 739 - 980
Earnings Before Tax....................................... = 320,727 = 312,773 = 319,982
Federal Tax Allowance..................................... - 0 - 0 - 0
Net Income................................................ = 320,727 = 312,773 = 319,982
Return Element (Net Income + Interest).................... ... 322,264 ... 313,512 ... 320,962
Investment Base (from Step 4)............................. / 921,776 / 443,312 / 587,828
Projected Return on Investment............................ = 0.35 = 0.71 = 0.55
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

The second sub-step required for Step 6 compares the results of
Tables 21 through 23 with the target ROI (approximately 4.64 percent)
we obtained in Step 5 to determine if an adjustment to the base
pilotage rate is necessary. Table 24 shows this comparison for each
area.

Table 24--Comparison of Projected ROI and Target ROI, by Area \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 1 Area 2 Area 4 Area 5 Area 6 Area 7 Area 8
---------------------------------------------------------------------------------------------------------------
Southeast
St. Lawrence Lake Ontario Lake Erie Shoal to Port Lakes Huron St. Mary's Lake Superior
River Huron, MI and Michigan River
--------------------------------------------------------------------------------------------------------------------------------------------------------
Projected return on investment.......... 0.539 0.424 0.382 0.657 0.350 0.707 0.546

[[Page 13535]]

Target return on investment............. 0.046 0.046 0.046 0.046 0.046 0.046 0.046
Difference in return on investment...... 0.493 0.377 0.336 0.610 0.303 0.661 0.500
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Note: Decimalization and rounding of the target ROI affects the display in this table but does not affect our calculations, which are based on the
actual figure.

Because Table 24 shows a significant difference between the
projected and target ROIs, an adjustment to the base pilotage rates is
necessary. Step 6 now requires us to determine the pilotage revenues
that are needed to make the target return on investment equal to the
projected return on investment. This calculation is shown in Table 25.
It adjusts the investment base we used in Step 4, multiplying it by the
target ROI from Step 5, and applies the result to the operating
expenses and target pilot compensation determined in Steps 1 and 2.

Table 25--Revenue Needed To Recover Target ROI, by Area
--------------------------------------------------------------------------------------------------------------------------------------------------------
Investment
Operating Target Pilot Base (Step 4) Federal Tax
Pilotage area Expenses Compensation x 4.64 (Target Allowance Revenue Needed
(Step 1) (Step 2) ROI Step 5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters).............. $598,805 + $1,307,436 + $45,813 + $0 = $1,952,054
Area 2 (Undesignated waters)............ 472,540 + 793,469 + 36,157 + 0 = 1,302,166
Area 4 (Undesignated waters)............ 528,181 + 634,775 + 14,780 + 7,360 = 1,185,096
Area 5 (Designated waters).............. 792,272 + 1,307,436 + 33,364 + 11,040 = 2,144,112
Area 6 (Undesignated waters)............ 754,254 + 1,110,856 + 42,770 + 0 = 1,907,881
Area 7 (Designated waters).............. 362,742 + 871,624 + 20,570 + 0 = 1,254,936
Area 8 (Undesignated waters)............ 480,996 + 952,163 + 27,275 + 0 = 1,460,433
---------------------------------------------------------------------------------------------------------------
Total............................... 3,989,788 + 6,977,760 + 220,730 + 18,400 = 11,206,678
--------------------------------------------------------------------------------------------------------------------------------------------------------

The ``Revenue Needed'' column of Table 25 is less than the revenue
we projected in Table 16. For purposes of transparency, we verify Table
25's calculations by rerunning the first part of Step 6, using the
revenue needed from Table 25 instead of the Table 16 revenue
projections we used in Tables 21 through 23. Tables 26 through 28 show
that attaining the Table 25 revenue needed is sufficient to recover
target ROI.

Table 26--Balancing Revenue Needed and Target ROI, District One
------------------------------------------------------------------------
Area 1 Area 2
------------------------------------------------------------------------
Revenue Needed...................... + $1,952,054 + $1,302,166
Operating Expenses (from Step 1).... - 598,805 - 472,540
Pilot Compensation (from Step 2).... - 1,307,436 - 793,469
Operating Profit/(Loss)............. = 45,813 = 36,157
Interest Expense (from audits)...... - 12,576 - 9,926
Earnings Before Tax................. = 33,237 = 26,231
Federal Tax Allowance............... - 0 - 0
Net Income.......................... = 33,237 = 26,231
Return Element (Net Income + ... 45,813 ... 36,157
Interest)..........................
Investment Base (from Step 4)....... / 987,354 / 779,248
Return on Investment................ = 0.0464 = 0.0464
------------------------------------------------------------------------

Table 27--Balancing Revenue Needed and Target ROI, District Two
------------------------------------------------------------------------
Area 4 Area 5
------------------------------------------------------------------------
Revenue Needed...................... + $1,185,096 + $2,144,112
Operating Expenses (from Step 1).... - 528,181 - 792,272
Pilot Compensation (from Step 2).... - 634,775 - 1,307,436
Operating Profit/(Loss)............. = 22,140 = 44,404
Interest Expense (from audits)...... - 3,522 - 5,283
Earnings Before Tax................. = 18,616 = 39,115
Federal Tax Allowance............... - 7,360 - 11,040
Net Income.......................... = 11,258 = 28,081
Return Element (Net Income + ... 14,780 ... 33,364
Interest)..........................
Investment Base (from Step 4)....... / 318,543 / 719,056

[[Page 13536]]

Return on Investment................ = 0.0464 = 0.0464
------------------------------------------------------------------------

Table 28--Balancing Revenue Needed and Target ROI, District Three
----------------------------------------------------------------------------------------------------------------
Area 6 Area 7 Area 8
----------------------------------------------------------------------------------------------------------------
Revenue Needed............................................ + $1,907,881 + $1,254,936 + $1,460,433
Operating Expenses (from Step 1).......................... - 754,254 - 362,742 - 480,996
Pilot Compensation (from Step 2).......................... - 1,110,856 - 871,624 - 952,163
Operating Profit/(Loss)................................... = 42,770 = 20,570 = 27,275
Interest Expense (from audits)............................ - 1,537 - 739 - 980
Earnings Before Tax....................................... = 41,233 = 19,831 = 26,295
Federal Tax Allowance..................................... - 0 - 0 - 0
Net Income................................................ = 41,233 = 19,831 = 26,295
Return Element (Net Income + Interest).................... 42,770 20,570 27,275
Investment Base (from Step 4)............................. / 921,776 / 443,312 / 587,828
Return on Investment...................................... = 0.0464 = 0.0464 = 0.0464
----------------------------------------------------------------------------------------------------------------

Step 7: Adjustment of Pilotage Rates. This step calls for us to
divide the Step 6 revenue needed (Table 25) by the Step 3 revenue
projection (Table 16), to give us a rate multiplier for each area.
Tables 29 through 31 show these calculations.

Table 29--Rate Multiplier, Areas in District One
----------------------------------------------------------------------------------------------------------------
Area 1 St. Area 2 Lake
Ratemaking projections Lawrence River Ontario
----------------------------------------------------------------------------------------------------------------
Revenue Needed (from Step 6).................................... $1,952,046 $1,302,159
Revenue (from Step 3)........................................... / 2,438,897 / 1,596,067
Rate Multiplier................................................. = 0.8004 = 0.8159
----------------------------------------------------------------------------------------------------------------

Table 30--Rate Multiplier, Areas in District Two
----------------------------------------------------------------------------------------------------------------
Area 5
Area 4 Lake Southeast
Ratemaking projections Erie Shoal to Port
Huron, MI
----------------------------------------------------------------------------------------------------------------
Revenue Needed (from Step 6).................................... $1,185,094 $2,144,106
Revenue (from Step 3)........................................... / 1,284,712 / 2,571,969
Rate Multiplier................................................. = 0.9225 = 0.8336
----------------------------------------------------------------------------------------------------------------

Table 31--Rate Multiplier, Areas in District Three
----------------------------------------------------------------------------------------------------------------
Area 6 Lakes
Ratemaking projections Huron and Area 7 St. Area 8 Lake
Michigan Mary's River Superior
----------------------------------------------------------------------------------------------------------------
Revenue Needed (from Step 6)............ $1,907,873 $1,254,932 $1,460,429
Revenue (from Step 3)................... / 2,187,375 / 1,547,878 / 1,754,120
Rate Multiplier......................... = 0.8722 = 0.8107 = 0.8326
----------------------------------------------------------------------------------------------------------------

Rates for cancellation, delay, or interruption in rendering
services (46 CFR 401.420) and basic rates and charges for carrying a
U.S. pilot beyond the normal change point, or for boarding at other
than the normal boarding point (46 CFR 401.428), would decrease by
16.25 percent in all areas.
We then calculate a rate multiplier for adjusting the basic rates
and charges described in 46 CFR 401.420 and 401.428 and applicable in
all areas. We divide total revenue needed (Step 6, Table 25) by total
projected revenue (Step 3 & 3A, Table 16). Table 32 shows this
calculation.

Table 32--Rate Multiplier for Basic Rates and Charges in 46 CFR 401.420
and 401.428
------------------------------------------------------------------------
Ratemaking projections
------------------------------------------------------------------------
Total Revenue Needed (from Step 6)..... $11,206,638.64
Total revenue (from Step 3)............ / $13,381,017.91

[[Page 13537]]

Rate Multiplier........................ = 0.838
------------------------------------------------------------------------

Without further action, the existing rates we established in our
2012 final rule would then be multiplied by the rate multipliers from
Tables 29 through 31 to calculate the area by area rate changes for
2013. The resulting 2013 rates, on average, would then be decreased
almost 16 percent from the 2012 rates, instead of increasing almost 2
percent as we proposed in our August 2012 NPRM. We decline to impose
that decrease; but instead, we are relying on the discretionary
authority we have under Step 7 to further adjust rates. Table 33
compares the impact, area by area, that an average decrease of almost
16 percent would have, relative to the impact each area will actually
experience as a result of this final rule.

Table 33--Impact of Exercising Step 7 Discretion
------------------------------------------------------------------------
Percent change
without Percent change
Area exercising with exercise
Step 7 of Step 7
discretion discretion
------------------------------------------------------------------------
Area 1 (Designated waters).............. -19.96 -1.41
Area 2 (Undesignated waters)............ -18.41 -1.69
Area 4 (Undesignated waters)............ -7.75 8.87
Area 5 (Designated waters).............. -16.64 0.95
Area 6 (Undesignated waters)............ -12.78 4.31
Area 7 (Designated waters).............. -18.93 0.56
Area 8 (Undesignated waters)............ -16.74 1.52
------------------------------------------------------------------------

Our discretionary authority under Step 7 must be ``based on
requirements of the Memorandum of Arrangements between the United
States and Canada, and other supportable circumstances that may be
appropriate.'' The Memorandum of Arrangements calls for comparable U.S.
and Canadian rates, and the rates would not be comparable if U.S. rates
decrease by 16 percent, while Canadian rates for 2013 increase by 2.5
percent.\3\ ``Other supportable circumstances'' we have for exercising
our discretion include recent Executive Order 13609, which calls on
Federal agencies to eliminate ``unnecessary differences'' between U.S.
and foreign regulations (77 FR 26413, sec. 1), and the possibility that
a 16 percent rate decrease would jeopardize the ability of the three
pilotage associations to provide safe, dependable service. (In the case
of one association, our examination of that association's financial
data suggests it could not survive such a rate decrease.)
---------------------------------------------------------------------------

\3\ The Canadian Great Lakes Pilotage Authority (GLPA)
originally recommended a 2013 rate increase of 4 percent based on
GLPA's analysis of the revenue needed to cover the costs of
providing pilotage service for GLPA clients, but reduced that figure
to 2.5 percent based in large part on our NPRM's proposed average
1.87 percent increase.
---------------------------------------------------------------------------

The following tables reflect the rate adjustments we proposed in
our August 2012 NPRM. We are finalizing the values from the NPRM in
this rulemaking.
Tables 34 through 36 show these calculations.

Table 34--Adjustment of Pilotage Rates, Areas in District One
----------------------------------------------------------------------------------------------------------------
Rate
multiplier Adjusted rate
2012 Rate (2013 APP A for 2013
NPRM)
----------------------------------------------------------------------------------------------------------------
Area 1
St. Lawrence River:
Basic Pilotage.............................. $19.02/km, x 0.986 = $18.75/km,
$33.67/mi $33.19/mi
Each lock transited......................... $422 x 0.986 = $416
Harbor movage............................... $1,381 x 0.986 = $1,361
Minimum basic rate, St. Lawrence River...... $921 x 0.986 = $908
Maximum rate, through trip.................. $4,041 x 0.986 = $3,984
Area 2
Lake Ontario:
6-Hour period............................... $865 x 0.983 = $851
Docking or Undocking........................ $826 x 0.983 = $812
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

[[Page 13538]]

Table 35--Adjustment of Pilotage Rates, Areas in District Two
----------------------------------------------------------------------------------------------------------------
Rate
multiplier Adjusted rate
2012 Rate (2013 APP A for 2013
NPRM)
----------------------------------------------------------------------------------------------------------------
Area 4
Lake Erie:
6-Hour period............................... $760 x 1.089 = $828
Docking or undocking........................ $585 x 1.089 = $637
Any point on Niagara River below Black Rock $1,493 x 1.089 = $1,626
Lock.......................................
Area 5
Southeast Shoal to Port Huron, MI between any
point on or in:
Toledo or any point on Lake Erie W. of $1,369 x 1.010 = $1,382
Southeast Shoal............................
Toledo or any point on Lake Erie W. of $2,317 x 1.010 = $2,339
Southeast Shoal & Southeast Shoal..........
Toledo or any point on Lake Erie W. of $3,008 x 1.010 = $3,037
Southeast Shoal & Detroit River............
Toledo or any point on Lake Erie W. of $2,317 x 1.010 = $2,339
Southeast Shoal & Detroit Pilot Boat.......
Port Huron Change Point & Southeast Shoal $4,036 x 1.010 = $4,074
(when pilots are not changed at the Detroit
Pilot Boat)................................
Port Huron Change Point & Toledo or any $4,675 x 1.010 = $4,719
point on Lake Erie W. of Southeast Shoal
(when pilots are not changed at the Detroit
Pilot Boat)................................
Port Huron Change Point & Detroit River..... $3,031 x 1.010 = $3,060
Port Huron Change Point & Detroit Pilot Boat $2,358 x 1.010 = $2,381
Port Huron Change Point & St. Clair River... $1,677 x 1.010 = $1,693
St. Clair River............................. $1,369 x 1.010 = $1,382
St. Clair River & Southeast Shoal (when $4,036 x 1.010 = $4,074
pilots are not changed at the Detroit Pilot
Boat)......................................
St. Clair River & Detroit River/Detroit $3,031 x 1.010 = $3,060
Pilot Boat.................................
Detroit, Windsor, or Detroit River.......... $1,369 x 1.010 = $1,382
Detroit, Windsor, or Detroit River & $2,317 x 1.010 = $2,339
Southeast Shoal............................
Detroit, Windsor, or Detroit River & Toledo $3,008 x 1.010 = $3,037
or any point on Lake Erie W. of Southeast
Shoal......................................
Detroit, Windsor, or Detroit River & St. $3,031 x 1.010 = $3,060
Clair River................................
Detroit Pilot Boat & Southeast Shoal........ $1,677 x 1.010 = $1,693
Detroit Pilot Boat & Toledo or any point on $2,317 x 1.010 = $2,339
Lake Erie W. of Southeast Shoal............
Detroit Pilot Boat & St. Clair River........ $3,031 x 1.010 = $3,060
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

Table 36--Adjustment of Pilotage Rates, Areas in District Three
----------------------------------------------------------------------------------------------------------------
Rate
multiplier Adjusted rate
2012 Rate (2013 APP A for 2013
NPRM)
----------------------------------------------------------------------------------------------------------------
Area 6 Lakes Huron and Michigan:
6-Hour Period............................... $662 x 1.043 = $691
Docking or undocking........................ $629 x 1.043 = $656
Area 7 St. Mary's River between any point on or
in:
Gros Cap & De Tour.......................... $2,568 x 1.006 = $2,583
Algoma Steel Corp. Wharf, Sault Ste. Marie, $2,568 x 1.006 = $2,583
Ont. & De Tour.............................
Algoma Steel Corp. Wharf, Sault Ste. Marie, $967 x 1.006 = $973
Ont. & Gros Cap............................
Any point in Sault St. Marie, Ont., except $2,153 x 1.006 = $2,165
the Algoma Steel Corp. Wharf & De Tour.....
Any point in Sault St. Marie, Ont., except $967 x 1.006 = $973
the Algoma Steel Corp. Wharf & Gros Cap....
Sault Ste. Marie, MI & De Tour.............. $2,153 x 1.006 = $2,165
Sault Ste. Marie, MI & Gros Cap............. $967 x 1.006 = $973
Harbor movage............................... $967 x 1.006 = $973
Area 8 Lake Superior:
6-Hour period............................... $577 x 1.015 = $586
Docking or undocking........................ $549 x 1.015 = $557
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

VII. Regulatory Analyses

We developed this rule after considering numerous statutes and
executive orders related to rulemaking. Below we summarize our analyses
based on these statutes or executive orders.

A. Regulatory Planning and Review

Executive Orders (E.O.) 12866 (``Regulatory Planning and Review'')
and 13563 (``Improving Regulation and Regulatory Review'') direct
agencies to assess the costs and benefits of available regulatory
alternatives and, if regulation is necessary, to select regulatory

[[Page 13539]]

approaches that maximize net benefits (including potential economic,
environmental, public health and safety effects, distributive impacts,
and equity). Executive Order 13563 emphasizes the importance of
quantifying both costs and benefits, of reducing costs, of harmonizing
rules, and of promoting flexibility. This rule is not a ``significant
regulatory action'' under section 3(f) of E.O. 12866. Accordingly, the
final rule has not been reviewed by the Office of Management and Budget
(OMB). Step 7 allows for discretion when making the rate. The
Memorandum of Arrangements between the United States and Canada calls
for comparable rates. As such, we maintain the rate increase presented
in the NPRM, resulting in an estimated cost to shippers of $148,000.
A regulatory assessment follows.
The Coast Guard is required to review and adjust pilotage rates on
the Great Lakes annually. See sections III and IV of this preamble for
detailed discussions of the Coast Guard's legal basis and purpose for
this rulemaking and for background information on Great Lakes pilotage
ratemaking. Based on our annual review of this rule, we are adjusting
the pilotage rates for the 2013 shipping season to generate sufficient
revenue to cover allowable expenses, and target pilot compensation and
returns on investment. The rate adjustments in this final rule will
lead to a cost in all three districts with an estimated cost to
shippers of approximately $148,000 across all three districts.
This rule increases Great Lakes pilotage rates, on average,
approximately 1.87 percent overall from the current rates set in the
2012 final rule. This represents the same increase as proposed in the
NPRM. The Appendix A methodology is discussed and applied in detail in
section V of this preamble. Among other factors described in section V,
it reflects audited 2010 financial data from the pilots' associations
(the most recent year available for auditing), projected association
expenses, and regional inflation or deflation. The last full Appendix A
ratemaking was concluded in 2011 and used financial data from the 2009
base accounting year. The last annual rate review, conducted under 46
CFR part 404, Appendix C, was completed early in 2011.
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 will result in a cost reduction or
savings for shippers in that area. The shippers affected by these rate
adjustments are those owners and operators of domestic vessels
operating on register (employed in 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. The Coast Guard's interpretation is 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 and is not a part of our estimated national
cost to shippers. Coast Guard sampling of pilot data suggests there are
very few U.S. domestic vessels, without registry and operating only in
the Great Lakes that voluntarily purchase pilotage services.
We used 2008-2010 vessel arrival data from the Coast Guard's Marine
Information for Safety and Law Enforcement (MISLE) system to estimate
the average annual number of vessels affected by the rate adjustment to
be 204 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 204 vessels, there were approximately 319 annual U.S.
port arrivals before the vessels left the Great Lakes system, based on
2008-2010 vessel data from MISLE.
Historically, the impact of the rate adjustment to shippers is
estimated from the District pilotage revenues. These revenues represent
the direct and indirect costs that shippers must pay for pilotage
services. The Coast Guard sets rates so that revenues equal the
estimated cost of pilotage. For this rule, we base our rate on pilotage
revenues as reported for the NPRM, as discussed in step 7, despite new
data provided by AMOU.
We estimate the additional impact (costs or savings) of the rate
adjustment in this rule to be the difference between the total
projected revenue needed to cover costs in 2013 based on the 2012 rate
adjustment and the total projected revenue needed to cover costs in
2013 as set forth in the NPRM. Table 37 details additional costs or
savings by area and district.

Table 37--Rate Adjustment and Additional Impact of the Rule by Area and District ($U.S.; Non-Discounted)
----------------------------------------------------------------------------------------------------------------
Additional
Projected Projected costs or
revenue needed revenue needed savings of
in 2012 * in 2013 ** this rule
----------------------------------------------------------------------------------------------------------------
Area 1.......................................................... $2,308,357 $2,404,424 $96,067
Area 2.......................................................... 1,614,791 1,569,160 (45,631)
Total, District One......................................... 3,923,148 3,973,583 50,435
Area 4.......................................................... 1,310,549 1,398,694 88,145
Area 5.......................................................... 2,600,490 2,596,484 (4,006)
Total, District Two......................................... 3,911,039 3,995,178 84,139
Area 6.......................................................... 2,227,555 2,281,673 54,118
Area 7.......................................................... 1,565,906 1,556,517 (9,389)
Area 8.......................................................... 1,811,863 1,780,829 (31,034)
Total, District Three....................................... 5,605,324 5,619,020 13,696
----------------------------------------------------------------------------------------------------------------
* These 2012 estimates are detailed in Table 18 of the 2012 final rule (76 FR 6351).
** These 2013 estimates are detailed in Table 27 of the NPRM for this rulemaking.
Some values may not total due to rounding.
``Additional Revenue or Cost of this Rulemaking'' = ``Revenue needed in 2012'' minus ``Revenue needed in 2011.''

[[Page 13540]]

After applying the rate change in this rule, the resulting
difference between the projected revenue in 2012 and the projected
revenue in 2013 is the annual impact to shippers from this rule. This
figure would be equivalent to the total additional payments or savings
that shippers would incur for pilotage services from this 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 rate adjustments lead to a cost in all three
districts, with affected shippers operating in District One, District
Two, and District Three experiencing costs of $50,435, $84,139, and
$13,696, respectively. To calculate an exact cost or savings per vessel
is difficult because of the variation in vessel types, routes, port
arrivals, commodity carriage, time of season, conditions during
navigation, and preferences for the extent of pilotage services on
designated and undesignated portions of the Great Lakes system. Some
owners and operators would pay more and some would pay less depending
on the distance and port arrivals of their vessels' trips. As Table 37
indicates, shippers operating in all Districts would experience an
increased annual cost due to this rule. The overall impact of the rule
would be a cost to shippers of approximately $148,000 across all three
districts.
This rule allows the U.S. Coast Guard to meet the statutory
requirements to review the rates for pilotage services on the Great
Lakes--ensuring proper pilot compensation.
Alternatively, if we were to impose the new rates based on the new
contract data from AMOU, there would be a nearly 16 percent decrease in
rates across the system. This would have a dramatically different
effect on industry, moving from a proposed cost to shippers of
approximately $148,000 to a cost savings of approximately $1.7 million.
Table 38 shows the difference in projected 2012 expenses as compared to
projected 2013 expenses based on the new AMOU contract information.

Table 38--Alternative Rate Adjustment and Additional Impact of the Rule by Area and District ($U.S.; Non-
Discounted)
----------------------------------------------------------------------------------------------------------------
Total Total Additional
projected Proposed rate projected revenue or
expenses in change expenses in cost of this
2012 2013 rulemaking
----------------------------------------------------------------------------------------------------------------
Area 1.......................................... $2,308,357 0.9465 $2,438,897 $130,540
Area 2.......................................... 1,614,791 1.0117 1,596,067 (18,724)
Total, District One......................... 3,923,148 1.6086 2,438,897 (1,484,251)
Area 4.......................................... 1,310,549 1.0201 1,284,712 (25,837)
Area 5.......................................... 2,600,490 1.0111 2,571,969 (28,521)
Total, District Two......................... 3,911,039 1.0141 3,856,681 (54,358)
Area 6.......................................... 2,227,555 1.0184 2,187,375 (40,180)
Area 7.......................................... 1,565,906 1.0116 1,547,878 (18,028)
Area 8.......................................... 1,811,863 1.0329 1,754,120 (57,743)
Total, District Three....................... 5,605,324 1.0211 5,489,373 (115,951)
All Three Districts............................. 13,439,511 1.1404 11,784,951 (1,654,560)
----------------------------------------------------------------------------------------------------------------

We reject this alternative for the reasons laid out in our
discussion of Step 7 in part VI of this preamble.

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 this rule will be classified under
the North American Industry Classification System (NAICS) code
subsector 483--Water Transportation, which includes the following 6-
digit NAICS codes for freight transportation: 483111--Deep Sea Freight
Transportation, 483113--Coastal and Great Lakes Freight Transportation,
and 483211--Inland Water Freight Transportation. According to the Small
Business Administration's definition, a U.S. company with these NAICS
codes and employing less than 500 employees is considered a small
entity.
For the rule, we reviewed recent company size and ownership data
from 2008-2010 Coast Guard MISLE data and business revenue and size
data provided by publicly available sources such as MANTA and Reference
USA. 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 would be
comparable in ownership and size to these shippers.
There are three U.S. entities affected by this rule that receive
revenue from pilotage services. These are the three pilots'
associations that provide and manage pilotage services within the Great
Lakes districts. Two of the associations operate as partnerships and
one operates as a corporation. These associations are designated the
same NAICS industry classification and small entity size standards
described above, but they have far fewer than 500 employees; they have
approximately 65 total employees combined. We expect no adverse impact
to these entities from this rule because all associations receive
enough revenue to balance the projected expenses associated with the
projected number of bridge hours and pilots. Additionally, while we are
not required to conduct a full Regulatory Flexibility Analysis for this
action, we have indicated some potential adverse impacts from
alternative action in our discussion of the analysis performed under
Step 7.
Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that
this final rule will not have a significant economic impact on a
substantial number of small entities.

C. Assistance for Small Entities

Under section 213(a) of the Small Business Regulatory Enforcement
Fairness Act of 1996 (Pub. L. 104-121), we offered to assist small
entities in understanding this rule so that they could better evaluate
its effects on them and participate in the rulemaking. If the rule will
affect your small business,

[[Page 13541]]

organization, or governmental jurisdiction and you have questions
concerning its provisions or options for compliance, please consult Mr.
Todd Haviland, Director, Great Lake Pilotage, Office of Great Lakes
Pilotage, Commandant (CG-WWM-2), Coast Guard; telephone 202-372-2037,
email Todd.A.Haviland@uscg.mil, or fax 202-372-1909. The Coast Guard
will not retaliate against small entities that question or complain
about this rule or any policy or action of the Coast Guard.
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 would call 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 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. Congress directed the Coast Guard to
establish ``rates and charges for pilotage services.'' 46 U.S.C.
9303(f). This regulation is issued pursuant to that statute and is
preemptive of state law as outlined in 46 U.S.C. 9306. Under 46 U.S.C.
9306, a ``State or political subdivision of a State may not regulate or
impose any requirement on pilotage on the Great Lakes.'' Because States
may not promulgate rules within this category, preemption is not an
issue under Executive Order 13132.
Additionally, President Barack Obama's memorandum of May 20, 2009,
titled ``Preemption,'' states that ``preemption of State law by
executive departments and agencies should be undertaken only with full
consideration of the legitimate prerogatives of the States and with a
sufficient legal basis for preemption.'' To that end, when a department
or agency intends to preempt State law, it should do so only if
justified under legal principles governing preemption, including those
outlined in Executive Order 13132, and it should also include
preemption provisions in the codified regulation. As currently stated
in 46 CFR 401.120, states, municipalities, and other local authorities
are prohibited from requiring ``the use of pilots or [regulating] any
aspect of pilotage in any of the waters specified in the Act.''
Therefore, this regulation complies with the requirements of the
memorandum.

F. Unfunded Mandates Reform Act

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

G. Taking of Private Property

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

H. Civil Justice Reform

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

I. Protection of Children

We have analyzed this rule under E.O. 13045, Protection of Children
From Environmental Health Risks and Safety Risks. This rule is not an
economically significant rule and would 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 E.O. 13175,
Consultation and Coordination With Indian Tribal Governments, because
it would 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 E.O. 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 E.O. 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 E.O. 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 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. 4321-4370h), and have concluded
that this action is one of a category of actions that do not
individually or cumulatively have a significant effect on the human
environment. This rule adjusts rates in accordance with applicable
statutory and regulatory mandates and is categorically excluded under
section 2.B.2, figure 2-1, paragraph (34)(a) of the Instruction, which
includes regulations that are editorial or procedural. An environmental
analysis checklist and a categorical exclusion determination are
available in the docket where indicated under the ADDRESSES section of
this preamble.

[[Page 13542]]

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

0
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.

0
2. In Sec. 401.405, revise paragraphs (a) and (b), including the
footnote to Table (a), to read as follows:

Sec. 401.405 Basic rates and charges on the St. Lawrence River and
Lake Ontario.

* * * * *
(a) Area 1 (Designated Waters):

------------------------------------------------------------------------
Service St. Lawrence River
------------------------------------------------------------------------
Basic Pilotage......................... $18.75 per kilometer or $33.19
per mile \1\
Each Lock Transited.................... $416 \1\
Harbor Movage.......................... 1,361 \1\
------------------------------------------------------------------------
\1\ The minimum basic rate for assignment of a pilot in the St. Lawrence
River is $908, and the maximum basic rate for a through trip is
$3,984.

(b) Area 2 (Undesignated Waters):

------------------------------------------------------------------------
Lake
Service Ontario
------------------------------------------------------------------------
6-Hour Period.............................................. $851
Docking or Undocking....................................... 812
------------------------------------------------------------------------

0
3. In Sec. 401.407 revise paragraphs (a) and (b), including the
footnote to Table (b), to read as follows:

Sec. 401.407 Basic rates and charges on Lake Erie and the navigable
waters from Southeast Shoal to Port Huron, MI.

* * * * *
(a) Area 4 (Undesignated Waters):

------------------------------------------------------------------------
Lake Erie
(East of
Service Southeast Buffalo
Shoal)
------------------------------------------------------------------------
6-Hour Period........................... $828 $828
Docking or Undocking.................... 637 637
Any point on the Niagara River below the N/A 1,626
Black Rock Lock........................
------------------------------------------------------------------------

(b) Area 5 (Designated Waters):

----------------------------------------------------------------------------------------------------------------
Toledo or any
point on Lake
Any point on or in Southeast Erie west of Detroit River Detroit Pilot St. Clair
Shoal Southeast Boat River
Shoal
----------------------------------------------------------------------------------------------------------------
Toledo or any port on Lake Erie $2,339 $1,382 $3,037 $2,339 N/A
west of Southeast Shoal........
Port Huron Change Point......... \1\ 4,074 \1\ 4,719 3,060 2,381 1,693
St. Clair River................. \1\ 4,074 N/A 3,060 3,060 1,382
Detroit or Windsor or the 2,339 3,037 1,382 N/A 3,060
Detroit River..................
Detroit Pilot Boat.............. 1,693 2,339 N/A N/A 3,060
----------------------------------------------------------------------------------------------------------------
\1\ When pilots are not changed at the Detroit Pilot Boat.

0
4. In Sec. 401.410, revise paragraphs (a), (b), and (c) to read as
follows:

Sec. 401.410 Basic rates and charges on Lakes Huron, Michigan, and
Superior; and the St. Mary's River.

* * * * *
(a) Area 6 (Undesignated Waters):

------------------------------------------------------------------------
Lakes Huron
Service and
Michigan
------------------------------------------------------------------------
6-Hour Period.............................................. $691
Docking or Undocking....................................... 656
------------------------------------------------------------------------

(b) Area 7 (Designated Waters):

----------------------------------------------------------------------------------------------------------------
Area De Tour Gros cap Any harbor
----------------------------------------------------------------------------------------------------------------
Gros Cap........................................................ $2,583 N/A N/A
Algoma Steel Corporation Wharf at Sault Ste. Marie, Ontario..... 2,583 $973 N/A
Any point in Sault Ste. Marie, Ontario, except the Algoma Steel 2,165 973 N/A
Corporation Wharf..............................................
Sault Ste. Marie, MI............................................ 2,165 973 N/A
Harbor Movage................................................... N/A N/A $973
----------------------------------------------------------------------------------------------------------------

[[Page 13543]]

------------------------------------------------------------------------
Lake
Service Superior
------------------------------------------------------------------------
6-Hour Period.............................................. $586
Docking or Undocking....................................... 557
------------------------------------------------------------------------

Sec. 401.420 [Amended]

0
5. Amend Sec. 401.420 as follows:
0
a. In paragraph (a), remove the text ``$124'' and add, in its place,
the text ``$126''; and remove the text ``$1,942'' and add, in its
place, the text ``$1,972'';
0
b. In paragraph (b), remove the text ``$124'' and add, in its place,
the text ``$126''; and remove the text ``$1,942'' and add, in its
place, the text ``$1,972''; and
0
c. In paragraph (c)(1), remove the text ``$733'' and add, in its place,
the text ``$744''; and in paragraph (c)(3), remove the text ``$124''
and add, in its place, the text ``$126'', and remove the text
``$1,942'' and add, in its place, the text ``$1,972''.

Sec. 401.428 [Amended]

0
6. In Sec. 401.428, remove the text ``$748'' and add, in its place,
the text ``$744''.

Dated: February 20, 2013.
Dana A. Goward,
Director, Marine Transportation Systems Management, U.S. Coast Guard.
[FR Doc. 2013-04321 Filed 2-27-13; 8:45 am]
BILLING CODE 9110-04-P

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