Great Lakes Pilotage Rates-2015 Annual Review and Adjustment, 10365-10389 [2015-04036]

Download as PDF 10365 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations Community No. State and location Riley County, Unincorporated Areas ..... 200298 Effective date authorization/cancellation of sale of flood insurance in community Current effective map date June 23, 1975, Emerg; April 1, 1982, Reg; March 16, 2015, Susp. ......do ............... Date certain Federal assistance no longer available in SFHAs Do. * -do- =Ditto. Code for reading third column: Emerg.—Emergency; Reg.—Regular; Susp.—Suspension. Dated: February 6, 2015. David L. Miller, Associate Administrator, Federal Insurance and Mitigation Administration, Department of Homeland Security, Federal Emergency Management Agency. [FR Doc. 2015–03954 Filed 2–25–15; 8:45 am] BILLING CODE 9110–12–P DEPARTMENT OF HOMELAND SECURITY Coast Guard 46 CFR Part 401 [Docket No. USCG–2014–0481] RIN 1625–AC22 Great Lakes Pilotage Rates—2015 Annual Review and Adjustment Coast Guard, DHS. Final rule. AGENCY: ACTION: The Coast Guard is adjusting rates for pilotage services on the Great Lakes, which were last amended in March 2014. The adjustments establish new base rates made in accordance with a full ratemaking procedure. Additionally, the Coast Guard exercises the discretion provided by Step 7 of the Appendix A methodology. The result is an upward adjustment to close the gap between revenues projected by this rulemaking and those collected by the pilot associations. Our proposed rates planned to maintain parity with the Canadian Great Lakes Pilotage Authority. While this continues to be our goal, we have since discovered a more significant challenge demonstrated by the recently completed revenue audits. This is a more pressing concern for the operation of safe, efficient, and reliable pilotage service on the Great Lakes than maintaining parity because it demonstrates that the pilot associations are unable to properly fund their operations. Also, we are implementing temporary surcharges to accelerate recoupment of necessary and reasonable training and investment costs for the pilot associations. This final rule promotes the Coast Guard’s strategic goal of maritime safety. rmajette on DSK2VPTVN1PROD with RULES SUMMARY: VerDate Sep<11>2014 14:38 Feb 25, 2015 Jkt 235001 This final rule is effective August 1, 2015. 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–2014–0481 and are available for inspection or copying at the Docket Management Facility (M–30), U.S. Department of Transportation, West Building Ground Floor, Room W12–140, 1200 New Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. You may also find this docket on the Internet by going to https://www.regulations.gov, inserting USCG–2014–0481 in the ‘‘Keyword’’ box, and then clicking ‘‘Search.’’ FOR FURTHER INFORMATION CONTACT: If you have questions on this rule, call or email Mr. Todd Haviland, Director, Great Lakes Pilotage, Commandant (CG– WWM–2), Coast Guard; telephone 202– 372–2037, email Todd.A.Haviland@ uscg.mil, or fax 202–372–1914. If you have questions on viewing or submitting material to the docket, call Ms. Cheryl Collins, Program Manager, Docket Operations, telephone 202–366–9826. SUPPLEMENTARY INFORMATION: DATES: Table of Contents for Preamble I. Abbreviations II. Regulatory History III. Basis and Purpose IV. Background V. Discussion of Comments and Changes A. Ratemaking Methodology B. AMOU Contracts C. Surcharge D. Revenue Audits E. Pilot Boats VI. Summary of the Rule and Discussion of Methodology A. Summary of the Rule B. Discussion of the Methodology 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 PO 00000 Frm 00043 Fmt 4700 Sfmt 4700 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 E.O. Executive Order FR Federal Register GLPA Great Lakes Pilotage Association MISLE Marine Information for Safety and Law Enforcement MOA Memorandum of Arrangements MOU Memorandum of Understanding NAICS North American Industry Classification System NPRM Notice of proposed rulemaking OMB Office of Management and Budget ROI Return on investment § Section symbol U.S.C. United States Code WGLPA Western Great Lakes Pilots Association II. Regulatory History On September 4, 2014, we published a notice of proposed rulemaking (NPRM) titled ‘‘Great Lakes Pilotage Rates—2015 Annual Review and Adjustment’’ in the Federal Register (79 FR 52602). We received 10 submissions on the NPRM from multiple sources, including pilotage associations, pilots, pilot organizations, and shippers. No public meeting was requested and none was held. On December 1, 2014, we published the recently completed revenue audits of the pilot associations and reopened the public comment period in the Federal Register (79 FR 71082). We received 5 submissions on the revenue audits. III. Basis and Purpose The basis of this final rule 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 1 ‘‘On register’’ means that the vessel’s certificate of documentation has been endorsed with a registry endorsement, and therefore, may be employed in foreign trade or trade with Guam, American Samoa, Wake, Midway, or Kingman Reef. 46 U.S.C. 12105, 46 CFR 67.17. E:\FR\FM\26FER1.SGM 26FER1 10366 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations rmajette on DSK2VPTVN1PROD with RULES system. 46 U.S.C. 9302(a)(1). The Act requires the Secretary to ‘‘prescribe by regulation rates and charges for pilotage services, giving consideration to the public interest and the costs of providing the services.’’ 46 U.S.C. 9303(f). Rates must be established or reviewed and adjusted each year, not later than March 1. Base rates must be established by a full ratemaking at least once every 5 years, and in years when base rates are not established, they must be reviewed and, if necessary, adjusted. Id. The Secretary’s duties and authority under the Act have been delegated to the Coast Guard. Department of Homeland Security Delegation No. 0170.1, paragraph (92)(f). Coast Guard regulations implementing the Act appear in parts 401 through 404 of Title 46, Code of Federal Regulations (CFR). Procedures for use in establishing base rates appear in 46 CFR part 404, Appendix A, and procedures for annual review and adjustment of existing base rates appear in 46 CFR part 404, Appendix C. The purpose of this final rule 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 final rule 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 to operate a pilotage pool. It is important to note that we do not control the actual compensation that pilots receive. The actual compensation is determined by each of the three district associations, which use different compensation practices. District One, consisting of Areas 1 and 2, includes all U.S. waters of the St. Lawrence River and Lake Ontario. District Two, consisting of Areas 4 and 5, includes all U.S. waters of Lake Erie, the Detroit River, Lake St. Clair, and the St. Clair River. District Three, consisting of Areas 6, 7, and 8, includes all U.S. waters of the St. Mary’s River, Sault Ste. Marie Locks, and Lakes Michigan, Huron, and Superior. Area 3 is the Welland Canal, which is serviced 2 A ‘‘laker’’ is a commercial cargo vessel especially designed for and generally limited to use on the Great Lakes. VerDate Sep<11>2014 14:38 Feb 25, 2015 Jkt 235001 exclusively by the Canadian Great Lakes Pilotage Association (GLPA) and, accordingly, is not included in the United States rate structure. Areas 1, 5, and 7 have been designated by Presidential Proclamation, pursuant to the Act, to be waters in which pilots must, at all times, be fully engaged in the navigation of vessels in their charge. Areas 2, 4, 6, and 8 have not been so designated because they are open bodies of water. While working in those undesignated areas, pilots must only ‘‘be on board and available to direct the navigation of the vessel at the discretion of and subject to the customary authority of the master.’’ 46 U.S.C. 9302(a) (1) (B). This final rule is a full ratemaking to establish new base pilotage rates, using the methodology found in 46 CFR part 404, Appendix A (hereafter ‘‘Appendix A’’). The last full ratemaking established the current base rates in March 2014 (79 FR 12084; Mar. 4, 2014). Among other things, the Appendix A methodology requires us to review detailed pilot association financial information, and we contract with independent accountants to assist in that review. We have now completed our review of the independent accountants’ 2012 financial reports. The comments by the pilot associations on those reports and the independent accountants’ final findings are discussed in our document titled ‘‘Summary—Independent Accountant’s Report on Pilot Association Expenses, with Pilot Association Comments and Accountant’s Responses,’’ which appears in the docket. In addition, we also use the independent accountant’s review of pilot association revenues. The review, contracted by the Coast Guard, confirms the revenues of the pilot associations and it establishes a baseline of comparison between actual collected revenues and those projected by the rulemaking. The revenue reports also appear in the docket. V. Discussion of Comments and Changes We received 10 public submissions in response to the initial public comment period of our NPRM. In the NPRM, the Coast Guard proposed a 2.5 percent across the board rate increase for the three pilotage districts and varying surcharge levels across the three districts. However, due to the completion of the revenue audits during the initial comment period, the Coast Guard extended the comment period for 30 days for the public to comment on the revenue audits. We received an additional five comments to our supplementary comment period PO 00000 Frm 00044 Fmt 4700 Sfmt 4700 focusing on the revenue audits. Of all the comments we received, 10 came from pilots or pilot associations, 3 came from industry groups, and 2 came from the union whose contract data provides benchmark data for pilot compensation. Based on the comments and revenue audits, the Coast Guard is implementing a 10 percent across the board rate increase for the three pilotage districts and a 10 percent surcharge for each district. The reasoning behind the changes follows. Any further changes involving the Appendix A methodology will be published for notice and comment in a future rulemaking. A. Ratemaking Methodology Three commenters questioned various aspects of the ratemaking methodology. First, a pilot from the Western Great Lakes Pilots Association (WGLPA) questioned the application of bridge hours, as well as what the definition should include. We are currently working with the pilots, industry, and the American Pilots Association to finalize a new model to gauge necessary pilot strength. We plan to propose this model in a future rulemaking. We believe this coordinated, thorough process is needed to address the longstanding challenges with pilot recruitment and retention on the Great Lakes. Another pilot suggested that we need to incorporate multiple years of inflation in the rate to compensate for the time lapse between the conduct of the audits and the effective date of the rate. Under Step 1.C of the Appendix A methodology, the adjustment for inflation or deflation is a 1-year adjustment between the reported year (the audit year) and the succeeding navigation season. As we have stated in previous rulemakings, we are unable to incorporate a multiyear adjustment in the current methodology. We will consider changing this step in a future rulemaking. Also, the same commenter questioned our application of benefits to the American Maritime Officers Union (AMOU) contract. This is a longstanding issue and the commenter argues that we should multiply first mate wages and benefits by 150 percent to determine designated waters compensation. We disagree and continue to maintain that the 150 percent applies only to wages; benefits are then added to the result. As part of our extensive review of the Appendix A methodology, we are actively seeking alternative compensation benchmarks to the AMOU contracts. Another commenter believes that compensation must exceed that of the AMOU in order to successfully recruit future pilots. We E:\FR\FM\26FER1.SGM 26FER1 rmajette on DSK2VPTVN1PROD with RULES Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations agree that actual pilot compensation should be sufficient to attract and retain U.S. Registered Pilots and we are actively pursuing alternatives to the AMOU contracts for a new pilot compensation standard. Two commenters suggested that the pilot strength called for in the rate is inadequate. As discussed previously, we believe the current bridge hour standard is not an effective means of establishing pilot strength. We plan to continue efforts to develop a new pilot strength model based on feedback from the stakeholders and will provide it for public comment in a future rulemaking. Another commenter questioned the effective date of the rate, saying that the rate should go into effect at the start of the season instead of aligning with the union contract start date of August 1. Since the AMOU contracts are part of the current Appendix A methodology, August 1 continues to be the effective date of the rate. We are open to adjusting the effective date of the rate in a future rulemaking in coordination with our expansive review of the methodology if doing so will enhance the delivery of safe, efficient, and reliable service. Additionally, five commenters questioned use of our discretion under Step 7 of the Appendix A methodology. Two of those commenters, a member of industry and a pilot, disagree with our basis for Step 7 adjustments, citing insufficient support for our justification of parity adjustments under the Memorandum of Arrangements/ Memorandum of Understanding (MOA/ MOU) with Canada and Executive Order (E.O.) 13609. We disagree. The purpose of the MOA/MOU and E.O. 13609 is to work to better align U.S. and Canadian regulatory schemes. We agree that the new MOU has a less strict interpretation of parity, seeking comparable rates over identical ones. However, we believe that the revenue shortfall against projections uncovered in the recently completed audits calls for action. Our actions to seek comparable rates are undercut by overprojections and the inability of the current billing scheme to generate sufficient revenue to operate the pilotage associations. The third commenter, also a member of industry, asserts that the results of our calculations represent a ‘‘serious flaw’’ in the methodology. We plan to address the challenges with the current methodology in a future rulemaking. We neither believe the calculations resulting from the methodology in this rule are representative of economic conditions in the Great Lakes region, nor do they represent increased VerDate Sep<11>2014 14:38 Feb 25, 2015 Jkt 235001 efficiencies of the pilot organizations. As such, we continue to utilize our Step 7 discretion to adjust them. Another commenter stated that the Canadian GLPA is actually raising their rates only 1 percent rather than 2.5 percent as stated in the NPRM. While we continue to strive for comparability with Canadian rates, our greater concern currently is the gap in revenue. Thus, we seek to actively close the confirmed revenue gap between pilot association collections and Coast Guard projections by increasing the rate. The gap highlighted in the revenue audits points to an even greater disparity between U.S. and Canadian rates on the Great Lakes that must be addressed. This leads into a discussion of the final commenter on the ratemaking methodology. The remaining commenter highlights the gap between revenues projected in the rate and those actually collected by the pilot association, as well as the second and third order effects of that gap. Based on a review of the recently completed revenue audits, we agree with the commenter that the gap between revenue projections in the rate and the revenues actually collected by the pilot associations presents an untenable situation. The revenue projections in the rate for each pilot association directly impact each association’s ability to provide safe, efficient, and reliable service. Since the actual revenues collected by the associations fall well short of our projections, we are utilizing our Step 7 discretion to increase the rates in all areas by 10 percent. This rate increase will begin to address the significant shortfall in pilotage revenue against our projections. We believe that the current shortfall in revenue is a result of both bridge hour projections and a billing scheme that is not properly baselined to collect appropriate revenue. Rate increases to address the shortfall will continue to be separate and distinct from the temporary surcharges applied in the districts for training and investments. B. AMOU Contracts Five commenters–three pilots or pilots’ representatives and two officials from the AMOU–addressed our use of AMOU contracts to estimate average annual compensation for U.S. Registered Pilots in Step 2.A of our Appendix A ratemaking methodology. Since the application of these contracts is currently the subject of pending litigation, we refrain from addressing these comments and will continue to utilize the AMOU contract data as we did in the 2013 and 2014 ratemakings. PO 00000 Frm 00045 Fmt 4700 Sfmt 4700 10367 C. Surcharge Eight commenters–seven pilots or pilot associations and one member of industry–addressed the proposed surcharges in the NPRM. We received a comment from the Lakes Pilots Association, Inc. supporting the proposed surcharge for District Two. Commenters from both District One and District Three stated that they require two additional pilot applicants each above their authorized strength to deal with personnel turnover. We agree with both commenters. The pilotage associations are facing a wave of retirements, both expected and unexpected, and these additional applicant pilots are necessary to ensure the system continues to operate smoothly. The long lead time for pilot training necessitates that the pilot associations begin training now to address current pilot retirements as well as those projected for the next 24 months. Thus, we are using our surcharge authority to fund applicant pilots that exceed the current authorized pilot strength of the associations. Based on how three associations plan to compensate the applicants and the costs associated with training, we have estimated that a 5 percent surcharge is necessary to fund each applicant pilot. As you will see in the following discussion, we have established a 10 percent surcharge for each district in order to accelerate the costs associated with training 2 applicant pilots. In the case of District One, we agree with the need for two applicant pilots above their authorized strength of 11 pilots to ensure safe, efficient, and reliable pilotage service. To fund these applicant pilots, we will increase their authorized surcharge to 10 percent. We also agree with the need for two applicant pilots above their authorized strength of 15 pilots to ensure safe, efficient, and reliable pilotage service in District Three. Accordingly, we will fund two additional applicants above their authorized pilot strength and increase their authorized surcharge to 10 percent. As mentioned above, in conjunction with stakeholders, we are developing a new pilotage strength model that we will provide for public comment in a future rulemaking. Finally, a member of industry questioned the need for pilot training surcharges and the authority to charge for expenses not yet incurred. The Coast Guard has the authority to prescribe rates and charges pursuant to 46 U.S.C. 9303. Temporary surcharge authority was implemented through regulation in the 2014 ratemaking cycle. See 78 FR 48376. The surcharges include funds for E:\FR\FM\26FER1.SGM 26FER1 10368 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations rmajette on DSK2VPTVN1PROD with RULES professional training, investments in pilotage technology, and the costs to train and fund six new applicant pilots across the system. These applicants will all be in place for the 2015 shipping season and thus, through the temporary surcharge, the Coast Guard is accelerating recoupment of these important expenses. We fully support investments in professional development and technology to enhance the safety, reliability, and efficiency of the system. Further, we believe the recruitment, funding, and training of applicant pilots before the retirement of current registered pilots is essential to the stability of the system and to achieve and maintain acceptable levels of service. Any overages in surcharge collection against the actual costs will be adjusted in the next year’s rate. We discuss surcharges further in Part VI after our discussion of other comments. D. Revenue Audits We received three comments on the revenue audits—two from pilots and one from industry. Both pilot commenters approved of the revenue audits and asked the Coast Guard to adjust for the differences between actual and projected revenues. We agree with these comments and have adjusted our rate increase to 10 percent across all districts to begin aligning actual and projected revenues. Our discussion in Step 7 provides additional discussion on this topic. It is clear that the audits for the 2013 Appendix A rulemaking demonstrate a significant shortfall. Since we only have a single data point, we plan to increase the base rate to fill this gap over a multi-year period. Ten percent is reasonable because this is greater than inflation and begins to align the revenues needed to provide safe, efficient, and reliable service with the actual revenues that our rulemakings generate. We will also work to address this discrepancy in a future rulemaking regarding the methodology. We discuss this further in Step 7 of the methodology. The industry commenter disapproves of the open-ended nature of the comment period, seeking further clarity regarding our plan for use of the revenue audits and a better explanation of our use of discretion. We disagree. The comment period was set up to allow access by all parties to the revenue audits and to provide feedback to the Coast Guard regarding their review and incorporation into the ratemaking methodology. The revenue audits clearly point to a shortcoming in the billing scheme and methodology that significantly reduces actual revenue. Failure to act on the revenue audits would ignore the point ‘‘and VerDate Sep<11>2014 14:38 Feb 25, 2015 Jkt 235001 other supportable economic factors’’ in Step 7 of the methodology. While we do not propose a solution for the methodology in this rulemaking, we are working to develop new proposals to address the significant hindrances of the current methodology. The discretion exercised in Step 7 seeks to maintain safe, efficient, and reliable pilotage service while we prepare a future rulemaking to address the current methodology. E. Pilot Boats We received two comments regarding purchase of new pilot boats. District Two submitted information regarding the purchase of a new boat for use in Detroit for consideration in the rate. However, based on the documents submitted, the pilots have reached an agreement with the Canadian GLPA and industry to fund the pilot boat through usage fees, not through the rate. As a result, the expenses associated with the new pilot boat will not be included in the 2015 rate. Similarly, a pilot from the WGLPA believes that infrastructure investment in a new dock and new pilot boat near Sault Sainte Marie, MI should be included in the rate. We disagree. Like District Two, the letter of intent signed between the WGLPA and the Canadian GLPA plans to recoup the cost of their infrastructure improvement through levied pilot boat fees, not the pilotage rate. We support and encourage the investment of both associations in badly needed infrastructure and capital assets but cannot allow recoupment of expenses already marked to be paid by industry separately. VI. Summary of the Rule and Discussion of Methodology A. Summary of the Rule We are establishing new base pilotage rates in accordance with the methodology outlined in Appendix A to 46 CFR part 404. The new rates will be established by March 1, 2015 and become effective August 1, 2015. Our calculations under Steps 1 through 6 of Appendix A would result in an average 12 percent rate decrease. This rate decrease is not the result of increased efficiencies in providing pilotage services but rather is a result of changes to AMOU contract data. Additionally, the recently completed revenue audits demonstrate a significant shortfall between revenues projected by the Coast Guard using the Appendix A methodology and those actually captured by the current billing scheme. This gap, explained further in our Step 7 discussion, demonstrates that a more significant rate increase is necessary to PO 00000 Frm 00046 Fmt 4700 Sfmt 4700 promote a standard safe, efficient, and reliable pilotage service by ensuring the pilot associations have sufficient actual revenue to continue operations. Therefore, we will continue to exercise the discretion outlined in Step 7, increasing rates by 10 percent to begin closing the gap between projected revenues and those actually collected by the pilot associations. Table 1 shows the percent change for the new rates for each area. Secondly, we are implementing temporary surcharges for the pilot associations to recoup necessary and reasonable training and investment expenses incurred or that are expected to be incurred prior to the required March 1, 2015 publication of the final rule. Normally, these expenses would not be recognized until the 2016 annual ratemaking or later. By authorizing the temporary surcharges now, this action will accelerate the reimbursement for necessary and reasonable training and investment expenses. The surcharge will be authorized for the duration of the 2015 shipping season, which begins in March 2015. The value of the surcharges is based on the audited revenues of the pilot associations and the identified need to train two additional pilot applicants per District. This action will merely accelerate the recoupment of these expenses. At the conclusion of the 2015 shipping season, we would account for the monies generated by the surcharge and make adjustments as necessary to the operating expenses for the following year. In District One, we are implementing a temporary surcharge of 10 percent to compensate pilots for $28,028.91 that the District One pilot association spent on training in 2013 and early 2014, as well as the anticipated $300,000 cost to train two new applicant pilots and prepare replacements for retiring pilots. We believe this training is necessary and reasonable to promote safe, efficient, and reliable pilotage on the Great Lakes and support the St. Lawrence Seaway Pilots Association’s continued commitment to the training and professional development of their pilots. Additionally, we are implementing a temporary surcharge of 10 percent in District Two to compensate pilots for $300,000 that the District Two pilot association spent training two applicant pilots in 2014. This is necessary and reasonable to allow the association to bring on new pilots in the face of upcoming retirements without adjusting the pilotage needs as determined by the ratemaking methodology. This surcharge will also accelerate the E:\FR\FM\26FER1.SGM 26FER1 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations repayment of the association’s investment in upgraded technology ($25,829.80) to enhance the situational awareness of pilots on the bridge. We believe this needed technology will assist in the safety, efficiency, and reliability of the system. Next, we are implementing a temporary surcharge of 10 percent in District Three to compensate pilots for $26,950 that the District Three pilot association plans to spend on training at the conclusion of the 2014 shipping season. We believe this training is necessary and reasonable for the provision of safe pilotage service. This also compensates District Three for the anticipated $300,000 cost of training two additional pilot applicants to increase pilot strength and advance safe, efficient, and reliable pilotage service in the district. All figures in the tables that follow are based on calculations performed either 10369 by an independent accountant or by the Director’s 3 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 figures, which are rounded for presentation in the tables. TABLE 1—SUMMARY OF RATE ADJUSTMENTS BASED ON STEP 7 DISCRETION Then the percent change over the current rate is: If pilotage service is required in: Area Area Area Area Area Area Area 1 2 4 5 6 7 8 (Designated waters) ........................................................................................................................................................... (Undesignated waters) ....................................................................................................................................................... (Undesignated waters) ....................................................................................................................................................... (Designated waters) ........................................................................................................................................................... (Undesignated waters) ....................................................................................................................................................... (Designated waters) ........................................................................................................................................................... (Undesignated waters) ....................................................................................................................................................... B. Discussion of the Methodology The Appendix A methodology provides seven steps, with sub-steps, for calculating rate adjustments. The following discussion describes those steps and sub-steps, and includes tables showing how we have applied them to the 2012 financial information supplied by the pilots association. Step 1: Projection of Operating Expenses. In this step, we project the amount of vessel traffic annually. Based on that projection, we forecast the amount of necessary and reasonable operating expenses that pilotage rates should recover. Step 1.A: Submission of Financial Information. This sub-step requires each pilot association to provide us with detailed financial information in accordance with 46 CFR part 403. The associations complied with this requirement, supplying 2012 financial information in 2013. This is the most current and complete data set we have available. Step 1.B: Determination of Recognizable Expenses. This sub-step requires us to determine which reported association expenses will be recognized for ratemaking purposes, using the guidelines shown in 46 CFR 404.5. We contracted with an independent accountant to review the reported expenses and submit findings recommending which reported expenses should be recognized. The accountant also reviewed which reported expenses should be adjusted prior to recognition 10 10 10 10 10 10 10 or disallowed for ratemaking purposes. The accountant’s preliminary findings were sent to the pilot associations, they reviewed and commented on those findings, and the accountant then finalized the findings. The Director reviewed and accepted the final findings, resulting in the determination of recognizable expenses. The preliminary findings, the associations’ comments on those findings, and the final findings are all discussed in the ‘‘Summary—Independent Accountant’s Report on Pilot Association Expenses, with Pilot Association Comments and Accountant’s Responses,’’ which appears in the docket. Tables 2 through 4 show each association’s recognized expenses. TABLE 2—RECOGNIZED EXPENSES FOR DISTRICT ONE Area 1 rmajette on DSK2VPTVN1PROD with RULES 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 ................................................................................................................. Payroll taxes ......................................................................................................................... Area 2 St. Lawrence River Reported expenses for 2012 Lake Ontario $227,199 0 62,038 596 $137,315 0 48,452 549 $364,514 0 110,490 1,145 289,833 186,316 476,149 108,539 0 13,429 95,405 0 11,804 203,944 0 25,233 3 ‘‘Director’’ is the Coast Guard Director, Great Lakes Pilotage, which is used throughout this rule. VerDate Sep<11>2014 14:38 Feb 25, 2015 Jkt 235001 PO 00000 Frm 00047 Fmt 4700 Sfmt 4700 Total E:\FR\FM\26FER1.SGM 26FER1 10370 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations TABLE 2—RECOGNIZED EXPENSES FOR DISTRICT ONE—Continued Area 1 Area 2 St. Lawrence River Reported expenses for 2012 Lake Ontario Total Total Pilot and Dispatch Costs ...................................................................................... Administrative Expenses: Legal—general counsel ........................................................................................................ Legal—lobbying .................................................................................................................... Insurance .............................................................................................................................. Employee benefits ................................................................................................................ Payroll taxes ......................................................................................................................... Other taxes ........................................................................................................................... Travel .................................................................................................................................... Depreciation/Auto leasing/Other ........................................................................................... Interest .................................................................................................................................. Dues and subscriptions ........................................................................................................ Utilities .................................................................................................................................. Salaries ................................................................................................................................. Accounting/Professional fees ............................................................................................... Pilot Training ......................................................................................................................... Other ..................................................................................................................................... 121,968 107,209 229,177 1,369 3,957 21,907 21,281 0 18,491 473 38,346 15,484 13,740 4,549 48,837 4,683 26,353 10,689 1,281 3,478 18,998 18,509 0 15,801 416 33,705 13,610 10,240 3,897 42,927 4,317 21,961 8,974 2,650 7,435 40,905 39,790 0 34,292 889 72,051 29,094 23,980 8,446 91,764 9,000 48,314 19,663 Total Administrative Expenses ...................................................................................... 230,159 198,114 428,273 Total Operating Expenses Adjustments (Independent certified public accountant (CPA)): Pilotage subsistence/Travel .................................................................................................. Payroll taxes ......................................................................................................................... Dues and subscriptions ........................................................................................................ 641,960 491,639 1,133,599 (887) (13,719) (13,740) (779) (12,058) (10,240) (1,666) (25,777) (23,980) TOTAL CPA ADJUSTMENTS ....................................................................................... Adjustments (Director): American Pilots Association (APA) Dues ............................................................................. Pilot Training (surcharge) ..................................................................................................... Legal—lobbying .................................................................................................................... (28,346) (23,077) (51,423) 11,679 (26,353) (3,957) 8,704 (21,961) (3,478) 20,383 (48,314) (7,435) TOTAL DIRECTOR ADJUSTMENTS ........................................................................... (18,631) (16,735) (35,366) Total Operating Expenses ............................................................................................. 594,983 451,827 1,046,810 Note: Numbers may not total due to rounding. TABLE 3—RECOGNIZED EXPENSES FOR DISTRICT TWO Area 4 Area 5 Lake Erie Southeast Shoal to Port Huron, MI Reported Expenses for 2012 Operating Expenses: Other Pilotage Costs: Pilot subsistence/Travel ........................................................................................................ License insurance ................................................................................................................. Payroll taxes ......................................................................................................................... Other ..................................................................................................................................... Total 130,421 9,252 63,328 35,833 217,368 15,420 105,546 59,721 Total Other Pilotage Costs ............................................................................................ Pilot Boat and Dispatch Costs: Pilot boat expense ................................................................................................................ Dispatch expense ................................................................................................................. Employee Benefits ................................................................................................................ Payroll taxes ......................................................................................................................... rmajette on DSK2VPTVN1PROD with RULES 86,947 6,168 42,218 23,888 159,221 238,834 398,055 131,285 6,600 48,310 7,412 196,930 9,900 72,465 11,119 328,215 16,500 120,775 18,531 Total Pilot and Dispatch Costs ...................................................................................... Administrative Expenses: Legal—general counsel ........................................................................................................ Legal—lobbying .................................................................................................................... Legal—litigation .................................................................................................................... Office rent ............................................................................................................................. Insurance .............................................................................................................................. Employee benefits ................................................................................................................ Payroll taxes ......................................................................................................................... Other taxes ........................................................................................................................... 193,607 290,414 484,021 2,054 2,704 6,488 26,275 10,682 16,452 4,143 12,546 3,082 4,055 9,733 39,413 16,024 24,678 6,216 18,819 5,136 6,759 16,221 65,688 26,706 41,130 10,359 31,365 VerDate Sep<11>2014 14:38 Feb 25, 2015 Jkt 235001 PO 00000 Frm 00048 Fmt 4700 Sfmt 4700 E:\FR\FM\26FER1.SGM 26FER1 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations 10371 TABLE 3—RECOGNIZED EXPENSES FOR DISTRICT TWO—Continued Area 4 Area 5 Lake Erie Southeast Shoal to Port Huron, MI Reported Expenses for 2012 Total Depreciation/Auto leasing/Other ........................................................................................... Interest .................................................................................................................................. Utilities .................................................................................................................................. Salaries ................................................................................................................................. Accounting/Professional fees ............................................................................................... Pilot Training ......................................................................................................................... Other ..................................................................................................................................... 9,074 2,989 13,917 36,252 11,764 0 9,405 13,610 4,483 20,876 54,377 17,646 0 14,108 22,684 7,472 34,793 90,629 29,410 0 23,513 Total Administrative Expenses ...................................................................................... 164,745 247,120 411,865 Total Operating Expenses ............................................................................................. Adjustments (Independent CPA): Pilot subsistence/Travel ........................................................................................................ Employee benefits ................................................................................................................ TOTAL CPA ADJUSTMENTS ....................................................................................... 517,573 776,368 1,293,941 (1,982) (3,585) (5,567) (2,974) (5,378) (8,352) (4,956) (8,963) (13,919) Adjustments (Director): Federal Tax Allowance ......................................................................................................... APA Dues ............................................................................................................................. Legal—lobbying .................................................................................................................... Legal—litigation .................................................................................................................... (5,200) 7,344 (2,704) (6,488) (7,800) 11,016 (4,055) (9,733) (13,000) 18,360 (6,759) (16,221) TOTAL DIRECTOR ADJUSTMENTS ........................................................................... (7,048) (10,572) (17,620) Total Operating Expenses ............................................................................................. 504,958 757,444 1,262,402 Note: Numbers may not total due to rounding. TABLE 4—RECOGNIZED EXPENSES FOR DISTRICT THREE Area 6 Area 7 Area 8 Lakes Huron and Michigan Reported expenses for 2012 St. Mary’s River Lake Superior Operating Expenses: Other Pilotage Costs: Pilot subsistence/Travel ............................................................................ License insurance ..................................................................................... Payroll taxes ............................................................................................. Other ......................................................................................................... $180,316 8,859 0 2,875 $77,278 3,797 0 1,232 $110,398 5,424 0 1,760 $367,992 18,080 0 5,867 192,050 82,307 117,582 391,939 261,937 81,958 8,203 112,259 35,125 3,515 160,370 50,178 5,022 534,566 167,261 16,740 Total Pilot Boat and Dispatch Costs ................................................. Administrative Expenses: Legal—lobbying ........................................................................................ Office rent ................................................................................................. Insurance .................................................................................................. Employee benefits .................................................................................... Payroll taxes ............................................................................................. Other taxes ............................................................................................... Depreciation/Auto leasing ......................................................................... Interest ...................................................................................................... Utilities ...................................................................................................... Salaries ..................................................................................................... Accounting/Professional fees ................................................................... Pilot Training ............................................................................................. Other ......................................................................................................... 352,098 150,899 215,570 718,567 4,304 4,851 6,469 77,348 5,404 941 17,462 2,692 20,950 54,003 13,157 0 4,657 1,845 2,079 2,773 33,149 2,316 403 7,484 1,154 8,979 23,144 5,639 0 1,996 2,635 2,970 3,961 47,356 3,309 576 10,691 1,648 12,827 33,063 8,055 0 2,851 8,784 9,900 13,203 157,854 11,029 1,920 35,637 5,494 42,756 110,210 26,851 0 9,504 Total Administrative Expenses .......................................................... 212,238 90,961 129,942 433,141 Total Operating Expenses ................................................................. Adjustments (Independent CPA): Pilot subsistence/travel ............................................................................. 756,386 324,167 463,094 1,543,647 (5,303) (2,273) (3,247) (10,823) Total Other Pilotage Costs ................................................................ Pilot Boat and Dispatch Costs: Pilot boat expense .................................................................................... Dispatch expense ..................................................................................... Payroll taxes ............................................................................................. rmajette on DSK2VPTVN1PROD with RULES Total VerDate Sep<11>2014 14:38 Feb 25, 2015 Jkt 235001 PO 00000 Frm 00049 Fmt 4700 Sfmt 4700 E:\FR\FM\26FER1.SGM 26FER1 10372 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations TABLE 4—RECOGNIZED EXPENSES FOR DISTRICT THREE—Continued Area 6 Area 7 Area 8 Lakes Huron and Michigan Reported expenses for 2012 St. Mary’s River Lake Superior Total Payroll taxes ............................................................................................. Other taxes ............................................................................................... Other ......................................................................................................... 44,613 (1,761) (637) 19,120 (755) (273) 27,314 (1,078) (390) 91,046 (3,594) (1,300) TOTAL CPA ADJUSTMENTS ........................................................... Adjustments (Director): APA dues .................................................................................................. Legal—lobbying ........................................................................................ 36,912 15,819 22,599 75,329 11,695 (4,304) 5,012 (1,845) 7,160 (2,635) 23,868 (8,784) TOTAL DIRECTOR ADJUSTMENTS ............................................... 7,391 3,167 4,525 15,084 Total Operating Expenses ................................................................. 800,689 343,153 490,218 1,634,060 Note: Numbers may not total due to rounding. Step 1.C: Adjustment for Inflation or Deflation. In this sub-step, we project rates of inflation or deflation for the succeeding navigation season. Because we used 2012 financial information, the ‘‘succeeding navigation season’’ for this ratemaking is 2013. We based our inflation adjustment of 1.4 percent on the 2013 change in the Consumer Price Index (CPI) for the Midwest Region of the United States, which can be found at https://www.bls.gov/xg_shells/ ro5xg01.htm. This adjustment appears in Tables 5 through 7. The Coast Guard is aware that the current annual adjustment for inflation does not account for the value of money over time. We are working on a solution to allow for a better approximation of actual costs. TABLE 5—INFLATION ADJUSTMENT, DISTRICT ONE Area 1 Total Operating Expenses: ....................................................................... 2013 change in the CPI for the Midwest Region of the United States .... Inflation Adjustment .................................................................................. Area 2 St. Lawrence River Reported expenses for 2012 Lake Ontario $594,983 .014 $8,330 × = Total $451,827 .014 $6,326 × = × = $1,046,810 .014 $14,655 TABLE 6—INFLATION ADJUSTMENT, DISTRICT TWO Area 4 Area 5 Lake Erie Southeast Shoal to Port Huron, MI Reported expenses for 2012 Total Operating Expenses ........................................................................ 2013 change in the CPI for the Midwest Region of the United States .... Inflation Adjustment .................................................................................. $504,958 .014 $7,069 × = × = $757,444 .014 $10,604 Total × = $1,262,402 .014 $17,674 TABLE 7—INFLATION ADJUSTMENT, DISTRICT THREE Area 6 rmajette on DSK2VPTVN1PROD with RULES Total Operating Expenses ................................ 2013 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 VerDate Sep<11>2014 17:39 Feb 25, 2015 Jkt 235001 Area 7 Area 8 Lakes Huron and Michigan St. Mary’s River Lake Superior $800,689 Reported expenses for 2012 $343,153 × = .014 $11,210 Total × = .014 $4,804 preceding sub-steps and any other foreseeable circumstances that could affect the accuracy of the projection. PO 00000 Frm 00050 Fmt 4700 Sfmt 4700 $490,218 × = .014 $6,863 $1,634,060 × = .014 $22,877 For District One, the projected operating expenses are based on the calculations from Steps 1.A through 1.C. Table 8 shows these projections. E:\FR\FM\26FER1.SGM 26FER1 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations 10373 TABLE 8—PROJECTED OPERATING EXPENSES, DISTRICT ONE Area 1 Total operating expenses ......................................................................... Inflation adjustment 1.4% ......................................................................... Total projected expenses for 2015 pilotage season ................................ Area 2 St. Lawrence River Reported expenses for 2012 Lake Ontario Total $594,983 $8,330 $603,313 + = $451,827 $6,326 $458,153 + = $1,046,810 $14,655 $1,061,465 + = Note: Numbers may not total due to rounding. In District Two the 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 TWO Area 4 Area 5 Lake Erie Southeast Shoal to Port Huron, MI Reported expenses for 2012 Total Operating Expenses ........................................................................ Inflation adjustment 1.4% ......................................................................... Total projected expenses for 2015 pilotage season ................................ In District Three, projected operating expenses are based on the calculations $504,958 7,069 512,027 + = $757,444 10,604 768,048 + = Total + = $1,262,402 17,674 1,280,076 from Steps 1.A through 1.C. Table 10 shows these projections. TABLE 10—PROJECTED OPERATING EXPENSES, DISTRICT THREE Area 6 Area 7 Area 8 Lakes Huron and Michigan Reported expenses for 2012 St. Mary’s River Lake Superior Total + $800,689 11,210 + $343,153 4,804 + $490,218 6,863 + $1,634,060 22,877 = 811,899 = 347,957 = 497,081 = 1,656,937 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 2015. 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 on designated waters by multiplying the average first mates’ wages by 150 rmajette on DSK2VPTVN1PROD with RULES Total Expenses ............................................... Inflation adjustment 1.4% ................................ Total projected expenses for 2015 pilotage season ......................................................... percent and then adding the average first mates’ benefits. We rely upon union contract data provided by the AMOU, which has agreements with three U.S. companies engaged in Great Lakes shipping. We derive the data from two separate AMOU contracts—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 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, 2015, as follows: (1) In undesignated waters, $632.12 for Agreement A and $624.34 for Agreement B; and (2) In designated waters, $870.05 for Agreement A and $856.42 for Agreement B. Because we are interested in annual compensation, we must convert these daily rates. We use a 270-day multiplier which reflects an average 30-day month, over the 9 months of the average shipping season. Table 11 shows our calculations using the 270-day multiplier. TABLE 11—PROJECTED ANNUAL AGGREGATE RATE COMPONENTS Aggregate Rate–Wages and Vacation, Pension, and Medical Benefits Pilots on undesignated waters Agreement A: $632.12 daily rate × 270 days ...................................................................................................................................................... VerDate Sep<11>2014 17:39 Feb 25, 2015 Jkt 235001 PO 00000 Frm 00051 Fmt 4700 Sfmt 4700 E:\FR\FM\26FER1.SGM 26FER1 $170,672.40 10374 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations TABLE 11—PROJECTED ANNUAL AGGREGATE RATE COMPONENTS—Continued Agreement B: $624.34 daily rate × 270 days ...................................................................................................................................................... 168,571.80 Pilots on designated waters Agreement A: $870.05 daily rate × 270 days ...................................................................................................................................................... Agreement B: $856.42 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 vessels 234,913.50 231,233.40 operated by American Steamship Co. and Mittal Steel USA, Inc., representing approximately 70 percent of tonnage. Table 12 provides details. TABLE 12—SHIPPING TONNAGE APPORTIONED BY CONTRACT Company Agreement A American Steamship Company ....................................................... Mittal Steel USA, Inc ....................................................................... Key Lakes, Inc ................................................................................. Total tonnage, each agreement ...................................................... Percent tonnage, each agreement .................................................. We use the percentages from Table 12 to apportion the projected compensation from Table 11. This gives us a single Agreement B 815,600 38,826 361,385 361,385 361,385 ÷ 1,215,811 = 29.7238% 854,426 854,426 ÷ 1,215,811 = 70.2762% tonnage-weighted set of figures. Table 13 shows our calculations. TABLE 13—TONNAGE-WEIGHTED WAGE AND BENEFIT COMPONENTS Undesignated waters Designated waters × $170,672.40 29.7238% × $234,913.50 29.7238% Total ........................................................................................................................................... = $50,730 = $69,825 Agreement B: Total wages and benefits .................................................................................................................. Percent tonnage ................................................................................................................................ × $168,571.80 70.2762% × $231,233.40 70.2762% Total ........................................................................................................................................... = $118,466 = $162,502 Projected Target Rate of Compensation: Agreement A total weighted average wages and benefits ............................................................... Agreement B total weighted average wages and benefits ............................................................... + $50,730 $118,466 + $69,825 $162,502 Total ........................................................................................................................................... rmajette on DSK2VPTVN1PROD with RULES Agreement A: Total wages and benefits .................................................................................................................. Percent tonnage ................................................................................................................................ = $169,196 = $232,327 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 through dividing projected bridge hours for each area by either the 1,000 (designated waters) or 1,800 (undesignated waters) bridge hours specified in Step 2.B. We round the mathematical results and express our determination as a whole number of pilots. VerDate Sep<11>2014 17:39 Feb 25, 2015 Jkt 235001 According to 46 CFR part 404, Appendix A, Step 2.B(1), bridge hours are the number of hours a pilot is aboard a vessel providing pilotage service. For that reason, and as we explained most recently in the 2011 ratemaking’s final rule (76 FR 6351 at 6352 col. 3 (Feb. 4, 2011)), we do not include, and never have included, pilot delay, detention, or cancellation in calculating bridge hours. Projected bridge hours are based on the vessel traffic that pilots are expected to serve. We use historical data, input from the pilots and industry, periodicals and trade magazines, and information from PO 00000 Frm 00052 Fmt 4700 Sfmt 4700 conferences to project demand for pilotage services for the coming year. In our 2014 final rule, we determined that 36 pilots would be needed for ratemaking purposes. For 2015, we project 36 pilots is still the proper number to use for ratemaking purposes. The total pilot authorization strength includes five pilots in Area 2, where rounding up alone would result in only four pilots. For the same reasons we explained at length in the 2008 ratemaking final rule (74 FR 220 at 221– 22 (Jan. 5, 2009)), we have determined that this adjustment is essential for E:\FR\FM\26FER1.SGM 26FER1 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations ensuring uninterrupted pilotage service in Area 2. Table 14 shows the bridge hours we project will be needed for each area and our calculations to determine 10375 the whole number of pilots needed for ratemaking purposes. TABLE 14—NUMBER OF PILOTS NEEDED Pilotage area Area Area Area Area Area Area Area 1 2 4 5 6 7 8 Divided by 1,000 (designated waters) or 1,800 (undesignated waters) Projected 2015 bridge hours (Designated waters) ........................................ (Undesignated waters) .................................... (Undesignated waters) .................................... (Designated waters) ........................................ (Undesignated waters) .................................... (Designated waters) ........................................ (Undesignated waters) .................................... Step 2.C: Projection of Target Pilot Compensation. In Table 15, we project total target pilot compensation 5,116 5,429 5,814 5,052 9,611 3,023 7,540 ÷ ÷ ÷ ÷ ÷ ÷ ÷ 1,000 1,800 1,800 1,000 1,800 1,000 1,800 separately for each area by multiplying the number of pilots needed in each Calculated value of pilot demand = = = = = = = Pilots needed (total = 36) 5.116 3.016 3.230 5.052 5.339 3.023 4.189 6 5 4 6 6 4 5 area, as shown in Table 14, by the target pilot compensation shown in Table 13. TABLE 15—PROJECTION OF TARGET PILOT COMPENSATION BY AREA Area Area Area Area Area Area Area 1 2 4 5 6 7 8 Target rate of pilot compensation Pilots needed (total = 36) Pilotage area (Designated waters) ................................................................................... (Undesignated waters) ............................................................................... (Undesignated waters) ............................................................................... (Designated waters) ................................................................................... (Undesignated waters) ............................................................................... (Designated waters) ................................................................................... (Undesignated waters) ............................................................................... × × × × × × × 6 5 4 6 6 4 5 $232,327 169,196 169,196 232,327 169,196 232,327 169,196 Projected target pilot compensation = = = = = = = $1,393,964 845,981 676,785 1,393,964 1,015,177 929,309 845,981 Note: Numbers may not total due to rounding. Steps 3 and 3.A: Projection of Revenue. In Steps 3 and 3.A., we project the revenue that would be received in 2015 if demand for pilotage services matches the bridge hours we projected in Table 14, and if 2014 pilotage rates are left unchanged. Table 16 shows this calculation. TABLE 16—PROJECTION OF REVENUE BY AREA Projected 2015 bridge hours Pilotage area Area Area Area Area Area Area Area 1 2 4 5 6 7 8 (Designated waters) ............................................................................. (Undesignated waters) ......................................................................... (Undesignated waters) ......................................................................... (Designated waters) ............................................................................. (Undesignated waters) ......................................................................... (Designated waters) ............................................................................. (Undesignated waters) ......................................................................... 5,116 5,429 5,814 5,052 9,611 3,023 7,540 Total ........................................................................................................... Revenue projection for 2015 2014 Pilotage rates × × × × × × × ............................ $472.50 291.96 210.40 521.64 204.95 495.01 191.34 = = = = = = = $2,417,285 1,585,032 1,223,262 2,635,314 1,969,800 1,496,427 1,442,677 ............................ 12,769,797 Note: Numbers may not total due to rounding. rmajette on DSK2VPTVN1PROD with RULES 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 to support pilotage operations. This step uses a formula set out in 46 CFR part 404, Appendix B. The first part of the formula identifies each association’s total sources of funds. Tables 17 through 19 follow the formula up to that point. TABLE 17—TOTAL SOURCES OF FUNDS, DISTRICT ONE Area 1 Recognized Assets: Total Current Assets ......................................................................................................................... Total Current Liabilities ..................................................................................................................... Current Notes Payable ...................................................................................................................... VerDate Sep<11>2014 17:39 Feb 25, 2015 Jkt 235001 PO 00000 Frm 00053 Fmt 4700 Sfmt 4700 ¥ + E:\FR\FM\26FER1.SGM 26FER1 $532,237 61,808 23,413 Area 2 ¥ + $467,833 54,329 20,579 10376 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations TABLE 17—TOTAL SOURCES OF FUNDS, DISTRICT ONE—Continued Area 1 Area 2 Total Property and Equipment (NET) ............................................................................................... Land .................................................................................................................................................. Total Other Assets ............................................................................................................................ + ¥ + 445,044 11,727 0 + ¥ + 391,191 10,308 0 Total Recognized Assets ........................................................................................................... = 927,159 = 814,966 Non-Recognized Assets: Total Investments and Special Funds .............................................................................................. + 6,452 + 5,672 Total Non-Recognized Assets ................................................................................................... = 6,452 = 5,672 Total Assets: Total Recognized Assets .................................................................................................................. Total Non-Recognized Assets .......................................................................................................... + 927,159 6,452 + 814,966 5,672 Total Assets ............................................................................................................................... = 933,611 = 820,638 Recognized Sources of Funds: Total Stockholder Equity ................................................................................................................... Long-Term Debt ................................................................................................................................ Current Notes Payable ...................................................................................................................... Advances from Affiliated Companies ................................................................................................ Long-Term Obligations—Capital Leases .......................................................................................... + + + + 659,141 262,785 23,413 0 0 + + + + 579,380 230,986 20,579 0 0 Total Recognized Sources ......................................................................................................... = 945,339 = 830,945 Non-Recognized Sources of Funds: Pension Liability ................................................................................................................................ Other Non-Current Liabilities ............................................................................................................ Deferred Federal Income Taxes ....................................................................................................... Other Deferred Credits ...................................................................................................................... + + + 0 0 10,675 0 + + + 0 0 9,383 0 Total Non-Recognized Sources ................................................................................................. = 10,675 = 9,383 Total Sources of Funds: Total Recognized Sources ................................................................................................................ Total Non-Recognized Sources ........................................................................................................ + 945,339 10,675 + 830,945 9,383 Total Sources of Funds ............................................................................................................. = 956,014 = 840,328 Note: Numbers may not total due to rounding. TABLE 18—TOTAL SOURCES OF FUNDS, DISTRICT TWO Area 4 Area 5 ¥ + + ¥ + 498,456 494,410 33,962 436,063 0 60,418 ¥ + + ¥ + 747,683 741,614 50,942 654,094 0 90,627 Total Recognized Assets ........................................................................................................... = 534,488 = 801,733 Non-Recognized Assets: Total Investments and Special Funds .............................................................................................. + 0 + 0 Total Non-Recognized Assets ................................................................................................... = 0 = 0 Total Assets: Total Recognized Assets .................................................................................................................. Total Non-Recognized Assets .......................................................................................................... rmajette on DSK2VPTVN1PROD with RULES Recognized Assets: Total Current Assets ......................................................................................................................... Total Current Liabilities ..................................................................................................................... Current Notes Payable ...................................................................................................................... Total Property and Equipment (NET) ............................................................................................... Land .................................................................................................................................................. Total Other Assets ............................................................................................................................ + 534,488 0 + 801,733 0 Total Assets ............................................................................................................................... = 534,488 = 801,733 Recognized Sources of Funds: Total Stockholder Equity ................................................................................................................... Long-Term Debt ................................................................................................................................ Current Notes Payable ...................................................................................................................... Advances from Affiliated Companies ................................................................................................ + + + 85,846 414,681 33,962 0 + + + 128,768 622,022 50,942 0 VerDate Sep<11>2014 14:38 Feb 25, 2015 Jkt 235001 PO 00000 Frm 00054 Fmt 4700 Sfmt 4700 E:\FR\FM\26FER1.SGM 26FER1 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations 10377 TABLE 18—TOTAL SOURCES OF FUNDS, DISTRICT TWO—Continued Area 4 Area 5 Long-Term Obligations—Capital Leases .......................................................................................... + 0 + 0 Total Recognized Sources ......................................................................................................... = 534,488 = 801,733 Non-Recognized Sources of Funds: Pension Liability ................................................................................................................................ Other Non-Current Liabilities ............................................................................................................ Deferred Federal Income Taxes ....................................................................................................... Other Deferred Credits ...................................................................................................................... + + + 0 0 0 0 + + + 0 0 0 0 Total Non-Recognized Sources ................................................................................................. = 0 = 0 Total Sources of Funds: Total Recognized Sources ................................................................................................................ Total Non-Recognized Sources ........................................................................................................ + 534,488 0 + 801,733 0 Total Sources of Funds ............................................................................................................. = 534,488 = 801,733 Note: Numbers may not total due to rounding. TABLE 19—TOTAL SOURCES OF FUNDS, DISTRICT THREE Area 6 Area 7 Area 8 ¥ + + ¥ + 656,459 82,775 7,730 19,611 0 490 ¥ + + ¥ + 281,340 35,475 3,313 8,405 0 210 ¥ + + ¥ + 401,914 50,679 4,733 12,007 0 300 Total Recognized Assets ....................................................................... = 601,515 = 257,793 = 368,275 Non-Recognized Assets: Total Investments and Special Funds ........................................................... + 0 + 0 + 0 Total Non-Recognized Assets ................................................................ = 0 = 0 = 0 Total Assets: Total Recognized Assets ............................................................................... Total Non-Recognized Assets ....................................................................... + 601,515 0 + 257,793 0 + 368,275 0 Total Assets ............................................................................................ = 601,515 = 257,793 = 368,275 Recognized Sources of Funds: Total Stockholder Equity ............................................................................... Long-Term Debt ............................................................................................ Current Notes Payable .................................................................................. Advances from Affiliated Companies ............................................................ Long-Term Obligations – Capital Leases ...................................................... + + + + 586,300 7,485 7,730 0 0 + + + + 251,271 3,208 3,313 0 0 + + + + 358,959 4,583 4,733 0 0 Total Recognized Sources ..................................................................... = 601,515 = 257,793 = 368,275 Non-Recognized Sources of Funds: Pension Liability ............................................................................................. Other Non-Current Liabilities ......................................................................... Deferred Federal Income Taxes ................................................................... Other Deferred Credits .................................................................................. + + + 0 0 0 0 + + + 0 0 0 0 + + + 0 0 0 0 Total Non-Recognized Sources ............................................................. = 0 = 0 = 0 Total Sources of Funds: Total Recognized Sources ............................................................................ Total Non-Recognized Sources .................................................................... rmajette on DSK2VPTVN1PROD with RULES Recognized Assets: Total Current Assets ...................................................................................... Total Current Liabilities .................................................................................. Current Notes Payable .................................................................................. Total Property and Equipment (NET) ............................................................ Land ............................................................................................................... Total Other Assets ......................................................................................... + 601,515 0 + 257,792 0 + 368,275 0 Total Sources of Funds .......................................................................... = 601,515 = 257,792 = 368,275 Note: Numbers may not total due to rounding. VerDate Sep<11>2014 14:38 Feb 25, 2015 Jkt 235001 PO 00000 Frm 00055 Fmt 4700 Sfmt 4700 E:\FR\FM\26FER1.SGM 26FER1 10378 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations Tables 17 through 19 also relate to the second part of the formula for calculating the investment base. The second part establishes a ratio between recognized sources of funds and total sources of funds. Since non-recognized sources of funds (sources we do not recognize as required to support pilotage operations) only exist for District One 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) for Districts Two and Three. District One has a multiplier of 0.99. Table 20 applies the multiplier of 0.99 and 1 as necessary and shows the investment base for each association. Table 20 also expresses these results by area, because area results will be needed in subsequent steps. TABLE 20—INVESTMENT BASE BY AREA AND DISTRICT Area Total recognized assets ($) Recognized sources of funds ($) Total sources of funds ($) One ........................................................................ 1 2 927,159 814,966 945,339 830,945 956,014 840,328 0.99 0.99 916,806 805,866 Total ................................................................ .......... .................... .................... .......................... .................................. 1,722,672 Two 2 ...................................................................... 4 5 534,488 801,733 534,488 801,733 534,488 801,733 1 1 534,488 801,733 Total ................................................................ .......... .................... .................... .......................... .................................. 1,336,221 Three ...................................................................... 6 7 8 601,515 257,793 368,275 601,515 257,792 368,275 601,515 257,792 368,275 1 1 1 601,515 257,793 368,275 Total ................................................................ .......... .................... .................... .......................... .................................. 1,227,581 District Multiplier (ratio of recognized to total sources) Investment base ($) 1 base’’ = ‘‘Total recognized assets’’ × ‘‘Multiplier (ratio of recognized to total sources)’’. pilot associations that provide pilotage services in Districts One and Three operate as partnerships. The pilot association that provides pilotage service for District Two operates as a corporation. Note: Numbers may not total due to rounding. 1 ‘‘Investment 2 The Step 5: Determination of Target Rate of Return. We determine a marketequivalent return on investment (ROI) that will be allowed for the recognized net capital invested in each association by its members. We do not recognize capital that is unnecessary or unreasonable for providing pilotage services. There are no non-recognized investments in this year’s calculations. The allowed ROI is based on the preceding year’s average annual rate of return for new issues of high-grade corporate securities. For 2013, the preceding year, the allowed ROI was 4.24 percent, based on the average rate of return for that year on Moody’s AAA corporate bonds, which can be found at https://research.stlouisfed.org/fred2/ series/AAA/downloaddata?cid=119. Step 6: Adjustment Determination. The first part of the adjustment determination requires an initial calculation, applying a formula described in Appendix A. The formula uses the results from Steps 1, 2, 3, and 4 to project the ROI that can be expected in each area if no further adjustments are made. This calculation is shown in Tables 21 through 23. TABLE 21—PROJECTED ROI, AREAS IN DISTRICT ONE Area 1 Revenue (from Step 3) ............................................................................................................................. Operating Expenses (from Step 1) .......................................................................................................... Pilot Compensation (from Step 2) ............................................................................................................ Operating Profit/(Loss) ............................................................................................................................. Interest Expense (from audits) ................................................................................................................. Earnings Before Tax ................................................................................................................................ Federal Tax Allowance ............................................................................................................................. Net Income ............................................................................................................................................... Return Element (Net Income + Interest) .................................................................................................. Investment Base (from Step 4) ................................................................................................................ Projected Return on Investment .............................................................................................................. ¥ ¥ = ¥ = ¥ = ÷ = $2,417,285 $603,313 $1,393,964 $420,009 $15,484 $404,525 $0 $404,525 $420,009 $916,806 0.46 Area 2 ¥ ¥ = ¥ = ¥ = ÷ = $1,585,032 $458,153 $845,981 $280,899 $13,610 $267,289 $0 $267,289 $280,899 $805,866 0.35 rmajette on DSK2VPTVN1PROD with RULES TABLE 22—PROJECTED ROI, AREAS IN DISTRICT TWO Area 4 Revenue (from Step 3) ............................................................................................................................. Operating Expenses (from Step 1) .......................................................................................................... Pilot Compensation (from Step 2) ............................................................................................................ Operating Profit/(Loss) ............................................................................................................................. Interest Expense (from audits) ................................................................................................................. Earnings Before Tax ................................................................................................................................ VerDate Sep<11>2014 17:39 Feb 25, 2015 Jkt 235001 PO 00000 Frm 00056 Fmt 4700 Sfmt 4700 ¥ ¥ = ¥ = E:\FR\FM\26FER1.SGM $1,223,262 $512,027 $676,785 $34,450 $2,989 $31,461 26FER1 Area 5 ¥ ¥ = ¥ = $2,635,314 $768,048 $1,393,964 $473,302 $4,483 $468,819 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations 10379 TABLE 22—PROJECTED ROI, AREAS IN DISTRICT TWO—Continued Area 4 Federal Tax Allowance ............................................................................................................................. Net Income ............................................................................................................................................... Return Element (Net Income + Interest) .................................................................................................. Investment Base (from Step 4) ................................................................................................................ Projected Return on Investment .............................................................................................................. ¥ = Area 5 ¥ = $5,200 $26,261 $29,250 $534,488 0.05 ÷ = ÷ = $7,800 $461,019 $465,502 $801,733 0.58 TABLE 23—PROJECTED ROI, AREAS IN DISTRICT THREE Area 6 Revenue (from Step 3) ......................................................................................... Operating Expenses (from Step 1) ....................................................................... Pilot Compensation (from Step 2) ........................................................................ Operating Profit/(Loss) .......................................................................................... Interest Expense (from audits) ............................................................................. Earnings Before Tax ............................................................................................. Federal Tax Allowance ......................................................................................... Net Income ........................................................................................................... Return Element (Net Income + Interest) .............................................................. Investment Base (from Step 4) ............................................................................ Projected Return on Investment ........................................................................... The second part required for Step 6 compares the results of Tables 21 through 23 with the target ROI (4.24 Area 7 $1,969,800 $811,899 $1,015,177 $142,724 $2,692 $140,032 $0 $140,032 $142,724 $601,515 0.24 ¥ ¥ = ¥ = ¥ = ÷ = percent) we obtained in Step 5 to determine if an adjustment to the base Area 8 $1,496,427 $347,957 $929,309 $219,161 $1,154 $218,007 $0 $218,007 $219,161 $257,793 0.85 ¥ ¥ = ¥ = ¥ = ÷ = ¥ ¥ = ¥ = ¥ = ÷ = $1,442,677 $497,081 $845,981 $99,615 $1,648 $97,967 $0 $97,967 $99,615 $368,275 0.27 pilotage rate is necessary. Table 24 shows this comparison for each area. TABLE 24—COMPARISON OF PROJECTED ROI AND TARGET ROI, BY AREA1 Area 1 Area 2 Area 4 Area 5 Area 6 Area 7 Area 8 St. Lawrence River Lake Ontario Lake Erie Southeast Shoal to Port Huron, MI Lakes Huron and Michigan St. Mary’s River Lake Superior Projected return on investment ................... Target return on investment .......................... Difference in return on investment ................ 0.4581 0.3486 0.0547 0.5806 0.2373 0.8501 0.2705 0.0424 0.0424 0.0424 0.0424 0.0424 0.0424 0.0424 0.4157 0.3062 0.0123 0.5382 0.1949 0.8077 0.2281 1 Note: Decimalization and rounding of the target ROI affects the display in this table but does not affect our calculations, which are based on the actual figure. Because Table 24 shows a significant difference between the projected and target ROIs, an adjustment to the base pilotage rates is necessary. Step 6 now requires us to determine the pilotage revenues that are needed to make the target return on investment equal to the projected return on investment. This calculation is shown in Table 25. It adjusts the investment base we used in Step 4, multiplying it by the target ROI from Step 5, and applies the result to the operating expenses and target pilot compensation determined in Steps 1 and 2. TABLE 25—REVENUE NEEDED TO RECOVER TARGET ROI, BY AREA rmajette on DSK2VPTVN1PROD with RULES Pilotage area Area 1 (Designated waters) ......................... Area 2 (Undesignated waters) ......................... Area 4 (Undesignated waters) ......................... Area 5 (Designated waters) ......................... Area 6 (Undesignated waters) ......................... VerDate Sep<11>2014 17:39 Feb 25, 2015 Operating expenses (Step 1) Investment base (Step 4) × 4.24% (Target ROI Step 5) Target pilot compensation (Step 2) Federal tax allowance Revenue needed $603,313 + 1,393,964 + 38,873 + 0 = 2,036,149 $458,153 + 845,981 + 34,169 + 0 = 1,338,302 $512,027 + 676,785 + 22,662 + 5,200 = 1,216,674 $768,048 + 1,393,964 + 33,993 + 7,800 = 2,203,805 $811,899 + 1,015,177 + 25,504 + 0 = 1,852,580 Jkt 235001 PO 00000 Frm 00057 Fmt 4700 Sfmt 4700 E:\FR\FM\26FER1.SGM 26FER1 10380 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations TABLE 25—REVENUE NEEDED TO RECOVER TARGET ROI, BY AREA—Continued Operating expenses (Step 1) Pilotage area Investment base (Step 4) × 4.24% (Target ROI Step 5) Target pilot compensation (Step 2) Federal tax allowance Revenue needed Area 7 (Designated waters) ......................... Area 8 (Undesignated waters) ......................... $347,957 + 929,309 + 10,930 + 0 = 1,288,197 $497,081 + 845,981 + 15,615 + 0 = 1,358,677 Total ......................... $3,998,479 + 7,101,160 + 181,747 + 13,000 = 11,294,385 The ‘‘Revenue Needed’’ column of Table 25 is less than the revenue we projected in Table 16. Step 7: Adjustment of Pilotage Rates. Finally, we calculate rate adjustments based on the requirements of agreements between the United States and Canada and adjustment for other supportable circumstances. Tables 26 through 28 show these calculations. by dividing the Step 6 revenue needed (Table 25) by the Step 3 revenue projection (Table 16), to give us a rate multiplier for each area. These rate adjustments are subject to adjustment TABLE 26—RATE MULTIPLIER, AREAS IN DISTRICT ONE Area 1 Revenue Needed (from Step 6) ..................................................................................................... Revenue (from Step 3) ................................................................................................................... Rate Multiplier ................................................................................................................................ Area 2 St. Lawrence River Ratemaking projections Lake Ontario $2,036,149 $2,417,285 0.8423 ÷ = $1,338,302 $1,585,032 0.8443 ÷ = TABLE 27—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) ..................................................................................................... Revenue (from Step 3) ................................................................................................................... Rate Multiplier ................................................................................................................................ $1,216,674 $1,223,262 0.9946 ÷ = $2,203,805 $2,635,314 0.8363 ÷ = TABLE 28—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 $1,825,580 $1,969,800 0.9405 ÷ = $1,288,197 $1,496,427 0.8608 ÷ = ÷ = $1,358,677 $1,442,677 0.9418 Note: Numbers may not total due to rounding. rmajette on DSK2VPTVN1PROD with RULES We calculate a rate multiplier for adjusting the basic rates and charges described in 46 CFR 401.420 and 401.428, and it is applicable in all areas. We divide total revenue needed (Step 6, Table 25) by total projected revenue (Steps 3 and 3.A, Table 16). Table 29 shows this calculation. TABLE 29—RATE MULTIPLIER FOR BASIC RATES AND CHARGES IN 46 CFR 401.420 AND 401.428 Ratemaking Projections: VerDate Sep<11>2014 17:39 Feb 25, 2015 Jkt 235001 TABLE 29—RATE MULTIPLIER FOR BASIC RATES AND CHARGES IN 46 CFR 401.420 AND 401.428—Continued Total Revenue Needed (from Step 6) ............... Total revenue (from Step 3) ............... Rate Multiplier ............... $11,294,385 ÷ = $12,769,797 0.884 Using this table, we calculate rates for cancellation, delay, or interruption in rendering services (46 CFR 401.420) and basic rates and charges for carrying a PO 00000 Frm 00058 Fmt 4700 Sfmt 4700 U.S. pilot beyond the normal change point, or for boarding at other than the normal boarding point (46 CFR 401.428). The result is a decrease by 11.55 percent in all areas. Without further action, the existing rates we established in our 2014 final rule would then be multiplied by the rate multipliers from Tables 29 through 31 to calculate the area by area rate changes for 2015. The resulting 2015 rates across the Great Lakes, on average, would then decrease by approximately 12 percent from the 2014 rates. This decrease is not due to increased E:\FR\FM\26FER1.SGM 26FER1 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations efficiencies in pilotage services but rather a result of adjustments to AMOU contract data. We decline to impose this decrease because recently completed independent audits of pilot association revenues detail a significant gap between revenues projected by the Coast Guard and those actually collected by the pilot associations. Implementing a rate decrease would further widen this disparity and adversely impact the provision of safe, efficient, and reliable pilotage service on the Great Lakes. In light of the revenue studies, our initial proposal in the NPRM to raise rates 2.5 percent in order to gain parity with the Canadian GLPA now appears insufficient to ensure the funding of safe, efficient, and reliable pilotage service. In 46 U.S.C. 9303(f), the statute states ‘‘The Secretary shall prescribe by regulation rates and charges for pilotage services, giving consideration to the 10381 public interest and the costs of providing the services.’’ We believe the public interest is best served through promotion of safe, efficient, and reliable pilotage service. Sufficient revenue to fund safe, efficient, and reliable pilotage operations are considered integral to the public interest. Table 30 demonstrates the results of the revenue audits compared to our projections. TABLE 30—REVENUE GAP Ratemaking projections (2015) District 1 ............................................................................................................... 2 ............................................................................................................... 3 ............................................................................................................... Further, the gap captured in Table 30 actually underestimates the revenue gap because the projections of the current Actual revenue revenue audits (2013) $4,002,317 3,858,576 4,908,904 rulemaking rely on the alterations of proprietary union contracts. Table 31 illustrates the average U.S. Registered Revenue shortfall (projections minus actual) $3,406,164 3,169,377 4,323,965 $596,153 689,199 584,939 Pilot compensation, assuming all revenue remaining after expenses is distributed as compensation. TABLE 31—2013 AVERAGE ACTUAL COMPENSATION * District Revenues Expenses Total available for compensation Approximate compensation per pilot Number of pilots ** 1 ..................................................................................... 2 ..................................................................................... 3 ..................................................................................... $3,406,164 3,169,377 4,323,965 $1,272,365 1,461,438 1,778,118 $2,133,799 1,707,939 2,545,847 11 10 17 $193,982 170,794 149,756 Total ........................................................................ 10,899,506 4,511,921 6,387,585 38 168,094 rmajette on DSK2VPTVN1PROD with RULES * The Coast Guard does not establish pay procedures for the pilot associations, rather we set a target rate of compensation for general compensation calculation. ** The District Three Association actually employed 13 pilots during this timeframe; their approximate compensation per pilot is higher than this table depicts. Seventeen pilots were authorized in the rate. These figures demonstrate the significant shortfall in pilot compensation compared to an estimated present value of 2011 compensation (the last figures are not in dispute) of approximately $260,000. We believe $260,000 is a fair estimate of what pilot compensation should be based on uncontested figures from previous AMOU contracts. The gap of almost $90,000 between approximate actual compensation and our estimates of where pilot compensation should stand place the pilot associations in an untenable position. We believe it is imperative to act quickly to raise the revenue needed to sustain pilot association operations and compensate pilots in a fair and reasonable manner. This gap also highlights a significant discrepancy in the actual salaries of U.S. VerDate Sep<11>2014 14:38 Feb 25, 2015 Jkt 235001 Registered Pilots compared to the Canadian Registered Pilots of the GLPA, estimated to be approximately ($US) 250,000. We must work quickly to rebaseline the billing scheme and raise the revenue necessary to continue to sustain safe, efficient, and reliable pilotage service on the Great Lakes. We believe the shortfalls in revenue are caused by an overprojection of bridge hours and to a larger extent, an inadequate billing scheme. To this end, we will adjust our proposal to raise rates in all areas by 10 percent in a concerted effort to begin closing the established gap between compensation of U.S. and Canadian Registered Pilots, as well as the gap between actual salaries and previous estimates. This percentage increase is high enough above inflation to begin closing the revenue gap without PO 00000 Frm 00059 Fmt 4700 Sfmt 4700 being unduly burdensome to industry. We believe sustained, steady rate increases to close the gap are more responsible than a one-time action. This replaces our initial projections of a 2.5 percent increase in all areas. We will seek to address the underlying methodology challenges in a future rulemaking. Therefore, we rely on the discretionary authority we have under Step 7 to further adjust rates and begin closing the gap between revenues projected by the Coast Guard and those collected by the pilot associations. Table 32 compares the impact, area by area, that an average decrease of 12 percent would have, relative to the impact each area would experience if United States rates increase. E:\FR\FM\26FER1.SGM 26FER1 10382 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations TABLE 32—IMPACT OF EXERCISING STEP 7 DISCRETION Percent change in rate without exercising Step 7 discretion Area Area Area Area Area Area Area Area 1 2 4 5 6 7 8 ¥15.77 ¥15.57 ¥0.54 ¥16.37 ¥5.95 ¥13.92 ¥5.82 (Designated waters) ..................................................................................................... (Undesignated waters) ................................................................................................. (Undesignated waters) ................................................................................................. (Designated waters) ..................................................................................................... (Undesignated waters) ................................................................................................. (Designated waters) ..................................................................................................... (Undesignated waters) ................................................................................................. The following tables reflect our rate adjustments of 10 percent across all areas. Percent change in rate with exercise of Step 7 discretion 10 10 10 10 10 10 10 Tables 33 through 35 show these calculations. TABLE 33—ADJUSTMENT OF PILOTAGE RATES, AREAS IN DISTRICT ONE 2014 Rate Area 1 St. Lawrence River Basic Pilotage ........................................................................ Each lock Transited ............................................................... Harbor movage ...................................................................... Minimum basic rate, St. Lawrence River .............................. Maximum rate, through trip ................................................... Area 2 Lake Ontario 6-hour period ......................................................................... Docking or Undocking ........................................................... Rate multiplier Adjusted rate for 2015 $19.22/km, $34.02/mi $426 1,395 931 4,084 × × × × × 1.1 1.1 1.1 1.1 1.1 = = = = = $21.14/km, $37.42/mi $469 1,535 1,024 4,492 872 832 × × 1.1 1.1 = = 959 915 Note: Numbers may not total due to rounding. In addition to the rate charges in Table 33, as we explain in the Summary section of Part VI of this preamble, we are authorizing District One to implement a temporary supplemental 10 percent charge on each source form (the ‘‘bill’’ for pilotage service) for the duration of the 2015 shipping season, which begins in March 2015. District One will be required to provide us with monthly status reports once this surcharge becomes effective for the duration of the 2015 shipping season. We will exclude these expenses from future rates and any surcharge surplus/ deficit from the 2014 season would impact the final authorized surcharge for the 2015 season. TABLE 34—ADJUSTMENT OF PILOTAGE RATES, AREAS IN DISTRICT TWO rmajette on DSK2VPTVN1PROD with RULES 2014 Rate Area 4 Lake Erie 6-hour period ......................................................................................................... Docking or undocking ............................................................................................ Any point on Niagara River below Black Rock Lock ............................................ Area 5 Southeast Shoal to Port Huron, MI between any point on or in Toledo or any point on Lake Erie W. of Southeast Shoal .................................... Toledo or any point on Lake Erie W. of Southeast Shoal & Southeast Shoal .... Toledo or any point on Lake Erie W. of Southeast Shoal & Detroit River ........... Toledo or any point on Lake Erie W. of Southeast Shoal & Detroit Pilot Boat .... Port Huron Change Point & Southeast Shoal (when pilots are not changed at the Detroit Pilot Boat) ........................................................................................ Port Huron Change Point & Toledo or any point on Lake Erie W. of Southeast Shoal (when pilots are not changed at the Detroit Pilot Boat) ......................... Port Huron Change Point & Detroit River ............................................................. Port Huron Change Point & Detroit Pilot Boat ...................................................... Port Huron Change Point & St. Clair River .......................................................... St. Clair River ........................................................................................................ St. Clair River & Southeast Shoal (when pilots are not changed at the Detroit Pilot Boat) .......................................................................................................... St. Clair River & Detroit River/Detroit Pilot Boat ................................................... Detroit, Windsor, or Detroit River .......................................................................... Detroit, Windsor, or Detroit River & Southeast Shoal .......................................... VerDate Sep<11>2014 14:38 Feb 25, 2015 Jkt 235001 PO 00000 Frm 00060 Fmt 4700 Sfmt 4700 Adjusted rate for 2015 Rate multiplier $849 653 1,667 × × × 1.1 1.1 1.1 = = = $934 718 1,834 1,417 2,397 3,113 2,397 × × × × 1.1 1.1 1.1 1.1 = = = = 1,559 2,637 3,424 2,637 4,176 × 1.1 = 4,594 4,837 3,137 2,441 1,735 1,417 × × × × × 1.1 1.1 1.1 1.1 1.1 = = = = = 5,321 3,451 2,685 1,909 1,559 4,176 3,137 1,417 2,397 × × × × 1.1 1.1 1.1 1.1 = = = = 4,594 3,451 1,559 2,637 E:\FR\FM\26FER1.SGM 26FER1 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations 10383 TABLE 34—ADJUSTMENT OF PILOTAGE RATES, AREAS IN DISTRICT TWO—Continued 2014 Rate Detroit, Windsor, or Detroit River & Toledo or any point on Lake Erie W. of Southeast Shoal ................................................................................................ Detroit, Windsor, or Detroit River & St. Clair River .............................................. Detroit Pilot Boat & Southeast Shoal .................................................................... Detroit Pilot Boat & Toledo or any point on Lake Erie W. of Southeast Shoal .... Detroit Pilot Boat & St. Clair River ........................................................................ 3,113 3,137 1,735 2,397 3,137 Adjusted rate for 2015 Rate multiplier × × × × × 1.1 1.1 1.1 1.1 1.1 = = = = = 3,424 3,451 1,909 2,637 3,451 Note: Numbers may not total due to rounding. In addition to the rate charges in Table 34, and for the reasons we discussed in the Summary section of Part VI of this preamble, we are authorizing District Two to implement a temporary supplemental 10 percent charge on each source form for the duration of the 2015 shipping season, which begins in March 2015. District Two will be required to provide us with monthly status reports once this surcharge becomes effective for the duration of the 2015 shipping season. We will exclude these expenses from future rates. TABLE 35—ADJUSTMENT OF PILOTAGE RATES, AREAS IN DISTRICT THREE 2014 Rate Area 6 Lakes Huron and Michigan 6-hour Period ......................................................................................................... Docking or undocking ............................................................................................ Area 7 St. Mary’s River between any point on or in Gros Cap & De Tour ............................................................................................. Algoma Steel Corp. Wharf, Sault Ste. Marie, Ont. & De Tour ............................. Algoma Steel Corp. Wharf, Sault Ste. Marie, Ont. & Gros Cap ........................... Any point in Sault Ste. Marie, Ont., except the Algoma Steel Corp. Wharf & De Tour .................................................................................................................... Any point in Sault Ste. Marie, Ont., except the Algoma Steel Corp. Wharf & Gros Cap ........................................................................................................... Sault Ste. Marie, MI & De Tour ............................................................................ Sault Ste. Marie, MI & Gros Cap .......................................................................... Harbor movage ...................................................................................................... Area 8 Lake Superior 6-hour period ......................................................................................................... Docking or undocking ............................................................................................ Adjusted rate for 2015 Rate multiplier $708 672 × × 1.1 1.1 = = $779 739 2,648 2,648 997 × × × 1.1 1.1 1.1 = = = 2,913 2,913 1,097 2,219 × 1.1 = 2,441 997 2,219 997 997 × × × × 1.1 1.1 1.1 1.1 = = = = 1,097 2,441 1,097 1,097 601 571 × × 1.1 1.1 = = 661 628 Note: Numbers may not total due to rounding. rmajette on DSK2VPTVN1PROD with RULES In addition to the rate charges in Table 35, and for the reasons we discussed in the Summary section of Part VI of this preamble, we are authorizing District Three to implement a temporary supplemental 10 percent charge on each source form for the duration of the 2015 shipping season, which begins in March 2015. District Three will be required to provide us with monthly status reports once this surcharge becomes effective for the duration of the 2015 shipping season. We will exclude these expenses from future rates. 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. VerDate Sep<11>2014 17:39 Feb 25, 2015 Jkt 235001 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. PO 00000 Frm 00061 Fmt 4700 Sfmt 4700 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. 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 2015 shipping season to generate sufficient revenue to cover allowable expenses, and to target pilot compensation and returns on pilot associations’ investments. The rate adjustments in this rule will, if codified, lead to an increase in the cost per unit E:\FR\FM\26FER1.SGM 26FER1 10384 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations of service to shippers in all three districts, and result in an estimated annual cost increase to shippers of approximately $1,276,980 across all three districts over 2014 rates—an increase of 10 percent. In addition to the increase in payments that will be incurred by shippers in all three districts from the previous year as a result of the discretionary rate adjustments, we are authorizing temporary, supplemental surcharges to traffic across all three districts in order for the pilotage associations to recover training expenses and technology improvements that were incurred throughout the 2013 and 2014 shipping seasons. These temporary surcharges will be authorized for the duration of the 2015 shipping season, which begins in March. The additional revenue due to the temporary surcharges was calculated by multiplying the surcharge percentage by the projected revenue needed in 2015 for each district (Table 37). We estimate that these temporary surcharges will generate a combined $1,404,678 in revenue for the pilotage associations across all three districts. In District One, the 10 percent surcharge is expected to generate an additional $440,255 in revenue. In District Two, the 10 percent surcharge is expected to generate $424,443 in additional revenue. In District Three, the 10 percent surcharge is expected to generate an additional $539,979 in revenue. At the end of the 2015 shipping season, we will account for the monies the surcharges generate and make adjustments (debits/credits) to the operating expenses for the following year. Therefore, after accounting for the implementation of the temporary surcharges on traffic across all three districts, the payments made by shippers during the 2015 shipping season are estimated to be approximately $2,681,657 more than the payments that were made in 2014.4 A regulatory assessment follows. The final rule applies 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 10 percent overall from the current rates set in the 2014 final rule. The Appendix A methodology is discussed and applied in detail in Part VI of this preamble. Among other factors described in Part VI, it reflects audited 2012 financial data from the pilotage associations (the most recent year available for auditing), projected association expenses, and regional inflation or deflation. The last full Appendix A ratemaking was concluded in 2014 and used financial data from the 2011 base accounting year. The last annual rate review, conducted under 46 CFR part 404, Appendix C, was completed early in 2011. The shippers affected by these rate adjustments are those owners and operators of domestic vessels operating on register (employed in foreign trade) and owners and operators of foreign vessels on a route within the Great Lakes system. These owners and operators must have pilots or pilotage service as required by 46 U.S. C. 9302. There is no minimum tonnage limit or exemption for these vessels. The statute applies only to commercial vessels and not to recreational vessels. Owners and operators of other vessels that are not affected by this final rule, such as recreational boats and vessels operating only within the Great Lakes system, may elect to purchase pilotage services. However, this election is voluntary and does not affect our calculation of the rate and is not a part of our estimated national cost to shippers. We used 2011–2013 vessel arrival data from the Coast Guard’s Marine Information for Safety and Law Enforcement (MISLE) system to estimate the average annual number of vessels affected by the rate adjustment. Using that period, we found that approximately 114 different 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 made more than one distinct stop, docking, loading, and unloading at facilities in Great Lakes ports. Of the total trips for the 114 vessels, there were approximately 353 annual U.S. port arrivals before the vessels left the Great Lakes system, based on 2011–2013 vessel data from MISLE. The impact of the rate adjustment to shippers is estimated from the District pilotage revenues. These revenues represent the 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 2014, based on the 2014 rate adjustment, and the total projected revenue needed to cover costs in 2015, 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 2015 after making the discretionary adjustment to pilotage rates as discussed in Step 7 of Part V of this preamble. Table 37 summarizes the derivation for calculating the revenue expected to be generated as a result of the temporary surcharges applied to traffic in all three districts as discussed in Step 7 of Part V of this preamble. Table 38 details the additional cost increases to shippers by area and district as a result of the rate adjustments and temporary surcharges on traffic in Districts One,Two, and Three. TABLE 36—RATE ADJUSTMENT BY AREA AND DISTRICT [$U.S.; Non-discounted] 2014 Pilotage rates 5 Rate change 6 2015 Pilotage rates 7 $472.50 291.96 1.10 1.10 $519.74 321.15 rmajette on DSK2VPTVN1PROD with RULES Area 1 .................................................................................. Area 2 .................................................................................. 4 Total payments across all three districts are equal to the increase in payments incurred by shippers as a result of the rate changes plus the temporary surcharges applied to traffic in Districts One, Two, and Three. VerDate Sep<11>2014 17:39 Feb 25, 2015 Jkt 235001 5 2014 Pilotage Rates are described in Table 16 of this rule. 6 The estimated rate changes are described in Table 32 of this rule. 7 2015 Pilotage Rates—2014 Pilotage Rates × Rate Change. PO 00000 Frm 00062 Fmt 4700 Sfmt 4700 Projected 2015 bridge hours 8 5,116 5,429 Projected revenue needed in 2015 9 $2,659,014 1,743,536 8 Projected 2015 Bridge Hours are described in Table 14 of this rule. 9 Projected Revenue Needed in 2015—2015 Pilotage Rates × Projected 2015 Bridge Hours. E:\FR\FM\26FER1.SGM 26FER1 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations 10385 TABLE 36—RATE ADJUSTMENT BY AREA AND DISTRICT—Continued [$U.S.; Non-discounted] Projected revenue needed in 2015 9 2014 Pilotage rates 5 Rate change 6 2015 Pilotage rates 7 Projected 2015 bridge hours 8 Total, District One ......................................................... Area 4 .................................................................................. Area 5 .................................................................................. ........................ 210.40 521.64 ........................ 1.10 1.10 ........................ 231.44 573.80 ........................ 5,814 5,052 4,402,549 1,345,588 2,898,845 Total, District Two ......................................................... Area 6 .................................................................................. Area 7 .................................................................................. Area 8 .................................................................................. ........................ 204.95 495.01 191.34 ........................ 1.10 1.10 1.10 ........................ 225.45 544.52 210.47 ........................ 9,611 3,023 7,540 4,244,433 2,166,780 1,646,070 1,586,945 Total, District Three ...................................................... ........................ ........................ ........................ ........................ 5,399,795 * Some values may not total due to rounding. TABLE 37—DERIVATION OF TEMPORARY SURCHARGE Area 1 Projected Revenue Needed in 2015 ........ Surcharge Rate ............ Surcharge Raised ........ Area 2 Area 4 Area 5 Area 6 Area 7 Area 8 $2,659,014 10% $265,901 $1,743,536 10% $174,354 $1,345,588 10% $134,559 $2,898,845 10% $289,885 $2,166,780 10% $216,678 $1,646,070 10% $167,607 $1,586,945 10% $158,694 Total Surcharge .... $440,255 $424,443 $539,979 TABLE 38—IMPACT OF THE RULE BY AREA AND DISTRICT [$U.S.; Non-discounted] Projected revenue needed in 2014 10 Projected revenue needed in 2015 11 Temporary surcharge Additional revenue or costs 2015 (2015–2014) Total costs or savings of this final rule (additional revenue or costs 2015+temporary surcharge) Area 1 ................................................................................ Area 2 ................................................................................ $2,417,285 1,585,032 $2,659,014 1,743,536 $265,901 174,354 $241,729 158,503 $507,630 332,857 Total, District One ...................................................... Area 4 ................................................................................ Area 5 ................................................................................ 4,002,318 1,223,262 2,635,314 4,402,549 1,345,588 2,898,845 440,255 134,559 289,885 400,232 122,326 263,531 840,487 256,885 553,416 Total, District Two ...................................................... Area 6 ................................................................................ Area 7 ................................................................................ Area 8 ................................................................................ 3,858,576 1,969,800 1,496,427 1,442,677 4,244,433 2,166,780 1,646,070 1,586,945 424,443 216,678 164,607 158,694 385,858 196,980 149,643 144,268 810,301 413,658 314,250 302,962 Total, District Three .................................................... System Total .............................................................. 4,908,904 12,769,797 5,399,795 14,046,777 539,979 1,404,678 490,890 1,276,980 1,030,870 2,681,657 rmajette on DSK2VPTVN1PROD with RULES * Some values may not total due to rounding. After applying the discretionary rate change in this rule, the resulting difference between the projected revenue in 2014 and the projected revenue in 2015 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 VerDate Sep<11>2014 17:50 Feb 25, 2015 Jkt 235001 payments from the previous year that shippers will incur for pilotage services from this rule. The impact of the discretionary rate adjustment on shippers varies by area and district in this final rule. The discretionary rate adjustments will lead to affected shippers operating in District 10 Projected revenue needed in 2014 is described in Table 16 of this rule. 11 Projected revenue needed in 2015 is described in Table 36 of this rule. PO 00000 Frm 00063 Fmt 4700 Sfmt 4700 One, District Two, and District Three experiencing an increase in payments of $400,232, $385,858, and $490,890, respectively, from the previous year. In addition to the rate adjustments, temporary surcharges on traffic in District One, District Two, and District Three will be applied for the duration of the 2015 season in order for the pilotage associations to recover training expenses and technology investments incurred during the 2013 and 2014 E:\FR\FM\26FER1.SGM 26FER1 10386 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations shipping seasons. We estimate that these surcharges will generate an additional $440,255, $424,443, and $539,979 in revenue for the pilotage associations in District One, District Two, and District Three, respectively. At the end of the 2015 shipping season, we will account for the monies the surcharges generate and make adjustments (debits/credits) to the operating expenses for the following year.12 To calculate an exact cost or savings per vessel is difficult because of the variation in vessel types, routes, port arrivals, commodity carriage, time of season, conditions during navigation, and preferences for the extent of pilotage services on designated and undesignated portions of the Great Lakes system. Some owners and operators will pay more and some would pay less, depending on the distance travelled and the number of port arrivals by their vessels. However, the increase in costs reported earlier in this rule does capture the adjustment in payments that shippers will experience from the previous year. The overall adjustment in payments, after taking into account the increase in pilotage rates and the addition of temporary surcharges will be an increase in payments by shippers of approximately $2,681,657 across all three districts. This rule will allow the Coast Guard to meet the requirements in 46 U.S. C. 9303 to review the rates for pilotage services on the Great Lakes, thus ensuring proper pilot compensation. Alternatively, if we imposed the new rates based on the new contract data from AMOU, instead of using the discretionary rate adjustment described in Step 7, there would be an approximately 12 percent decrease in rates across the system. Instead of shippers experiencing an increase in payments of approximately $1,276,980 13 from the previous year, as a result of the rate adjustments, shippers would instead experience a reduction in payments of approximately $1,475,412.14 Table 39 details projected revenue needed to cover costs in 2015 if the discretionary adjustment to pilotage rates as discussed in Step 7 of Part V of this preamble is not made. Table 40 details the additional costs or savings by area and district as a result of this alternative proposal. TABLE 39—ALTERNATIVE RATE ADJUSTMENT BY AREA AND DISTRICT [$U.S.; Non-discounted] 2014 Pilotage rates 2015 Pilotage rates Rate change 15 Projected 2015 bridge hours Projected revenue needed in 2015 Area 1 ............................................................................ Area 2 ............................................................................ $472.50 291.96 0.8423 0.8443 $398.00 246.51 5,116 5,429 $2,036,149 1,338,302 Total, District One ................................................... Area 4 ............................................................................ Area 5 ............................................................................ ........................ 210.40 521.64 ........................ 0.9946 0.8363 ........................ 209.27 436.22 ........................ 5,814 5,052 3,374,451 1,216,674 2,203,805 Total, District Two ................................................... Area 6 ............................................................................ Area 7 ............................................................................ Area 8 ............................................................................ ........................ 204.95 495.01 191.34 ........................ 0.9405 0.8608 0.9418 ........................ 192.76 426.13 180.20 ........................ 9,611 3,023 7,540 3,420,480 1,852,580 1,288,197 1,358,677 Total, District Three ................................................ System Total ........................................................... ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 4,499,454 11,294,385 * Some values may not total due to rounding. TABLE 40—ALTERNATIVE IMPACT OF THE RULE BY AREA AND DISTRICT [$U.S.; Non-discounted] Projected revenue needed in 2015 Area 1 ............................................................................................ Area 2 ............................................................................................ $2,417,285 1,585,032 $2,036,149 1,338,302 $203,615 133,830 ($177,521) (112,900) Total, District One ................................................................... Area 4 ............................................................................................ Area 5 ............................................................................................ 4,002,318 1,223,262 2,635,314 3,374,451 1,216,674 2,203,805 337,445 121,667 220,381 (290,421) 115,080 (211,128) Total, District Two ................................................................... Area 6 ............................................................................................ Area 7 ............................................................................................ Area 8 ............................................................................................ rmajette on DSK2VPTVN1PROD with RULES Projected revenue needed in 2014 3,858,576 1,969,800 1,496,427 1,442,677 3,420,480 1,852,580 1,288,197 1,358,677 342,048 185,258 128,820 135,868 (96,048) 68,038 (79,411) 51,868 12 Our projections indicate in the 2016 rulemaking we will apply a surcharge of $112,226 for District One shippers at the end of the 2015 season in order to account for the difference between the total surcharges collected ($440,255) and the actual expenses incurred by the District One pilot association ($328,029 for training expenses), District Two shippers $98,614 VerDate Sep<11>2014 14:38 Feb 25, 2015 Jkt 235001 (calculation: $424,443 (total surcharges collected) minus $300,000 to train two applicant pilots and ($25,829.80 for technology improvements)), and District Three shippers $213,029 (calculation: $539,979 (total surcharges collected) minus $326,950 (actual training expenses incurred)). 13 This figure is the total costs or savings of the final rule minus the surcharges. PO 00000 Frm 00064 Fmt 4700 Sfmt 4700 Temporary surcharge Additional costs or savings of this rule 14 This figure does not include the additional payments incurred by shippers as a result of the temporary surcharges applied to traffic in all three districts. The figure is equal to the total additional costs or savings of this final rule minus the temporary surcharges (see Table 40). 15 The estimated rate changes are described in Table 32 of this final rule. E:\FR\FM\26FER1.SGM 26FER1 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations 10387 TABLE 40—ALTERNATIVE IMPACT OF THE RULE BY AREA AND DISTRICT—Continued [$U.S.; Non-discounted] Projected revenue needed in 2014 Projected revenue needed in 2015 Total, District Three ................................................................ 4,908,904 4,499,454 449,945 40,495 System Total ........................................................................... 12,769,797 11,294,385 1,129,439 (345,974) * Some Additional costs or savings of this rule values may not total due to rounding. We reject this alternative, however, because independent audits of pilot association revenues details a nearly $2 million gap between Coast Guard revenue projections and the amount of revenues actually collected. A rate decrease would only further widen this disparity, and would also jeopardize the ability of pilotage associations to provide safe, efficient, and reliable pilotage service. A rate increase of 10 percent in all areas will lessen the gap between revenues projected by the Coast Guard and those collected by pilot associations, and the gap between the actual salaries of U.S. Registered Pilots and Canadian Registered Pilots of the GLPA. See our discussion of Step 7 in Part VI of this preamble for further explanation. rmajette on DSK2VPTVN1PROD with RULES Temporary surcharge B. Small Entities Under the Regulatory Flexibility Act, 5 U.S.C. 601–612, we have considered whether this rule would have a significant economic impact on a substantial number of small entities. The term ‘‘small entities’’ comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000 people. We expect that entities affected by the final rule will be classified under the North American Industry Classification System (NAICS) code subsector 483Water Transportation, which includes the following 6-digit NAICS codes for freight transportation: 483111—Deep Sea Freight Transportation, 483113— Coastal and Great Lakes Freight Transportation, and 483211—Inland Water Freight Transportation. According to the Small Business Administration’s definition, a U.S. company with these NAICS codes and employing less than 500 employees is considered a small entity. For the final rule, we reviewed recent company size and ownership data for the period 2011 through 2013 in the Coast Guard’s MISLE database, and we reviewed business revenue and size data provided by publicly available sources VerDate Sep<11>2014 14:38 Feb 25, 2015 Jkt 235001 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 rule that receive revenue from pilotage services. These are the three pilot associations that provide and manage pilotage services within the Great Lakes districts. Two of the associations operate as partnerships and one operates as a corporation. These associations are designated with the same NAICS industry classification and small-entity size standards described above, but they have fewer than 500 employees; combined, they have approximately 65 total employees. We expect no adverse impact to these entities from this rule because through this rulemaking, all the pilot associations are provided with additional revenue to offset some of the projected expenses associated with the projected number of bridge hours and pilots, and to keep them on par with their Canadian counterparts. Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that this 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 (Pub. L. 104–121), we offered to assist small entities in understanding this rule so that they can better evaluate its effects on them and participate in the rulemaking. 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 PO 00000 Frm 00065 Fmt 4700 Sfmt 4700 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 OMB Control Number 1625–0086, Great Lakes Pilotage Methodology. E. Federalism A rule has implications for federalism under E.O. 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 E.O. 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 specified in 46 U.S.C. 9306. Under 46 U.S.C. 9306, a ‘‘State or political subdivision of a State may not regulate or impose any requirement on pilotage on the Great Lakes.’’ As a result, States or local governments are expressly prohibited from regulating within this category. Therefore, this rule is consistent with the principles of federalism and preemption requirements in E.O. 13132. 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 E:\FR\FM\26FER1.SGM 26FER1 10388 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule would not result in such expenditure, we discuss the effects of this rule elsewhere in this preamble. have a significant adverse effect on the supply, distribution, or use of energy. The Administrator of the Office of Information and Regulatory Affairs has not designated it as a significant energy action. Therefore, it does not require a Statement of Energy Effects under E.O. 13211. List of Subjects in 46 CFR Part 401 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. L. Technical Standards Title 46—Shipping The National Technology Transfer and Advancement Act (15 U.S.C. 272, note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the OMB, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management 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. PART 401—GREAT LAKES PILOTAGE REGULATIONS 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 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: 1. The authority citation for part 401 continues to read as follows: ■ Authority: 46 U.S.C. 2104(a), 6101, 7701, 8105, 9303, 9304; Department of Homeland Security Delegation No. 0170.1; 46 CFR 401.105 also issued under the authority of 44 U.S.C. 3507. 2. In § 401.405, revise paragraphs (a) and (b), including the footnote to Table (a), to read as follows: ■ § 401.405 Basic rates and charges on the St. Lawrence River and Lake Ontario. * * * * * (a) Area 1 (Designated Waters): Service St. Lawrence River M. Environment Basic Pilotage ........... We have analyzed this rule under Department of Homeland Security Management Directive 023–01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (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. This final rule involves regulations that are editorial or procedural and fall under section 2.B.2, figure 2–1, paragraph (34)(a) of the Instruction. Each Lock Transited Harbor Movage ......... $21.13 per kilometer or $37.42 per mile.1 $469.1 $1,535.1 1 The minimum basic rate for assignment of a pilot in the St. Lawrence River is $1,024, and the maximum basic rate for a through trip is $4,492. (b) Area 2 (Undesignated Waters): Service 6-hour Period .................... Docking or Undocking ...... 3. In § 401.407, revise paragraphs (a) and (b), including the footnote to Table (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. * * * * * (a) Area 4 (Undesignated Waters): Lake Erie (East of Southeast Shoal) rmajette on DSK2VPTVN1PROD with RULES 6-hour Period ................................................................................................................................................... Docking or Undocking ..................................................................................................................................... Any point on the Niagara River below the Black Rock Lock .......................................................................... $934 718 N/A (b) Area 5 (Designated Waters): 14:38 Feb 25, 2015 Jkt 235001 PO 00000 Frm 00066 Fmt 4700 Sfmt 4700 $959 915 ■ Service VerDate Sep<11>2014 Lake Ontario E:\FR\FM\26FER1.SGM 26FER1 Buffalo $934 718 1,834 10389 Federal Register / Vol. 80, No. 38 / Thursday, February 26, 2015 / Rules and Regulations Any point on or in Toledo or any port on Lake Erie west of Southeast Shoal Port Huron Change Point .................................................... St. Clair River ....................................................................... Detroit or Windsor or the Detroit River ................................ Detroit Pilot Boat .................................................................. 1 When $1,559 1 5,321 1 4,594 N/A 3,424 2,637 2,637 1,909 § 401.410 Basic rates and charges on Lakes Huron, Michigan, and Superior; and the St. Mary’s River. * * Lakes Huron and Michigan Service 6-hour Period .................... $779 * (c) Area 8 (Undesignated Waters): Service DEPARTMENT OF DEFENSE Lake Superior 6-hour Period .................... Docking or Undocking ...... $661 628 5. Amend § 401.420 as follows: ■ a. In paragraph (a), remove the text ‘‘$129’’ and add, in its place, the text ‘‘$142’’; and remove the text ‘‘$2,021’’ and add, in its place, the text ‘‘$2,223’’; ■ b. In paragraph (b), remove the text ‘‘$129’’ and add, in its place, the text ‘‘$142’’; and remove the text ‘‘$2,021’’ and add, in its place, the text ‘‘$2,223’’; and ■ c. In paragraph (c)(1), remove the text ‘‘$763’’ and add, in its place, the text ‘‘$839’’; in paragraph (c)(3), remove the text ‘‘$129’’ and add, in its place, the text ‘‘$142’’; and remove the text ‘‘$2,021’’ and add, in its place, the text ‘‘$2,223’’. [Amended] Dated: February 23, 2015. Gary C. Rasicot, Director, Marine Transportation Systems, U.S. Coast Guard. [FR Doc. 2015–04036 Filed 2–25–15; 8:45 am] BILLING CODE 9110–04–P 14:38 Feb 25, 2015 48 CFR Part 212 Defense Federal Acquisition Regulation Supplement: Deletion of Obsolete Text Relating to Acquisition of Commercial Items (DFARS Case 2015–D002) Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Final rule. AGENCY: DoD is issuing a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to delete obsolete text relating to acquisition of commercial items. DATES: Effective February 26, 2015. FOR FURTHER INFORMATION CONTACT: Janetta Brewer, telephone 571–372– 6104. SUMMARY: SUPPLEMENTARY INFORMATION: 6. In § 401.428, remove the text ‘‘$763’’ and add, in its place, the text ‘‘$839’’. ■ VerDate Sep<11>2014 Defense Acquisition Regulations System RIN 0750–AI50 [Amended] ■ rmajette on DSK2VPTVN1PROD with RULES N/A 1,909 1,559 3,451 3,451 Jkt 235001 I. Background On March 12, 2012, the DFARS was amended to implement a recommendation made by the Panel on Contracting Integrity and included in its 2009 Report to Congress concerning compliance with the DFARS documentation requirements for commercial item determinations. PO 00000 Frm 00067 Fmt 4700 Sfmt 4700 Lakes Huron and Michigan Docking or Undocking ...... 739 (b) Area 7 (Designated Waters): De tour Gros Cap ..................................................................................................................................... Algoma Steel Corporation Wharf at Sault Ste. Marie, Ontario ................................................... Any point in Sault Ste. Marie, Ontario, except the Algoma Steel Corporation Wharf ................ Sault Ste. Marie, MI ..................................................................................................................... Harbor Movage ............................................................................................................................ § 401.428 St. Clair River $2,637 2,685 3,451 N/A N/A Service Area § 401.420 Detroit Pilot Boat $3,424 3,451 3,451 1,559 N/A (a) Area 6 (Undesignated Waters): 4. In § 401.410, revise paragraphs (a), (b), and (c) to read as follows: * $2,637 1 4,594 Detroit River pilots are not changed at the Detroit Pilot Boat. ■ * Toledo or any point on Lake Erie west of Southeast Shoal Southeast Shoal $2,913 2,913 2,441 2,441 N/A Gros cap N/A $1,097 1,097 1,097 N/A Any harbor N/A N/A N/A N/A $1,097 DFARS subpart 212.1 was revised to require the contracting officer to determine that an acquisition exceeding $1 million and using FAR part 12 procedures either meets the commercial item definition at FAR 2.101 or the criteria at FAR 12.102(g)(1). The DFARS reference to FAR 12.102(g)(1), however, is no longer necessary since the FAR criteria only apply to contracts and task orders entered on or before November 24, 2013. Accordingly, DFARS 212.102(a)(i)(A) is being revised to remove the statement ‘‘or meets the criteria at FAR 12.102(g)(1)’’. On November 1, 2004, DFARS subpart 212.70 was amended to implement section 847 of the National Defense Authorization Act for Fiscal Year 2004, which authorized DoD to carry out a pilot program that permitted the use of streamlined contracting procedures for the production of items or processes begun as prototype projects under other transaction agreements. Since the authority for this program expired on September 30, 2010, the associated text at DFARS subpart 212.70 is being removed. II. Publication of This Final Rule for Public Comment Is Not Required by Statute ‘‘Publication of proposed regulations’’, 41 U.S.C. 1707, is the statute which applies to the publication of the Federal Acquisition Regulation. Paragraph (a)(1) of the statute requires that a procurement policy, regulation, E:\FR\FM\26FER1.SGM 26FER1

Agencies

[Federal Register Volume 80, Number 38 (Thursday, February 26, 2015)]
[Rules and Regulations]
[Pages 10365-10389]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-04036]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

46 CFR Part 401

[Docket No. USCG-2014-0481]
RIN 1625-AC22

Great Lakes Pilotage Rates--2015 Annual Review and Adjustment

AGENCY: Coast Guard, DHS.

ACTION: Final rule.

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SUMMARY: The Coast Guard is adjusting rates for pilotage services on
the Great Lakes, which were last amended in March 2014. The adjustments
establish new base rates made in accordance with a full ratemaking
procedure. Additionally, the Coast Guard exercises the discretion
provided by Step 7 of the Appendix A methodology. The result is an
upward adjustment to close the gap between revenues projected by this
rulemaking and those collected by the pilot associations. Our proposed
rates planned to maintain parity with the Canadian Great Lakes Pilotage
Authority. While this continues to be our goal, we have since
discovered a more significant challenge demonstrated by the recently
completed revenue audits. This is a more pressing concern for the
operation of safe, efficient, and reliable pilotage service on the
Great Lakes than maintaining parity because it demonstrates that the
pilot associations are unable to properly fund their operations. Also,
we are implementing temporary surcharges to accelerate recoupment of
necessary and reasonable training and investment costs for the pilot
associations. This final rule promotes the Coast Guard's strategic goal
of maritime safety.

DATES: This final rule is effective August 1, 2015.

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-2014-0481 and are available for inspection or
copying at the Docket Management Facility (M-30), U.S. Department of
Transportation, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal holidays. You may also find this
docket on the Internet by going to https://www.regulations.gov,
inserting USCG-2014-0481 in the ``Keyword'' box, and then clicking
``Search.''

FOR FURTHER INFORMATION CONTACT: If you have questions on this rule,
call or email Mr. Todd Haviland, Director, Great Lakes Pilotage,
Commandant (CG-WWM-2), Coast Guard; telephone 202-372-2037, email
Todd.A.Haviland@uscg.mil, or fax 202-372-1914. If you have questions on
viewing or submitting material to the docket, call Ms. Cheryl Collins,
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. Ratemaking Methodology
B. AMOU Contracts
C. Surcharge
D. Revenue Audits
E. Pilot Boats
VI. Summary of the Rule and Discussion of Methodology
A. Summary of the Rule
B. Discussion of the Methodology
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
E.O. Executive Order
FR Federal Register
GLPA Great Lakes Pilotage Association
MISLE Marine Information for Safety and Law Enforcement
MOA Memorandum of Arrangements
MOU Memorandum of Understanding
NAICS North American Industry Classification System
NPRM Notice of proposed rulemaking
OMB Office of Management and Budget
ROI Return on investment
Sec. Section symbol
U.S.C. United States Code
WGLPA Western Great Lakes Pilots Association

II. Regulatory History

On September 4, 2014, we published a notice of proposed rulemaking
(NPRM) titled ``Great Lakes Pilotage Rates--2015 Annual Review and
Adjustment'' in the Federal Register (79 FR 52602). We received 10
submissions on the NPRM from multiple sources, including pilotage
associations, pilots, pilot organizations, and shippers. No public
meeting was requested and none was held.
On December 1, 2014, we published the recently completed revenue
audits of the pilot associations and reopened the public comment period
in the Federal Register (79 FR 71082). We received 5 submissions on the
revenue audits.

III. Basis and Purpose

The basis of this final rule 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

[[Page 10366]]

system. 46 U.S.C. 9302(a)(1). The Act requires the Secretary to
``prescribe by regulation rates and charges for pilotage services,
giving consideration to the public interest and the costs of providing
the services.'' 46 U.S.C. 9303(f). Rates must be established or
reviewed and adjusted each year, not later than March 1. Base rates
must be established by a full ratemaking at least once every 5 years,
and in years when base rates are not established, they must be reviewed
and, if necessary, adjusted. Id. The Secretary's duties and authority
under the Act have been delegated to the Coast Guard. Department of
Homeland Security Delegation No. 0170.1, paragraph (92)(f). Coast Guard
regulations implementing the Act appear in parts 401 through 404 of
Title 46, Code of Federal Regulations (CFR). Procedures for use in
establishing base rates appear in 46 CFR part 404, Appendix A, and
procedures for annual review and adjustment of existing base rates
appear in 46 CFR part 404, Appendix C.
---------------------------------------------------------------------------

\1\ ``On register'' means that the vessel's certificate of
documentation has been endorsed with a registry endorsement, and
therefore, may be employed in foreign trade or trade with Guam,
American Samoa, Wake, Midway, or Kingman Reef. 46 U.S.C. 12105, 46
CFR 67.17.
---------------------------------------------------------------------------

The purpose of this final rule 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 final rule 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 to operate a pilotage pool. It is important to
note that we do not control the actual compensation that pilots
receive. The actual compensation is determined by each of the three
district associations, which use different compensation practices.
District One, consisting of Areas 1 and 2, includes all U.S. waters
of the St. Lawrence River and Lake Ontario. District Two, consisting of
Areas 4 and 5, includes all U.S. waters of Lake Erie, the Detroit
River, Lake St. Clair, and the St. Clair River. District Three,
consisting of Areas 6, 7, and 8, includes all U.S. waters of the St.
Mary's River, Sault Ste. Marie Locks, and Lakes Michigan, Huron, and
Superior. Area 3 is the Welland Canal, which is serviced exclusively by
the Canadian Great Lakes Pilotage Association (GLPA) and, accordingly,
is not included in the United States rate structure. Areas 1, 5, and 7
have been designated by Presidential Proclamation, pursuant to the Act,
to be waters in which pilots must, at all times, be fully engaged in
the navigation of vessels in their charge. Areas 2, 4, 6, and 8 have
not been so designated because they are open bodies of water. While
working in those undesignated areas, pilots must only ``be on board and
available to direct the navigation of the vessel at the discretion of
and subject to the customary authority of the master.'' 46 U.S.C.
9302(a) (1) (B).
This final rule is a full ratemaking to establish new base pilotage
rates, using the methodology found in 46 CFR part 404, Appendix A
(hereafter ``Appendix A''). The last full ratemaking established the
current base rates in March 2014 (79 FR 12084; Mar. 4, 2014). Among
other things, the Appendix A methodology requires us to review detailed
pilot association financial information, and we contract with
independent accountants to assist in that review. We have now completed
our review of the independent accountants' 2012 financial reports. The
comments by the pilot associations on those reports and the independent
accountants' final findings are discussed in our document titled
``Summary--Independent Accountant's Report on Pilot Association
Expenses, with Pilot Association Comments and Accountant's Responses,''
which appears in the docket. In addition, we also use the independent
accountant's review of pilot association revenues. The review,
contracted by the Coast Guard, confirms the revenues of the pilot
associations and it establishes a baseline of comparison between actual
collected revenues and those projected by the rulemaking. The revenue
reports also appear in the docket.

V. Discussion of Comments and Changes

We received 10 public submissions in response to the initial public
comment period of our NPRM.
In the NPRM, the Coast Guard proposed a 2.5 percent across the
board rate increase for the three pilotage districts and varying
surcharge levels across the three districts. However, due to the
completion of the revenue audits during the initial comment period, the
Coast Guard extended the comment period for 30 days for the public to
comment on the revenue audits. We received an additional five comments
to our supplementary comment period focusing on the revenue audits. Of
all the comments we received, 10 came from pilots or pilot
associations, 3 came from industry groups, and 2 came from the union
whose contract data provides benchmark data for pilot compensation.
Based on the comments and revenue audits, the Coast Guard is
implementing a 10 percent across the board rate increase for the three
pilotage districts and a 10 percent surcharge for each district. The
reasoning behind the changes follows. Any further changes involving the
Appendix A methodology will be published for notice and comment in a
future rulemaking.

A. Ratemaking Methodology

Three commenters questioned various aspects of the ratemaking
methodology. First, a pilot from the Western Great Lakes Pilots
Association (WGLPA) questioned the application of bridge hours, as well
as what the definition should include. We are currently working with
the pilots, industry, and the American Pilots Association to finalize a
new model to gauge necessary pilot strength. We plan to propose this
model in a future rulemaking. We believe this coordinated, thorough
process is needed to address the longstanding challenges with pilot
recruitment and retention on the Great Lakes. Another pilot suggested
that we need to incorporate multiple years of inflation in the rate to
compensate for the time lapse between the conduct of the audits and the
effective date of the rate. Under Step 1.C of the Appendix A
methodology, the adjustment for inflation or deflation is a 1-year
adjustment between the reported year (the audit year) and the
succeeding navigation season. As we have stated in previous
rulemakings, we are unable to incorporate a multiyear adjustment in the
current methodology. We will consider changing this step in a future
rulemaking.
Also, the same commenter questioned our application of benefits to
the American Maritime Officers Union (AMOU) contract. This is a
longstanding issue and the commenter argues that we should multiply
first mate wages and benefits by 150 percent to determine designated
waters compensation. We disagree and continue to maintain that the 150
percent applies only to wages; benefits are then added to the result.
As part of our extensive review of the Appendix A methodology, we are
actively seeking alternative compensation benchmarks to the AMOU
contracts. Another commenter believes that compensation must exceed
that of the AMOU in order to successfully recruit future pilots. We

[[Page 10367]]

agree that actual pilot compensation should be sufficient to attract
and retain U.S. Registered Pilots and we are actively pursuing
alternatives to the AMOU contracts for a new pilot compensation
standard. Two commenters suggested that the pilot strength called for
in the rate is inadequate. As discussed previously, we believe the
current bridge hour standard is not an effective means of establishing
pilot strength. We plan to continue efforts to develop a new pilot
strength model based on feedback from the stakeholders and will provide
it for public comment in a future rulemaking. Another commenter
questioned the effective date of the rate, saying that the rate should
go into effect at the start of the season instead of aligning with the
union contract start date of August 1. Since the AMOU contracts are
part of the current Appendix A methodology, August 1 continues to be
the effective date of the rate. We are open to adjusting the effective
date of the rate in a future rulemaking in coordination with our
expansive review of the methodology if doing so will enhance the
delivery of safe, efficient, and reliable service.
Additionally, five commenters questioned use of our discretion
under Step 7 of the Appendix A methodology. Two of those commenters, a
member of industry and a pilot, disagree with our basis for Step 7
adjustments, citing insufficient support for our justification of
parity adjustments under the Memorandum of Arrangements/Memorandum of
Understanding (MOA/MOU) with Canada and Executive Order (E.O.) 13609.
We disagree. The purpose of the MOA/MOU and E.O. 13609 is to work to
better align U.S. and Canadian regulatory schemes. We agree that the
new MOU has a less strict interpretation of parity, seeking comparable
rates over identical ones. However, we believe that the revenue
shortfall against projections uncovered in the recently completed
audits calls for action. Our actions to seek comparable rates are
undercut by overprojections and the inability of the current billing
scheme to generate sufficient revenue to operate the pilotage
associations. The third commenter, also a member of industry, asserts
that the results of our calculations represent a ``serious flaw'' in
the methodology. We plan to address the challenges with the current
methodology in a future rulemaking. We neither believe the calculations
resulting from the methodology in this rule are representative of
economic conditions in the Great Lakes region, nor do they represent
increased efficiencies of the pilot organizations. As such, we continue
to utilize our Step 7 discretion to adjust them.
Another commenter stated that the Canadian GLPA is actually raising
their rates only 1 percent rather than 2.5 percent as stated in the
NPRM. While we continue to strive for comparability with Canadian
rates, our greater concern currently is the gap in revenue. Thus, we
seek to actively close the confirmed revenue gap between pilot
association collections and Coast Guard projections by increasing the
rate. The gap highlighted in the revenue audits points to an even
greater disparity between U.S. and Canadian rates on the Great Lakes
that must be addressed.
This leads into a discussion of the final commenter on the
ratemaking methodology. The remaining commenter highlights the gap
between revenues projected in the rate and those actually collected by
the pilot association, as well as the second and third order effects of
that gap. Based on a review of the recently completed revenue audits,
we agree with the commenter that the gap between revenue projections in
the rate and the revenues actually collected by the pilot associations
presents an untenable situation. The revenue projections in the rate
for each pilot association directly impact each association's ability
to provide safe, efficient, and reliable service. Since the actual
revenues collected by the associations fall well short of our
projections, we are utilizing our Step 7 discretion to increase the
rates in all areas by 10 percent. This rate increase will begin to
address the significant shortfall in pilotage revenue against our
projections. We believe that the current shortfall in revenue is a
result of both bridge hour projections and a billing scheme that is not
properly baselined to collect appropriate revenue. Rate increases to
address the shortfall will continue to be separate and distinct from
the temporary surcharges applied in the districts for training and
investments.

B. AMOU Contracts

Five commenters-three pilots or pilots' representatives and two
officials from the AMOU-addressed our use of AMOU contracts to estimate
average annual compensation for U.S. Registered Pilots in Step 2.A of
our Appendix A ratemaking methodology. Since the application of these
contracts is currently the subject of pending litigation, we refrain
from addressing these comments and will continue to utilize the AMOU
contract data as we did in the 2013 and 2014 ratemakings.

C. Surcharge

Eight commenters-seven pilots or pilot associations and one member
of industry-addressed the proposed surcharges in the NPRM. We received
a comment from the Lakes Pilots Association, Inc. supporting the
proposed surcharge for District Two. Commenters from both District One
and District Three stated that they require two additional pilot
applicants each above their authorized strength to deal with personnel
turnover. We agree with both commenters. The pilotage associations are
facing a wave of retirements, both expected and unexpected, and these
additional applicant pilots are necessary to ensure the system
continues to operate smoothly. The long lead time for pilot training
necessitates that the pilot associations begin training now to address
current pilot retirements as well as those projected for the next 24
months. Thus, we are using our surcharge authority to fund applicant
pilots that exceed the current authorized pilot strength of the
associations. Based on how three associations plan to compensate the
applicants and the costs associated with training, we have estimated
that a 5 percent surcharge is necessary to fund each applicant pilot.
As you will see in the following discussion, we have established a 10
percent surcharge for each district in order to accelerate the costs
associated with training 2 applicant pilots.
In the case of District One, we agree with the need for two
applicant pilots above their authorized strength of 11 pilots to ensure
safe, efficient, and reliable pilotage service. To fund these applicant
pilots, we will increase their authorized surcharge to 10 percent.
We also agree with the need for two applicant pilots above their
authorized strength of 15 pilots to ensure safe, efficient, and
reliable pilotage service in District Three. Accordingly, we will fund
two additional applicants above their authorized pilot strength and
increase their authorized surcharge to 10 percent. As mentioned above,
in conjunction with stakeholders, we are developing a new pilotage
strength model that we will provide for public comment in a future
rulemaking.
Finally, a member of industry questioned the need for pilot
training surcharges and the authority to charge for expenses not yet
incurred. The Coast Guard has the authority to prescribe rates and
charges pursuant to 46 U.S.C. 9303. Temporary surcharge authority was
implemented through regulation in the 2014 ratemaking cycle. See 78 FR
48376. The surcharges include funds for

[[Page 10368]]

professional training, investments in pilotage technology, and the
costs to train and fund six new applicant pilots across the system.
These applicants will all be in place for the 2015 shipping season and
thus, through the temporary surcharge, the Coast Guard is accelerating
recoupment of these important expenses. We fully support investments in
professional development and technology to enhance the safety,
reliability, and efficiency of the system. Further, we believe the
recruitment, funding, and training of applicant pilots before the
retirement of current registered pilots is essential to the stability
of the system and to achieve and maintain acceptable levels of service.
Any overages in surcharge collection against the actual costs will be
adjusted in the next year's rate. We discuss surcharges further in Part
VI after our discussion of other comments.

D. Revenue Audits

We received three comments on the revenue audits--two from pilots
and one from industry. Both pilot commenters approved of the revenue
audits and asked the Coast Guard to adjust for the differences between
actual and projected revenues. We agree with these comments and have
adjusted our rate increase to 10 percent across all districts to begin
aligning actual and projected revenues. Our discussion in Step 7
provides additional discussion on this topic. It is clear that the
audits for the 2013 Appendix A rulemaking demonstrate a significant
shortfall. Since we only have a single data point, we plan to increase
the base rate to fill this gap over a multi-year period. Ten percent is
reasonable because this is greater than inflation and begins to align
the revenues needed to provide safe, efficient, and reliable service
with the actual revenues that our rulemakings generate. We will also
work to address this discrepancy in a future rulemaking regarding the
methodology. We discuss this further in Step 7 of the methodology. The
industry commenter disapproves of the open-ended nature of the comment
period, seeking further clarity regarding our plan for use of the
revenue audits and a better explanation of our use of discretion. We
disagree. The comment period was set up to allow access by all parties
to the revenue audits and to provide feedback to the Coast Guard
regarding their review and incorporation into the ratemaking
methodology. The revenue audits clearly point to a shortcoming in the
billing scheme and methodology that significantly reduces actual
revenue. Failure to act on the revenue audits would ignore the point
``and other supportable economic factors'' in Step 7 of the
methodology. While we do not propose a solution for the methodology in
this rulemaking, we are working to develop new proposals to address the
significant hindrances of the current methodology. The discretion
exercised in Step 7 seeks to maintain safe, efficient, and reliable
pilotage service while we prepare a future rulemaking to address the
current methodology.

E. Pilot Boats

We received two comments regarding purchase of new pilot boats.
District Two submitted information regarding the purchase of a new boat
for use in Detroit for consideration in the rate. However, based on the
documents submitted, the pilots have reached an agreement with the
Canadian GLPA and industry to fund the pilot boat through usage fees,
not through the rate. As a result, the expenses associated with the new
pilot boat will not be included in the 2015 rate. Similarly, a pilot
from the WGLPA believes that infrastructure investment in a new dock
and new pilot boat near Sault Sainte Marie, MI should be included in
the rate. We disagree. Like District Two, the letter of intent signed
between the WGLPA and the Canadian GLPA plans to recoup the cost of
their infrastructure improvement through levied pilot boat fees, not
the pilotage rate. We support and encourage the investment of both
associations in badly needed infrastructure and capital assets but
cannot allow recoupment of expenses already marked to be paid by
industry separately.

VI. Summary of the Rule and Discussion of Methodology

A. Summary of the Rule

We are establishing new base pilotage rates in accordance with the
methodology outlined in Appendix A to 46 CFR part 404. The new rates
will be established by March 1, 2015 and become effective August 1,
2015. Our calculations under Steps 1 through 6 of Appendix A would
result in an average 12 percent rate decrease. This rate decrease is
not the result of increased efficiencies in providing pilotage services
but rather is a result of changes to AMOU contract data.
Additionally, the recently completed revenue audits demonstrate a
significant shortfall between revenues projected by the Coast Guard
using the Appendix A methodology and those actually captured by the
current billing scheme. This gap, explained further in our Step 7
discussion, demonstrates that a more significant rate increase is
necessary to promote a standard safe, efficient, and reliable pilotage
service by ensuring the pilot associations have sufficient actual
revenue to continue operations. Therefore, we will continue to exercise
the discretion outlined in Step 7, increasing rates by 10 percent to
begin closing the gap between projected revenues and those actually
collected by the pilot associations. Table 1 shows the percent change
for the new rates for each area.
Secondly, we are implementing temporary surcharges for the pilot
associations to recoup necessary and reasonable training and investment
expenses incurred or that are expected to be incurred prior to the
required March 1, 2015 publication of the final rule. Normally, these
expenses would not be recognized until the 2016 annual ratemaking or
later. By authorizing the temporary surcharges now, this action will
accelerate the reimbursement for necessary and reasonable training and
investment expenses. The surcharge will be authorized for the duration
of the 2015 shipping season, which begins in March 2015. The value of
the surcharges is based on the audited revenues of the pilot
associations and the identified need to train two additional pilot
applicants per District. This action will merely accelerate the
recoupment of these expenses. At the conclusion of the 2015 shipping
season, we would account for the monies generated by the surcharge and
make adjustments as necessary to the operating expenses for the
following year.
In District One, we are implementing a temporary surcharge of 10
percent to compensate pilots for $28,028.91 that the District One pilot
association spent on training in 2013 and early 2014, as well as the
anticipated $300,000 cost to train two new applicant pilots and prepare
replacements for retiring pilots. We believe this training is necessary
and reasonable to promote safe, efficient, and reliable pilotage on the
Great Lakes and support the St. Lawrence Seaway Pilots Association's
continued commitment to the training and professional development of
their pilots.
Additionally, we are implementing a temporary surcharge of 10
percent in District Two to compensate pilots for $300,000 that the
District Two pilot association spent training two applicant pilots in
2014. This is necessary and reasonable to allow the association to
bring on new pilots in the face of upcoming retirements without
adjusting the pilotage needs as determined by the ratemaking
methodology. This surcharge will also accelerate the

[[Page 10369]]

repayment of the association's investment in upgraded technology
($25,829.80) to enhance the situational awareness of pilots on the
bridge. We believe this needed technology will assist in the safety,
efficiency, and reliability of the system.
Next, we are implementing a temporary surcharge of 10 percent in
District Three to compensate pilots for $26,950 that the District Three
pilot association plans to spend on training at the conclusion of the
2014 shipping season. We believe this training is necessary and
reasonable for the provision of safe pilotage service. This also
compensates District Three for the anticipated $300,000 cost of
training two additional pilot applicants to increase pilot strength and
advance safe, efficient, and reliable pilotage service in the district.
All figures in the tables that follow are based on calculations
performed either by an independent accountant or by the Director's \3\
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 figures, which are rounded for presentation in the tables.
---------------------------------------------------------------------------

\3\ ``Director'' is the Coast Guard Director, Great Lakes
Pilotage, which is used throughout this rule.

Table 1--Summary of Rate Adjustments Based on Step 7 Discretion
------------------------------------------------------------------------
Then the percent
If pilotage service is required in: change over the
current rate is:
------------------------------------------------------------------------
Area 1 (Designated waters)........................... 10
Area 2 (Undesignated waters)......................... 10
Area 4 (Undesignated waters)......................... 10
Area 5 (Designated waters)........................... 10
Area 6 (Undesignated waters)......................... 10
Area 7 (Designated waters)........................... 10
Area 8 (Undesignated waters)......................... 10
------------------------------------------------------------------------

B. Discussion of the Methodology

The Appendix A methodology provides seven steps, with sub-steps,
for calculating rate adjustments. The following discussion describes
those steps and sub-steps, and includes tables showing how we have
applied them to the 2012 financial information supplied by the pilots
association.
Step 1: Projection of Operating Expenses. In this step, we project
the amount of vessel traffic annually. Based on that projection, we
forecast the amount of necessary and reasonable operating expenses that
pilotage rates should recover.
Step 1.A: Submission of Financial Information. This sub-step
requires each pilot association to provide us with detailed financial
information in accordance with 46 CFR part 403. The associations
complied with this requirement, supplying 2012 financial information in
2013. This is the most current and complete data set we have available.
Step 1.B: Determination of Recognizable Expenses. This sub-step
requires us to determine which reported association expenses will be
recognized for ratemaking purposes, using the guidelines shown in 46
CFR 404.5. We contracted with an independent accountant to review the
reported expenses and submit findings recommending which reported
expenses should be recognized. The accountant also reviewed which
reported expenses should be adjusted prior to recognition or disallowed
for ratemaking purposes. The accountant's preliminary findings were
sent to the pilot associations, they reviewed and commented on those
findings, and the accountant then finalized the findings. The Director
reviewed and accepted the final findings, resulting in the
determination of recognizable expenses. The preliminary findings, the
associations' comments on those findings, and the final findings are
all discussed in the ``Summary--Independent Accountant's Report on
Pilot Association Expenses, with Pilot Association Comments and
Accountant's Responses,'' which appears in the docket. Tables 2 through
4 show each association's recognized expenses.

Table 2--Recognized Expenses for District One
----------------------------------------------------------------------------------------------------------------
Area 1 Area 2
--------------------------------
Reported expenses for 2012 St. Lawrence Total
River Lake Ontario
----------------------------------------------------------------------------------------------------------------
Operating Expenses:
Other Pilotage Costs:
Pilot subsistence/Travel.................................... $227,199 $137,315 $364,514
License insurance........................................... 0 0 0
Payroll taxes............................................... 62,038 48,452 110,490
Other....................................................... 596 549 1,145
-----------------------------------------------
Total Other Pilotage Costs.............................. 289,833 186,316 476,149
Pilot Boat and Dispatch Costs:
Pilot boat expense.......................................... 108,539 95,405 203,944
Dispatch expense............................................ 0 0 0
Payroll taxes............................................... 13,429 11,804 25,233
-----------------------------------------------

[[Page 10370]]

Total Pilot and Dispatch Costs.......................... 121,968 107,209 229,177
Administrative Expenses:
Legal--general counsel...................................... 1,369 1,281 2,650
Legal--lobbying............................................. 3,957 3,478 7,435
Insurance................................................... 21,907 18,998 40,905
Employee benefits........................................... 21,281 18,509 39,790
Payroll taxes............................................... 0 0 0
Other taxes................................................. 18,491 15,801 34,292
Travel...................................................... 473 416 889
Depreciation/Auto leasing/Other............................. 38,346 33,705 72,051
Interest.................................................... 15,484 13,610 29,094
Dues and subscriptions...................................... 13,740 10,240 23,980
Utilities................................................... 4,549 3,897 8,446
Salaries.................................................... 48,837 42,927 91,764
Accounting/Professional fees................................ 4,683 4,317 9,000
Pilot Training.............................................. 26,353 21,961 48,314
Other....................................................... 10,689 8,974 19,663
-----------------------------------------------
Total Administrative Expenses........................... 230,159 198,114 428,273
-----------------------------------------------
Total Operating Expenses 641,960 491,639 1,133,599
Adjustments (Independent certified public accountant (CPA)):
Pilotage subsistence/Travel................................. (887) (779) (1,666)
Payroll taxes............................................... (13,719) (12,058) (25,777)
Dues and subscriptions...................................... (13,740) (10,240) (23,980)
-----------------------------------------------
TOTAL CPA ADJUSTMENTS................................... (28,346) (23,077) (51,423)
Adjustments (Director):
American Pilots Association (APA) Dues...................... 11,679 8,704 20,383
Pilot Training (surcharge).................................. (26,353) (21,961) (48,314)
Legal--lobbying............................................. (3,957) (3,478) (7,435)
-----------------------------------------------
TOTAL DIRECTOR ADJUSTMENTS.............................. (18,631) (16,735) (35,366)
-----------------------------------------------
Total Operating Expenses................................ 594,983 451,827 1,046,810
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

Table 3--Recognized Expenses for District Two
----------------------------------------------------------------------------------------------------------------
Area 4 Area 5
--------------------------------
Reported Expenses for 2012 Southeast Total
Lake Erie Shoal to Port
Huron, MI
----------------------------------------------------------------------------------------------------------------
Operating Expenses:
Other Pilotage Costs:
Pilot subsistence/Travel.................................... 86,947 130,421 217,368
License insurance........................................... 6,168 9,252 15,420
Payroll taxes............................................... 42,218 63,328 105,546
Other....................................................... 23,888 35,833 59,721
-----------------------------------------------
Total Other Pilotage Costs.............................. 159,221 238,834 398,055
Pilot Boat and Dispatch Costs:
Pilot boat expense.......................................... 131,285 196,930 328,215
Dispatch expense............................................ 6,600 9,900 16,500
Employee Benefits........................................... 48,310 72,465 120,775
Payroll taxes............................................... 7,412 11,119 18,531
-----------------------------------------------
Total Pilot and Dispatch Costs.......................... 193,607 290,414 484,021
Administrative Expenses:
Legal--general counsel...................................... 2,054 3,082 5,136
Legal--lobbying............................................. 2,704 4,055 6,759
Legal--litigation........................................... 6,488 9,733 16,221
Office rent................................................. 26,275 39,413 65,688
Insurance................................................... 10,682 16,024 26,706
Employee benefits........................................... 16,452 24,678 41,130
Payroll taxes............................................... 4,143 6,216 10,359
Other taxes................................................. 12,546 18,819 31,365

[[Page 10371]]

Depreciation/Auto leasing/Other............................. 9,074 13,610 22,684
Interest.................................................... 2,989 4,483 7,472
Utilities................................................... 13,917 20,876 34,793
Salaries.................................................... 36,252 54,377 90,629
Accounting/Professional fees................................ 11,764 17,646 29,410
Pilot Training.............................................. 0 0 0
Other....................................................... 9,405 14,108 23,513
-----------------------------------------------
Total Administrative Expenses........................... 164,745 247,120 411,865
-----------------------------------------------
Total Operating Expenses................................ 517,573 776,368 1,293,941
Adjustments (Independent CPA):
Pilot subsistence/Travel.................................... (1,982) (2,974) (4,956)
Employee benefits........................................... (3,585) (5,378) (8,963)
TOTAL CPA ADJUSTMENTS................................... (5,567) (8,352) (13,919)
-----------------------------------------------
Adjustments (Director):
Federal Tax Allowance....................................... (5,200) (7,800) (13,000)
APA Dues.................................................... 7,344 11,016 18,360
Legal--lobbying............................................. (2,704) (4,055) (6,759)
Legal--litigation........................................... (6,488) (9,733) (16,221)
-----------------------------------------------
TOTAL DIRECTOR ADJUSTMENTS.............................. (7,048) (10,572) (17,620)
-----------------------------------------------
Total Operating Expenses................................ 504,958 757,444 1,262,402
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

Table 4--Recognized expenses for District Three
----------------------------------------------------------------------------------------------------------------
Area 6 Area 7 Area 8
------------------------------------------------
Reported expenses for 2012 Lakes Huron St. Mary's Total
and Michigan River Lake Superior
----------------------------------------------------------------------------------------------------------------
Operating Expenses:
Other Pilotage Costs:
Pilot subsistence/Travel.................... $180,316 $77,278 $110,398 $367,992
License insurance........................... 8,859 3,797 5,424 18,080
Payroll taxes............................... 0 0 0 0
Other....................................... 2,875 1,232 1,760 5,867
---------------------------------------------------------------
Total Other Pilotage Costs.............. 192,050 82,307 117,582 391,939
Pilot Boat and Dispatch Costs:
Pilot boat expense.......................... 261,937 112,259 160,370 534,566
Dispatch expense............................ 81,958 35,125 50,178 167,261
Payroll taxes............................... 8,203 3,515 5,022 16,740
---------------------------------------------------------------
Total Pilot Boat and Dispatch Costs..... 352,098 150,899 215,570 718,567
Administrative Expenses:
Legal--lobbying............................. 4,304 1,845 2,635 8,784
Office rent................................. 4,851 2,079 2,970 9,900
Insurance................................... 6,469 2,773 3,961 13,203
Employee benefits........................... 77,348 33,149 47,356 157,854
Payroll taxes............................... 5,404 2,316 3,309 11,029
Other taxes................................. 941 403 576 1,920
Depreciation/Auto leasing................... 17,462 7,484 10,691 35,637
Interest.................................... 2,692 1,154 1,648 5,494
Utilities................................... 20,950 8,979 12,827 42,756
Salaries.................................... 54,003 23,144 33,063 110,210
Accounting/Professional fees................ 13,157 5,639 8,055 26,851
Pilot Training.............................. 0 0 0 0
Other....................................... 4,657 1,996 2,851 9,504
---------------------------------------------------------------
Total Administrative Expenses........... 212,238 90,961 129,942 433,141
---------------------------------------------------------------
Total Operating Expenses................ 756,386 324,167 463,094 1,543,647
Adjustments (Independent CPA):
Pilot subsistence/travel.................... (5,303) (2,273) (3,247) (10,823)

[[Page 10372]]

Payroll taxes............................... 44,613 19,120 27,314 91,046
Other taxes................................. (1,761) (755) (1,078) (3,594)
Other....................................... (637) (273) (390) (1,300)
---------------------------------------------------------------
TOTAL CPA ADJUSTMENTS................... 36,912 15,819 22,599 75,329
Adjustments (Director):
APA dues.................................... 11,695 5,012 7,160 23,868
Legal--lobbying............................. (4,304) (1,845) (2,635) (8,784)
---------------------------------------------------------------
TOTAL DIRECTOR ADJUSTMENTS.............. 7,391 3,167 4,525 15,084
---------------------------------------------------------------
Total Operating Expenses................ 800,689 343,153 490,218 1,634,060
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

Step 1.C: Adjustment for Inflation or Deflation. In this sub-step,
we project rates of inflation or deflation for the succeeding
navigation season. Because we used 2012 financial information, the
``succeeding navigation season'' for this ratemaking is 2013. We based
our inflation adjustment of 1.4 percent on the 2013 change in the
Consumer Price Index (CPI) for the Midwest Region of the United States,
which can be found at https://www.bls.gov/xg_shells/ro5xg01.htm. This
adjustment appears in Tables 5 through 7.
The Coast Guard is aware that the current annual adjustment for
inflation does not account for the value of money over time. We are
working on a solution to allow for a better approximation of actual
costs.

Table 5--Inflation Adjustment, District One
----------------------------------------------------------------------------------------------------------------
Area 1 Area 2
------------------ ------------------
Reported expenses for 2012 St. Lawrence Total
River Lake Ontario
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses:.................. ... $594,983 ... $451,827 ... $1,046,810
2013 change in the CPI for the Midwest x .014 x .014 x .014
Region of the United States...............
Inflation Adjustment....................... = $8,330 = $6,326 = $14,655
----------------------------------------------------------------------------------------------------------------

Table 6--Inflation Adjustment, District Two
----------------------------------------------------------------------------------------------------------------
Area 4 Area 5
------------------ ------------------
Reported expenses for 2012 Southeast Shoal Total
Lake Erie to Port Huron,
MI
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses................... ... $504,958 ... $757,444 ... $1,262,402
2013 change in the CPI for the Midwest x .014 x .014 x .014
Region of the United States...............
Inflation Adjustment....................... = $7,069 = $10,604 = $17,674
----------------------------------------------------------------------------------------------------------------

Table 7--Inflation adjustment, District Three
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 6 Area 7 Area 8
------------------ ------------------ ------------------
Reported expenses for 2012 Lakes Huron and Total
Michigan St. Mary's River Lake Superior
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses.................................... ... $800,689 ... $343,153 ... $490,218 ... $1,634,060
2013 change in the CPI for the Midwest Region of the United x .014 x .014 x .014 x .014
States.....................................................
Inflation Adjustment........................................ = $11,210 = $4,804 = $6,863 = $22,877
--------------------------------------------------------------------------------------------------------------------------------------------------------

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.
For District One, the projected operating expenses are based on the
calculations from Steps 1.A through 1.C. Table 8 shows these
projections.

[[Page 10373]]

Table 8--Projected Operating Expenses, District One
----------------------------------------------------------------------------------------------------------------
Area 1 Area 2
------------------ ------------------
Reported expenses for 2012 St. Lawrence Total
River Lake Ontario
----------------------------------------------------------------------------------------------------------------
Total operating expenses................... ... $594,983 ... $451,827 ... $1,046,810
Inflation adjustment 1.4%.................. + $8,330 + $6,326 + $14,655
Total projected expenses for 2015 pilotage = $603,313 = $458,153 = $1,061,465
season....................................
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

In District Two the 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 Two
----------------------------------------------------------------------------------------------------------------
Area 4 Area 5
---------------- ----------------------
Reported expenses for 2012 Southeast Shoal to Total
Lake Erie Port Huron, MI
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses................... ... $504,958 ... $757,444 ... $1,262,402
Inflation adjustment 1.4%.................. + 7,069 + 10,604 + 17,674
Total projected expenses for 2015 pilotage = 512,027 = 768,048 = 1,280,076
season....................................
----------------------------------------------------------------------------------------------------------------

In District Three, projected operating expenses are based on the
calculations from Steps 1.A through 1.C. Table 10 shows these
projections.

Table 10--Projected Operating Expenses, District Three
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 6 Area 7 Area 8
------------------- ------------------- -------------------
Reported expenses for 2012 Lakes Huron and Total
Michigan St. Mary's River Lake Superior
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Expenses............................................. ... $800,689 ... $343,153 ... $490,218 ... $1,634,060
Inflation adjustment 1.4%.................................. + 11,210 + 4,804 + 6,863 + 22,877
Total projected expenses for 2015 pilotage season.......... = 811,899 = 347,957 = 497,081 = 1,656,937
--------------------------------------------------------------------------------------------------------------------------------------------------------

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 2015.
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 on designated waters by multiplying
the average first mates' wages by 150 percent and then adding the
average first mates' benefits.
We rely upon union contract data provided by the AMOU, which has
agreements with three U.S. companies engaged in Great Lakes shipping.
We derive the data from two separate AMOU contracts--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 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, 2015, as follows: (1) In undesignated waters, $632.12 for
Agreement A and $624.34 for Agreement B; and (2) In designated waters,
$870.05 for Agreement A and $856.42 for Agreement B.
Because we are interested in annual compensation, we must convert
these daily rates. We use a 270-day multiplier which reflects an
average 30-day month, over the 9 months of the average shipping season.
Table 11 shows our calculations using the 270-day multiplier.

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

------------------------------------------------------------------------
Aggregate Rate-Wages and Vacation, Pension, and Medical Benefits
------------------------------------------------------------------------
Pilots on undesignated waters
------------------------------------------------------------------------
Agreement A:
$632.12 daily rate x 270 days....................... $170,672.40

[[Page 10374]]

Agreement B:
$624.34 daily rate x 270 days....................... 168,571.80
------------------------------------------------------------------------
Pilots on designated waters
------------------------------------------------------------------------
Agreement A:
$870.05 daily rate x 270 days....................... 234,913.50
Agreement B:
$856.42 daily rate x 270 days....................... 231,233.40
------------------------------------------------------------------------

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 vessels operated by American Steamship Co. and Mittal Steel
USA, Inc., representing approximately 70 percent of tonnage. Table 12
provides details.

Table 12--Shipping Tonnage Apportioned by Contract
----------------------------------------------------------------------------------------------------------------
Company Agreement A Agreement B
----------------------------------------------------------------------------------------------------------------
American Steamship Company.............. .................................. 815,600
Mittal Steel USA, Inc................... .................................. 38,826
Key Lakes, Inc.......................... 361,385 ..................................
Total tonnage, each agreement........... 361,385 854,426
Percent tonnage, each agreement......... 361,385 / 1,215,811 = 29.7238% 854,426 / 1,215,811 = 70.2762%
----------------------------------------------------------------------------------------------------------------

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

Table 13--Tonnage-Weighted Wage and Benefit Components
------------------------------------------------------------------------
Undesignated Designated
waters waters
------------------------------------------------------------------------
Agreement A:
Total wages and benefits.. ... $170,672.40 ... $234,913.50
Percent tonnage........... x 29.7238% x 29.7238%
-----------------------------------------
Total................. = $50,730 = $69,825
------------------------------------------------------------------------
Agreement B:
Total wages and benefits.. ... $168,571.80 ... $231,233.40
Percent tonnage........... x 70.2762% x 70.2762%
-----------------------------------------
Total................. = $118,466 = $162,502
------------------------------------------------------------------------
Projected Target Rate of
Compensation:
Agreement A total weighted ... $50,730 ... $69,825
average wages and
benefits.................
Agreement B total weighted + $118,466 + $162,502
average wages and
benefits.................
-----------------------------------------
Total................. = $169,196 = $232,327
------------------------------------------------------------------------

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 through dividing projected bridge
hours for each area by either the 1,000 (designated waters) or 1,800
(undesignated waters) bridge hours specified in Step 2.B. We round the
mathematical results and express our determination as a whole number of
pilots.
According to 46 CFR part 404, Appendix A, Step 2.B(1), bridge hours
are the number of hours a pilot is aboard a vessel providing pilotage
service. For that reason, and as we explained most recently in the 2011
ratemaking's final rule (76 FR 6351 at 6352 col. 3 (Feb. 4, 2011)), we
do not include, and never have included, pilot delay, detention, or
cancellation in calculating bridge hours. Projected bridge hours are
based on the vessel traffic that pilots are expected to serve. We use
historical data, input from the pilots and industry, periodicals and
trade magazines, and information from conferences to project demand for
pilotage services for the coming year.
In our 2014 final rule, we determined that 36 pilots would be
needed for ratemaking purposes. For 2015, we project 36 pilots is still
the proper number to use for ratemaking purposes. The total pilot
authorization strength includes five pilots in Area 2, where rounding
up alone would result in only four pilots. For the same reasons we
explained at length in the 2008 ratemaking final rule (74 FR 220 at
221-22 (Jan. 5, 2009)), we have determined that this adjustment is
essential for

[[Page 10375]]

ensuring uninterrupted pilotage service in Area 2. Table 14 shows the
bridge hours we project will be needed for each area and our
calculations to determine the whole number of pilots needed for
ratemaking purposes.

Table 14--Number of Pilots Needed
--------------------------------------------------------------------------------------------------------------------------------------------------------
Divided by 1,000
(designated
Pilotage area Projected 2015 waters) or 1,800 Calculated value Pilots needed
bridge hours (undesignated of pilot demand (total = 36)
waters)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters)......................................... 5,116 / 1,000 = 5.116 6
Area 2 (Undesignated waters)....................................... 5,429 / 1,800 = 3.016 5
Area 4 (Undesignated waters)....................................... 5,814 / 1,800 = 3.230 4
Area 5 (Designated waters)......................................... 5,052 / 1,000 = 5.052 6
Area 6 (Undesignated waters)....................................... 9,611 / 1,800 = 5.339 6
Area 7 (Designated waters)......................................... 3,023 / 1,000 = 3.023 4
Area 8 (Undesignated waters)....................................... 7,540 / 1,800 = 4.189 5
--------------------------------------------------------------------------------------------------------------------------------------------------------

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

Table 15--Projection of Target Pilot Compensation by Area
----------------------------------------------------------------------------------------------------------------
Target rate of Projected
Pilotage area Pilots needed pilot target pilot
(total = 36) compensation compensation
----------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters)......................... 6 x $232,327 = $1,393,964
Area 2 (Undesignated waters)....................... 5 x 169,196 = 845,981
Area 4 (Undesignated waters)....................... 4 x 169,196 = 676,785
Area 5 (Designated waters)......................... 6 x 232,327 = 1,393,964
Area 6 (Undesignated waters)....................... 6 x 169,196 = 1,015,177
Area 7 (Designated waters)......................... 4 x 232,327 = 929,309
Area 8 (Undesignated waters)....................... 5 x 169,196 = 845,981
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

Steps 3 and 3.A: Projection of Revenue. In Steps 3 and 3.A., we
project the revenue that would be received in 2015 if demand for
pilotage services matches the bridge hours we projected in Table 14,
and if 2014 pilotage rates are left unchanged. Table 16 shows this
calculation.

Table 16--Projection of Revenue by Area
----------------------------------------------------------------------------------------------------------------
Revenue
Pilotage area Projected 2015 2014 Pilotage projection for
bridge hours rates 2015
----------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters)...................... 5,116 x $472.50 = $2,417,285
Area 2 (Undesignated waters).................... 5,429 x 291.96 = 1,585,032
Area 4 (Undesignated waters).................... 5,814 x 210.40 = 1,223,262
Area 5 (Designated waters)...................... 5,052 x 521.64 = 2,635,314
Area 6 (Undesignated waters).................... 9,611 x 204.95 = 1,969,800
Area 7 (Designated waters)...................... 3,023 x 495.01 = 1,496,427
Area 8 (Undesignated waters).................... 7,540 x 191.34 = 1,442,677
-----------------
Total....................................... ................ ................ 12,769,797
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

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

Table 17--Total Sources of Funds, District One
------------------------------------------------------------------------
Area 1 Area 2
------------------------------------------------------------------------
Recognized Assets: ... .............. ... ..............
Total Current Assets...... ... $532,237 ... $467,833
Total Current Liabilities. - 61,808 - 54,329
Current Notes Payable..... + 23,413 + 20,579

[[Page 10376]]

Total Property and + 445,044 + 391,191
Equipment (NET)..........
Land...................... - 11,727 - 10,308
Total Other Assets........ + 0 + 0
-----------------------------------------
Total Recognized = 927,159 = 814,966
Assets...............
------------------------------------------------------------------------
Non-Recognized Assets: ... .............. ... ..............
Total Investments and + 6,452 + 5,672
Special Funds............
-----------------------------------------
Total Non-Recognized = 6,452 = 5,672
Assets...............
------------------------------------------------------------------------
Total Assets: ... .............. ... ..............
Total Recognized Assets... ... 927,159 ... 814,966
Total Non-Recognized + 6,452 + 5,672
Assets...................
-----------------------------------------
Total Assets.......... = 933,611 = 820,638
------------------------------------------------------------------------
Recognized Sources of Funds: ... .............. ... ..............
Total Stockholder Equity.. ... 659,141 ... 579,380
Long-Term Debt............ + 262,785 + 230,986
Current Notes Payable..... + 23,413 + 20,579
Advances from Affiliated + 0 + 0
Companies................
Long-Term Obligations-- + 0 + 0
Capital Leases...........
-----------------------------------------
Total Recognized = 945,339 = 830,945
Sources..............
------------------------------------------------------------------------
Non-Recognized Sources of ... .............. ... ..............
Funds:
Pension Liability......... ... 0 ... 0
Other Non-Current + 0 + 0
Liabilities..............
Deferred Federal Income + 10,675 + 9,383
Taxes....................
Other Deferred Credits.... + 0 + 0
-----------------------------------------
Total Non-Recognized = 10,675 = 9,383
Sources..............
------------------------------------------------------------------------
Total Sources of Funds: ... .............. ... ..............
Total Recognized Sources.. ... 945,339 ... 830,945
Total Non-Recognized + 10,675 + 9,383
Sources..................
-----------------------------------------
Total Sources of Funds = 956,014 = 840,328
------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

Table 18--Total Sources of Funds, District Two
------------------------------------------------------------------------
Area 4 Area 5
------------------------------------------------------------------------
Recognized Assets: ... .............. ... ..............
Total Current Assets...... ... 498,456 ... 747,683
Total Current Liabilities. - 494,410 - 741,614
Current Notes Payable..... + 33,962 + 50,942
Total Property and + 436,063 + 654,094
Equipment (NET)..........
Land...................... - 0 - 0
Total Other Assets........ + 60,418 + 90,627
-----------------------------------------
Total Recognized = 534,488 = 801,733
Assets...............
------------------------------------------------------------------------
Non-Recognized Assets: ... .............. ... ..............
Total Investments and + 0 + 0
Special Funds............
-----------------------------------------
Total Non-Recognized = 0 = 0
Assets...............
------------------------------------------------------------------------
Total Assets: ... .............. ... ..............
Total Recognized Assets... ... 534,488 ... 801,733
Total Non-Recognized + 0 + 0
Assets...................
-----------------------------------------
Total Assets.......... = 534,488 = 801,733
------------------------------------------------------------------------
Recognized Sources of Funds: ... .............. ... ..............
Total Stockholder Equity.. ... 85,846 ... 128,768
Long-Term Debt............ + 414,681 + 622,022
Current Notes Payable..... + 33,962 + 50,942
Advances from Affiliated + 0 + 0
Companies................

[[Page 10377]]

Long-Term Obligations-- + 0 + 0
Capital Leases...........
-----------------------------------------
Total Recognized = 534,488 = 801,733
Sources..............
------------------------------------------------------------------------
Non-Recognized Sources of ... .............. ... ..............
Funds:
Pension Liability......... ... 0 ... 0
Other Non-Current + 0 + 0
Liabilities..............
Deferred Federal Income + 0 + 0
Taxes....................
Other Deferred Credits.... + 0 + 0
-----------------------------------------
Total Non-Recognized = 0 = 0
Sources..............
------------------------------------------------------------------------
Total Sources of Funds: ... .............. ... ..............
Total Recognized Sources.. ... 534,488 ... 801,733
Total Non-Recognized + 0 + 0
Sources..................
-----------------------------------------
Total Sources of Funds = 534,488 = 801,733
------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

Table 19--Total Sources of Funds, District Three
----------------------------------------------------------------------------------------------------------------
Area 6 Area 7 Area 8
----------------------------------------------------------------------------------------------------------------
Recognized Assets: ... .............. ... .............. ... ..............
Total Current Assets......................... ... 656,459 ... 281,340 ... 401,914
Total Current Liabilities.................... - 82,775 - 35,475 - 50,679
Current Notes Payable........................ + 7,730 + 3,313 + 4,733
Total Property and Equipment (NET)........... + 19,611 + 8,405 + 12,007
Land......................................... - 0 - 0 - 0
Total Other Assets........................... + 490 + 210 + 300
--------------------------------------------------------------
Total Recognized Assets.................. = 601,515 = 257,793 = 368,275
----------------------------------------------------------------------------------------------------------------
Non-Recognized Assets: ... .............. ... .............. ... ..............
Total Investments and Special Funds.......... + 0 + 0 + 0
--------------------------------------------------------------
Total Non-Recognized Assets.............. = 0 = 0 = 0
----------------------------------------------------------------------------------------------------------------
Total Assets: ... .............. ... .............. ... ..............
Total Recognized Assets...................... ... 601,515 ... 257,793 ... 368,275
Total Non-Recognized Assets.................. + 0 + 0 + 0
--------------------------------------------------------------
Total Assets............................. = 601,515 = 257,793 = 368,275
----------------------------------------------------------------------------------------------------------------
Recognized Sources of Funds: ... .............. ... .............. ... ..............
Total Stockholder Equity..................... ... 586,300 ... 251,271 ... 358,959
Long-Term Debt............................... + 7,485 + 3,208 + 4,583
Current Notes Payable........................ + 7,730 + 3,313 + 4,733
Advances from Affiliated Companies........... + 0 + 0 + 0
Long-Term Obligations - Capital Leases....... + 0 + 0 + 0
--------------------------------------------------------------
Total Recognized Sources................. = 601,515 = 257,793 = 368,275
----------------------------------------------------------------------------------------------------------------
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..................... ... 601,515 ... 257,792 ... 368,275
Total Non-Recognized Sources................. + 0 + 0 + 0
--------------------------------------------------------------
Total Sources of Funds................... = 601,515 = 257,792 = 368,275
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

[[Page 10378]]

Tables 17 through 19 also relate to the second part of the formula
for calculating the investment base. The second part establishes a
ratio between recognized sources of funds and total sources of funds.
Since non-recognized sources of funds (sources we do not recognize as
required to support pilotage operations) only exist for District One
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) for
Districts Two and Three. District One has a multiplier of 0.99. Table
20 applies the multiplier of 0.99 and 1 as necessary and shows the
investment base for each association. Table 20 also expresses these
results by area, because area results will be needed in subsequent
steps.

Table 20--Investment Base by Area and District
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Recognized Multiplier (ratio Investment
District Area recognized sources of Total sources of recognized to base ($)
assets ($) funds ($) of funds ($) total sources) \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
One................................................................ 1 927,159 945,339 956,014 0.99 916,806
2 814,966 830,945 840,328 0.99 805,866
------------------------------------------------------------------------------------
Total.......................................................... ...... ........... ........... ............... ................... 1,722,672
--------------------------------------------------------------------------------------------------------------------------------------------------------
Two \2\............................................................ 4 534,488 534,488 534,488 1 534,488
5 801,733 801,733 801,733 1 801,733
------------------------------------------------------------------------------------
Total.......................................................... ...... ........... ........... ............... ................... 1,336,221
--------------------------------------------------------------------------------------------------------------------------------------------------------
Three.............................................................. 6 601,515 601,515 601,515 1 601,515
7 257,793 257,792 257,792 1 257,793
8 368,275 368,275 368,275 1 368,275
------------------------------------------------------------------------------------
Total.......................................................... ...... ........... ........... ............... ................... 1,227,581
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ ``Investment base'' = ``Total recognized assets'' x ``Multiplier (ratio of recognized to total sources)''.
\2\ The pilot associations that provide pilotage services in Districts One and Three operate as partnerships. The pilot association that provides
pilotage service for District Two operates as a corporation.
Note: Numbers may not total due to rounding.

Step 5: Determination of Target Rate of Return. We determine a
market-equivalent return on investment (ROI) that will be allowed for
the recognized net capital invested in each association by its members.
We do not recognize capital that is unnecessary or unreasonable for
providing pilotage services. There are no non-recognized investments in
this year's calculations. The allowed ROI is based on the preceding
year's average annual rate of return for new issues of high-grade
corporate securities. For 2013, the preceding year, the allowed ROI was
4.24 percent, based on the average rate of return for that year on
Moody's AAA corporate bonds, which can be found at https://research.stlouisfed.org/fred2/series/AAA/downloaddata?cid=119.
Step 6: Adjustment Determination. The first part of the adjustment
determination requires an initial calculation, applying a formula
described in Appendix A. The formula uses the results from Steps 1, 2,
3, and 4 to project the ROI that can be expected in each area if no
further adjustments are made. This calculation is shown in Tables 21
through 23.

Table 21--Projected ROI, Areas in District One
------------------------------------------------------------------------
Area 1 Area 2
------------------------------------------------------------------------
Revenue (from Step 3)......... ... $2,417,285 ... $1,585,032
Operating Expenses (from Step - $603,313 - $458,153
1)...........................
Pilot Compensation (from Step - $1,393,964 - $845,981
2)...........................
Operating Profit/(Loss)....... = $420,009 = $280,899
Interest Expense (from audits) - $15,484 - $13,610
Earnings Before Tax........... = $404,525 = $267,289
Federal Tax Allowance......... - $0 - $0
Net Income.................... = $404,525 = $267,289
Return Element (Net Income + ... $420,009 ... $280,899
Interest)....................
Investment Base (from Step 4). / $916,806 / $805,866
Projected Return on Investment = 0.46 = 0.35
------------------------------------------------------------------------

Table 22--Projected ROI, Areas in District Two
------------------------------------------------------------------------
Area 4 Area 5
------------------------------------------------------------------------
Revenue (from Step 3)......... ... $1,223,262 ... $2,635,314
Operating Expenses (from Step - $512,027 - $768,048
1)...........................
Pilot Compensation (from Step - $676,785 - $1,393,964
2)...........................
Operating Profit/(Loss)....... = $34,450 = $473,302
Interest Expense (from audits) - $2,989 - $4,483
Earnings Before Tax........... = $31,461 = $468,819

[[Page 10379]]

Federal Tax Allowance......... - $5,200 - $7,800
Net Income.................... = $26,261 = $461,019
Return Element (Net Income + ... $29,250 ... $465,502
Interest)....................
Investment Base (from Step 4). / $534,488 / $801,733
Projected Return on Investment = 0.05 = 0.58
------------------------------------------------------------------------

Table 23--Projected ROI, Areas in District Three
----------------------------------------------------------------------------------------------------------------
Area 6 Area 7 Area 8
----------------------------------------------------------------------------------------------------------------
Revenue (from Step 3)............................ ... $1,969,800 ... $1,496,427 ... $1,442,677
Operating Expenses (from Step 1)................. - $811,899 - $347,957 - $497,081
Pilot Compensation (from Step 2)................. - $1,015,177 - $929,309 - $845,981
Operating Profit/(Loss).......................... = $142,724 = $219,161 = $99,615
Interest Expense (from audits)................... - $2,692 - $1,154 - $1,648
Earnings Before Tax.............................. = $140,032 = $218,007 = $97,967
Federal Tax Allowance............................ - $0 - $0 - $0
Net Income....................................... = $140,032 = $218,007 = $97,967
Return Element (Net Income + Interest)........... ... $142,724 ... $219,161 ... $99,615
Investment Base (from Step 4).................... / $601,515 / $257,793 / $368,275
Projected Return on Investment................... = 0.24 = 0.85 = 0.27
----------------------------------------------------------------------------------------------------------------

The second part required for Step 6 compares the results of Tables
21 through 23 with the target ROI (4.24 percent) we obtained in Step 5
to determine if an adjustment to the base pilotage rate is necessary.
Table 24 shows this comparison for each area.

Table 24--Comparison of projected ROI and Target ROI, by Area\1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 1 Area 2 Area 4 Area 5 Area 6 Area 7 Area 8
---------------------------------------------------------------------------------------------------------------
Southeast
St. Lawrence Lake Ontario Lake Erie Shoal to Port Lakes Huron St. Mary's Lake Superior
River Huron, MI and Michigan River
--------------------------------------------------------------------------------------------------------------------------------------------------------
Projected return on investment.......... 0.4581 0.3486 0.0547 0.5806 0.2373 0.8501 0.2705
Target return on investment............. 0.0424 0.0424 0.0424 0.0424 0.0424 0.0424 0.0424
Difference in return on investment...... 0.4157 0.3062 0.0123 0.5382 0.1949 0.8077 0.2281
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Note: Decimalization and rounding of the target ROI affects the display in this table but does not affect our calculations, which are based on the
actual figure.

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

Table 25--Revenue Needed To Recover Target ROI, by Area
--------------------------------------------------------------------------------------------------------------------------------------------------------
Investment base
Operating Target pilot (Step 4) x 4.24% Federal tax
Pilotage area expenses (Step compensation (Target ROI Step allowance Revenue needed
1) (Step 2) 5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters)............... $603,313 + 1,393,964 + 38,873 + 0 = 2,036,149
Area 2 (Undesignated waters)............. $458,153 + 845,981 + 34,169 + 0 = 1,338,302
Area 4 (Undesignated waters)............. $512,027 + 676,785 + 22,662 + 5,200 = 1,216,674
Area 5 (Designated waters)............... $768,048 + 1,393,964 + 33,993 + 7,800 = 2,203,805
Area 6 (Undesignated waters)............. $811,899 + 1,015,177 + 25,504 + 0 = 1,852,580

[[Page 10380]]

Area 7 (Designated waters)............... $347,957 + 929,309 + 10,930 + 0 = 1,288,197
Area 8 (Undesignated waters)............. $497,081 + 845,981 + 15,615 + 0 = 1,358,677
--------------------------------------------------------------------------------------------------------------
Total................................ $3,998,479 + 7,101,160 + 181,747 + 13,000 = 11,294,385
--------------------------------------------------------------------------------------------------------------------------------------------------------

The ``Revenue Needed'' column of Table 25 is less than the revenue we
projected in Table 16.

Step 7: Adjustment of Pilotage Rates. Finally, we calculate rate
adjustments by dividing the Step 6 revenue needed (Table 25) by the
Step 3 revenue projection (Table 16), to give us a rate multiplier for
each area. These rate adjustments are subject to adjustment based on
the requirements of agreements between the United States and Canada and
adjustment for other supportable circumstances. Tables 26 through 28
show these calculations.

Table 26--Rate Multiplier, Areas in District One
----------------------------------------------------------------------------------------------------------------
Area 1 Area 2
---------------- --------------------
Ratemaking projections St. Lawrence
River Lake Ontario
----------------------------------------------------------------------------------------------------------------
Revenue Needed (from Step 6)..................................... ... $2,036,149 ... $1,338,302
Revenue (from Step 3)............................................ / $2,417,285 / $1,585,032
Rate Multiplier.................................................. = 0.8423 = 0.8443
----------------------------------------------------------------------------------------------------------------

Table 27--Rate Multiplier, Areas in District Two
----------------------------------------------------------------------------------------------------------------
Area 4 Area 5
---------------- --------------------
Ratemaking projections Southeast Shoal to
Lake Erie Port Huron, MI
----------------------------------------------------------------------------------------------------------------
Revenue Needed (from Step 6)..................................... ... $1,216,674 ... $2,203,805
Revenue (from Step 3)............................................ / $1,223,262 / $2,635,314
Rate Multiplier.................................................. = 0.9946 = 0.8363
----------------------------------------------------------------------------------------------------------------

Table 28--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)........... ... $1,825,580 ... $1,288,197 ... $1,358,677
Revenue (from Step 3).................. / $1,969,800 / $1,496,427 / $1,442,677
Rate Multiplier........................ = 0.9405 = 0.8608 = 0.9418
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

We calculate a rate multiplier for adjusting the basic rates and
charges described in 46 CFR 401.420 and 401.428, and it is applicable
in all areas. We divide total revenue needed (Step 6, Table 25) by
total projected revenue (Steps 3 and 3.A, Table 16). Table 29 shows
this calculation.

Table 29--Rate Multiplier for Basic Rates and Charges in 46 CFR 401.420
and 401.428
------------------------------------------------------------------------

------------------------------------------------------------------------
Ratemaking Projections:
Total Revenue Needed (from Step 6)............. ... $11,294,385
Total revenue (from Step 3).................... / $12,769,797
Rate Multiplier.................................... = 0.884
------------------------------------------------------------------------

Using this table, we calculate 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).
The result is a decrease by 11.55 percent in all areas.
Without further action, the existing rates we established in our
2014 final rule would then be multiplied by the rate multipliers from
Tables 29 through 31 to calculate the area by area rate changes for
2015. The resulting 2015 rates across the Great Lakes, on average,
would then decrease by approximately 12 percent from the 2014 rates.
This decrease is not due to increased

[[Page 10381]]

efficiencies in pilotage services but rather a result of adjustments to
AMOU contract data.
We decline to impose this decrease because recently completed
independent audits of pilot association revenues detail a significant
gap between revenues projected by the Coast Guard and those actually
collected by the pilot associations. Implementing a rate decrease would
further widen this disparity and adversely impact the provision of
safe, efficient, and reliable pilotage service on the Great Lakes. In
light of the revenue studies, our initial proposal in the NPRM to raise
rates 2.5 percent in order to gain parity with the Canadian GLPA now
appears insufficient to ensure the funding of safe, efficient, and
reliable pilotage service. In 46 U.S.C. 9303(f), the statute states
``The Secretary shall prescribe by regulation rates and charges for
pilotage services, giving consideration to the public interest and the
costs of providing the services.'' We believe the public interest is
best served through promotion of safe, efficient, and reliable pilotage
service. Sufficient revenue to fund safe, efficient, and reliable
pilotage operations are considered integral to the public interest.
Table 30 demonstrates the results of the revenue audits compared to our
projections.

Table 30--Revenue Gap
----------------------------------------------------------------------------------------------------------------
Actual revenue Revenue shortfall
District Ratemaking revenue audits (projections minus
projections (2015) (2013) actual)
----------------------------------------------------------------------------------------------------------------
1............................................. $4,002,317 $3,406,164 $596,153
2............................................. 3,858,576 3,169,377 689,199
3............................................. 4,908,904 4,323,965 584,939
----------------------------------------------------------------------------------------------------------------

Further, the gap captured in Table 30 actually underestimates the
revenue gap because the projections of the current rulemaking rely on
the alterations of proprietary union contracts. Table 31 illustrates
the average U.S. Registered Pilot compensation, assuming all revenue
remaining after expenses is distributed as compensation.

Table 31--2013 Average Actual Compensation *
----------------------------------------------------------------------------------------------------------------
Total Approximate
District Revenues Expenses available for Number of compensation
compensation pilots ** per pilot
----------------------------------------------------------------------------------------------------------------
1............................ $3,406,164 $1,272,365 $2,133,799 11 $193,982
2............................ 3,169,377 1,461,438 1,707,939 10 170,794
3............................ 4,323,965 1,778,118 2,545,847 17 149,756
----------------------------------------------------------------------------------
Total.................... 10,899,506 4,511,921 6,387,585 38 168,094
----------------------------------------------------------------------------------------------------------------
* The Coast Guard does not establish pay procedures for the pilot associations, rather we set a target rate of
compensation for general compensation calculation.
** The District Three Association actually employed 13 pilots during this timeframe; their approximate
compensation per pilot is higher than this table depicts. Seventeen pilots were authorized in the rate.

These figures demonstrate the significant shortfall in pilot
compensation compared to an estimated present value of 2011
compensation (the last figures are not in dispute) of approximately
$260,000. We believe $260,000 is a fair estimate of what pilot
compensation should be based on uncontested figures from previous AMOU
contracts. The gap of almost $90,000 between approximate actual
compensation and our estimates of where pilot compensation should stand
place the pilot associations in an untenable position. We believe it is
imperative to act quickly to raise the revenue needed to sustain pilot
association operations and compensate pilots in a fair and reasonable
manner. This gap also highlights a significant discrepancy in the
actual salaries of U.S. Registered Pilots compared to the Canadian
Registered Pilots of the GLPA, estimated to be approximately ($US)
250,000. We must work quickly to rebaseline the billing scheme and
raise the revenue necessary to continue to sustain safe, efficient, and
reliable pilotage service on the Great Lakes. We believe the shortfalls
in revenue are caused by an overprojection of bridge hours and to a
larger extent, an inadequate billing scheme. To this end, we will
adjust our proposal to raise rates in all areas by 10 percent in a
concerted effort to begin closing the established gap between
compensation of U.S. and Canadian Registered Pilots, as well as the gap
between actual salaries and previous estimates. This percentage
increase is high enough above inflation to begin closing the revenue
gap without being unduly burdensome to industry. We believe sustained,
steady rate increases to close the gap are more responsible than a one-
time action. This replaces our initial projections of a 2.5 percent
increase in all areas. We will seek to address the underlying
methodology challenges in a future rulemaking.
Therefore, we rely on the discretionary authority we have under
Step 7 to further adjust rates and begin closing the gap between
revenues projected by the Coast Guard and those collected by the pilot
associations. Table 32 compares the impact, area by area, that an
average decrease of 12 percent would have, relative to the impact each
area would experience if United States rates increase.

[[Page 10382]]

Table 32--Impact of Exercising Step 7 Discretion
----------------------------------------------------------------------------------------------------------------
Percent change in rate Percent change in rate
Area without exercising Step with exercise of Step 7
7 discretion discretion
----------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters).................................... -15.77 10
Area 2 (Undesignated waters).................................. -15.57 10
Area 4 (Undesignated waters).................................. -0.54 10
Area 5 (Designated waters).................................... -16.37 10
Area 6 (Undesignated waters).................................. -5.95 10
Area 7 (Designated waters).................................... -13.92 10
Area 8 (Undesignated waters).................................. -5.82 10
----------------------------------------------------------------------------------------------------------------

The following tables reflect our rate adjustments of 10 percent
across all areas.
Tables 33 through 35 show these calculations.

Table 33--Adjustment of Pilotage Rates, Areas in District One
----------------------------------------------------------------------------------------------------------------
Rate
2014 Rate multiplier Adjusted rate for 2015
----------------------------------------------------------------------------------------------------------------
Area 1
St. Lawrence River
Basic Pilotage.................. $19.22/km, $34.02/mi x 1.1 = $21.14/km, $37.42/mi
Each lock Transited............. $426 x 1.1 = $469
Harbor movage................... 1,395 x 1.1 = 1,535
Minimum basic rate, St. Lawrence 931 x 1.1 = 1,024
River..........................
Maximum rate, through trip...... 4,084 x 1.1 = 4,492
Area 2
Lake Ontario
6-hour period................... 872 x 1.1 = 959
Docking or Undocking............ 832 x 1.1 = 915
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

In addition to the rate charges in Table 33, as we explain in the
Summary section of Part VI of this preamble, we are authorizing
District One to implement a temporary supplemental 10 percent charge on
each source form (the ``bill'' for pilotage service) for the duration
of the 2015 shipping season, which begins in March 2015. District One
will be required to provide us with monthly status reports once this
surcharge becomes effective for the duration of the 2015 shipping
season. We will exclude these expenses from future rates and any
surcharge surplus/deficit from the 2014 season would impact the final
authorized surcharge for the 2015 season.

Table 34--Adjustment of Pilotage Rates, Areas in District Two
----------------------------------------------------------------------------------------------------------------
Rate Adjusted rate
2014 Rate multiplier for 2015
----------------------------------------------------------------------------------------------------------------
Area 4
Lake Erie
6-hour period..................................... $849 x 1.1 = $934
Docking or undocking.............................. 653 x 1.1 = 718
Any point on Niagara River below Black Rock Lock.. 1,667 x 1.1 = 1,834
Area 5
Southeast Shoal to Port Huron, MI between any point on
or in
Toledo or any point on Lake Erie W. of Southeast 1,417 x 1.1 = 1,559
Shoal............................................
Toledo or any point on Lake Erie W. of Southeast 2,397 x 1.1 = 2,637
Shoal & Southeast Shoal..........................
Toledo or any point on Lake Erie W. of Southeast 3,113 x 1.1 = 3,424
Shoal & Detroit River............................
Toledo or any point on Lake Erie W. of Southeast 2,397 x 1.1 = 2,637
Shoal & Detroit Pilot Boat.......................
Port Huron Change Point & Southeast Shoal (when 4,176 x 1.1 = 4,594
pilots are not changed at the Detroit Pilot Boat)
Port Huron Change Point & Toledo or any point on 4,837 x 1.1 = 5,321
Lake Erie W. of Southeast Shoal (when pilots are
not changed at the Detroit Pilot Boat)...........
Port Huron Change Point & Detroit River........... 3,137 x 1.1 = 3,451
Port Huron Change Point & Detroit Pilot Boat...... 2,441 x 1.1 = 2,685
Port Huron Change Point & St. Clair River......... 1,735 x 1.1 = 1,909
St. Clair River................................... 1,417 x 1.1 = 1,559
St. Clair River & Southeast Shoal (when pilots are 4,176 x 1.1 = 4,594
not changed at the Detroit Pilot Boat)...........
St. Clair River & Detroit River/Detroit Pilot Boat 3,137 x 1.1 = 3,451
Detroit, Windsor, or Detroit River................ 1,417 x 1.1 = 1,559
Detroit, Windsor, or Detroit River & Southeast 2,397 x 1.1 = 2,637
Shoal............................................

[[Page 10383]]

Detroit, Windsor, or Detroit River & Toledo or any 3,113 x 1.1 = 3,424
point on Lake Erie W. of Southeast Shoal.........
Detroit, Windsor, or Detroit River & St. Clair 3,137 x 1.1 = 3,451
River............................................
Detroit Pilot Boat & Southeast Shoal.............. 1,735 x 1.1 = 1,909
Detroit Pilot Boat & Toledo or any point on Lake 2,397 x 1.1 = 2,637
Erie W. of Southeast Shoal.......................
Detroit Pilot Boat & St. Clair River.............. 3,137 x 1.1 = 3,451
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

In addition to the rate charges in Table 34, and for the reasons we
discussed in the Summary section of Part VI of this preamble, we are
authorizing District Two to implement a temporary supplemental 10
percent charge on each source form for the duration of the 2015
shipping season, which begins in March 2015. District Two will be
required to provide us with monthly status reports once this surcharge
becomes effective for the duration of the 2015 shipping season. We will
exclude these expenses from future rates.

Table 35--Adjustment of Pilotage Rates, Areas in District Three
----------------------------------------------------------------------------------------------------------------
Rate Adjusted rate
2014 Rate multiplier for 2015
----------------------------------------------------------------------------------------------------------------
Area 6
Lakes Huron and Michigan
6-hour Period..................................... $708 x 1.1 = $779
Docking or undocking.............................. 672 x 1.1 = 739
Area 7
St. Mary's River between any point on or in
Gros Cap & De Tour................................ 2,648 x 1.1 = 2,913
Algoma Steel Corp. Wharf, Sault Ste. Marie, Ont. & 2,648 x 1.1 = 2,913
De Tour..........................................
Algoma Steel Corp. Wharf, Sault Ste. Marie, Ont. & 997 x 1.1 = 1,097
Gros Cap.........................................
Any point in Sault Ste. Marie, Ont., except the 2,219 x 1.1 = 2,441
Algoma Steel Corp. Wharf & De Tour...............
Any point in Sault Ste. Marie, Ont., except the 997 x 1.1 = 1,097
Algoma Steel Corp. Wharf & Gros Cap..............
Sault Ste. Marie, MI & De Tour.................... 2,219 x 1.1 = 2,441
Sault Ste. Marie, MI & Gros Cap................... 997 x 1.1 = 1,097
Harbor movage..................................... 997 x 1.1 = 1,097
Area 8
Lake Superior
6-hour period..................................... 601 x 1.1 = 661
Docking or undocking.............................. 571 x 1.1 = 628
----------------------------------------------------------------------------------------------------------------
Note: Numbers may not total due to rounding.

In addition to the rate charges in Table 35, and for the reasons we
discussed in the Summary section of Part VI of this preamble, we are
authorizing District Three to implement a temporary supplemental 10
percent charge on each source form for the duration of the 2015
shipping season, which begins in March 2015. District Three will be
required to provide us with monthly status reports once this surcharge
becomes effective for the duration of the 2015 shipping season. We will
exclude these expenses from future rates.

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.
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 2015 shipping season to generate
sufficient revenue to cover allowable expenses, and to target pilot
compensation and returns on pilot associations' investments. The rate
adjustments in this rule will, if codified, lead to an increase in the
cost per unit

[[Page 10384]]

of service to shippers in all three districts, and result in an
estimated annual cost increase to shippers of approximately $1,276,980
across all three districts over 2014 rates--an increase of 10 percent.
In addition to the increase in payments that will be incurred by
shippers in all three districts from the previous year as a result of
the discretionary rate adjustments, we are authorizing temporary,
supplemental surcharges to traffic across all three districts in order
for the pilotage associations to recover training expenses and
technology improvements that were incurred throughout the 2013 and 2014
shipping seasons. These temporary surcharges will be authorized for the
duration of the 2015 shipping season, which begins in March. The
additional revenue due to the temporary surcharges was calculated by
multiplying the surcharge percentage by the projected revenue needed in
2015 for each district (Table 37). We estimate that these temporary
surcharges will generate a combined $1,404,678 in revenue for the
pilotage associations across all three districts. In District One, the
10 percent surcharge is expected to generate an additional $440,255 in
revenue. In District Two, the 10 percent surcharge is expected to
generate $424,443 in additional revenue. In District Three, the 10
percent surcharge is expected to generate an additional $539,979 in
revenue. At the end of the 2015 shipping season, we will account for
the monies the surcharges generate and make adjustments (debits/
credits) to the operating expenses for the following year.
Therefore, after accounting for the implementation of the temporary
surcharges on traffic across all three districts, the payments made by
shippers during the 2015 shipping season are estimated to be
approximately $2,681,657 more than the payments that were made in
2014.\4\
---------------------------------------------------------------------------

\4\ Total payments across all three districts are equal to the
increase in payments incurred by shippers as a result of the rate
changes plus the temporary surcharges applied to traffic in
Districts One, Two, and Three.
---------------------------------------------------------------------------

A regulatory assessment follows.
The final rule applies 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 10
percent overall from the current rates set in the 2014 final rule. The
Appendix A methodology is discussed and applied in detail in Part VI of
this preamble. Among other factors described in Part VI, it reflects
audited 2012 financial data from the pilotage associations (the most
recent year available for auditing), projected association expenses,
and regional inflation or deflation. The last full Appendix A
ratemaking was concluded in 2014 and used financial data from the 2011
base accounting year. The last annual rate review, conducted under 46
CFR part 404, Appendix C, was completed early in 2011.
The shippers affected by these rate adjustments are those owners
and operators of domestic vessels operating on register (employed in
foreign trade) and owners and operators of foreign vessels on a route
within the Great Lakes system. These owners and operators must have
pilots or pilotage service as required by 46 U.S. C. 9302. There is no
minimum tonnage limit or exemption for these vessels. The statute
applies only to commercial vessels and not to recreational vessels.
Owners and operators of other vessels that are not affected by this
final rule, such as recreational boats and vessels operating only
within the Great Lakes system, may elect to purchase pilotage services.
However, this election is voluntary and does not affect our calculation
of the rate and is not a part of our estimated national cost to
shippers.
We used 2011-2013 vessel arrival data from the Coast Guard's Marine
Information for Safety and Law Enforcement (MISLE) system to estimate
the average annual number of vessels affected by the rate adjustment.
Using that period, we found that approximately 114 different 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
made more than one distinct stop, docking, loading, and unloading at
facilities in Great Lakes ports. Of the total trips for the 114
vessels, there were approximately 353 annual U.S. port arrivals before
the vessels left the Great Lakes system, based on 2011-2013 vessel data
from MISLE.
The impact of the rate adjustment to shippers is estimated from the
District pilotage revenues. These revenues represent the 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 2014,
based on the 2014 rate adjustment, and the total projected revenue
needed to cover costs in 2015, 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 2015 after making the
discretionary adjustment to pilotage rates as discussed in Step 7 of
Part V of this preamble. Table 37 summarizes the derivation for
calculating the revenue expected to be generated as a result of the
temporary surcharges applied to traffic in all three districts as
discussed in Step 7 of Part V of this preamble. Table 38 details the
additional cost increases to shippers by area and district as a result
of the rate adjustments and temporary surcharges on traffic in
Districts One, Two, and Three.
---------------------------------------------------------------------------

\5\ 2014 Pilotage Rates are described in Table 16 of this rule.
\6\ The estimated rate changes are described in Table 32 of this
rule.
\7\ 2015 Pilotage Rates--2014 Pilotage Rates x Rate Change.
\8\ Projected 2015 Bridge Hours are described in Table 14 of
this rule.
\9\ Projected Revenue Needed in 2015--2015 Pilotage Rates x
Projected 2015 Bridge Hours.

Table 36--Rate Adjustment by Area and District
[$U.S.; Non-discounted]
----------------------------------------------------------------------------------------------------------------
Projected
2014 Pilotage Rate change 2015 Pilotage Projected 2015 revenue
rates \5\ \6\ rates \7\ bridge hours needed in 2015
\8\ \9\
----------------------------------------------------------------------------------------------------------------
Area 1.......................... $472.50 1.10 $519.74 5,116 $2,659,014
Area 2.......................... 291.96 1.10 321.15 5,429 1,743,536
-------------------------------------------------------------------------------

[[Page 10385]]

Total, District One......... .............. .............. .............. .............. 4,402,549
Area 4.......................... 210.40 1.10 231.44 5,814 1,345,588
Area 5.......................... 521.64 1.10 573.80 5,052 2,898,845
-------------------------------------------------------------------------------
Total, District Two......... .............. .............. .............. .............. 4,244,433
Area 6.......................... 204.95 1.10 225.45 9,611 2,166,780
Area 7.......................... 495.01 1.10 544.52 3,023 1,646,070
Area 8.......................... 191.34 1.10 210.47 7,540 1,586,945
-------------------------------------------------------------------------------
Total, District Three....... .............. .............. .............. .............. 5,399,795
----------------------------------------------------------------------------------------------------------------
* Some values may not total due to rounding.

Table 37--Derivation of Temporary Surcharge
--------------------------------------------------------------------------------------------------------------------------------------------------------
Area 1 Area 2 Area 4 Area 5 Area 6 Area 7 Area 8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Projected Revenue Needed in 2015........ $2,659,014 $1,743,536 $1,345,588 $2,898,845 $2,166,780 $1,646,070 $1,586,945
Surcharge Rate.......................... 10% 10% 10% 10% 10% 10% 10%
Surcharge Raised........................ $265,901 $174,354 $134,559 $289,885 $216,678 $167,607 $158,694
---------------------------------------------------------------------------------------------------------------
Total Surcharge..................... $440,255
$424,443
$539,979
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 38--Impact of the Rule by Area and District
[$U.S.; Non-discounted]
----------------------------------------------------------------------------------------------------------------
Total costs or
savings of
this final
Projected Projected Additional rule
revenue revenue Temporary revenue or (additional
needed in needed in surcharge costs 2015 revenue or
2014 \10\ 2015 \11\ (2015-2014) costs
2015+temporary
surcharge)
----------------------------------------------------------------------------------------------------------------
Area 1.......................... $2,417,285 $2,659,014 $265,901 $241,729 $507,630
Area 2.......................... 1,585,032 1,743,536 174,354 158,503 332,857
-------------------------------------------------------------------------------
Total, District One......... 4,002,318 4,402,549 440,255 400,232 840,487
Area 4.......................... 1,223,262 1,345,588 134,559 122,326 256,885
Area 5.......................... 2,635,314 2,898,845 289,885 263,531 553,416
-------------------------------------------------------------------------------
Total, District Two......... 3,858,576 4,244,433 424,443 385,858 810,301
Area 6.......................... 1,969,800 2,166,780 216,678 196,980 413,658
Area 7.......................... 1,496,427 1,646,070 164,607 149,643 314,250
Area 8.......................... 1,442,677 1,586,945 158,694 144,268 302,962
-------------------------------------------------------------------------------
Total, District Three....... 4,908,904 5,399,795 539,979 490,890 1,030,870
System Total................ 12,769,797 14,046,777 1,404,678 1,276,980 2,681,657
----------------------------------------------------------------------------------------------------------------
* Some values may not total due to rounding.

After applying the discretionary rate change in this rule, the
resulting difference between the projected revenue in 2014 and the
projected revenue in 2015 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 will incur for pilotage services from this rule.
---------------------------------------------------------------------------

\10\ Projected revenue needed in 2014 is described in Table 16
of this rule.
\11\ Projected revenue needed in 2015 is described in Table 36
of this rule.
---------------------------------------------------------------------------

The impact of the discretionary rate adjustment on shippers varies
by area and district in this final rule. The discretionary rate
adjustments will lead to affected shippers operating in District One,
District Two, and District Three experiencing an increase in payments
of $400,232, $385,858, and $490,890, respectively, from the previous
year.
In addition to the rate adjustments, temporary surcharges on
traffic in District One, District Two, and District Three will be
applied for the duration of the 2015 season in order for the pilotage
associations to recover training expenses and technology investments
incurred during the 2013 and 2014

[[Page 10386]]

shipping seasons. We estimate that these surcharges will generate an
additional $440,255, $424,443, and $539,979 in revenue for the pilotage
associations in District One, District Two, and District Three,
respectively. At the end of the 2015 shipping season, we will account
for the monies the surcharges generate and make adjustments (debits/
credits) to the operating expenses for the following year.\12\
---------------------------------------------------------------------------

\12\ Our projections indicate in the 2016 rulemaking we will
apply a surcharge of $112,226 for District One shippers at the end
of the 2015 season in order to account for the difference between
the total surcharges collected ($440,255) and the actual expenses
incurred by the District One pilot association ($328,029 for
training expenses), District Two shippers $98,614 (calculation:
$424,443 (total surcharges collected) minus $300,000 to train two
applicant pilots and ($25,829.80 for technology improvements)), and
District Three shippers $213,029 (calculation: $539,979 (total
surcharges collected) minus $326,950 (actual training expenses
incurred)).
---------------------------------------------------------------------------

To calculate an exact cost or savings per vessel is difficult
because of the variation in vessel types, routes, port arrivals,
commodity carriage, time of season, conditions during navigation, and
preferences for the extent of pilotage services on designated and
undesignated portions of the Great Lakes system. Some owners and
operators will pay more and some would pay less, depending on the
distance travelled and the number of port arrivals by their vessels.
However, the increase in costs reported earlier in this rule does
capture the adjustment in payments that shippers will experience from
the previous year. The overall adjustment in payments, after taking
into account the increase in pilotage rates and the addition of
temporary surcharges will be an increase in payments by shippers of
approximately $2,681,657 across all three districts.
This rule will allow the Coast Guard to meet the requirements in 46
U.S. C. 9303 to review the rates for pilotage services on the Great
Lakes, thus ensuring proper pilot compensation.
Alternatively, if we imposed the new rates based on the new
contract data from AMOU, instead of using the discretionary rate
adjustment described in Step 7, there would be an approximately 12
percent decrease in rates across the system. Instead of shippers
experiencing an increase in payments of approximately $1,276,980 \13\
from the previous year, as a result of the rate adjustments, shippers
would instead experience a reduction in payments of approximately
$1,475,412.\14\ Table 39 details projected revenue needed to cover
costs in 2015 if the discretionary adjustment to pilotage rates as
discussed in Step 7 of Part V of this preamble is not made. Table 40
details the additional costs or savings by area and district as a
result of this alternative proposal.
---------------------------------------------------------------------------

\13\ This figure is the total costs or savings of the final rule
minus the surcharges.
\14\ This figure does not include the additional payments
incurred by shippers as a result of the temporary surcharges applied
to traffic in all three districts. The figure is equal to the total
additional costs or savings of this final rule minus the temporary
surcharges (see Table 40).
\15\ The estimated rate changes are described in Table 32 of
this final rule.

Table 39--Alternative Rate Adjustment by Area and District
[$U.S.; Non-discounted]
----------------------------------------------------------------------------------------------------------------
2014 Pilotage Rate change 2015 Pilotage Projected 2015 Projected revenue
rates \15\ rates bridge hours needed in 2015
----------------------------------------------------------------------------------------------------------------
Area 1....................... $472.50 0.8423 $398.00 5,116 $2,036,149
Area 2....................... 291.96 0.8443 246.51 5,429 1,338,302
----------------------------------------------------------------------------------
Total, District One...... .............. .............. .............. .............. 3,374,451
Area 4....................... 210.40 0.9946 209.27 5,814 1,216,674
Area 5....................... 521.64 0.8363 436.22 5,052 2,203,805
----------------------------------------------------------------------------------
Total, District Two...... .............. .............. .............. .............. 3,420,480
Area 6....................... 204.95 0.9405 192.76 9,611 1,852,580
Area 7....................... 495.01 0.8608 426.13 3,023 1,288,197
Area 8....................... 191.34 0.9418 180.20 7,540 1,358,677
----------------------------------------------------------------------------------
Total, District Three.... .............. .............. .............. .............. 4,499,454
System Total............. .............. .............. .............. .............. 11,294,385
----------------------------------------------------------------------------------------------------------------
\*\ Some values may not total due to rounding.

Table 40--Alternative Impact of the Rule by Area and District
[$U.S.; Non-discounted]
----------------------------------------------------------------------------------------------------------------
Projected Projected Additional costs
revenue needed revenue needed Temporary or savings of
in 2014 in 2015 surcharge this rule
----------------------------------------------------------------------------------------------------------------
Area 1................................. $2,417,285 $2,036,149 $203,615 ($177,521)
Area 2................................. 1,585,032 1,338,302 133,830 (112,900)
------------------------------------------------------------------------
Total, District One................ 4,002,318 3,374,451 337,445 (290,421)
Area 4................................. 1,223,262 1,216,674 121,667 115,080
Area 5................................. 2,635,314 2,203,805 220,381 (211,128)
------------------------------------------------------------------------
Total, District Two................ 3,858,576 3,420,480 342,048 (96,048)
Area 6................................. 1,969,800 1,852,580 185,258 68,038
Area 7................................. 1,496,427 1,288,197 128,820 (79,411)
Area 8................................. 1,442,677 1,358,677 135,868 51,868
------------------------------------------------------------------------

[[Page 10387]]

Total, District Three.............. 4,908,904 4,499,454 449,945 40,495
------------------------------------------------------------------------
System Total....................... 12,769,797 11,294,385 1,129,439 (345,974)
----------------------------------------------------------------------------------------------------------------
\*\ Some values may not total due to rounding.

We reject this alternative, however, because independent audits of
pilot association revenues details a nearly $2 million gap between
Coast Guard revenue projections and the amount of revenues actually
collected. A rate decrease would only further widen this disparity, and
would also jeopardize the ability of pilotage associations to provide
safe, efficient, and reliable pilotage service. A rate increase of 10
percent in all areas will lessen the gap between revenues projected by
the Coast Guard and those collected by pilot associations, and the gap
between the actual salaries of U.S. Registered Pilots and Canadian
Registered Pilots of the GLPA. 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
people.
We expect that entities affected by the final rule will be
classified under the North American Industry Classification System
(NAICS) code subsector 483-Water Transportation, which includes the
following 6-digit NAICS codes for freight transportation: 483111--Deep
Sea Freight Transportation, 483113--Coastal and Great Lakes Freight
Transportation, and 483211--Inland Water Freight Transportation.
According to the Small Business Administration's definition, a U.S.
company with these NAICS codes and employing less than 500 employees is
considered a small entity.
For the final rule, we reviewed recent company size and ownership
data for the period 2011 through 2013 in the Coast Guard's MISLE
database, and we reviewed 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 rule that receive
revenue from pilotage services. These are the three pilot associations
that provide and manage pilotage services within the Great Lakes
districts. Two of the associations operate as partnerships and one
operates as a corporation. These associations are designated with the
same NAICS industry classification and small-entity size standards
described above, but they have fewer than 500 employees; combined, they
have approximately 65 total employees. We expect no adverse impact to
these entities from this rule because through this rulemaking, all the
pilot associations are provided with additional revenue to offset some
of the projected expenses associated with the projected number of
bridge hours and pilots, and to keep them on par with their Canadian
counterparts.
Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that
this 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 (Pub. L. 104-121), we offered to assist small
entities in understanding this rule so that they can better evaluate
its effects on them and participate in the rulemaking. 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 OMB Control Number 1625-0086, Great Lakes Pilotage Methodology.

E. Federalism

A rule has implications for federalism under E.O. 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 E.O. 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 specified in
46 U.S.C. 9306. Under 46 U.S.C. 9306, a ``State or political
subdivision of a State may not regulate or impose any requirement on
pilotage on the Great Lakes.'' As a result, States or local governments
are expressly prohibited from regulating within this category.
Therefore, this rule is consistent with the principles of federalism
and preemption requirements in E.O. 13132.

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

[[Page 10388]]

that may result in the expenditure by a State, local, or tribal
government, in the aggregate, or by the private sector of $100,000,000
(adjusted for inflation) or more in any one year. Though this rule
would not result in such expenditure, we 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. The Administrator of the
Office of Information and Regulatory Affairs has not designated it as a
significant energy action. Therefore, it does not require a Statement
of Energy Effects under E.O. 13211.

L. Technical Standards

The National Technology Transfer and Advancement Act (15 U.S.C.
272, note) directs agencies to use voluntary consensus standards in
their regulatory activities unless the agency provides Congress,
through the OMB, with an explanation of why using these standards would
be inconsistent with applicable law or otherwise impractical. Voluntary
consensus standards are technical standards (e.g., specifications of
materials, performance, design, or operation; test methods; sampling
procedures; and related management systems practices) that are
developed or adopted by voluntary consensus standards bodies. This rule
does not use technical standards. Therefore, we did not consider the
use of voluntary consensus standards.

M. Environment

We have analyzed this rule under Department of Homeland Security
Management Directive 023-01 and Commandant Instruction M16475.lD, which
guide the Coast Guard in complying with the National Environmental
Policy Act of 1969 (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. This final rule involves regulations that are editorial
or procedural and fall under section 2.B.2, figure 2-1, paragraph
(34)(a) of the Instruction.

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:

Title 46--Shipping

PART 401--GREAT LAKES PILOTAGE REGULATIONS

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

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

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

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

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

------------------------------------------------------------------------
Service St. Lawrence River
------------------------------------------------------------------------
Basic Pilotage............................ $21.13 per kilometer or
$37.42 per mile.\1\
Each Lock Transited....................... $469.\1\
Harbor Movage............................. $1,535.\1\
------------------------------------------------------------------------
\1\ The minimum basic rate for assignment of a pilot in the St. Lawrence
River is $1,024, and the maximum basic rate for a through trip is
$4,492.

(b) Area 2 (Undesignated Waters):

------------------------------------------------------------------------
Service Lake Ontario
------------------------------------------------------------------------
6-hour Period......................................... $959
Docking or Undocking.................................. 915
------------------------------------------------------------------------

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

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

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

------------------------------------------------------------------------
Lake Erie (East
Service of Southeast Buffalo
Shoal)
------------------------------------------------------------------------
6-hour Period....................... $934 $934
Docking or Undocking................ 718 718
Any point on the Niagara River below N/A 1,834
the Black Rock Lock................
------------------------------------------------------------------------

(b) Area 5 (Designated Waters):

[[Page 10389]]

----------------------------------------------------------------------------------------------------------------
Toledo or any
point on Lake
Any point on or in Southeast Erie west of Detroit River Detroit Pilot St. Clair
Shoal Southeast Boat River
Shoal
----------------------------------------------------------------------------------------------------------------
Toledo or any port on Lake Erie $2,637 $1,559 $3,424 $2,637 N/A
west of Southeast Shoal........
Port Huron Change Point......... \1\ 4,594 \1\ 5,321 3,451 2,685 1,909
St. Clair River................. \1\ 4,594 N/A 3,451 3,451 1,559
Detroit or Windsor or the 2,637 3,424 1,559 N/A 3,451
Detroit River..................
Detroit Pilot Boat.............. 1,909 2,637 N/A N/A 3,451
----------------------------------------------------------------------------------------------------------------
\1\ When pilots are not changed at the Detroit Pilot Boat.

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

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

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

------------------------------------------------------------------------
Lakes Huron and
Service Michigan
------------------------------------------------------------------------
6-hour Period......................................... $779
Docking or Undocking.................................. 739
------------------------------------------------------------------------

(b) Area 7 (Designated Waters):

----------------------------------------------------------------------------------------------------------------
Area De tour Gros cap Any harbor
----------------------------------------------------------------------------------------------------------------
Gros Cap........................................................ $2,913 N/A N/A
Algoma Steel Corporation Wharf at Sault Ste. Marie, Ontario..... 2,913 $1,097 N/A
Any point in Sault Ste. Marie, Ontario, except the Algoma Steel 2,441 1,097 N/A
Corporation Wharf..............................................
Sault Ste. Marie, MI............................................ 2,441 1,097 N/A
Harbor Movage................................................... N/A N/A $1,097
----------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------
Service Lake Superior
------------------------------------------------------------------------
6-hour Period......................................... $661
Docking or Undocking.................................. 628
------------------------------------------------------------------------

Sec. 401.420 [Amended]

0
5. Amend Sec. 401.420 as follows:
0
a. In paragraph (a), remove the text ``$129'' and add, in its place,
the text ``$142''; and remove the text ``$2,021'' and add, in its
place, the text ``$2,223'';
0
b. In paragraph (b), remove the text ``$129'' and add, in its place,
the text ``$142''; and remove the text ``$2,021'' and add, in its
place, the text ``$2,223''; and
0
c. In paragraph (c)(1), remove the text ``$763'' and add, in its place,
the text ``$839''; in paragraph (c)(3), remove the text ``$129'' and
add, in its place, the text ``$142''; and remove the text ``$2,021''
and add, in its place, the text ``$2,223''.

Sec. 401.428 [Amended]

0
6. In Sec. 401.428, remove the text ``$763'' and add, in its place,
the text ``$839''.

Dated: February 23, 2015.
Gary C. Rasicot,
Director, Marine Transportation Systems, U.S. Coast Guard.
[FR Doc. 2015-04036 Filed 2-25-15; 8:45 am]
BILLING CODE 9110-04-P

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