Great Lakes Pilotage Rates-2014 Annual Review and Adjustment, 12084-12108 [2014-04591]

Download as PDF 12084 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this action and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register. A major rule cannot take effect until 60 days after it is published in the Federal Register. This action is not a ‘‘major rule’’ as defined by 5 U.S.C. 804(2). Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by May 5, 2014. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).) List of Subjects in 40 CFR Part 52 Dated: February 10, 2014. Judith A. Enck, Regional Administrator, Region 2. Part 52, chapter I, title 40 of the Code of Federal Regulations is amended as follows: PART 52—APPROVAL AND PROMULGATION OF IMPLEMENTAION PLANS 1. The authority citation for part 52 continues to read as follows: ■ Authority: 42 U.S.C. 7401 et seq. Environmental protection, Air pollution control, Hydrocarbons, Incorporation by reference, Intergovernmental relations, Oxides of nitrogen, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds. Subpart HH—New York 2. In § 52.1670, the table in paragraph (c) is amended by revising the entry for Title 6, Part 228 to read as follows: ■ § 52.1670 * Identification of plan. * * (c) * * * * * EPA—APPROVED NEW YORK STATE REGULATIONS AND LAWS State effective date New York State regulation Comments Latest EPA approval date Title 6: * * * Part 228, Surface Coating Processes, Commercial and Industrial Adhesives, Sealants and Primers. * * * 6/5/13 * * 3/4/14 [FR page citation]. * DEPARTMENT OF HOMELAND SECURITY § 52.1683 Coast Guard Control strategy: Ozone. * * * * * (b) The State of New York has certified to the satisfaction of the EPA that no sources are located in the State which are covered by the following Control Techniques Guidelines: (1) Fiberglass Boat Manufacturing Materials. (2) [Reserved] * * * * * [FR Doc. 2014–04324 Filed 3–3–14; 8:45 am] emcdonald on DSK67QTVN1PROD with RULES BILLING CODE 6560–50–P VerDate Mar<15>2010 17:49 Mar 03, 2014 Jkt 232001 46 CFR Part 401 [USCG–2013–0534] RIN 1625–AC07 Great Lakes Pilotage Rates—2014 Annual Review and Adjustment Coast Guard, DHS. Final rule. AGENCY: ACTION: The Coast Guard is adjusting Great Lakes pilotage rates that were last amended in February 2013. The adjustments establish new base rates, and are made in accordance with a full ratemaking procedure. The Coast Guard is exercising its discretion to establish new base rates to more closely align with recent Canadian rate increases. The final rule also adjusts weighting factors used to determine rates for vessels of different size, adopts a new procedure for temporary surcharges, applies a temporary surcharge for one pilotage association, and allows pilotage SUMMARY: PO 00000 Frm 00052 Fmt 4700 Sfmt 4700 * * * 3. Section 52.1683 is amended, by adding paragraph (b) to read as follows: ■ * * associations to recoup the cost of dues paid to the American Pilots Association. This rulemaking promotes the Coast Guard’s maritime safety mission. DATES: Effective August 1, 2014 except for §§ 401.400 and 401.401 which are effective April 3, 2014. ADDRESSES: Comments and material received from the public, as well as documents mentioned in this preamble as being available in the docket, are part of docket USCG–2013–0534 and are available for inspection or copying at the Docket Management Facility (M–30), U.S. Department of Transportation, West Building Ground Floor, Room W12–140, 1200 New Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. You may also find this docket online by going to https://www.regulations.gov and following the instructions on that Web site. FOR FURTHER INFORMATION CONTACT: If you have questions on this rule, call or email Mr. Todd Haviland, Coast Guard; telephone 202–372–2037, email Todd.A.Haviland@uscg.mil. If you have questions on viewing material to the E:\FR\FM\04MRR1.SGM 04MRR1 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations docket, call Ms. Barbara Hairston, Program Manager, Docket Operations, telephone 202–366–9826. SUPPLEMENTARY INFORMATION: Table of Contents for Preamble I. Abbreviations II. Regulatory History III. Basis and Purpose IV. Background V. Discussion of Comments and Changes A. AMOU Contracts B. APA Dues C. Pilot License Insurance D. Weighting Factors E. Surcharges F. Director Discretion G. Number of Pilots H. Ratemaking Methodology I. Economic Analysis J. District One Dock VI. Discussion of Rulemaking VII. Regulatory Analyses A. Regulatory Planning and Review B. Small Entities C. Assistance for Small Entities D. Collection of Information E. Federalism F. Unfunded Mandates Reform Act G. Taking of Private Property H. Civil Justice Reform I. Protection of Children J. Indian Tribal Governments K. Energy Effects L. Technical Standards M. Environment I. Abbreviations AMOU American Maritime Officers Union APA American Pilots Association CFR Code of Federal Regulations CPA Certified Public Accountant CPI Consumer price index DHS Department of Homeland Security E.O. Executive Order FR Federal Register GLPA Great Lakes Pilotage Authority (Canada) GLPAC Great Lakes Pilotage Advisory Committee MISLE Marine Information for Safety and Law Enforcement NAICS North American Industry Classification System NPRM Notice of proposed rulemaking OMB Office of Management and Budget ROI Return on investment U.S.C. United States Code emcdonald on DSK67QTVN1PROD with RULES II. Regulatory History On August 8, 2013, we published a notice of proposed rulemaking (NPRM) titled ‘‘Great Lakes Pilotage Rates—2014 Annual Review and Adjustment’’ in the Federal Register (78 FR 48374). We received 11 submissions on the NPRM from multiple sources, including pilotage associations, pilots, pilot organizations, and shippers. No public meeting was requested and none was held. VerDate Mar<15>2010 17:49 Mar 03, 2014 Jkt 232001 III. Basis and Purpose The basis of this rulemaking is the Great Lakes Pilotage Act of 1960 (‘‘the Act’’) (46 U.S.C. Chapter 93), which requires U.S. vessels operating ‘‘on register’’ 1 and foreign vessels to use U.S.- 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 of the department in which the Coast Guard is operating to ‘‘prescribe by regulation rates and charges for pilotage services, giving consideration to the public interest and the costs of providing the services.’’ 46 U.S.C. 9303(f). Rates must be established, or reviewed and adjusted, each year not later than March 1. Base rates must be established by a full ratemaking at least once every 5 years, and in years when base rates are not established, they must be reviewed and, if necessary, adjusted. 46 U.S.C. 9303(f). The Secretary of the Department of Homeland Security’s (DHS’s) duties and authority under the Act have been delegated to the Coast Guard. DHS Delegation No. 0170.1, paragraph (92)(f). Coast Guard regulations implementing the Act appear in parts 401 through 404 of 46 CFR. Procedures for establishing base rates appear in 46 CFR part 404, Appendix A, and procedures for annual review and adjustment of existing base rates appear in 46 CFR part 404, Appendix C. The purpose of this rulemaking is to establish new base pilotage rates, using the methodology found in 46 CFR part 404, Appendix A. IV. Background The vessels affected by this rulemaking are those engaged in foreign trade upon the U.S. waters of the Great Lakes. United 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 (‘‘the Director’’) to operate a pilotage pool. It is important to note that, while we set rates, the Coast Guard does not control the actual number of pilots an 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. 2 A ‘‘laker’’ is a commercial cargo vessel especially designed for and generally limited to use on the Great Lakes. PO 00000 Frm 00053 Fmt 4700 Sfmt 4700 12085 association maintains. We ensure the association is able to provide safe, efficient, and reliable pilotage service. The Coast Guard also does not control the actual compensation that pilots receive. Each district association determines the actual compensation of its district, and each association uses 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 (GLPA), and accordingly is not included in the U.S. rate structure. Areas 1, 5, and 7 have been designated by Presidential Proclamation, pursuant to the 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). The last full ratemaking established the current base rates in 2013 (78 FR 13521, Feb. 28, 2013), using the ratemaking methodology described in 46 CFR part 404, Appendix A. Among other things, the Appendix A methodology requires us to review detailed pilotage association financial information, and we contract with independent accountants to assist in that review. We opened this year’s ratemaking with an NPRM (78 FR 48374, Aug. 8, 2013) that reflected financial data for the 2011 shipping season, and that the proposed new base rates be calculated in accordance with the Appendix A methodology. V. Discussion of Comments and Changes We received 11 public submissions in response to our NPRM. Eight of those submissions came from pilotage associations, pilots, and pilot organizations; two came from groups that represent shippers who use Great Lakes pilotage service; and one came from the union whose contracts provide benchmark data for Great Lakes pilotage ratemaking. E:\FR\FM\04MRR1.SGM 04MRR1 emcdonald on DSK67QTVN1PROD with RULES 12086 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations A. AMOU Contracts Seven commenters—six pilots or pilot representatives, and the American Maritime Officers Union (AMOU)— addressed our use of AMOU contracts to estimate the average annual compensation for masters and first mates on U.S. Great Lakes vessels, in accordance with Step 2.A of our Appendix A ratemaking methodology. Many of these commenters took issue with the NPRM’s statement, 78 FR 48374 at 48376, col. 2, that recent AMOU contracts are marked by ‘‘downward changes,’’ and pointed out that AMOU contracts actually increase wages over a 5-year period. Our discussion is not a reflection on AMOU contract trends, but rather emphasizes that AMOU contract information, when factored into our Appendix A ratemaking methodology, could lead to a pilotage rate decrease, if not offset by the application of discretion under Step 7 of Appendix A. The six pilot/pilot representative commenters said we had incorrectly interpreted or misapplied AMOU contract data. A registered lobbyist representing all three pilotage associations said we should have used the daily aggregate rate information included in an AMOU letter dated November 2, 2012, and further claimed that we based our calculations on ‘‘wrong multipliers.’’ We reject each of these assertions and confirm the accuracy of the figures given in our NPRM. The assertion of the registered lobbyist that we should have used data from the November 2, 2012 AMOU letter is unfounded. Prior to publication of the NPRM, the AMOU provided and confirmed contract data to us on four separate occasions in 2012: On November 2, November 15, December 5, and December 17. The first communication on November 2 (the letter referenced by the registered lobbyist) provided information on wages and benefits but was marked ‘‘proprietary,’’ and therefore has not been and cannot be shared by the Coast Guard with the public. Because Coast Guard could not share the component data, Coast Guard and AMOU agreed that AMOU would provide daily aggregate data. The November 15 and December 5 letters provided information on 2013, 2014 and 2015 daily aggregate (wage and benefit) rates for Agreement A and Agreement B, respectively. The letters indicated that the daily aggregate rates would increase by 3% each year. On December 17, 2012, we emailed a table of the aggregate rate data that we planned to use in the NPRM, and in response, the AMOU promptly emailed: VerDate Mar<15>2010 17:49 Mar 03, 2014 Jkt 232001 ‘‘This table and only this table is acceptable to AMO[U].’’ That table’s data, with 3% added in accordance with AMOU’s correspondence, is what we presented in Table 11 of our NPRM, 78 FR at 48382. Multipliers are only used if we can site individual components of compensation in our calculations. Because our calculations were based only on the aggregate data shown in the table, they are not affected by ‘‘wrong multipliers.’’ In its October 4, 2013 comment on the NPRM, the AMOU offered ‘‘correct’’ daily aggregate rates that differ significantly from the figures in the table the AMOU confirmed as ‘‘acceptable’’ on December 17, 2012. The AMOU comment reflects a ‘‘season bonus’’ that the AMOU has not previously cited as part of its contracts, and that we do not recognize for purposes of Great Lakes pilotage compensation. 46 CFR 404.5(a). As a disinterested third party to our ratemakings, the AMOU is under no obligation to share contract information with us. The AMOU has not provided a copy of the contracts nor agreed to allow us to review them. This compromises our ability to use that data in a transparent way and prohibits us from evaluating the individual components for compensation. We are investigating alternatives to using AMOU contract data for our ratemaking purposes. B. APA Dues Four commenters addressed our proposed inclusion in the ratemaking calculations of dues for pilotage association membership in the American Pilots Association (APA). Three pilot representatives favored inclusion. One shipping industry commenter said that APA membership is voluntary, and therefore should not be included. We consider the APA to play a key role in ensuring our mutual goals of safe, efficient, and reliable pilotage on the Great Lakes. The APA has assisted the three pilotage associations with professional development and training plans, and we believe the APA is a critical resource for the pilotage associations in spreading best practices throughout the pilotage profession. Therefore, we continue to find that APA dues are a necessary and reasonable expense of the pilotage associations. One pilotage association said we had incorrectly calculated its APA dues. The St. Lawrence Seaway Pilots’ Association contends that APA dues paid by the organization were actually $27,730. We disagree. Much of the amount asserted by the association is for lobbying expenses that are not PO 00000 Frm 00054 Fmt 4700 Sfmt 4700 eligible to be included in the rate. However, a review of the financial statements approved by the pilotage association shows dues paid to the APA in the amount of $22,720. Accordingly we updated the necessary tables to include this amount, an addition to the expense base of $4,360. However, because of our Step 7 discretion, this change to the underlying data does not impact the final rate. C. Pilot License Insurance One pilotage association commented that we failed to include the amount that the association paid for pilot license insurance in our calculations. This is incorrect. The association requested a change in reporting that moved license insurance from an operating expense to an employee benefit. The association again approved the change when they were given the opportunity to comment on the reports prepared by the auditors. Benefits are considered part of compensation, and are not allowed to be included separately in the rate. However, because we have historically included license insurance as an allowable expense, and because both of the other pilotage associations include license insurance as an allowable expense, we will allow inclusion of the 2011 license insurance cost ($52,232) in the expense base of the association. Again, because of our exercise of Step 7 discretion in this rulemaking, this change to the expense base does not alter the final rate. D. Weighting Factors Five commenters addressed our proposal to match U.S. weighting factors to those used by Canada. All were in favor of this proposal, but one pilotage association said we overestimated the beneficial impact, for pilots, of adjusting weighting factors (see the NPRM, 78 FR 48376). One pilot commented that it is unfair of us not to apply a retroactive rate adjustment recognizing the 6 years during which the U.S. weighting factors differed from those used by Canada. We think the association based its lower estimate on its local data, not on data for the Great Lakes as a whole. We stand by our estimate of the beneficial impact of the adjustment. E. Surcharges Two pilot representatives and two representatives of shippers commented on our proposal to allow establishment of temporary surcharges. The pilot representatives supported the proposal. One of the shipper representatives said our proposal was too vague and that surcharges could have a damaging economic impact, and the other said it E:\FR\FM\04MRR1.SGM 04MRR1 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations emcdonald on DSK67QTVN1PROD with RULES is unnecessary because the Director of Great Lakes Pilotage already has sufficient authority to make discretionary rate adjustments. We think the proposal is sufficiently clear, and this final rule adopts it. Whether any given surcharge will have a damaging economic impact can be the subject of public comment, an opportunity for which will be given each time we propose a surcharge. While it is true that the Director has substantial authority to make discretionary rate adjustments, we believe that the surcharge mechanism is preferable because it provides more regulatory transparency. F. Director Discretion Our regulations found in 46 CFR 404.10(a) give the Director of Great Lakes Pilotage discretionary authority to determine what ‘‘other circumstances’’ beyond those listed in the Appendix A ratemaking methodology might need to be factored into ratemaking calculations. Two shipper representatives and one pilot representative commented on the Director’s exercise of this discretionary authority. The pilot representative commented the latitude of the Director’s discretion to modify rates as calculated by the Appendix A methodology is ‘‘troubling.’’ One of the shipper representatives commented that the apparent need for the Director to exercise this discretion indicates there is something ‘‘definitely wrong’’ with the methodology given that the calculated rates and the rates that were actually implemented are drastically different. We agree with both commenters. Our concerns about possible flaws in the Appendix A methodology led us to commission the comprehensive study of that methodology, which a contractor recently completed for the Coast Guard. The recommendations from that study will be addressed in a future rulemaking. Separately, another shipper representative commented that the Director’s proposed discretionary adjustment of rate calculations to increase rates would have a ‘‘damaging economic impact.’’ We disagree. Pilotage charges in U.S. waters of the Great Lakes remain below the charges (including temporary surcharges) that apply in Canadian waters. We know of no evidence that U.S. pilotage rates are driving traffic away from the Great Lakes. We plan to exercise the Director’s authority in future rulemakings until the methodology is updated. We will use the surcharges to accelerate certain expenses as previously discussed. Until we are able to obtain an audit of the revenues by an independent third party, VerDate Mar<15>2010 17:49 Mar 03, 2014 Jkt 232001 we will rely upon inflation and the consumer price index (CPI) for the Midwest to guide our ratemaking adjustments. If the revenue audit reveals a significant revenue gap between the projected revenues and the actual revenues recovered by the rate, we will work with the stakeholders through the Great Lakes Pilotage Advisory Committee (GLPAC) and exercise our discretion to address the gap. G. Ratemaking Methodology Four pilot representatives and one shipper representative commented on our ratemaking methodology. Three pilot representatives commented that we should use a multi-year inflation factor to compensate for the time value of money between the time the audits are conducted and the rate is established (for the 2014 NPRM, we proposed to use 2011 data that was audited in 2012). Under Step 1.C of the Appendix A ratemaking methodology, the ratemaking adjustment for inflation or deflation is a one-year adjustment between the reported year (2011) and the ‘‘succeeding navigation season’’ (2012). We are therefore unable to make a multi-year adjustment under the current methodology; however, we acknowledge the pilots’ concern and will consider altering the inflation/ deflation adjustment mechanism in a future rulemaking. A pilot and a pilot representative reiterated the pilots’ long-held contention (see the 2013 final rule, 78 FR 13522) that our over-projection of shipping traffic results in an overprojection of pilotage revenue. One of these commenters said that the Coast Guard should ensure that pilots reach target compensation. We agree that traffic projection is an issue that needs to be addressed in a future rulemaking to revise the Appendix A methodology, but we disagree that the Coast Guard should ensure that pilots reach target compensation. The Coast Guard never sets actual compensation; instead, actual compensation is handled differently by the three private pilotage associations. Due to the inherent risk in operating a private business, we cannot guarantee compensation for any of the associations. A pilot commented that, under the 1977 Memorandum of Agreement between the United States and Canada, U.S. pilotage rates must be identical to Canadian rates. He said that while our proposed 2.5 percent rate increase matches the latest Canadian increase, the two rate structures are not identical. While it is true that the 1977 agreement does require ‘‘identical’’ rates, in practice the two pilotage systems are so PO 00000 Frm 00055 Fmt 4700 Sfmt 4700 12087 differently structured that it has not been possible to set identical rates since the early 1980s. A new memorandum has been signed and will replace the 1977 agreement. It calls for ‘‘comparable’’ rates. We believe that, after accounting for the structural differences in U.S. and Canadian Great Lakes pilotage systems, the two rate structures are comparable. The same commenter reiterated the pilots’ long-held contention (see the 2010 final rule, 75 FR 7959, Feb. 23, 2010) that we incorrectly calculate the application of benefits to the AMOU contracts in setting rates for designated waters, and that we should instead multiply both the average first mate wages and benefits by 150 percent to approximate a master’s compensation. Our position continues to be that, under Step 2.A of the Appendix A methodology, the 150 percent is applied only to wages; benefits are then added to the result. As previously mentioned, we are evaluating if there are alternatives to using AMOU contract data for our ratemaking purposes. Finally, the same commenter contends that we should allow a higher return on investment (ROI) than the average rate for Moody’s AAA high grade corporate securities, given the degree of risk that pilots run. We have correctly calculated the ROI, in accordance with Step 5 of the Appendix A methodology, which requires us to tie ROI to the ‘‘preceding year’s average rate of return for new issues of high grade corporate securities.’’ We may revise our ROI calculations as part of a comprehensive revision of Appendix A. The shipper representative suggested that our NPRM’s Appendix A calculations, resulting in a prediscretion-adjusted 11 percent rate decrease, may demonstrate that U.S. Great Lakes pilots are at least adequately compensated, and perhaps overcompensated by regional standards. We disagree. As we discussed at length in the NPRM (78 FR 48389), the preadjustment calculations are due to changes in benchmark AMOU contracts rather than to any changes in Great Lakes pilotage as such, and we think it would be contrary to the public interest to decrease pilotage rates as a result of this year’s calculations. Additionally, incorporating these compensation changes would result in a target pilot compensation significantly lower than Canadian Great Lakes-registered pilots. We believe this is also contrary to the public interest. We intend to address this inequity in target pilot compensation in a future rulemaking. We believe the proper benchmark for target pilot compensation of U.S. Great E:\FR\FM\04MRR1.SGM 04MRR1 12088 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations Lakes registered pilots should be comparable to the compensation of Canadian Great Lakes registered pilots. H. Economic Analysis A pilot commented that footnote 5 to our NPRM (78 FR 48391) ‘‘defies common sense.’’ The footnote states that despite increasing pilotage rates, ‘‘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.’’ Although we agree with the commenter that the reduction in payments accrued by shippers in Districts Two and Three are not a result of the Coast Guard’s proposed rate changes to pilotage services, but instead are the result of changes in market conditions, the economic impact to industry presented in the NPRM remains unchanged because these market conditions were factored into our analysis; the aggregate reduction in payments by shippers across all three districts is not expected to jeopardize the ability of the three pilotage associations to provide safe, efficient, and reliable pilotage services. emcdonald on DSK67QTVN1PROD with RULES I. Number of Pilots The District Two pilotage association requested immediate authorization for an additional pilot in light of the impending retirement of current pilots in that district. We agree that the district should plan for these expected retirements, but we do not think that requires the immediate authorization of an additional billet. However, the unforeseen potential medical disability of another pilot in the district compounds the difficulty of resourcing new pilots to replace those retiring. Because investing in the training, recruitment and resourcing of pilots is necessary to promote safe, efficient and reliable pilotage, we will, in accordance with our new surcharge authority, consider proposing, for public comment, a surcharge for District Two to cover the cost of training and resourcing a new pilot in our 2015 ratemaking NPRM. J. District One Dock The District One pilotage association said that our rates have not enabled them to recover approximately $21,345 spent on a dock project, because their actual revenue fell short of our projections. We agree that $21,345 is a substantial shortfall relating to a capital expenditure made in the interest of safety. We have not validated the existence and/or magnitude of the alleged gap between projected and actual revenues, because the methodology does not consider actual VerDate Mar<15>2010 17:49 Mar 03, 2014 Jkt 232001 revenues to set rates. Therefore, we believe any discussion related to closing a gap between projected and actual revenues should be addressed by the GLPAC.3 We defer action on this request until we hear from the advisory committee regarding this specific request at the next GLPAC meeting in 2014. We will then address this in the next annual ratemaking NPRM for the 2015 shipping season. VI. Discussion of Rulemaking A. Summary As required by 46 U.S.C. 9303(f), we are establishing new base pilotage rates by the March 1, 2014 statutory deadline. The rates are established in accordance with the Appendix A methodology and will take effect on August 1, 2014. The rates reflect our determination that 85 percent of the dues paid by the pilotage associations to the APA is recognizable expenses under 46 CFR 404.5 (the remaining 15 percent represents lobbying expenses, which are not recognizable expenses). Our arithmetical calculations under Steps 1 through 6 of Appendix A would result in an average 10.28 percent rate decrease. This rate decrease is not the result of increased efficiencies in providing pilotage services, but rather is a result of recent changes in benchmark AMOU contracts. Therefore, we are exercising our discretion under Appendix A, Step 7 to more closely align with the recent Canadian rate adjustment, and therefore rates in Districts One, Two and Three will increase by 2.5 percent. On April 3, 2014, we are adjusting the U.S. weighting factors in 46 CFR 401.400 to match the weighting factors adopted by Canada in 2008, as recommended unanimously by the GLPAC in Resolution 13–01 in February 2013. 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 provides greater parity between the U.S. and Canada, and should reduce billing confusion between the two countries. These are important Federal Government concerns, as emphasized by recent Executive Order (E.O.) 13609, ‘‘Promoting International Regulatory Cooperation’’ (77 FR 26413, May 4, 2012). In our NPRM, we proposed making this change effective on March 1, 2014, but for reasons of administrative convenience we have 3 Per 46 U.S.C. 9307(d)(1), as delegated to the Coast Guard, we are to, ‘‘whenever practicable, consult with the [GLPAC] before taking any significant action relating to Great Lakes pilotage.’’ PO 00000 Frm 00056 Fmt 4700 Sfmt 4700 now determined that the change should take effect after the usual 30-day waiting period provided by the Administrative Procedure Act (5 U.S.C. 553(d)). Also, effective April 3, 2014, we are adding new 46 CFR 401.401, allowing authorization of temporary surcharges in the interest of safe, efficient, and reliable pilotage. The Director of Great Lakes Pilotage authorizes the District One pilotage association to charge a 3 percent surcharge during the 2014 shipping season, effective April 3, 2014, to recoup expenses that the association incurred for training ($48,995). All figures in the tables that follow in Section B ‘‘Discussion of Methodology’’ are based on calculations performed either by an independent accountant or by the Director’s staff. In both cases, those calculations were performed using common commercial computer programs. Decimalization and rounding of the audited and calculated data affects the display in these tables, but does not affect the calculations. The calculations are based on the actual figure that rounds values for presentation in the tables. 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 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 pilotage 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 to submit findings recommending which reported expenses should be recognized. The accountant also reviewed which reported expenses should be adjusted prior to recognition E:\FR\FM\04MRR1.SGM 04MRR1 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations or disallowed for ratemaking purposes. The accountant’s preliminary findings were sent to the pilotage associations; they reviewed and commented on those findings, and the accountant then finalized them. The Director reviewed and accepted the final findings, resulting in the determination of 12089 recognizable expenses. Tables 1 through 3 show each association’s recognized expenses. TABLE 1—RECOGNIZED EXPENSES, DISTRICT ONE Area 1 Operating Expenses: Other Pilotage Costs: Pilot subsistence/Travel ............................................................................................ License insurance ..................................................................................................... Payroll taxes ............................................................................................................. Other ......................................................................................................................... Area 2 St. Lawrence River Reported expenses for 2011 Lake Ontario Total $234,724 26,976 61,483 837 $156,246 25,256 47,611 588 $390,970 52,232 109,094 1,425 Total Other Pilotage Costs ................................................................................ Pilot Boat and Dispatch Costs: Pilot boat expense .................................................................................................... Dispatch expense ..................................................................................................... Payroll taxes ............................................................................................................. 324,020 229,701 553,721 111,772 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 11,360 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 11,360 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 22,720 7,255 85,615 9,180 6,477 16,839 Total Administrative Expenses .......................................................................... 209,523 146,332 355,855 Total Operating Expenses ................................................................................. Adjustments proposed by the Coast Guard’s independent certified public accountant (CPA): Operating Expenses: Other Pilot Costs: Pilotage subsistence/Travel ...................................................................................... Payroll taxes ............................................................................................................. 653,926 458,862 1,112,788 (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 ................................................................................. 664,317 466,012 1,130,329 TABLE 2—RECOGNIZED EXPENSES, DISTRICT TWO Area 4 Area 5 Lake Erie Southeast Shoal to Port Huron, MI emcdonald on DSK67QTVN1PROD with RULES Reported expenses for 2011 Operating Expenses: Other Pilotage Costs: Pilot subsistence/Travel ............................................................................................ License insurance ..................................................................................................... Payroll taxes ............................................................................................................. Other ......................................................................................................................... Total Other Pilotage Costs ................................................................................ Pilot Boat and Dispatch Costs: Pilot boat expense .................................................................................................... Dispatch expense ..................................................................................................... VerDate Mar<15>2010 17:49 Mar 03, 2014 Jkt 232001 PO 00000 Frm 00057 Fmt 4700 Sfmt 4700 Total $79,250 6,168 36,676 23,560 $118,874 9,252 55,013 35,341 $198,124 15,420 91,689 58,901 145,654 218,480 364,134 104,955 6,060 157,432 9,090 262,387 15,150 E:\FR\FM\04MRR1.SGM 04MRR1 12090 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations TABLE 2—RECOGNIZED EXPENSES, DISTRICT TWO—Continued Area 4 Area 5 Lake Erie Southeast Shoal to Port Huron, MI Reported expenses for 2011 Total Employee Benefits .................................................................................................... Payroll taxes ............................................................................................................. 40,419 7,135 60,628 10,703 101,047 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 ............................................................................................ Utilities ...................................................................................................................... Salaries ..................................................................................................................... Accounting/Professional fees ................................................................................... Pilot Training ............................................................................................................. Other ......................................................................................................................... 158,569 237,853 396,422 37,520 26,275 10,672 16,365 4,446 14,273 15,604 2,772 7,069 15,410 39,874 12,110 0 8,860 56,281 39,413 16,009 24,548 6,668 21,409 23,407 4,159 10,603 23,115 59,810 18,164 0 13,291 93,801 65,688 26,681 40,913 11,114 35,682 39,011 6,931 17,672 38,525 99,684 30,274 0 22,151 Total Administrative Expenses .......................................................................... 211,250 316,877 528,127 Total Operating Expenses ................................................................................. Adjustments proposed by the Coast Guard’s independent certified public accountant (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 TABLE 3—RECOGNIZED EXPENSES, 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 .................................................................................. 339,743 125,830 163,580 629,154 12,188 5,346 7,451 4,495 1,980 2,760 5,844 2,574 3,587 22,477 9,900 13,798 Reported expenses for 2011 emcdonald on DSK67QTVN1PROD with RULES Operating Expenses: Other Pilotage Costs: Pilot subsistence/Travel ............................................................ License insurance ..................................................................... Payroll taxes ............................................................................. Other ......................................................................................... VerDate Mar<15>2010 17:49 Mar 03, 2014 Jkt 232001 PO 00000 Frm 00058 Fmt 4700 Sfmt 4700 Total E:\FR\FM\04MRR1.SGM 04MRR1 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations 12091 TABLE 3—RECOGNIZED EXPENSES, DISTRICT THREE—Continued Area 6 Area 7 Area 8 Lakes Huron and Michigan St. Mary’s River Lake Superior Employee benefits .................................................................... Payroll taxes ............................................................................. Other taxes ............................................................................... Depreciation/Auto leasing ......................................................... Interest ...................................................................................... Dues and subscriptions ............................................................ Utilities ...................................................................................... Salaries ..................................................................................... Accounting/Professional fees ................................................... Pilot Training ............................................................................. Other ......................................................................................... 73,230 6,154 19,339 34,341 2,682 11,016 19,723 55,772 13,419 516 5,394 27,122 2,279 7,163 12,719 993 5,508 7,305 20,656 4,970 191 1,998 35,259 2,963 9,311 16,534 1,291 7,344 9,496 26,853 6,461 248 2,597 135,611 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 Total Operating Expenses ........................................................ Adjustments proposed by the Coast Guard’s independent certified public accountant (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 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 Total ‘‘succeeding navigation season’’ for this ratemaking is 2012. We based our inflation adjustment of 2 percent on the 2012 change in the CPI for the Midwest Region of the United States, which can be found at: https://www.bls.gov/xg_ shells/ro5xg01.htm. This adjustment appears in Tables 4 through 6. TABLE 4—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 × = $664,317 .02 13,286 Total $466,012 .02 9,320 × = × = $1,130,329 .02 22,607 TABLE 5—INFLATION ADJUSTMENT, DISTRICT TWO Area 4 Area 5 Lake Erie Southeast Shoal to Port Huron, MI emcdonald on DSK67QTVN1PROD with RULES Reported expenses for 2011 Total Operating Expenses: ....................................................................... 2012 change in the CPI for the Midwest Region of the United States .... Inflation Adjustment .................................................................................. VerDate Mar<15>2010 17:49 Mar 03, 2014 Jkt 232001 PO 00000 Frm 00059 Fmt 4700 × = Sfmt 4700 $512,184 .02 10,244 × = E:\FR\FM\04MRR1.SGM $768,277 .02 15,366 04MRR1 Total × = $1,280,461 .02 25,609 12092 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations TABLE 6—INFLATION ADJUSTMENT, DISTRICT THREE Area 6 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. .02 17,829 × = $431,255 × = .02 6,632 .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 7 shows these projections. TABLE 7—PROJECTED OPERATING EXPENSES, DISTRICT ONE Area 1 Total Operating Expenses: ....................................................................... Inflation adjustment 2.0% ......................................................................... Total projected expenses for 2014 pilotage season ................................ In District Two, Federal taxes of $12,000 are accounted for in Step 6 (Federal Tax Allowance). The projected Area 2 St. Lawrence River Reported expenses for 2011 Lake Ontario Total $664,317 13,286 677,603 + = operating expenses are based on the calculations from Steps 1.A through 1.C $466,012 9,320 475,332 + = + = $1,130,329 22,607 1,152,936 and Federal taxes. Table 8 shows these projections. TABLE 8—PROJECTED OPERATING EXPENSES, DISTRICT TWO Area 4 Area 5 Lake Erie Southeast Shoal to Port Huron, MI Reported expenses for 2011 Total Operating Expenses .................................................................. Inflation adjustment 2.0% ................................................................... Director’s adjustment & foreseeable circumstances Federal taxes (accounted for in Step 6) ............................................. Total projected expenses for 2014 pilotage season ................... Currently, we are not aware of any foreseeable circumstances for District ...... + Total $512,184 10,244 + $768,277 15,366 + $1,280,461 25,609 + (4,800) + (7,200) + (12,000) = 517,627 = 776,442 = 1,294,070 Three. Its projected operating expenses are based on the calculations from Steps 1.A through 1.C. Table 9 shows these projections. TABLE 9—PROJECTED OPERATING EXPENSES, DISTRICT THREE Area 6 emcdonald on DSK67QTVN1PROD with RULES Total Expenses ......................................... Inflation adjustment 2.0% .......................... Total projected expenses for 2014 pilotage season ............................................ 17:49 Mar 03, 2014 Jkt 232001 Area 8 St. Mary’s River Lake Superior Total ...... + $891,453 17,829 + $331,595 6,632 + $431,255 8,625 + $1,654,303 33,086 = 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 VerDate Mar<15>2010 Area 7 Lakes Huron and Michigan Reported expenses for 2011 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 PO 00000 Frm 00060 Fmt 4700 Sfmt 4700 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 E:\FR\FM\04MRR1.SGM 04MRR1 12093 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations pilots on designated waters by multiplying the average first mate’s wages by 150 percent and then adding the average first mate’s 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 10 shows our calculations using the 270-day multiplier. TABLE 10—PROJECTED ANNUAL AGGREGATE RATE COMPONENTS Aggregate Rate–Wages, 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 11 provides details. TABLE 11—SHIPPING TONNAGE APPORTIONED BY CONTRACT Company Agreement A Agreement B American Steamship Company ................................................................... Mittal Steel USA, Inc ................................................................................... Key Lakes, Inc ............................................................................................. Total tonnage, each agreement .................................................................. Percent tonnage, each agreement .............................................................. ...................................................... ...................................................... 361,385 361,385 361,385 ÷ 1,215,811 = 29.7238% 815,600 38,826 ...................................................... 854,426 854,426 ÷ 1,215,811 = 70.2762% We use the percentages from Table 11 to apportion the projected compensation from Table 10. This gives us a single tonnage-weighted set of figures. Table 12 shows our calculations. TABLE 12—TONNAGE-WEIGHTED WAGE AND BENEFIT COMPONENTS Undesignated waters emcdonald on DSK67QTVN1PROD with RULES 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 VerDate Mar<15>2010 17:49 Mar 03, 2014 Jkt 232001 PO 00000 Frm 00061 Fmt 4700 Sfmt 4700 E:\FR\FM\04MRR1.SGM 04MRR1 12094 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations TABLE 12—TONNAGE-WEIGHTED WAGE AND BENEFIT COMPONENTS—Continued Undesignated waters Total ............................................................................................................................... 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 basic 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 (see 76 FR 6352, Feb. 4, 2011), we do not include, and have never 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 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 Designated waters 163,860 = 225,000 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 (see 74 FR 22221–22, Jan. 5, 2009), we determined that this adjustment is essential for ensuring uninterrupted pilotage service in Area 2. Table 13 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 13—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 14, 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 13, by the target pilot compensation shown in Table 12. TABLE 14—PROJECTION OF TARGET PILOT COMPENSATION BY AREA emcdonald on DSK67QTVN1PROD with RULES Area Area Area Area Area Area Area 1 2 4 5 6 7 8 (Designated waters) ............................................................................. (Undesignated waters) ......................................................................... (Undesignated waters) ......................................................................... (Designated waters) ............................................................................. (Undesignated waters) ......................................................................... (Designated waters) ............................................................................. (Undesignated waters) ......................................................................... Steps 3 and 3.A: Projection of revenue. In Steps 3 and 3.A., we project VerDate Mar<15>2010 19:01 Mar 03, 2014 Jkt 232001 Target rate of pilot compensation Pilots needed (total = 36) Pilotage area 6 5 4 6 6 4 5 the revenue that would be received in 2014 if demand for pilotage services PO 00000 Frm 00062 Fmt 4700 Sfmt 4700 x × × × × × × $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 matches the bridge hours we projected in Table 13, and if 2013 pilotage rates are left unchanged. Table 15 shows this calculation. E:\FR\FM\04MRR1.SGM 04MRR1 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations 12095 TABLE 15—PROJECTION OF REVENUE BY AREA Projected 2014 bridge hours Pilotage area Area Area Area Area Area Area Area (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 Total ........................................................................................................... * 1 2 4 5 6 7 8 2013 Pilotage rates * × × × × × × × ............................ Revenue projection for 2014 $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 12,458,339 Projected 2013 revenue divided by projected 2013 bridge hours, per area. 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 16 through 18 follow the formula up to that point. TABLE 16—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 = 1,002,685 = 689,897 + + + + 647,677 318,571 24,746 0 0 + + + + 445,633 219,193 17,026 0 0 = 990,994 = 681,852 + + + = 0 0 0 0 0 + + + = 0 0 0 0 0 Total Sources of Funds: Total Recognized Sources ........................................................................................................ Total Non-Recognized Sources ................................................................................................ + 990,994 0 + 681,852 0 Total Sources of Funds: .................................................................................................... = 990,994 = 681,852 Total Assets: ...................................................................................................................... Recognized Sources of Funds: Total Stockholder Equity ........................................................................................................... Long-Term Debt ........................................................................................................................ Current Notes Payable .............................................................................................................. Advances from Affiliated Companies ........................................................................................ Long-Term Obligations—Capital Leases .................................................................................. Total Recognized Sources: ................................................................................................ Non-Recognized Sources of Funds: Pension Liability ........................................................................................................................ Other Non-Current Liabilities .................................................................................................... Deferred Federal Income Taxes ............................................................................................... Other Deferred Credits .............................................................................................................. Total Non-Recognized Sources: ............................................................................................... emcdonald on DSK67QTVN1PROD with RULES TABLE 17—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 .......................................................................................................................................... VerDate Mar<15>2010 17:49 Mar 03, 2014 Jkt 232001 PO 00000 Frm 00063 Fmt 4700 Sfmt 4700 ¥ + + ¥ E:\FR\FM\04MRR1.SGM $454,465 409,366 25,822 420,422 0 04MRR1 Area 5 ¥ + + ¥ $681,697 614,048 38,734 630,632 0 12096 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations TABLE 17—TOTAL SOURCES OF FUNDS, DISTRICT TWO—Continued Area 4 Area 5 Total Other Assets .................................................................................................................... + 60,195 + 90,293 Total Recognized Assets ................................................................................................... Non-Recognized Assets: Total Investments and Special Funds ...................................................................................... = 551,538 = 827,308 + 0 + 0 Total Non-Recognized Assets ........................................................................................... Total Assets: Total Recognized Assets .......................................................................................................... Total Non-Recognized Assets .................................................................................................. = 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 ............................................................................................... Other Deferred Credits .............................................................................................................. = 525,716 = 788,574 + + + 0 0 0 0 + + + 0 0 0 0 Total Non-Recognized Sources ......................................................................................... Total Sources of Funds: Total Recognized Sources ........................................................................................................ Total Non-Recognized Sources ................................................................................................ = 0 = 0 + 525,716 0 + 788,574 0 Total Sources of Funds ..................................................................................................... = 525,716 = 788,574 TABLE 18—TOTAL SOURCES OF FUNDS, DISTRICT THREE emcdonald on DSK67QTVN1PROD with RULES Area 6 Recognized Assets: Total Current Assets .......................................................................... Total Current Liabilities ...................................................................... Current Notes Payable ...................................................................... Total Property and Equipment (Net) ................................................. Land ................................................................................................... Total Other Assets ............................................................................. Total Recognized Assets ................................................................... Non-Recognized Assets: Total Investments and Special Funds ............................................... Total Non-Recognized Assets ........................................................... Total Assets: Total Recognized Assets ................................................................... Total Non-Recognized Assets ........................................................... Total Assets ....................................................................................... Recognized Sources of Funds: Total Stockholder Equity ................................................................... Long-Term Debt ................................................................................ Current Notes Payable ...................................................................... Advances from Affiliated Companies ................................................ Long-Term Obligations—Capital Leases .......................................... Total Recognized Sources ................................................................ Non-Recognized Sources of Funds: Pension Liability ................................................................................. Other Non-Current Liabilities ............................................................. Deferred Federal Income Taxes ....................................................... Other Deferred Credits ...................................................................... Total Non-Recognized Sources ........................................................ Total Sources of Funds: Total Recognized Sources ................................................................ Total Non-Recognized Sources ........................................................ Total Sources of Funds .............................................................. VerDate Mar<15>2010 17:49 Mar 03, 2014 Jkt 232001 PO 00000 Frm 00064 Fmt 4700 Area 7 Area 8 ¥ + + ¥ + = $658,934 64,869 3,869 21,905 0 540 620,379 ¥ + + ¥ + = $244,050 24,025 1,433 8,113 0 200 229,771 ¥ + + ¥ + = $317,265 31,233 1,863 10,547 0 260 298,702 + = 0 0 + = 0 0 + = 0 0 + = 620,379 0 620,379 + = 229,771 0 229,771 + = 298,702 0 298,702 + + + + = 606,164 6,478 3,869 0 0 616,511 + + + + = 224,505 2,399 1,433 0 0 228,337 + + + + = 291,857 3,119 1,863 0 0 296,839 + + + = 0 0 0 0 0 + + + = 0 0 0 0 0 + + + = 0 0 0 0 0 + 616,511 0 + 228,337 0 + 296,839 0 = 616,511 = 228,337 = 296,839 Sfmt 4700 E:\FR\FM\04MRR1.SGM 04MRR1 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations Tables 16 through 18 also relate to the second part of the formula for calculating the investment base. The second part establishes a ratio between recognized sources of funds and total sources of funds. Since no nonrecognized sources of funds (sources we 12097 multiplier of 1 and shows that the investment base for each association equals its total recognized assets. Table 19 also expresses these results by area, because area results will be needed in subsequent steps. do not recognize as required to support pilotage operations) exist for any of the pilotage associations for this year’s rulemaking, the ratio between recognized sources of funds and total sources of funds is 1:1 (or a multiplier of 1) in all cases. Table 19 applies the TABLE 19—INVESTMENT BASE BY AREA AND DISTRICT District Total recognized assets ($) Area Recognized sources of funds ($) Multiplier (ratio of recognized to total sources) Total sources of funds ($) 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)’’. pilotage associations that provide pilotage services in Districts One and Three operate as partnerships. The pilotage 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 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 sub-step of Step 6 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 20 through 22. TABLE 20—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 ROI ................................................................................................................................... ¥ ¥ = ¥ = ¥ = ÷ = $2,358,327 677,603 1,349,999 330,725 18,484 312,241 0 312,241 330,725 996,442 0.3319 Area 2 ¥ ¥ = ¥ = ¥ = ÷ = $1,546,373 475,332 819,298 251,743 12,718 239,025 0 239,025 251,743 685,602 0.3672 TABLE 21—PROJECTED ROI, AREAS IN DISTRICT TWO emcdonald on DSK67QTVN1PROD with RULES 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 ....................................................................................................................................... VerDate Mar<15>2010 17:49 Mar 03, 2014 Jkt 232001 PO 00000 Frm 00065 Fmt 4700 Sfmt 4700 ¥ ¥ = ¥ = ¥ = E:\FR\FM\04MRR1.SGM $1,193,426 517,627 655,438 20,361 2,772 17,589 4,800 12,789 04MRR1 Area 5 ¥ ¥ = ¥ = ¥ = $2,571,038 776,442 1,349,999 444,597 4,159 440,438 7,200 433,238 12098 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations TABLE 21—PROJECTED ROI, AREAS IN DISTRICT TWO—Continued Area 4 Return Element (Net Income + Interest) .......................................................................................... Investment Base (from Step 4) ........................................................................................................ Projected ROI ................................................................................................................................... Area 5 15,561 551,538 0.0282 ÷ = 437,397 827,308 0.5287 ÷ = TABLE 22—PROJECTED ROI, AREAS IN DISTRICT THREE Area 6 Revenue (from Step 3) ............................................................................. Operating Expenses (from Step 1) ........................................................... Pilot Compensation (from Step 2) ............................................................ Operating Profit/(Loss) .............................................................................. Interest Expense (from audits) ................................................................. Earnings Before Tax ................................................................................. Federal Tax Allowance ............................................................................. Net Income ............................................................................................... Return Element (Net Income + Interest) .................................................. Investment Base (from Step 4) ................................................................ Projected ROI ........................................................................................... The second sub-step compares the results of Tables 20 through 22 with the Area 7 $1,921,756 909,282 983,157 29,317 2,682 26,635 0 26,635 29,317 620,379 0.0473 ¥ ¥ = ¥ = ¥ = ÷ = target ROI (3.67 percent) we obtained in Step 5 to determine if an adjustment to Area 8 $1,459,929 338,227 899,999 221,703 993 220,710 0 220,710 221,703 229,771 0.9649 ¥ ¥ = ¥ = ¥ = ÷ = $1,407,490 439,880 819,298 148,312 1,291 147,021 0 147,021 148,312 298,702 0.4965 ¥ ¥ = ¥ = ¥ = ÷ = the base pilotage rate is necessary. Table 23 shows this comparison for each area. TABLE 23—COMPARISON OF PROJECTED ROI AND TARGET ROI, BY AREA 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 ROI .............. Target ROI ................... Difference in ROIs ....... 0.3319 0.0367 0.2952 0.3672 0.0367 0.3305 Because Table 23 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 0.0282 0.0367 (0.0085) 0.5287 0.0367 0.4920 revenues that are needed to make the target return on investment equal to the projected return on investment. This calculation is shown in Table 24. It adjusts the investment base we used in 0.0473 0.0367 0.0106 0.9649 0.0367 0.9282 0.4965 0.0367 0.4598 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 24—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) .............. $677,603 475,332 517,627 776,442 909,282 338,227 439,880 + + + + + + + $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 = = = = = = = $2,064,171 1,319,791 1,198,107 2,164,003 1,915,207 1,246,659 1,270,140 Total ............................................... emcdonald on DSK67QTVN1PROD with RULES Area Area Area Area Area Area Area Investment Base (Step 4) × 3.67% (Target ROI Step 5) Target pilot compensation (Step 2) 4,134,394 + 6,877,187 + 154,498 + 12,000 = 11,178,078 The ‘‘Revenue Needed’’ column of Table 24 is more than the revenue we projected in Table 15. For purposes of transparency, we verify the calculations VerDate Mar<15>2010 17:49 Mar 03, 2014 Jkt 232001 in Table 24 by rerunning the formula in the first sub-step of Step 6, using the revenue needed from Table 24 instead of the Table 15 revenue projections we PO 00000 Frm 00066 Fmt 4700 Sfmt 4700 used in Tables 20 through 22. Tables 25 through 27 show that attaining the Table 24 revenue needed is sufficient to recover target ROI. E:\FR\FM\04MRR1.SGM 04MRR1 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations 12099 TABLE 25—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) ........................................................................................................ ROI ................................................................................................................................................... $2,064,171 677,603 1,349,999 36,569 18,484 18,085 0 18,085 36,569 996,442 0.0367 ¥ ¥ = ¥ = ¥ = ÷ = Area 2 ¥ ¥ = ¥ = ¥ = ÷ = $1,319,791 475,332 819,298 25,162 12,718 12,444 0 12,444 25,162 685,602 0.0367 TABLE 26—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) ........................................................................................................ ROI ................................................................................................................................................... + ¥ ¥ = ¥ = ¥ = $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 27—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) ................................................................ ROI ............................................................................................................ Step 7: Adjustment of pilotage rates. Finally, and subject to negotiation with Canada or to an 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 24) 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 15), to give us a rate multiplier for each area. Tables 28 through 30 show these calculations. TABLE 28—RATE MULTIPLIER, AREAS IN DISTRICT ONE Area 1 emcdonald on DSK67QTVN1PROD with RULES Revenue Needed (from Step 6) ....................................................................................................... Revenue (from Step 3) ..................................................................................................................... Rate Multiplier .................................................................................................................................. Area 2 St. Lawrence River Ratemaking Projections Lake Ontario ÷ = $2,064,171 2,358,327 0.8753 ÷ = $1,319,791 1,546,373 0.8535 TABLE 29—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 17:49 Mar 03, 2014 Jkt 232001 PO 00000 Frm 00067 Fmt 4700 Sfmt 4700 E:\FR\FM\04MRR1.SGM $1,198,107 04MRR1 $2,164,003 12100 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations TABLE 29—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 30—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 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 24) by total projected revenue (Steps 3 and 3.A, Table 15). Table 31 shows this calculation. Without further action, the existing rates we established in our 2013 final rule would then be multiplied by the rate multipliers from Tables 28 through 30 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 TABLE 31—RATE MULTIPLIER FOR BASIC RATES AND CHARGES IN 46 services, but rather is a result of recent significant changes in AMOU contracts. CFR 401.420 AND 401.428 We declined to impose this decrease because financial data from one of the Ratemaking Projections: associations indicates that such a rate Total Revenue Needed decrease would make it difficult for it to (from Step 6) ........... $11,178,078 continue funding operations, and may Total revenue (from Step 3) ..................... ÷ 12,458,339 even cause the association to Rate Multiplier ................. = 0.897 permanently close. Moreover, the decrease would have an adverse effect on providing safe, efficient, and reliable This table shows that rates for pilotage in the other two pilotage cancellation, delay, or interruption in districts. Finally, our 2013 agreement rendering services (46 CFR 401.420) and with Canada calls for comparable basic rates and charges for carrying a pilotage rates between the two U.S. pilot beyond the normal change countries, and we proposed aligning our point, or for boarding at other than the rates to the Canadian rate, which normal boarding point (46 CFR actually increased by 2.5 percent this 401.428), would decrease by 10.3 year. Our discretionary authority under percent in all areas. Step 7 must be ‘‘based on requirements ÷ = $1,246,659 1,459,929 0.8539 ÷ = $1,270,140 1,407,490 0.9024 of the Memorandum . . . between the United States and Canada, and other supportable circumstances that may be appropriate.’’ 46 CFR part 404, App. A. Without the 2.5 percent increase, U.S. and Canadian rates would be less comparable. ‘‘Other supportable circumstances’’ we have for exercising our discretion include E.O. 13609, ‘‘Promoting International Regulatory Cooperation,’’ which calls on Federal agencies to eliminate ‘‘unnecessary differences’’ between U.S. and foreign regulations (see 77 FR 26413, May 4, 2012). Additionally, there is a 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 are relying on the discretionary authority we have under Step 7 to further adjust rates so that they closely align with those adopted by the Canadian GLPA for 2014. Table 32 compares the impact, area by area, that an average decrease of 11 percent would have, relative to the impact each area would experience if U.S. rates more closely align with those of the Canadian GLPA. TABLE 32—IMPACT OF EXERCISING STEP 7 DISCRETION Percent change in rate without exercising Step 7 discretion emcdonald on DSK67QTVN1PROD with RULES Area Area Area Area Area Area Area Area 1 2 4 5 6 7 8 (Designated waters) ..................................................................................................... (Undesignated waters) ................................................................................................. (Undesignated waters) ................................................................................................. (Designated waters) ..................................................................................................... (Undesignated waters) ................................................................................................. (Designated waters) ..................................................................................................... (Undesignated waters) ................................................................................................. VerDate Mar<15>2010 17:49 Mar 03, 2014 Jkt 232001 PO 00000 Frm 00068 Fmt 4700 Sfmt 4700 E:\FR\FM\04MRR1.SGM ¥12.47 ¥14.65 0.39 ¥15.83 ¥0.34 ¥14.61 ¥9.76 04MRR1 Percent change in rate with exercise of Step 7 discretion 2.50 2.50 2.50 2.50 2.50 2.50 2.50 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations 12101 Tables 33 through 35 reflect our rate adjustments of 2.5 percent across Districts One, Two and Three. TABLE 33—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 ....................................................................................... In addition to the rate charges in Table 33, and for the reasons we discussed in Section V.A. of this preamble, we are adding 46 CFR 401.401, authorizing imposition of temporary surcharges. Effective April 3, 2014, we authorize 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. We do not think this surcharge will have a disruptive effect on District One traffic, because Canada has used an 18 percent surcharge in the past with no such effect. TABLE 34—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 emcdonald on DSK67QTVN1PROD with RULES Area 5, Southeast Shoal to Port Huron, MI between any point on or in Toledo or any point on Lake Erie W. of Southeast Shoal ............................... Toledo or any point on Lake Erie W. of Southeast Shoal & Southeast Shoal Toledo or any point on Lake Erie W. of Southeast Shoal & Detroit River ...... Toledo or any point on Lake Erie W. of Southeast Shoal & Detroit Pilot Boat Port Huron Change Point & Southeast Shoal (when pilots are not changed at the Detroit Pilot Boat) ............................................................................... Port Huron Change Point & Toledo or any point on Lake Erie W. of Southeast Shoal (when pilots are not changed at the Detroit Pilot Boat) ............. Port Huron Change Point & Detroit River ........................................................ Port Huron Change Point & Detroit Pilot Boat ................................................. Port Huron Change Point & St. Clair River ...................................................... St. Clair River ................................................................................................... St. Clair River & Southeast Shoal (when pilots are not changed at the Detroit Pilot Boat) .............................................................................................. St. Clair River & Detroit River/Detroit Pilot Boat .............................................. Detroit, Windsor, or Detroit River ..................................................................... Detroit, Windsor, or Detroit River & Southeast Shoal ...................................... Detroit, Windsor, or Detroit River & Toledo or any point on Lake Erie W. of Southeast Shoal ............................................................................................ Detroit, Windsor, or Detroit River & St. Clair River .......................................... Detroit Pilot Boat & Southeast Shoal ............................................................... Detroit Pilot Boat & Toledo or any point on Lake Erie W. of Southeast Shoal Detroit Pilot Boat & St. Clair River ................................................................... VerDate Mar<15>2010 17:49 Mar 03, 2014 Jkt 232001 PO 00000 Frm 00069 Fmt 4700 Sfmt 4700 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 3,037 3,060 1,693 2,339 3,060 × × × × × 1.025 1.025 1.025 1.025 1.025 = = = = = 3,113 3,137 1,735 2,397 3,137 E:\FR\FM\04MRR1.SGM 04MRR1 12102 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations TABLE 35—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 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 ................................................................................................. 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 × × 1.025 1.025 = = 601 571 Area 8 Lake Superior 6-hour period .................................................................................................... Docking or undocking ....................................................................................... emcdonald on DSK67QTVN1PROD with RULES VII. Regulatory Analyses We developed this 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 rule is not a significant regulatory action under section 3(f) of E.O. 12866 as supplemented by E.O. 13563, and does not require an assessment of potential costs and benefits under section 6(a)(3) of E.O. 12866. The Office of Management and Budget (OMB) has not reviewed it under E.O. 12866. Nonetheless, we developed an analysis of the costs and benefits of the rule to ascertain its probable impacts on industry. Based on comments received, the Coast Guard is adjusting the operating expense base in District One in order to account for an addition to the expense base of $4,360 for APA dues, as well as the inclusion of the 2011 license VerDate Mar<15>2010 17:49 Mar 03, 2014 Jkt 232001 insurance cost ($52,232) in the expense base. However, because of our Step 7 discretionary adjustment to pilotage rates, which increases rates by 2.5 percent from the previous year in all three districts, these changes to the underlying data do not impact the final rates. Despite this increase in pilotage rates, as well as the implementation of a temporary, supplemental surcharge to traffic in District One of 3 percent, we estimate that shippers will experience a reduction in payments from the previous year of approximately $697,914 across all three districts as a result of an expected decrease in the demand for pilotage services from the previous year.4 A regulatory assessment follows. 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 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 pilotage associations’ investments. The rate adjustments in this final rule would, if codified, lead to an increase in the cost per unit of service to shippers in all three districts. Despite these rate 4 Total reduction in payments made by shippers across all three districts is equal to the costs from rate changes (¥$817,983) plus a temporary surcharge to traffic in District One ($120,070). PO 00000 Frm 00070 Fmt 4700 Sfmt 4700 increases, however, we estimate that shippers in Districts Two and Three will experience a decrease in payments from the previous year as a result of a decrease in demand for pilotage services. The reduction in payments that would occur in Districts Two and Three would outweigh the increase in payments in District One, which would result in an estimated annual decrease in payments by shippers of approximately $817,983 across all three districts.5 After accounting for the implementation of a temporary 3 percent surcharge to traffic in District One, which is expected to generate $120,070, the annual payments made by shippers across all three districts for pilotage services are estimated to be approximately $697,914 less than the payments that were made in 2013. The 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 in all three districts 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 5 This annual reduction in payments is due to a projected decrease in the number of billeted pilots in Areas 6 and 8 from 2013 to 2014, as well as an overall decrease in the demand for pilotage services across all three districts. This decrease in the demand for pilotage services would reduce the projected revenue needed to cover costs and pilotage services. E:\FR\FM\04MRR1.SGM 04MRR1 12103 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations 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 routes in 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 does not apply to recreational vessels. Owners and operators of other vessels that are not affected by this 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; it does not affect our calculation of the rate, and it is not a part of our estimated national cost to shippers. Our sampling of pilot data suggests that there are very few domestic vessels that do not have a 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 data from 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, which include 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 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 (cost increases or cost decreases) of the rate adjustment in this rule to be the difference between the total projected revenue needed to cover costs in 2013, based on the 2013 rate adjustment, and the total projected revenue needed to cover costs in 2014, as set forth in this rule, plus any temporary surcharges authorized by the Coast Guard. Table 36 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 37 summarizes the derivation for calculating the 3 percent surcharge on District One traffic, as discussed earlier in this preamble. Table 38 details the additional cost increases or decreases by area and district as a result of the rate adjustments and the temporary surcharge to District One traffic. TABLE 36—RATE ADJUSTMENT BY AREA AND DISTRICT [$U.S.; Non-discounted] 2013 pilotage rates 6 Rate change 7 2014 pilotage rates 8 Projected 2014 bridge hours 9 Projected revenue needed in 2014 10 Area 1 .................................................... Area 2 .................................................... $460.971 284.836 1.0250 1.0250 $472.50 291.96 5,116 5,429 $2,417,285.09 1,585,032.47 Total, District One ........................... .............................. .............................. .............................. .............................. 4,002,317.56 Area 4 .................................................... Area 5 .................................................... 205.268 508.915 1.0250 1.0250 210.40 521.64 5,814 5,052 1,223,261.97 2,635,314.21 Total, District Two ........................... .............................. .............................. .............................. .............................. 3,858,576.18 Area 6 .................................................... Area 7 .................................................... Area 8 .................................................... 199.954 482.940 186.670 1.0250 1.0250 1.0250 204.95 495.01 191.34 9,611 3,023 7,540 1,969,800.03 1,496,427.14 1,442,676.83 Total, District Three ........................ .............................. .............................. .............................. .............................. 4,908,904.00 * Some values may not total due to rounding. TABLE 37—DERIVATION OF TEMPORARY SURCHARGE emcdonald on DSK67QTVN1PROD with RULES Area 1 Projected Revenue Needed in 2014 11 ................................................................................... Surcharge Rate ........................................................................................................................ Surcharge Raised .................................................................................................................... 6 These 2013 estimates are described in Table 15 of this final rule. 7 The estimated rate changes are described in Table 32 of this rule. VerDate Mar<15>2010 19:45 Mar 03, 2014 Jkt 232001 8 2014 Pilotage Rates = 2013 Pilotage Rates × Rate Change. 9 These 2014 estimates are detailed in Table 13 of this final rule. PO 00000 Frm 00071 Fmt 4700 Sfmt 4700 $2,417,285.09 3% 72,518.55 Area 2 $1,585,032.47 3% 47,550.97 10 Projected Revenue needed in 2014 = 2014 Pilotage Rates × Projected 2014 Bridge Hours. E:\FR\FM\04MRR1.SGM 04MRR1 12104 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations TABLE 37—DERIVATION OF TEMPORARY SURCHARGE—Continued Area 1 Total Surcharge ................................................................................................................ Area 2 120,069.53 TABLE 38—CHANGE IN PAYMENTS BY SHIPPERS FROM THE PREVIOUS YEAR BY AREA AND DISTRICT [$U.S.; Non-discounted] Temporary surcharge 12 Additional costs or savings of this proposed rule Projected revenue needed in 2013 Projected revenue needed in 2014 Area 1 ...................................................................................... Area 2 ...................................................................................... Total, District One ............................................................. $2,404,424 1,569,160 3,973,584 $2,417,285 1,585,032 4,002,318 Area 4 ...................................................................................... Area 5 ...................................................................................... Total, District Two ............................................................. 1,398,694 2,596,484 3,995,178 1,223,262 2,635,314 3,858,576 (175,432) 38,830 (136,602) Area 6 ...................................................................................... Area 7 ...................................................................................... Area 8 ...................................................................................... Total, District Three .......................................................... 2,281,673 1,556,517 1,780,829 5,619,019 1,969,800 1,496,427 1,442,677 4,908,904 (311,873) (60,090) (338,152) (710,115) $72,519 47,551 120,070 $85,380 63,423 148,803 emcdonald on DSK67QTVN1PROD with RULES * Some values may not total due to rounding. After applying the discretionary rate change in this final rule, the resulting difference between the projected revenue in 2013 and the projected revenue in 2014 is the annual change in payments from shippers to pilots after accounting for market conditions (i.e., a decrease in demand for pilotage services) and the change to pilotage rates as a result of this final rule. This figure is equivalent to the total additional payments or reduction in payments from the previous year that shippers would incur for pilotage services. The impact of the discretionary rate adjustments in this final rule to shippers varies by area and district. Although the discretionary rate adjustments would lead to affected shippers experiencing an increase in payments for pilotage services in all three districts, when combined with the overall decrease in demand for pilotage services across all three districts, only shippers operating in District One are estimated to experience an increase in payments of $28,733.56, while affected shippers operating in District Two and District Three would experience a reduction in payments of $136,602.82 and $710,115.00, respectively from the previous year. This decrease in demand is projected to result in a decrease in the number of billeted pilots in Areas 6 and 8 from 2013 to 2014, which 11 These estimates are derived in Table 36 of this final rule. 12 These estimates are derived in Table 37 of this final rule. VerDate Mar<15>2010 19:01 Mar 03, 2014 Jkt 232001 consequently would lead to a decrease in payments despite the increase in pilotage rates. In addition to the rate adjustments, District One would incur a temporary surcharge to traffic for the duration of the 2014 season. In District One, shippers would incur a temporary 3 percent surcharge in order for the district’s pilot association to recover training expenses incurred in 2012. We estimate that this surcharge would generate $120,070 in District One. 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.13 To calculate an exact cost or cost reduction 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 decrease in costs reported earlier in this final rule does capture the adjustment in payments that shippers would 13 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 expenses incurred by District One pilots ($48,995 (training)). PO 00000 Frm 00072 Fmt 4700 Sfmt 4700 experience from the previous year. The overall adjustment in payments, after taking into account: (1) The decrease in demand for pilotage services; (2) the increase in pilotage rates; and (3) the addition of a temporary surcharge in District One, would be a reduction in payments by shippers of approximately $697,914 across all three districts. This final rule would allow the Coast Guard to meet the statutory requirements to review the rates for pilotage services on the Great Lakes, ensuring proper pilot compensation. Alternatively, if we instead 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 much more detrimental effect on pilots, as payments from shippers would decrease by approximately $2,308,184. In contrast, as discussed above, if the discretionary 2.5 percent increase is applied to traffic in Districts One, Two, and Three, the payment from shippers only decreases by $697,914. Table 39 details projected revenue needed to cover costs in 2014 if the discretionary adjustment to pilotage rates as discussed in Step 7 of Part VI of this preamble is not made. Table 40 details the changes in payments to pilots from the previous year, by area and district, after accounting for: (1) A decrease in demand for pilotage services; (2) an increase in pilotage rates E:\FR\FM\04MRR1.SGM 04MRR1 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations across all three districts; and (3) the 12105 addition of a temporary surcharge applied to traffic in District One. TABLE 39—ALTERNATIVE RATE ADJUSTMENT BY AREA AND DISTRICT [$U.S.; Non-discounted] 2013 Pilotage rates 2014 Pilotage rates Rate change 14 Projected 2014 bridge hours Projected revenue needed in 2014 15 Area 1 .................................................... Area 2 .................................................... $460.97 284.84 0.8753 0.8535 $403.47 243.10 5,116 5,429 $2,064,171 1,319,791 Total, District One ........................... .............................. .............................. .............................. .............................. 3,383,963 Area 4 .................................................... Area 5 .................................................... 205.27 508.91 1.0039 0.8417 206.07 428.35 5,814 5,052 1,198,107 2,164,002 Total, District Two ........................... .............................. .............................. .............................. .............................. 3,362,110 Area 6 .................................................... Area 7 .................................................... Area 8 .................................................... 199.95 482.94 186.67 0.9966 0.8539 0.9024 199.27 412.39 168.45 9,611 3,023 7,540 1,915,207 1,246,659 1,270,140 Total, District Three ........................ .............................. .............................. .............................. .............................. 4,432,006 * Some values may not total due to rounding. TABLE 40—ALTERNATIVE CHANGE IN PAYMENTS BY SHIPPERS FROM THE PREVIOUS YEAR BY AREA AND DISTRICT [$U.S.; Non-discounted] Projected revenue needed in 2013 Projected revenue needed in 2014 Temporary surcharge Total increase or decrease in payments (A) (B) (C) (B¥A) + C Area 1 ...................................................................................... Area 2 ...................................................................................... $2,404,424 1,569,160 $2,064,171 1,319,791 $61,925 39,594 ($278,328) (209,775) Total, District One ............................................................. 3,973,584 3,383,963 101,519 (488,102) Area 4 ...................................................................................... Area 5 ...................................................................................... 1,398,694 2,596,484 1,198,107 2,164,002 .............................. .............................. (200,587) (432,482) Total, District Two ............................................................. 3,995,178 3,362,110 .............................. (633,068) Area 6 ...................................................................................... Area 7 ...................................................................................... Area 8 ...................................................................................... 2,281,673 1,556,517 1,780,829 1,915,207 1,246,659 1,270,140 .............................. .............................. .............................. (366,466) (309,858) (510,689) Total, District Three .......................................................... 5,619,019 4,432,006 .............................. (1,187,013) emcdonald on DSK67QTVN1PROD with RULES * Some values may not total due to rounding. We reject this alternative because a substantial decrease in payments by shippers would jeopardize the ability of the three pilotage associations to provide safe, efficient, and reliable pilotage services, and it would 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 14 The estimated rate changes are described in Table 32 of this preamble. 15 Projected Revenue needed in 2014 = 2014 Pilotage Rates × Projected 2014 Bridge Hours. VerDate Mar<15>2010 17:49 Mar 03, 2014 Jkt 232001 Under the Regulatory Flexibility Act, 5 U.S.C. 601–612, we have considered whether this rule would have a significant economic impact on a substantial number of small entities. The term ‘‘small entities’’ comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. PO 00000 Frm 00073 Fmt 4700 Sfmt 4700 We expect that entities affected by the 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 E:\FR\FM\04MRR1.SGM 04MRR1 12106 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations emcdonald on DSK67QTVN1PROD with RULES employing less than 500 employees is considered a small entity. For the final 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 this final rule that receive revenue from pilotage services. These are the three pilotage 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 final 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 final rule would not have a significant economic impact on a substantial number of small entities. C. Assistance for Small Entities Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996, Public Law 104– 121, we offered to assist small entities in understanding this rule so that they could better evaluate its effects on them and participate in the rulemaking. If the rule will affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the Coast Guard (see FOR FURTHER INFORMATION CONTACT). 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 VerDate Mar<15>2010 17:49 Mar 03, 2014 Jkt 232001 responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1–888–REG–FAIR (1–888–734–3247). D. Collection of Information This rule calls for no new collection of information under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501– 3520. This rule does not change the burden in the collection currently approved by the OMB under 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.’’ Because States may not promulgate rules within this category, 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 have exclusive authority to promulgate regulations, the Coast Guard recognizes the key role that State and local governments may have in making regulatory determinations. Additionally, for rules with federalism implications and preemptive effect, Executive Order 13132 specifically directs agencies to consult with State and local governments during the rulemaking process. If you believe this rule has implications for federalism under Executive Order 13132, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section of this preamble. 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 PO 00000 Frm 00074 Fmt 4700 Sfmt 4700 particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble. G. Taking of Private Property This rule will not cause a taking of private property or otherwise have taking implications under E.O. 12630 (‘‘Governmental Actions and Interference with Constitutionally Protected Property Rights’’). H. Civil Justice Reform This rule meets applicable standards in sections 3(a) and 3(b)(2) of E.O. 12988 (‘‘Civil Justice Reform’’), to minimize litigation, eliminate ambiguity, and reduce burden. I. Protection of Children We have analyzed this rule under E.O. 13045 (‘‘Protection of Children from Environmental Health Risks and Safety Risks’’). This rule is not an economically significant rule and would not create an environmental risk to health or risk to safety that might disproportionately affect children. J. Indian Tribal Governments This rule does not have tribal implications under E.O. 13175 (‘‘Consultation and Coordination with Indian Tribal Governments’’), because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. K. Energy Effects We have analyzed this rule under E.O. 13211 (‘‘Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use’’). We have determined that it is not a ‘‘significant energy action’’ under that order because it is not a ‘‘significant regulatory action’’ under E.O. 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. L. Technical Standards The National Technology Transfer and Advancement Act, codified as a note to 15 U.S.C. 272, directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through OMB, with an explanation of why using E:\FR\FM\04MRR1.SGM 04MRR1 12107 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies. This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards. M. Environment PART 401—GREAT LAKES PILOTAGE REGULATIONS List of Subjects in 46 CFR Part 401 Administrative practice and procedure, Great Lakes, Navigation (water), Penalties, Reporting and recordkeeping requirements, Seamen. 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. Any point on or in * * * * (b) Weighting factor table: emcdonald on DSK67QTVN1PROD with RULES Weighting factor 0–49 ........................................ 50–159 .................................... 160–189 .................................. 190–and over .......................... * ■ 1.0 1.15 1.30 1.45 $872 832 5. In § 401.407, revise paragraphs (a) and (b) to read as follows: ■ § 401.407 Basic rates and charges on Lake Erie and the navigable waters from Southeast Shoal to Port Huron, MI. * * * * * 3. Add § 401.401 to read as follows: § 401.401 Lake Ontario Service 6-hour Period ............................ Docking or Undocking .............. Range of pilotage units * * * * (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 1 year. ■ 4. In § 401.405, revise paragraphs (a) and (b), including the footnote to paragraph (a) to read as follows: Toledo or any point on Lake Erie west of Southeast Shoal $2,397 6-hour Period .... Docking or Undocking ..... Any point on the Niagara River below the Black Rock Lock ............... Detroit River 1 4,837 1 4,176 N/A 3,113 2,397 2,397 1,735 Buffalo $849 $849 653 653 N/A 1,667 (b) Area 5 (Designated Waters): $1,417 1 4,176 Lake Erie (East of Southeast Shoal) Service * * * * (a) Area 1 (Designated Waters): 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. * (b) Area 2 (Undesignated Waters): § 401.400 Calculation of pilotage units and determination of weighting factor. * ■ * 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. 2. In § 401.400, revise paragraph (b) 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 .................................... 1 When Each Lock Transited Harbor Movage ......... ■ § 401.405 Basic rates and charges on the St. Lawrence River and Lake Ontario. For the reasons discussed in the preamble, the Coast Guard amends 46 CFR part 401 as follows: $19.22 per kilometer or $34.02 per mile.1 426.1 1,395.1 ■ * We have analyzed this rule under DHS 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 concluded that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. A final environmental analysis checklist supporting this determination is available in the docket where indicated under the ADDRESSES section of this preamble. St. Lawrence River Basic Pilotage ........... 1. The authority citation for part 401 continues to read as follows: Service * * (a) Area 6 (Undesignated Waters): Lakes Huron and Michigan Service 6-hour Period ........................ $708 17:49 Mar 03, 2014 Jkt 232001 PO 00000 Frm 00075 Fmt 4700 Sfmt 4700 672 (b) Area 7 (Designated Waters): De tour Gros Cap ......................................................................................................................... Algoma Steel Corporation Wharf at Sault Ste. Marie, Ontario ....................................... VerDate Mar<15>2010 Docking or Undocking .......... * Area Lakes Huron and Michigan Service Gros cap $2,648 2,648 E:\FR\FM\04MRR1.SGM Any harbor N/A 997 04MRR1 N/A N/A 12108 Federal Register / Vol. 79, No. 42 / Tuesday, March 4, 2014 / Rules and Regulations Area De tour Any point in Sault Ste. Marie, Ontario, except the Algoma Steel Corporation Wharf .... Sault Ste. Marie, MI ......................................................................................................... Harbor Movage ................................................................................................................ emcdonald on DSK67QTVN1PROD with RULES (c) Area 8 (Undesignated Waters): prohibited species catch allowances, and closures for the groundfish fishery Service Lake Superior of the Bering Sea and Aleutian Islands management area (BSAI). This action is 6-hour Period ...................... $601 necessary to establish harvest limits for Docking or Undocking ........ 571 groundfish during the 2014 and 2015 fishing years, and to accomplish the § 401.420 [Amended] goals and objectives of the Fishery Management Plan for Groundfish of the ■ 7. Amend § 401.420 as follows: BSAI (FMP). The intended effect of this ■ a. In paragraph (a), remove the text action is to conserve and manage the ‘‘$126’’ and add, in its place, the text groundfish resources in the BSAI in ‘‘$129’’; and remove the text ‘‘$1,972’’ accordance with the Magnuson-Stevens and add, in its place, the text ‘‘$2,021’’; ■ b. In paragraph (b), remove the text Fishery Conservation and Management ‘‘$126’’ and add, in its place, the text Act (Magnuson-Stevens Act). ‘‘$129’’; and remove the text ‘‘$1,972’’ DATES: Specifications and closures are and add, in its place, the text ‘‘$2,021’’; effective from 1200 hrs, Alaska local and time (A.l.t.), March 4, 2014, through ■ c. In paragraph (c)(1), remove the text 2400 hrs, A.l.t., December 31, 2015. ‘‘$744’’ and add, in its place, the text ADDRESSES: Electronic copies of the ‘‘$763’’; and in paragraph (c)(3), remove Alaska Groundfish Harvest the text ‘‘$126’’ and add, in its place, the Specifications Final Environmental text ‘‘$129’’, and remove the text Impact Statement (EIS), Record of ‘‘$1,972’’ and add, in its place, the text Decision (ROD), Supplementary ‘‘$2,021’’. Information Report (SIR) to the EIS, and the Final Regulatory Flexibility Analysis § 401.428 [Amended] (FRFA) prepared for this action are ■ 8. In § 401.428, remove the text available from https:// ‘‘$744’’ and add, in its place, the text alaskafisheries.noaa.gov. The final 2013 ‘‘$763’’. Stock Assessment and Fishery Dated: February 25, 2014. Evaluation (SAFE) report for the groundfish resources of the BSAI, dated Gary C. Rasicot, November 2013, as well as the SAFE Director, Marine Transportation Systems reports for previous years, are available Management, U.S. Coast Guard. from the North Pacific Fishery [FR Doc. 2014–04591 Filed 2–28–14; 11:15 am] Management Council (Council) at 605 BILLING CODE 9110–04–P West 4th Avenue, Suite 306, Anchorage, AK 99510–2252, (phone) 907–271–2809, or from the Council’s Web site at DEPARTMENT OF COMMERCE https://www.npfmc.org/. FOR FURTHER INFORMATION CONTACT: National Oceanic and Atmospheric Steve Whitney, 907–586–7228. Administration SUPPLEMENTARY INFORMATION: Federal 50 CFR Part 679 regulations at 50 CFR part 679 implement the FMP and govern the [Docket No. 131021878–4158–02] groundfish fisheries in the BSAI. The RIN 0648–XC927 Council prepared the FMP, and NMFS approved it under the MagnusonFisheries of the Exclusive Economic Stevens Act. General regulations Zone Off Alaska; Bering Sea and governing U.S. fisheries also appear at Aleutian Islands; 2014 and 2015 50 CFR part 600. Harvest Specifications for Groundfish The FMP and its implementing regulations require NMFS, after AGENCY: National Marine Fisheries consultation with the Council, to Service (NMFS), National Oceanic and specify the total allowable catch (TAC) Atmospheric Administration (NOAA), for each target species category. The Commerce. sum TAC for all groundfish species ACTION: Final rule; specifications and must be within the optimum yield (OY) closures. range of 1.4 million to 2.0 million SUMMARY: NMFS announces final 2014 metric tons (mt) (see § 679.20(a)(1)(i)). and 2015 harvest specifications, This final rule specifies the TAC at 2.0 VerDate Mar<15>2010 17:49 Mar 03, 2014 Jkt 232001 PO 00000 Frm 00076 Fmt 4700 Sfmt 4700 Gros cap 2,219 2,219 N/A Any harbor 997 997 N/A N/A N/A 997 million mt for both 2014 and 2015. NMFS also must specify apportionments of TAC, prohibited species catch (PSC) allowances, and prohibited species quota (PSQ) reserves established by § 679.21; seasonal allowances of pollock, Pacific cod, and Atka mackerel TAC; Amendment 80 allocations; and Community Development Quota (CDQ) reserve amounts established by § 679.20(b)(1)(ii). The final harvest specifications set forth in Tables 1 through 22 of this action satisfy these requirements. Section 679.20(c)(3)(i) further requires NMFS to consider public comment on the proposed annual TACs (and apportionments thereof) and PSC allowances, and to publish final harvest specifications in the Federal Register. The proposed 2014 and 2015 harvest specifications and PSC allowances for the groundfish fishery of the BSAI were published in the Federal Register on December 10, 2013 (78 FR 74063). Comments were invited and accepted through January 9, 2014. NMFS received one letter with one comment on the proposed harvest specifications. This comment is summarized and responded to in the ‘‘Response to Comments’’ section of this rule. NMFS consulted with the Council on the final 2014 and 2015 harvest specifications during the December 2013 Council meeting in Anchorage, AK. After considering public comments, as well as biological and economic data that were available at the Council’s December meeting, NMFS is implementing the final 2014 and 2015 harvest specifications as recommended by the Council. Acceptable Biological Catch (ABC) and TAC Harvest Specifications The final ABC levels for Alaska groundfish are based on the best available biological and socioeconomic information, including projected biomass trends, information on assumed distribution of stock biomass, and revised technical methods used to calculate stock biomass. In general, the development of ABCs and overfishing levels (OFLs) involves sophisticated statistical analyses of fish populations. The FMP specifies a series of six tiers to define OFL and ABC amounts based on the level of reliable information available to fishery scientists. Tier 1 represents the highest level of E:\FR\FM\04MRR1.SGM 04MRR1

Agencies

[Federal Register Volume 79, Number 42 (Tuesday, March 4, 2014)]
[Rules and Regulations]
[Pages 12084-12108]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-04591]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

46 CFR Part 401

[USCG-2013-0534]
RIN 1625-AC07

Great Lakes Pilotage Rates--2014 Annual Review and Adjustment

AGENCY: Coast Guard, DHS.

ACTION: Final rule.

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SUMMARY: The Coast Guard is adjusting Great Lakes pilotage rates that
were last amended in February 2013. The adjustments establish new base
rates, and are made in accordance with a full ratemaking procedure. The
Coast Guard is exercising its discretion to establish new base rates to
more closely align with recent Canadian rate increases. The final rule
also adjusts weighting factors used to determine rates for vessels of
different size, adopts a new procedure for temporary surcharges,
applies a temporary surcharge for one pilotage association, and allows
pilotage associations to recoup the cost of dues paid to the American
Pilots Association. This rulemaking promotes the Coast Guard's maritime
safety mission.

DATES: Effective August 1, 2014 except for Sec. Sec. 401.400 and
401.401 which are effective April 3, 2014.

ADDRESSES: Comments and material received from the public, as well as
documents mentioned in this preamble as being available in the docket,
are part of docket USCG-2013-0534 and are available for inspection or
copying at the Docket Management Facility (M-30), U.S. Department of
Transportation, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal holidays. You may also find this
docket online by going to https://www.regulations.gov and following the
instructions on that Web site.

FOR FURTHER INFORMATION CONTACT: If you have questions on this rule,
call or email Mr. Todd Haviland, Coast Guard; telephone 202-372-2037,
email Todd.A.Haviland@uscg.mil. If you have questions on viewing
material to the

[[Page 12085]]

docket, call Ms. Barbara Hairston, Program Manager, Docket Operations,
telephone 202-366-9826.

SUPPLEMENTARY INFORMATION:

Table of Contents for Preamble

I. Abbreviations
II. Regulatory History
III. Basis and Purpose
IV. Background
V. Discussion of Comments and Changes
A. AMOU Contracts
B. APA Dues
C. Pilot License Insurance
D. Weighting Factors
E. Surcharges
F. Director Discretion
G. Number of Pilots
H. Ratemaking Methodology
I. Economic Analysis
J. District One Dock
VI. Discussion of Rulemaking
VII. Regulatory Analyses
A. Regulatory Planning and Review
B. Small Entities
C. Assistance for Small Entities
D. Collection of Information
E. Federalism
F. Unfunded Mandates Reform Act
G. Taking of Private Property
H. Civil Justice Reform
I. Protection of Children
J. Indian Tribal Governments
K. Energy Effects
L. Technical Standards
M. Environment

I. Abbreviations

AMOU American Maritime Officers Union
APA American Pilots Association
CFR Code of Federal Regulations
CPA Certified Public Accountant
CPI Consumer price index
DHS Department of Homeland Security
E.O. Executive Order
FR Federal Register
GLPA Great Lakes Pilotage Authority (Canada)
GLPAC Great Lakes Pilotage Advisory Committee
MISLE Marine Information for Safety and Law Enforcement
NAICS North American Industry Classification System
NPRM Notice of proposed rulemaking
OMB Office of Management and Budget
ROI Return on investment
U.S.C. United States Code

II. Regulatory History

On August 8, 2013, we published a notice of proposed rulemaking
(NPRM) titled ``Great Lakes Pilotage Rates--2014 Annual Review and
Adjustment'' in the Federal Register (78 FR 48374). We received 11
submissions on the NPRM from multiple sources, including pilotage
associations, pilots, pilot organizations, and shippers. No public
meeting was requested and none was held.

III. Basis and Purpose

The basis of this rulemaking is the Great Lakes Pilotage Act of
1960 (``the Act'') (46 U.S.C. Chapter 93), which requires U.S. vessels
operating ``on register'' \1\ and foreign vessels to use U.S.- 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 of the department in which the Coast Guard
is operating to ``prescribe by regulation rates and charges for
pilotage services, giving consideration to the public interest and the
costs of providing the services.'' 46 U.S.C. 9303(f). Rates must be
established, or reviewed and adjusted, each year not later than March
1. Base rates must be established by a full ratemaking at least once
every 5 years, and in years when base rates are not established, they
must be reviewed and, if necessary, adjusted. 46 U.S.C. 9303(f). The
Secretary of the Department of Homeland Security's (DHS's) duties and
authority under the Act have been delegated to the Coast Guard. DHS
Delegation No. 0170.1, paragraph (92)(f). Coast Guard regulations
implementing the Act appear in parts 401 through 404 of 46 CFR.
Procedures for 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 rulemaking 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 rulemaking are those engaged in
foreign trade upon the U.S. waters of the Great Lakes. United 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 (``the Director'') to operate a pilotage pool. It
is important to note that, while we set rates, the Coast Guard does not
control the actual number of pilots an association maintains. We ensure
the association is able to provide safe, efficient, and reliable
pilotage service. The Coast Guard also does not control the actual
compensation that pilots receive. Each district association determines
the actual compensation of its district, and each association uses
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 (GLPA), and accordingly is
not included in the U.S. rate structure. Areas 1, 5, and 7 have been
designated by Presidential Proclamation, pursuant to the 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).
The last full ratemaking established the current base rates in 2013
(78 FR 13521, Feb. 28, 2013), using the ratemaking methodology
described in 46 CFR part 404, Appendix A. Among other things, the
Appendix A methodology requires us to review detailed pilotage
association financial information, and we contract with independent
accountants to assist in that review.
We opened this year's ratemaking with an NPRM (78 FR 48374, Aug. 8,
2013) that reflected financial data for the 2011 shipping season, and
that the proposed new base rates be calculated in accordance with the
Appendix A methodology.

V. Discussion of Comments and Changes

We received 11 public submissions in response to our NPRM. Eight of
those submissions came from pilotage associations, pilots, and pilot
organizations; two came from groups that represent shippers who use
Great Lakes pilotage service; and one came from the union whose
contracts provide benchmark data for Great Lakes pilotage ratemaking.

[[Page 12086]]

A. AMOU Contracts

Seven commenters--six pilots or pilot representatives, and the
American Maritime Officers Union (AMOU)--addressed our use of AMOU
contracts to estimate the average annual compensation for masters and
first mates on U.S. Great Lakes vessels, in accordance with Step 2.A of
our Appendix A ratemaking methodology.
Many of these commenters took issue with the NPRM's statement, 78
FR 48374 at 48376, col. 2, that recent AMOU contracts are marked by
``downward changes,'' and pointed out that AMOU contracts actually
increase wages over a 5-year period. Our discussion is not a reflection
on AMOU contract trends, but rather emphasizes that AMOU contract
information, when factored into our Appendix A ratemaking methodology,
could lead to a pilotage rate decrease, if not offset by the
application of discretion under Step 7 of Appendix A.
The six pilot/pilot representative commenters said we had
incorrectly interpreted or misapplied AMOU contract data. A registered
lobbyist representing all three pilotage associations said we should
have used the daily aggregate rate information included in an AMOU
letter dated November 2, 2012, and further claimed that we based our
calculations on ``wrong multipliers.''
We reject each of these assertions and confirm the accuracy of the
figures given in our NPRM. The assertion of the registered lobbyist
that we should have used data from the November 2, 2012 AMOU letter is
unfounded. Prior to publication of the NPRM, the AMOU provided and
confirmed contract data to us on four separate occasions in 2012: On
November 2, November 15, December 5, and December 17. The first
communication on November 2 (the letter referenced by the registered
lobbyist) provided information on wages and benefits but was marked
``proprietary,'' and therefore has not been and cannot be shared by the
Coast Guard with the public. Because Coast Guard could not share the
component data, Coast Guard and AMOU agreed that AMOU would provide
daily aggregate data. The November 15 and December 5 letters provided
information on 2013, 2014 and 2015 daily aggregate (wage and benefit)
rates for Agreement A and Agreement B, respectively. The letters
indicated that the daily aggregate rates would increase by 3% each
year. On December 17, 2012, we emailed a table of the aggregate rate
data that we planned to use in the NPRM, and in response, the AMOU
promptly emailed: ``This table and only this table is acceptable to
AMO[U].'' That table's data, with 3% added in accordance with AMOU's
correspondence, is what we presented in Table 11 of our NPRM, 78 FR at
48382. Multipliers are only used if we can site individual components
of compensation in our calculations. Because our calculations were
based only on the aggregate data shown in the table, they are not
affected by ``wrong multipliers.''
In its October 4, 2013 comment on the NPRM, the AMOU offered
``correct'' daily aggregate rates that differ significantly from the
figures in the table the AMOU confirmed as ``acceptable'' on December
17, 2012. The AMOU comment reflects a ``season bonus'' that the AMOU
has not previously cited as part of its contracts, and that we do not
recognize for purposes of Great Lakes pilotage compensation. 46 CFR
404.5(a). As a disinterested third party to our ratemakings, the AMOU
is under no obligation to share contract information with us. The AMOU
has not provided a copy of the contracts nor agreed to allow us to
review them. This compromises our ability to use that data in a
transparent way and prohibits us from evaluating the individual
components for compensation. We are investigating alternatives to using
AMOU contract data for our ratemaking purposes.

B. APA Dues

Four commenters addressed our proposed inclusion in the ratemaking
calculations of dues for pilotage association membership in the
American Pilots Association (APA). Three pilot representatives favored
inclusion. One shipping industry commenter said that APA membership is
voluntary, and therefore should not be included. We consider the APA to
play a key role in ensuring our mutual goals of safe, efficient, and
reliable pilotage on the Great Lakes. The APA has assisted the three
pilotage associations with professional development and training plans,
and we believe the APA is a critical resource for the pilotage
associations in spreading best practices throughout the pilotage
profession. Therefore, we continue to find that APA dues are a
necessary and reasonable expense of the pilotage associations. One
pilotage association said we had incorrectly calculated its APA dues.
The St. Lawrence Seaway Pilots' Association contends that APA dues paid
by the organization were actually $27,730. We disagree. Much of the
amount asserted by the association is for lobbying expenses that are
not eligible to be included in the rate. However, a review of the
financial statements approved by the pilotage association shows dues
paid to the APA in the amount of $22,720. Accordingly we updated the
necessary tables to include this amount, an addition to the expense
base of $4,360. However, because of our Step 7 discretion, this change
to the underlying data does not impact the final rate.

C. Pilot License Insurance

One pilotage association commented that we failed to include the
amount that the association paid for pilot license insurance in our
calculations. This is incorrect. The association requested a change in
reporting that moved license insurance from an operating expense to an
employee benefit. The association again approved the change when they
were given the opportunity to comment on the reports prepared by the
auditors. Benefits are considered part of compensation, and are not
allowed to be included separately in the rate. However, because we have
historically included license insurance as an allowable expense, and
because both of the other pilotage associations include license
insurance as an allowable expense, we will allow inclusion of the 2011
license insurance cost ($52,232) in the expense base of the
association. Again, because of our exercise of Step 7 discretion in
this rulemaking, this change to the expense base does not alter the
final rate.

D. Weighting Factors

Five commenters addressed our proposal to match U.S. weighting
factors to those used by Canada. All were in favor of this proposal,
but one pilotage association said we overestimated the beneficial
impact, for pilots, of adjusting weighting factors (see the NPRM, 78 FR
48376). One pilot commented that it is unfair of us not to apply a
retroactive rate adjustment recognizing the 6 years during which the
U.S. weighting factors differed from those used by Canada. We think the
association based its lower estimate on its local data, not on data for
the Great Lakes as a whole. We stand by our estimate of the beneficial
impact of the adjustment.

E. Surcharges

Two pilot representatives and two representatives of shippers
commented on our proposal to allow establishment of temporary
surcharges. The pilot representatives supported the proposal. One of
the shipper representatives said our proposal was too vague and that
surcharges could have a damaging economic impact, and the other said it

[[Page 12087]]

is unnecessary because the Director of Great Lakes Pilotage already has
sufficient authority to make discretionary rate adjustments. We think
the proposal is sufficiently clear, and this final rule adopts it.
Whether any given surcharge will have a damaging economic impact can be
the subject of public comment, an opportunity for which will be given
each time we propose a surcharge. While it is true that the Director
has substantial authority to make discretionary rate adjustments, we
believe that the surcharge mechanism is preferable because it provides
more regulatory transparency.

F. Director Discretion

Our regulations found in 46 CFR 404.10(a) give the Director of
Great Lakes Pilotage discretionary authority to determine what ``other
circumstances'' beyond those listed in the Appendix A ratemaking
methodology might need to be factored into ratemaking calculations. Two
shipper representatives and one pilot representative commented on the
Director's exercise of this discretionary authority. The pilot
representative commented the latitude of the Director's discretion to
modify rates as calculated by the Appendix A methodology is
``troubling.'' One of the shipper representatives commented that the
apparent need for the Director to exercise this discretion indicates
there is something ``definitely wrong'' with the methodology given that
the calculated rates and the rates that were actually implemented are
drastically different. We agree with both commenters. Our concerns
about possible flaws in the Appendix A methodology led us to commission
the comprehensive study of that methodology, which a contractor
recently completed for the Coast Guard. The recommendations from that
study will be addressed in a future rulemaking.
Separately, another shipper representative commented that the
Director's proposed discretionary adjustment of rate calculations to
increase rates would have a ``damaging economic impact.'' We disagree.
Pilotage charges in U.S. waters of the Great Lakes remain below the
charges (including temporary surcharges) that apply in Canadian waters.
We know of no evidence that U.S. pilotage rates are driving traffic
away from the Great Lakes. We plan to exercise the Director's authority
in future rulemakings until the methodology is updated. We will use the
surcharges to accelerate certain expenses as previously discussed.
Until we are able to obtain an audit of the revenues by an independent
third party, we will rely upon inflation and the consumer price index
(CPI) for the Midwest to guide our ratemaking adjustments. If the
revenue audit reveals a significant revenue gap between the projected
revenues and the actual revenues recovered by the rate, we will work
with the stakeholders through the Great Lakes Pilotage Advisory
Committee (GLPAC) and exercise our discretion to address the gap.

G. Ratemaking Methodology

Four pilot representatives and one shipper representative commented
on our ratemaking methodology. Three pilot representatives commented
that we should use a multi-year inflation factor to compensate for the
time value of money between the time the audits are conducted and the
rate is established (for the 2014 NPRM, we proposed to use 2011 data
that was audited in 2012). Under Step 1.C of the Appendix A ratemaking
methodology, the ratemaking adjustment for inflation or deflation is a
one-year adjustment between the reported year (2011) and the
``succeeding navigation season'' (2012). We are therefore unable to
make a multi-year adjustment under the current methodology; however, we
acknowledge the pilots' concern and will consider altering the
inflation/deflation adjustment mechanism in a future rulemaking.
A pilot and a pilot representative reiterated the pilots' long-held
contention (see the 2013 final rule, 78 FR 13522) that our over-
projection of shipping traffic results in an over-projection of
pilotage revenue. One of these commenters said that the Coast Guard
should ensure that pilots reach target compensation. We agree that
traffic projection is an issue that needs to be addressed in a future
rulemaking to revise the Appendix A methodology, but we disagree that
the Coast Guard should ensure that pilots reach target compensation.
The Coast Guard never sets actual compensation; instead, actual
compensation is handled differently by the three private pilotage
associations. Due to the inherent risk in operating a private business,
we cannot guarantee compensation for any of the associations.
A pilot commented that, under the 1977 Memorandum of Agreement
between the United States and Canada, U.S. pilotage rates must be
identical to Canadian rates. He said that while our proposed 2.5
percent rate increase matches the latest Canadian increase, the two
rate structures are not identical. While it is true that the 1977
agreement does require ``identical'' rates, in practice the two
pilotage systems are so differently structured that it has not been
possible to set identical rates since the early 1980s. A new memorandum
has been signed and will replace the 1977 agreement. It calls for
``comparable'' rates. We believe that, after accounting for the
structural differences in U.S. and Canadian Great Lakes pilotage
systems, the two rate structures are comparable.
The same commenter reiterated the pilots' long-held contention (see
the 2010 final rule, 75 FR 7959, Feb. 23, 2010) that we incorrectly
calculate the application of benefits to the AMOU contracts in setting
rates for designated waters, and that we should instead multiply both
the average first mate wages and benefits by 150 percent to approximate
a master's compensation. Our position continues to be that, under Step
2.A of the Appendix A methodology, the 150 percent is applied only to
wages; benefits are then added to the result. As previously mentioned,
we are evaluating if there are alternatives to using AMOU contract data
for our ratemaking purposes.
Finally, the same commenter contends that we should allow a higher
return on investment (ROI) than the average rate for Moody's AAA high
grade corporate securities, given the degree of risk that pilots run.
We have correctly calculated the ROI, in accordance with Step 5 of the
Appendix A methodology, which requires us to tie ROI to the ``preceding
year's average rate of return for new issues of high grade corporate
securities.'' We may revise our ROI calculations as part of a
comprehensive revision of Appendix A.
The shipper representative suggested that our NPRM's Appendix A
calculations, resulting in a pre-discretion-adjusted 11 percent rate
decrease, may demonstrate that U.S. Great Lakes pilots are at least
adequately compensated, and perhaps overcompensated by regional
standards. We disagree. As we discussed at length in the NPRM (78 FR
48389), the pre-adjustment calculations are due to changes in benchmark
AMOU contracts rather than to any changes in Great Lakes pilotage as
such, and we think it would be contrary to the public interest to
decrease pilotage rates as a result of this year's calculations.
Additionally, incorporating these compensation changes would result in
a target pilot compensation significantly lower than Canadian Great
Lakes-registered pilots. We believe this is also contrary to the public
interest. We intend to address this inequity in target pilot
compensation in a future rulemaking. We believe the proper benchmark
for target pilot compensation of U.S. Great

[[Page 12088]]

Lakes registered pilots should be comparable to the compensation of
Canadian Great Lakes registered pilots.

H. Economic Analysis

A pilot commented that footnote 5 to our NPRM (78 FR 48391)
``defies common sense.'' The footnote states that despite increasing
pilotage rates, ``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.'' Although we agree with the
commenter that the reduction in payments accrued by shippers in
Districts Two and Three are not a result of the Coast Guard's proposed
rate changes to pilotage services, but instead are the result of
changes in market conditions, the economic impact to industry presented
in the NPRM remains unchanged because these market conditions were
factored into our analysis; the aggregate reduction in payments by
shippers across all three districts is not expected to jeopardize the
ability of the three pilotage associations to provide safe, efficient,
and reliable pilotage services.

I. Number of Pilots

The District Two pilotage association requested immediate
authorization for an additional pilot in light of the impending
retirement of current pilots in that district. We agree that the
district should plan for these expected retirements, but we do not
think that requires the immediate authorization of an additional
billet. However, the unforeseen potential medical disability of another
pilot in the district compounds the difficulty of resourcing new pilots
to replace those retiring. Because investing in the training,
recruitment and resourcing of pilots is necessary to promote safe,
efficient and reliable pilotage, we will, in accordance with our new
surcharge authority, consider proposing, for public comment, a
surcharge for District Two to cover the cost of training and resourcing
a new pilot in our 2015 ratemaking NPRM.

J. District One Dock

The District One pilotage association said that our rates have not
enabled them to recover approximately $21,345 spent on a dock project,
because their actual revenue fell short of our projections. We agree
that $21,345 is a substantial shortfall relating to a capital
expenditure made in the interest of safety. We have not validated the
existence and/or magnitude of the alleged gap between projected and
actual revenues, because the methodology does not consider actual
revenues to set rates. Therefore, we believe any discussion related to
closing a gap between projected and actual revenues should be addressed
by the GLPAC.\3\ We defer action on this request until we hear from the
advisory committee regarding this specific request at the next GLPAC
meeting in 2014. We will then address this in the next annual
ratemaking NPRM for the 2015 shipping season.
---------------------------------------------------------------------------

\3\ Per 46 U.S.C. 9307(d)(1), as delegated to the Coast Guard,
we are to, ``whenever practicable, consult with the [GLPAC] before
taking any significant action relating to Great Lakes pilotage.''
---------------------------------------------------------------------------

VI. Discussion of Rulemaking

A. Summary

As required by 46 U.S.C. 9303(f), we are establishing new base
pilotage rates by the March 1, 2014 statutory deadline. The rates are
established in accordance with the Appendix A methodology and will take
effect on August 1, 2014. The rates reflect our determination that 85
percent of the dues paid by the pilotage associations to the APA is
recognizable expenses under 46 CFR 404.5 (the remaining 15 percent
represents lobbying expenses, which are not recognizable expenses). Our
arithmetical calculations under Steps 1 through 6 of Appendix A would
result in an average 10.28 percent rate decrease. This rate decrease is
not the result of increased efficiencies in providing pilotage
services, but rather is a result of recent changes in benchmark AMOU
contracts. Therefore, we are exercising our discretion under Appendix
A, Step 7 to more closely align with the recent Canadian rate
adjustment, and therefore rates in Districts One, Two and Three will
increase by 2.5 percent.
On April 3, 2014, we are adjusting the U.S. weighting factors in 46
CFR 401.400 to match the weighting factors adopted by Canada in 2008,
as recommended unanimously by the GLPAC in Resolution 13-01 in February
2013. 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 provides greater parity between the U.S.
and Canada, and should reduce billing confusion between the two
countries. These are important Federal Government concerns, as
emphasized by recent Executive Order (E.O.) 13609, ``Promoting
International Regulatory Cooperation'' (77 FR 26413, May 4, 2012). In
our NPRM, we proposed making this change effective on March 1, 2014,
but for reasons of administrative convenience we have now determined
that the change should take effect after the usual 30-day waiting
period provided by the Administrative Procedure Act (5 U.S.C. 553(d)).
Also, effective April 3, 2014, we are adding new 46 CFR 401.401,
allowing authorization of temporary surcharges in the interest of safe,
efficient, and reliable pilotage. The Director of Great Lakes Pilotage
authorizes the District One pilotage association to charge a 3 percent
surcharge during the 2014 shipping season, effective April 3, 2014, to
recoup expenses that the association incurred for training ($48,995).
All figures in the tables that follow in Section B ``Discussion of
Methodology'' are based on calculations performed either by an
independent accountant or by the Director's staff. In both cases, those
calculations were performed using common commercial computer programs.
Decimalization and rounding of the audited and calculated data affects
the display in these tables, but does not affect the calculations. The
calculations are based on the actual figure that rounds values for
presentation in the tables.

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 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 pilotage 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 to submit findings recommending which reported
expenses should be recognized. The accountant also reviewed which
reported expenses should be adjusted prior to recognition

[[Page 12089]]

or disallowed for ratemaking purposes. The accountant's preliminary
findings were sent to the pilotage associations; they reviewed and
commented on those findings, and the accountant then finalized them.
The Director reviewed and accepted the final findings, resulting in the
determination of recognizable expenses. Tables 1 through 3 show each
association's recognized expenses.

Table 1--Recognized Expenses, 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..................................... 26,976 25,256 52,232
Payroll taxes......................................... 61,483 47,611 109,094
Other................................................. 837 588 1,425
-----------------------------------------------------
Total Other Pilotage Costs........................ 324,020 229,701 553,721
Pilot Boat and Dispatch Costs:
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................................ 11,360 11,360 22,720
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..................... 209,523 146,332 355,855
-----------------------------------------------------
Total Operating Expenses.......................... 653,926 458,862 1,112,788
Adjustments proposed by the Coast Guard's 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.......................... 664,317 466,012 1,130,329
----------------------------------------------------------------------------------------------------------------

Table 2--Recognized Expenses, 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

[[Page 12090]]

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
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
Adjustments proposed by the Coast Guard's independent
certified public accountant (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
----------------------------------------------------------------------------------------------------------------

Table 3--Recognized Expenses, 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............................... 12,188 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

[[Page 12091]]

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
-----------------------------------------------------------------------
Total Operating Expenses............ 878,937 326,960 425,230 1,631,127
Adjustments proposed by the Coast
Guard's independent certified public
accountant (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
----------------------------------------------------------------------------------------------------------------

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 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 4
through 6.

Table 4--Inflation Adjustment, District One
----------------------------------------------------------------------------------------------------------------
Area 1 Area 2
------------------ ------------------
Reported expenses for 2011 St. Lawrence Total
River Lake Ontario
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses:.................. ... $664,317 ... $466,012 ... $1,130,329
2012 change in the CPI for the Midwest x .02 x .02 x .02
Region of the United States...............
Inflation Adjustment....................... = 13,286 = 9,320 = 22,607
----------------------------------------------------------------------------------------------------------------

Table 5--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
----------------------------------------------------------------------------------------------------------------

[[Page 12092]]

Table 6--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 7 shows these
projections.

Table 7--Projected operating expenses, District One
----------------------------------------------------------------------------------------------------------------
Area 1 Area 2
------------------ ------------------
Reported expenses for 2011 St. Lawrence Total
River Lake Ontario
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses:.................. ... $664,317 ... $466,012 ... $1,130,329
Inflation adjustment 2.0%.................. + 13,286 + 9,320 + 22,607
Total projected expenses for 2014 pilotage = 677,603 = 475,332 = 1,152,936
season....................................
----------------------------------------------------------------------------------------------------------------

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
8 shows these projections.

Table 8--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 & 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 9 shows these
projections.

Table 9--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

[[Page 12093]]

pilots on designated waters by multiplying the average first mate's
wages by 150 percent and then adding the average first mate's 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 10 shows our calculations using the 270-day multiplier.

Table 10--Projected Annual Aggregate Rate Components
------------------------------------------------------------------------

------------------------------------------------------------------------
Aggregate Rate-Wages, 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 11 provides details.

Table 11--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 11 to apportion the projected
compensation from Table 10. This gives us a single tonnage-weighted set
of figures. Table 12 shows our calculations.

Table 12--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
---------------------------------------------

[[Page 12094]]

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 basic 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 (see 76 FR 6352, Feb. 4, 2011), we do not
include, and have never 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 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
(see 74 FR 22221-22, Jan. 5, 2009), we determined that this adjustment
is essential for ensuring uninterrupted pilotage service in Area 2.
Table 13 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 13--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 14, we
project total target pilot compensation separately for each area by
multiplying the number of pilots needed in each area, as shown in Table
13, by the target pilot compensation shown in Table 12.

Table 14--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
----------------------------------------------------------------------------------------------------------------

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 13,
and if 2013 pilotage rates are left unchanged. Table 15 shows this
calculation.

[[Page 12095]]

Table 15--Projection of Revenue by Area
----------------------------------------------------------------------------------------------------------------
Revenue
Pilotage area Projected 2014 2013 Pilotage projection for
bridge hours rates * 2014
----------------------------------------------------------------------------------------------------------------
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
----------------------------------------------------------------------------------------------------------------
* Projected 2013 revenue divided by projected 2013 bridge hours, per area.

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 16 through 18 follow the
formula up to that point.

Table 16--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 17--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

[[Page 12096]]

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
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 18--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 Liabilities.......... + 0 + 0 + 0
Deferred Federal Income Taxes.......... + 0 + 0 + 0
Other Deferred Credits................. + 0 + 0 + 0
Total Non-Recognized Sources........... = 0 = 0 = 0
Total Sources of Funds:
Total Recognized Sources............... 616,511 228,337 296,839
Total Non-Recognized Sources........... + 0 + 0 + 0
--------------------------------------------------------------------
Total Sources of Funds............. = 616,511 = 228,337 = 296,839
----------------------------------------------------------------------------------------------------------------

[[Page 12097]]

Tables 16 through 18 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
pilotage 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 19 applies the multiplier of 1 and
shows that the investment base for each association equals its total
recognized assets. Table 19 also expresses these results by area,
because area results will be needed in subsequent steps.

Table 19--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 pilotage associations that provide pilotage services in Districts One and Three operate as partnerships. The pilotage 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 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 sub-step of Step 6
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 20 through
22.

Table 20--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).................................. - 677,603 - 475,332
Pilot Compensation (from Step 2).................................. - 1,349,999 - 819,298
Operating Profit/(Loss)........................................... = 330,725 = 251,743
Interest Expense (from audits).................................... - 18,484 - 12,718
Earnings Before Tax............................................... = 312,241 = 239,025
Federal Tax Allowance............................................. - 0 - 0
Net Income........................................................ = 312,241 = 239,025
Return Element (Net Income + Interest)............................ 330,725 251,743
Investment Base (from Step 4)..................................... / 996,442 / 685,602
Projected ROI..................................................... = 0.3319 = 0.3672
----------------------------------------------------------------------------------------------------------------

Table 21--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

[[Page 12098]]

Return Element (Net Income + Interest)............................ 15,561 437,397
Investment Base (from Step 4)..................................... / 551,538 / 827,308
Projected ROI..................................................... = 0.0282 = 0.5287
----------------------------------------------------------------------------------------------------------------

Table 22--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
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 ROI.............................. = 0.0473 = 0.9649 = 0.4965
----------------------------------------------------------------------------------------------------------------

The second sub-step compares the results of Tables 20 through 22
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 23 shows
this comparison for each area.

Table 23--Comparison of Projected ROI and Target ROI, by Area
--------------------------------------------------------------------------------------------------------------------------------------------------------
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 ROI........................... 0.3319 0.3672 0.0282 0.5287 0.0473 0.9649 0.4965
Target ROI.............................. 0.0367 0.0367 0.0367 0.0367 0.0367 0.0367 0.0367
Difference in ROIs...................... 0.2952 0.3305 (0.0085) 0.4920 0.0106 0.9282 0.4598
--------------------------------------------------------------------------------------------------------------------------------------------------------

Because Table 23 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 24.
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 24--Revenue Needed to Recover Target ROI, by Area
--------------------------------------------------------------------------------------------------------------------------------------------------------
Investment
Operating Target pilot Base (Step 4)
Pilotage area expenses compensation x 3.67% Federal tax Revenue needed
(Step 1) (Step 2) (Target ROI allowance
Step 5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters).......................... $677,603 + $1,349,999 + $36,569 + $0 = $2,064,171
Area 2 (Undesignated waters)........................ 475,332 + 819,298 + 25,162 + 0 = 1,319,791
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........................................... 4,134,394 + 6,877,187 + 154,498 + 12,000 = 11,178,078
--------------------------------------------------------------------------------------------------------------------------------------------------------

The ``Revenue Needed'' column of Table 24 is more than the revenue
we projected in Table 15. For purposes of transparency, we verify the
calculations in Table 24 by rerunning the formula in the first sub-step
of Step 6, using the revenue needed from Table 24 instead of the Table
15 revenue projections we used in Tables 20 through 22. Tables 25
through 27 show that attaining the Table 24 revenue needed is
sufficient to recover target ROI.

[[Page 12099]]

Table 25--Balancing Revenue Needed and Target ROI, District One
----------------------------------------------------------------------------------------------------------------
Area 1 Area 2
----------------------------------------------------------------------------------------------------------------
Revenue Needed.................................................... ... $2,064,171 ... $1,319,791
Operating Expenses (from Step 1).................................. - 677,603 - 475,332
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
ROI............................................................... = 0.0367 = 0.0367
----------------------------------------------------------------------------------------------------------------

Table 26--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
ROI............................................................... = 0.0367 = 0.0367
----------------------------------------------------------------------------------------------------------------

Table 27--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
ROI........................................ = 0.0367 = 0.0367 = 0.0367
----------------------------------------------------------------------------------------------------------------

Step 7: Adjustment of pilotage rates. Finally, and subject to
negotiation with Canada or to an adjustment for other supportable
circumstances, we calculate rate adjustments by dividing the Step 6
revenue needed (Table 24) by the Step 3 revenue projection (Table 15),
to give us a rate multiplier for each area. Tables 28 through 30 show
these calculations.

Table 28--Rate Multiplier, Areas in District One
----------------------------------------------------------------------------------------------------------------
Area 1 Area 2
------------------ -----------------
Ratemaking Projections St. Lawrence
River Lake Ontario
----------------------------------------------------------------------------------------------------------------
Revenue Needed (from Step 6)...................................... ... $2,064,171 ... $1,319,791
Revenue (from Step 3)............................................. / 2,358,327 / 1,546,373
Rate Multiplier................................................... = 0.8753 = 0.8535
----------------------------------------------------------------------------------------------------------------

Table 29--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 12100]]

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

Table 30--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 24) by
total projected revenue (Steps 3 and 3.A, Table 15). Table 31 shows
this calculation.

Table 31--Rate Multiplier for Basic Rates and Charges in 46 CFR 401.420
and 401.428
------------------------------------------------------------------------

------------------------------------------------------------------------
Ratemaking Projections:
Total Revenue Needed (from Step 6)................. ... $11,178,078
Total revenue (from Step 3)........................ / 12,458,339
Rate Multiplier...................................... = 0.897
------------------------------------------------------------------------

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 10.3 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 28 through 30 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 is a result
of recent significant changes in 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 the association to
permanently close. Moreover, the decrease would have an adverse effect
on providing safe, efficient, and reliable pilotage in the other two
pilotage districts. Finally, our 2013 agreement with Canada calls for
comparable pilotage rates between the two countries, and we proposed
aligning our rates to the Canadian rate, which actually increased by
2.5 percent this year. Our discretionary authority under Step 7 must be
``based on requirements of the Memorandum . . . between the United
States and Canada, and other supportable circumstances that may be
appropriate.'' 46 CFR part 404, App. A. Without the 2.5 percent
increase, U.S. and Canadian rates would be less comparable. ``Other
supportable circumstances'' we have for exercising our discretion
include E.O. 13609, ``Promoting International Regulatory Cooperation,''
which calls on Federal agencies to eliminate ``unnecessary
differences'' between U.S. and foreign regulations (see 77 FR 26413,
May 4, 2012). Additionally, there is a 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 are relying on the discretionary authority we have
under Step 7 to further adjust rates so that they closely align with
those adopted by the Canadian GLPA for 2014. Table 32 compares the
impact, area by area, that an average decrease of 11 percent would
have, relative to the impact each area would experience if U.S. rates
more closely align with those of the Canadian GLPA.

Table 32--Impact of Exercising Step 7 Discretion
----------------------------------------------------------------------------------------------------------------
Percent change in rate Percent change in rate
Area without exercising with exercise of Step
Step 7 discretion 7 discretion
----------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters).................................... -12.47 2.50
Area 2 (Undesignated waters).................................. -14.65 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
Area 8 (Undesignated waters).................................. -9.76 2.50
----------------------------------------------------------------------------------------------------------------

[[Page 12101]]

Tables 33 through 35 reflect our rate adjustments of 2.5 percent
across Districts One, Two and Three.

Table 33--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
----------------------------------------------------------------------------------------------------------------

In addition to the rate charges in Table 33, and for the reasons we
discussed in Section V.A. of this preamble, we are adding 46 CFR
401.401, authorizing imposition of temporary surcharges. Effective
April 3, 2014, we authorize 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. We do
not think this surcharge will have a disruptive effect on District One
traffic, because Canada has used an 18 percent surcharge in the past
with no such effect.

Table 34--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..........................................
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
----------------------------------------------------------------------------------------------------------------

[[Page 12102]]

Table 35--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, Ont. 2,583 x 1.025 = 2,648
& 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
----------------------------------------------------------------------------------------------------------------

VII. Regulatory Analyses

We developed this 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 rule is not a significant regulatory action
under section 3(f) of E.O. 12866 as supplemented by E.O. 13563, and
does not require an assessment of potential costs and benefits under
section 6(a)(3) of E.O. 12866. The Office of Management and Budget
(OMB) has not reviewed it under E.O. 12866. Nonetheless, we developed
an analysis of the costs and benefits of the rule to ascertain its
probable impacts on industry.
Based on comments received, the Coast Guard is adjusting the
operating expense base in District One in order to account for an
addition to the expense base of $4,360 for APA dues, as well as the
inclusion of the 2011 license insurance cost ($52,232) in the expense
base. However, because of our Step 7 discretionary adjustment to
pilotage rates, which increases rates by 2.5 percent from the previous
year in all three districts, these changes to the underlying data do
not impact the final rates. Despite this increase in pilotage rates, as
well as the implementation of a temporary, supplemental surcharge to
traffic in District One of 3 percent, we estimate that shippers will
experience a reduction in payments from the previous year of
approximately $697,914 across all three districts as a result of an
expected decrease in the demand for pilotage services from the previous
year.\4\
---------------------------------------------------------------------------

\4\ Total reduction in payments made by shippers across all
three districts is equal to the costs from rate changes (-$817,983)
plus a temporary surcharge to traffic in District One ($120,070).
---------------------------------------------------------------------------

A regulatory assessment follows.
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 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 pilotage associations' investments. The
rate adjustments in this final rule would, if codified, lead to an
increase in the cost per unit of service to shippers in all three
districts. Despite these rate increases, however, we estimate that
shippers in Districts Two and Three will experience a decrease in
payments from the previous year as a result of a decrease in demand for
pilotage services. The reduction in payments that would occur in
Districts Two and Three would outweigh the increase in payments in
District One, which would result in an estimated annual decrease in
payments by shippers of approximately $817,983 across all three
districts.\5\ After accounting for the implementation of a temporary 3
percent surcharge to traffic in District One, which is expected to
generate $120,070, the annual payments made by shippers across all
three districts for pilotage services are estimated to be approximately
$697,914 less than the payments that were made in 2013.
---------------------------------------------------------------------------

\5\ This annual reduction in payments is due to a projected
decrease in the number of billeted pilots in Areas 6 and 8 from 2013
to 2014, as well as an overall decrease in the demand for pilotage
services across all three districts. This decrease in the demand for
pilotage services would reduce the projected revenue needed to cover
costs and pilotage services.
---------------------------------------------------------------------------

The 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 in all three districts 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

[[Page 12103]]

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 routes in
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 does not apply to recreational vessels.
Owners and operators of other vessels that are not affected by this
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; it does not affect our calculation of the
rate, and it is not a part of our estimated national cost to shippers.
Our sampling of pilot data suggests that there are very few domestic
vessels that do not have a 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 data from 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, which include 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 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 (cost increases or cost
decreases) of the rate adjustment in this rule to be the difference
between the total projected revenue needed to cover costs in 2013,
based on the 2013 rate adjustment, and the total projected revenue
needed to cover costs in 2014, as set forth in this rule, plus any
temporary surcharges authorized by the Coast Guard. Table 36 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 37 summarizes the derivation for
calculating the 3 percent surcharge on District One traffic, as
discussed earlier in this preamble. Table 38 details the additional
cost increases or decreases by area and district as a result of the
rate adjustments and the temporary surcharge to District One traffic.

Table 36--Rate Adjustment by Area and District
[$U.S.; Non-discounted]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Projected revenue
2013 pilotage Rate change \7\ 2014 pilotage Projected 2014 needed in 2014
rates \6\ rates \8\ bridge hours \9\ \10\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 1................................................... $460.971 1.0250 $472.50 5,116 $2,417,285.09
Area 2................................................... 284.836 1.0250 291.96 5,429 1,585,032.47
----------------------------------------------------------------------------------------------
Total, District One.................................. ................. ................. ................. ................. 4,002,317.56
==============================================================================================
Area 4................................................... 205.268 1.0250 210.40 5,814 1,223,261.97
Area 5................................................... 508.915 1.0250 521.64 5,052 2,635,314.21
----------------------------------------------------------------------------------------------
Total, District Two.................................. ................. ................. ................. ................. 3,858,576.18
==============================================================================================
Area 6................................................... 199.954 1.0250 204.95 9,611 1,969,800.03
Area 7................................................... 482.940 1.0250 495.01 3,023 1,496,427.14
Area 8................................................... 186.670 1.0250 191.34 7,540 1,442,676.83
----------------------------------------------------------------------------------------------
Total, District Three................................ ................. ................. ................. ................. 4,908,904.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Some values may not total due to rounding.

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

\6\ These 2013 estimates are described in Table 15 of this final
rule.
\7\ The estimated rate changes are described in Table 32 of this
rule.
\8\ 2014 Pilotage Rates = 2013 Pilotage Rates x Rate Change.
\9\ These 2014 estimates are detailed in Table 13 of this final
rule.
\10\ Projected Revenue needed in 2014 = 2014 Pilotage Rates x
Projected 2014 Bridge Hours.

Table 37--Derivation of Temporary Surcharge
----------------------------------------------------------------------------------------------------------------
Area 1 Area 2
----------------------------------------------------------------------------------------------------------------
Projected Revenue Needed in 2014 \11\......................... $2,417,285.09 $1,585,032.47
Surcharge Rate................................................ 3% 3%
Surcharge Raised.............................................. 72,518.55 47,550.97
-------------------------------------------------

[[Page 12104]]

Total Surcharge........................................... 120,069.53
----------------------------------------------------------------------------------------------------------------

Table 38--Change in Payments by Shippers From the Previous Year 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 \12\ this proposed
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.

After applying the discretionary rate change in this final rule,
the resulting difference between the projected revenue in 2013 and the
projected revenue in 2014 is the annual change in payments from
shippers to pilots after accounting for market conditions (i.e., a
decrease in demand for pilotage services) and the change to pilotage
rates as a result of this final rule. This figure is equivalent to the
total additional payments or reduction in payments from the previous
year that shippers would incur for pilotage services.
---------------------------------------------------------------------------

\11\ These estimates are derived in Table 36 of this final rule.
\12\ These estimates are derived in Table 37 of this final rule.
---------------------------------------------------------------------------

The impact of the discretionary rate adjustments in this final rule
to shippers varies by area and district. Although the discretionary
rate adjustments would lead to affected shippers experiencing an
increase in payments for pilotage services in all three districts, when
combined with the overall decrease in demand for pilotage services
across all three districts, only shippers operating in District One are
estimated to experience an increase in payments of $28,733.56, while
affected shippers operating in District Two and District Three would
experience a reduction in payments of $136,602.82 and $710,115.00,
respectively from the previous year. This decrease in demand is
projected to result in a decrease in the number of billeted pilots in
Areas 6 and 8 from 2013 to 2014, which consequently would lead to a
decrease in payments despite the increase in pilotage rates.
In addition to the rate adjustments, District One would incur a
temporary surcharge to traffic for the duration of the 2014 season. In
District One, shippers would incur a temporary 3 percent surcharge in
order for the district's pilot association to recover training expenses
incurred in 2012. We estimate that this surcharge would generate
$120,070 in District One. 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.\13\
---------------------------------------------------------------------------

\13\ 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 expenses incurred by District One pilots
($48,995 (training)).
---------------------------------------------------------------------------

To calculate an exact cost or cost reduction 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 decrease in costs reported earlier in this final
rule does capture the adjustment in payments that shippers would
experience from the previous year. The overall adjustment in payments,
after taking into account: (1) The decrease in demand for pilotage
services; (2) the increase in pilotage rates; and (3) the addition of a
temporary surcharge in District One, would be a reduction in payments
by shippers of approximately $697,914 across all three districts.
This final rule would allow the Coast Guard to meet the statutory
requirements to review the rates for pilotage services on the Great
Lakes, ensuring proper pilot compensation.
Alternatively, if we instead 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 much more
detrimental effect on pilots, as payments from shippers would decrease
by approximately $2,308,184. In contrast, as discussed above, if the
discretionary 2.5 percent increase is applied to traffic in Districts
One, Two, and Three, the payment from shippers only decreases by
$697,914. Table 39 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 40 details the
changes in payments to pilots from the previous year, by area and
district, after accounting for: (1) A decrease in demand for pilotage
services; (2) an increase in pilotage rates

[[Page 12105]]

across all three districts; and (3) the addition of a temporary
surcharge applied to traffic in District One.

Table 39--Alternative Rate Adjustment by Area and District
[$U.S.; Non-discounted]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Projected revenue
2013 Pilotage Rate change \14\ 2014 Pilotage Projected 2014 needed in 2014
rates rates bridge hours \15\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 1................................................... $460.97 0.8753 $403.47 5,116 $2,064,171
Area 2................................................... 284.84 0.8535 243.10 5,429 1,319,791
----------------------------------------------------------------------------------------------
Total, District One.................................. ................. ................. ................. ................. 3,383,963
==============================================================================================
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.................................. ................. ................. ................. ................. 3,362,110
==============================================================================================
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.

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

\14\ The estimated rate changes are described in Table 32 of
this preamble.
\15\ Projected Revenue needed in 2014 = 2014 Pilotage Rates x
Projected 2014 Bridge Hours.

Table 40--Alternative Change in Payments by Shippers From the Previous Year by Area and District
[$U.S.; Non-discounted]
----------------------------------------------------------------------------------------------------------------
Total increase or
Projected revenue Projected revenue Temporary decrease in
needed in 2013 needed in 2014 surcharge payments
(A) (B) (C) (B-A) + C
----------------------------------------------------------------------------------------------------------------
Area 1.............................. $2,404,424 $2,064,171 $61,925 ($278,328)
Area 2.............................. 1,569,160 1,319,791 39,594 (209,775)
---------------------------------------------------------------------------
Total, District One............. 3,973,584 3,383,963 101,519 (488,102)
===========================================================================
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 3,362,110 ................. (633,068)
===========================================================================
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.

We reject this alternative because a substantial decrease in
payments by shippers would jeopardize the ability of the three pilotage
associations to provide safe, efficient, and reliable pilotage
services, and it would 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 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.
We expect that entities affected by the 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

[[Page 12106]]

employing less than 500 employees is considered a small entity.
For the final 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 this final rule that
receive revenue from pilotage services. These are the three pilotage
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 final 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 final rule would not have a significant economic impact on a
substantial number of small entities.

C. Assistance for Small Entities

Under section 213(a) of the Small Business Regulatory Enforcement
Fairness Act of 1996, Public Law 104-121, we offered to assist small
entities in understanding this rule so that they could better evaluate
its effects on them and participate in the rulemaking. If the rule will
affect your small business, organization, or governmental jurisdiction
and you have questions concerning its provisions or options for
compliance, please contact the Coast Guard (see FOR FURTHER INFORMATION
CONTACT). The Coast Guard will not retaliate against small entities
that question or complain about this rule or any policy or action of
the Coast Guard.
Small businesses may send comments on the actions of Federal
employees who enforce, or otherwise determine compliance with, Federal
regulations to the Small Business and Agriculture Regulatory
Enforcement Ombudsman and the Regional Small Business Regulatory
Fairness Boards. The Ombudsman evaluates these actions annually and
rates each agency's responsiveness to small business. If you wish to
comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR
(1-888-734-3247).

D. Collection of Information

This rule calls for no new collection of information under the
Paperwork Reduction Act of 1995, 44 U.S.C. 3501-3520. This rule does
not change the burden in the collection currently approved by the OMB
under 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.'' Because States may not promulgate rules
within this category, 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 have exclusive authority
to promulgate regulations, the Coast Guard recognizes the key role that
State and local governments may have in making regulatory
determinations. Additionally, for rules with federalism implications
and preemptive effect, Executive Order 13132 specifically directs
agencies to consult with State and local governments during the
rulemaking process. If you believe this rule has implications for
federalism under Executive Order 13132, please contact the person
listed in the FOR FURTHER INFORMATION CONTACT section of this preamble.

F. Unfunded Mandates Reform Act

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

G. Taking of Private Property

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

H. Civil Justice Reform

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

I. Protection of Children

We have analyzed this rule under E.O. 13045 (``Protection of
Children from Environmental Health Risks and Safety Risks''). This rule
is not an economically significant rule and would not create an
environmental risk to health or risk to safety that might
disproportionately affect children.

J. Indian Tribal Governments

This rule does not have tribal implications under E.O. 13175
(``Consultation and Coordination with Indian Tribal Governments''),
because it would not have a substantial direct effect on one or more
Indian tribes, on the relationship between the Federal Government and
Indian tribes, or on the distribution of power and responsibilities
between the Federal Government and Indian tribes.

K. Energy Effects

We have analyzed this rule under E.O. 13211 (``Actions Concerning
Regulations That Significantly Affect Energy Supply, Distribution, or
Use''). We have determined that it is not a ``significant energy
action'' under that order because it is not a ``significant regulatory
action'' under E.O. 12866 and is not likely to have a significant
adverse effect on the supply, distribution, or use of energy.

L. Technical Standards

The National Technology Transfer and Advancement Act, codified as a
note to 15 U.S.C. 272, directs agencies to use voluntary consensus
standards in their regulatory activities unless the agency provides
Congress, through OMB, with an explanation of why using

[[Page 12107]]

these standards would be inconsistent with applicable law or otherwise
impractical. Voluntary consensus standards are technical standards
(e.g., specifications of materials, performance, design, or operation;
test methods; sampling procedures; and related management systems
practices) that are developed or adopted by voluntary consensus
standards bodies. This rule does not use technical standards.
Therefore, we did not consider the use of voluntary consensus
standards.

M. Environment

We have analyzed this rule under DHS 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 concluded that this action is one of a category of
actions that do not individually or cumulatively have a significant
effect on the human environment. A final environmental analysis
checklist supporting this determination is available in the docket
where indicated under the ADDRESSES section of this preamble.

List of Subjects in 46 CFR Part 401

Administrative practice and procedure, Great Lakes, Navigation
(water), Penalties, Reporting and recordkeeping requirements, Seamen.

For the reasons discussed in the preamble, the Coast Guard amends
46 CFR part 401 as follows:

PART 401--GREAT LAKES PILOTAGE REGULATIONS

0
1. The authority citation for part 401 continues to read as follows:

Authority: 46 U.S.C. 2104(a), 6101, 7701, 8105, 9303, 9304;
Department of Homeland Security Delegation No. 0170.1; 46 CFR
401.105 also issued under the authority of 44 U.S.C. 3507.

0
2. In Sec. 401.400, 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 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 1 year.

0
4. In Sec. 401.405, revise paragraphs (a) and (b), including the
footnote to paragraph (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):

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

0
5. In Sec. 401.407, revise paragraphs (a) and (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):

----------------------------------------------------------------------------------------------------------------
Area De tour Gros cap Any harbor
----------------------------------------------------------------------------------------------------------------
Gros Cap.................................................. $2,648 N/A N/A
Algoma Steel Corporation Wharf at Sault Ste. Marie, 2,648 997 N/A
Ontario..................................................

[[Page 12108]]

Any point in Sault Ste. Marie, Ontario, except the Algoma 2,219 997 N/A
Steel 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: February 25, 2014.
Gary C. Rasicot,
Director, Marine Transportation Systems Management, U.S. Coast Guard.
[FR Doc. 2014-04591 Filed 2-28-14; 11:15 am]
BILLING CODE 9110-04-P

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