Great Lakes Pilotage Rates-2014 Annual Review and Adjustment, 48374-48397 [2013-19209]

Download as PDF mstockstill on DSK4VPTVN1PROD with PROPOSALS 48374 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules (NAAQS) SIP for Lancaster County (also referred to as the ‘‘Lancaster Maintenance Area’’). The other SIP revision updates the point source inventory for NOX and VOCs. In the Final Rules section of this Federal Register, EPA is approving the State’s SIP submittal as a direct final rule without prior proposal because the Agency views this as a noncontroversial submittal and anticipates no adverse comments. A detailed rationale for the approval is set forth in the direct final rule. If no adverse comments are received in response to this action, no further activity is contemplated. If EPA receives adverse comments, the direct final rule will be withdrawn and all public comments received will be addressed in a subsequent final rule based on this proposed rule. EPA will not institute a second comment period. Any parties interested in commenting on this action should do so at this time. DATES: Comments must be received in writing by September 9, 2013. ADDRESSES: Submit your comments, identified by Docket ID Number EPA– R03–OAR–2013–0058 by one of the following methods: A. www.regulations.gov. Follow the on-line instructions for submitting comments. B. Email: fernandez.cristina@epa.gov. C. Mail: EPA–R03–OAR–2013–0058, Cristina Fernandez, Associate Director, Office of Air Program Planning, Mailcode 3AP30, U.S. Environmental Protection Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103. D. Hand Delivery: At the previouslylisted EPA Region III address. Such deliveries are only accepted during the Docket’s normal hours of operation, and special arrangements should be made for deliveries of boxed information. Instructions: Direct your comments to Docket ID No. EPA–R03–OAR–2013– 0058. EPA’s policy is that all comments received will be included in the public docket without change, and may be made available online at www.regulations.gov, including any personal information provided, unless the comment includes information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through www.regulations.gov or email. The www.regulations.gov Web site is an ‘‘anonymous access’’ system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an email VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 comment directly to EPA without going through www.regulations.gov, your email address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD–ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files should avoid the use of special characters, any form of encryption, and be free of any defects or viruses. Docket: All documents in the electronic docket are listed in the www.regulations.gov index. Although listed in the index, some information is not publicly available, i.e., CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, is not placed on the Internet and will be publicly available only in hard copy form. Publicly available docket materials are available either electronically in www.regulations.gov or in hard copy during normal business hours at the Air Protection Division, U.S. Environmental Protection Agency, Region III, 1650 Arch Street, Philadelphia, Pennsylvania 19103. Copies of the State submittal are available at Pennsylvania Department of Environmental Protection, Bureau of Air Quality Control, P.O. Box 8468, 400 Market Street, Harrisburg, Pennsylvania 17105. FOR FURTHER INFORMATION CONTACT: Asrah Khadr, (215) 814–2071, or by email at khadr.asrah@epa.gov. For further information, please see the information provided in the direct final action, with the same title, that is located in the ‘‘Rules and Regulations’’ section of this Federal Register publication. SUPPLEMENTARY INFORMATION: Dated: July 18, 2013. W.C. Early, Acting Regional Administrator, Region III. [FR Doc. 2013–18877 Filed 8–7–13; 8:45 am] BILLING CODE 6560–50–P PO 00000 Frm 00038 Fmt 4702 Sfmt 4702 DEPARTMENT OF HOMELAND SECURITY Coast Guard 46 CFR Part 401 [USCG–2013–0534] 1625–AC07 Great Lakes Pilotage Rates—2014 Annual Review and Adjustment Coast Guard, DHS. Notice of proposed rulemaking. AGENCY: ACTION: The Coast Guard proposes rate adjustments for pilotage services on the Great Lakes, which were last amended in February 2013. The proposed adjustments would establish new base rates and are made in accordance with a full ratemaking procedure. The proposed update reflects the Coast Guard exercising the discretion provided by Step 7 of the Appendix A methodology. The result is an upward adjustment to match the rate increase of the Canadian Great Lakes Pilotage Authority. We also propose adjusting weighting factors used to determine rates for vessels of different size, providing a procedure for temporary surcharges, and including dues paid to the American Pilots Association. This notice of proposed rulemaking promotes the Coast Guard’s strategic goal of maritime safety. DATES: Comments and related material must either be submitted to our online docket via https://www.regulations.gov on or before October 7, 2013 or reach the Docket Management Facility by that date. ADDRESSES: You may submit comments identified by docket number USCG– 2013–0534 using any one of the following methods: (1) Federal eRulemaking Portal: https://www.regulations.gov. (2) Fax: 202–493–2251. (3) Mail: 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– 0001. (4) Hand delivery: Same as mail address above, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The telephone number is 202–366–9329. To avoid duplication, please use only one of these four methods. See the ‘‘Public Participation and Request for Comments’’ portion of the SUPPLEMENTARY INFORMATION section below for instructions on submitting comments. SUMMARY: E:\FR\FM\08AUP1.SGM 08AUP1 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules If you have questions on this proposed 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– 372–1914. If you have questions on viewing or submitting material to the docket, call Ms. Barbara Hairston, Program Manager, Docket Operations, telephone 202–366–9826. SUPPLEMENTARY INFORMATION: FOR FURTHER INFORMATION CONTACT: Table of Contents for Preamble I. Public Participation and Request for Comments A. Submitting Comments B. Viewing Comments and Documents C. Privacy Act D. Public Meeting II. Abbreviations III. Basis and Purpose IV. Background V. Discussion of Proposed Rule A. Summary B. Discussion of Methodology VI. 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 B. Viewing Comments and Documents To view comments, as well as documents mentioned in this preamble as being available in the docket, go to https://www.regulations.gov, insert ‘‘USCG–2013–0534’’ and click ‘‘Search.’’ Click the ‘‘Open Docket Folder’’ in the ‘‘Actions’’ column. If you do not have access to the Internet, you may view the docket online by visiting the Docket Management Facility in Room W12–140 on the ground floor of the Department of Transportation West Building, 1200 New Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. We have an agreement with the Department of Transportation to use the Docket Management Facility. I. Public Participation and Request for Comments We encourage you to participate in this rulemaking by submitting comments and related materials. All comments received will be posted without change to https:// www.regulations.gov and will include any personal information you have provided. mstockstill on DSK4VPTVN1PROD with PROPOSALS A. Submitting Comments If you submit a comment, please include the docket number for this rulemaking (USCG–2013–0534), indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation. You may submit your comments and material online or by fax, mail, or hand delivery, but please use only one of these means. We recommend that you include your name and a mailing address, an email address, or a phone number in the body of your document so that we can contact you if we have questions regarding your submission. VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 To submit your comment online, go to https://www.regulations.gov and insert ‘‘USCG–2013–0534’’ in the ‘‘Search’’ box. Click on ‘‘Submit a Comment’’ in the ‘‘Actions’’ column. If you submit your comments by mail or hand delivery, submit them in an unbound format, no larger than 81⁄2 by 11 inches, suitable for copying and electronic filing. If you submit comments by mail and would like to know that they reached the Facility, please enclose a stamped, self-addressed postcard or envelope. We will consider all comments and material received during the comment period and may change this notice of proposed rulemaking (NPRM) based on your comments. C. Privacy Act Anyone can search the electronic form of comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review a Privacy Act notice regarding our public dockets in the January 17, 2008 issue of the Federal Register (73 FR 3316). D. Public Meeting We do not now plan to hold a public meeting, but you may submit a request for one to the docket using one of the methods specified under ADDRESSES. In your request, explain why you believe a public meeting would be beneficial. If we determine that one would aid this rulemaking, we will hold one at a time and place announced by a later notice in the Federal Register. II. Abbreviations AMOU American Maritime Officers Union APA American Pilots Association CFR Code of Federal Regulations PO 00000 Frm 00039 Fmt 4702 Sfmt 4702 48375 CPA Certified public accountant CPI Consumer Price Index E.O. Executive Order FR Federal Register GLPAC Great Lakes Pilotage Advisory Committee MISLE Marine Information for Safety and Law Enforcement MOA Memorandum of Arrangements NAICS North American Industry Classification System NPRM Notice of proposed rulemaking OMB Office of Management and Budget ROI Return on investment § Section symbol U.S.C. United States Code III. Basis and Purpose The basis of this NPRM 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. or Canadian 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 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, if necessary, adjusted. 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 NPRM is to establish new base pilotage rates, using the methodology found in 46 CFR part 404, Appendix A. IV. Background The vessels affected by this NPRM are those engaged in foreign trade upon the U.S. waters of the Great Lakes. United 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. E:\FR\FM\08AUP1.SGM 08AUP1 mstockstill on DSK4VPTVN1PROD with PROPOSALS 48376 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules States 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, which use different compensation practices. District One, consisting of Areas 1 and 2, includes all U.S. waters of the St. Lawrence River and Lake Ontario. District Two, consisting of Areas 4 and 5, includes all U.S. waters of Lake Erie, the Detroit River, Lake St. Clair, and the St. Clair River. District Three, consisting of Areas 6, 7, and 8, includes all U.S. waters of the St. Mary’s River, Sault Ste. Marie Locks, and Lakes Michigan, Huron, and Superior. Area 3 is the Welland Canal, which is serviced exclusively by the Canadian Great Lakes Pilotage Authority and, accordingly, is not included in the United States rate structure. Areas 1, 5, and 7 have been designated by Presidential Proclamation, pursuant to the Act, to be waters in which pilots must, at all times, be fully engaged in the navigation of vessels in their charge. Areas 2, 4, 6, and 8 have not been so designated because they are open bodies of water. 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 NPRM is a full ratemaking to establish new base pilotage rates, using the methodology found in 46 CFR part 404, Appendix A. The last full ratemaking established the current base rates in 2013 (78 FR 13521; Feb. 28, 2013). 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. We have now completed our review of the independent accountants’ 2011 financial reports. The 2 A ‘‘laker’’ is a commercial cargo vessel especially designed for and generally limited to use on the Great Lakes. VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 comments by the pilot associations on those reports and the independent accountants’ final findings are discussed in our document entitled ‘‘Summary— Independent Accountant’s Report on Pilot Association Expenses, with Pilot Association Comments and Accountant’s Responses,’’ which appears in the docket. V. Discussion of Proposed Rule A. Summary We propose establishing new base pilotage rates in accordance with the methodology outlined in Appendix A to 46 CFR part 404. The proposed new rates would be established by March 1, 2014, and effective August 1, 2014. Our arithmetical calculations under Steps 1 through 6 of Appendix A would result in an average 10.74 percent rate decrease. This rate decrease is not the result of increased efficiencies in providing pilotage services but rather is a result of recent downward changes to American Maritime Officers Union (AMOU) contracts. Therefore, we will exercise the discretion outlined in Step 7 and increase rates by 2.5 percent to match the Canadian Great Lakes Pilotage Authority’s rate adjustment. We will provide additional discussion when we explain our Step 7 adjustment of pilot rates. Table 1 shows the proposed percent change for the new rates for each area. Secondly, we propose to adjust United States weighting factors in this NPRM to match Canadian weighting factors. At its February 2013 meeting, the Great Lakes Pilotage Advisory Committee (GLPAC) unanimously recommended (Resolution 13–01, which can be viewed at www.faca.gov 3) that the Coast Guard align United States weighting factors with those adopted by Canada in 2008. Weighting factors are multipliers based on the size of a ship and are used in determining actual charges for pilotage service. Matching the Canadian weighting factors would provide greater parity between the United States and Canada and reduce billing confusion between the two countries, both of which are important Federal Government concerns, as emphasized by recent Executive Order (E.O.) 13609, ‘‘Promoting International Regulatory Cooperation’’ (77 FR 26413; May 4, 2012). These weighting factors are applied to the charges for pilotage service; they are not used in the ratemaking methodology nor are they related to the annual changes in benchmark union contracts that 3 Resolution 13–01, a summary, and a transcript of the GLPAC meeting are available at this Web site. PO 00000 Frm 00040 Fmt 4702 Sfmt 4702 determine target pilot compensation. Because this adjustment would in no way be connected with the benchmark contract changes that take effect on August 1, 2014, we propose making the adjustment effective March 1, 2014, to eliminate the disparity between U.S. and Canadian pilotage systems that has existed since 2008. Based on historic traffic levels, we believe this weighting factor adjustment will increase U.S. pilot association revenues by approximately 6 to 7.5 percent. Next, we propose to include dues paid to the American Pilots Association (APA) by the three districts as an allowable expense that is necessary and reasonable for the safe conduct of pilotage on the Great Lakes. We are committed to a safe and efficient pilotage system on the Great Lakes and the APA, as the trade association for all pilotage groups across the United States, has worked diligently with the Coast Guard and the associations to share best practices and facilitate the development of training plans for the U.S. Great Lakes Registered Pilots. Fifteen percent of the APA dues are used for lobbying and will be excluded, because lobbying expenses are prohibited. Previously, APA dues were excluded from the ratemaking process because they were deemed unnecessary for pilot licensure. While it remains true APA membership is not needed for licensure, we now believe that the APA’s commitment to safety, professional development, and the sharing of best practices warrants the inclusion of APA dues as a necessary and reasonable expense. Finally, we propose adding a new regulation that would allow the Coast Guard to authorize temporary surcharges under the authority of 46 U.S.C. 9303(f) and in the interest of safe, efficient, and reliable pilotage. 46 U.S.C. 9303(f) allows the Secretary to ‘‘prescribe by regulation rates and charges for pilotage services, giving consideration to the public interest and the costs of providing the services.’’ Temporary surcharges would be imposed when the surcharges serve the public interest by enabling the pilot associations to take on expenses in the interest of providing safe and reliable pilotage. Among the situations we think might warrant the imposition of a surcharge would be an association’s need to acquire new capital assets or new technology, and the need to train pilots in the proper use of new assets or technology. Under our proposal, a given surcharge will not exceed 1 year in length and must be proposed for public comment prior to application. We propose using this new procedure to impose a temporary 3 percent surcharge E:\FR\FM\08AUP1.SGM 08AUP1 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules to traffic in District One to compensate pilots for $48,995 that the District One pilots’ association spent on training in 2012. Normally, this expense would not be recognized and reflected in pilotage rates until the 2015 annual ratemaking. By authorizing a surcharge now, we would accelerate the reimbursement for necessary and reasonable training expenses. This procedure will allow the associations to recover these expenses the year after they are incurred instead of waiting three years. We conducted several meetings with the pilot association presidents to discuss training and they would be more willing to participate in training if the expenses were fully recognized the following year. The surcharge would be authorized for the duration of the 2014 shipping season, which begins in March 2014. This merely accelerates the payment for these improvements, which fall within historically-approved reimbursable items. At the end of the 2014 shipping season, we will account for the monies the surcharge generate and make adjustments (debits/credits) to the operating expenses for the following year. We will also ensure that these accelerated training expenses are removed from the expenses of future rulemakings. We encourage all Great Lakes pilots to renew training on a 5–10 year basis that includes these topics, which are essential for providing safe, efficient, and reliable pilotage service: • Radar observer certification; • Bridge resource management; • Requirements of the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1978, as amended; • Legal aspects of pilotage; • Fatigue training as recommended by the National Transportation Safety Board; and • Basic and emergency ship handling simulator/manned models training. The Coast Guard is pleased that District One pilots sought portions of this training. We encourage District Two and District Three pilots to seek similar training, which we are willing to review for inclusion in the rate on a case-by-case basis. All figures in the tables that follow are based on calculations performed either by an independent accountant or by the Director’s 4 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—SUMMARY OF RATE ADJUSTMENTS BASED ON STEP 7 DISCRETION If pilotage service is required in: Area Area Area Area Area Area Area 1 2 4 5 6 7 8 Then the percent change over the current rate is: (Designated waters) ..... (Undesignated waters) (Undesignated waters) (Designated waters) ..... (Undesignated waters) (Designated waters) ..... (Undesignated waters) 2.50 2.50 2.50 2.50 2.50 2.50 2.50 B. Discussion of Methodology 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 2011 financial information supplied by the pilots association. Step 1: Projection of Operating Expenses. In this step, we project the 48377 amount of vessel traffic annually. Based on 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 pilot association to provide us with detailed financial information in accordance with 46 CFR part 403. The associations complied with this requirement, supplying 2011 financial information in 2012. 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 disallowed for ratemaking purposes. The accountant’s preliminary findings were sent to the pilot associations, they reviewed and commented on those findings, and the accountant then finalized the findings. The Director reviewed and accepted the final findings, resulting in the determination of recognizable expenses. The preliminary findings, the associations’ comments on those findings, and the final findings are all discussed in the ‘‘Summary—Independent Accountant’s Report on Pilot Association Expenses, with Pilot Association Comments and Accountant’s Responses,’’ which appears in the docket. Tables 2 through 4 show each association’s recognized expenses. TABLE 2—RECOGNIZED EXPENSES FOR DISTRICT ONE Area 1 mstockstill on DSK4VPTVN1PROD with PROPOSALS Operating Expenses: Other Pilotage Costs: Pilot subsistence/Travel ............................................................................................ License insurance ..................................................................................................... Payroll taxes ............................................................................................................. Other ......................................................................................................................... Total Other Pilotage Costs ................................................................................ Pilot Boat and Dispatch Costs: Area 2 St. Lawrence River Reported expenses for 2011 Lake Ontario Total $234,724 0 61,483 837 $156,246 0 47,611 588 $390,970 0 109,094 1,425 297,044 204,445 501,489 4 ‘‘Director’’ is the Coast Guard Director, Great Lakes Pilotage, which is used throughout this NPRM. VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 PO 00000 Frm 00041 Fmt 4702 Sfmt 4702 E:\FR\FM\08AUP1.SGM 08AUP1 48378 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules TABLE 2—RECOGNIZED EXPENSES FOR DISTRICT ONE—Continued Area 1 Area 2 St. Lawrence River Reported expenses for 2011 Lake Ontario Total Pilot boat expense .................................................................................................... Dispatch expense ..................................................................................................... Payroll taxes ............................................................................................................. 111,772 0 8,611 76,904 0 5,925 188,676 0 14,536 Total Pilot and Dispatch Costs .......................................................................... Administrative Expenses: Legal ......................................................................................................................... Insurance .................................................................................................................. Employee benefits .................................................................................................... Payroll taxes ............................................................................................................. Other taxes ............................................................................................................... Travel ........................................................................................................................ Depreciation/Auto leasing/Other ............................................................................... Interest ...................................................................................................................... Dues and subscriptions ............................................................................................ Utilities ...................................................................................................................... Salaries ..................................................................................................................... Accounting/Professional fees ................................................................................... Pilot Training ............................................................................................................. Other ......................................................................................................................... 120,383 82,829 203,212 10,592 23,780 21,282 5,032 5,042 756 38,252 18,484 9,180 4,314 50,718 5,752 4,200 9,959 6,922 16,492 14,645 3,463 3,470 520 26,319 12,718 9,180 2,941 34,897 3,428 2,277 6,880 17,514 40,272 35,927 8,495 8,512 1,276 64,571 31,202 18,360 7,255 85,615 9,180 6,477 16,839 Total Administrative Expenses .......................................................................... 207,343 144,152 351,495 Total Operating Expenses ................................................................................. Proposed Adjustments (Independent certified public accountant (CPA): Operating Expenses: Other Pilot Costs: Pilotage subsistence/Travel ...................................................................................... Payroll taxes ............................................................................................................. 624,770 431,426 1,056,196 (2,492) 12,883 (1,714) 8,864 (4,206) 21,747 Total Other Pilotage Costs ................................................................................ 10,391 7,150 17,541 TOTAL CPA ADJUSTMENTS ........................................................................... 10,391 7,150 17,541 Total Operating Expenses ......................................................................... 635,161 438,576 1,073,737 Note: Numbers may not total due to rounding. TABLE 3—RECOGNIZED EXPENSES FOR DISTRICT TWO Area 4 Area 5 Lake Erie Southeast Shoal to Port Huron, MI Reported expenses for 2011 Operating Expenses: Other Pilotage Costs: Pilot subsistence/Travel ............................................................................................ License insurance ..................................................................................................... Payroll taxes ............................................................................................................. Other ......................................................................................................................... Total $118,874 9,252 55,013 35,341 $198,124 15,420 91,689 58,901 Total Other Pilotage Costs ................................................................................ Pilot Boat and Dispatch Costs: Pilot boat expense .................................................................................................... Dispatch expense ..................................................................................................... Employee Benefits .................................................................................................... Payroll taxes ............................................................................................................. mstockstill on DSK4VPTVN1PROD with PROPOSALS $79,250 6,168 36,676 23,560 145,654 218,480 364,134 104,955 6,060 40,419 7,135 157,432 9,090 60,628 10,703 262,387 15,150 101,047 17,838 Total Pilot and Dispatch Costs .......................................................................... Administrative Expenses: Legal ......................................................................................................................... Office rent ................................................................................................................. Insurance .................................................................................................................. Employee benefits .................................................................................................... Payroll taxes ............................................................................................................. Other taxes ............................................................................................................... Depreciation/Auto leasing/Other ............................................................................... Interest ...................................................................................................................... Dues and subscriptions ............................................................................................ 158,569 237,853 396,422 37,520 26,275 10,672 16,365 4,446 14,273 15,604 2,772 7,069 56,281 39,413 16,009 24,548 6,668 21,409 23,407 4,159 10,603 93,801 65,688 26,681 40,913 11,114 35,682 39,011 6,931 17,672 VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 PO 00000 Frm 00042 Fmt 4702 Sfmt 4702 E:\FR\FM\08AUP1.SGM 08AUP1 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules 48379 TABLE 3—RECOGNIZED EXPENSES FOR DISTRICT TWO—Continued Area 4 Area 5 Lake Erie Southeast Shoal to Port Huron, MI Reported expenses for 2011 Total Utilities ...................................................................................................................... Salaries ..................................................................................................................... Accounting/Professional fees ................................................................................... Pilot Training ............................................................................................................. Other ......................................................................................................................... 15,410 39,874 12,110 0 8,860 23,115 59,810 18,164 0 13,291 38,525 99,684 30,274 0 22,151 Total Administrative Expenses .......................................................................... 211,250 316,877 528,127 Total Operating Expenses: ................................................................................ Proposed Adjustments (Independent CPA): Operating Expenses: Other Pilotage Costs: Pilot subsistence/Travel ............................................................................................ Other ......................................................................................................................... 515,473 773,210 1,288,683 (2,598) (566) (3,896) (850) (6,494) (1,416) Total Other Pilotage Costs ................................................................................ Pilot Boat and Dispatch Costs: Employee benefits .................................................................................................... (3,164) (4,746) (7,910) (100) (150) (249) Total Pilot Boat and Dispatch Costs ................................................................. Administrative Expenses: Employee benefits .................................................................................................... (100) (150) (249) (25) (38) (63) Total Administrative Expenses .......................................................................... (25) (38) (63) TOTAL CPA ADJUSTMENTS ........................................................................... (3,289) (4,933) (8,222) Total Operating Expenses ......................................................................... 512,184 768,277 1,280,461 Note: Numbers may not total due to rounding. TABLE 4—RECOGNIZED EXPENSES FOR DISTRICT THREE Area 6 Area 7 Area 8 Lakes Huron and Michigan St. Mary’s River Lake Superior 196,529 10,157 63,803 2,184 72,789 3,762 23,631 809 94,625 4,891 30,720 1,052 363,943 18,810 118,153 4,045 Total Other Pilotage Costs ................................................ Pilot Boat and Dispatch Costs: Pilot boat expense .................................................................... Dispatch expense ..................................................................... Payroll taxes ............................................................................. 272,673 100,991 131,288 504,951 243,077 87,059 9,607 90,028 32,244 3,558 117,037 41,917 4,626 450,142 161,221 17,791 Total Pilot Boat and Dispatch Costs ................................. Administrative Expenses: Legal ......................................................................................... Office rent ................................................................................. Insurance .................................................................................. Employee benefits .................................................................... Payroll taxes ............................................................................. Other taxes ............................................................................... Depreciation/Auto leasing ......................................................... Interest ...................................................................................... Dues and subscriptions ............................................................ Utilities ...................................................................................... Salaries ..................................................................................... Accounting/Professional fees ................................................... Pilot Training ............................................................................. Other ......................................................................................... 339,743 125,830 163,580 629,154 12,138 5,346 7,451 73,230 6,154 19,339 34,341 2,682 11,016 19,723 55,772 13,419 516 5,394 4,495 1,980 2,760 27,122 2,279 7,163 12,719 993 5,508 7,305 20,656 4,970 191 1,998 5,844 2,574 3,587 35,259 2,963 9,311 16,534 1,291 7,344 9,496 26,853 6,461 248 2,597 22,477 9,900 13,798 135,611 11,396 35,813 63,594 4,966 23,868 36,524 103,281 24,850 955 9,989 Total Administrative Expenses .......................................... 266,521 100,139 130,362 497,022 Reported expenses for 2011 mstockstill on DSK4VPTVN1PROD with PROPOSALS Operating Expenses: Other Pilotage Costs: Pilot subsistence/Travel ............................................................ License insurance ..................................................................... Payroll taxes ............................................................................. Other ......................................................................................... VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 PO 00000 Frm 00043 Fmt 4702 Sfmt 4702 Total E:\FR\FM\08AUP1.SGM 08AUP1 48380 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules TABLE 4—RECOGNIZED EXPENSES FOR DISTRICT THREE—Continued Area 6 Area 7 Area 8 Lakes Huron and Michigan St. Mary’s River Lake Superior Total Operating Expenses ................................................. Proposed Adjustments (Independent CPA): Operating Expenses: Other Pilotage Costs: Payroll taxes ............................................................................. 878,937 326,960 425,230 1,631,127 22,446 8,313 10,807 41,566 Total Other Pilotage Costs ................................................ Administrative Expenses: Other Taxes .............................................................................. Depreciation/Auto leasing ......................................................... Other ......................................................................................... 22,446 8,313 10,807 41,566 (1,613) (7,707) (610) (598) (2,854) (226) (777) (3,711) (294) (2,988) (14,272) (1,130) Total Administrative Expenses .......................................... (9,930) (3,678) (4,782) (18,390) TOTAL CPA ADJUSTMENTS ........................................... 12,516 4,635 6,025 23,176 Total Operating Expenses ......................................... 891,453 331,595 431,255 1,654,303 Reported expenses for 2011 Total 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 2011 financial information, the ‘‘succeeding navigation season’’ for this ratemaking is 2012. We based our inflation adjustment of 2 percent on the 2012 change in the Consumer Price Index (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: ....................................................................... 2012 change in the CPI for the Midwest Region of the United States .... Inflation Adjustment .................................................................................. Area 2 St. Lawrence River Reported expenses for 2011 Lake Ontario $635,161 .02 $12,703 × = Total $438,576 .02 $8,772 × = × = $1,073,737 .02 $21,475 TABLE 6—INFLATION ADJUSTMENT, DISTRICT TWO Area 4 Area 5 Lake Erie Southeast Shoal to Port Huron, MI Reported expenses for 2011 Total Operating Expenses: ....................................................................... 2012 change in the CPI for the Midwest Region of the United States .... Inflation Adjustment .................................................................................. $512,184 .02 $10,244 × = × = $768,277 .02 $15,366 Total × = $1,280,461 .02 $25,609 TABLE 7—INFLATION ADJUSTMENT, DISTRICT THREE Area 6 mstockstill on DSK4VPTVN1PROD with PROPOSALS Area 7 Area 8 Lakes Huron and Michigan St. Mary’s River Lake Superior $891,453 Reported expenses for 2011 $331,595 Total Total Operating Expenses: ............................... 2012 change in the CPI for the Midwest Region of the United States ............................... Inflation Adjustment ........................................... × = Step 1.D: Projection of Operating Expenses. In this final sub-step of Step 1, we 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. We are not aware of any such foreseeable circumstances that now exist in District One. VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 PO 00000 .02 $17,829 Frm 00044 Fmt 4702 × = Sfmt 4702 .02 $6,632 $431,255 × = .02 $8,625 $1,654,303 × = .02 $33,086 For District One, the projected operating expenses are based on the calculations from Steps 1.A through 1.C. Table 8 shows these projections. E:\FR\FM\08AUP1.SGM 08AUP1 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules 48381 TABLE 8—PROJECTED OPERATING EXPENSES, DISTRICT ONE Area 1 Area 2 St. Lawrence River Reported expenses for 2011 Lake Ontario Total Total operating expenses ......................................................................... Inflation adjustment 2.0% ......................................................................... + $635,161 $12,703 + $438,576 $8,772 + $1,073,737 $21,475 Total projected expenses for 2014 pilotage season ......................... = $647,864 = $447,348 = $1,095,212 Note: Numbers may not total due to rounding. In District Two, Federal taxes of $12,000 are accounted for in Step 6 (Federal Tax Allowance). The projected operating expenses are based on the calculations from Steps 1.A through 1.C 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 Reported expenses for 2011 Total Total Operating Expenses ........................................................................ Inflation adjustment 2.0% ......................................................................... Director’s adjustment and foreseeable circumstances Federal taxes (accounted for in Step 6) ................................................... + $512,184 $10,244 + $768,277 $15,366 + $1,280,461 $25,609 + ($4,800) + ($7,200) + ($12,000) Total projected expenses for 2014 pilotage season ......................... = $517,627 = $776,442 = $1,294,070 Currently, we are not aware of any foreseeable circumstances for District Three. Its projected operating expenses are based on the calculations from 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 2011 St. Mary’s River Lake Superior Total + $891,453 $17,829 + $331,595 $6,632 + $431,255 $8,625 + $1,654,303 $33,086 Total projected expenses for 2014 pilotage season ............................................. mstockstill on DSK4VPTVN1PROD with PROPOSALS Total expenses .................................................. Inflation adjustment 2.0% .................................. = $909,282 = $338,227 = $439,880 = $1,687,389 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 2014. 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’ VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 wages by 150 percent and then adding the average first mates’ benefits. The most current union contracts available to us are AMOU contracts with three U.S. companies engaged in Great Lakes shipping. There are two separate AMOU contracts available—we refer to them as Agreements A and B, and 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., and Agreement B applies to all vessels operated by American Steamship Co. and Mittal Steel USA, Inc. Agreements A and B both expire on July 31, 2016. The AMOU has set the PO 00000 Frm 00045 Fmt 4702 Sfmt 4702 daily aggregate rate—including the daily wage rate, vacation pay, pension plan contributions, and medical plan contributions effective August 1, 2014 as follows: (1) In undesignated waters, $612.20 for Agreement A and $604.64 for Agreement B; and (2) In designated waters, $842.63 for Agreement A and $829.40 for Agreement B. Because we are interested in annual compensation, we must convert these daily rates. We 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. E:\FR\FM\08AUP1.SGM 08AUP1 48382 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules TABLE 11—PROJECTED ANNUAL AGGREGATE RATE COMPONENTS Aggregate Rate—Wages and Vacation, Pension, and Medical Benefits Pilots on undesignated waters Agreement A: $612.20 daily rate × 270 days ............................................................................................................................ Agreement B: $604.64 daily rate × 270 days ............................................................................................................................ 165,294.00 163,252.80 Pilots on designated waters Agreement A: $842.63 daily rate × 270 days ............................................................................................................................ Agreement B: $829.40 daily rate × 270 days ............................................................................................................................ 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 227,510.10 223,938.00 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 American Steamship Company ................................................................... Mittal Steel USA, Inc. .................................................................................. Key Lakes, Inc. ............................................................................................ ...................................................... ...................................................... 361,385 815,600 38,826 Total tonnage, each agreement ........................................................... 361,385 854,426 Percent tonnage, each agreement ................................................ 361,385 ÷ 1,215,811 = 29.7238% 854,426 ÷ 1,215,811 = 70.2762% We use the percentages from Table 12 to apportion the projected compensation from Table 11. This gives us a single Agreement B tonnage-weighted set of figures. Table 13 shows our calculations. TABLE 13—TONNAGE-WEIGHTED WAGE AND BENEFIT COMPONENTS Undesignated waters Agreement A: Total wages and benefits .......................................................................................................... Percent tonnage ........................................................................................................................ Designated waters $165,294.00 29.7238% × $227,510.10 29.7238% Total ................................................................................................................................... Agreement B: Total wages and benefits .......................................................................................................... Percent tonnage ........................................................................................................................ = $49,132 = $67,625 × $163,252.80 70.2762% × $223,938.00 70.2762% Total ................................................................................................................................... Projected Target Rate of Compensation: Agreement A total weighted average wages and benefits ....................................................... Agreement B total weighted average wages and benefits ....................................................... = $114,728 = $157,375 + $49,132 $114,728 + $67,625 $157,375 Total ................................................................................................................................... mstockstill on DSK4VPTVN1PROD with PROPOSALS × = $163,860 = $225,000 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 VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 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 (76 FR 6351 at 6352 col. 3 (Feb. 4, 2011)), we do not include, and never have included, pilot delay, detention, or PO 00000 Frm 00046 Fmt 4702 Sfmt 4702 cancellation in calculating bridge hours. 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 2013 final rule, we determined that 38 pilots would be needed for ratemaking purposes. We have E:\FR\FM\08AUP1.SGM 08AUP1 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules determined that District 3 has two excess billets that remain unfilled and that current and projected traffic levels do not support the retention of these unfilled billets. For 2014, we project 36 pilots is the proper number to use for ratemaking purposes. We are removing one pilot from each of the undesignated 48383 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. waters of District Three (one each from Area 6 and Area 8). The total pilot authorization strength 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 2008 ratemaking final rule (74 FR 220 at 221–22 (Jan. 5, 2009)) we TABLE 14—NUMBER OF PILOTS NEEDED Pilotage area Area Area Area Area Area Area Area 1 2 4 5 6 7 8 Divided by 1,000 (designated waters) or 1,800 (undesignated waters) Projected 2014 bridge hours (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 total target pilot compensation 5,116 5,429 5,814 5,052 9,611 3,023 7,540 ÷ ÷ ÷ ÷ ÷ ÷ ÷ 1,000 1,800 1,800 1,000 1,800 1,000 1,800 separately for each area by multiplying the number of pilots needed in each Calculated value of pilot demand = = = = = = = Pilots needed (total = 36) 5.116 3.016 3.230 5.052 5.339 3.023 4.189 6 5 4 6 6 4 5 area, as shown in Table 14, by the target pilot compensation shown in Table 13. 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= 36) Pilotage area (Designated waters) ............................................................................. (Undesignated waters) ......................................................................... (Undesignated waters) ......................................................................... (Designated waters) ............................................................................. (Undesignated waters) ......................................................................... (Designated waters) ............................................................................. (Undesignated waters) ......................................................................... 6 5 4 6 6 4 5 × × × × × × × $225,000 $163,860 $163,860 $225,000 $163,860 $225,000 $163,860 Projected target pilot compensation = = = = = = = $1,349,999 $819,298 $655,438 $1,349,999 $983,157 $899,999 $819,298 Note: Numbers may not total due to rounding. Steps 3 and 3.A: Projection of Revenue. In Steps 3 and 3.A., we project the revenue that would be received in 2014 if demand for pilotage services matches the bridge hours we projected in Table 14, and if 2012 pilotage rates are left unchanged. Table 16 shows this calculation. TABLE 16—PROJECTION OF REVENUE BY AREA Projected 2014 bridge hours Pilotage area 2013 Pilotage rates Revenue projection for 2013 (Designated waters) ............................................................................. (Undesignated waters) ......................................................................... (Undesignated waters) ......................................................................... (Designated waters) ............................................................................. (Undesignated waters) ......................................................................... (Designated waters) ............................................................................. (Undesignated waters) ......................................................................... 5,116 5,429 5,814 5,052 9,611 3,023 7,540 × × × × × × × $460.97 $284.84 $205.27 $508.91 $199.95 $482.94 $186.67 = = = = = = = $2,358,327 $1,546,373 $1,193,426 $2,571,038 $1,921,756 $1,459,929 $1,407,490 Total ........................................................................................................... ............................ .... ............................ .... $12,458,339 mstockstill on DSK4VPTVN1PROD with PROPOSALS Area Area Area Area Area Area Area 1 2 4 5 6 7 8 Note: Numbers may not total due to rounding. Step 4: Calculation of Investment Base. In this step, we calculate each association’s investment base, which is the recognized capital investment in the VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 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 PO 00000 Frm 00047 Fmt 4702 Sfmt 4702 of the formula identifies each association’s total sources of funds. Tables 17 through 19 follow the formula up to that point. E:\FR\FM\08AUP1.SGM 08AUP1 48384 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules 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 ¥ + + ¥ + $669,895 $54,169 $24,746 $369,024 $13,054 $0 ¥ + + ¥ + $460,921 $37,271 $17,026 $253,907 $8,981 $0 Total Recognized Assets: .............................................................................................. Non-Recognized Assets Total Investments and Special Funds .................................................................................. = $996,442 = $685,602 + $6,243 + $4,295 Total Non-Recognized Assets: ...................................................................................... Total Assets Total Recognized Assets ...................................................................................................... Total Non-Recognized Assets .............................................................................................. = $6,243 = $4,295 + $996,442 $6,243 + $685,602 $4,295 Total Assets: .................................................................................................................. Recognized Sources of Funds Total Stockholder Equity ....................................................................................................... Long-Term Debt .................................................................................................................... Current Notes Payable .......................................................................................................... Advances from Affiliated Companies .................................................................................... Long-Term Obligations—Capital Leases .............................................................................. = $1,002,685 = $689,897 + + + + $647,677 $318,571 $24,746 $0 $0 + + + + $445,633 $219,193 $17,026 $0 $0 Total Recognized Sources: ............................................................................................ Non-Recognized Sources of Funds Pension Liability .................................................................................................................... Other Non-Current Liabilities ................................................................................................ Deferred Federal Income Taxes ........................................................................................... Other Deferred Credits .......................................................................................................... = $990,994 = $681,852 + + + $0 $0 $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 + = $990,994 $0 $990,994 + = $681,852 $0 $681,852 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 .................................................................................................................... ¥ + + ¥ + $454,465 $409,366 $25,822 $420,422 $0 $60,195 ¥ + + ¥ + $681,697 $614,048 $38,734 $630,632 $0 $90,293 = $551,538 = $827,308 + = $0 $0 + = $0 $0 + $551,538 $0 + $827,308 $0 Total Assets ....................................................................................................................... Recognized Sources of Funds: Total Stockholder Equity ........................................................................................................... Long-Term Debt ........................................................................................................................ Current Notes Payable .............................................................................................................. Advances from Affiliated Companies ........................................................................................ Long-Term Obligations—Capital Leases .................................................................................. = $551,538 = $827,308 + + + + $89,537 $410,357 $25,822 $0 $0 + + + + $134,305 $615,535 $38,734 $0 $0 Total Recognized Sources ................................................................................................. Non-Recognized Sources of Funds: Pension Liability ........................................................................................................................ Other Non-Current Liabilities .................................................................................................... Deferred Federal Income Taxes ............................................................................................... = $525,716 = $788,574 + + $0 $0 $0 + + $0 $0 $0 Total Recognized Assets ................................................................................................... Non-Recognized Assets: Total Investments and Special Funds ...................................................................................... Total Non-Recognized Assets ........................................................................................... Total Assets: Total Recognized Assets .......................................................................................................... Total Non-Recognized Assets .................................................................................................. mstockstill on DSK4VPTVN1PROD with PROPOSALS Area 5 VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 PO 00000 Frm 00048 Fmt 4702 Sfmt 4702 E:\FR\FM\08AUP1.SGM 08AUP1 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules 48385 TABLE 18—TOTAL SOURCES OF FUNDS, DISTRICT TWO—Continued Area 4 Area 5 Other Deferred Credits .............................................................................................................. + $0 + $0 Total Non-Recognized Sources ......................................................................................... Total Sources of Funds: Total Recognized Sources ........................................................................................................ Total Non-Recognized Sources ................................................................................................ = $0 = $0 + $525,716 $0 + $788,574 $0 Total Sources of Funds ..................................................................................................... = $525,716 = $788,574 TABLE 19—TOTAL SOURCES OF FUNDS, DISTRICT THREE Area 6 Recognized Assets: Total Current Assets .......................................................................... Total Current Liabilities ...................................................................... Current Notes Payable ...................................................................... Total Property and Equipment (NET) ................................................ Land ................................................................................................... Total Other Assets ............................................................................. Area 7 Area 8 ¥ + + ¥ + $658,934 $64,869 $3,869 $21,905 $0 $540 ¥ + + ¥ + $244,050 $24,025 $1,433 $8,113 $0 $200 ¥ + + ¥ + $317,265 $31,233 $1,863 $10,547 $0 $260 Total Recognized Assets ........................................................... Non-Recognized Assets: Total Investments and Special Funds ............................................... = $620,379 = $229,771 = $298,702 + $0 + $0 + $0 Total Non-Recognized Assets .................................................... Total Assets: Total Recognized Assets ................................................................... Total Non-Recognized Assets ........................................................... = $0 = $0 = $0 + $620,379 $0 + $229,771 $0 + $298,702 $0 Total Assets ................................................................................ Recognized Sources of Funds: Total Stockholder Equity ................................................................... Long-Term Debt ................................................................................ Current Notes Payable ...................................................................... Advances from Affiliated Companies ................................................ Long-Term Obligations—Capital Leases .......................................... = $620,379 = $229,771 = $298,702 + + + + $606,164 $6,478 $3,869 $0 $0 + + + + $224,505 $2,399 $1,433 $0 $0 + + + + $291,857 $3,119 $1,863 $0 $0 Total Recognized Sources ......................................................... Non-Recognized Sources of Funds: Pension Liability ................................................................................. Other Non-Current ............................................................................. Liabilities ............................................................................................ Deferred Federal Income .................................................................. Taxes ................................................................................................. Other Deferred Credits ...................................................................... = $616,511 = $228,337 = $296,839 $0 $0 $0 + $0 + $0 + $0 + + $0 $0 + + $0 $0 + + $0 $0 = $0 = $0 = $0 + $616,511 $0 + $228,337 $0 + $296,839 $0 Total Sources of Funds .............................................................. mstockstill on DSK4VPTVN1PROD with PROPOSALS Total Non-Recognized Sources ................................................. Total Sources of Funds: Total Recognized Sources ................................................................ Total Non-Recognized Sources ........................................................ = $616,511 = $228,337 = $296,839 Tables 17 through 19 also relate to the second part of the formula for calculating the investment base. The second part establishes a ratio between recognized sources of funds and total sources of funds. Since no nonrecognized sources of funds (sources we VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 do not recognize as required to support pilotage operations) exist for any of the pilot associations for this year’s rulemaking, the ratio between recognized sources of funds and total sources of funds is 1:1 (or a multiplier of 1) in all cases. Table 20 applies the PO 00000 Frm 00049 Fmt 4702 Sfmt 4702 multiplier of 1 and shows that the investment base for each association equals its total recognized assets. Table 20 also expresses these results by area, because area results will be needed in subsequent steps. E:\FR\FM\08AUP1.SGM 08AUP1 48386 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules TABLE 20—INVESTMENT BASE BY AREA AND DISTRICT District Total recognized assets ($) Area Recognized sources of funds ($) Total sources of funds ($) Multiplier (ratio of recognized to total sources) Investment base ($) 1 One ........................................................... 1 2 996,442 685,602 990,994 681,852 990,994 681,852 1 1 996,442 685,602 TOTAL ............................................... Two 2 ......................................................... ........................ 4 5 ........................ 551,538 827,308 ........................ 525,716 788,574 ........................ 525,716 788,574 ........................ 1 1 1,682,044 551,538 827,308 TOTAL ............................................... Three ......................................................... ........................ 6 7 8 ........................ 620,379 229,771 298,702 ........................ 616,511 228,337 296,839 ........................ 616,511 228,337 296,839 ........................ 1 1 1 1,378,846 620,379 229,771 298,702 TOTAL ............................................... ........................ ........................ ........................ ........................ ........................ 1,148,852 base’’ = ‘‘Total recognized assets’’ × ‘‘Multiplier (ratio of recognized to total sources)’’. pilot associations that provide pilotage services in Districts One and Three operate as partnerships. The pilot association that provides pilotage service for District Two operates as a corporation. 1 ‘‘Investment 2 The 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 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 2012, the preceding year, the allowed ROI was 3.67 percent, based on the average rate of return for that year on Moody’s AAA corporate bonds, which can be found at: https://research.stlouisfed.org/fred2/ series/AAA/downloaddata?cid=119. Step 6: Adjustment Determination. The first part of 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 ...................................................................................................... $2,358,327 $647,864 $1,349,999 $360,464 $18,484 $341,980 $0 $341,980 $360,464 $996,442 0.3618 ¥ ¥ = ¥ = ¥ = ÷ = Area 2 ¥ ¥ = ¥ = ¥ = ÷ = $1,546,373 $447,348 $819,298 $279,728 $12,718 $267,010 $0 $267,010 $279,728 $685,602 0.4080 TABLE 22—PROJECTED ROI, AREAS IN DISTRICT TWO mstockstill on DSK4VPTVN1PROD with PROPOSALS 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 ...................................................................................................... $1,193,426 $517,627 $655,438 $20,361 $2,772 $17,589 $4,800 $12,789 $15,561 $551,538 0.0282 ¥ ¥ = ¥ = ¥ = ÷ = Area 5 ¥ ¥ = ¥ = ¥ = ÷ = $2,571,038 $776,442 $1,349,999 $444,597 $4,159 $440,438 $7,200 $433,238 $437,397 $827,308 0.5287 TABLE 23—PROJECTED ROI, AREAS IN DISTRICT THREE Area 6 Revenue (from Step 3) ............................................................................. VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 PO 00000 Frm 00050 Fmt 4702 $1,921,756 Sfmt 4702 E:\FR\FM\08AUP1.SGM Area 7 $1,459,929 08AUP1 Area 8 $1,407,490 48387 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules TABLE 23—PROJECTED ROI, AREAS IN DISTRICT THREE—Continued Area 6 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 ............................................................... The second part required for Step 6 compares the results of Tables 21 through 23 with the target ROI (3.67 ¥ ¥ = ¥ = ¥ = Area 7 $909,282 $983,157 $29,317 $2,682 $26,635 $0 $26,635 $29,317 620,379 0.0473 ÷ = percent) we obtained in Step 5 to determine if an adjustment to the base ¥ ¥ = ¥ = ¥ = Area 8 ¥ ¥ = ¥ = ¥ = $338,227 $899,999 $221,703 $993 $220,710 $0 $220,710 $221,703 $229,771 0.9649 ÷ = $439,880 $819,298 $148,312 $1,291 $147,021 $0 $147,021 $148,312 $298,702 0.4965 ÷ = 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 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 ................... Target return on investment .......................... Difference in return on investment ................ 1Note: Decimalization 0.3618 0.4080 0.0282 0.5287 0.0473 0.9649 0.4965 0.0367 0.0367 0.0367 0.0367 0.0367 0.0367 0.0367 0.3251 0.3713 (0.0085) 0.4920 0.0106 0.9282 0.4598 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 1 2 4 5 6 7 8 Federal tax allowance Revenue needed (Designated waters) .................. (Undesignated waters) .............. (Undesignated waters) .............. (Designated waters) .................. (Undesignated waters) .............. (Designated waters) .................. (Undesignated waters) .............. $647,864 447,348 517,627 776,442 909,282 338,227 439,880 + + + + + + + $1,349,999 819,298 655,438 1,349,999 983,157 899,999 819,298 + + + + + + + $36,569 25,162 20,241 30,362 22,768 8,433 10,962 + + + + + + + $0 0 4,800 7,200 0 0 0 = = = = = = = $2,034,432 1,291,807 1,198,107 2,164,003 1,915,207 1,246,659 1,270,140 Total ............................................... mstockstill on DSK4VPTVN1PROD with PROPOSALS Area Area Area Area Area Area Area Investment base (Step 4) × 3.67% (Target ROI Step 5) Target pilot compensation (Step 2) 4,076,671 + 6,877,187 + 154,498 + 12,000 = 11,120,355 The ‘‘Revenue Needed’’ column of Table 25 is more than the revenue we projected in Table 16. For purposes of transparency, we verify the calculations VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 in Table 25 by rerunning the formula in the first part of Step 6, using the revenue needed from Table 25 instead of the Table 16 revenue projections we PO 00000 Frm 00051 Fmt 4702 Sfmt 4702 used in Tables 21 through 23. Tables 26 through 28 show that attaining the Table 25 revenue needed is sufficient to recover target ROI. E:\FR\FM\08AUP1.SGM 08AUP1 48388 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules 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 ....................................................................................................................... $2,034,432 647,864 1,349,999 36,569 18,484 18,085 0 18,085 36,569 996,442 0.0367 ¥ ¥ = ¥ = ¥ = ÷ = Area 2 ¥ ¥ = ¥ = ¥ = ÷ = $1,291,807 447,348 819,298 25,162 12,718 12,444 0 12,444 25,162 685,602 0.0367 TABLE 27—BALANCING REVENUE NEEDED AND TARGET ROI, DISTRICT TWO 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) ........................................................................................................ Return on Investment ....................................................................................................................... + ¥ ¥ = ¥ = ¥ = $1,198,107 517,627 655,438 25,041 2,772 22,269 4,800 17,469 20,241 551,538 0.0367 ÷ = Area 5 + ¥ ¥ = ¥ = ¥ = ÷ = $2,164,003 776,442 1,349,999 37,562 4,159 33,403 7,200 26,203 30,362 827,308 0.0367 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. Finally, and subject to negotiation with Canada or adjustment for other + ¥ ¥ = ¥ = ¥ = ÷ = $1,915,207 $909,282 $983,157 $22,768 $2,682 $20,086 $0 $20,086 $22,768 $620,379 0.0367 supportable circumstances, we calculate rate adjustments by dividing the Step 6 revenue needed (Table 25) by the Step Area 7 + ¥ ¥ = ¥ = ¥ = $1,246,659 $338,227 $899,999 $8,433 $993 $7,440 $0 $7,440 $8,433 $229,771 0.0367 ÷ = Area 8 + ¥ ¥ = ¥ = ¥ = ÷ = $1,270,140 $439,880 $819,298 $10,962 $1,291 $9,671 $0 $9,671 $10,962 $298,702 0.0367 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 mstockstill on DSK4VPTVN1PROD with PROPOSALS Revenue Needed (from Step 6) ....................................................................................................... Revenue (from Step 3) ..................................................................................................................... Rate Multiplier .................................................................................................................................. Area 2 St. Lawrence River Ratemaking projections Lake Ontario ÷ = $2,034,432 $2,358,327 0.8627 ÷ = $1,291,807 $1,546,373 0.8354 TABLE 30—RATE MULTIPLIER, AREAS IN DISTRICT TWO Area 4 Area 5 Lake Erie Southeast Shoal to Port Huron, MI Ratemaking projections Revenue Needed (from Step 6) ....................................................................................................... VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 PO 00000 Frm 00052 Fmt 4702 Sfmt 4702 E:\FR\FM\08AUP1.SGM $1,198,107 08AUP1 $2,164,003 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules 48389 TABLE 30—RATE MULTIPLIER, AREAS IN DISTRICT TWO—Continued Area 4 Area 5 Lake Erie Southeast Shoal to Port Huron, MI Ratemaking projections Revenue (from Step 3) ..................................................................................................................... Rate Multiplier .................................................................................................................................. ÷ = $1,193,426 1.0039 ÷ = $2,571,038 0.8417 TABLE 31—RATE MULTIPLIER, AREAS IN DISTRICT THREE Area 6 Revenue Needed (from Step 6) ............................................................... Revenue (from Step 3) ............................................................................. Rate Multiplier ........................................................................................... Area 7 Area 8 Lakes Huron and Michigan Ratemaking projections St. Mary’s River Lake Superior ÷ = $1,915,207 $1,921,756 0.9966 changes for 2014. The resulting 2014 rates, on average, would then be decreased approximately 11 percent from the 2013 rates. This decrease is not due to increased efficiencies in pilotage services but rather a result of recent significant downward adjustments to AMOU contracts. We declined to impose this decrease because financial data from one of the associations TABLE 32—RATE MULTIPLIER FOR BASIC RATES AND CHARGES IN 46 indicates that such a rate decrease would make it difficult for it to continue CFR 401.420 AND 401.428 funding operations and may even cause it to fold. Further, the decrease would Ratemaking projections have an adverse effect on providing safe, Total Revenue Needed efficient, and reliable pilotage in the (from Step 6) ............... $11,120,355 other two pilotage districts as well. Total revenue (from Step Finally, our Memorandum of 3) ................................. ÷ $12,458,339 Arrangements (MOA) with Canada calls Rate Multiplier ................. = 0.8926 for comparable pilotage rates between the two countries and we have proposed This table shows that rates for matching our rates to the Canadian rate, cancellation, delay, or interruption in which has actually increased by 2.5 rendering services (46 CFR 401.420) and percent this year. Our discretionary basic rates and charges for carrying a authority under Step 7 must be ‘‘based U.S. pilot beyond the normal change on requirements of the Memorandum of point, or for boarding at other than the Arrangements between the United normal boarding point (46 CFR States and Canada, and other 401.428), would decrease by 10.74 supportable circumstances that may be percent in all areas. appropriate.’’ The MOA call for Without further action, the existing comparable United States and Canadian rates we established in our 2013 final rates, and the rates would not be rule would then be multiplied by the comparable if United States rates for rate multipliers from Tables 29 through 2014 decrease by approximately 11 31 to calculate the area by area rate percent, while Canadian rates for 2014 We calculate a rate multiplier for adjusting the basic rates and charges described in 46 CFR 401.420 and 401.428, and it is applicable in all areas. We divide total revenue needed (Step 6, Table 25) by total projected revenue (Steps 3 and 3.A, Table 16). Table 32 shows this calculation. ÷ = $1,246,659 $1,459,929 0.8539 ÷ = $1,270,140 $1,407,490 0.9024 increase by 2.5 percent. ‘‘Other supportable circumstances’’ we have for exercising our discretion include recent E.O. 13609, ‘‘Promoting International Regulatory Cooperation,’’ which calls on Federal agencies to eliminate ‘‘unnecessary differences’’ between U.S. and foreign regulations (77 FR 26413; May 4, 2012; sec. 1), and the risk that a substantial rate decrease would jeopardize the ability of the three pilotage associations to provide safe, efficient, and reliable pilotage service. Therefore, we propose relying on the discretionary authority we have under Step 7 to further adjust rates so that they match those adopted by the Canadian Great Lakes Pilotage Authority for 2014. Table 33 compares the impact, area by area, that an average decrease of 11 percent would have, relative to the impact each area would experience if United States rates match those of the Canadian GLPA. A Coast Guard contractor is currently preparing a comprehensive study of our Great Lakes Pilotage ratemaking methodology, which is scheduled to be completed later in 2013. The study will address possible alternatives to the use of AMOU contracts as benchmarks for pilot compensation. We welcome any recommendations from GLPAC or the public on that issue. mstockstill on DSK4VPTVN1PROD with PROPOSALS TABLE 33—IMPACT OF EXERCISING STEP 7 DISCRETION Percent change in rate without exercising Step 7 discretion Area Area Area Area Area Area Area 1 2 4 5 6 7 (Designated waters) ..................................................................................................... (Undesignated waters) ................................................................................................. (Undesignated waters) ................................................................................................. (Designated waters) ..................................................................................................... (Undesignated waters) ................................................................................................. (Designated waters) ..................................................................................................... VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 PO 00000 Frm 00053 Fmt 4702 Sfmt 4702 E:\FR\FM\08AUP1.SGM ¥13.73 ¥16.46 0.39 ¥15.83 ¥0.34 ¥14.61 08AUP1 Percent change in rate with exercise of Step 7 discretion 2.50 2.50 2.50 2.50 2.50 2.50 48390 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules TABLE 33—IMPACT OF EXERCISING STEP 7 DISCRETION—Continued Percent change in rate without exercising Step 7 discretion Area ¥9.76 Area 8 (Undesignated waters) ................................................................................................. The following tables reflect our proposed rate adjustments of 2.5 percent across all areas. Percent change in rate with exercise of Step 7 discretion 2.50 Tables 34 through 36 show these calculations. TABLE 34—PROPOSED ADJUSTMENT OF PILOTAGE RATES, AREAS IN DISTRICT ONE 2013 Rate Adjusted rate for 2014 Rate multiplier Area 1—St. Lawrence River $18.75/km, $33.19/mi $416 $1,361 $908 $3,984 Each lock transited ........................................................................................... Harbor movage ................................................................................................. Minimum basic rate, St. Lawrence River ......................................................... Maximum rate, through trip .............................................................................. × 1.025 = × × × × 1.025 1.025 1.025 1.025 = = = = $19.22/km, $34.02/mi $426 $1,395 $931 $4,084 $851 $812 Basic Pilotage ................................................................................................... × × 1.025 1.025 = = $872 $832 Area 2—Lake Ontario 6-hour period .................................................................................................... Docking or undocking ....................................................................................... Note: Numbers may not total due to rounding. In addition to the proposed rate charges in Table 34, and for the reasons we discussed in the Summary section of Part V of this preamble, we propose adding the authority to impose surcharges in the governing regulations and, under that new regulation, we propose authorizing District One to implement a temporary supplemental 3 percent charge on each source form (the ‘‘bill’’ for pilotage service) for the duration of the 2014 shipping season, which begins in March 2014. The Canadian Great Lakes Pilotage Authority (GLPA) has used an 18 percent surcharge without disrupting traffic. As a result, we have concluded that a 3 percent surcharge will not disrupt traffic. District One must provide us with monthly status reports once this surcharge becomes effective for the duration of the 2014 shipping season, which begins in March 2014. We will exclude these training expenses from future rates. TABLE 35—PROPOSED ADJUSTMENT OF PILOTAGE RATES, AREAS IN DISTRICT TWO 2013 Rate Adjusted rate for 2014 Rate multiplier Area 4—Lake Erie 6-hour period .................................................................................................... Docking or undocking ....................................................................................... Any point on Niagara River below Black Rock Lock ....................................... 828 637 1,626 × × × 1.025 1.025 1.025 = = = 849 653 1,667 mstockstill on DSK4VPTVN1PROD with PROPOSALS 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 ...................................... VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 PO 00000 Frm 00054 Fmt 4702 Sfmt 4702 1,382 2,339 3,037 2,339 × × × × 1.025 1.025 1.025 1.025 = = = = 1,417 2,397 3,113 2,397 4,074 × 1.025 = 4,176 4,719 3,060 2,381 1,693 1,382 × × × × × 1.025 1.025 1.025 1.025 1.025 = = = = = 4,837 3,137 2,441 1,735 1,417 4,074 3,060 1,382 2,339 × × × × 1.025 1.025 1.025 1.025 = = = = 4,176 3,137 1,417 2,397 E:\FR\FM\08AUP1.SGM 08AUP1 48391 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules TABLE 35—PROPOSED ADJUSTMENT OF PILOTAGE RATES, AREAS IN DISTRICT TWO—Continued 2013 Rate 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 ................................................................... 3,037 3,060 1,693 2,339 3,060 Adjusted rate for 2014 Rate multiplier × × × × × 1.025 1.025 1.025 1.025 1.025 = = = = = 3,113 3,137 1,735 2,397 3,137 Note: Numbers may not total due to rounding. TABLE 36—PROPOSED ADJUSTMENT OF PILOTAGE RATES, AREAS IN DISTRICT THREE 2013 Rate Adjusted rate for 2014 Rate multiplier Area 6—Lakes Huron and Michigan 6-hour Period .................................................................................................... Docking or undocking ....................................................................................... $691 $656 × × 1.025 1.025 = = $708 $672 Area 7—St. Mary’s River between any point on or in $2,583 $2,583 $973 × × × 1.025 1.025 1.025 = = = $2,648 $2,648 $997 $2,165 × 1.025 = $2,219 $973 $2,165 $973 $973 × × × × 1.025 1.025 1.025 1.025 = = = = $997 $2,219 $997 $997 $586 $557 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 ................................................................................................. × × 1.025 1.025 = = $601 $571 Area 8—Lake Superior 6-hour period .................................................................................................... Docking or undocking ....................................................................................... Note: Numbers may not total due to rounding. VI. Regulatory Analyses We developed this proposed rule after considering numerous statutes and E.O.s related to rulemaking. Below we summarize our analyses based on these statutes or E.O.s. mstockstill on DSK4VPTVN1PROD with PROPOSALS A. Regulatory Planning and Review Executive Orders 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 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 proposed rule is not a ‘‘significant regulatory action’’ under section 3(f) of E.O. 12866. Accordingly, the NPRM has not been reviewed by the VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 Office of Management and Budget (OMB). The Coast Guard is required to review and adjust pilotage rates on the Great Lakes annually. See Parts 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 for this proposed rulemaking, we are adjusting the pilotage rates for the 2014 shipping season to generate sufficient revenue to cover allowable expenses, and to target pilot compensation and returns on pilot associations’ investments. The rate adjustments in this proposed rule would, if codified, lead to a cost in District One and cost savings in Districts Two and Three. The cost savings that would accrue to Districts Two and Three would outweigh the cost to District One, which would result in an estimated annual cost savings to PO 00000 shippers of approximately $817,983 across all three districts.5 In addition to the overall cost savings that would accrue to all three districts as a result of the rate adjustments, we propose authorizing District One to implement a temporary supplemental 3 percent surcharge to traffic in District One in order to recover training expenses from 2012. This temporary surcharge would be authorized for the duration of the 2014 shipping season, which begins in March. We estimate that this would generate $120,070. At the end of the 2014 shipping season, we will account for the monies the surcharge generates and make adjustments (debits/credits) to the operating expenses for the following year.6 5 Despite increasing Great Lakes pilotage rates, on average, by approximately 2.5 percent from the current rates set in the 2013 final rule, we estimate a net cost savings across all three districts as a result of an expected decrease in the demand for pilotage services from the previous year. 6 Assuming our estimate is correct, we would credit District One shippers $71,075 in order to Continued Frm 00055 Fmt 4702 Sfmt 4702 E:\FR\FM\08AUP1.SGM 08AUP1 48392 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules Therefore, this proposed rule is expected to result in a cost savings to shippers of approximately $697,914 across all three districts.7 A regulatory assessment follows. The proposed rule would apply the 46 CFR part 404, Appendix A, full ratemaking methodology, including the exercise of our discretion to increase Great Lakes pilotage rates, on average, approximately 2.5 percent overall from the current rates set in the 2013 final rule. The Appendix A methodology is discussed and applied in detail in Part V of this preamble. Among other factors described in Part V, it reflects audited 2011 financial data from the pilotage 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 2013 and used financial data from the 2010 base accounting year. The last annual rate review, conducted under 46 CFR part 404, Appendix C, was completed early in 2011. 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 proposed rule, such as recreational boats and vessels operating only within the Great Lakes system, may elect to purchase pilotage services. However, this election is voluntary and does not affect our calculation of the rate and is not a part of our estimated national cost to shippers. Our sampling of pilot data suggests that there are very few U.S. domestic vessels that do not have registry and operate only in the Great Lakes that voluntarily purchase pilotage services. We used 2010–2012 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. Using that period, we found that approximately 128 vessels journeyed into the Great Lakes system annually. These vessels entered the Great Lakes by transiting 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 128 vessels, there were approximately 353 annual U.S. port arrivals before the vessels left the Great Lakes system, based on 2010–2012 vessel data from MISLE. The impact of the rate adjustment to shippers is estimated from the District pilotage revenues. These revenues represent the direct and indirect costs (‘‘economic costs’’) that shippers must pay for pilotage services. The Coast Guard sets rates so that revenues equal the estimated cost of pilotage for these services. We estimate the additional impact (costs or savings) of the rate adjustment in this proposed rule to be the difference between the total projected revenue needed to cover costs in 2014, based on the 2013 rate adjustment, and the total projected revenue needed to cover costs in 2014, as set forth in this proposed rule, plus any temporary surcharges authorized by the Coast Guard. Table 37 details projected revenue needed to cover costs in 2014 after making the discretionary adjustment to pilotage rates as discussed in Step 7 of Part VI of this preamble. Table 38 summarizes the derivation for calculating the 3 percent surcharge on District One traffic as discussed in Step 7 of Part VI of this preamble. Table 39 details the additional costs or savings by area and district as a result of the rate adjustments and the temporary surcharge to District One traffic. TABLE 37—RATE ADJUSTMENT BY AREA AND DISTRICT [$U.S.; Non-discounted] 2013 Pilotage rates 8 Rate change 9 2014 Pilotage rates 10 Projected 2014 bridge hours 11 Projected revenue needed in 2014 12 $460.97 284.84 1.0250 1.0250 $472.50 291.96 5,116 5,429 $2,417,285 1,585,032 Total, District One ........................... Area 4 .................................................... Area 5 .................................................... .............................. 205.27 508.91 .............................. 1.0250 1.0250 .............................. 210.40 521.64 .............................. 5,814 5,052 4,002,318 1,223,262 2,635,314 Total, District Two ........................... Area 6 .................................................... Area 7 .................................................... Area 8 .................................................... .............................. 199.95 482.94 186.67 .............................. 1.0250 1.0250 1.0250 .............................. 204.95 495.01 191.34 .............................. 9,611 3,023 7,540 3,858,576 1,969,800 1,496,427 1,442,677 Total, District Three ........................ mstockstill on DSK4VPTVN1PROD with PROPOSALS Area 1 .................................................... Area 2 .................................................... .............................. .............................. .............................. .............................. 4,908,904 * Some values may not total due to rounding. 8 These 2013 estimates are described in Table 16 of this NPRM. 9 The estimated rate changes are described in Table 33 of this NPRM. 10 2014 Pilotage Rates = 2013 Pilotage Rates x Rate Change. 11 These 2014 estimates are detailed in Table 14 of this NPRM. 12 Projected Revenue needed in 2014 = 2014 Pilotage Rates × Projected 2014 Bridge Hours. account for the difference between the total surcharges collected ($120,070) and the actual training expenses incurred ($48,995). VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 7 Total cost savings across all three districts is equal to the cost savings from rate changes plus a temporary surcharge to traffic in District One. PO 00000 Frm 00056 Fmt 4702 Sfmt 4702 E:\FR\FM\08AUP1.SGM 08AUP1 48393 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules TABLE 38—DERIVATION OF TEMPORARY SURCHARGE Area 1 Area 2 Projected Revenue Needed in 2014 13 ................................................................................... Surcharge Rate ........................................................................................................................ Surcharge Raised .................................................................................................................... $2,417,285 3% $72,519 $1,585,032 3% $47,551 Total Surcharge ................................................................................................................ ........................................ $120,070 13 These estimates are described in Table 37 of this NPRM. TABLE 39—IMPACT OF THE PROPOSED RULE BY AREA AND DISTRICT [$U.S: Non-discounted] Projected revenue needed in 2013 14 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 2014 $2,404,424 1,569,160 3,973,584 1,398,694 2,596,484 3,995,178 2,281,673 1,556,517 1,780,829 5,619,019 $2,417,285 1,585,032 4,002,318 1,223,262 2,635,314 3,858,576 1,969,800 1,496,427 1,442,677 4,908,904 Temporary surcharge 15 $72,519 47,551 120,070 .............................. .............................. .............................. .............................. .............................. .............................. .............................. Additional costs or savings of this proposed rule $85,380 63,423 148,803 (175,432) 38,830 (136,602) (311,873) (60,090) (338,152) (710,115) mstockstill on DSK4VPTVN1PROD with PROPOSALS * Some values may not total due to rounding. 14 These 2013 estimates are described in Table 27 of the 2013 NPRM. 15 These estimates are described in Table 38 of this NPRM. After applying the discretionary rate change in this NPRM, the resulting difference between the projected revenue in 2013 and the projected revenue in 2014 is the annual impact to shippers from this proposed rule. This figure is equivalent to the total additional payments or savings that shippers would incur for pilotage services from this proposed rule. As discussed earlier, we consider a reduction in payments to be a cost savings. The impact of the discretionary rate adjustment in this proposed rule to shippers varies by area and district. The discretionary rate adjustments would lead to affected shippers operating in District One experiencing total cost increases of $28,733.56, and affected shippers operating in District Two and District Three experiencing total cost savings of $136,601.82 and $710,115.00, respectively. The savings that accrue to shippers operating in District Two and District Three are the result of an expected decrease in the demand for pilotage services. In addition to the rate adjustments, District One would also incur a temporary surcharge of 3 percent to traffic for the duration of the 2014 season in order to recover training expenses incurred from 2012. We estimate that this surcharge would generate $120,070. At the end of the 2014 shipping season, we will account for the monies the surcharge generates and make adjustments (debits/credits) to the operating expenses for the following year.16 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 the number of port arrivals of their vessels’ trips. However, the additional savings reported earlier in this NPRM does capture the adjustment the shippers would experience as a result of the proposed rate adjustment. The overall impact of this NPRM would be a cost savings to shippers of approximately $697,914 across all three districts. This proposed rule would allow the Coast Guard to meet the statutory requirements to review the rates for pilotage services on the Great Lakes, thus ensuring proper pilot compensation. Alternatively, if we imposed the new rates based on the new contract data from AMOU, there would be an approximately 11 percent decrease in rates across the system. This would have a larger effect on industry, moving from a proposed cost savings of approximately $697,914 to a cost savings of approximately $2,367,640. Table 40 details projected revenue needed to cover costs in 2014 if the discretionary adjustment to pilotage rates as discussed in Step 7 of Part VI of this preamble is not made. Table 41 details the additional costs or savings by area and district as a result of this alternative proposal. 16 Assuming our estimate is correct, we would credit District One shippers $71,075 at the end of the 2014 season in order to account for the difference between the total surcharges collected ($120,070) and the actual training expenses incurred by District One pilots ($48,995). 17 These 2014 estimates are detailed in Table 14 of this NPRM. VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 PO 00000 Frm 00057 Fmt 4702 Sfmt 4702 E:\FR\FM\08AUP1.SGM 08AUP1 48394 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules TABLE 40—ALTERNATIVE RATE ADJUSTMENT BY AREA AND DISTRICT [$U.S.; Non-discounted] 2013 Pilotage rates Area 1 .................................................... Area 2 .................................................... Total, District One ........................... Area 4 .................................................... Area 5 .................................................... Total, District Two ........................... Area 6 .................................................... Area 7 .................................................... Area 8 .................................................... Total, District Three ........................ Rate change 2014 Pilotage rates Projected 2014 bridge hours 17 $460.97 284.84 .............................. 205.27 508.91 .............................. 199.95 482.94 186.67 .............................. 0.8627 0.8354 .............................. 1.0039 0.8417 .............................. 0.9966 0.8539 0.9024 .............................. $397.66 237.95 .............................. 206.07 428.35 .............................. 199.27 412.39 168.45 .............................. 5,116 5,429 .............................. 5,814 5,052 .............................. 9,611 3,023 7,540 .............................. Projected revenue needed in 2014 $2,034,432 1,291,807 3,326,239 1,198,107 2,164,002 3,362,109 1,915,207 1,246,659 1,270,140 4,432,006 * Some values may not total due to rounding. TABLE 41—ALTERNATIVE IMPACT OF THE RULE BY AREA AND DISTRICT [$U.S.; Non-discounted] Projected revenue needed in 2013 (A) 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 2014 (B) $2,404,424 1,569,160 3,973,584 1,398,694 2,596,484 3,995,178 2,281,673 1,556,517 1,780,829 5,619,019 $2,034,432 1,291,807 3,326,239 1,198,107 2,164,002 3,362,109 1,915,207 1,246,659 1,270,140 4,432,006 Temporary surcharge 18 (C) $61,033 38,754 99,787 .............................. .............................. .............................. .............................. .............................. .............................. .............................. Additional costs or savings of this proposed rule (B¥A) + C ($308,959) (238,599) (547,558) (200,587) (432,482) (633,069) (366,466) (309,858) (510,689) (1,187,013) * Some values may not total due to rounding. mstockstill on DSK4VPTVN1PROD with PROPOSALS We reject this alternative because a substantial rate decrease would jeopardize the ability of the three pilotage associations to provide safe, efficient, and reliable pilotage service as well as violate the Memorandum of Arrangements, which calls for the United States’ and Canada’s pilotage rates to be comparable. See our discussion of Step 7 in Part VI of this preamble for further explanation. B. Small Entities Under the Regulatory Flexibility Act (5 U.S.C. 601–612), we have considered whether this proposed 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. 18 The temporary surcharge generated under this alternative is expected to be less than under the proposed alternative. This is a result of a substantial decrease in projected revenue due to the lower Projected Pilotage Rates for 2014 under this alternative. VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 We expect that entities affected by the proposed rule would 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 proposed rule, we reviewed recent company size and ownership data from 2010–2012 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, foreignowned 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 the proposed rule that receive PO 00000 Frm 00058 Fmt 4702 Sfmt 4702 revenue from pilotage services. These are the three pilot associations that provide and manage pilotage services within the Great Lakes districts. Two of the associations operate as partnerships and one operates as a corporation. These associations are designated with the same NAICS industry classification and small-entity size standards described above, but they have fewer than 500 employees; combined, they have approximately 65 total employees. We expect no adverse impact to these entities from this proposed rule because all associations receive enough revenue to balance the projected expenses associated with the projected number of bridge hours and pilots. Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities. If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this proposed rule would have a significant economic impact on it, please submit a comment to the Docket Management Facility at the address under ADDRESSES. In your comment, explain why you think it E:\FR\FM\08AUP1.SGM 08AUP1 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules qualifies, as well as how and to what degree this proposed rule would economically affect it. C. Assistance for Small Entities Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104–121), we want to assist small entities in understanding this proposed rule so that they can better evaluate its effects on them and participate in the rulemaking. If the proposed rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please consult 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 202–372–1914. 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). mstockstill on DSK4VPTVN1PROD with PROPOSALS D. Collection of Information This proposed rule would call for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520). This proposed rule would not change the burden in the collection currently approved by the OMB under OMB Control Number 1625–0086, Great Lakes Pilotage Methodology. E. Federalism A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and have determined that it is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132. Our analysis is explained below. Congress directed the Coast Guard to establish ‘‘rates and charges for pilotage VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 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.’’ As a result, States or local governments are prohibited from regulating within this category. Therefore, the rule is consistent with the principles of federalism and preemption requirements in Executive Order 13132. While it is well settled that States may not regulate in categories in which Congress intended the Coast Guard to be the sole source of a vessel’s obligations, the Coast Guard recognizes the key role that State and local governments may have in making regulatory determinations. Additionally, for rules with implications and preemptive effect, Executive Order 13132 specifically directs agencies to consult with State and local governments during the rulemaking process. Therefore, the Coast Guard invites State and local governments and their representative national organizations to indicate their desire for participation and consultation in this rulemaking process by submitting comments to this NPRM. In accordance with Executive Order 13132, the Coast Guard will provide a federalism impact statement to document: (1) The extent of the Coast Guard’s consultation with State and local officials who submit comments to this proposed rule; (2) a summary of the nature of any concerns raised by State or local governments and the Coast Guard’s position thereon; and (3) a statement of the extent to which the concerns of State and local officials have been met. We will also report to the Office of Management and Budget any written communications with the States. 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 proposed rule would not result in such expenditure, we discuss the effects of this proposed rule elsewhere in this preamble. G. Taking of Private Property This proposed rule would not cause a taking of private property or otherwise have taking implications under E.O. PO 00000 Frm 00059 Fmt 4702 Sfmt 4702 48395 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights. H. Civil Justice Reform This proposed 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 proposed rule under E.O. 13045, Protection of Children from Environmental Health Risks and Safety Risks. This proposed rule is not an economically significant rule and would not create an environmental risk to health or risk to safety that might disproportionately affect children. J. Indian Tribal Governments This proposed 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 proposed 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 E.O. 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 (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the OMB, 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 E:\FR\FM\08AUP1.SGM 08AUP1 48396 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules systems practices) that are developed or adopted by voluntary consensus standards bodies. This proposed rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards. M. Environment For the reasons discussed in the preamble, the Coast Guard proposes to amend 46 CFR part 401 as follows: List of Subjects in 46 CFR Part 401 Administrative practice and procedure, Great Lakes, Navigation (water), Penalties, Reporting and recordkeeping requirements, Seamen. Any point on or in PART 401—GREAT LAKES PILOTAGE REGULATIONS mstockstill on DSK4VPTVN1PROD with PROPOSALS Service St. Lawrence River Basic Pilotage ........... 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. Each Lock Transited Harbor Movage ......... 2. In § 401.400, revise paragraph (b) to read as follows: ■ * * * * * (b) Weighting Factor Table: (b) Area 2 (Undesignated Waters): 0–49 ........................................ 50–159 .................................... 160–189 .................................. 190–and over .......................... 1.0 1.15 1.30 1.45 * * * * ■ 3. Add new § 401.401 to read as follows: § 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): Surcharges. To facilitate safe, efficient, and reliable pilotage, and for good cause, the Director may authorize surcharges on any rate or charge authorized by this subpart. Surcharges must be proposed for prior public comment and may not be authorized for more than one year. ■ 4. In § 401.405, revise paragraphs (a) and (b), including the footnote to Table (a), to read as follows: $2,397 1 4,837 1 4,176 N/A 3,113 2,397 2,397 1,735 Lake Erie (east of Southeast Shoal) 6-hour Period .... Docking or Undocking ..... Any point on the Niagara River below the Black Rock Lock ............... Buffalo $849 $849 653 653 N/A 1,667 (b) Area 5 (Designated Waters): Detroit River $1,417 1 4,176 $872 832 5. In § 401.407, revise paragraphs (a) and (b), including the footnote to Table (b), to read as follows: Service Toledo or any point on Lake Erie west of Southeast Shoal Lake Ontario ■ * * § 401.401 Service 6-hour Period ........................ Docking or Undocking .......... Weighting factor Range of pilotage units $19.22 per kilometer or $34.02 per mile 1. 426 1. 1,395 1. 1 The minimum basic rate for assignment of a pilot in the St. Lawrence River is $931, and the maximum basic rate for a through trip is $4,084. § 401.400 Calculation of pilotage units and determination of weighting factor. Southeast Shoal Detroit Pilot Boat $3,113 3,137 3,137 1,417 N/A St. Clair River $2,397 2,441 3,137 N/A N/A N/A 1,735 1,417 3,137 3,137 pilots are not changed at the Detroit Pilot Boat. 6. In § 401.410, revise paragraphs (a), (b), and (c) to read as follows: ■ § 401.410 Basic rates and charges on Lakes Huron, Michigan, and Superior; and the St. Mary’s River. * * * * * (a) Area 1 (Designated Waters): 1. The authority citation for part 401 continues to read as follows: 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 .................................... * * ■ We have analyzed this proposed rule under Department of Homeland Security Management Directive 023–01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321–4370f), and have made a preliminary determination that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. A preliminary environmental analysis checklist supporting this determination is available in the docket where indicated under the ‘‘Public Participation and Request for Comments’’ section of this preamble. This proposed rule is categorically excluded under section 2.B.2, figure 2–1, paragraph 34(a) of the Instruction. Paragraph 34(a) pertains to minor regulatory changes that are editorial or procedural in nature. This proposed rule adjusts rates in accordance with applicable statutory and regulatory mandates. We seek any comments or information that may lead to the discovery of a significant environmental impact from this proposed rule. 1 When § 401.405 Basic rates and charges on the St. Lawrence River and Lake Ontario. * VerDate Mar<15>2010 * (a) Area 6 (Undesignated Waters): Lakes Huron and Michigan Service 6-hour Period ........................ * 17:53 Aug 07, 2013 Jkt 229001 PO 00000 Frm 00060 Fmt 4702 Service Sfmt 4702 $708 Lakes Huron and Michigan Docking or Undocking .......... (b) Area 7 (Designated Waters): E:\FR\FM\08AUP1.SGM 08AUP1 672 Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Proposed Rules Area De Tour 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 ............................................................................................................................ each set of transportation-related provisions/clauses with one or more Service Lake Superior alternates. The rule also proposes to add a separate prescription for the basic 6-hour Period ...................... $601 clause as well as each alternate. In Docking or Undocking ........ 571 addition, the proposed rule would include the full text of each provision § 401.420 [Amended] and/or clause alternate. ■ 7. Amend § 401.420 as follows: DATES: Comments on the proposed rule ■ a. In paragraph (a), remove the text should be submitted in writing to the ‘‘$126’’ and add, in its place, the text address shown below on or before ‘‘$129’’; and remove the text ‘‘$1,972’’ October 7, 2013, to be considered in the and add, in its place, the text ‘‘$2,021’’; formation of a final rule. ■ b. In paragraph (b), remove the text ‘‘$126’’ and add, in its place, the text ADDRESSES: Submit comments ‘‘$129’’; and remove the text ‘‘$1,972’’ identified by DFARS Case 2012–D057, and add, in its place, the text ‘‘$2,021’’; using any of the following methods: and Æ Regulations.gov: https:// ■ c. In paragraph (c)(1), remove the text www.regulations.gov. Submit comments ‘‘$744’’ and add, in its place, the text via the Federal eRulemaking portal by ‘‘$763’’; and in paragraph (c)(3), remove entering ‘‘DFARS Case 2012–D057’’ the text ‘‘$126’’ and add, in its place, the under the heading ‘‘Enter keyword or text ‘‘$129’’, and remove the text ID’’ and selecting ‘‘Search.’’ Select the ‘‘$1,972’’ and add, in its place, the text link ‘‘Submit a Comment’’ that ‘‘$2,021’’. corresponds with ‘‘DFARS Case 2012– D057.’’ Follow the instructions provided § 401.428 [Amended] at the ‘‘Submit a Comment’’ screen. ■ 8. In § 401.428, remove the text Please include your name, company ‘‘$744’’ and add, in its place, the text name (if any), and ‘‘DFARS Case 2012– ‘‘$763’’. D057’’ on your attached document. Dated: July 31, 2013. Æ Email: dfars@osd.mil. Include Rajiv Khandpur, DFARS Case 2012–D057 in the subject Acting Director, Marine Transportation line of the message. Systems Management, U.S. Coast Guard. Æ Fax: 571–372–6094. [FR Doc. 2013–19209 Filed 8–7–13; 8:45 am] Æ Mail: Defense Acquisition BILLING CODE 9110–04–P Regulations System, Attn: Ms. Meredith Murphy, OUSD(AT&L)DPAP/DARS, Room 3B855, 3060 Defense Pentagon, DEPARTMENT OF DEFENSE Washington, DC 20301–3060. Comments received generally will be Defense Acquisition Regulations posted without change to https:// System www.regulations.gov, including any personal information provided. To 48 CFR Parts 212, 216, 247, and 252 confirm receipt of your comment(s), RIN 0750–AH90 please check www.regulations.gov, approximately two to three days after Defense Federal Acquisition submission to verify posting (except Regulation Supplement: Clauses With allow 30 days for posting of comments Alternates—Transportation (DFARS submitted by mail). Case 2012–D057) mstockstill on DSK4VPTVN1PROD with PROPOSALS (c) Area 8 (Undesignated Waters): Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Proposed rule. AGENCY: DoD is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to create an overarching prescription for SUMMARY: VerDate Mar<15>2010 17:53 Aug 07, 2013 Jkt 229001 Ms. Meredith Murphy, Defense Acquisition Regulations System, OUSD(AT&L)DPAP/DARS, Room 3B855, 3060 Defense Pentagon, Washington, DC 20301–3060. Telephone 571–372–6098; facsimile 571–372–6101. FOR FURTHER INFORMATION CONTACT: SUPPLEMENTARY INFORMATION: PO 00000 Frm 00061 Fmt 4702 Sfmt 4702 $2,648 2,648 2,219 2,219 N/A Gros Cap N/A 997 997 997 N/A 48397 Any harbor N/A N/A N/A N/A $997 I. Background DoD is proposing to amend the DFARS to create an overarching prescription for each set of transportation-related provisions/ clauses with one or more alternates. The rule also proposes to add a separate prescription for the basic clause as well as each alternate. In addition, the proposed rule would include the full text of each provision/clause alternate. For clarity, the preface of the alternate will continue to explain what portions of that alternate are different from the basic provision/clause. Separate prescriptions for the basic and alternates of DFARS provisions and clauses will facilitate the use of automated contract writing systems. The proposed rule will not revise the prescriptions in any substantive way or change the applicability of the provisions/clauses or their alternates. The inclusion of the full text of each provision/clause alternate aims to make the terms of a provision/clause alternate clearer to offerors and to DoD contracting officers. The current convention for alternates is to show only the changed paragraphs from the basic provision or clause. This proposed rule would include the full text of each provision/clause and each alternate, which will assist in making solicitation and contract terms and conditions easier to read and understand. By placing alternates in full text, all paragraph substitutions from the basic provision/ clause will have already been made. Inapplicable paragraphs from the basic provision/clause that are superseded by the alternate will not be included in the solicitation or contract in order to prevent confusion. Although this rule proposes to include each alternate in full, it retains the language that precedes the provision/clause or alternate, which includes the location of the alternate’s prescription and a statement that identifies which paragraphs were changed from the basic provision/ clause. Further, alternates are proposed to have individual titles that tie them to the basic clause, e.g., ‘‘Requirements— Alternate I’’ in lieu of ‘‘Alternate I.’’ This rule proposes to revise the naming convention for provisions/ clauses with alternates to indicate that E:\FR\FM\08AUP1.SGM 08AUP1

Agencies

[Federal Register Volume 78, Number 153 (Thursday, August 8, 2013)]
[Proposed Rules]
[Pages 48374-48397]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-19209]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

46 CFR Part 401

[USCG-2013-0534]
1625-AC07

Great Lakes Pilotage Rates--2014 Annual Review and Adjustment

AGENCY: Coast Guard, DHS.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Coast Guard proposes rate adjustments for pilotage
services on the Great Lakes, which were last amended in February 2013.
The proposed adjustments would establish new base rates and are made in
accordance with a full ratemaking procedure. The proposed update
reflects the Coast Guard exercising the discretion provided by Step 7
of the Appendix A methodology. The result is an upward adjustment to
match the rate increase of the Canadian Great Lakes Pilotage Authority.
We also propose adjusting weighting factors used to determine rates for
vessels of different size, providing a procedure for temporary
surcharges, and including dues paid to the American Pilots Association.
This notice of proposed rulemaking promotes the Coast Guard's strategic
goal of maritime safety.

DATES: Comments and related material must either be submitted to our
online docket via https://www.regulations.gov on or before October 7,
2013 or reach the Docket Management Facility by that date.

ADDRESSES: You may submit comments identified by docket number USCG-
2013-0534 using any one of the following methods:
(1) Federal eRulemaking Portal: https://www.regulations.gov.
(2) Fax: 202-493-2251.
(3) Mail: Docket Management Facility (M-30), U.S. Department of
Transportation, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE., Washington, DC 20590-0001.
(4) Hand delivery: Same as mail address above, between 9 a.m. and 5
p.m., Monday through Friday, except Federal holidays. The telephone
number is 202-366-9329.
To avoid duplication, please use only one of these four methods.
See the ``Public Participation and Request for Comments'' portion of
the SUPPLEMENTARY INFORMATION section below for instructions on
submitting comments.

[[Page 48375]]

FOR FURTHER INFORMATION CONTACT: If you have questions on this proposed
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 202-372-1914. If you have questions on
viewing or submitting material to the docket, call Ms. Barbara
Hairston, Program Manager, Docket Operations, telephone 202-366-9826.

SUPPLEMENTARY INFORMATION:

Table of Contents for Preamble

I. Public Participation and Request for Comments
A. Submitting Comments
B. Viewing Comments and Documents
C. Privacy Act
D. Public Meeting
II. Abbreviations
III. Basis and Purpose
IV. Background
V. Discussion of Proposed Rule
A. Summary
B. Discussion of Methodology
VI. 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. Public Participation and Request for Comments

We encourage you to participate in this rulemaking by submitting
comments and related materials. All comments received will be posted
without change to https://www.regulations.gov and will include any
personal information you have provided.

A. Submitting Comments

If you submit a comment, please include the docket number for this
rulemaking (USCG-2013-0534), indicate the specific section of this
document to which each comment applies, and provide a reason for each
suggestion or recommendation. You may submit your comments and material
online or by fax, mail, or hand delivery, but please use only one of
these means. We recommend that you include your name and a mailing
address, an email address, or a phone number in the body of your
document so that we can contact you if we have questions regarding your
submission.
To submit your comment online, go to https://www.regulations.gov and
insert ``USCG-2013-0534'' in the ``Search'' box. Click on ``Submit a
Comment'' in the ``Actions'' column. If you submit your comments by
mail or hand delivery, submit them in an unbound format, no larger than
8\1/2\ by 11 inches, suitable for copying and electronic filing. If you
submit comments by mail and would like to know that they reached the
Facility, please enclose a stamped, self-addressed postcard or
envelope.
We will consider all comments and material received during the
comment period and may change this notice of proposed rulemaking (NPRM)
based on your comments.

B. Viewing Comments and Documents

To view comments, as well as documents mentioned in this preamble
as being available in the docket, go to https://www.regulations.gov,
insert ``USCG-2013-0534'' and click ``Search.'' Click the ``Open Docket
Folder'' in the ``Actions'' column. If you do not have access to the
Internet, you may view the docket online by visiting the Docket
Management Facility in Room W12-140 on the ground floor of the
Department of Transportation West Building, 1200 New Jersey Avenue SE.,
Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday,
except Federal holidays. We have an agreement with the Department of
Transportation to use the Docket Management Facility.

C. Privacy Act

Anyone can search the electronic form of comments received into any
of our dockets by the name of the individual submitting the comment (or
signing the comment, if submitted on behalf of an association,
business, labor union, etc.). You may review a Privacy Act notice
regarding our public dockets in the January 17, 2008 issue of the
Federal Register (73 FR 3316).

D. Public Meeting

We do not now plan to hold a public meeting, but you may submit a
request for one to the docket using one of the methods specified under
ADDRESSES. In your request, explain why you believe a public meeting
would be beneficial. If we determine that one would aid this
rulemaking, we will hold one at a time and place announced by a later
notice in the Federal Register.

II. Abbreviations

AMOU American Maritime Officers Union
APA American Pilots Association
CFR Code of Federal Regulations
CPA Certified public accountant
CPI Consumer Price Index
E.O. Executive Order
FR Federal Register
GLPAC Great Lakes Pilotage Advisory Committee
MISLE Marine Information for Safety and Law Enforcement
MOA Memorandum of Arrangements
NAICS North American Industry Classification System
NPRM Notice of proposed rulemaking
OMB Office of Management and Budget
ROI Return on investment
Sec. Section symbol
U.S.C. United States Code

III. Basis and Purpose

The basis of this NPRM 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. or
Canadian 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 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, if necessary, adjusted. 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.
---------------------------------------------------------------------------

\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.
---------------------------------------------------------------------------

The purpose of this NPRM is to establish new base pilotage rates,
using the methodology found in 46 CFR part 404, Appendix A.

IV. Background

The vessels affected by this NPRM are those engaged in foreign
trade upon the U.S. waters of the Great Lakes. United

[[Page 48376]]

States and Canadian ``lakers,'' \2\ which account for most commercial
shipping on the Great Lakes, are not affected. 46 U.S.C. 9302.
---------------------------------------------------------------------------

\2\ A ``laker'' is a commercial cargo vessel especially designed
for and generally limited to use on the Great Lakes.
---------------------------------------------------------------------------

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,
which use different compensation practices.
District One, consisting of Areas 1 and 2, includes all U.S. waters
of the St. Lawrence River and Lake Ontario. District Two, consisting of
Areas 4 and 5, includes all U.S. waters of Lake Erie, the Detroit
River, Lake St. Clair, and the St. Clair River. District Three,
consisting of Areas 6, 7, and 8, includes all U.S. waters of the St.
Mary's River, Sault Ste. Marie Locks, and Lakes Michigan, Huron, and
Superior. Area 3 is the Welland Canal, which is serviced exclusively by
the Canadian Great Lakes Pilotage Authority and, accordingly, is not
included in the United States rate structure. Areas 1, 5, and 7 have
been designated by Presidential Proclamation, pursuant to the Act, to
be waters in which pilots must, at all times, be fully engaged in the
navigation of vessels in their charge. Areas 2, 4, 6, and 8 have not
been so designated because they are open bodies of water. 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 NPRM is a full ratemaking to establish new base pilotage
rates, using the methodology found in 46 CFR part 404, Appendix A. The
last full ratemaking established the current base rates in 2013 (78 FR
13521; Feb. 28, 2013). 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.
We have now completed our review of the independent accountants' 2011
financial reports. The comments by the pilot associations on those
reports and the independent accountants' final findings are discussed
in our document entitled ``Summary--Independent Accountant's Report on
Pilot Association Expenses, with Pilot Association Comments and
Accountant's Responses,'' which appears in the docket.

V. Discussion of Proposed Rule

A. Summary

We propose establishing new base pilotage rates in accordance with
the methodology outlined in Appendix A to 46 CFR part 404. The proposed
new rates would be established by March 1, 2014, and effective August
1, 2014. Our arithmetical calculations under Steps 1 through 6 of
Appendix A would result in an average 10.74 percent rate decrease. This
rate decrease is not the result of increased efficiencies in providing
pilotage services but rather is a result of recent downward changes to
American Maritime Officers Union (AMOU) contracts. Therefore, we will
exercise the discretion outlined in Step 7 and increase rates by 2.5
percent to match the Canadian Great Lakes Pilotage Authority's rate
adjustment. We will provide additional discussion when we explain our
Step 7 adjustment of pilot rates. Table 1 shows the proposed percent
change for the new rates for each area.
Secondly, we propose to adjust United States weighting factors in
this NPRM to match Canadian weighting factors. At its February 2013
meeting, the Great Lakes Pilotage Advisory Committee (GLPAC)
unanimously recommended (Resolution 13-01, which can be viewed at
www.faca.gov \3\) that the Coast Guard align United States weighting
factors with those adopted by Canada in 2008. Weighting factors are
multipliers based on the size of a ship and are used in determining
actual charges for pilotage service. Matching the Canadian weighting
factors would provide greater parity between the United States and
Canada and reduce billing confusion between the two countries, both of
which are important Federal Government concerns, as emphasized by
recent Executive Order (E.O.) 13609, ``Promoting International
Regulatory Cooperation'' (77 FR 26413; May 4, 2012). These weighting
factors are applied to the charges for pilotage service; they are not
used in the ratemaking methodology nor are they related to the annual
changes in benchmark union contracts that determine target pilot
compensation. Because this adjustment would in no way be connected with
the benchmark contract changes that take effect on August 1, 2014, we
propose making the adjustment effective March 1, 2014, to eliminate the
disparity between U.S. and Canadian pilotage systems that has existed
since 2008. Based on historic traffic levels, we believe this weighting
factor adjustment will increase U.S. pilot association revenues by
approximately 6 to 7.5 percent.
---------------------------------------------------------------------------

\3\ Resolution 13-01, a summary, and a transcript of the GLPAC
meeting are available at this Web site.
---------------------------------------------------------------------------

Next, we propose to include dues paid to the American Pilots
Association (APA) by the three districts as an allowable expense that
is necessary and reasonable for the safe conduct of pilotage on the
Great Lakes. We are committed to a safe and efficient pilotage system
on the Great Lakes and the APA, as the trade association for all
pilotage groups across the United States, has worked diligently with
the Coast Guard and the associations to share best practices and
facilitate the development of training plans for the U.S. Great Lakes
Registered Pilots. Fifteen percent of the APA dues are used for
lobbying and will be excluded, because lobbying expenses are
prohibited. Previously, APA dues were excluded from the ratemaking
process because they were deemed unnecessary for pilot licensure. While
it remains true APA membership is not needed for licensure, we now
believe that the APA's commitment to safety, professional development,
and the sharing of best practices warrants the inclusion of APA dues as
a necessary and reasonable expense.
Finally, we propose adding a new regulation that would allow the
Coast Guard to authorize temporary surcharges under the authority of 46
U.S.C. 9303(f) and in the interest of safe, efficient, and reliable
pilotage. 46 U.S.C. 9303(f) allows the Secretary to ``prescribe by
regulation rates and charges for pilotage services, giving
consideration to the public interest and the costs of providing the
services.'' Temporary surcharges would be imposed when the surcharges
serve the public interest by enabling the pilot associations to take on
expenses in the interest of providing safe and reliable pilotage. Among
the situations we think might warrant the imposition of a surcharge
would be an association's need to acquire new capital assets or new
technology, and the need to train pilots in the proper use of new
assets or technology. Under our proposal, a given surcharge will not
exceed 1 year in length and must be proposed for public comment prior
to application. We propose using this new procedure to impose a
temporary 3 percent surcharge

[[Page 48377]]

to traffic in District One to compensate pilots for $48,995 that the
District One pilots' association spent on training in 2012. Normally,
this expense would not be recognized and reflected in pilotage rates
until the 2015 annual ratemaking. By authorizing a surcharge now, we
would accelerate the reimbursement for necessary and reasonable
training expenses. This procedure will allow the associations to
recover these expenses the year after they are incurred instead of
waiting three years. We conducted several meetings with the pilot
association presidents to discuss training and they would be more
willing to participate in training if the expenses were fully
recognized the following year. The surcharge would be authorized for
the duration of the 2014 shipping season, which begins in March 2014.
This merely accelerates the payment for these improvements, which fall
within historically-approved reimbursable items. At the end of the 2014
shipping season, we will account for the monies the surcharge generate
and make adjustments (debits/credits) to the operating expenses for the
following year. We will also ensure that these accelerated training
expenses are removed from the expenses of future rulemakings.
We encourage all Great Lakes pilots to renew training on a 5-10
year basis that includes these topics, which are essential for
providing safe, efficient, and reliable pilotage service:
Radar observer certification;
Bridge resource management;
Requirements of the International Convention on Standards
of Training, Certification and Watchkeeping for Seafarers, 1978, as
amended;
Legal aspects of pilotage;
Fatigue training as recommended by the National
Transportation Safety Board; and
Basic and emergency ship handling simulator/manned models
training. The Coast Guard is pleased that District One pilots sought
portions of this training. We encourage District Two and District Three
pilots to seek similar training, which we are willing to review for
inclusion in the rate on a case-by-case basis.
All figures in the tables that follow are based on calculations
performed either by an independent accountant or by the Director's \4\
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.
---------------------------------------------------------------------------

\4\ ``Director'' is the Coast Guard Director, Great Lakes
Pilotage, which is used throughout this NPRM.

Table 1--Summary of Rate Adjustments Based on Step 7 Discretion
------------------------------------------------------------------------
Then the
percent
If pilotage service is required in: change over
the current
rate is:
------------------------------------------------------------------------
Area 1 (Designated waters)................................. 2.50
Area 2 (Undesignated waters)............................... 2.50
Area 4 (Undesignated waters)............................... 2.50
Area 5 (Designated waters)................................. 2.50
Area 6 (Undesignated waters)............................... 2.50
Area 7 (Designated waters)................................. 2.50
Area 8 (Undesignated waters)............................... 2.50
------------------------------------------------------------------------

B. Discussion of Methodology

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 2011 financial information supplied by the pilots
association.
Step 1: Projection of Operating Expenses. In this step, we project
the amount of vessel traffic annually. Based on 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 pilot association to provide us with detailed financial
information in accordance with 46 CFR part 403. The associations
complied with this requirement, supplying 2011 financial information in
2012. 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 disallowed
for ratemaking purposes. The accountant's preliminary findings were
sent to the pilot associations, they reviewed and commented on those
findings, and the accountant then finalized the findings. The Director
reviewed and accepted the final findings, resulting in the
determination of recognizable expenses. The preliminary findings, the
associations' comments on those findings, and the final findings are
all discussed in the ``Summary--Independent Accountant's Report on
Pilot Association Expenses, with Pilot Association Comments and
Accountant's Responses,'' which appears 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 2011 St. Lawrence Total
River Lake Ontario
----------------------------------------------------------------------------------------------------------------
Operating Expenses:
Other Pilotage Costs:
Pilot subsistence/Travel.............................. $234,724 $156,246 $390,970
License insurance..................................... 0 0 0
Payroll taxes......................................... 61,483 47,611 109,094
Other................................................. 837 588 1,425
-----------------------------------------------------
Total Other Pilotage Costs........................ 297,044 204,445 501,489
Pilot Boat and Dispatch Costs:

[[Page 48378]]

Pilot boat expense.................................... 111,772 76,904 188,676
Dispatch expense...................................... 0 0 0
Payroll taxes......................................... 8,611 5,925 14,536
-----------------------------------------------------
Total Pilot and Dispatch Costs.................... 120,383 82,829 203,212
Administrative Expenses:
Legal................................................. 10,592 6,922 17,514
Insurance............................................. 23,780 16,492 40,272
Employee benefits..................................... 21,282 14,645 35,927
Payroll taxes......................................... 5,032 3,463 8,495
Other taxes........................................... 5,042 3,470 8,512
Travel................................................ 756 520 1,276
Depreciation/Auto leasing/Other....................... 38,252 26,319 64,571
Interest.............................................. 18,484 12,718 31,202
Dues and subscriptions................................ 9,180 9,180 18,360
Utilities............................................. 4,314 2,941 7,255
Salaries.............................................. 50,718 34,897 85,615
Accounting/Professional fees.......................... 5,752 3,428 9,180
Pilot Training........................................ 4,200 2,277 6,477
Other................................................. 9,959 6,880 16,839
-----------------------------------------------------
Total Administrative Expenses..................... 207,343 144,152 351,495
-----------------------------------------------------
Total Operating Expenses.......................... 624,770 431,426 1,056,196
Proposed Adjustments (Independent certified public
accountant (CPA):
Operating Expenses:
Other Pilot Costs:
Pilotage subsistence/Travel........................... (2,492) (1,714) (4,206)
Payroll taxes......................................... 12,883 8,864 21,747
-----------------------------------------------------
Total Other Pilotage Costs........................ 10,391 7,150 17,541
-----------------------------------------------------
TOTAL CPA ADJUSTMENTS............................. 10,391 7,150 17,541
-----------------------------------------------------
Total Operating Expenses...................... 635,161 438,576 1,073,737
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

Table 3--Recognized Expenses for District Two
----------------------------------------------------------------------------------------------------------------
Area 4 Area 5
------------------------------------
Reported expenses for 2011 Southeast Shoal Total
Lake Erie to Port Huron,
MI
----------------------------------------------------------------------------------------------------------------
Operating Expenses:
Other Pilotage Costs:
Pilot subsistence/Travel.............................. $79,250 $118,874 $198,124
License insurance..................................... 6,168 9,252 15,420
Payroll taxes......................................... 36,676 55,013 91,689
Other................................................. 23,560 35,341 58,901
-----------------------------------------------------
Total Other Pilotage Costs........................ 145,654 218,480 364,134
Pilot Boat and Dispatch Costs:
Pilot boat expense.................................... 104,955 157,432 262,387
Dispatch expense...................................... 6,060 9,090 15,150
Employee Benefits..................................... 40,419 60,628 101,047
Payroll taxes......................................... 7,135 10,703 17,838
-----------------------------------------------------
Total Pilot and Dispatch Costs.................... 158,569 237,853 396,422
Administrative Expenses:
Legal................................................. 37,520 56,281 93,801
Office rent........................................... 26,275 39,413 65,688
Insurance............................................. 10,672 16,009 26,681
Employee benefits..................................... 16,365 24,548 40,913
Payroll taxes......................................... 4,446 6,668 11,114
Other taxes........................................... 14,273 21,409 35,682
Depreciation/Auto leasing/Other....................... 15,604 23,407 39,011
Interest.............................................. 2,772 4,159 6,931
Dues and subscriptions................................ 7,069 10,603 17,672

[[Page 48379]]

Utilities............................................. 15,410 23,115 38,525
Salaries.............................................. 39,874 59,810 99,684
Accounting/Professional fees.......................... 12,110 18,164 30,274
Pilot Training........................................ 0 0 0
Other................................................. 8,860 13,291 22,151
-----------------------------------------------------
Total Administrative Expenses..................... 211,250 316,877 528,127
-----------------------------------------------------
Total Operating Expenses:......................... 515,473 773,210 1,288,683
Proposed Adjustments (Independent CPA):
Operating Expenses:
Other Pilotage Costs:
Pilot subsistence/Travel.............................. (2,598) (3,896) (6,494)
Other................................................. (566) (850) (1,416)
-----------------------------------------------------
Total Other Pilotage Costs........................ (3,164) (4,746) (7,910)
Pilot Boat and Dispatch Costs:
Employee benefits..................................... (100) (150) (249)
-----------------------------------------------------
Total Pilot Boat and Dispatch Costs............... (100) (150) (249)
Administrative Expenses:
Employee benefits..................................... (25) (38) (63)
-----------------------------------------------------
Total Administrative Expenses..................... (25) (38) (63)
-----------------------------------------------------
TOTAL CPA ADJUSTMENTS............................. (3,289) (4,933) (8,222)
-----------------------------------------------------
Total Operating Expenses...................... 512,184 768,277 1,280,461
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

Table 4--Recognized Expenses for District Three
----------------------------------------------------------------------------------------------------------------
Area 6 Area 7 Area 8
------------------------------------------------------
Reported expenses for 2011 Lakes Huron and Total
Michigan St. Mary's River Lake Superior
----------------------------------------------------------------------------------------------------------------
Operating Expenses:
Other Pilotage Costs:
Pilot subsistence/Travel............ 196,529 72,789 94,625 363,943
License insurance................... 10,157 3,762 4,891 18,810
Payroll taxes....................... 63,803 23,631 30,720 118,153
Other............................... 2,184 809 1,052 4,045
-----------------------------------------------------------------------
Total Other Pilotage Costs...... 272,673 100,991 131,288 504,951
Pilot Boat and Dispatch Costs:
Pilot boat expense.................. 243,077 90,028 117,037 450,142
Dispatch expense.................... 87,059 32,244 41,917 161,221
Payroll taxes....................... 9,607 3,558 4,626 17,791
-----------------------------------------------------------------------
Total Pilot Boat and Dispatch 339,743 125,830 163,580 629,154
Costs..........................
Administrative Expenses:
Legal............................... 12,138 4,495 5,844 22,477
Office rent......................... 5,346 1,980 2,574 9,900
Insurance........................... 7,451 2,760 3,587 13,798
Employee benefits................... 73,230 27,122 35,259 135,611
Payroll taxes....................... 6,154 2,279 2,963 11,396
Other taxes......................... 19,339 7,163 9,311 35,813
Depreciation/Auto leasing........... 34,341 12,719 16,534 63,594
Interest............................ 2,682 993 1,291 4,966
Dues and subscriptions.............. 11,016 5,508 7,344 23,868
Utilities........................... 19,723 7,305 9,496 36,524
Salaries............................ 55,772 20,656 26,853 103,281
Accounting/Professional fees........ 13,419 4,970 6,461 24,850
Pilot Training...................... 516 191 248 955
Other............................... 5,394 1,998 2,597 9,989
-----------------------------------------------------------------------
Total Administrative Expenses... 266,521 100,139 130,362 497,022
-----------------------------------------------------------------------

[[Page 48380]]

Total Operating Expenses........ 878,937 326,960 425,230 1,631,127
Proposed Adjustments (Independent CPA):
Operating Expenses:
Other Pilotage Costs:
Payroll taxes....................... 22,446 8,313 10,807 41,566
-----------------------------------------------------------------------
Total Other Pilotage Costs...... 22,446 8,313 10,807 41,566
Administrative Expenses:
Other Taxes......................... (1,613) (598) (777) (2,988)
Depreciation/Auto leasing........... (7,707) (2,854) (3,711) (14,272)
Other............................... (610) (226) (294) (1,130)
-----------------------------------------------------------------------
Total Administrative Expenses... (9,930) (3,678) (4,782) (18,390)
-----------------------------------------------------------------------
TOTAL CPA ADJUSTMENTS........... 12,516 4,635 6,025 23,176
-----------------------------------------------------------------------
Total Operating Expenses.... 891,453 331,595 431,255 1,654,303
----------------------------------------------------------------------------------------------------------------
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 2011 financial information, the
``succeeding navigation season'' for this ratemaking is 2012. We based
our inflation adjustment of 2 percent on the 2012 change in the
Consumer Price Index (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 2011 St. Lawrence Total
River Lake Ontario
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses:.................. ... $635,161 ... $438,576 ... $1,073,737
2012 change in the CPI for the Midwest x .02 x .02 x .02
Region of the United States...............
Inflation Adjustment....................... = $12,703 = $8,772 = $21,475
----------------------------------------------------------------------------------------------------------------

Table 6--Inflation Adjustment, District Two
----------------------------------------------------------------------------------------------------------------
Area 4 Area 5
------------------ ------------------
Reported expenses for 2011 Southeast Shoal Total
Lake Erie to Port Huron,
MI
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses:.................. ... $512,184 ... $768,277 ... $1,280,461
2012 change in the CPI for the Midwest x .02 x .02 x .02
Region of the United States...............
Inflation Adjustment....................... = $10,244 = $15,366 = $25,609
----------------------------------------------------------------------------------------------------------------

Table 7--Inflation Adjustment, District Three
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 6 Area 7 Area 8
------------------ ------------------ ------------------
Reported expenses for 2011 Lakes Huron and Total
Michigan St. Mary's River Lake Superior
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses:................................... ... $891,453 ... $331,595 ... $431,255 ... $1,654,303
2012 change in the CPI for the Midwest Region of the United x .02 x .02 x .02 x .02
States.....................................................
Inflation Adjustment........................................ = $17,829 = $6,632 = $8,625 = $33,086
--------------------------------------------------------------------------------------------------------------------------------------------------------

Step 1.D: Projection of Operating Expenses. In this final sub-step
of Step 1, we 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. We are
not aware of any such foreseeable circumstances that now exist in
District One.
For District One, the projected operating expenses are based on the
calculations from Steps 1.A through 1.C. Table 8 shows these
projections.

[[Page 48381]]

Table 8--Projected Operating Expenses, District One
----------------------------------------------------------------------------------------------------------------
Area 1 Area 2
------------------ ------------------
Reported expenses for 2011 St. Lawrence Total
River Lake Ontario
----------------------------------------------------------------------------------------------------------------
Total operating expenses................... ... $635,161 ... $438,576 ... $1,073,737
Inflation adjustment 2.0%.................. + $12,703 + $8,772 + $21,475
--------------------------------------------------------------------
Total projected expenses for 2014 = $647,864 = $447,348 = $1,095,212
pilotage season.......................
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

In District Two, Federal taxes of $12,000 are accounted for in Step
6 (Federal Tax Allowance). The projected operating expenses are based
on the calculations from Steps 1.A through 1.C and Federal taxes. Table
9 shows these projections.

Table 9--Projected Operating Expenses, District Two
----------------------------------------------------------------------------------------------------------------
Area 4 Area 5
------------------ ------------------
Reported expenses for 2011 Southeast Shoal Total
Lake Erie to Port Huron,
MI
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses................... ... $512,184 ... $768,277 ... $1,280,461
Inflation adjustment 2.0%.................. + $10,244 + $15,366 + $25,609
Director's adjustment and foreseeable
circumstances
Federal taxes (accounted for in Step 6).... + ($4,800) + ($7,200) + ($12,000)
--------------------------------------------------------------------
Total projected expenses for 2014 = $517,627 = $776,442 = $1,294,070
pilotage season.......................
----------------------------------------------------------------------------------------------------------------

Currently, we are not aware of any foreseeable circumstances for
District Three. Its projected operating expenses are based on the
calculations from 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 2011 Lakes Huron and Total
Michigan St. Mary's River Lake Superior
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total expenses.............................................. ... $891,453 ... $331,595 ... $431,255 ... $1,654,303
Inflation adjustment 2.0%................................... + $17,829 + $6,632 + $8,625 + $33,086
-------------------------------------------------------------------------------------------
Total projected expenses for 2014 pilotage season....... = $909,282 = $338,227 = $439,880 = $1,687,389
--------------------------------------------------------------------------------------------------------------------------------------------------------

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 2014.
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.
The most current union contracts available to us are AMOU contracts
with three U.S. companies engaged in Great Lakes shipping. There are
two separate AMOU contracts available--we refer to them as Agreements A
and B, and 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., and Agreement B applies to all vessels operated by American
Steamship Co. and Mittal Steel USA, Inc.
Agreements A and B both expire on July 31, 2016. The AMOU has set
the daily aggregate rate--including the daily wage rate, vacation pay,
pension plan contributions, and medical plan contributions effective
August 1, 2014 as follows: (1) In undesignated waters, $612.20 for
Agreement A and $604.64 for Agreement B; and (2) In designated waters,
$842.63 for Agreement A and $829.40 for Agreement B.
Because we are interested in annual compensation, we must convert
these daily rates. We 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.

[[Page 48382]]

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

------------------------------------------------------------------------
Aggregate Rate--Wages and Vacation, Pension, and Medical Benefits Pilots
on undesignated waters
------------------------------------------------------------------------
Agreement A:
$612.20 daily rate x 270 days......... 165,294.00
Agreement B:
$604.64 daily rate x 270 days......... 163,252.80
------------------------------------------------------------------------
Pilots on designated waters
------------------------------------------------------------------------
Agreement A:
$842.63 daily rate x 270 days......... 227,510.10
Agreement B:
$829.40 daily rate x 270 days......... 223,938.00
------------------------------------------------------------------------

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%
----------------------------------------------------------------------------------------------------------------

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 Wage and Benefit Components
----------------------------------------------------------------------------------------------------------------
Undesignated Designated
waters waters
----------------------------------------------------------------------------------------------------------------
Agreement A:
Total wages and benefits...................................... ... $165,294.00 ... $227,510.10
Percent tonnage............................................... x 29.7238% x 29.7238%
---------------------------------------------
Total..................................................... = $49,132 = $67,625
Agreement B:
Total wages and benefits...................................... ... $163,252.80 ... $223,938.00
Percent tonnage............................................... x 70.2762% x 70.2762%
---------------------------------------------
Total..................................................... = $114,728 = $157,375
Projected Target Rate of Compensation:
Agreement A total weighted average wages and benefits......... ... $49,132 ... $67,625
Agreement B total weighted average wages and benefits......... + $114,728 + $157,375
---------------------------------------------
Total..................................................... = $163,860 = $225,000
----------------------------------------------------------------------------------------------------------------

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 (76 FR 6351 at 6352 col. 3 (Feb. 4, 2011)), we
do not include, and never have included, pilot delay, detention, or
cancellation in calculating bridge hours. 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 2013 final rule, we determined that 38 pilots would be
needed for ratemaking purposes. We have

[[Page 48383]]

determined that District 3 has two excess billets that remain unfilled
and that current and projected traffic levels do not support the
retention of these unfilled billets. For 2014, we project 36 pilots is
the proper number to use for ratemaking purposes. We are removing one
pilot from each of the undesignated waters of District Three (one each
from Area 6 and Area 8). The total pilot authorization strength
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
2008 ratemaking final rule (74 FR 220 at 221-22 (Jan. 5, 2009)) 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
Pilotage area Projected 2014 waters) or 1,800 Calculated value Pilots needed
bridge hours (undesignated of pilot demand (total = 36)
waters)
----------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters).... 5,116 / 1,000 = 5.116 6
Area 2 (Undesignated waters).. 5,429 / 1,800 = 3.016 5
Area 4 (Undesignated waters).. 5,814 / 1,800 = 3.230 4
Area 5 (Designated waters).... 5,052 / 1,000 = 5.052 6
Area 6 (Undesignated waters).. 9,611 / 1,800 = 5.339 6
Area 7 (Designated waters).... 3,023 / 1,000 = 3.023 4
Area 8 (Undesignated waters).. 7,540 / 1,800 = 4.189 5
----------------------------------------------------------------------------------------------------------------

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.

Table 15--Projection of Target Pilot Compensation by Area
----------------------------------------------------------------------------------------------------------------
Target rate of Projected target
Pilotage area Pilots needed pilot pilot
(total= 36) compensation compensation
----------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters)...................... 6 x $225,000 = $1,349,999
Area 2 (Undesignated waters).................... 5 x $163,860 = $819,298
Area 4 (Undesignated waters).................... 4 x $163,860 = $655,438
Area 5 (Designated waters)...................... 6 x $225,000 = $1,349,999
Area 6 (Undesignated waters).................... 6 x $163,860 = $983,157
Area 7 (Designated waters)...................... 4 x $225,000 = $899,999
Area 8 (Undesignated waters).................... 5 x $163,860 = $819,298
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

Steps 3 and 3.A: Projection of Revenue. In Steps 3 and 3.A., we
project the revenue that would be received in 2014 if demand for
pilotage services matches the bridge hours we projected in Table 14,
and if 2012 pilotage rates are left unchanged. Table 16 shows this
calculation.

Table 16--Projection of Revenue by Area
----------------------------------------------------------------------------------------------------------------
Revenue
Pilotage area Projected 2014 2013 Pilotage projection for
bridge hours rates 2013
----------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters)...................... 5,116 x $460.97 = $2,358,327
Area 2 (Undesignated waters).................... 5,429 x $284.84 = $1,546,373
Area 4 (Undesignated waters).................... 5,814 x $205.27 = $1,193,426
Area 5 (Designated waters)...................... 5,052 x $508.91 = $2,571,038
Area 6 (Undesignated waters).................... 9,611 x $199.95 = $1,921,756
Area 7 (Designated waters)...................... 3,023 x $482.94 = $1,459,929
Area 8 (Undesignated waters).................... 7,540 x $186.67 = $1,407,490
---------------------------------------------------------------
Total....................................... ................ ... ................ ... $12,458,339
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

Step 4: Calculation of Investment Base. In this step, we calculate
each association's investment base, which is 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.

[[Page 48384]]

Table 17--Total Sources of Funds, District One
----------------------------------------------------------------------------------------------------------------
Area 1 Area 2
----------------------------------------------------------------------------------------------------------------
Recognized Assets:
Total Current Assets.......................................... ... $669,895 ... $460,921
Total Current Liabilities..................................... - $54,169 - $37,271
Current Notes Payable......................................... + $24,746 + $17,026
Total Property and Equipment (NET)............................ + $369,024 + $253,907
Land.......................................................... - $13,054 - $8,981
Total Other Assets............................................ + $0 + $0
---------------------------------------------
Total Recognized Assets:.................................. = $996,442 = $685,602
Non-Recognized Assets
Total Investments and Special Funds........................... + $6,243 + $4,295
---------------------------------------------
Total Non-Recognized Assets:.............................. = $6,243 = $4,295
Total Assets
Total Recognized Assets....................................... ... $996,442 ... $685,602
Total Non-Recognized Assets................................... + $6,243 + $4,295
---------------------------------------------
Total Assets:............................................. = $1,002,685 = $689,897
Recognized Sources of Funds
Total Stockholder Equity...................................... ... $647,677 ... $445,633
Long-Term Debt................................................ + $318,571 + $219,193
Current Notes Payable......................................... + $24,746 + $17,026
Advances from Affiliated Companies............................ + $0 + $0
Long-Term Obligations--Capital Leases......................... + $0 + $0
---------------------------------------------
Total Recognized Sources:................................. = $990,994 = $681,852
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...................................... ... $990,994 ... $681,852
Total Non-Recognized Sources.................................. + $0 + $0
Total Sources of Funds:................................... = $990,994 = $681,852
----------------------------------------------------------------------------------------------------------------

Table 18--Total Sources of Funds, District Two
----------------------------------------------------------------------------------------------------------------
Area 4 Area 5
----------------------------------------------------------------------------------------------------------------
Recognized Assets:
Total Current Assets.......................................... ... $454,465 ... $681,697
Total Current Liabilities..................................... - $409,366 - $614,048
Current Notes Payable......................................... + $25,822 + $38,734
Total Property and Equipment (NET)............................ + $420,422 + $630,632
Land.......................................................... - $0 - $0
Total Other Assets............................................ + $60,195 + $90,293
---------------------------------------------
Total Recognized Assets................................... = $551,538 = $827,308
Non-Recognized Assets: ................
Total Investments and Special Funds........................... + $0 + $0
Total Non-Recognized Assets............................... = $0 = $0
Total Assets:
Total Recognized Assets....................................... ... $551,538 ... $827,308
Total Non-Recognized Assets................................... + $0 + $0
---------------------------------------------
Total Assets.............................................. = $551,538 = $827,308
Recognized Sources of Funds:
Total Stockholder Equity...................................... ... $89,537 ... $134,305
Long-Term Debt................................................ + $410,357 + $615,535
Current Notes Payable......................................... + $25,822 + $38,734
Advances from Affiliated Companies............................ + $0 + $0
Long-Term Obligations--Capital Leases......................... + $0 + $0
---------------------------------------------
Total Recognized Sources.................................. = $525,716 = $788,574
Non-Recognized Sources of Funds:
Pension Liability............................................. ... $0 ... $0
Other Non-Current Liabilities................................. + $0 + $0
Deferred Federal Income Taxes................................. + $0 + $0

[[Page 48385]]

Other Deferred Credits........................................ + $0 + $0
---------------------------------------------
Total Non-Recognized Sources.............................. = $0 = $0
Total Sources of Funds:
Total Recognized Sources...................................... ... $525,716 ... $788,574
Total Non-Recognized Sources.................................. + $0 + $0
---------------------------------------------
Total Sources of Funds.................................... = $525,716 = $788,574
----------------------------------------------------------------------------------------------------------------

Table 19--Total Sources of Funds, District Three
----------------------------------------------------------------------------------------------------------------
Area 6 Area 7 Area 8
----------------------------------------------------------------------------------------------------------------
Recognized Assets:
Total Current Assets................... ... $658,934 ... $244,050 ... $317,265
Total Current Liabilities.............. - $64,869 - $24,025 - $31,233
Current Notes Payable.................. + $3,869 + $1,433 + $1,863
Total Property and Equipment (NET)..... + $21,905 + $8,113 + $10,547
Land................................... - $0 - $0 - $0
Total Other Assets..................... + $540 + $200 + $260
--------------------------------------------------------------------
Total Recognized Assets............ = $620,379 = $229,771 = $298,702
Non-Recognized Assets:
Total Investments and Special Funds.... + $0 + $0 + $0
--------------------------------------------------------------------
Total Non-Recognized Assets........ = $0 = $0 = $0
Total Assets:
Total Recognized Assets................ ... $620,379 ... $229,771 ... $298,702
Total Non-Recognized Assets............ + $0 + $0 + $0
--------------------------------------------------------------------
Total Assets....................... = $620,379 = $229,771 = $298,702
Recognized Sources of Funds:
Total Stockholder Equity............... ... $606,164 ... $224,505 ... $291,857
Long-Term Debt......................... + $6,478 + $2,399 + $3,119
Current Notes Payable.................. + $3,869 + $1,433 + $1,863
Advances from Affiliated Companies..... + $0 + $0 + $0
Long-Term Obligations--Capital Leases.. + $0 + $0 + $0
--------------------------------------------------------------------
Total Recognized Sources........... = $616,511 = $228,337 = $296,839
Non-Recognized Sources of Funds:
Pension Liability...................... ... $0 ... $0 ... $0
Other Non-Current...................... + $0 + $0 + $0
Liabilities............................
Deferred Federal Income................ + $0 + $0 + $0
Taxes..................................
Other Deferred Credits................. + $0 + $0 + $0
--------------------------------------------------------------------
Total Non-Recognized Sources....... = $0 = $0 = $0
Total Sources of Funds:
Total Recognized Sources............... ... $616,511 ... $228,337 ... $296,839
Total Non-Recognized Sources........... + $0 + $0 + $0
--------------------------------------------------------------------
Total Sources of Funds............. = $616,511 = $228,337 = $296,839
----------------------------------------------------------------------------------------------------------------

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 pilot
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.

[[Page 48386]]

Table 20--Investment Base by Area and District
--------------------------------------------------------------------------------------------------------------------------------------------------------
Multiplier
Total Recognized Total sources (ratio of Investment
District Area recognized sources of of funds ($) recognized to base ($) \1\
assets ($) funds ($) total sources)
--------------------------------------------------------------------------------------------------------------------------------------------------------
One..................................................... 1 996,442 990,994 990,994 1 996,442
2 685,602 681,852 681,852 1 685,602
-----------------------------------------------------------------------------------------------
TOTAL............................................... .............. .............. .............. .............. .............. 1,682,044
Two \2\................................................. 4 551,538 525,716 525,716 1 551,538
5 827,308 788,574 788,574 1 827,308
-----------------------------------------------------------------------------------------------
TOTAL............................................... .............. .............. .............. .............. .............. 1,378,846
Three................................................... 6 620,379 616,511 616,511 1 620,379
7 229,771 228,337 228,337 1 229,771
8 298,702 296,839 296,839 1 298,702
-----------------------------------------------------------------------------------------------
TOTAL............................................... .............. .............. .............. .............. .............. 1,148,852
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ ``Investment base'' = ``Total recognized assets'' x ``Multiplier (ratio of recognized to total sources)''.
\2\ The pilot associations that provide pilotage services in Districts One and Three operate as partnerships. The pilot 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 2012, the preceding year, the allowed ROI was
3.67 percent, based on the average rate of return for that year on
Moody's AAA corporate bonds, which can be found at: https://research.stlouisfed.org/fred2/series/AAA/downloaddata?cid=119.
Step 6: Adjustment Determination. The first part of 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)............................................. ... $2,358,327 ... $1,546,373
Operating Expenses (from Step 1).................................. - $647,864 - $447,348
Pilot Compensation (from Step 2).................................. - $1,349,999 - $819,298
Operating Profit/(Loss)........................................... = $360,464 = $279,728
Interest Expense (from audits).................................... - $18,484 - $12,718
Earnings Before Tax............................................... = $341,980 = $267,010
Federal Tax Allowance............................................. - $0 - $0
Net Income........................................................ = $341,980 = $267,010
Return Element (Net Income + Interest)............................ ... $360,464 ... $279,728
Investment Base (from Step 4)..................................... / $996,442 / $685,602
Projected Return on Investment.................................... = 0.3618 = 0.4080
----------------------------------------------------------------------------------------------------------------

Table 22--Projected ROI, Areas in District Two
----------------------------------------------------------------------------------------------------------------
Area 4 Area 5
----------------------------------------------------------------------------------------------------------------
Revenue (from Step 3)............................................. ... $1,193,426 ... $2,571,038
Operating Expenses (from Step 1).................................. - $517,627 - $776,442
Pilot Compensation (from Step 2).................................. - $655,438 - $1,349,999
Operating Profit/(Loss)........................................... = $20,361 = $444,597
Interest Expense (from audits).................................... - $2,772 - $4,159
Earnings Before Tax............................................... = $17,589 = $440,438
Federal Tax Allowance............................................. - $4,800 - $7,200
Net Income........................................................ = $12,789 = $433,238
Return Element (Net Income + Interest)............................ ... $15,561 ... $437,397
Investment Base (from Step 4)..................................... / $551,538 / $827,308
Projected Return on Investment.................................... = 0.0282 = 0.5287
----------------------------------------------------------------------------------------------------------------

Table 23--Projected ROI, Areas in District Three
----------------------------------------------------------------------------------------------------------------
Area 6 Area 7 Area 8
----------------------------------------------------------------------------------------------------------------
Revenue (from Step 3)...................... ... $1,921,756 ... $1,459,929 ... $1,407,490

[[Page 48387]]

Operating Expenses (from Step 1)........... - $909,282 - $338,227 - $439,880
Pilot Compensation (from Step 2)........... - $983,157 - $899,999 - $819,298
Operating Profit/(Loss).................... = $29,317 = $221,703 = $148,312
Interest Expense (from audits)............. - $2,682 - $993 - $1,291
Earnings Before Tax........................ = $26,635 = $220,710 = $147,021
Federal Tax Allowance...................... - $0 - $0 - $0
Net Income................................. = $26,635 = $220,710 = $147,021
Return Element (Net Income + Interest)..... ... $29,317 ... $221,703 ... $148,312
Investment Base (from Step 4).............. / 620,379 / $229,771 / $298,702
Projected Return on Investment............. = 0.0473 = 0.9649 = 0.4965
----------------------------------------------------------------------------------------------------------------

The second part required for Step 6 compares the results of Tables
21 through 23 with the target ROI (3.67 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.......... 0.3618 0.4080 0.0282 0.5287 0.0473 0.9649 0.4965
Target return on investment............. 0.0367 0.0367 0.0367 0.0367 0.0367 0.0367 0.0367
Difference in return on investment...... 0.3251 0.3713 (0.0085) 0.4920 0.0106 0.9282 0.4598
--------------------------------------------------------------------------------------------------------------------------------------------------------
\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)
Pilotage area expenses (Step compensation x 3.67% Federal tax Revenue needed
1) (Step 2) (Target ROI allowance
Step 5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters).......................... $647,864 + $1,349,999 + $36,569 + $0 = $2,034,432
Area 2 (Undesignated waters)........................ 447,348 + 819,298 + 25,162 + 0 = 1,291,807
Area 4 (Undesignated waters)........................ 517,627 + 655,438 + 20,241 + 4,800 = 1,198,107
Area 5 (Designated waters).......................... 776,442 + 1,349,999 + 30,362 + 7,200 = 2,164,003
Area 6 (Undesignated waters)........................ 909,282 + 983,157 + 22,768 + 0 = 1,915,207
Area 7 (Designated waters).......................... 338,227 + 899,999 + 8,433 + 0 = 1,246,659
Area 8 (Undesignated waters)........................ 439,880 + 819,298 + 10,962 + 0 = 1,270,140
---------------------------------------------------------------------------------------------------
Total........................................... 4,076,671 + 6,877,187 + 154,498 + 12,000 = 11,120,355
--------------------------------------------------------------------------------------------------------------------------------------------------------

The ``Revenue Needed'' column of Table 25 is more than the revenue
we projected in Table 16. For purposes of transparency, we verify the
calculations in Table 25 by rerunning the formula in 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.

[[Page 48388]]

Table 26--Balancing Revenue Needed and Target ROI, District One
----------------------------------------------------------------------------------------------------------------
Area 1 Area 2
----------------------------------------------------------------------------------------------------------------
Revenue Needed.................................................... ... $2,034,432 ... $1,291,807
Operating Expenses (from Step 1).................................. - 647,864 - 447,348
Pilot Compensation (from Step 2).................................. - 1,349,999 - 819,298
Operating Profit/(Loss)........................................... = 36,569 = 25,162
Interest Expense (from audits).................................... - 18,484 - 12,718
Earnings Before Tax............................................... = 18,085 = 12,444
Federal Tax Allowance............................................. - 0 - 0
Net Income........................................................ = 18,085 = 12,444
Return Element (Net Income + Interest)............................ ... 36,569 ... 25,162
Investment Base (from Step 4)..................................... / 996,442 / 685,602
Return on Investment.............................................. = 0.0367 = 0.0367
----------------------------------------------------------------------------------------------------------------

Table 27--Balancing Revenue Needed and Target ROI, District Two
----------------------------------------------------------------------------------------------------------------
Area 4 Area 5
----------------------------------------------------------------------------------------------------------------
Revenue Needed.................................................... + $1,198,107 + $2,164,003
Operating Expenses (from Step 1).................................. - 517,627 - 776,442
Pilot Compensation (from Step 2).................................. - 655,438 - 1,349,999
Operating Profit/(Loss)........................................... = 25,041 = 37,562
Interest Expense (from audits).................................... - 2,772 - 4,159
Earnings Before Tax............................................... = 22,269 = 33,403
Federal Tax Allowance............................................. - 4,800 - 7,200
Net Income........................................................ = 17,469 = 26,203
Return Element (Net Income + Interest)............................ ... 20,241 ... 30,362
Investment Base (from Step 4)..................................... / 551,538 / 827,308
Return on Investment.............................................. = 0.0367 = 0.0367
----------------------------------------------------------------------------------------------------------------

Table 28--Balancing Revenue Needed and Target ROI, District Three
----------------------------------------------------------------------------------------------------------------
Area 6 Area 7 Area 8
----------------------------------------------------------------------------------------------------------------
Revenue Needed............................. + $1,915,207 + $1,246,659 + $1,270,140
Operating Expenses (from Step 1)........... - $909,282 - $338,227 - $439,880
Pilot Compensation (from Step 2)........... - $983,157 - $899,999 - $819,298
Operating Profit/(Loss).................... = $22,768 = $8,433 = $10,962
Interest Expense (from audits)............. - $2,682 - $993 - $1,291
Earnings Before Tax........................ = $20,086 = $7,440 = $9,671
Federal Tax Allowance...................... - $0 - $0 - $0
Net Income................................. = $20,086 = $7,440 = $9,671
Return Element (Net Income + Interest)..... ... $22,768 ... $8,433 ... $10,962
Investment Base (from Step 4).............. / $620,379 / $229,771 / $298,702
Return on Investment....................... = 0.0367 = 0.0367 = 0.0367
----------------------------------------------------------------------------------------------------------------

Step 7: Adjustment of Pilotage Rates. Finally, and subject to
negotiation with Canada or adjustment for other supportable
circumstances, we calculate rate adjustments by dividing 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 Area 2
------------------ -----------------
Ratemaking projections St. Lawrence
River Lake Ontario
----------------------------------------------------------------------------------------------------------------
Revenue Needed (from Step 6)...................................... ... $2,034,432 ... $1,291,807
Revenue (from Step 3)............................................. / $2,358,327 / $1,546,373
Rate Multiplier................................................... = 0.8627 = 0.8354
----------------------------------------------------------------------------------------------------------------

Table 30--Rate Multiplier, Areas in District Two
----------------------------------------------------------------------------------------------------------------
Area 4 Area 5
------------------ -----------------
Ratemaking projections Southeast Shoal
Lake Erie to Port Huron,
MI
----------------------------------------------------------------------------------------------------------------
Revenue Needed (from Step 6)...................................... ... $1,198,107 ... $2,164,003

[[Page 48389]]

Revenue (from Step 3)............................................. / $1,193,426 / $2,571,038
Rate Multiplier................................................... = 1.0039 = 0.8417
----------------------------------------------------------------------------------------------------------------

Table 31--Rate Multiplier, Areas in District Three
----------------------------------------------------------------------------------------------------------------
Area 6 Area 7 Area 8
------------------ ------------------ -----------------
Ratemaking projections Lakes Huron and
Michigan St. Mary's River Lake Superior
----------------------------------------------------------------------------------------------------------------
Revenue Needed (from Step 6)............... ... $1,915,207 ... $1,246,659 ... $1,270,140
Revenue (from Step 3)...................... / $1,921,756 / $1,459,929 / $1,407,490
Rate Multiplier............................ = 0.9966 = 0.8539 = 0.9024
----------------------------------------------------------------------------------------------------------------

We calculate a rate multiplier for adjusting the basic rates and
charges described in 46 CFR 401.420 and 401.428, and it is applicable
in all areas. We divide total revenue needed (Step 6, Table 25) by
total projected revenue (Steps 3 and 3.A, 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)................... ... $11,120,355
Total revenue (from Step 3).......................... / $12,458,339
Rate Multiplier...................................... = 0.8926
------------------------------------------------------------------------

This table shows that 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 10.74 percent in all areas.
Without further action, the existing rates we established in our
2013 final rule would then be multiplied by the rate multipliers from
Tables 29 through 31 to calculate the area by area rate changes for
2014. The resulting 2014 rates, on average, would then be decreased
approximately 11 percent from the 2013 rates. This decrease is not due
to increased efficiencies in pilotage services but rather a result of
recent significant downward adjustments to AMOU contracts. We declined
to impose this decrease because financial data from one of the
associations indicates that such a rate decrease would make it
difficult for it to continue funding operations and may even cause it
to fold. Further, the decrease would have an adverse effect on
providing safe, efficient, and reliable pilotage in the other two
pilotage districts as well. Finally, our Memorandum of Arrangements
(MOA) with Canada calls for comparable pilotage rates between the two
countries and we have proposed matching our rates to the Canadian rate,
which has actually increased by 2.5 percent this year. 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 MOA
call for comparable United States and Canadian rates, and the rates
would not be comparable if United States rates for 2014 decrease by
approximately 11 percent, while Canadian rates for 2014 increase by 2.5
percent. ``Other supportable circumstances'' we have for exercising our
discretion include recent E.O. 13609, ``Promoting International
Regulatory Cooperation,'' which calls on Federal agencies to eliminate
``unnecessary differences'' between U.S. and foreign regulations (77 FR
26413; May 4, 2012; sec. 1), and the risk that a substantial rate
decrease would jeopardize the ability of the three pilotage
associations to provide safe, efficient, and reliable pilotage service.
Therefore, we propose relying on the discretionary authority we
have under Step 7 to further adjust rates so that they match those
adopted by the Canadian Great Lakes Pilotage Authority for 2014. Table
33 compares the impact, area by area, that an average decrease of 11
percent would have, relative to the impact each area would experience
if United States rates match those of the Canadian GLPA.
A Coast Guard contractor is currently preparing a comprehensive
study of our Great Lakes Pilotage ratemaking methodology, which is
scheduled to be completed later in 2013. The study will address
possible alternatives to the use of AMOU contracts as benchmarks for
pilot compensation. We welcome any recommendations from GLPAC or the
public on that issue.

Table 33--Impact of Exercising Step 7 Discretion
----------------------------------------------------------------------------------------------------------------
Percent change in rate Percent change in rate
Area without exercising Step with exercise of Step 7
7 discretion discretion
----------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters).................................... -13.73 2.50
Area 2 (Undesignated waters).................................. -16.46 2.50
Area 4 (Undesignated waters).................................. 0.39 2.50
Area 5 (Designated waters).................................... -15.83 2.50
Area 6 (Undesignated waters).................................. -0.34 2.50
Area 7 (Designated waters).................................... -14.61 2.50

[[Page 48390]]

Area 8 (Undesignated waters).................................. -9.76 2.50
----------------------------------------------------------------------------------------------------------------

The following tables reflect our proposed rate adjustments of 2.5
percent across all areas.
Tables 34 through 36 show these calculations.

Table 34--Proposed adjustment of Pilotage Rates, Areas in District One
----------------------------------------------------------------------------------------------------------------
Adjusted rate
2013 Rate Rate multiplier for 2014
----------------------------------------------------------------------------------------------------------------
Area 1--St. Lawrence River
----------------------------------------------------------------------------------------------------------------
Basic Pilotage.................................. $18.75/km, x 1.025 = $19.22/km,
$33.19/mi $34.02/mi
Each lock transited............................. $416 x 1.025 = $426
Harbor movage................................... $1,361 x 1.025 = $1,395
Minimum basic rate, St. Lawrence River.......... $908 x 1.025 = $931
Maximum rate, through trip...................... $3,984 x 1.025 = $4,084
----------------------------------------------------------------------------------------------------------------
Area 2--Lake Ontario
----------------------------------------------------------------------------------------------------------------
6-hour period................................... $851 x 1.025 = $872
Docking or undocking............................ $812 x 1.025 = $832
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

In addition to the proposed rate charges in Table 34, and for the
reasons we discussed in the Summary section of Part V of this preamble,
we propose adding the authority to impose surcharges in the governing
regulations and, under that new regulation, we propose authorizing
District One to implement a temporary supplemental 3 percent charge on
each source form (the ``bill'' for pilotage service) for the duration
of the 2014 shipping season, which begins in March 2014. The Canadian
Great Lakes Pilotage Authority (GLPA) has used an 18 percent surcharge
without disrupting traffic. As a result, we have concluded that a 3
percent surcharge will not disrupt traffic. District One must provide
us with monthly status reports once this surcharge becomes effective
for the duration of the 2014 shipping season, which begins in March
2014. We will exclude these training expenses from future rates.

Table 35--Proposed Adjustment of Pilotage Rates, Areas in District Two
----------------------------------------------------------------------------------------------------------------
Adjusted rate
2013 Rate Rate multiplier for 2014
----------------------------------------------------------------------------------------------------------------
Area 4--Lake Erie
----------------------------------------------------------------------------------------------------------------
6-hour period................................... 828 x 1.025 = 849
Docking or undocking............................ 637 x 1.025 = 653
Any point on Niagara River below Black Rock Lock 1,626 x 1.025 = 1,667
----------------------------------------------------------------------------------------------------------------
Area 5--Southeast Shoal to Port Huron, MI between any point on or in
----------------------------------------------------------------------------------------------------------------
Toledo or any point on Lake Erie W. of Southeast 1,382 x 1.025 = 1,417
Shoal..........................................
Toledo or any point on Lake Erie W. of Southeast 2,339 x 1.025 = 2,397
Shoal & Southeast Shoal........................
Toledo or any point on Lake Erie W. of Southeast 3,037 x 1.025 = 3,113
Shoal & Detroit River..........................
Toledo or any point on Lake Erie W. of Southeast 2,339 x 1.025 = 2,397
Shoal & Detroit Pilot Boat.....................
Port Huron Change Point & Southeast Shoal (when 4,074 x 1.025 = 4,176
pilots are not changed at the Detroit Pilot
Boat)..........................................
Port Huron Change Point & Toledo or any point on 4,719 x 1.025 = 4,837
Lake Erie W. of Southeast Shoal (when pilots
are not changed at the Detroit Pilot Boat).....
Port Huron Change Point & Detroit River......... 3,060 x 1.025 = 3,137
Port Huron Change Point & Detroit Pilot Boat.... 2,381 x 1.025 = 2,441
Port Huron Change Point & St. Clair River....... 1,693 x 1.025 = 1,735
St. Clair River................................. 1,382 x 1.025 = 1,417
St. Clair River & Southeast Shoal (when pilots 4,074 x 1.025 = 4,176
are not changed at the Detroit Pilot Boat).....
St. Clair River & Detroit River/Detroit Pilot 3,060 x 1.025 = 3,137
Boat...........................................
Detroit, Windsor, or Detroit River.............. 1,382 x 1.025 = 1,417
Detroit, Windsor, or Detroit River & Southeast 2,339 x 1.025 = 2,397
Shoal..........................................

[[Page 48391]]

Detroit, Windsor, or Detroit River & Toledo or 3,037 x 1.025 = 3,113
any point on Lake Erie W. of Southeast Shoal...
Detroit, Windsor, or Detroit River & St. Clair 3,060 x 1.025 = 3,137
River..........................................
Detroit Pilot Boat & Southeast Shoal............ 1,693 x 1.025 = 1,735
Detroit Pilot Boat & Toledo or any point on Lake 2,339 x 1.025 = 2,397
Erie W. of Southeast Shoal.....................
Detroit Pilot Boat & St. Clair River............ 3,060 x 1.025 = 3,137
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

Table 36--Proposed Adjustment of Pilotage Rates, Areas in District Three
----------------------------------------------------------------------------------------------------------------
Adjusted rate
2013 Rate Rate multiplier for 2014
----------------------------------------------------------------------------------------------------------------
Area 6--Lakes Huron and Michigan
----------------------------------------------------------------------------------------------------------------
6-hour Period.................................. $691 x 1.025 = $708
Docking or undocking........................... $656 x 1.025 = $672
----------------------------------------------------------------------------------------------------------------
Area 7--St. Mary's River between any point on or in
----------------------------------------------------------------------------------------------------------------
Gros Cap & De Tour............................. $2,583 x 1.025 = $2,648
Algoma Steel Corp. Wharf, Sault Ste. Marie, $2,583 x 1.025 = $2,648
Ont. & De Tour................................
Algoma Steel Corp. Wharf, Sault. Ste. Marie, $973 x 1.025 = $997
Ont. & Gros Cap...............................
Any point in Sault St. Marie, Ont., except the $2,165 x 1.025 = $2,219
Algoma Steel Corp. Wharf & De Tour............
Any point in Sault St. Marie, Ont., except the $973 x 1.025 = $997
Algoma Steel Corp. Wharf & Gros Cap...........
Sault Ste. Marie, MI & De Tour................. $2,165 x 1.025 = $2,219
Sault Ste. Marie, MI & Gros Cap................ $973 x 1.025 = $997
Harbor movage.................................. $973 x 1.025 = $997
----------------------------------------------------------------------------------------------------------------
Area 8--Lake Superior
----------------------------------------------------------------------------------------------------------------
6-hour period.................................. $586 x 1.025 = $601
Docking or undocking........................... $557 x 1.025 = $571
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

VI. Regulatory Analyses

We developed this proposed rule after considering numerous statutes
and E.O.s related to rulemaking. Below we summarize our analyses based
on these statutes or E.O.s.

A. Regulatory Planning and Review

Executive Orders 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 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 proposed rule is not a ``significant regulatory action'' under
section 3(f) of E.O. 12866. Accordingly, the NPRM has not been reviewed
by the Office of Management and Budget (OMB).
The Coast Guard is required to review and adjust pilotage rates on
the Great Lakes annually. See Parts 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 for this proposed rulemaking, we
are adjusting the pilotage rates for the 2014 shipping season to
generate sufficient revenue to cover allowable expenses, and to target
pilot compensation and returns on pilot associations' investments. The
rate adjustments in this proposed rule would, if codified, lead to a
cost in District One and cost savings in Districts Two and Three. The
cost savings that would accrue to Districts Two and Three would
outweigh the cost to District One, which would result in an estimated
annual cost savings to shippers of approximately $817,983 across all
three districts.\5\
---------------------------------------------------------------------------

\5\ Despite increasing Great Lakes pilotage rates, on average,
by approximately 2.5 percent from the current rates set in the 2013
final rule, we estimate a net cost savings across all three
districts as a result of an expected decrease in the demand for
pilotage services from the previous year.
---------------------------------------------------------------------------

In addition to the overall cost savings that would accrue to all
three districts as a result of the rate adjustments, we propose
authorizing District One to implement a temporary supplemental 3
percent surcharge to traffic in District One in order to recover
training expenses from 2012. This temporary surcharge would be
authorized for the duration of the 2014 shipping season, which begins
in March. We estimate that this would generate $120,070. At the end of
the 2014 shipping season, we will account for the monies the surcharge
generates and make adjustments (debits/credits) to the operating
expenses for the following year.\6\
---------------------------------------------------------------------------

\6\ Assuming our estimate is correct, we would credit District
One shippers $71,075 in order to account for the difference between
the total surcharges collected ($120,070) and the actual training
expenses incurred ($48,995).

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

[[Page 48392]]

Therefore, this proposed rule is expected to result in a cost
savings to shippers of approximately $697,914 across all three
districts.\7\
---------------------------------------------------------------------------

\7\ Total cost savings across all three districts is equal to
the cost savings from rate changes plus a temporary surcharge to
traffic in District One.
---------------------------------------------------------------------------

A regulatory assessment follows.
The proposed rule would apply the 46 CFR part 404, Appendix A, full
ratemaking methodology, including the exercise of our discretion to
increase Great Lakes pilotage rates, on average, approximately 2.5
percent overall from the current rates set in the 2013 final rule. The
Appendix A methodology is discussed and applied in detail in Part V of
this preamble. Among other factors described in Part V, it reflects
audited 2011 financial data from the pilotage 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 2013 and used financial data from the 2010
base accounting year. The last annual rate review, conducted under 46
CFR part 404, Appendix C, was completed early in 2011.
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
proposed rule, such as recreational boats and vessels operating only
within the Great Lakes system, may elect to purchase pilotage services.
However, this election is voluntary and does not affect our calculation
of the rate and is not a part of our estimated national cost to
shippers. Our sampling of pilot data suggests that there are very few
U.S. domestic vessels that do not have registry and operate only in the
Great Lakes that voluntarily purchase pilotage services.
We used 2010-2012 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.
Using that period, we found that approximately 128 vessels journeyed
into the Great Lakes system annually. These vessels entered the Great
Lakes by transiting 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 128 vessels, there were
approximately 353 annual U.S. port arrivals before the vessels left the
Great Lakes system, based on 2010-2012 vessel data from MISLE.
The impact of the rate adjustment to shippers is estimated from the
District pilotage revenues. These revenues represent the direct and
indirect costs (``economic costs'') that shippers must pay for pilotage
services. The Coast Guard sets rates so that revenues equal the
estimated cost of pilotage for these services.
We estimate the additional impact (costs or savings) of the rate
adjustment in this proposed rule to be the difference between the total
projected revenue needed to cover costs in 2014, based on the 2013 rate
adjustment, and the total projected revenue needed to cover costs in
2014, as set forth in this proposed rule, plus any temporary surcharges
authorized by the Coast Guard. Table 37 details projected revenue
needed to cover costs in 2014 after making the discretionary adjustment
to pilotage rates as discussed in Step 7 of Part VI of this preamble.
Table 38 summarizes the derivation for calculating the 3 percent
surcharge on District One traffic as discussed in Step 7 of Part VI of
this preamble. Table 39 details the additional costs or savings by area
and district as a result of the rate adjustments and the temporary
surcharge to District One traffic.

Table 37--Rate Adjustment by Area and District
[$U.S.; Non-discounted]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Projected revenue
2013 Pilotage Rate change \9\ 2014 Pilotage Projected 2014 needed in 2014
rates \8\ rates \10\ bridge hours \11\ \12\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 1................................................... $460.97 1.0250 $472.50 5,116 $2,417,285
Area 2................................................... 284.84 1.0250 291.96 5,429 1,585,032
----------------------------------------------------------------------------------------------
Total, District One.................................. ................. ................. ................. ................. 4,002,318
Area 4................................................... 205.27 1.0250 210.40 5,814 1,223,262
Area 5................................................... 508.91 1.0250 521.64 5,052 2,635,314
----------------------------------------------------------------------------------------------
Total, District Two.................................. ................. ................. ................. ................. 3,858,576
Area 6................................................... 199.95 1.0250 204.95 9,611 1,969,800
Area 7................................................... 482.94 1.0250 495.01 3,023 1,496,427
Area 8................................................... 186.67 1.0250 191.34 7,540 1,442,677
----------------------------------------------------------------------------------------------
Total, District Three................................ ................. ................. ................. ................. 4,908,904
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Some values may not total due to rounding.
\8\ These 2013 estimates are described in Table 16 of this NPRM.
\9\ The estimated rate changes are described in Table 33 of this NPRM.
\10\ 2014 Pilotage Rates = 2013 Pilotage Rates x Rate Change.
\11\ These 2014 estimates are detailed in Table 14 of this NPRM.
\12\ Projected Revenue needed in 2014 = 2014 Pilotage Rates x Projected 2014 Bridge Hours.

[[Page 48393]]

Table 38--Derivation of Temporary Surcharge
----------------------------------------------------------------------------------------------------------------
Area 1 Area 2
----------------------------------------------------------------------------------------------------------------
Projected Revenue Needed in 2014 \13\......................... $2,417,285 $1,585,032
Surcharge Rate................................................ 3% 3%
Surcharge Raised.............................................. $72,519 $47,551
-------------------------------------------------
Total Surcharge........................................... ....................... $120,070
----------------------------------------------------------------------------------------------------------------
\13\ These estimates are described in Table 37 of this NPRM.

Table 39--Impact of the Proposed Rule by Area and District
[$U.S: Non-discounted]
----------------------------------------------------------------------------------------------------------------
Additional costs
Projected revenue Projected revenue Temporary or savings of
needed in 2013 needed in 2014 surcharge \15\ this proposed
\14\ rule
----------------------------------------------------------------------------------------------------------------
Area 1.............................. $2,404,424 $2,417,285 $72,519 $85,380
Area 2.............................. 1,569,160 1,585,032 47,551 63,423
Total, District One............. 3,973,584 4,002,318 120,070 148,803
Area 4.............................. 1,398,694 1,223,262 ................. (175,432)
Area 5.............................. 2,596,484 2,635,314 ................. 38,830
Total, District Two............. 3,995,178 3,858,576 ................. (136,602)
Area 6.............................. 2,281,673 1,969,800 ................. (311,873)
Area 7.............................. 1,556,517 1,496,427 ................. (60,090)
Area 8.............................. 1,780,829 1,442,677 ................. (338,152)
Total, District Three........... 5,619,019 4,908,904 ................. (710,115)
----------------------------------------------------------------------------------------------------------------
* Some values may not total due to rounding.
\14\ These 2013 estimates are described in Table 27 of the 2013 NPRM.
\15\ These estimates are described in Table 38 of this NPRM.

After applying the discretionary rate change in this NPRM, the
resulting difference between the projected revenue in 2013 and the
projected revenue in 2014 is the annual impact to shippers from this
proposed rule. This figure is equivalent to the total additional
payments or savings that shippers would incur for pilotage services
from this proposed rule. As discussed earlier, we consider a reduction
in payments to be a cost savings.
The impact of the discretionary rate adjustment in this proposed
rule to shippers varies by area and district. The discretionary rate
adjustments would lead to affected shippers operating in District One
experiencing total cost increases of $28,733.56, and affected shippers
operating in District Two and District Three experiencing total cost
savings of $136,601.82 and $710,115.00, respectively. The savings that
accrue to shippers operating in District Two and District Three are the
result of an expected decrease in the demand for pilotage services.
In addition to the rate adjustments, District One would also incur
a temporary surcharge of 3 percent to traffic for the duration of the
2014 season in order to recover training expenses incurred from 2012.
We estimate that this surcharge would generate $120,070. At the end of
the 2014 shipping season, we will account for the monies the surcharge
generates and make adjustments (debits/credits) to the operating
expenses for the following year.\16\
---------------------------------------------------------------------------

\16\ Assuming our estimate is correct, we would credit District
One shippers $71,075 at the end of the 2014 season in order to
account for the difference between the total surcharges collected
($120,070) and the actual training expenses incurred by District One
pilots ($48,995).
---------------------------------------------------------------------------

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 the number of port arrivals of their vessels' trips.
However, the additional savings reported earlier in this NPRM does
capture the adjustment the shippers would experience as a result of the
proposed rate adjustment. The overall impact of this NPRM would be a
cost savings to shippers of approximately $697,914 across all three
districts.
This proposed rule would allow the Coast Guard to meet the
statutory requirements to review the rates for pilotage services on the
Great Lakes, thus ensuring proper pilot compensation.
Alternatively, if we imposed the new rates based on the new
contract data from AMOU, there would be an approximately 11 percent
decrease in rates across the system. This would have a larger effect on
industry, moving from a proposed cost savings of approximately $697,914
to a cost savings of approximately $2,367,640. Table 40 details
projected revenue needed to cover costs in 2014 if the discretionary
adjustment to pilotage rates as discussed in Step 7 of Part VI of this
preamble is not made. Table 41 details the additional costs or savings
by area and district as a result of this alternative proposal.
---------------------------------------------------------------------------

\17\ These 2014 estimates are detailed in Table 14 of this NPRM.

[[Page 48394]]

Table 40--Alternative Rate Adjustment by Area and District
[$U.S.; Non-discounted]
--------------------------------------------------------------------------------------------------------------------------------------------------------
2013 Pilotage 2014 Pilotage Projected 2014 Projected revenue
rates Rate change rates bridge hours \17\ needed in 2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 1................................................... $460.97 0.8627 $397.66 5,116 $2,034,432
Area 2................................................... 284.84 0.8354 237.95 5,429 1,291,807
Total, District One.................................. ................. ................. ................. ................. 3,326,239
Area 4................................................... 205.27 1.0039 206.07 5,814 1,198,107
Area 5................................................... 508.91 0.8417 428.35 5,052 2,164,002
Total, District Two.................................. ................. ................. ................. ................. 3,362,109
Area 6................................................... 199.95 0.9966 199.27 9,611 1,915,207
Area 7................................................... 482.94 0.8539 412.39 3,023 1,246,659
Area 8................................................... 186.67 0.9024 168.45 7,540 1,270,140
Total, District Three................................ ................. ................. ................. ................. 4,432,006
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Some values may not total due to rounding.

Table 41--Alternative Impact of the Rule by Area and District
[$U.S.; Non-discounted]
----------------------------------------------------------------------------------------------------------------
Additional costs
Projected revenue Projected revenue Temporary or savings of
needed in 2013 needed in 2014 surcharge \18\ this proposed
(A) (B) (C) rule (B-A) + C
----------------------------------------------------------------------------------------------------------------
Area 1.............................. $2,404,424 $2,034,432 $61,033 ($308,959)
Area 2.............................. 1,569,160 1,291,807 38,754 (238,599)
Total, District One............. 3,973,584 3,326,239 99,787 (547,558)
Area 4.............................. 1,398,694 1,198,107 ................. (200,587)
Area 5.............................. 2,596,484 2,164,002 ................. (432,482)
Total, District Two............. 3,995,178 3,362,109 ................. (633,069)
Area 6.............................. 2,281,673 1,915,207 ................. (366,466)
Area 7.............................. 1,556,517 1,246,659 ................. (309,858)
Area 8.............................. 1,780,829 1,270,140 ................. (510,689)
Total, District Three........... 5,619,019 4,432,006 ................. (1,187,013)
----------------------------------------------------------------------------------------------------------------
* Some values may not total due to rounding.

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

\18\ The temporary surcharge generated under this alternative is
expected to be less than under the proposed alternative. This is a
result of a substantial decrease in projected revenue due to the
lower Projected Pilotage Rates for 2014 under this alternative.
---------------------------------------------------------------------------

We reject this alternative because a substantial rate decrease
would jeopardize the ability of the three pilotage associations to
provide safe, efficient, and reliable pilotage service as well as
violate the Memorandum of Arrangements, which calls for the United
States' and Canada's pilotage rates to be comparable. See our
discussion of Step 7 in Part VI of this preamble for further
explanation.

B. Small Entities

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have
considered whether this proposed 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 that entities affected by the proposed rule would 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 proposed rule, we reviewed recent company size and
ownership data from 2010-2012 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, 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 the proposed rule that
receive revenue from pilotage services. These are the three pilot
associations that provide and manage pilotage services within the Great
Lakes districts. Two of the associations operate as partnerships and
one operates as a corporation. These associations are designated with
the same NAICS industry classification and small-entity size standards
described above, but they have fewer than 500 employees; combined, they
have approximately 65 total employees. We expect no adverse impact to
these entities from this proposed rule because all associations receive
enough revenue to balance the projected expenses associated with the
projected number of bridge hours and pilots.
Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that
this proposed rule would not have a significant economic impact on a
substantial number of small entities. If you think that your business,
organization, or governmental jurisdiction qualifies as a small entity
and that this proposed rule would have a significant economic impact on
it, please submit a comment to the Docket Management Facility at the
address under ADDRESSES. In your comment, explain why you think it

[[Page 48395]]

qualifies, as well as how and to what degree this proposed rule would
economically affect it.

C. Assistance for Small Entities

Under section 213(a) of the Small Business Regulatory Enforcement
Fairness Act of 1996 (Pub. L. 104-121), we want to assist small
entities in understanding this proposed rule so that they can better
evaluate its effects on them and participate in the rulemaking. If the
proposed rule would affect your small business, organization, or
governmental jurisdiction and you have questions concerning its
provisions or options for compliance, please consult 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-
1914. 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 proposed rule would call for no new collection of information
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). This
proposed rule would not change the burden in the collection currently
approved by the OMB under OMB Control Number 1625-0086, Great Lakes
Pilotage Methodology.

E. Federalism

A rule has implications for federalism under Executive Order 13132,
Federalism, if it has a substantial direct effect on the States, on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government. We have analyzed this rule under that Order and have
determined that it is consistent with the fundamental federalism
principles and preemption requirements described in Executive Order
13132. Our analysis is explained below.
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.'' As a result, States or local governments
are prohibited from regulating within this category. Therefore, the
rule is consistent with the principles of federalism and preemption
requirements in Executive Order 13132.
While it is well settled that States may not regulate in categories
in which Congress intended the Coast Guard to be the sole source of a
vessel's obligations, the Coast Guard recognizes the key role that
State and local governments may have in making regulatory
determinations. Additionally, for rules with implications and
preemptive effect, Executive Order 13132 specifically directs agencies
to consult with State and local governments during the rulemaking
process.
Therefore, the Coast Guard invites State and local governments and
their representative national organizations to indicate their desire
for participation and consultation in this rulemaking process by
submitting comments to this NPRM. In accordance with Executive Order
13132, the Coast Guard will provide a federalism impact statement to
document: (1) The extent of the Coast Guard's consultation with State
and local officials who submit comments to this proposed rule; (2) a
summary of the nature of any concerns raised by State or local
governments and the Coast Guard's position thereon; and (3) a statement
of the extent to which the concerns of State and local officials have
been met. We will also report to the Office of Management and Budget
any written communications with the States.

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 proposed rule would not
result in such expenditure, we discuss the effects of this proposed
rule elsewhere in this preamble.

G. Taking of Private Property

This proposed rule would 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 proposed 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 proposed rule under E.O. 13045, Protection of
Children from Environmental Health Risks and Safety Risks. This
proposed rule is not an economically significant rule and would not
create an environmental risk to health or risk to safety that might
disproportionately affect children.

J. Indian Tribal Governments

This proposed 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 proposed 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 E.O. 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 (15 U.S.C. 272
note) directs agencies to use voluntary consensus standards in their
regulatory activities unless the agency provides Congress, through the
OMB, 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

[[Page 48396]]

systems practices) that are developed or adopted by voluntary consensus
standards bodies. This proposed rule does not use technical standards.
Therefore, we did not consider the use of voluntary consensus
standards.

M. Environment

We have analyzed this proposed rule under Department of Homeland
Security Management Directive 023-01 and Commandant Instruction
M16475.lD, which guide the Coast Guard in complying with the National
Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have made
a preliminary determination that this action is one of a category of
actions that do not individually or cumulatively have a significant
effect on the human environment. A preliminary environmental analysis
checklist supporting this determination is available in the docket
where indicated under the ``Public Participation and Request for
Comments'' section of this preamble. This proposed rule is
categorically excluded under section 2.B.2, figure 2-1, paragraph 34(a)
of the Instruction. Paragraph 34(a) pertains to minor regulatory
changes that are editorial or procedural in nature. This proposed rule
adjusts rates in accordance with applicable statutory and regulatory
mandates. We seek any comments or information that may lead to the
discovery of a significant environmental impact from this proposed
rule.

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 proposes
to amend 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. 401.400, revise paragraph (b) to read as follows:

Sec. 401.400 Calculation of pilotage units and determination of
weighting factor.

* * * * *
(b) Weighting Factor Table:

------------------------------------------------------------------------
Weighting
Range of pilotage units factor
------------------------------------------------------------------------
0-49...................................................... 1.0
50-159.................................................... 1.15
160-189................................................... 1.30
190-and over.............................................. 1.45
------------------------------------------------------------------------

* * * * *
0
3. Add new Sec. 401.401 to read as follows:

Sec. 401.401 Surcharges.

To facilitate safe, efficient, and reliable pilotage, and for good
cause, the Director may authorize surcharges on any rate or charge
authorized by this subpart. Surcharges must be proposed for prior
public comment and may not be authorized for more than one year.
0
4. 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...................... $19.22 per kilometer or $34.02 per
mile \1\.
Each Lock Transited................. 426 \1\.
Harbor Movage....................... 1,395 \1\.
------------------------------------------------------------------------
\1\ The minimum basic rate for assignment of a pilot in the St. Lawrence
River is $931, and the maximum basic rate for a through trip is
$4,084.

(b) Area 2 (Undesignated Waters):

------------------------------------------------------------------------
Service Lake Ontario
------------------------------------------------------------------------
6-hour Period........................................... $872
Docking or Undocking.................................... 832
------------------------------------------------------------------------

0
5. 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................................. $849 $849
Docking or Undocking.......................... 653 653
Any point on the Niagara River below the Black N/A 1,667
Rock Lock....................................
------------------------------------------------------------------------

(b) Area 5 (Designated Waters):

--------------------------------------------------------------------------------------------------------------------------------------------------------
Toledo or any
point on Lake Detroit Pilot
Any point on or in Southeast Shoal Erie west of Detroit River Boat St. Clair River
Southeast Shoal
--------------------------------------------------------------------------------------------------------------------------------------------------------
Toledo or any port on Lake Erie west of Southeast Shoal.. $2,397 $1,417 $3,113 $2,397 N/A
Port Huron Change Point.................................. \1\ 4,176 \1\ 4,837 3,137 2,441 1,735
St. Clair River.......................................... \1\ 4,176 N/A 3,137 3,137 1,417
Detroit or Windsor or the Detroit River.................. 2,397 3,113 1,417 N/A 3,137
Detroit Pilot Boat....................................... 1,735 2,397 N/A N/A 3,137
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ When pilots are not changed at the Detroit Pilot Boat.

0
6. 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........................................... $708
Docking or Undocking.................................... 672
------------------------------------------------------------------------

(b) Area 7 (Designated Waters):

[[Page 48397]]

----------------------------------------------------------------------------------------------------------------
Area De Tour Gros Cap Any harbor
----------------------------------------------------------------------------------------------------------------
Gros Cap........................................................ $2,648 N/A N/A
Algoma Steel Corporation Wharf at Sault Ste. Marie, Ontario..... 2,648 997 N/A
Any point in Sault Ste. Marie, Ontario, except the Algoma Steel 2,219 997 N/A
Corporation Wharf..............................................
Sault Ste. Marie, MI............................................ 2,219 997 N/A
Harbor Movage................................................... N/A N/A $997
----------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------
Service Lake Superior
------------------------------------------------------------------------
6-hour Period.......................................... $601
Docking or Undocking................................... 571
------------------------------------------------------------------------

Sec. 401.420 [Amended]

0
7. Amend Sec. 401.420 as follows:
0
a. In paragraph (a), remove the text ``$126'' and add, in its place,
the text ``$129''; and remove the text ``$1,972'' and add, in its
place, the text ``$2,021'';
0
b. In paragraph (b), remove the text ``$126'' and add, in its place,
the text ``$129''; and remove the text ``$1,972'' and add, in its
place, the text ``$2,021''; and
0
c. In paragraph (c)(1), remove the text ``$744'' and add, in its place,
the text ``$763''; and in paragraph (c)(3), remove the text ``$126''
and add, in its place, the text ``$129'', and remove the text
``$1,972'' and add, in its place, the text ``$2,021''.

Sec. 401.428 [Amended]

0
8. In Sec. 401.428, remove the text ``$744'' and add, in its place,
the text ``$763''.

Dated: July 31, 2013.
Rajiv Khandpur,
Acting Director, Marine Transportation Systems Management, U.S. Coast
Guard.
[FR Doc. 2013-19209 Filed 8-7-13; 8:45 am]
BILLING CODE 9110-04-P

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