Great Lakes Pilotage Rates-2023 Annual Ratemaking and Review of Methodology, 12226-12258 [2023-03212]
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Federal Register / Vol. 88, No. 38 / Monday, February 27, 2023 / Rules and Regulations
Congressional Review
This regulation is not a major rule as
defined in 5 U.S.C. 804.
§ 1336.50 Financial and administrative
requirements.
Executive Orders 12866 and 13563—
Regulatory Impact Analysis
*
Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory
alternatives and, if the regulation is
necessary, to select the 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. While there
are some costs associated with these
regulations, they are not economically
significant as defined under Executive
Order 12866. However, the regulation is
significant and has been reviewed by
Office of Management and Budget.
The regulation change will benefit
recipients that have been financially
impacted by an emergency event and
are unable to meet their matching cost
requirement, as required by the grant
award. It would reduce the financial
burden to recipients that need a waiver
to provide the 20 percent cost share. To
the extent that this final rule results in
transfers, they will not exceed the
threshold for economic significance
because the total funding level for the
program is below the threshold. Also,
there is no cost to the agency other than
the administrative time that it would
take to review and if approved, process
the waiver request.
January Contreras, Assistant Secretary
of the Administration for Children and
Families, approved this document on
January 24, 2023.
List of Subjects in 45 CFR Part 1336
Disaster assistance, Emergency
preparedness, Native Americans, Public
health.
Dated: February 22, 2023.
Xavier Becerra,
Secretary, Department of Health and Human
Services.
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For the reasons stated in the
preamble, we amend 45 CFR part 1336
as follows:
PART 1336—NATIVE AMERICAN
PROGRAMS
1. The authority citation for part 1336
continues to read as follows:
■
Authority: 42 U.S.C. 2991 et seq.
VerDate Sep<11>2014
18:59 Feb 24, 2023
2. Amend § 1336.50 by revising
paragraphs (b)(2) and (3) to read as
follows:
■
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*
*
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(b) * * *
(2) Application. If an applicant or
recipient wishes to request a waiver of
the requirement for a 20 percent nonFederal matching share, the following
conditions must be met:
(i) If an applicant for an initial award
or an applicant for a non-competing
continuation award anticipates that it
will be unable to meet the cost-sharing
or matching requirement, the applicant
may request a waiver of the 20 percent
non-Federal matching share. It must
include with its application for funding,
the submission of a revised SF424A, a
written justification that clearly
explains why the applicant cannot
provide the matching share including
the amount of non-Federal share to be
waived, and how it meets the criteria
indicated in paragraph (b)(3) of this
section. For an applicant for an initial
award, or an applicant seeking a noncompeting continuation award, a
request for a waiver must be submitted
at the time of the initial application or
non-competing continuation (NCC)
application.
(ii) If a recipient is unable to
contribute part or all of the required
non-Federal matching share during a
budget period due to an emergency
situation such as a natural disaster,
man-made disaster, act of terrorism,
public health emergency, or other
qualifying event, the recipient may
request a waiver of all or part of the
requirement for a 20 percent nonFederal matching share specified under
paragraph (b)(1) of this section. Any
requests for an emergency waiver may
be submitted at any time during a
budget period as soon as the adverse
effect is known to the recipient and
must be submitted in accordance with
the requirements specified in paragraph
(b)(3) of this section.
(3) Criteria. Both of the following
criteria must be met for an applicant or
recipient to be eligible for a waiver of
the non-Federal matching requirement:
(i) Applicant or recipient lacks the
available resources to meet part or all of
the non-Federal matching requirement.
This must be documented by an
institutional audit if available, or a full
disclosure of applicant’s or recipient’s
total assets and liabilities.
(ii) Applicants or recipients can
document that reasonable efforts to
obtain cash or in-kind contributions for
the purposes of the project from third
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parties have been unsuccessful,
including evidence and the results of
such attempts. Evidence of such efforts
can include letters from possible
sources of funding or any relevant
correspondence, indicating that the
requested resources are not available for
that project. The requests must be
appropriate to the source in terms of
project purpose, applicant eligibility,
and reasonableness of the request.
*
*
*
*
*
[FR Doc. 2023–03994 Filed 2–24–23; 8:45 am]
BILLING CODE 4184–34–P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
46 CFR Part 401
[Docket No. USCG–2022–0370]
RIN 1625–AC82
Great Lakes Pilotage Rates—2023
Annual Ratemaking and Review of
Methodology
Coast Guard, DHS.
Final rule.
AGENCY:
ACTION:
In accordance with the
statutory provisions enacted by the
Great Lakes Pilotage Act of 1960, the
Coast Guard is issuing new base pilotage
rates for the 2023 shipping season. This
rule adjusts the pilotage rates to account
for changes in district operating
expenses, an increase in the number of
pilots, and anticipated inflation. These
changes, when combined, result in a 16percent net increase in pilotage costs
compared to the 2022 season.
DATES: This final rule is effective March
29, 2023.
ADDRESSES: To view documents
mentioned in this preamble as being
available in the docket, go to
www.regulations.gov, type USCG–2022–
0370 in the search box and click
‘‘Search.’’ Next, in the Document Type
column, select ‘‘Supporting & Related
Material.’’
SUMMARY:
For
information about this document call or
email Mr. Brian Rogers, Commandant,
Office of Waterways and Ocean Policy—
Great Lakes Pilotage Division (CG–
WWM–2), Coast Guard; telephone 410–
360–9260, email Brian.Rogers@uscg.mil,
or fax 202–372–1914.
SUPPLEMENTARY INFORMATION:
FOR FURTHER INFORMATION CONTACT:
Table of Contents for Preamble
I. Abbreviations
II. Executive Summary
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III. Basis and Purpose
IV. Discussion of Comments and Changes
A. Great Lakes Pilotage Ratemaking
Methodology
B. The Staffing Model
C. 2023 Great Lakes Pilotage Rate
D. Cruise Line Traffic
E. Fair Business Practices
G. Changes to the NPRM’s Estimate for
District Three Pilot Numbers
F. Miscellaneous Concerns
V. Discussion of Methodological and Other
Changes
VI. Individual Target Pilot Compensation
Benchmark
VII. Discussion of Rate Adjustments
District One
A. Step 1: Recognize Previous Operating
Expenses
B. Step 2: Project Operating Expenses,
Adjusting for Inflation or Deflation
C. Step 3: Estimate Number of Registered
Pilots and Apprentice Pilots
D. Step 4: Determine Target Pilot
Compensation Benchmark and
Apprentice Pilot Wage Benchmark
E. Step 5: Project Working Capital Fund
F. Step 6: Project Needed Revenue
G. Step 7: Calculate Initial Base Rates
H. Step 8: Calculate Average Weighting
Factors by Area
I. Step 9: Calculate Revised Base Rates
J. Step 10: Review and Finalize Rates
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District Two
A. Step 1: Recognize Previous Operating
Expenses
B. Step 2: Project Operating Expenses,
Adjusting for Inflation or Deflation
C. Step 3: Estimate Number of Registered
Pilots and Apprentice Pilots
D. Step 4: Determine Target Pilot
Compensation Benchmark and
Apprentice Pilot Wage Benchmark
E. Step 5: Project Working Capital Fund
F. Step 6: Project Needed Revenue
G. Step 7: Calculate Initial Base Rates
H. Step 8: Calculate Average Weighting
Factors by Area
I. Step 9: Calculate Revised Base Rates
J. Step 10: Review and Finalize Rates
District Three
A. Step 1: Recognize Previous Operating
Expenses
B. Step 2: Project Operating Expenses,
Adjusting for Inflation or Deflation
C. Step 3: Estimate Number of Registered
Pilots and Apprentice Pilots
D. Step 4: Determine Target Pilot
Compensation Benchmark and
Apprentice Pilot Wage Benchmark
E. Step 5: Project Working Capital Fund
F. Step 6: Project Needed Revenue
G. Step 7: Calculate Initial Base Rates
H. Step 8: Calculate Average Weighting
Factors by Area
I. Step 9: Calculate Revised Base Rates
J. Step 10: Review and Finalize Rates
VIII. Regulatory Analyses
A. Regulatory Planning and Review
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B. Small Entities
C. Assistance for Small Entities
D. Collection of Information
E. Federalism
F. Unfunded Mandates
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
BLS Bureau of Labor Statistics
CFR Code of Federal Regulations
CPA Certified public accountant
CPI Consumer Price Index
DHS Department of Homeland Security
Director U.S. Coast Guard’s Director of the
Great Lakes Pilotage
ECI Employment Cost Index
FOMC Federal Open Market Committee
FR Federal Register
GLPA Great Lakes Pilotage Authority
(Canadian)
GLPAC Great Lakes Pilotage Advisory
Committee
GLPMS Great Lakes Pilotage Management
System
LPA Lakes Pilots Association
NAICS North American Industry
Classification System
NPRM Notice of proposed rulemaking
OMB Office of Management and Budget
PCE Personal Consumption Expenditures
§ Section
SBA Small Business Administration
SLSPA Saint Lawrence Seaway Pilotage
Association
The Act The Great Lakes Pilotage Act
U.S.C. United States Code
WGLPA Western Great Lakes Pilots
Association
II. Executive Summary
In accordance with Title 46 of the
United States Code (U.S.C.), Chapter
93,1 the Coast Guard regulates pilotage
for oceangoing vessels on the Great
Lakes and St. Lawrence Seaway—
including setting the rates for pilotage
services and adjusting them on an
annual basis for the upcoming shipping
season. The shipping season begins
when the locks open in the St. Lawrence
Seaway, which allows traffic access to
and from the Atlantic Ocean. The
opening of the locks varies annually,
depending on waterway conditions, but
is generally in March or April. The
rates, which for the 2023 season range
from $410 to $876 per pilot hour
(depending on which of the specific six
areas pilotage service is provided), are
1 46
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U.S.C. 9301–9308.
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paid by shippers to the pilot
associations. The three pilot
associations, which are the exclusive
U.S. source of registered pilots on the
Great Lakes, use this revenue to cover
operating expenses, maintain
infrastructure, compensate apprentice
and registered pilots, acquire and
implement technological advances, train
new personnel, and provide for
continuing professional development.
In accordance with statutory and
regulatory requirements, the Coast
Guard employs the ratemaking
methodology introduced in 2016. Our
ratemaking methodology calculates the
revenue needed for each pilotage
association (operating expenses,
compensation for the number of pilots,
and anticipated inflation), and then
divides that amount by the expected
demand for pilotage services over the
course of the coming year, to produce an
hourly rate. This is a 10-step
methodology to calculate rates, which is
explained in detail in the ‘‘Discussion of
Methodological and Other Changes’’ in
section V of the preamble to this rule.
As part of our annual review, the
Coast Guard is issuing a full ratemaking
and establishing new pilotage rates for
2023 based on the existing 10-step
ratemaking methodology. The Coast
Guard conducted the last full
ratemaking 5 years ago, in 2018 (83 FR
26162, June 5, 2018). Per Title 46 of the
Code of Federal Regulations (CFR),
section 404.100(a), in this final rule, the
Coast Guard’s Director of the Great
Lakes Pilotage (‘‘the Director’’) is
establishing base pilotage rates via a full
ratemaking pursuant to §§ 404.101
through 404.110. The Coast Guard sets
base rates to meet the goal of promoting
safe, efficient, and reliable pilotage
service on the Great Lakes by generating
sufficient revenue for each pilotage
association to reimburse its necessary
and reasonable operating expenses,
fairly compensate trained and rested
pilots, and provide appropriate funds to
use for improvements. A 10-year
average is used when calculating traffic
to smooth out anomalies in traffic
caused by unexpected events, such as
those caused by the COVID–19
pandemic. The Coast Guard estimates
that this rule results in $5,172,200 of
additional costs.
Based on the ratemaking model
discussed in this final rule, the Coast
Guard is establishing the rates shown in
table 1.
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TABLE 1—CURRENT AND 2023 PILOTAGE RATES ON THE GREAT LAKES
Area
District
District
District
District
District
District
One: Designated .......................................
One: Undesignated ...................................
Two: Designated .......................................
Two: Undesignated ...................................
Three: Designated ....................................
Three: Undesignated ................................
This rule affects 56 U.S. Great Lakes
pilots, 6 apprentice pilots, 3 pilot
associations, and the owners and
operators of an average of 285
oceangoing vessels that transit the Great
Lakes annually. This rule is not
economically significant under
Executive Order 12866 and will not
affect the Coast Guard’s budget or
increase Federal spending. The
estimated overall annual regulatory
economic impact of this rate change is
a net increase of $5,172,200 in estimated
payments made by shippers during the
2023 shipping season. This final rule
establishes the 2023 yearly
compensation for pilots on the Great
Lakes at $424,398 per pilot (a $25,132
increase, or 6.29 percent, over their
2022 compensation). Because the Coast
Guard must review, and, if necessary,
adjust rates each year, the Coast Guard
analyzes these as single-year costs and
does not annualize them over 10 years.
Section VIII of this preamble provides
the regulatory impact analyses of this
rule.
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III. Basis and Purpose
The legal basis of this rulemaking is
46 U.S.C. Chapter 93,2 which requires
foreign merchant vessels and United
States vessels operating ‘‘on register’’
(meaning United States vessels engaged
in foreign trade) to use United States or
Canadian pilots while transiting the
United States waters of the St. Lawrence
Seaway and the Great Lakes system.3
For U.S. Great Lakes pilots, the statute
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.’’ 4 The statute
requires that rates be established or
reviewed and adjusted each year, no
later than March 1.5 The statute also
requires that base rates 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
U.S.C. 9301–9308.
3 46 U.S.C. 9302(a)(1).
4 46 U.S.C. 9303(f).
5 Id.
18:59 Feb 24, 2023
St. Lawrence River ...............................................................
Lake Ontario .........................................................................
Navigable waters from Southeast Shoal to Port Huron, MI
Lake Erie ..............................................................................
St. Mary’s River ....................................................................
Lakes Huron, Michigan, and Superior .................................
and, if necessary, adjusted.6 The
Secretary’s duties and authority under
46 U.S.C. Chapter 93 have generally
been delegated to the Coast Guard.7
The purpose of this rule is to issue
new pilotage rates for the 2023 shipping
season. The Coast Guard believes that
the new rates will continue to promote
our goal, as outlined in 46 CFR 404.1,
of promoting safe, efficient, and reliable
pilotage service in the Great Lakes by
generating for each pilotage association
sufficient revenue to reimburse its
necessary and reasonable operating
expenses, fairly compensate trained and
rested pilots, and provide appropriate
funds to use for improvements.
IV. Discussion of Comments and
Changes
In response to the notice of proposed
rulemaking (NPRM) for this ratemaking
(87 FR 52870, August 30, 2022) the
Coast Guard received six comment
submissions. These submissions include
one comment filed jointly by the Lakes
Pilots Association, the Saint Lawrence
Seaway Pilotage Association, and the
Western Great Lakes Pilots Association
(the Great Lakes Pilots’ comment); one
filed jointly by the Shipping Federation
of Canada, the American Great Lakes
Ports Association, and the United States
Great Lakes Shipping Association
(collectively, the Coalition); one from
the president of the St. Lawrence
Seaway Pilots’ Association (SLSPA);
one from the president of the Lakes
Pilots Association (LPA); one from the
president of the Western Great Lakes
Pilot Association (WGLPA); and one
from an individual who did not provide
an affiliation to any stakeholder. As
each of these commenters touched on
numerous issues, for each response
below, the Coast Guard notes which
commenter raised the specific points
addressed. In situations where multiple
commenters raised similar issues, the
Coast Guard provides one response to
those issues.
6 Id.
2 46
VerDate Sep<11>2014
Final 2022
pilotage rate
Name
7 DHS Delegation No. 00170.1 (II)(92)(f), Revision
No. 01.3. The Secretary retains the authority under
Section 9307 to establish, and appoint members to,
a Great Lakes Pilotage Advisory Committee.
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Final 2023
pilotage rate
$834
568
536
610
662
342
$876
586
601
704
834
410
A. Great Lakes Pilotage Ratemaking
Methodology
The Coalition recommended that the
Coast Guard define what the term
‘‘necessary and reasonable’’ means. In
46 CFR 404.2(b), the Coast Guard lists
criteria to recognize an expense item as
necessary and reasonable. In general,
necessary and reasonable operating
expenses are those with a clear business
reason to operate the pilotage pool or
provide pilotage, and for which the cost
is consistent with market conditions
and not excessive, to ensure safe and
reliable pilotage service to foreign-flag
vessels.
The Coalition recommended the
addition of a line-by-line review of the
previous year’s operating expenses in
order to better shape future projections
of operating expenses. The Coast Guard
disagrees with this recommendation
because the recommendation is already
in place and conducted by both the
Coast Guard and an independent third
party. The Coast Guard’s current
practice is to receive yearly financial
statements in April of each year from
each district and compare them to the
previous year’s expenses. For
transparency, we place the financial
statements on the Coast Guard’s Office
of Waterways and Ocean Policy—Great
Lakes Pilotage Division website so the
public can also look at these
documents.8 The Coast Guard also hires
an independent accounting firm to
conduct, in conjunction with the Coast
Guard, extensive reviews of the pilot
association’s financial information,
including but not limited to variance
analysis of previous operating expenses,
which enables the Coast Guard to
determine the necessity and
reasonableness of association expenses.
This practice was reviewed by the
Government Accountability Office in
2019 and was deemed a best practice
8 Financial statements can be found at https://
www.dco.uscg.mil/Our-Organization/AssistantCommandant-for-Prevention-Policy-CG-5P/MarineTransportation-Systems-CG-5PW/Office-ofWaterways-and-Ocean-Policy/Office-of-Waterwaysand-Ocean-Policy-Great-Lakes-Pilotage-Div/.
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when developing rates, as it keeps the
Coast Guard impartial.
The Coalition recommended a
reevaluation of the framework for
pilotage operation in ‘‘designated’’ and
‘‘undesignated’’ waters. The Coast
Guard does not have the authority to
accommodate this recommendation.
The Great Lakes Pilotage Act (‘‘the Act’’)
created the designated and
undesignated categories for the System.
In undesignated waters, the United
States- or Canadian-registered pilot
must be onboard and available to the
master. In designated waters, the pilot
must be on the bridge and direct the
navigation of the vessel. Through the
Act, Congress bestowed the authority to
classify these waters onto the President
of the United States. Such designation
can be accomplished only by Executive
order or Presidential proclamation,
which the Coast Guard has no authority
to issue, and would only oppose if the
change compromised maritime safety.
The Coalition recommended that the
Coast Guard make the compensation
level of individual pilots available to the
public. The Coast Guard disagrees with
this recommendation. Compensation of
individual pilots is not included in the
expense base or methodology, and,
therefore, we decline to add a regulatory
requirement for pilot associations to
publicly report the compensation of
individual pilots. The Coast Guard does
not use the actual earnings or average
earnings; instead, target pilot
compensation is used (described in Step
4 of the existing methodology), which
the Coast Guard has determined to be
reasonable and necessary. Because
actual salary values are not used in the
ratemaking, the Coast Guard believes
that a requirement to report pilot
compensation is not in the public
interest or necessary to provide for the
costs of services. Progress toward pilot
retention can be reviewed through pilot
turnover and the association’s ability to
promptly fill pilot vacancies for fully
registered pilots and apprentice pilots.
The Coalition recommended that the
Coast Guard include an additional layer
of review in the methodology by taking
an annual look back at the actual
revenues and comparing it with the
previous year’s projections for accuracy.
The Coast Guard acknowledges the
utility of such an exercise and already
has a process during which we take the
financial statements that are submitted
annually by each District under 46 CFR
401.320(d)(4) and compare the actual
revenue reported with the projected
revenue from the previous year’s rate.
Any substantial difference between
actual and projected revenue is a result
of incorrectly predicting vessel traffic or
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average vessel weight. The Coast Guard
uses a ten-year moving average to
predict traffic, which has been
demonstrated to be sufficiently accurate
over time while also providing a
measure of rate stability that pilots and
shippers alike can rely on.9 No
commenter has provided a more
accurate methodology to predict traffic.
While we acknowledge the value of
looking back on the accuracy of recent
projections, such analysis is not as
simple as comparing one number to
another. First, our estimates for
projected needed revenue are based on
3-year-old expense data, which means
the analysis may not be as accurate as
it would be if it were based on real-time
expense data. This delay is out of the
Coast Guard’s control, as we must wait
for the numbers to be audited before we
receive them. Second, there is a
necessary offset in comparing the
realized revenues because they have to
match the earlier year, when the base of
expenses occurred. Lastly, there is
prevailing inflation that occurs between
when expenses are realized and then
put into the ratemaking, and when we
receive the realized revenue figure to
compare back. These factors can cause
minor differences between the projected
and actual revenue figures and would
need to be included in a discussion on
the accuracy of past projections.
The Coast Guard is amenable to
including a discussion of the already
existing ‘‘look back’’ exercise into its
ratemaking process and would welcome
feedback on where and how to do this.
The Coast Guard encourages the
Coalition to bring this matter up at the
next advisory committee meeting, so we
can see exactly how they would like this
added to the methodology.
B. The Staffing Model
The WGLPA made the
recommendation that the Coast Guard
amend the final rule to reflect four
apprentice pilots. The Coast Guard
disagrees with this recommendation.
9 See Am. Great Lake Ports Assn. v. United States
Coast Guard, 443 F. Supp. 3d 44, 64 (D.D.C. 2020),
holding that ‘‘the Coast Guard made an intentional
choice to use a wider window for calculating the
traffic average in order to minimize volatility.
Although the agency acknowledged that using a
ten-year moving average meant that in 2018,
Plaintiffs would have to pay more than they would
have had the Coast Guard used a three-year moving
average, the agency determined that the ten-year
average was nonetheless preferable in order to
smooth out historically observed spikes in traffic
data. That was a rational choice, even if the traffic
data included data from the period of the last
recession.’’ The Court also cited ‘‘data [that] clearly
support[ed] the Coast Guard’s decision to use a tenyear moving average in order to prevent ‘dramatic
swings’ in rates from year to year.’’ Am. Great Lake
Ports Assn., 443 F. Supp. 3d at 65.
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District Three currently has 20 full
member pilots along with 5 apprentice
pilots. According to our records, two
apprentice pilots will become fully
registered pilots at the beginning of the
year. When these 2 apprentice pilots
become full members, that will bring the
number to 22 full member pilots. The
WGLPA does not have any additional
trainees or apprentice pilots in its
training program and did not provide
the names of any expected hires for the
Coast Guard to consider adjusting this
number. If the District would like to add
an additional apprentice pilot to their
roster for 2023, the matter can be
discussed with the Director prior to the
opening of the 2023 shipping season.
The WGLPA commented that it has
six pilots assigned to the designated
area and requested that the Coast Guard
adjust the rate to reflect six pilots, not
the five pilots currently implemented in
the rate. The Coast Guard disagrees. The
Coast Guard is willing to evaluate
potential adjustments based on specific
delays or safety concerns in the
designated area of District Three, but the
commenter did not provide any
supporting documentation for last year
or this year demonstrating that the
current split between designated and
undesignated pilots in the staffing
model is causing delays or safety
concerns in the system. The Coast
Guard did not see a significant enough
change in bridge hours to justify the
addition of a sixth pilot.
The LPA made the comment, that
they will have 16 registered pilots and
1 trainee pilot in District Two for the
2023 shipping season, as opposed to the
2 apprentice pilots listed in the NPRM.
The Coast Guard agrees with this
comment. Based on reviews from the
apprentice pilot training evaluations for
2022, one of the two apprentice pilots
finished the apprentice program more
rapidly than anticipated. Because of
this, the Coast Guard has determined
that District Two will have 16 registered
pilots and only 1 apprentice pilot at the
beginning of the 2023 shipping season
and will adjust the numbers in the rate
accordingly.
The LPA, WGLPA, and SLSPA all
recommended that the staffing model
increase the number of pilots in their
districts. The Coast Guard agrees with
this comment and is amenable to
addressing the current staffing model
further. A decision is necessary
regarding which changes will be
implemented to reflect the correct
number of pilots needed in the staffing
model in order to conduct safe and
continuous pilotage service. The Coast
Guard will discuss this issue with
stakeholders throughout the year and at
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the next GLPAC meeting so that this
issue is resolved for the next
ratemaking.
The SLSPA commented that they will
need three additional trainee pilots for
the 2023 season to safely and reliably
meet the future traffic demand in
District One. The Coast Guard agrees to
the addition of three trainee pilots. This
addition does not have any impact on
this ratemaking because the districts are
reimbursed for trainee pilot expenses,
via the rate, 3 calendar years after the
expenses are incurred in Step 1 of the
methodology. The Coast Guard
understands that changes to the staffing
model will need to be incorporated in
the 2024 ratemaking in order to
accommodate these potential pilots in
future rates. The Coast Guard will
discuss this issue with stakeholders
throughout the year and at the next
GLPAC meeting so that this issue is
resolved for the next ratemaking.
C. 2023 Great Lakes Pilotage Rate
The Coalition commented on the rate,
stating that rates are too high, landing
Great Lakes pilots within the wealthiest
2 percent of Americans. The Coast
Guard does not find this comment to be
relevant to the proposed rates
established by this rulemaking. The
commenter provided no supporting
documentation. The Coast Guard
suggests that the commenter provide
supporting documentation at a future
GLPAC meeting or submit supporting
documentation for further
consideration.
The WGLPA requested an explanation
for the ‘‘Director’s Adjustments—
Applicant Surcharge Collected’’ number
in table 27 of the NPRM. The Coast
Guard placed a Director’s adjustment of
$122,539 in the NPRM and final rule.
This number, $105,668.60, was derived
from surcharges collected from vessel
trips between April 6, 2020, and
December 9, 2020, and $16,870.58,
summed from vessel trips before April
6, 2020. The Coast Guard did not
authorize these surcharges.
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D. Cruise Line Traffic
The commenters were almost
unanimously concerned about an
explosion of cruise vessel traffic on the
Great Lakes and the resulting impact on
pilot demand. The Coast Guard
recognizes that a blossoming cruise ship
sector is of concern to all Great Lakes
stakeholders and considered the
concerns of each commenter in this
arena. Each commenter urged the Coast
Guard to stay abreast of this issue and
to address it in the staffing model
sooner rather than later.
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The Coast Guard understands the
importance of this issue and has already
begun studying the growth of the cruise
sector traffic. At the September 13,
2022, GLPAC meeting, the Coast Guard
addressed the issue of cruise ship traffic
with Great Lakes stakeholders. Among
the issues discussed was a recognition
that the staffing model, which is based
on pilot assignment cycle hours, may
not be as helpful when vessels such as
cruise ships have a different calculus of
their movement.10 For example, cruise
ships holding hundreds of passengers
will be less tolerant of delays than a
typical shipping vessel and will also
have scheduled delays while passengers
visit port city attractions. Another issue
is that because of the novelty of the
sector, lack of historic data, and COVID–
19 preventing any cruise ship traffic in
2020 and 2021, our 10-year moving
average does not capture very much
cruise ship traffic, which could result in
a systemic error.
The experts at GLPAC, having
recognized these deficiencies,
ultimately recommended that the
Director use his discretion to
accommodate cruise line traffic
demand, irrespective of the current
staffing model ceiling, if no changes to
the model or ratemaking methodology
itself are viable this year.
The Coast Guard is committed to
addressing this new demand but will
not make changes to the staffing model
without the ‘‘robust analysis’’ called for
by GLPAC.11 The Coast Guard will
collaborate with GLPAC to gather more
definitive pilot hour data for the cruise
ship sector, including ship assignment
and bridge hour numbers for cruise
ships in each District. We acknowledge
that this is a sector that could be a
permanent factor in the Great Lakes, and
we are committed to finding a
reasonable solution to increased pilot
demand without disregarding this year’s
statutory deadline. In addition to the
Coast Guard’s future efforts, we
encourage stakeholders to work
together, as there may be solutions to
this issue outside of this ratemaking
process.
In the meantime, the Director will use
his discretion, as recommended by
GLPAC, to take measures to
accommodate demand in the 2023
10 See discussion on pages 4–5 of the
Memorandum For the Record of the Sept. 13, 2022
GLPAC Meeting. The transcript is available in the
docket at https://www.regulations.gov/document/
USCG-2022-0370-0018.
11 See discussion on pages 43–54 of the GLP
Advisory Committee Sept. 1, 2021 Meeting
Minutes, available online at https://
www.regulations.gov/document/USCG-2022-03700009.
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season. Such measures may include
hiring contract pilots or allowing retired
pilots to return to work on a temporary
basis. The Coast Guard encourages
stakeholders to gather relevant data
before the next meeting of the GLPAC,
which will be announced in the Federal
Register.
E. Fair Business Practices
One commenter opposed the rate
increase on the basis that it forces hiring
a Coast Guard pilot, is creating a
monopoly, and is bad for business. The
Coast Guard disagrees. The Coast Guard
does not and has never employed Coast
Guard pilots for any trade, as the
commenter suggests. The Coast Guard
has no authority in determining market
structures. In 46 U.S.C. 9302, Congress
requires vessels to employ United States
or Canadian registered pilots. The Coast
Guard is only responsible for providing
clear and timely regulations, policy, and
direction to the affected population.
F. Temporary Pilot Services
The LPA requested recuperation of
operating expenses related to wages
paid to a retired pilot, which they
needed on a temporary registration to
meet demand surges. The Coast Guard
agrees with the recommendation and
finds this is a necessary and reasonable
cost related to the costs of providing
pilotage. In addition, at the most recent
GLPAC meeting, on September 13, 2022,
the appointed members unanimously
agreed that this expense should be an
allowable operating expense. The Coast
Guard posted a summary of the GLPAC
meeting minutes, titled, ‘‘GLPAC Sept
13, 2022, Meeting Memorandum for the
Record USCG’’ to the rulemaking
docket, USCG–2022–0370, on
September 20, 2022. A subsequent
‘‘GLPAC Sept 13, 2022, Meeting
Memorandum for the Record v2,’’
posted on October 3, 2022, made
unrelated corrections to Coast Guard
statements and replaced the original
September 20, 2022, version. The
‘‘Memorandum for the Record’’
summarizes the GLPAC discussion and
approval of the temporary pilot wages as
an operating expense. The Coast Guard
plans to issue guidelines regarding the
reimbursement of temporary registered
pilot costs.
The GLPAC consists of the three pilot
association presidents and four
additional members representing the
ports, vessel operators, shippers, and
labor organizations, who all concurred
with adding this expense to meet the
shipping demands for timely service.
The expenses associated with the hiring
of a temporary pilot in the operating
expenses are included in this
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ratemaking, in Step 1 of the
methodology.
G. Bridge Hours
The WGLPA made a comment that the
number of hours for District Three
‘‘Time on Task’’ should be amended to
reflect 3,520 hours in their designated
area in 2020, 23,678 hours in their
undesignated area in 2020, 2,516 hours
in their designated area in 2021, and
18,286 hours in their undesignated area
for 2021. The Coast Guard agrees with
this comment. Previous figures,
extracted from the data the Coast Guard
received, was inaccurate. The Coast
Guard has detailed this difference in
trips in the ‘‘SeaPro Sept 27 2022 Error
Conversation Memorandum for the
Record’’, which can be found at
www.regulations.gov/document/USCG2022-0370-0019. After reviewing the
updated numbers, the Coast Guard
agrees to incorporate the commenter’s
submitted numbers into the rulemaking.
V. Discussion of Methodological and
Other Changes
The Coast Guard is using the existing
ratemaking methodology for
establishing the base rates in this full
ratemaking. The Coast Guard is not
issuing any methodological or other
policy changes to the ratemaking within
this final rule.
According to 46 U.S.C. 9303(f), and
restated in 46 CFR 404.100(a), the Coast
Guard must establish base rates by a full
ratemaking at least once every 5 years.
The Coast Guard determined that the
current base rate and methodology still
adequately adheres to the Coast Guard’s
goals of safety through rate and
compensation stability, while promoting
recruitment and retention of qualified
U.S. registered pilots. The Coast Guard
has made several changes to the
ratemaking over the last several years in
consideration of the public interest and
the costs of providing services. The
recent changes and their impacts are
summarized as follows.
In the 2017 ratemaking (82 FR 41466,
August 31, 2017), the Coast Guard
modified the methodology to account
for the additional revenue produced by
the application of weighting factors
(discussed in detail in Steps 7 through
9 for each district, in section VII of this
preamble).
In the 2018 ratemaking (83 FR 26162,
June 5, 2018), the Coast Guard adopted
a new approach in the methodology for
the compensation benchmark, based
upon United States mariners rather than
Canadian working pilots.
12231
In the 2020 ratemaking (85 FR 20088,
April 9, 2020), the Coast Guard revised
the methodology to accurately capture
all costs and revenues associated with
Great Lakes pilotage requirements and
produce an hourly rate that adequately
and accurately compensates pilots and
covers expenses.
The 2021 ratemaking (86 FR 14184,
March 12, 2021) changed the inflation
calculation in Step 4, § 404.104(b) for
interim ratemakings, so that the
previous year’s target compensation
value is first adjusted by actual inflation
value using the Employment Cost Index
(ECI). That change ensures that the
target pilot compensation reimbursed to
the association remains current with
inflation and competitive with industry
pay increases.
The 2022 ratemaking (87 FR 18488,
March 30, 2022) implemented an
apprentice pilot wage benchmark in
Steps 3 and 4 to provide predictability
and stability to pilot associations
training apprentice pilots. The 2022
final rule also codified rounding up the
staffing model’s final number to ensure
the ratemaking does not undercount the
pilot need presented by the staffing
model and association circumstances.
Table 2 summarizes the changes
between the 2023 Ratemaking NPRM
and this final rule.
TABLE 2—CHANGES BETWEEN PROPOSED RULE AND FINAL RULE
Change
Reasoning
Revise number of pilots in District Two from 15 to 16 and adjust apprentice pilots from 2 to 1.
Correct traffic data for District Three to reflect discrepancy in the assignment of bridge hours to designated and undesignated areas.
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Update inflation figures .............................................................................
• Updates 2021 Employment Cost Index (ECI) inflation from 5.1%, listed in the NPRM, to 5.7%.
• Updates 2022 Personal Consumption Expenditures (PCE) inflation
from 2.7%, listed in the NPRM, to 4.3%.
• Updates 2023 PCE inflation from 2.3%, listed in the NPRM, to 2.7%.
District Two reported that one of their two apprentice pilots listed in the
NPRM would become a fully registered pilot for the 2023 season.
District Three commented that the hours listed in Step 7 were incorrect
and provided a corrected sheet of traffic hours, which correctly attribute hours between the designated and undesignated areas. See
further details below.
More recent figures were published since the Coast Guard conducted
the analysis for the NPRM.
Using the corrected traffic data for
2020, the Coast Guard removed 34 trips
from District Three that occurred before
March 24, 2020 (the opening of the 2020
season). The Coast Guard identified
eight incorrectly specified trips with
errors or missing data in the ‘‘Area’’
and/or ‘‘District’’ columns.12 With these
corrections, the total bridge hours
decreased by 500 hours for the
undesignated areas and decreased by
162 hours for the designated areas.
Similarly, for 2021, the Coast Guard
removed 19 trips that occurred before
March 21, 2021 (the opening of the 2021
season) and identified 12 incorrectly
specified trips with errors or missing
data in the ‘‘Area’’ and/or ‘‘District’’
columns. The 2021 total bridge hours
increased by 67 hours for the
undesignated areas and decreased by 68
hours for the designated area. Table 3
shows the difference between the
published figures for bridge hours in
Step 7 and the updated figures used for
this final rule.
12 The ‘‘Area’’ column is a written description
either as Lake (undesignated) or River (designated),
while ‘‘District’’ is the numerical Area, six, seven,
or eight. An example of an incorrect specification
was a trip described as Lake in the ‘‘Area’’ column,
and area seven in the ‘‘District’’ column, meaning
it was listed as simultaneously designated and
undesignated.
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TABLE 3—CHANGES TO STEP 7 BRIDGE HOURS FROM PROPOSED RULE TO FINAL RULE
Previously published
Updated
Undesignated
2020 .........................................................
Average ....................................................
2021 .........................................................
Average ....................................................
Designated
24,178
21,106
18,219
21,327
Further, the Coast Guard updated
Step 8, ‘‘Average Weighting Factor by
Area’’ to reflect the changes in the
number of transits by vessel class in
each area. This includes corrections to
the 8 incorrectly specified trips in 2020,
Undesignated
3,682
2,930
2,584
3,021
Designated
23,678
21,056
18,286
21,284
the 12 incorrectly specified trips in
2021, and the general corrections from
the change in bridge hours in the
updated data provided by District
Three. Table 4 details the changes by
area and vessel class for both 2020 and
Difference
Undesignated
¥500
¥50
67
¥43
3,520
2,914
2,516
2,998
Designated
¥162
¥16
¥68
¥23
2021 which will be used in this final
rule. The Coast Guard will not
otherwise publish a correction to the
previously published 2020 data used in
the 2022 ratemaking.
TABLE 4—CHANGES TO STEP 8 FROM PROPOSED RULE TO FINAL RULE
Number of transits
Area/vessel class
Previously
published
Updated
Difference
Area 6—Undesignated
Class
Class
Class
Class
Class
Class
1
2
2
3
4
4
(2021)
(2020)
(2021)
(2021)
(2020)
(2021)
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
7
395
261
7
413
312
8
332
273
5
339
356
1
¥63
12
¥2
¥74
44
16
12
250
128
4
385
299
15
15
218
131
1
336
258
¥1
3
¥32
3
¥3
¥49
¥41
4
239
96
2
456
182
5
180
124
1
265
319
1
¥59
28
¥1
¥191
137
Area 7—Designated
Class
Class
Class
Class
Class
Class
Class
1
1
2
2
3
4
4
(2020)
(2021)
(2020)
(2021)
(2020)
(2020)
(2021)
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
Area 8—Undesignated
Class
Class
Class
Class
Class
Class
1
2
2
3
4
4
(2021)
(2020)
(2021)
(2020)
(2020)
(2021)
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
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These refinements to the methodology
continue to promote safe, efficient, and
reliable pilotage service on the Great
Lakes, and allow each pilotage
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association to generate sufficient
revenue to cover its necessary and
reasonable operating expenses, fairly
compensate trained and rested pilots,
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and realize an appropriate revenue to
use for improvements.
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VI. Individual Target Pilot
Compensation Benchmark
The Coast Guard is issuing the target
pilot compensation benchmark in this
ratemaking at the target compensation
for the ratemaking year 2022, adjusted
for inflation. In a full ratemaking year,
per 46 CFR 404.104(a), the Director
determines a base individual target pilot
compensation using a compensation
benchmark in consideration of relevant
currently available non-proprietary
information. The Director may make
necessary and reasonable adjustments to
the benchmark if circumstances require.
The compensation benchmark will be
used in Step 4 of the existing
methodology. In the following interim
year ratemakings, the base target pilot
compensation will be adjusted annually
in accordance with § 404.104(b). How
the Coast Guard arrived at this
compensation benchmark is explained
below.
Prior to 2016, the Coast Guard based
the compensation benchmark on data
provided by the American Maritime
Officers Union (AMOU) regarding its
contract for first mates on the Great
Lakes. However, in 2016, the AMOU
elected to no longer provide this data to
the Coast Guard. In the 2016 ratemaking
(81 FR 11907, March 7, 2016), the Coast
Guard used the average compensation
for a Canadian pilot plus a 10-percent
adjustment. The shipping industry
challenged the compensation
benchmark, and the court found that the
Coast Guard did not adequately support
the 10-percent addition to the Canadian
GLPA compensation benchmark.
American Great Lakes Ports Association
v. Zukunft, 296 F.Supp. 3d 27, 48
(D.D.C. 2017), aff’d sub nom. American
Great Lakes Ports Association v.
Schultz, 962 F.3d 510 (D.C. Cir. 2020).
The Coast Guard then based the 2018
full ratemaking compensation
benchmark on data provided by the
AMOU, regarding its contract for first
mates on the Great Lakes in the 2011 to
2015 period (83 FR 26162, June 5, 2018).
The 2018 final rule adjusted the AMOU
2015 data for inflation using Federal
Open Market Committee median
economic projections for PCE inflation.
In the 2020 interim year ratemaking
final rule, the Coast Guard established
its most recent pilot compensation
benchmark. Given the lack of access to
AMOU data, the Coast Guard did not
rely on the AMOU aggregated wage and
benefit information as the basis for the
compensation benchmark. Instead, the
Coast Guard adopted the 2019 target
pilot compensation (with inflation) as
our compensation benchmark going
forward. The Coast Guard stated in the
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2020 final rule that no other United
States or Canadian pilot compensation
data was appropriate to use as a
benchmark at that time. See 85 FR
20088, 20091 (April 9, 2020). The
Director determined that the ratemaking
provided adequate compensation for
pilots. In the 2020 ratemaking, the Coast
Guard announced that the 2020
benchmark will be used for future rates.
See 85 FR 20091 (April 9, 2020).
Based on our experience over the past
three ratemakings (2020–2022), the
Director continues to believe that the
level of target pilot compensation for
those years provided an appropriate
level of compensation for U.S.registered pilots. According to
§ 404.101(a), the Director may make
necessary and reasonable adjustments to
the benchmark based on current
information. However, current
circumstances do not indicate that an
adjustment, other than for inflation, is
necessary. The Director bases this
decision on the fact that there is no
indication that registered pilots are
resigning due to their compensation, or
that this compensation benchmark is
causing shortfalls in achieving reliable
pilotage. The Coast Guard also does not
believe that the pilot compensation
benchmark is too high relative to the
expertise required to perform the job.
The compensation will continue to be
adjusted annually, in accordance with
published inflation rates, which will
ensure the compensation remains
competitive and current for upcoming
years.
Therefore, the Coast Guard is not
seeking alternative benchmarks for
target compensation at this time and,
instead, will simply adjust the amount
of target pilot compensation for inflation
as our target compensation benchmark
for 2023, as shown in Step 4. This target
compensation benchmark approach has
advanced and will continue to advance
the Coast Guard’s goals of safety through
rate and compensation stability while
also promoting recruitment and
retention of qualified U.S. pilots.
The compensation benchmark for
2023 is $399,266 per registered pilot
and $143,736 per apprentice pilot, using
the 2022 compensation as a benchmark.
The Coast Guard then follows the
procedure outlined in paragraph (b) of
§ 404.104, which adjusts the existing
compensation benchmark for inflation
using a two-step process. First, the Coast
Guard adjusts the 2022 target
compensation benchmark of $399,266
by 3.5 percent, for an adjusted value of
$413,240. This first adjustment accounts
for the difference in actual first quarter
2022 ECI inflation, which is 5.7 percent,
and the 2022 PCE estimate of 2.2
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12233
percent.13 14 The second step accounts
for projected inflation from 2022 to
2023, which is 2.7 percent.15 Based on
the projected 2023 inflation estimate,
the target compensation benchmark for
2023 is $424,398 per pilot. The
apprentice pilot wage benchmark is 36
percent of the target pilot compensation,
or $152,783 ($424,398 × 0.36).
VII. Discussion of Rate Adjustments
In this final rule, based on the policy
changes described in the previous
section, the Coast Guard is issuing new
pilotage rates for 2023. The Coast Guard
is conducting the 2023 ratemaking as a
full ratemaking, as was done in 2018 (83
FR 26162). Thus, the Coast Guard
adjusted the compensation benchmark
following the full ratemaking year
procedures under § 404.100(a) rather
than following the procedure for an
interim ratemaking year under
§ 404.100(b).
This section discusses the rate
changes using the ratemaking steps
provided in 46 CFR part 404. The Coast
Guard details all 10 steps of the
ratemaking procedure for each of the 3
districts to show how the Coast Guard
arrives at the new rates.
District One
A. Step 1: Recognize Previous Operating
Expenses
Step 1 in the ratemaking methodology
requires that the Coast Guard review
and recognize the operating expenses
for the last full year for which figures
are available (§ 404.101). To do so, the
Coast Guard begins by reviewing the
independent accountant’s financial
reports for each association’s 2020
expenses and revenues.16 For
accounting purposes, the financial
reports divide expenses into designated
and undesignated areas. For costs
accrued by the pilot associations
generally, such as employee benefits, for
example, the cost is divided between
the designated and undesignated areas
on a pro rata basis.
In the 2020 expenses used as the basis
for this rulemaking, districts used the
term ‘‘applicant’’ to describe applicant
13 Employment Cost Index, Total Compensation
for Private Industry workers in Transportation and
Material Moving, Annual Average, Series ID:
CIU2010000520000A. Accessed September 29,
2022. https://www.bls.gov/news.release/eci.t05.htm.
14 Table 1 Summary of Economic Projections, PCE
Inflation June Projection. Accessed September 2022
https://www.federalreserve.gov/monetarypolicy/
files/fomcprojtabl20220921.pdf.
15 Table 1 Summary of Economic Projections, PCE
Inflation December Projection. Accessed March
2022 https://www.federalreserve.gov/
monetarypolicy/files/fomcprojtabl20220316.pdf.
16 These reports are available in the docket for
this rulemaking.
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trainees and persons who will be called
apprentices (applicant pilots), under the
definition of ‘‘apprentice pilot’’, which
was introduced in the 2022 final rule.
Therefore, when describing past
expenses, the term ‘‘applicant’’ is used
to match what was reported from 2020,
which includes both applicant and
apprentice pilots. The term
‘‘apprentice’’ is used to distinguish
apprentice pilot wages and describe the
impacts of the ratemaking going
forward.
The Coast Guard will continue to
include apprentice salaries as an
allowable expense in the 2023
ratemaking, as it is based on 2020
operating expenses, when salaries were
still an allowable expense. The
apprentice salaries paid in the years
2020 and 2021 have not been
reimbursed in the ratemaking as of
publication of this rule. Applicant
salaries (including applicant trainees
and apprentice pilots) will continue to
be an allowable operating expense
through the 2024 ratemaking, which
uses operating expenses from 2021,
when the wages for apprentice pilots
were still authorized as operating
expenses.
Beginning with the 2025 ratemaking,
apprentice pilot salaries will no longer
be included as a 2022 operating
expense, because apprentice pilot wages
will have already been factored into the
ratemaking Steps 3 and 4 in calculation
of the 2022 rates. Beginning in 2025, the
applicant salaries’ operating expenses
for 2022 will consist of only applicant
trainees (those who are not yet
apprentice pilots). The recognized
operating expenses for District One are
shown in table 5.
TABLE 5—2020 RECOGNIZED EXPENSES FOR DISTRICT ONE
District One
Reported operating expenses for 2020
Applicant Pilot Compensation:
Salaries .................................................................................................................................
Employee Benefits ................................................................................................................
Applicant Subsistence/Travel ...............................................................................................
Applicant License Insurance ................................................................................................
Applicant Payroll Tax ............................................................................................................
Undesignated
St. Lawrence
River
Lake Ontario
Total
$257,250
13,633
14,901
1,771
20,823
$171,500
9,089
9,934
1,181
13,882
$428,750
22,722
24,835
2,952
34,705
308,378
205,586
513,964
575,475
32,802
45,859
188,318
26,433
383,650
21,868
30,573
125,546
17,621
959,125
54,671
76,432
313,864
44,054
868,887
579,258
1,448,145
325,904
104,658
139,916
22,930
217,269
69,772
93,277
15,287
543,173
174,430
233,193
38,217
593,408
395,605
989,013
3,124
62,906
8,793
35,040
5,541
6,511
69,000
23,298
21,516
152,071
(44,623)
36,924
(18,710)
27,172
4,080
15,618
69,848
8,220
55,213
2,083
41,937
5,862
23,360
3,694
4,341
46,000
15,532
14,344
101,381
(29,748)
24,616
(12,473)
18,115
2,720
10,412
46,565
5,480
36,809
5,207
104,843
14,655
58,400
9,235
10,852
115,000
38,830
35,860
253,452
(74,371)
61,540
(31,183)
45,287
6,800
26,030
116,413
13,700
92,022
26,787
481
17,858
320
44,645
801
Total Administrative Expenses ......................................................................................
568,810
379,208
948,018
Total Expenses (OpEx + Applicant + Pilot Boats + Admin + Capital) ........................................
2,339,483
1,559,657
3,899,140
Total Applicant Pilot Compensation ..............................................................................
Other Pilot Cost:
Subsistence/Travel- Pilot ......................................................................................................
Hotel/Lodging Cost ...............................................................................................................
License Insurance-Pilots ......................................................................................................
Payroll Taxes-Pilots ..............................................................................................................
Other .....................................................................................................................................
Total other pilotage costs ..............................................................................................
Pilot Boat and Dispatch Costs:
Pilot Boat Expense (Operating) ............................................................................................
Pilot Boat Cost (D1–20–01) .................................................................................................
Dispatch Expense .................................................................................................................
Payroll Taxes ........................................................................................................................
lotter on DSK11XQN23PROD with RULES1
Designated
Total Pilot and Dispatch Costs ......................................................................................
Administrative Expenses:
Legal-General Counsel .........................................................................................................
Legal-Shared Counsel (K&L Gates) .....................................................................................
Legal-USCG Litigation ..........................................................................................................
Insurance ..............................................................................................................................
Employee Benefits ................................................................................................................
Payroll Taxes ........................................................................................................................
Other Taxes ..........................................................................................................................
Real Estate Taxes ................................................................................................................
Travel ....................................................................................................................................
Depreciation ..........................................................................................................................
Certified Public Accountant (CPA) Deduction (D1–19–01) ..................................................
Interest ..................................................................................................................................
CPA Deduction (D1–19–01) .................................................................................................
American Pilots’ Association (APA) Dues ............................................................................
Dues and Subscriptions .......................................................................................................
Utilities ..................................................................................................................................
Salaries .................................................................................................................................
Accounting/Professional Fees ..............................................................................................
Other .....................................................................................................................................
Applicant Administrative Expense
Pilot Training .........................................................................................................................
Supplies ................................................................................................................................
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Federal Register / Vol. 88, No. 38 / Monday, February 27, 2023 / Rules and Regulations
12235
TABLE 5—2020 RECOGNIZED EXPENSES FOR DISTRICT ONE—Continued
District One
Reported operating expenses for 2020
Designated
Undesignated
St. Lawrence
River
Lake Ontario
Total
Director’s Adjustments—Applicant Surcharge Collected .....................................................
(10,814)
(7,209)
(18,024)
Director’s Adjustments—Applicant Salaries .........................................................................
(19,379)
(12,919)
(32,298)
Total Director’s Adjustments .........................................................................................
Total Operating Expenses (OpEx + Adjustments) .................................................
(30,193)
2,309,290
(20,129)
1,539,528
(50,322)
3,848,818
B. Step 2: Project Operating Expenses,
Adjusting for Inflation or Deflation
In accordance with the text in
§ 404.102, having identified the
recognized 2020 operating expenses in
Step 1, the next step is to estimate the
current year’s operating expenses by
adjusting those expenses for inflation
over the 3-year period. The Coast Guard
calculates inflation using the BLS data
from the CPI for the Midwest Region of
the United States for the 2021 inflation
rate.17 Because the BLS does not
provide forecasted inflation data, the
Coast Guard uses economic projections
from the Federal Reserve for the 2022
and 2023 inflation modification.18
Based on that information, the
calculations for Step 2 are as presented
in table 6.
TABLE 6—ADJUSTED OPERATING EXPENSES FOR DISTRICT ONE
District One
Designated
Total
2021
2022
2023
Undesignated
Total
Operating Expenses (Step 1) .............................................................................................
Inflation Modification (@5.1%) ...........................................................................................
Inflation Modification (@4.3%) ...........................................................................................
Inflation Modification (@2.7%) ...........................................................................................
$2,309,290
117,774
104,364
68,349
$1,539,528
78,516
69,576
45,566
$3,848,818
196,290
173,940
113,915
Adjusted 2023 Operating Expenses .....................................................................................
2,599,777
1,733,186
4,332,963
C. Step 3: Estimate Number of
Registered Pilots and Apprentice Pilots
In accordance with the text in
§ 404.103, the Coast Guard estimates the
number of fully registered pilots in each
district. The Coast Guard determines the
number of fully registered pilots based
on data provided by the SLSPA. Using
these numbers, the Coast Guard
estimates that there will be 18 registered
pilots in 2023 in District One. The Coast
Guard determines the number of
apprentice pilots based on input from
the district on anticipated retirements
and staffing needs. Using these
numbers, the Coast Guard estimates that
there will be two apprentice pilots in
2023 in District One. Based on the
seasonal staffing model discussed in the
2017 ratemaking (see 82 FR 41466
(August 31, 2017)), a certain number of
pilots are assigned to designated waters
and a certain number to undesignated
waters, as shown in table 7. These
numbers are used to determine the
amount of revenue needed in their
respective areas.
TABLE 7—AUTHORIZED PILOTS FOR DISTRICT ONE
Item
District One
Maximum Number of Pilots (per § 401.220(a)) * .................................................................................................................................
2023 Authorized Pilots (total) ..............................................................................................................................................................
Pilots Assigned to Designated Areas ..................................................................................................................................................
Pilots Assigned to Undesignated Areas ..............................................................................................................................................
2023 Apprentice Pilots .........................................................................................................................................................................
18
18
10
8
2
lotter on DSK11XQN23PROD with RULES1
* For a detailed calculation, refer to the Great Lakes Pilotage Rates—2017 Annual Review final rule, which contains the staffing model. See 82
FR 41466, table 6 at 41480 (August 31, 2017).
17 The 2021 inflation rate is available at https://
data.bls.gov/pdq/SurveyOutputServlet?data_
tool=dropmap&series_id=CUUR0200SA0,
CUUS0200SA0. Specifically, the CPI is defined as
‘‘All Urban Consumers (CPI–U), All Items, 1982–
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4=100.’’ Series CUUS0200SAO. (Downloaded
September 2022.)
18 The 2022 and 2023 inflation rates are available
at https://www.federalreserve.gov/monetarypolicy/
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files/fomcprojtabl20220921.pdf. We used the Core
PCE Inflation June Projection found in table 2.
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Federal Register / Vol. 88, No. 38 / Monday, February 27, 2023 / Rules and Regulations
D. Step 4: Determine Target Pilot
Compensation Benchmark and
Apprentice Pilot Wage Benchmark
In this step, the Coast Guard
determines the total pilot compensation
for each area. Because a full ratemaking
is being issued this year, the Coast
Guard follows the procedure outlined in
paragraph (a) of § 404.104, which
requires developing a benchmark after
considering the most relevant currently
available non-proprietary information.
In accordance with the discussion in
section VI. ‘‘Individual Target Pilot
Compensation Benchmark’’ of this
preamble, the compensation benchmark
for 2023 uses the 2022 compensation of
$399,266 per registered pilot as a base,
then adjusts for inflation following the
procedure outlined in paragraph (a) of
§ 404.104. The target pilot compensation
for 2023 is $424,398 per pilot. The
apprentice pilot wage benchmark is 36
percent of the target pilot compensation,
or $152,783 ($424,398 × 0.36).
Next, the Coast Guard certifies that
the number of pilots estimated for 2023
is less than or equal to the number
permitted under the staffing model in
§ 401.220(a). The staffing model
suggests that the number of pilots
needed is 18 pilots for District One,
which is less than or equal to 18, the
number of registered pilots provided by
the pilot association. In accordance with
§ 404.104(c), the Coast Guard uses the
revised target individual compensation
level to derive the total pilot
compensation by multiplying the
individual target compensation by the
estimated number of registered pilots for
District One, as shown in table 8. The
Coast Guard estimates that the number
of apprentice pilots with limited
registration needed will be two for
District One in the 2023 season. The
total target wages for apprentices are
allocated at 60 percent for the
designated area and 40 percent for the
undesignated area, in accordance with
the allocation for operating expenses.
TABLE 8—TARGET COMPENSATION FOR DISTRICT ONE
District One
Designated
Undesignated
Total
Target Pilot Compensation ..........................................................................................................
Number of Pilots ..........................................................................................................................
$424,398
10
$424,398
8
$424,398
18
Total Target Pilot Compensation ..........................................................................................
Target Apprentice Pilot Compensation ........................................................................................
Number of Apprentice Pilots ........................................................................................................
$4,243,980
$152,783
........................
$3,395,184
$152,783
........................
$7,639,164
$152,783
2
Total Target Apprentice Pilot Compensation .......................................................................
$183,340
$122,227
$305,567
E. Step 5: Project Working Capital Fund
Next, the Coast Guard calculates the
working capital fund revenues needed
for each area by first adding the figures
for projected operating expenses, total
pilot compensation, and total target
apprentice pilot wage for each area and
then finding the preceding year’s
average annual rate of return for new
issues of high-grade corporate securities.
Using Moody’s data, the number is
2.7033 percent.19 By multiplying the
two figures, the Coast Guard obtains the
working capital fund contribution for
each area, as shown in table 9.
TABLE 9—WORKING CAPITAL FUND CALCULATION FOR DISTRICT ONE
District One
Designated
Undesignated
Total
Adjusted Operating Expenses (Step 2) .......................................................................................
Total Target Pilot Compensation (Step 4) ...................................................................................
Total Target Apprentice Pilot Compensation (Step 4) ................................................................
$2,599,777
4,243,980
183,340
$1,733,186
3,395,184
122,227
$4,332,963
7,639,164
305,567
Total 2023 Expenses ............................................................................................................
7,027,097
5,250,597
12,277,694
Working Capital Fund (2.7%) ......................................................................................................
189,966
141,941
331,907
F. Step 6: Project Needed Revenue
In this step, the Coast Guards adds all
the expenses accrued to derive the total
revenue needed for each area. These
expenses include the projected
operating expenses (from Step 2), the
total pilot compensation (from Step 4),
total target apprentice pilot wage, (from
Step 4) and the working capital fund
contribution (from Step 5). These
calculations are shown in table 10.
TABLE 10—REVENUE NEEDED FOR DISTRICT ONE
lotter on DSK11XQN23PROD with RULES1
District One
Designated
Adjusted Operating Expenses (Step 2) .......................................................................................
19 Moody’s Seasoned Aaa Corporate Bond Yield,
average of 2021 monthly data. The Coast Guard uses
the most recent year of complete data. Moody’s is
taken from Moody’s Investors Service, which is a
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bond credit rating business of Moody’s Corporation.
Bond ratings are based on creditworthiness and
risk. The rating of ‘‘Aaa’’ is the highest bond rating
assigned with the lowest credit risk. See https://
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$2,599,777
Undesignated
$1,733,186
Total
$4,332,963
fred.stlouisfed.org/series/AAA. (Downloaded March
4, 2022.)
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Federal Register / Vol. 88, No. 38 / Monday, February 27, 2023 / Rules and Regulations
TABLE 10—REVENUE NEEDED FOR DISTRICT ONE—Continued
District One
Designated
Undesignated
Total
Total Target Pilot Compensation (Step 4) ...................................................................................
Total Target Apprentice Pilot Compensation (Step 4) ................................................................
Working Capital Fund (Step 5) ....................................................................................................
4,243,980
183,340
189,966
3,395,184
122,227
141,941
7,639,164
305,567
331,907
Total Revenue Needed ........................................................................................................
7,217,063
5,392,538
12,609,601
G. Step 7: Calculate Initial Base Rates
Having determined the revenue
needed for each area in the previous six
steps, to develop an hourly rate, the
Coast Guard divides that number by the
expected number of hours of traffic.
Step 7 is a two-part process. The first
part is calculating the 10-year average of
traffic in District One, using the total
time on task or pilot bridge hours. To
calculate the time on task for each
district, the Coast Guard uses billing
data from the GLPMS. The data is
pulled from the system filtering by
district, year, job status (including only
closed jobs), and flagging code
(including only U.S. jobs). Because
separate figures are calculated for
designated and undesignated waters,
there are two parts for each calculation,
as shown in table 11.
TABLE 11—TIME ON TASK FOR
DISTRICT ONE—Continued
[Hours]
TABLE 11—TIME ON TASK FOR
DISTRICT ONE
District One
Designated
Undesignated
6,188
6,265
8,232
6,943
7,605
5,434
5,743
6,810
5,864
4,771
7,871
7,560
8,405
8,445
8,679
6,217
6,667
6,853
5,529
5,121
..............
..............
..............
..............
..............
..............
..............
..............
..............
..............
Designated
Undesignated
6,386
7,135
Average .....
Year
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
District One
Year
[Hours]
Next, the Coast Guard derives the
initial hourly rate by dividing the
revenue needed by the average number
of hours for each area. This produces an
initial rate, which is necessary to
produce the revenue needed for each
area, assuming the amount of traffic is
as expected. The calculations for
District One are presented in table 12.
TABLE 12—INITIAL RATE CALCULATIONS FOR DISTRICT ONE
Designated
Revenue needed (Step 6) .......................................................................................................................................
Average time on task (hours) ..................................................................................................................................
Initial rate .................................................................................................................................................................
H. Step 8: Calculate Average Weighting
Factors by Area
In this step, the Coast Guard
calculates the average weighting factor
for each designated and undesignated
area by first collecting the weighting
factors, set forth in 46 CFR 401.400, for
each vessel trip. Using this database, the
$7,217,063
6,386
1,130
Undesignated
$5,392,538
7,135
756
average weighting factor for each area is
calculated, using the data from each
vessel transit from 2014 onward, as
shown in tables 13 and 14.
TABLE 13—AVERAGE WEIGHTING FACTOR FOR DISTRICT ONE, DESIGNATED AREAS
Number of
transits
lotter on DSK11XQN23PROD with RULES1
Vessel class/year
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
3
3
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2014)
(2015)
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.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
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31
41
31
28
54
72
8
10
285
295
185
352
559
378
560
315
50
28
27FER1
Weighting
factor
1
1
1
1
1
1
1
1
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.3
1.3
Weighted
transits
31
41
31
28
54
72
8
10
328
339
213
405
643
435
644
362
65
36
12238
Federal Register / Vol. 88, No. 38 / Monday, February 27, 2023 / Rules and Regulations
TABLE 13—AVERAGE WEIGHTING FACTOR FOR DISTRICT ONE, DESIGNATED AREAS—Continued
Number of
transits
Vessel class/year
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
3
3
3
3
3
3
4
4
4
4
4
4
4
4
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
Weighting
factor
Weighted
transits
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
50
67
86
122
67
52
271
251
214
285
393
730
427
407
1.3
1.3
1.3
1.3
1.3
1.3
1.45
1.45
1.45
1.45
1.45
1.45
1.45
1.45
65
87
112
159
87
68
393
364
310
413
570
1059
619
590
Total ......................................................................................................................................
6,704
........................
8,640
Average weighting factor (weighted transits ÷ number of transits) .............................................
........................
1.29
........................
TABLE 14—AVERAGE WEIGHTING FACTOR FOR DISTRICT ONE, UNDESIGNATED AREAS
Number of
transits
Vessel class/year
lotter on DSK11XQN23PROD with RULES1
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
3
3
3
3
3
3
3
3
4
4
4
4
4
4
4
4
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
Weighting
factor
Weighted
transits
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
25
28
18
19
22
30
3
19
238
263
169
290
352
366
358
463
60
42
28
45
63
58
35
71
289
269
222
285
382
326
334
466
1
1
1
1
1
1
1
1
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.3
1.3
1.3
1.3
1.3
1.3
1.3
1.3
1.45
1.45
1.45
1.45
1.45
1.45
1.45
1.45
25
28
18
19
22
30
3
19
274
302
194
334
405
421
412
532
78
55
36
59
82
75
46
92
419
390
322
413
554
473
484
676
Total ......................................................................................................................................
5,638
........................
7,291
Average weighting factor (weighted transits ÷ number of transits) .............................................
........................
........................
1.29
I. Step 9: Calculate Revised Base Rates
In this step, the Coast Guard revises
the base rates so that the total cost of
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pilotage is equal to the revenue needed
after considering the impact of the
weighting factors. To do this, the initial
base rates calculated in Step 7 are
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divided by the average weighting factors
calculated in Step 8, as shown in table
15.
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12239
TABLE 15—REVISED BASE RATES FOR DISTRICT ONE
Initial rate
(Step 7)
Area
District One: Designated ..............................................................................................................
District One: Undesignated ..........................................................................................................
appropriate compensation for pilots to
handle heavy traffic periods and
whether there is a sufficient number of
pilots to handle those heavy traffic
periods. The Director also considers
whether the rates will cover operating
expenses and infrastructure costs,
including average traffic and weighting
J. Step 10: Review and Finalize Rates
In this step, the Director reviews the
rates set forth by the staffing model and
ensures that they meet the goal of
ensuring safe, efficient, and reliable
pilotage. To establish this, the Director
considers whether the rates incorporate
$1,130
756
Average
weighting
factor
(Step 8)
Revised rate
(initial
rate average ÷
weighting
factor)
1.29
1.29
$876
586
factions. Based on the financial
information submitted by the pilots, the
Director is not issuing any alterations to
the rates in this step. By means of this
rule, § 401.405(a)(1) and (2) are
modified to reflect the final rates shown
in table 16.
TABLE 16—FINAL RATES FOR DISTRICT ONE
Final 2022
pilotage rate
Area
Name
District One: Designated ..............................................
District One: Undesignated ..........................................
St. Lawrence River .......................................................
Lake Ontario .................................................................
District Two
A. Step 1: Recognize Previous Operating
Expenses
Step 1 in the ratemaking methodology
requires that the Coast Guard review
and recognize the operating expenses of
the last full year for which figures are
available (§ 404.101). To do so, the Coast
Guard begins by reviewing the
independent accountant’s financial
reports for each association’s 2020
expenses and revenues.20 For
accounting purposes, the financial
reports divide expenses into designated
and undesignated areas. For costs
accrued by the pilot associations
generally, such as employee benefits, for
example, the cost is divided between
the designated and undesignated areas
on a pro rata basis.
In the 2020 expenses used as the basis
for this rulemaking, districts used the
term ‘‘applicant’’ to describe applicant
trainees and persons who will be called
apprentices (applicant pilots), under the
definition introduced by the 2022 final
rule. Therefore, when describing past
expenses, the term ‘‘applicant’’ is used
to match what was reported from 2020,
which includes both applicant and
apprentice pilots. The term
‘‘apprentice’’ is used to distinguish
apprentice pilot wages and describe the
impacts of the ratemaking going
forward.
The Coast Guard continues to include
apprentice salaries as an allowable
expense in the 2023 ratemaking, as it is
based on 2020 operating expenses,
when salaries were still an allowable
expense. The apprentice salaries paid in
the years 2020 and 2021 have not been
reimbursed in the ratemaking as of
publication of this rule. Applicant
Final 2023
pilotage rate
$834
568
$876
586
salaries (including applicant trainees
and apprentice pilots) will continue to
be an allowable operating expense
through the 2024 ratemaking, which
uses operating expenses from 2021,
where the wages for apprentice pilots
were still authorized as operating
expenses.
Beginning with the 2025 ratemaking,
apprentice pilot salaries will no longer
be included as a 2022 operating
expense, because apprentice pilot wages
will have already been factored into the
ratemaking Steps 3 and 4 in calculation
of the 2022 rates. Beginning in 2025, the
applicant salaries’ operating expenses
for 2022 will consist of only applicant
trainees (those who are not yet
apprentice pilots). The recognized
operating expenses for District Two are
shown in table 17.
TABLE 17—2020 RECOGNIZED EXPENSES FOR DISTRICT TWO
District Two
Designated
Reported operating expenses for 2020
Undesignated
lotter on DSK11XQN23PROD with RULES1
Lake Erie
Applicant
Applicant
Applicant
Applicant
Salaries ........................................................................................................................
Health Insurance ..........................................................................................................
Subsistence/Travel ......................................................................................................
Hotel/Lodging Cost ......................................................................................................
$101,810
12,706
6,732
3,652
20 These reports are available in the docket for
this rulemaking.
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Southeast
Shoal to Port
Huron
$152,715
19,058
10,098
5,478
Total
$254,525
31,764
16,830
9,130
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Federal Register / Vol. 88, No. 38 / Monday, February 27, 2023 / Rules and Regulations
TABLE 17—2020 RECOGNIZED EXPENSES FOR DISTRICT TWO—Continued
District Two
Designated
Reported operating expenses for 2020
Undesignated
Lake Erie
Total
Applicant Payroll Tax ...................................................................................................................
4,888
7,332
12,220
Total Applicant Cost .............................................................................................................
Pilot Subsistence/Travel ..............................................................................................................
Hotel/Lodging Cost ......................................................................................................................
License Renewal .........................................................................................................................
Payroll Taxes ...............................................................................................................................
Insurance .....................................................................................................................................
129,788
124,953
40,744
1,606
94,996
8,666
194,681
187,427
61,116
2,409
142,495
12,999
324,469
312,380
101,860
4,015
237,491
21,665
Total Other Pilotage Costs ...................................................................................................
Pilot Boat and Dispatch Costs:
Pilot Boat Cost ......................................................................................................................
Employee Benefits ................................................................................................................
Payroll taxes .........................................................................................................................
270,965
406,446
677,411
218,840
92,554
13,565
328,261
138,831
20,347
547,101
231,385
33,912
Total Pilot Boat and Dispatch Costs .............................................................................
Administrative Expense:
Legal—General Counsel ......................................................................................................
Legal—Shared Counsel (K&L Gates) ..................................................................................
Legal—Shared Counsel (K&L Gates) (D2–20–01) ..............................................................
Office Rent ............................................................................................................................
Insurance ..............................................................................................................................
Employee Benefits ................................................................................................................
Payroll Taxes ........................................................................................................................
Other Taxes ..........................................................................................................................
Real Estate Taxes ................................................................................................................
Depreciation/Auto Lease/Other ............................................................................................
Interest ..................................................................................................................................
APA Dues .............................................................................................................................
Dues and Subscriptions .......................................................................................................
Utilities ..................................................................................................................................
Salaries—Admin Employees ................................................................................................
Accounting ............................................................................................................................
Pilot Training .........................................................................................................................
Other .....................................................................................................................................
324,959
487,439
812,398
4,016
9,898
3,233
27,627
12,357
157,650
5,007
43,400
8,285
7,783
114
14,683
819
18,453
50,250
14,360
146
24,604
6,024
14,846
4,850
41,440
18,536
236,476
7,510
65,100
12,427
11,674
171
22,025
1,229
27,679
75,374
21,540
219
36,906
10,040
24,744
8,083
69,067
30,893
394,126
12,517
108,500
20,712
19,457
285
36,708
2,048
46,132
125,624
35,900
365
61,510
Total Administrative Expenses ......................................................................................
402,685
604,026
1,006,711
Total OpEx (Pilot Costs + Applicant Cost + Pilot Boats + Admin) .............................................
1,128,397
1,692,592
2,820,989
TOTAL DIRECTOR’S ADJUSTMENTS ...............................................................................
........................
........................
........................
Total Operating Expenses (OpEx + Adjustments) ........................................................
1,128,397
1,692,592
2,820,989
B. Step 2: Project Operating Expenses,
Adjusting for Inflation or Deflation
In accordance with the text in
§ 404.102, having identified the
recognized 2020 operating expenses in
Step 1, the next step is to estimate the
lotter on DSK11XQN23PROD with RULES1
Southeast
Shoal to Port
Huron
21 The 2021 inflation rate is available at https://
data.bls.gov/pdq/SurveyOutputServlet?data_
tool=dropmap&series_id=CUUR0200SA0,
CUUS0200SA0. Specifically, the CPI is defined as
‘‘All Urban Consumers (CPI–U), All Items, 1982–
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18:59 Feb 24, 2023
Jkt 259001
current year’s operating expenses by
adjusting those expenses for inflation
over the 3-year period. The Coast Guard
calculates inflation using the BLS data
from the CPI for the Midwest Region of
the United States for the 2021 inflation
rate.21 Because the BLS does not
provide forecasted inflation data,
economic projections are used from the
Federal Reserve for the 2022 and 2023
inflation modification.22 Based on that
information, the calculations for Step 2
are as presented in table 18.
4=100.’’ Series CUUS0200SAO. (Downloaded
September 2022.)
22 The 2022 and 2023 inflation rates are available
at https://www.federalreserve.gov/monetarypolicy/
files/fomcprojtabl20220921.pdf. We used the Core
PCE Inflation June Projection found in table 1.
(Downloaded September 2022.)
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12241
TABLE 18—ADJUSTED OPERATING EXPENSES FOR DISTRICT TWO
District Two
Undesignated
Total
2021
2022
2023
Designated
Total
Operating Expenses (Step 1) .............................................................................................
Inflation Modification (@5.1%) ...........................................................................................
Inflation Modification (@4.3%) ...........................................................................................
Inflation Modification (@2.7%) ...........................................................................................
$1,128,397
57,548
50,996
33,397
$1,692,592
86,322
76,493
50,096
$2,820,989
143,870
127,489
83,493
Adjusted 2023 Operating Expenses .....................................................................................
1,270,338
1,905,503
3,175,841
C. Step 3: Estimate Number of
Registered Pilots and Apprentice Pilots
In accordance with the text in
§ 404.103, the Coast Guard estimates the
number of fully registered pilots in each
district. The Coast Guard determines the
number of fully registered pilots based
on data provided by the LPA. Using
these numbers, the Coast Guard
estimates that there will be 16 registered
pilots in 2023 in District Two. The Coast
Guard determines the number of
apprentice pilots based on input from
the district on anticipated retirements
and staffing needs. Using these
numbers, the Coast Guard estimates that
there will be one apprentice pilot in
2023 in District Two. Based on the
seasonal staffing model discussed in the
2017 ratemaking (see 82 FR 41466), a
certain number of pilots are assigned to
designated waters and a certain number
to undesignated waters, as shown in
table 19. These numbers are used to
determine the amount of revenue
needed in their respective areas.
TABLE 19—AUTHORIZED PILOTS FOR DISTRICT TWO
Item
District Two
Maximum Number of Pilots (per § 401.220(a)) * .................................................................................................................................
2023 Authorized Pilots (total) ..............................................................................................................................................................
Pilots Assigned to Designated Areas ..................................................................................................................................................
Pilots Assigned to Undesignated Areas ..............................................................................................................................................
2023 Apprentice Pilots .........................................................................................................................................................................
16
16
6
10
1
* For a detailed calculation, refer to the Great Lakes Pilotage Rates—2017 Annual Review final rule, which contains the staffing model. See 82
FR 41466, table 6 at 41480 (August 31, 2017).
D. Step 4: Determine Target Pilot
Compensation Benchmark and
Apprentice Pilot Wage Benchmark
In this step, the Coast Guard
determines the total pilot compensation
for each area. Because a full ratemaking
is being issued this year, the Coast
Guard follows the procedure outlined in
paragraph (a) of § 404.104, which
requires developing a benchmark after
considering the most relevant currently
available non-proprietary information.
In accordance with the discussion in
section V of this preamble, the
compensation benchmark for 2023 uses
the 2022 compensation of $399,266 per
registered pilot as a base, then adjusts
for inflation following the procedure
outlined in paragraph (b) of § 404.104.
The target pilot compensation for 2023
is $424,398 per pilot. The apprentice
pilot wage benchmark is 36 percent of
the target pilot compensation, or
$152,783 ($424,398 × 0.36).
Next, the Coast Guard certifies that
the number of pilots estimated for 2023
is less than or equal to the number
permitted under the staffing model in
§ 401.220(a). The staffing model
suggests that the number of pilots
needed is 16 pilots for District Two,
which is less than or equal to 16, the
number of registered pilots provided by
the pilot association. In accordance with
§ 404.104(c), the Coast Guard uses the
revised target individual compensation
level to derive the total pilot
compensation by multiplying the
individual target compensation by the
estimated number of registered pilots for
District Two, as shown in table 20. The
Coast Guard estimates that the number
of apprentice pilots with limited
registration needed will be one for
District Two in the 2023 season. The
total target wages for apprentices are
allocated at 60 percent for the
designated area and 40 percent for the
undesignated area, in accordance with
the allocation for operating expenses.
TABLE 20—TARGET COMPENSATION FOR DISTRICT TWO
District Two
lotter on DSK11XQN23PROD with RULES1
Undesignated
Designated
Total
Target Pilot Compensation ..........................................................................................................
Number of Pilots ..........................................................................................................................
$424,398
10
$424,398
6
$424,398
16
Total Target Pilot Compensation ..........................................................................................
Target Apprentice Pilot Compensation ........................................................................................
Number of Apprentice Pilots ........................................................................................................
$4,243,980
$152,783
........................
$2,546,388
$152,783
........................
$6,790,368
$152,783
1
Total Target Apprentice Pilot Compensation .......................................................................
$61,113.39
$91,669.89
$152,783
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Federal Register / Vol. 88, No. 38 / Monday, February 27, 2023 / Rules and Regulations
E. Step 5: Project Working Capital Fund
Next, the Coast Guard calculates the
working capital fund revenues needed
for each area by first adding the figures
for projected operating expenses, total
pilot compensation, and total target
apprentice pilot wage for each area and
then finding the preceding year’s
average annual rate of return for new
issues of high-grade corporate securities.
Using Moody’s data, the number is
2.7033 percent.23 By multiplying the
two figures, the Coast Guard obtains the
working capital fund contribution for
each area, as shown in table 21.
TABLE 21—WORKING CAPITAL FUND CALCULATION FOR DISTRICT TWO
District Two
Undesignated
Designated
Total
Adjusted Operating Expenses (Step 2) .......................................................................................
Total Target Pilot Compensation (Step 4) ...................................................................................
Total Target Apprentice Pilot Compensation (Step 4) ................................................................
$1,270,338
4,243,980
61,113
$1,905,503
2,546,388
91,670
$3,175,841
6,790,368
152,783
Total 2023 Expenses ............................................................................................................
5,575,431
4,543,561
10,118,992
Working Capital Fund (2.7%) ......................................................................................................
150,722
122,828
273,550
F. Step 6: Project Needed Revenue
In this step, the Coast Guard adds all
the expenses accrued to derive the total
revenue needed for each area. These
expenses include the projected
operating expenses (from Step 2), the
total pilot compensation (from Step 4),
total target apprentice pilot wage, (from
Step 4) and the working capital fund
contribution (from Step 5). These
calculations are shown in table 22.
TABLE 22—REVENUE NEEDED FOR DISTRICT TWO
District Two
Undesignated
Designated
Total
Adjusted Operating Expenses (Step 2) .......................................................................................
Total Target Pilot Compensation (Step 4) ...................................................................................
Total Target Apprentice Pilot Compensation (Step 4) ................................................................
Working Capital Fund (Step 5) ....................................................................................................
$1,270,338
4,243,980
61,113
150,722
$1,905,503
2,546,388
91,670
122,828
$3,175,841
6,790,368
152,783
273,550
Total Revenue Needed ........................................................................................................
5,726,153
4,666,389
10,392,542
G. Step 7: Calculate Initial Base Rates
Having determined the revenue
needed for each area in the previous six
steps, to develop an hourly rate, the
Coast Guard divides that number by the
expected number of hours of traffic.
Step 7 is a two-part process. In the first
part, the Coast Guard calculates the 10year average of traffic in District Two,
using the total time on task or pilot
bridge hours. To calculate the time on
task for each district, the Coast Guard
uses billing data from SeaPro, pulling
the data from the system filtering by
district, year, job status (including only
processed jobs), and flagging code
(including only U.S. jobs). Because
separate figures are calculated for
designated and undesignated waters,
there are two parts for each calculation,
as shown in table 23.
TABLE 23—TIME ON TASK FOR DISTRICT TWO
[Hours]
District Two
Year
Undesignated
lotter on DSK11XQN23PROD with RULES1
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
Designated
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
8,826
6,232
6,512
6,150
5,139
6,425
6,535
7,856
4,603
3,848
3,226
8,401
7,715
6,655
6,074
5,615
5,967
7,001
4,750
3,922
Average ................................................................................................................................................................
6,213
5,933
23 Moody’s Seasoned Aaa Corporate Bond Yield,
average of 2021 monthly data. The Coast Guard uses
the most recent year of complete data. Moody’s is
taken from Moody’s Investors Service, which is a
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18:59 Feb 24, 2023
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bond credit rating business of Moody’s Corporation.
Bond ratings are based on creditworthiness and
risk. The rating of ‘‘Aaa’’ is the highest bond rating
assigned with the lowest credit risk. See https://
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Next, the Coast Guard derives the
initial hourly rate by dividing the
revenue needed by the average number
of hours for each area. This produces an
initial rate, which is necessary to
produce the revenue needed for each
12243
area, assuming the amount of traffic is
as expected. The calculations for
District Two are presented in table 24.
TABLE 24—INITIAL RATE CALCULATIONS FOR DISTRICT TWO
Undesignated
Revenue needed (Step 6) .......................................................................................................................................
Average time on task (hours) ..................................................................................................................................
Initial rate .................................................................................................................................................................
H. Step 8: Calculate Average Weighting
Factors by Area
In this step, the Coast Guard calculate
the average weighting factor for each
designated and undesignated area by
first collecting the weighting factors, set
forth in 46 CFR 401.400, for each vessel
trip. Using this database, the Coast
$5,726,153
6,213
$922
Designated
$4,666,389
5,933
$787
Guard calculates the average weighting
factor for each area using the data from
each vessel transit from 2014 onward, as
shown in tables 25 and 26.
TABLE 25—AVERAGE WEIGHTING FACTOR FOR DISTRICT TWO, UNDESIGNATED AREAS
Number of
transits
Vessel class/year
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
3
3
3
3
3
3
3
3
4
4
4
4
4
4
4
4
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
Weighting
factor
Weighted
transits
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
31
35
32
21
37
54
1
7
356
354
380
222
123
127
165
206
20
0
9
12
3
1
1
5
636
560
468
319
196
210
201
227
1
1
1
1
1
1
1
1
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.3
1.3
1.3
1.3
1.3
1.3
1.3
1.3
1.45
1.45
1.45
1.45
1.45
1.45
1.45
1.45
31
35
32
21
37
54
1
7
409
407
437
255
141
146
190
237
26
0
12
16
4
1
1
7
922
812
679
463
284
305
291
329
Total ......................................................................................................................................
5,019
........................
6,592
Average weighting factor (weighted transits ÷ number of transits) .............................................
........................
1.31
........................
TABLE 26—AVERAGE WEIGHTING FACTOR FOR DISTRICT TWO, DESIGNATED AREAS
Number of
transits
lotter on DSK11XQN23PROD with RULES1
Vessel class/year
Class
Class
Class
Class
Class
Class
Class
Class
Class
1
1
1
1
1
1
1
1
2
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2014)
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.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
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20
15
28
15
42
48
7
12
237
27FER1
Weighting
factor
1
1
1
1
1
1
1
1
1.15
Weighted
transits
20
15
28
15
42
48
7
12
273
12244
Federal Register / Vol. 88, No. 38 / Monday, February 27, 2023 / Rules and Regulations
TABLE 26—AVERAGE WEIGHTING FACTOR FOR DISTRICT TWO, DESIGNATED AREAS—Continued
Number of
transits
Vessel class/year
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
2
2
2
2
2
2
2
3
3
3
3
3
3
3
3
4
4
4
4
4
4
4
4
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
Weighting
factor
Weighted
transits
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
217
224
127
153
281
342
240
8
8
4
4
14
1
5
2
359
340
281
185
379
403
405
268
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.3
1.3
1.3
1.3
1.3
1.3
1.3
1.3
1.45
1.45
1.45
1.45
1.45
1.45
1.45
1.45
250
258
146
176
323
393
276
10
10
5
5
18
1
7
3
521
493
407
268
550
584
587
389
Total ......................................................................................................................................
4,674
........................
6,140
Average weighting factor (weighted transits ÷ number of transits) .............................................
........................
1.31
........................
I. Step 9: Calculate Revised Base Rates
pilotage is equal to the revenue needed
after considering the impact of the
weighting factors. To do this, the initial
base rates calculated in Step 7 are
In this step, the Coast Guard revises
the base rates so that the total cost of
divided by the average weighting factors
calculated in Step 8, as shown in table
27.
TABLE 27—REVISED BASE RATES FOR DISTRICT TWO
Initial rate
(Step 7)
Area
District Two: Undesignated ..........................................................................................................
District Two: Designated ..............................................................................................................
J. Step 10: Review and Finalize Rates
In this step, the Director reviews the
rates set forth by the staffing model and
ensures that they meet the goal of
ensuring safe, efficient, and reliable
pilotage. To establish this, the Director
considers whether the rates incorporate
appropriate compensation for pilots to
handle heavy traffic periods, and
whether there is a sufficient number of
pilots to handle those heavy traffic
periods. The Director also considers
whether the rates will cover operating
expenses and infrastructure costs and
takes average traffic and weighting
$922
787
Average
weighting
factor
(Step 8)
1.31
1.31
Revised rate
(initial rate/
average
weighting
factor)
$704
601
factors into consideration. Based on the
financial information submitted by the
pilots, the Director is not issuing any
alterations to the rates in this step. By
means of this rule, § 401.405(a)(3) and
(4) are modified to reflect the final rates
shown in table 28.
lotter on DSK11XQN23PROD with RULES1
TABLE 28—FINAL RATES FOR DISTRICT TWO
Final 2022
pilotage rate
Area
Name
District Two: Designated .......................................
District Two: Undesignated ...................................
Navigable waters from Southeast Shoal to Port Huron, MI
Lake Erie ..............................................................................
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$536
610
Final 2023
pilotage rate
$601
704
Federal Register / Vol. 88, No. 38 / Monday, February 27, 2023 / Rules and Regulations
District Three
A. Step 1: Recognize Previous Operating
Expenses
Step 1 in the ratemaking methodology
requires that the Coast Guard review
and recognize the operating expenses of
the last year for which figures are
available (§ 404.101). To do so, the Coast
Guard begins by reviewing the
independent accountant’s financial
reports for each association’s 2020
expenses and revenues.24 For
accounting purposes, the financial
reports divide expenses into designated
and undesignated areas. For costs
accrued by the pilot associations
generally, such as employee benefits, for
example, the cost is divided between
the designated and undesignated areas
on a pro rata basis.
In the 2020 expenses used as the basis
for this rulemaking, districts used the
term ‘‘applicant’’ to describe applicant
trainees and persons who will be called
apprentices (applicant pilots), under the
definition introduced by the 2022 final
rule. Therefore, when describing past
expenses, the term ‘‘applicant’’ is used
to match what was reported from 2020,
which includes both applicant and
apprentice pilots. The term
‘‘apprentice’’ is used to distinguish
apprentice pilot wages and describe the
impacts of the ratemaking going
forward.
The Coast Guard continues to include
apprentice salaries as an allowable
expense in the 2023 ratemaking, as it is
based on 2020 operating expenses,
when salaries were still an allowable
expense. The apprentice salaries paid in
the years 2020 and 2021 have not been
reimbursed in the ratemaking as of
publication of this rule. Applicant
12245
salaries (including applicant trainees
and apprentice pilots) will continue to
be an allowable operating expense
through the 2024 ratemaking, which
uses operating expenses from 2021,
where the wages for apprentice pilots
were still authorized as operating
expenses.
Beginning with the 2025 ratemaking,
apprentice pilot salaries will no longer
be included as a 2022 operating
expense, because apprentice pilot wages
will have already been factored into the
ratemaking Steps 3 and 4 in calculation
of the 2022 rates. Beginning in 2025, the
applicant salaries’ operating expenses
for 2022 will consist of only applicant
trainees (those who are not yet
apprentice pilots). The recognized
operating expenses for District Three are
shown in table 29.
TABLE 29—2020 RECOGNIZED EXPENSES FOR DISTRICT THREE
District Three
Reported operating
expenses for 2020
Undesignated
Designated
Undesignated
Lakes Huron
and Michigan
St. Mary’s
River
Lake Superior
$284,547
87,208
16,749
........................
151,266
6,505
$118,603
36,349
6,981
........................
63,049
2,711
$149,261
45,745
8,786
........................
79,348
3,412
$552,411
169,302
32,516
........................
293,663
12,628
Total Other Pilotage Costs ................................................................
Applicant Cost:
Applicant Salaries .....................................................................................
Applicant Benefits .....................................................................................
Applicant Payroll Tax ................................................................................
Applicant Hotel/Lodging ............................................................................
546,275
227,693
286,552
1,060,520
340,677
66,083
25,711
31,313
141,998
27,544
10,717
13,052
178,705
34,665
13,487
16,425
661,380
128,292
49,915
60,790
Total Applicant Cost ..........................................................................
Pilot Boat and Dispatch costs:
Pilot Boat Costs ........................................................................................
Dispatch Costs .........................................................................................
Employee Benefits ....................................................................................
Payroll Taxes ............................................................................................
463,784
193,311
243,282
900,377
515,075
112,008
41,153
16,771
214,689
46,686
17,153
6,991
270,187
58,755
21,587
8,798
999,951
217,449
79,893
32,560
685,007
285,519
359,327
1,329,853
1,921
21,650
3,601
8,575
18,811
80,117
8,101
15,797
2,001
61,096
2,940
23,860
4,971
50,795
54,212
801
9,024
1,501
3,574
7,841
33,394
3,377
6,584
834
25,465
1,225
9,945
2,072
21,172
22,596
1,008
11,357
1,889
4,498
9,867
42,026
4,250
8,286
1,050
32,048
1,542
12,516
2,607
26,645
28,438
3,730
42,031
6,991
16,647
36,519
155,537
15,728
30,667
3,885
118,609
5,707
46,321
9,650
98,612
105,246
lotter on DSK11XQN23PROD with RULES1
Other Pilotage Costs:
Pilot Subsistence/Travel ...........................................................................
Hotel/Lodging Cost ...................................................................................
License Insurance—Pilots ........................................................................
Payroll Taxes ............................................................................................
Payroll Tax (D3–19–01) ............................................................................
Other .........................................................................................................
Total Pilot Boat and Dispatch costs ..................................................
Administrative Cost:
Legal—General Counsel ..........................................................................
Legal—Shared Counsel (K&L Gates) ......................................................
Legal—Shared Counsel (K&L Gates) CPA Deduction (D3–20–03) ........
Legal—USCG Litigation ...........................................................................
Insurance ..................................................................................................
Employee Benefits ....................................................................................
Payroll Tax ................................................................................................
Other Taxes ..............................................................................................
Real Estate Taxes ....................................................................................
Depreciation/Auto Leasing/Other .............................................................
Interest ......................................................................................................
APA Dues .................................................................................................
Dues and Subscriptions ...........................................................................
Salaries .....................................................................................................
Utilities ......................................................................................................
24 These reports are available in the docket for
this rulemaking.
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Total
12246
Federal Register / Vol. 88, No. 38 / Monday, February 27, 2023 / Rules and Regulations
TABLE 29—2020 RECOGNIZED EXPENSES FOR DISTRICT THREE—Continued
District Three
Reported operating
expenses for 2020
Undesignated
Designated
Undesignated
Lakes Huron
and Michigan
St. Mary’s
River
Lake Superior
Total
Accounting/Professional Fees ..................................................................
Other Expenses ........................................................................................
Other Expenses CPA Deduction (D3–18–01) ..........................................
23,823
38,507
(4,684)
9,930
16,050
(1,952)
12,496
20,199
(2,457)
46,249
74,756
(9,093)
Total Administrative Expenses ..........................................................
416,094
173,433
218,265
807,792
Total Operating Expenses (Other Costs + Applicant Cost + Pilot Boats +
Admin) ..........................................................................................................
Director’s Adjustments—Applicant Surcharge Collected .........................
Total Director’s Adjustments .............................................................
2,111,160
(63,120)
(63,120)
879,956
(26,309)
(26,309)
1,107,426
(33,110)
(33,110)
4,098,542
(122,539)
(122,539)
Total Operating Expenses (OpEx + Adjustments) .....................
2,048,040
853,647
1,074,316
3,976,003
B. Step 2: Project Operating Expenses,
Adjusting for Inflation or Deflation
In accordance with the text in
§ 404.103, having identified the
recognized 2020 operating expenses in
Step 1, the next step is to estimate the
current year’s operating expenses by
adjusting those expenses for inflation
over the 3-year period. The Coast Guard
calculates inflation using the BLS data
from the CPI for the Midwest Region of
the United States for the 2021 inflation
rate.25 Because the BLS does not
provide forecasted inflation data,
economic projections are used from the
Federal Reserve for the 2022 and 2023
inflation modification.26 Based on that
information, the calculations for Step 2
are as presented in table 30.
TABLE 30—ADJUSTED OPERATING EXPENSES FOR DISTRICT THREE
District Three
Undesignated
Total
2021
2022
2023
Designated
Total
Operating Expenses (Step 1) .............................................................................................
Inflation Modification (@5.1%) ...........................................................................................
Inflation Modification (@4.3%) ...........................................................................................
Inflation Modification (@2.7%) ...........................................................................................
$3,122,356
159,240
141,109
92,413
$853,647
43,536
38,579
25,266
$3,976,003
202,776
179,688
117,679
Adjusted 2023 Operating Expenses .....................................................................................
3,515,118
961,028
4,476,146
C. Step 3: Estimate Number of
Registered Pilots and Apprentice Pilots
In accordance with the text in
§ 404.103, the Coast Guard estimate the
number of registered pilots in each
district. The Coast Guard determines the
number of registered pilots based on
data provided by the WGLPA. Using
these numbers, the Coast Guard
estimates that there will be 22 registered
pilots in 2023 in District Three. The
Coast Guard determine the number of
apprentice pilots based on input from
the district on anticipated retirements
and staffing needs. Using these
numbers, the Coast Guard estimates that
there will be three apprentice pilots in
2023 in District Three. Based on the
seasonal staffing model discussed in the
2017 ratemaking (see 82 FR 41466), a
certain number of pilots are assigned to
designated waters and a certain number
to undesignated waters, as shown in
table 31. These numbers are used to
determine the amount of revenue
needed in their respective areas.
TABLE 31—AUTHORIZED PILOTS FOR DISTRICT THREE
Item
District Three
lotter on DSK11XQN23PROD with RULES1
Maximum Number of Pilots (per § 401.220(a)) * .................................................................................................................................
2023 Authorized Pilots (total) ..............................................................................................................................................................
Pilots Assigned to Designated Areas ..................................................................................................................................................
Pilots Assigned to Undesignated Areas ..............................................................................................................................................
2023 Apprentice Pilots .........................................................................................................................................................................
22
22
5
17
3
* For a detailed calculation, refer to the Great Lakes Pilotage Rates—2017 Annual Review final rule, which contains the staffing model. See 82
FR 41466, table 6 at 41480 (August 31, 2017).
25 The 2021 inflation rate is available at https://
data.bls.gov/pdq/SurveyOutputServlet?data_
tool=dropmap&series_id=CUUR0200SA0,
CUUS0200SA0. Specifically, the CPI is defined as
‘‘All Urban Consumers (CPI–U), All Items, 1982–
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September 2022.)
26 The 2022 and 2023 inflation rates are available
at https://www.federalreserve.gov/monetarypolicy/
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Federal Register / Vol. 88, No. 38 / Monday, February 27, 2023 / Rules and Regulations
D. Step 4: Determine Target Pilot
Compensation Benchmark and
Apprentice Pilot Wage Benchmark
In this step, the Coast Guard
determine the total pilot compensation
for each area. Because a full ratemaking
is being issued this year, the Coast
Guard follows the procedure outlined in
paragraph (a) of § 404.104, which
requires developing a benchmark after
considering the most relevant currently
available non-proprietary information.
In accordance with the discussion in
section V of this preamble, the
compensation benchmark for 2023 uses
the 2022 compensation of $399,266 per
12247
the pilot association. In accordance with
§ 404.104(c), the revised target
individual compensation level is used
to derive the total pilot compensation by
multiplying the individual target
compensation by the estimated number
of registered pilots for District Three, as
shown in table 32. The Coast Guard
estimates that the number of apprentice
pilots with limited registration needed
will be three for District Three in the
2023 season. The total target wages for
apprentices are allocated with 21
percent for the designated area, and 79
percent (52 percent + 27 percent) for the
undesignated areas, in accordance with
the allocation for operating expenses.
registered pilot as a base, then adjusts
for inflation following the procedure
outlined in paragraph (b) of § 404.104.
The target pilot compensation for 2023
is $424,398 per pilot. The apprentice
pilot wage benchmark is 36 percent of
the target pilot compensation, or
$152,783 ($424,398 × 0.36).
Next, the Coast Guard certifies that
the number of pilots estimated for 2023
is less than or equal to the number
permitted under the staffing model in
§ 401.220(a). The staffing model
suggests that the number of pilots
needed is 22 pilots for District Three,
which is less than or equal to 22, the
number of registered pilots provided by
TABLE 32—TARGET COMPENSATION FOR DISTRICT THREE
District Three
Undesignated
Designated
Total
Target Pilot Compensation ..........................................................................................................
Number of Pilots ..........................................................................................................................
$424,398
17
$424,398
5
$424,398
22
Total Target Pilot Compensation ..........................................................................................
Target Apprentice Pilot Compensation ........................................................................................
Number of Apprentice Pilots ........................................................................................................
$7,214,766
$152,783
........................
$2,121,990
$152,783
........................
$9,336,756
$152,783
3
Total Target Apprentice Pilot Compensation .......................................................................
$359,942
$98,408
$458,350
E. Step 5: Project Working Capital Fund
Next, the Coast Guard calculates the
working capital fund revenues needed
for each area by first adding the figures
for projected operating expenses, total
pilot compensation, and total target
apprentice pilot wage for each area and
then finding the preceding year’s
average annual rate of return for new
issues of high-grade corporate securities.
Using Moody’s data, the number is
2.7033 percent.27 By multiplying the
two figures, the working capital fund
contribution for each area is obtained, as
shown in table 33.
TABLE 33—WORKING CAPITAL FUND CALCULATION FOR DISTRICT THREE
District Three
Undesignated
Designated
Total
Adjusted Operating Expenses (Step 2) .......................................................................................
Total Target Pilot Compensation (Step 4) ...................................................................................
Total Target Apprentice Pilot Compensation (Step 4) ................................................................
$3,515,118
7,214,766
359,942
$961,028
2,121,990
98,408
$4,476,146
9,336,756
458,350
Total 2023 Expenses ............................................................................................................
11,089,826
3,181,425
14,271,252
Working Capital Fund (2.7%) ......................................................................................................
299,795
86,005
385,800
F. Step 6: Project Needed Revenue
In this step, the Coast Guard adds all
the expenses accrued to derive the total
revenue needed for each area. These
expenses include the projected
operating expenses (from Step 2), the
total pilot compensation (from Step 4),
and the working capital fund
contribution (from Step 5). The
calculations are shown in table 34.
TABLE 34—REVENUE NEEDED FOR DISTRICT THREE
District Three
lotter on DSK11XQN23PROD with RULES1
Undesignated
Adjusted Operating Expenses (Step 2) .......................................................................................
27 Moody’s Seasoned Aaa Corporate Bond Yield,
average of 2021 monthly data. The Coast Guard uses
the most recent year of complete data. Moody’s is
taken from Moody’s Investors Service, which is a
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risk. The rating of ‘‘Aaa’’ is the highest bond rating
assigned with the lowest credit risk. See https://
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$3,515,118
Designated
$961,028
Total
$4,476,146
fred.stlouisfed.org/series/AAA. (Downloaded March
4, 2022).
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Federal Register / Vol. 88, No. 38 / Monday, February 27, 2023 / Rules and Regulations
TABLE 34—REVENUE NEEDED FOR DISTRICT THREE—Continued
District Three
Undesignated
Designated
Total
Total Target Pilot Compensation (Step 4) ...................................................................................
Total Target Apprentice Pilot Compensation (Step 4) ................................................................
Working Capital Fund (Step 5) ....................................................................................................
7,214,766
359,942
299,795
2,121,990
98,408
86,005
9,336,756
458,350
385,800
Total Revenue Needed ........................................................................................................
11,389,621
3,267,430
14,657,052
G. Step 7: Calculate Initial Base Rates
Having determined the revenue
needed for each area in the previous six
steps, to develop an hourly rate, the
Coast Guard divides that number by the
expected number of hours of traffic.
Step 7 is a two-part process. In the first
part, the 10-year average of traffic in
District Three is calculated using the
total time on task or pilot bridge hours.
To calculate the time on task for each
district, the Coast Guard uses billing
data from SeaPro, pulling the data from
the system filtering by district, year, job
status (including only processed jobs),
and flagging code (including only U.S.
jobs). Because separate figures for
designated and undesignated waters are
calculated, there are two parts for each
calculation, as shown in table 35.
TABLE 35—TIME ON TASK FOR
DISTRICT THREE
[Hours]
District Three
Year
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
Undesignated
Designated
18,286
23,678
24,851
19,967
20,955
23,421
22,824
25,833
17,115
15,906
2,516
3,520
3,395
3,455
2,997
2,769
2,696
3,835
2,631
2,163
21,284
2,998
..............
..............
..............
..............
..............
..............
..............
..............
..............
..............
Average
Next, the Coast Guard derives the
initial hourly rate by dividing the
revenue needed by the average number
of hours for each area. This produces an
initial rate, which is necessary to
produce the revenue needed for each
area, assuming the amount of traffic is
as expected. The calculations for
District Three are set forth in table 36.
TABLE 36—INITIAL RATE CALCULATIONS FOR DISTRICT THREE
Undesignated
Revenue needed (Step 6) .......................................................................................................................................
Average time on task (hours) ..................................................................................................................................
Initial rate .................................................................................................................................................................
H. Step 8: Calculate Average Weighting
Factors by Area
In this step, the Coast Guard
calculates the average weighting factor
for each designated and undesignated
area by first collecting the weighting
factors, set forth in 46 CFR 401.400, for
each vessel trip. Using this database, the
$11,389,621
21,284
$535
Designated
$3,267,430
2,998
$1,090
Coast Guard calculates the average
weighting factor for each area using the
data from each vessel transit from 2014
onward, as shown in tables 37 and 38.
TABLE 37—AVERAGE WEIGHTING FACTOR FOR DISTRICT THREE, UNDESIGNATED AREAS
Number of
transits
lotter on DSK11XQN23PROD with RULES1
Vessel class/year
Area 6:
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
3
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2014)
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......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
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45
56
136
148
103
173
4
8
274
207
236
264
169
279
332
273
15
27FER1
Weighting
factor
1
1
1
1
1
1
1
1
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.3
Weighted
transits
45
56
136
148
103
173
4
8
315
238
271
304
194
321
382
314
20
12249
Federal Register / Vol. 88, No. 38 / Monday, February 27, 2023 / Rules and Regulations
TABLE 37—AVERAGE WEIGHTING FACTOR FOR DISTRICT THREE, UNDESIGNATED AREAS—Continued
Number of
transits
Vessel class/year
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
3
3
3
3
3
3
3
4
4
4
4
4
4
4
4
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
Weighting
factor
Weighted
transits
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
8
10
19
9
9
4
5
394
375
332
367
337
334
339
356
1.3
1.3
1.3
1.3
1.3
1.3
1.3
1.45
1.45
1.45
1.45
1.45
1.45
1.45
1.45
10
13
25
12
12
5
7
571
544
481
532
489
484
492
516
Total for Area 6 .............................................................................................................
Area 8:
Class 1 (2014) ......................................................................................................................
Class 1 (2015) ......................................................................................................................
Class 1 (2016) ......................................................................................................................
Class 1 (2017) ......................................................................................................................
Class 1 (2018) ......................................................................................................................
Class 1 (2019) ......................................................................................................................
Class 1 (2020) ......................................................................................................................
Class 1 (2021) ......................................................................................................................
Class 2 (2014) ......................................................................................................................
Class 2 (2015) ......................................................................................................................
Class 2 (2016) ......................................................................................................................
Class 2 (2017) ......................................................................................................................
Class 2 (2018) ......................................................................................................................
Class 2 (2019) ......................................................................................................................
Class 2 (2020) ......................................................................................................................
Class 2 (2021) ......................................................................................................................
Class 3 (2014) ......................................................................................................................
Class 3 (2015) ......................................................................................................................
Class 3 (2016) ......................................................................................................................
Class 3 (2017) ......................................................................................................................
Class 3 (2018) ......................................................................................................................
Class 3 (2019) ......................................................................................................................
Class 3 (2020) ......................................................................................................................
Class 3 (2021) ......................................................................................................................
Class 4 (2014) ......................................................................................................................
Class 4 (2015) ......................................................................................................................
Class 4 (2016) ......................................................................................................................
Class 4 (2017) ......................................................................................................................
Class 4 (2018) ......................................................................................................................
Class 4 (2019) ......................................................................................................................
Class 4 (2020) ......................................................................................................................
Class 4 (2021) ......................................................................................................................
5,620
........................
7,224
3
0
4
4
0
0
1
5
177
169
174
151
102
120
180
124
3
0
7
18
7
6
1
1
243
253
204
269
188
254
265
319
1
1
1
1
1
1
1
1
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.3
1.3
1.3
1.3
1.3
1.3
1.3
1.3
1.45
1.45
1.45
1.45
1.45
1.45
1.45
1.45
3
0
4
4
0
0
1
5
204
194
200
174
117
138
207
143
4
0
9
23
9
8
1
1
352
367
296
390
273
368
384
463
Total for Area 8 .............................................................................................................
3,252
........................
4342
Combined total .......................................................................................................
8,872
........................
11,566
Average weighting factor (weighted transits/number of transits) ................................................
........................
1.30
........................
TABLE 38—AVERAGE WEIGHTING FACTOR FOR DISTRICT THREE, DESIGNATED AREAS
Number of
transits
lotter on DSK11XQN23PROD with RULES1
Vessel class/year
Area 7:
Class
Class
Class
Class
Class
Class
Class
Class
1
1
1
1
1
1
1
1
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
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......................................................................................................................
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23
55
62
47
45
15
15
27FER1
Weighting
factor
Weighted
transits
1
1
1
1
1
1
1
1
27
23
55
62
47
45
15
15
12250
Federal Register / Vol. 88, No. 38 / Monday, February 27, 2023 / Rules and Regulations
TABLE 38—AVERAGE WEIGHTING FACTOR FOR DISTRICT THREE, DESIGNATED AREAS—Continued
Number of
transits
Vessel class/year
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
Class
2
2
2
2
2
2
2
2
3
3
3
3
3
3
3
3
4
4
4
4
4
4
4
4
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
Weighting
factor
Weighted
transits
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
......................................................................................................................
221
145
174
170
126
162
218
131
15
0
6
14
6
3
1
2
321
245
191
234
225
308
336
258
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.3
1.3
1.3
1.3
1.3
1.3
1.3
1.3
1.45
1.45
1.45
1.45
1.45
1.45
1.45
1.45
254
167
200
196
145
186
251
151
20
0
8
18
8
4
1
3
465
355
277
339
326
447
487
374
Total ...............................................................................................................................
3,801
........................
4970
Average weighting factor (weighted transits/number of transits) ................................................
........................
1.31
........................
I. Step 9: Calculate Revised Base Rates
pilotage is equal to the revenue needed
after considering the impact of the
weighting factors. To do this, the Coast
Guard divides the initial base rates
In this step, the Coast Guard revises
the base rates so that the total cost of
calculated in Step 7 by the average
weighting factors calculated in Step 8,
as shown in table 39.
TABLE 39—REVISED BASE RATES FOR DISTRICT THREE
Initial rate
(Step 7)
Area
District Three: Undesignated .......................................................................................................
District Three: Designated ...........................................................................................................
J. Step 10: Review and Finalize Rates
In this step, the Director reviews the
rates set forth by the staffing model and
ensures that they meet the goal of
ensuring safe, efficient, and reliable
pilotage. To establish this, the Director
considers whether the rates incorporate
appropriate compensation for pilots to
handle heavy traffic periods and
whether there is a sufficient number of
pilots to handle those heavy traffic
periods. The Director also considers
whether the rates will cover operating
expenses and infrastructure costs and
$535
1,090
Average
weighting
factor
(Step 8)
Revised rate
(initial rate ÷
average
weighting
factor)
1.30
1.31
$410
834
takes average traffic and weighting
factors into consideration. Based on this
information, the Director is not issuing
any alterations to the rates in this step.
By means of this rule, § 401.405(a)(5)
and (6) are modified to reflect the final
rates shown in table 40.
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TABLE 40—FINAL RATES FOR DISTRICT THREE
Final 2022
pilotage rate
Area
Name
District Three: Designated ............................................
District Three: Undesignated ........................................
St. Mary’s River ............................................................
Lakes Huron, Michigan, and Superior ..........................
VIII. Regulatory Analyses
The Coast Guard developed this rule
after considering numerous statutes and
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$662
342
analyses based on these statutes or
Executive orders.
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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.
The Office of Management and Budget
(OMB) has not designated this rule a
significant regulatory action under
section 3(f) of Executive Order 12866. A
regulatory analysis follows.
The purpose of this rule is to establish
new base pilotage rates, as 46 U.S.C.
9303(f) requires that rates be established
or reviewed and adjusted each year. The
12251
statute also requires that base rates 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.
The last full ratemaking was concluded
in June of 2018.28 For this ratemaking,
the Coast Guard estimates an increase in
cost of approximately $5.17 million to
industry. This is approximately a 16percent increase because of the change
in revenue needed in 2023 compared to
the revenue needed in 2022.
TABLE 41—ECONOMIC IMPACTS DUE TO CHANGES
Change
Description
Affected population
Costs
Benefits
Rate changes ...........................
In accordance with 46 U.S.C.
Chapter 93, the Coast Guard
is required to review and adjust base pilotage rates annually.
Owners and operators of 285
vessels transiting the Great
Lakes system annually, 56
United States Great Lakes
pilots, 6 apprentice pilots,
and 3 pilotage associations.
Increase of $5,172,200 due to
change in revenue needed
for 2023 ($37,659,195) from
revenue needed for 2022
($32,486,995) as shown in
table 42.
New rates cover an association’s necessary and reasonable operating expenses.
Promotes safe, efficient, and
reliable pilotage service on
the Great Lakes.
Provides fair compensation,
adequate training, and sufficient rest periods for pilots.
Ensures the association receives sufficient revenues to
fund future improvements.
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The Coast Guard is required to review
and adjust pilotage rates on the Great
Lakes annually. See section III of this
preamble for detailed discussions of the
legal basis and purpose for this
rulemaking. Based on the annual review
for this rulemaking, the Coast Guard is
adjusting the pilotage rates for the 2023
shipping season to generate sufficient
revenues for each district to reimburse
its necessary and reasonable operating
expenses, fairly compensate properly
trained and rested pilots, and provide
an appropriate working capital fund to
use for improvements. The result is an
increase in rates for all areas in District
One, District Two, and District Three.
These changes also lead to a net
increase in the cost of service to
shippers. The change in per-unit cost to
each individual shipper is dependent on
their area of operation.
A detailed discussion of the economic
impact analysis follows.
Affected Population
This rule affects United States Great
Lakes pilots and apprentice pilots, the 3
pilot associations, and the owners and
operators of 285 oceangoing vessels that
transit the Great Lakes annually on
average from 2019 to 2021. The Coast
Guard estimates that there will be 56
registered pilots and 6 apprentice pilots
during the 2023 shipping season. The
shippers affected by these rate changes
are those owners and operators of
domestic vessels operating ‘‘on register’’
(engaged in foreign trade) and owners
and operators of non-Canadian foreign
vessels on routes 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. United Statesflagged vessels not operating on register,
and Canadian ‘‘lakers,’’ which account
for most commercial shipping on the
Great Lakes, are not required by 46
U.S.C. 9302 to have pilots. However,
these United States- and Canadianflagged lakers may voluntarily choose to
engage a Great Lakes registered pilot.
Vessels that are U.S.-flagged may opt to
have a pilot for varying reasons, such as
unfamiliarity with designated waters
and ports, or for insurance purposes.
The Coast Guard used billing
information from the years 2019 through
2021 from the GLPMS to estimate the
average annual number of vessels
affected by the rate adjustment. The
GLPMS tracks data related to managing
and coordinating the dispatch of pilots
on the Great Lakes, and billing in
accordance with the services. As
described in Step 7 of the ratemaking
methodology, the Coast Guard uses a 10-
year average to estimate the traffic and
used 3 years of the most recent billing
data to estimate the affected population.
When 10 years of the most recent billing
data was reviewed, the Coast Guard
found the data included vessels that
have not used pilotage services in recent
years; therefore, using 3 years of billing
data is a better representation of the
vessel population that is currently using
pilotage services and is impacted by this
rulemaking.
The Coast Guard found that 424
unique vessels used pilotage services
during the years 2019 through 2021.
That is, these vessels had a pilot
dispatched to the vessel, and billing
information was recorded in the GLPMS
or SeaPro. Of these vessels, 397 were
foreign-flagged vessels and 27 were
U.S.-flagged vessels. As stated
previously, U.S.-flagged vessels not
operating on register are not required to
have a registered pilot per 46 U.S.C.
9302, but they can voluntarily choose to
have one.
Numerous factors affect vessel traffic,
which varies from year to year.
Therefore, rather than using the total
number of vessels over the time period,
the Coast Guard took an average of the
unique vessels using pilotage services
from the years 2019 through 2021 as the
best representation of vessels estimated
to be affected by the rates in this
28 Great Lakes Pilotage Rates—2018 Annual
Review and Revisions to Methodology (83 FR
26162), published June 5, 2018.
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rulemaking. From 2019 through 2021,
an average of 285 vessels used pilotage
services annually.29 On average, 273 of
these vessels were foreign-flagged and
12 were U.S.-flagged vessels that
voluntarily opted into the pilotage
service (these figures are rounded
averages).
Total Cost to Shippers
The rate changes resulting from this
adjustment to the rates result in a net
increase in the cost of service to
shippers. However, the change in per
unit cost to each individual shipper is
dependent on their area of operation.
The Coast Guard estimates the effect
of the rate changes on shippers by
comparing the total projected revenues
needed to cover costs in 2022 with the
total projected revenues to cover costs
in 2023. The Coast Guard sets pilotage
rates so that pilot associations receive
enough revenue to cover their necessary
and reasonable expenses. Shippers pay
these rates when they engage a pilot as
required by 46 U.S.C. 9302. Therefore,
the aggregate payments of shippers to
pilot associations are equal to the
projected necessary revenues for pilot
associations. The revenues each year
represent the total costs that shippers
must pay for pilotage services. The
change in revenue from the previous
year is the additional cost to shippers
discussed in this rule.
The impacts of the rate changes on
shippers are estimated from the district
pilotage projected revenues (shown in
tables 10, 22, and 34 of this preamble).
The Coast Guard estimates that for the
2023 shipping season, the projected
revenue needed for all three districts is
$37,659,195.
To estimate the change in cost to
shippers from this rule, the Coast Guard
compared the 2023 total projected
revenues to the 2022 projected
revenues. Because the Coast Guard
reviews and prescribes rates for Great
Lakes pilotage annually, the effects are
estimated as a single-year cost rather
than annualized over a 10-year period.
In the 2022 rulemaking, the total
projected revenue needed for 2022 is
estimated as $32,486,994.30 This is the
best approximation of 2022 revenues,
as, at the time of publication of this rule,
the Coast Guard does not have enough
audited data available for the 2022
shipping season to revise these
projections. Table 42 shows the revenue
projections for 2022 and 2023 and
details the additional cost increases to
shippers by area and district as a result
of the rate changes on traffic in Districts
One, Two, and Three.
TABLE 42—EFFECT OF THE RULE BY AREA AND DISTRICT
[U.S. dollars; non-discounted]
Revenue
needed in
2022
Revenue
needed in
2023
Total, District One ........................................................................................................................
Total, District Two ........................................................................................................................
Total, District Three .....................................................................................................................
$11,791,695
8,786,882
11,908,418
$12,609,601
10,392,542
14,657,052
$817,906
1,605,660
2,748,633
System Total .........................................................................................................................
32,486,995
37,659,195
5,172,199
Area
Additional
costs of
this rule
Note: All figures are rounded to the nearest dollar and may not sum.
The resulting difference between the
projected revenue in 2022 and the
projected revenue in 2023 is the annual
change in payments from shippers to
pilots as a result of the rate changes by
this rule. The effect of the rate changes
to shippers will vary by area and
district. After taking into account the
change in pilotage rates, the rate
changes will lead to affected shippers
operating in District One experiencing
an increase in payments of $817,906
over the previous year. District Two and
District Three will experience an
increase in payments of $1,605,660 and
$2,748,633, respectively, when
compared with 2022. The overall
adjustment in payments will be an
increase in payments by shippers of
$5,172,199 across all three districts (a
16-percent increase when compared
with 2022). Again, because the Coast
Guard reviews and sets rates for Great
Lakes pilotage annually, the impacts are
estimated as single-year costs rather
than being annualized over a 10-year
period.
Table 43 shows the difference in
revenue by revenue-component from
2022 to 2023 and presents each revenuecomponent as a percentage of the total
revenue needed. In both 2022 and 2023,
the largest revenue-component was
pilotage compensation (63 percent of
total revenue needed in 2022, and 63
percent of total revenue needed in
2023), followed by operating expenses
(31 percent of total revenue needed in
2022, and 32 percent of total revenue
needed in 2023).
TABLE 43—DIFFERENCE IN REVENUE BY REVENUE-COMPONENT
Revenue
needed in
2022
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Revenue component
Percentage of
total revenue
needed in
2022
Revenue
needed in
2023
Percentage of
total revenue
needed in
2023
Difference
(2023 revenue¥
2022 revenue)
Percentage
change from
previous year
Adjusted Operating Expenses ..............................................
Total Target Pilot Compensation ..........................................
Total Target Apprentice Pilot Compensation ........................
Working Capital Fund ...........................................................
$10,045,658
20,362,566
1,293,622
785,149
31
63
4
2
$11,984,950
23,766,288
916,700
991,257
32
63
2
3
$1,939,292
3,403,722
(376,922)
206,108
19
17
(29)
26
Total Revenue Needed ..................................................
32,486,995
100
37,659,195
100
5,172,199
16
Note: All figures are rounded to the nearest dollar and may not sum.
29 Some vessels entered the Great Lakes multiple
times in a single year, affecting the average number
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of unique vessels using pilotage services in any
given year.
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30 87 FR 18488, see table 42. https://
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2022-06394.pdf.
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As stated above, the Coast Guard
estimates that there will be a total
increase in revenue needed by the pilot
associations of $5,172,200. This
represents an increase in revenue
needed for target pilot compensation of
$3,403,722, a decrease in revenue
needed for total apprentice pilot wage
benchmark of ($376,922), an increase in
the revenue needed for adjusted
operating expenses of $1,939,292, and
an increase in the revenue needed for
the working capital fund of $206,108. Of
the $5,172,200 total change in revenue,
$1,461,677 (28 percent) results from
changes in inflation, $2,052,118 (40
percent) results from changes in the
number of pilots, ($443,258) (¥9
percent) results from the decrease in the
number of apprentice pilots, and
$2,101,662 (41 percent) results from
other changes in traffic.
The change in revenue needed for
pilot compensation, $3,403,722, is due
to three factors: (1) The changes to
adjust 2022 pilotage compensation to
account for the difference between
actual ECI inflation 31 (5.7 percent) and
predicted PCE inflation 32 (2.2 percent)
for 2022; (2) an increase of two pilots in
District Two and three pilots in District
Three compared to 2022; and (3)
12253
projected inflation of pilotage
compensation in Step 2 of the
methodology, using predicted inflation
through 2024.
The target compensation is $424,398
per pilot in 2023, compared to $399,266
in 2022. The changes to modify the 2022
pilot compensation to account for the
difference between predicted and actual
inflation will increase the 2022 target
compensation value by 3.5 percent. As
shown in table 44, this inflation
adjustment increases total compensation
by $13,974 per pilot, and the total
revenue needed by $782,561 when
accounting for all 56 pilots.
TABLE 44—CHANGE IN REVENUE RESULTING FROM THE CHANGE TO INFLATION OF PILOT COMPENSATION CALCULATION
IN STEP 4
2022 Target Pilot Compensation .........................................................................................................................................................
Adjusted 2022 Compensation ($399,266 × 1.035) .............................................................................................................................
Difference between Adjusted Target 2022 Compensation and Target 2022 Compensation ($413,240¥$399,266) ........................
Increase in total Revenue for 56 Pilots ($13,974 × 56) ......................................................................................................................
$399,266
413,240
13,974
782,561
Note: All figures are rounded to the nearest dollar and may not sum.
Similarly, table 45 shows the impact
of the difference between predicted and
actual inflation on the target apprentice
pilot compensation benchmark. The
inflation adjustment increases the
compensation benchmark by $5,031 per
apprentice pilot, and the total revenue
needed by $30,185 when accounting for
all 6 apprentice pilots.
TABLE 45—CHANGE IN REVENUE RESULTING FROM THE CHANGE TO INFLATION OF APPRENTICE PILOT COMPENSATION
CALCULATION IN STEP 4
Target Apprentice Pilot Compensation ................................................................................................................................................
Adjusted Compensation ($143,736 × 1.035) .......................................................................................................................................
Difference between Adjusted Target Compensation and Target Compensation ($148,767¥$143,736) ..........................................
Increase in total Revenue for Apprentices ($5,031 × 6) .....................................................................................................................
$143,736
148,767
5,031
30,185
Note: All figures are rounded to the nearest dollar and may not sum.
As noted earlier, the Coast Guard
predicts that 56 pilots will be needed for
the 2023 season. This will be an
increase of five pilots compared to the
2022 season. The difference reflects an
increase of two pilots in District Two
and three pilots in District Three. Table
46 shows the increase of $2,052,118 in
revenue needed solely for pilot
compensation. As noted previously, to
avoid double counting, this value
excludes the change in revenue
resulting from the change to adjust 2022
pilotage compensation to account for
the difference between actual and
predicted inflation.
TABLE 46—CHANGE IN REVENUE RESULTING FROM INCREASE OF FIVE PILOTS
2023 Target Compensation .................................................................................................................................................................
Total Number of New Pilots ................................................................................................................................................................
Total Cost of New Pilots ($424,398 × 5) .............................................................................................................................................
Difference between Adjusted Target 2022 Compensation and Target 2022 Compensation ($413,240¥$399,266) ........................
Increase in total Revenue for 5 Pilots ($13,974 × 5) ..........................................................................................................................
Net Increase in total Revenue for 5 Pilots ($2,121,990¥$69,872) ....................................................................................................
$424,398
5
$2,121,990
$13,974
$69,872
$2,052,118
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Note: All figures are rounded to the nearest dollar and may not sum.
31 Employment Cost Index, Total Compensation
for Private Industry workers in Transportation and
Material Moving, Annual Average, Series ID:
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32 Table 1 Summary of Economic Projections, PCE
Inflation June Projection. Accessed September, 2022
https://www.federalreserve.gov/monetarypolicy/
files/fomcprojtabl20220921.pdf.
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Similarly, the Coast Guard predicts
that six apprentice pilots will be needed
for the 2023 season. This will be a
decrease of three apprentices from the
2022 season. The difference reflects a
decrease of one apprentice for District
Two and two apprentices for District
Three. Table 47 shows the decrease of
($443,258) in revenue needed solely for
apprentice pilot compensation. As
noted previously, to avoid double
counting, this value excludes the change
in revenue resulting from the change to
adjust 2022 apprentice pilotage
compensation to account for the
difference between actual and predicted
inflation.
TABLE 47—CHANGE IN REVENUE RESULTING FROM DECREASE OF THREE APPRENTICES
2023 Apprentice Target Compensation ...............................................................................................................................................
Total Number of New Apprentices ......................................................................................................................................................
Total Cost of New Apprentices ($152,783 × ¥3) ...............................................................................................................................
Difference between Adjusted Target 2022 Compensation and Target 2022 Compensation ($148,767¥$143,736) ........................
Increase in total Revenue for ¥3 Apprentices ($5,031 [× ¥3) ..........................................................................................................
Net Increase in total Revenue for ¥3 Apprentices (¥$458,350¥¥$15,092) ..................................................................................
$152,783
(3)
($458,350)
$5,031
($15,092)
($443,258)
Note: All figures are rounded to the nearest dollar and may not sum.
Another increase, $624,831, will be
the result of increasing compensation
for the 56 pilots to account for future
inflation of 2.7 percent in 2023. This
will increase total compensation by
$11,158 per pilot.
TABLE 48—CHANGE IN REVENUE RESULTING FROM INFLATING 2022 COMPENSATION TO 2023
Adjusted 2022 Compensation .............................................................................................................................................................
2023 Target Compensation ($413,240 × 1.027) .................................................................................................................................
Difference between Adjusted 2022 Compensation and Target 2023 Compensation $424,398¥$413,240) .....................................
Increase in total Revenue for 56 Pilots ($11,158 × 56) ......................................................................................................................
$413,240
424,398
11,158
624,831
Note: All figures are rounded to the nearest dollar and may not sum.
Similarly, an increase of $24,101 will
be the result of increasing compensation
for the 6 apprentice pilots to account for
future inflation of 2.7 percent in 2023.
This will increase total compensation by
$4,017 per apprentice pilot, as shown in
table 49.
TABLE 49—CHANGE IN REVENUE RESULTING FROM INFLATING 2022 APPRENTICE PILOT COMPENSATION TO 2023
Adjusted 2022 Compensation .............................................................................................................................................................
2023 Target Compensation ($424,398 × 36%) ...................................................................................................................................
Difference between Adjusted Compensation and Target Compensation $152,783¥$148,767) .......................................................
Increase in total Revenue for 6 Apprentices ($4,017 × 6) ..................................................................................................................
$148,767
152,783
4,017
24,101
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Note: All figures are rounded to the nearest dollar and may not sum.
Table 50 presents the percentage
change in revenue by area and revenue-
component, excluding surcharges, as
they are applied at the district level.33
33 The 2022 projected revenues are from the Great
Lakes Pilotage Rate—2022 Annual Review and
Revisions to Methodology final rule (86 FR 14184),
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are from tables 10, 22, and 34 of this final rule.
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1,905,503
3,515,118
961,028
2,603,961
711,920
1,270,338
1,733,186
$2,599,777
1,618,395
1,078,929
1,613,051
$2,419,401
2023
7
7
35
35
18
18
Percentage
change
1,747,987
6,556,746
2,510,585
3,366,611
3,309,117
$4,165,143
2022
2,121,990
7,214,766
2,546,388
4,243,980
3,395,184
$4,243,980
2023
3
2
21
10
1
26
Percentage
change
Total target pilot compensation
150,923
567,756
114,989
172,483
114,989
$172,483
2022
98,408
359,942
91,670
61,113
122,227
$183,340
2023
(35)
(37)
(20.3)
(64.6)
6.3
6.3
Percentage
change
Total target apprentice pilot
compensation
60,924
226,880
102,261
110,101
121,906
$163,077
2022
86,005
299,795
122,828
150,722
141,941
$189,966
2023
41
32
20
37
16
16
Percentage
change
Working capital fund
TABLE 50—DIFFERENCE IN REVENUE BY REVENUE-COMPONENT AND AREA
Note: All figures are rounded to the nearest dollar and may not sum.
District
One:
Designated ...
District
One: Undesignated ..........
District
Two: Undesignated ..........
District
Two:
Designated ...
District
Three:
Undesignated .....
District
Three:
Designated ...
2022
Adjusted operating expenses
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2,520,831
9,387,588
4,231,241
4,555,641
5,044,074
$6,747,621
2022
3,267,430
11,389,621
4,666,389
5,726,153
5,392,538
$7,217,063
2023
29.6
21.3
10.3
25.7
6.9
7.0
Percentage
change
Total revenue needed
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Benefits
This rule allows the Coast Guard to
meet the requirements in 46 U.S.C. 9303
to review the rates for pilotage services
on the Great Lakes. The rate changes
promote safe, efficient, and reliable
pilotage service on the Great Lakes by
(1) ensuring that rates cover an
association’s operating expenses, (2)
providing fair pilot compensation,
adequate training, and sufficient rest
periods for pilots, and (3) ensuring pilot
associations produce enough revenue to
fund future improvements. The rate
changes also help recruit and retain
pilots, which ensures a sufficient
number of pilots to meet peak shipping
demand, helping to reduce delays
caused by pilot shortages.
B. Small Entities
Under the Regulatory Flexibility Act,
5 U.S.C. 601–612, the Coast Guard has
considered whether this rule will 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.
For the rule, the Coast Guard
reviewed recent company size and
ownership data for the vessels identified
in the GLPMS, and we reviewed
business revenue and size data provided
by publicly available sources such as
ReferenceUSA.34 As described in
section VIII.A of this preamble, the
Coast Guard found that 285 unique
vessels used pilotage services on
average during the years 2019 through
2021. These vessels are owned by 59
entities, of which 44 are foreign entities
that operate primarily outside the
United States, and the remaining 15
entities are U.S. entities. The Coast
Guard compared the revenue and
employee data found in the company
search to the Small Business
Administration’s (SBA) small business
threshold as defined in the SBA’s
‘‘Table of Size Standards’’ for small
businesses to determine how many of
these companies are considered small
entities.35 Table 51 shows the North
34 See
https://resource.referenceusa.com/.
https://www.sba.gov/document/support-table-size-standards. SBA has established a ‘‘Table
of Size Standards’’ for small businesses that sets
small business size standards by NAICS code. A
size standard, which is usually stated in number of
employees or average annual receipts (‘‘revenues’’),
represents the largest size that a business (including
its subsidiaries and affiliates) may be in order to
remain classified as a small business for SBA and
Federal contracting programs. Accessed April 2022.
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35 See
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American Industry Classification
System (NAICS) codes of the U.S.
entities and the small entity standard
size established by the SBA.
TABLE 51—NAICS CODES AND SMALL
ENTITIES SIZE STANDARDS
NAICS
Description
238910
Site Preparation
Contractors.
Transportation
Equipment And
Supplies.
Wholesale Trade
Agents And
Brokers.
Inland Water Passenger Transportation.
Specialized
Freight (Except
Used Goods)
Trucking.
Navigational Services to Shipping.
Travel Agencies ...
All Other Travel
Arrangement
And Reservation Services.
Marinas ................
Business Associations.
423860
425120
483212
484230
488330
561510
561599
713930
813910
Small entity
size standard
$16,500,000.
150 Employees.
100 Employees.
500 Employees.
$30,000.
$41,500,000.
$22,000,000.
$22,000,000.
$8,000,000.
$8,000,000.
In addition to the owners and
operators discussed previously, three
U.S. entities that receive revenue from
pilotage services will be affected by this
rule. These are the three pilot
associations that provide and manage
pilotage services within the Great Lakes
districts. These associations are
designated with the same NAICS code
as Business Associations 36 with a smallentity size standard of $8,000,000.
Based on the reported revenues from
audit reports, none of the associations
qualify as small entities.
Finally, the Coast Guard did not find
any small not-for-profit organizations
that are independently owned and
operated and are not dominant in their
fields that will be impacted by this rule.
The Coast Guard also did not find any
small governmental jurisdictions with
populations of fewer than 50,000 people
that will be impacted by this rule. Based
on this analysis, the Coast Guard
concludes this rulemaking will not
affect a substantial number of small
entities, nor have a significant economic
impact on any of the affected entities.
Therefore, the Coast Guard certifies
under 5 U.S.C. 605(b) that this rule will
not have a significant economic impact
on a substantial number of small
entities.
C. Assistance for Small Entities
Of the 15 U.S. entities, 8 exceed the
SBA’s small business standards for
small entities. To estimate the potential
impact on the seven small entities, the
Coast Guard used their 2021 invoice
data to estimate their pilotage costs in
2023. Of the seven small entities, from
2019 to 2021, only five used pilotage
services in 2021. The Coast Guard
increased their 2021 costs to account for
the changes in pilotage rates resulting
from this rule and the Great Lakes
Pilotage Rates—2021 Annual Review
and Revisions to Methodology final rule
(86 FR 14184). The Coast Guard
estimated the change in cost to these
entities resulting from this rule by
subtracting their estimated 2022
pilotage costs from their estimated 2023
pilotage costs and found the average
costs to small firms will be
approximately $29,311, with a range of
$810 to $109,314. The estimated change
in pilotage costs between 2022 and 2023
was then compared with each firm’s
annual revenue. In all but one case, the
impact of the change in estimated
pilotage expenses were below 1 percent
of revenues. For one uniquely small
entity, the change in impact will be 4.19
percent of revenues, as this entity
reports revenue approximately 10 times
less than the next largest small entity.
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Under section 213(a) of the Small
Business Regulatory Enforcement
Fairness Act of 1996, Public Law 104–
121, the Coast Guard offers 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).
36 In previous rulemakings, the associations used
a different NAICS code, 483212 Inland Water
Passenger Transportation, which had a size
standard of 500 employees and, therefore,
designated the associations as small entities. The
change in NAICS code comes from an update to the
association’s ReferenceUSA profile in February
2022.
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Federal Register / Vol. 88, No. 38 / Monday, February 27, 2023 / Rules and Regulations
This rule calls for no new collection
of information nor does it revise an
existing collection of information under
the Paperwork Reduction Act of 1995,
44 U.S.C. 3501–3520.
aggregate, or by the private sector of
$100,000,000 (adjusted for inflation) or
more in any one year. Although this rule
will not result in such expenditure, the
effects of this rule are discussed
elsewhere in this preamble.
E. Federalism
G. Taking of Private Property
A rule has implications for federalism
under Executive Order 13132
(Federalism) if it has a substantial direct
effect on 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. The Coast
Guard has analyzed this rule under
Executive Order 13132 and determined
that it is consistent with the
fundamental federalism principles and
preemption requirements described in
Executive Order 13132. Our analysis
follows.
Congress directed the Coast Guard to
establish ‘‘rates and charges for pilotage
services.’’ See 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 fundamental
federalism principles and preemption
requirements described in Executive
Order 13132.
While it is well settled that States may
not regulate in categories in which
Congress intended the Coast Guard to be
the sole source of a vessel’s obligations,
the Coast Guard recognizes the key role
that State and local governments may
have in making regulatory
determinations. Additionally, for rules
with federalism implications and
preemptive effect, Executive Order
13132 specifically directs agencies to
consult with State and local
governments during the rulemaking
process. If you believe this rule will
have implications for federalism under
Executive Order 13132, please call or
email the person listed in the FOR
FURTHER INFORMATION CONTACT section of
this preamble.
This rule will not cause a taking of
private property or otherwise have
taking implications under Executive
Order 12630 (Governmental Actions and
Interference with Constitutionally
Protected Property Rights).
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, the Coast Guard
did not consider the use of voluntary
consensus standards.
H. Civil Justice Reform
M. Environment
This rule meets applicable standards
in sections 3(a) and 3(b)(2) of Executive
Order 12988 (Civil Justice Reform) to
minimize litigation, eliminate
ambiguity, and reduce burden.
F. Unfunded Mandates
The National Technology Transfer
and Advancement Act, codified as a
note to 15 U.S.C. 272, directs agencies
to use voluntary consensus standards in
their regulatory activities unless the
agency provides Congress, through
OMB, with an explanation of why using
these standards will be inconsistent
The Coast Guard has analyzed this
rule under Department of Homeland
Security Management Directive 023–01,
Rev. 1, associated implementing
instructions, and Environmental
Planning COMDTINST 5090.1 (series),
which guide the Coast Guard in
complying with the National
Environmental Policy Act of 1969 (42
U.S.C. 4321–4370f), and have made a
determination that this action is one of
a category of actions that do not
individually or cumulatively have a
significant effect on the human
environment. A Record of
Environmental Consideration
supporting this determination is
available in the docket. For instructions
on locating the docket, see the
ADDRESSES section of this preamble.
This rule is categorically excluded
under paragraphs A3 and L54 of
Appendix A, Table 1 of DHS Instruction
Manual 023–01–001–01, Rev. 1.
Paragraph A3 pertains to the
promulgation of rules of the following
nature: (a) those of a strictly
administrative or procedural nature; (b)
those that implement, without
substantive change, statutory or
regulatory requirements; (c) those that
implement, without substantive change,
procedures, manuals, and other
guidance documents; (d) those that
interpret or amend an existing
regulation without changing its
environmental effect; (e) those that
provide technical guidance on safety
and security matters; and (f) those that
provide guidance for the preparation of
security plans. Paragraph L54 pertains
to regulations which are editorial or
procedural.
This rule involves setting or adjusting
the pilotage rates for the 2023 shipping
season to account for changes in district
operating expenses, changes in the
number of pilots, and anticipated
inflation. These changes are consistent
with, and promote, the Coast Guard’s
maritime safety mission.
D. Collection of Information
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12257
The Unfunded Mandates Reform Act
of 1995, 2 U.S.C. 1531–1538, requires
Federal agencies to assess the effects of
their discretionary regulatory actions. In
particular, the Act addresses actions
that may result in the expenditure by a
State, local, or Tribal government, in the
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I. Protection of Children
The Coast Guard has analyzed this
rule under Executive Order 13045
(Protection of Children from
Environmental Health Risks and Safety
Risks). This rule is not an economically
significant rule and will 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 Executive Order
13175 (Consultation and Coordination
with Indian Tribal Governments),
because it will 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
The Coast Guard has analyzed this
rule under Executive Order 13211
(Actions Concerning Regulations That
Significantly Affect Energy Supply,
Distribution, or Use) and have
determined that it is not a ‘‘significant
energy action’’ under that order because
it is not a ‘‘significant regulatory action’’
under Executive Order 12866 and is not
likely to have a significant adverse effect
on the supply, distribution, or use of
energy.
L. Technical Standards
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12258
Federal Register / Vol. 88, No. 38 / Monday, February 27, 2023 / Rules and Regulations
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 is amending
46 CFR part 401 as follows:
PART 401—GREAT LAKES PILOTAGE
REGULATIONS
1. The authority citation for part 401
is revised to read as follows:
■
Authority: 46 U.S.C. 2103, 2104(a), 6101,
7701, 8105, 9303, 9304; DHS Delegation No.
00170.1, Revision No. 01.3, paragraphs
(II)(92)(a), (d), (e), (f).
2. Amend § 401.405 by revising
paragraphs (a)(1) through (6) to read as
follows:
■
§ 401.405
Pilotage rates and charges.
(a) * * *
(1) The St. Lawrence River is $876;
(2) Lake Ontario is $586;
(3) Lake Erie is $704;
(4) The navigable waters from
Southeast Shoal to Port Huron, MI is
$601;
(5) Lakes Huron, Michigan, and
Superior is $410; and
(6) The St. Mary’s River is $834.
*
*
*
*
*
Dated: February 8, 2023.
W.R. Arguin,
Rear Admiral, U.S. Coast Guard, Assistant
Commandant for Prevention Policy.
List of Subjects in 47 CFR Part 73
Federal Communications Commission.
Nazifa Sawez,
Assistant Chief, Audio Division, Media
Bureau.
BILLING CODE 9110–04–P
[DA 23–111; FR ID 127148]
For the reasons discussed in the
preamble, the Federal Communications
Commission amends 47 CFR part 73 as
follows:
Radio Broadcasting Services; Various
Locations
PART 73—RADIO BROADCAST
SERVICES
Federal Communications
Commission.
ACTION: Final rule.
■
47 CFR Part 73
AGENCY:
1. The authority citation for part 73
continues to read as follows:
This document amends the
FM Table of Allotments, of the
Commission’s rules, by reinstating
certain channels as a vacant FM
allotment in various communities. The
FM allotments were previously removed
from the FM Table because a
construction permit and/or license was
granted. These FM allotments are now
considered vacant because of the
cancellation of the associated FM
authorizations or the dismissal of longform auction FM applications. A staff
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§ 73.202
*
Table of Allotments.
*
*
(b) * * *
*
*
TABLE 1 TO PARAGRAPH (b)
U.S. States
Channel No.
Arizona
*
*
*
Ajo .........................................
*
275A.
*
*
*
*
Fredonia ................................
*
266C1.
*
*
*
*
Peach Springs ......................
*
280A.
*
*
*
*
*
Arkansas
*
*
*
Lake Village ..........................
*
278C3.
*
Final Rules
FEDERAL COMMUNICATIONS
COMMISSION
SUMMARY:
v. An entry for ‘‘Grand Portage’’ under
Minnesota;
■ vi. An entry for ‘‘Greenwood’’ under
Mississippi; and
■ vii. An entry for ‘‘Bunker’’ under
Missouri;
■ b. Revising the entry for ‘‘Owyhee’’
under Nevada;
■ c. Adding in alphabetical order an
entry for ‘‘Clovis’’ under New Mexico;
■ d. Revising the entry for ‘‘Junction’’
under Texas;
■ e. Adding in alphabetical order the
entry for ‘‘Sonora’’ under Texas; and
■ f. Adding in alphabetical order an
entry for ‘‘Barton’’ under Vermont.
The additions and revisions read as
follows:
■
*
Radio, Radio broadcasting.
[FR Doc. 2023–03212 Filed 2–24–23; 8:45 am]
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engineering analysis confirms that all of
the vacant FM allotments complies with
the Commission’s minimum distance
separation and city-grade coverage
requirements. The window period for
filing applications for these vacant FM
allotments will not be opened at this
time. Instead, the issue of opening these
allotments for filing will be addressed
by the Commission in subsequent order.
DATES: Effective February 27, 2023.
FOR FURTHER INFORMATION CONTACT:
Rolanda F. Smith, Media Bureau, (202)
418–2700.
SUPPLEMENTARY INFORMATION: This is a
synopsis of the Commission’s Order,
adopted February 8, 2023 and released
February 9, 2023. The full text of this
Commission decision is available online
at https://apps.fcc.gov/ecfs/. The full
text of this document can also be
downloaded in Word or Portable
Document Format (PDF) at https://
www.fcc.gov/edocs. This document does
not contain information collection
requirements subject to the Paperwork
Reduction Act of 1995, Public Law 104–
13. The Commission will not send a
copy of the Order in a report to be sent
to Congress and the Government
Accountability Office pursuant to the
Congressional Review Act, see 5 U.S.C.
801(a)(1)(A), because these allotments
were previously reported.
Authority: 47 U.S.C. 154, 155, 301, 303,
307, 309, 310, 334, 336 and 339.
2. In § 73.202, in paragraph (b), amend
table 1 (the Table of FM Allotments) by:
■ a. Adding in alphabetical order:
■ i. Entries for ‘‘Ajo,’’ ‘‘Fredonia,’’ and
‘‘Peach Springs’’ under Arizona;
■ ii. An entry for ‘‘Lake Village’’ under
Arkansas;
■ iii. Entries for ‘‘Kettleman City,’’
‘‘Tecopa,’’ and ‘‘Wasco’’ under
California;
■ iv. An entry for ‘‘Bear Lake’’ under
Michigan;
■
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*
*
*
*
*
California
*
*
*
Kettleman City ......................
*
299A.
*
*
*
*
Tecopa ..................................
*
288A.
*
*
*
*
Wasco ...................................
*
224A.
*
*
*
*
*
*
Michigan
Bear Lake .............................
*
*
*
264C3.
*
*
Minnesota
*
*
*
Grand Portage ......................
E:\FR\FM\27FER1.SGM
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*
251A.
*
]]>Agencies
[Federal Register Volume 88, Number 38 (Monday, February 27, 2023)]
[Rules and Regulations]
[Pages 12226-12258]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-03212]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HOMELAND SECURITY
Coast Guard
46 CFR Part 401
[Docket No. USCG-2022-0370]
RIN 1625-AC82
Great Lakes Pilotage Rates--2023 Annual Ratemaking and Review of
Methodology
AGENCY: Coast Guard, DHS.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: In accordance with the statutory provisions enacted by the
Great Lakes Pilotage Act of 1960, the Coast Guard is issuing new base
pilotage rates for the 2023 shipping season. This rule adjusts the
pilotage rates to account for changes in district operating expenses,
an increase in the number of pilots, and anticipated inflation. These
changes, when combined, result in a 16-percent net increase in pilotage
costs compared to the 2022 season.
DATES: This final rule is effective March 29, 2023.
ADDRESSES: To view documents mentioned in this preamble as being
available in the docket, go to www.regulations.gov, type USCG-2022-0370
in the search box and click ``Search.'' Next, in the Document Type
column, select ``Supporting & Related Material.''
FOR FURTHER INFORMATION CONTACT: For information about this document
call or email Mr. Brian Rogers, Commandant, Office of Waterways and
Ocean Policy--Great Lakes Pilotage Division (CG-WWM-2), Coast Guard;
telephone 410-360-9260, email [email protected], or fax 202-372-
1914.
SUPPLEMENTARY INFORMATION:
Table of Contents for Preamble
I. Abbreviations
II. Executive Summary
[[Page 12227]]
III. Basis and Purpose
IV. Discussion of Comments and Changes
A. Great Lakes Pilotage Ratemaking Methodology
B. The Staffing Model
C. 2023 Great Lakes Pilotage Rate
D. Cruise Line Traffic
E. Fair Business Practices
G. Changes to the NPRM's Estimate for District Three Pilot
Numbers
F. Miscellaneous Concerns
V. Discussion of Methodological and Other Changes
VI. Individual Target Pilot Compensation Benchmark
VII. Discussion of Rate Adjustments
District One
A. Step 1: Recognize Previous Operating Expenses
B. Step 2: Project Operating Expenses, Adjusting for Inflation
or Deflation
C. Step 3: Estimate Number of Registered Pilots and Apprentice
Pilots
D. Step 4: Determine Target Pilot Compensation Benchmark and
Apprentice Pilot Wage Benchmark
E. Step 5: Project Working Capital Fund
F. Step 6: Project Needed Revenue
G. Step 7: Calculate Initial Base Rates
H. Step 8: Calculate Average Weighting Factors by Area
I. Step 9: Calculate Revised Base Rates
J. Step 10: Review and Finalize Rates
District Two
A. Step 1: Recognize Previous Operating Expenses
B. Step 2: Project Operating Expenses, Adjusting for Inflation
or Deflation
C. Step 3: Estimate Number of Registered Pilots and Apprentice
Pilots
D. Step 4: Determine Target Pilot Compensation Benchmark and
Apprentice Pilot Wage Benchmark
E. Step 5: Project Working Capital Fund
F. Step 6: Project Needed Revenue
G. Step 7: Calculate Initial Base Rates
H. Step 8: Calculate Average Weighting Factors by Area
I. Step 9: Calculate Revised Base Rates
J. Step 10: Review and Finalize Rates
District Three
A. Step 1: Recognize Previous Operating Expenses
B. Step 2: Project Operating Expenses, Adjusting for Inflation
or Deflation
C. Step 3: Estimate Number of Registered Pilots and Apprentice
Pilots
D. Step 4: Determine Target Pilot Compensation Benchmark and
Apprentice Pilot Wage Benchmark
E. Step 5: Project Working Capital Fund
F. Step 6: Project Needed Revenue
G. Step 7: Calculate Initial Base Rates
H. Step 8: Calculate Average Weighting Factors by Area
I. Step 9: Calculate Revised Base Rates
J. Step 10: Review and Finalize Rates
VIII. Regulatory Analyses
A. Regulatory Planning and Review
B. Small Entities
C. Assistance for Small Entities
D. Collection of Information
E. Federalism
F. Unfunded Mandates
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
BLS Bureau of Labor Statistics
CFR Code of Federal Regulations
CPA Certified public accountant
CPI Consumer Price Index
DHS Department of Homeland Security
Director U.S. Coast Guard's Director of the Great Lakes Pilotage
ECI Employment Cost Index
FOMC Federal Open Market Committee
FR Federal Register
GLPA Great Lakes Pilotage Authority (Canadian)
GLPAC Great Lakes Pilotage Advisory Committee
GLPMS Great Lakes Pilotage Management System
LPA Lakes Pilots Association
NAICS North American Industry Classification System
NPRM Notice of proposed rulemaking
OMB Office of Management and Budget
PCE Personal Consumption Expenditures
Sec. Section
SBA Small Business Administration
SLSPA Saint Lawrence Seaway Pilotage Association
The Act The Great Lakes Pilotage Act
U.S.C. United States Code
WGLPA Western Great Lakes Pilots Association
II. Executive Summary
In accordance with Title 46 of the United States Code (U.S.C.),
Chapter 93,\1\ the Coast Guard regulates pilotage for oceangoing
vessels on the Great Lakes and St. Lawrence Seaway--including setting
the rates for pilotage services and adjusting them on an annual basis
for the upcoming shipping season. The shipping season begins when the
locks open in the St. Lawrence Seaway, which allows traffic access to
and from the Atlantic Ocean. The opening of the locks varies annually,
depending on waterway conditions, but is generally in March or April.
The rates, which for the 2023 season range from $410 to $876 per pilot
hour (depending on which of the specific six areas pilotage service is
provided), are paid by shippers to the pilot associations. The three
pilot associations, which are the exclusive U.S. source of registered
pilots on the Great Lakes, use this revenue to cover operating
expenses, maintain infrastructure, compensate apprentice and registered
pilots, acquire and implement technological advances, train new
personnel, and provide for continuing professional development.
---------------------------------------------------------------------------
\1\ 46 U.S.C. 9301-9308.
---------------------------------------------------------------------------
In accordance with statutory and regulatory requirements, the Coast
Guard employs the ratemaking methodology introduced in 2016. Our
ratemaking methodology calculates the revenue needed for each pilotage
association (operating expenses, compensation for the number of pilots,
and anticipated inflation), and then divides that amount by the
expected demand for pilotage services over the course of the coming
year, to produce an hourly rate. This is a 10-step methodology to
calculate rates, which is explained in detail in the ``Discussion of
Methodological and Other Changes'' in section V of the preamble to this
rule.
As part of our annual review, the Coast Guard is issuing a full
ratemaking and establishing new pilotage rates for 2023 based on the
existing 10-step ratemaking methodology. The Coast Guard conducted the
last full ratemaking 5 years ago, in 2018 (83 FR 26162, June 5, 2018).
Per Title 46 of the Code of Federal Regulations (CFR), section
404.100(a), in this final rule, the Coast Guard's Director of the Great
Lakes Pilotage (``the Director'') is establishing base pilotage rates
via a full ratemaking pursuant to Sec. Sec. 404.101 through 404.110.
The Coast Guard sets base rates to meet the goal of promoting safe,
efficient, and reliable pilotage service on the Great Lakes by
generating sufficient revenue for each pilotage association to
reimburse its necessary and reasonable operating expenses, fairly
compensate trained and rested pilots, and provide appropriate funds to
use for improvements. A 10-year average is used when calculating
traffic to smooth out anomalies in traffic caused by unexpected events,
such as those caused by the COVID-19 pandemic. The Coast Guard
estimates that this rule results in $5,172,200 of additional costs.
Based on the ratemaking model discussed in this final rule, the
Coast Guard is establishing the rates shown in table 1.
[[Page 12228]]
Table 1--Current and 2023 Pilotage Rates on the Great Lakes
----------------------------------------------------------------------------------------------------------------
Final 2022 Final 2023
Area Name pilotage rate pilotage rate
----------------------------------------------------------------------------------------------------------------
District One: Designated...................... St. Lawrence River.............. $834 $876
District One: Undesignated.................... Lake Ontario.................... 568 586
District Two: Designated...................... Navigable waters from Southeast 536 601
Shoal to Port Huron, MI.
District Two: Undesignated.................... Lake Erie....................... 610 704
District Three: Designated.................... St. Mary's River................ 662 834
District Three: Undesignated.................. Lakes Huron, Michigan, and 342 410
Superior.
----------------------------------------------------------------------------------------------------------------
This rule affects 56 U.S. Great Lakes pilots, 6 apprentice pilots,
3 pilot associations, and the owners and operators of an average of 285
oceangoing vessels that transit the Great Lakes annually. This rule is
not economically significant under Executive Order 12866 and will not
affect the Coast Guard's budget or increase Federal spending. The
estimated overall annual regulatory economic impact of this rate change
is a net increase of $5,172,200 in estimated payments made by shippers
during the 2023 shipping season. This final rule establishes the 2023
yearly compensation for pilots on the Great Lakes at $424,398 per pilot
(a $25,132 increase, or 6.29 percent, over their 2022 compensation).
Because the Coast Guard must review, and, if necessary, adjust rates
each year, the Coast Guard analyzes these as single-year costs and does
not annualize them over 10 years. Section VIII of this preamble
provides the regulatory impact analyses of this rule.
III. Basis and Purpose
The legal basis of this rulemaking is 46 U.S.C. Chapter 93,\2\
which requires foreign merchant vessels and United States vessels
operating ``on register'' (meaning United States vessels engaged in
foreign trade) to use United States or Canadian pilots while transiting
the United States waters of the St. Lawrence Seaway and the Great Lakes
system.\3\ For U.S. Great Lakes pilots, the statute 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.'' \4\ The statute requires that rates be
established or reviewed and adjusted each year, no later than March
1.\5\ The statute also requires that base rates 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.\6\ The Secretary's duties and authority under 46 U.S.C.
Chapter 93 have generally been delegated to the Coast Guard.\7\
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\2\ 46 U.S.C. 9301-9308.
\3\ 46 U.S.C. 9302(a)(1).
\4\ 46 U.S.C. 9303(f).
\5\ Id.
\6\ Id.
\7\ DHS Delegation No. 00170.1 (II)(92)(f), Revision No. 01.3.
The Secretary retains the authority under Section 9307 to establish,
and appoint members to, a Great Lakes Pilotage Advisory Committee.
---------------------------------------------------------------------------
The purpose of this rule is to issue new pilotage rates for the
2023 shipping season. The Coast Guard believes that the new rates will
continue to promote our goal, as outlined in 46 CFR 404.1, of promoting
safe, efficient, and reliable pilotage service in the Great Lakes by
generating for each pilotage association sufficient revenue to
reimburse its necessary and reasonable operating expenses, fairly
compensate trained and rested pilots, and provide appropriate funds to
use for improvements.
IV. Discussion of Comments and Changes
In response to the notice of proposed rulemaking (NPRM) for this
ratemaking (87 FR 52870, August 30, 2022) the Coast Guard received six
comment submissions. These submissions include one comment filed
jointly by the Lakes Pilots Association, the Saint Lawrence Seaway
Pilotage Association, and the Western Great Lakes Pilots Association
(the Great Lakes Pilots' comment); one filed jointly by the Shipping
Federation of Canada, the American Great Lakes Ports Association, and
the United States Great Lakes Shipping Association (collectively, the
Coalition); one from the president of the St. Lawrence Seaway Pilots'
Association (SLSPA); one from the president of the Lakes Pilots
Association (LPA); one from the president of the Western Great Lakes
Pilot Association (WGLPA); and one from an individual who did not
provide an affiliation to any stakeholder. As each of these commenters
touched on numerous issues, for each response below, the Coast Guard
notes which commenter raised the specific points addressed. In
situations where multiple commenters raised similar issues, the Coast
Guard provides one response to those issues.
A. Great Lakes Pilotage Ratemaking Methodology
The Coalition recommended that the Coast Guard define what the term
``necessary and reasonable'' means. In 46 CFR 404.2(b), the Coast Guard
lists criteria to recognize an expense item as necessary and
reasonable. In general, necessary and reasonable operating expenses are
those with a clear business reason to operate the pilotage pool or
provide pilotage, and for which the cost is consistent with market
conditions and not excessive, to ensure safe and reliable pilotage
service to foreign-flag vessels.
The Coalition recommended the addition of a line-by-line review of
the previous year's operating expenses in order to better shape future
projections of operating expenses. The Coast Guard disagrees with this
recommendation because the recommendation is already in place and
conducted by both the Coast Guard and an independent third party. The
Coast Guard's current practice is to receive yearly financial
statements in April of each year from each district and compare them to
the previous year's expenses. For transparency, we place the financial
statements on the Coast Guard's Office of Waterways and Ocean Policy--
Great Lakes Pilotage Division website so the public can also look at
these documents.\8\ The Coast Guard also hires an independent
accounting firm to conduct, in conjunction with the Coast Guard,
extensive reviews of the pilot association's financial information,
including but not limited to variance analysis of previous operating
expenses, which enables the Coast Guard to determine the necessity and
reasonableness of association expenses. This practice was reviewed by
the Government Accountability Office in 2019 and was deemed a best
practice
[[Page 12229]]
when developing rates, as it keeps the Coast Guard impartial.
---------------------------------------------------------------------------
\8\ Financial statements can be found at https://www.dco.uscg.mil/Our-Organization/Assistant-Commandant-for-Prevention-Policy-CG-5P/Marine-Transportation-Systems-CG-5PW/Office-of-Waterways-and-Ocean-Policy/Office-of-Waterways-and-Ocean-Policy-Great-Lakes-Pilotage-Div/.
---------------------------------------------------------------------------
The Coalition recommended a reevaluation of the framework for
pilotage operation in ``designated'' and ``undesignated'' waters. The
Coast Guard does not have the authority to accommodate this
recommendation. The Great Lakes Pilotage Act (``the Act'') created the
designated and undesignated categories for the System. In undesignated
waters, the United States- or Canadian-registered pilot must be onboard
and available to the master. In designated waters, the pilot must be on
the bridge and direct the navigation of the vessel. Through the Act,
Congress bestowed the authority to classify these waters onto the
President of the United States. Such designation can be accomplished
only by Executive order or Presidential proclamation, which the Coast
Guard has no authority to issue, and would only oppose if the change
compromised maritime safety.
The Coalition recommended that the Coast Guard make the
compensation level of individual pilots available to the public. The
Coast Guard disagrees with this recommendation. Compensation of
individual pilots is not included in the expense base or methodology,
and, therefore, we decline to add a regulatory requirement for pilot
associations to publicly report the compensation of individual pilots.
The Coast Guard does not use the actual earnings or average earnings;
instead, target pilot compensation is used (described in Step 4 of the
existing methodology), which the Coast Guard has determined to be
reasonable and necessary. Because actual salary values are not used in
the ratemaking, the Coast Guard believes that a requirement to report
pilot compensation is not in the public interest or necessary to
provide for the costs of services. Progress toward pilot retention can
be reviewed through pilot turnover and the association's ability to
promptly fill pilot vacancies for fully registered pilots and
apprentice pilots.
The Coalition recommended that the Coast Guard include an
additional layer of review in the methodology by taking an annual look
back at the actual revenues and comparing it with the previous year's
projections for accuracy. The Coast Guard acknowledges the utility of
such an exercise and already has a process during which we take the
financial statements that are submitted annually by each District under
46 CFR 401.320(d)(4) and compare the actual revenue reported with the
projected revenue from the previous year's rate.
Any substantial difference between actual and projected revenue is
a result of incorrectly predicting vessel traffic or average vessel
weight. The Coast Guard uses a ten-year moving average to predict
traffic, which has been demonstrated to be sufficiently accurate over
time while also providing a measure of rate stability that pilots and
shippers alike can rely on.\9\ No commenter has provided a more
accurate methodology to predict traffic.
---------------------------------------------------------------------------
\9\ See Am. Great Lake Ports Assn. v. United States Coast Guard,
443 F. Supp. 3d 44, 64 (D.D.C. 2020), holding that ``the Coast Guard
made an intentional choice to use a wider window for calculating the
traffic average in order to minimize volatility. Although the agency
acknowledged that using a ten-year moving average meant that in
2018, Plaintiffs would have to pay more than they would have had the
Coast Guard used a three-year moving average, the agency determined
that the ten-year average was nonetheless preferable in order to
smooth out historically observed spikes in traffic data. That was a
rational choice, even if the traffic data included data from the
period of the last recession.'' The Court also cited ``data [that]
clearly support[ed] the Coast Guard's decision to use a ten-year
moving average in order to prevent `dramatic swings' in rates from
year to year.'' Am. Great Lake Ports Assn., 443 F. Supp. 3d at 65.
---------------------------------------------------------------------------
While we acknowledge the value of looking back on the accuracy of
recent projections, such analysis is not as simple as comparing one
number to another. First, our estimates for projected needed revenue
are based on 3-year-old expense data, which means the analysis may not
be as accurate as it would be if it were based on real-time expense
data. This delay is out of the Coast Guard's control, as we must wait
for the numbers to be audited before we receive them. Second, there is
a necessary offset in comparing the realized revenues because they have
to match the earlier year, when the base of expenses occurred. Lastly,
there is prevailing inflation that occurs between when expenses are
realized and then put into the ratemaking, and when we receive the
realized revenue figure to compare back. These factors can cause minor
differences between the projected and actual revenue figures and would
need to be included in a discussion on the accuracy of past
projections.
The Coast Guard is amenable to including a discussion of the
already existing ``look back'' exercise into its ratemaking process and
would welcome feedback on where and how to do this. The Coast Guard
encourages the Coalition to bring this matter up at the next advisory
committee meeting, so we can see exactly how they would like this added
to the methodology.
B. The Staffing Model
The WGLPA made the recommendation that the Coast Guard amend the
final rule to reflect four apprentice pilots. The Coast Guard disagrees
with this recommendation. District Three currently has 20 full member
pilots along with 5 apprentice pilots. According to our records, two
apprentice pilots will become fully registered pilots at the beginning
of the year. When these 2 apprentice pilots become full members, that
will bring the number to 22 full member pilots. The WGLPA does not have
any additional trainees or apprentice pilots in its training program
and did not provide the names of any expected hires for the Coast Guard
to consider adjusting this number. If the District would like to add an
additional apprentice pilot to their roster for 2023, the matter can be
discussed with the Director prior to the opening of the 2023 shipping
season.
The WGLPA commented that it has six pilots assigned to the
designated area and requested that the Coast Guard adjust the rate to
reflect six pilots, not the five pilots currently implemented in the
rate. The Coast Guard disagrees. The Coast Guard is willing to evaluate
potential adjustments based on specific delays or safety concerns in
the designated area of District Three, but the commenter did not
provide any supporting documentation for last year or this year
demonstrating that the current split between designated and
undesignated pilots in the staffing model is causing delays or safety
concerns in the system. The Coast Guard did not see a significant
enough change in bridge hours to justify the addition of a sixth pilot.
The LPA made the comment, that they will have 16 registered pilots
and 1 trainee pilot in District Two for the 2023 shipping season, as
opposed to the 2 apprentice pilots listed in the NPRM. The Coast Guard
agrees with this comment. Based on reviews from the apprentice pilot
training evaluations for 2022, one of the two apprentice pilots
finished the apprentice program more rapidly than anticipated. Because
of this, the Coast Guard has determined that District Two will have 16
registered pilots and only 1 apprentice pilot at the beginning of the
2023 shipping season and will adjust the numbers in the rate
accordingly.
The LPA, WGLPA, and SLSPA all recommended that the staffing model
increase the number of pilots in their districts. The Coast Guard
agrees with this comment and is amenable to addressing the current
staffing model further. A decision is necessary regarding which changes
will be implemented to reflect the correct number of pilots needed in
the staffing model in order to conduct safe and continuous pilotage
service. The Coast Guard will discuss this issue with stakeholders
throughout the year and at
[[Page 12230]]
the next GLPAC meeting so that this issue is resolved for the next
ratemaking.
The SLSPA commented that they will need three additional trainee
pilots for the 2023 season to safely and reliably meet the future
traffic demand in District One. The Coast Guard agrees to the addition
of three trainee pilots. This addition does not have any impact on this
ratemaking because the districts are reimbursed for trainee pilot
expenses, via the rate, 3 calendar years after the expenses are
incurred in Step 1 of the methodology. The Coast Guard understands that
changes to the staffing model will need to be incorporated in the 2024
ratemaking in order to accommodate these potential pilots in future
rates. The Coast Guard will discuss this issue with stakeholders
throughout the year and at the next GLPAC meeting so that this issue is
resolved for the next ratemaking.
C. 2023 Great Lakes Pilotage Rate
The Coalition commented on the rate, stating that rates are too
high, landing Great Lakes pilots within the wealthiest 2 percent of
Americans. The Coast Guard does not find this comment to be relevant to
the proposed rates established by this rulemaking. The commenter
provided no supporting documentation. The Coast Guard suggests that the
commenter provide supporting documentation at a future GLPAC meeting or
submit supporting documentation for further consideration.
The WGLPA requested an explanation for the ``Director's
Adjustments--Applicant Surcharge Collected'' number in table 27 of the
NPRM. The Coast Guard placed a Director's adjustment of $122,539 in the
NPRM and final rule. This number, $105,668.60, was derived from
surcharges collected from vessel trips between April 6, 2020, and
December 9, 2020, and $16,870.58, summed from vessel trips before April
6, 2020. The Coast Guard did not authorize these surcharges.
D. Cruise Line Traffic
The commenters were almost unanimously concerned about an explosion
of cruise vessel traffic on the Great Lakes and the resulting impact on
pilot demand. The Coast Guard recognizes that a blossoming cruise ship
sector is of concern to all Great Lakes stakeholders and considered the
concerns of each commenter in this arena. Each commenter urged the
Coast Guard to stay abreast of this issue and to address it in the
staffing model sooner rather than later.
The Coast Guard understands the importance of this issue and has
already begun studying the growth of the cruise sector traffic. At the
September 13, 2022, GLPAC meeting, the Coast Guard addressed the issue
of cruise ship traffic with Great Lakes stakeholders. Among the issues
discussed was a recognition that the staffing model, which is based on
pilot assignment cycle hours, may not be as helpful when vessels such
as cruise ships have a different calculus of their movement.\10\ For
example, cruise ships holding hundreds of passengers will be less
tolerant of delays than a typical shipping vessel and will also have
scheduled delays while passengers visit port city attractions. Another
issue is that because of the novelty of the sector, lack of historic
data, and COVID-19 preventing any cruise ship traffic in 2020 and 2021,
our 10-year moving average does not capture very much cruise ship
traffic, which could result in a systemic error.
---------------------------------------------------------------------------
\10\ See discussion on pages 4-5 of the Memorandum For the
Record of the Sept. 13, 2022 GLPAC Meeting. The transcript is
available in the docket at https://www.regulations.gov/document/USCG-2022-0370-0018.
---------------------------------------------------------------------------
The experts at GLPAC, having recognized these deficiencies,
ultimately recommended that the Director use his discretion to
accommodate cruise line traffic demand, irrespective of the current
staffing model ceiling, if no changes to the model or ratemaking
methodology itself are viable this year.
The Coast Guard is committed to addressing this new demand but will
not make changes to the staffing model without the ``robust analysis''
called for by GLPAC.\11\ The Coast Guard will collaborate with GLPAC to
gather more definitive pilot hour data for the cruise ship sector,
including ship assignment and bridge hour numbers for cruise ships in
each District. We acknowledge that this is a sector that could be a
permanent factor in the Great Lakes, and we are committed to finding a
reasonable solution to increased pilot demand without disregarding this
year's statutory deadline. In addition to the Coast Guard's future
efforts, we encourage stakeholders to work together, as there may be
solutions to this issue outside of this ratemaking process.
---------------------------------------------------------------------------
\11\ See discussion on pages 43-54 of the GLP Advisory Committee
Sept. 1, 2021 Meeting Minutes, available online at https://www.regulations.gov/document/USCG-2022-0370-0009.
---------------------------------------------------------------------------
In the meantime, the Director will use his discretion, as
recommended by GLPAC, to take measures to accommodate demand in the
2023 season. Such measures may include hiring contract pilots or
allowing retired pilots to return to work on a temporary basis. The
Coast Guard encourages stakeholders to gather relevant data before the
next meeting of the GLPAC, which will be announced in the Federal
Register.
E. Fair Business Practices
One commenter opposed the rate increase on the basis that it forces
hiring a Coast Guard pilot, is creating a monopoly, and is bad for
business. The Coast Guard disagrees. The Coast Guard does not and has
never employed Coast Guard pilots for any trade, as the commenter
suggests. The Coast Guard has no authority in determining market
structures. In 46 U.S.C. 9302, Congress requires vessels to employ
United States or Canadian registered pilots. The Coast Guard is only
responsible for providing clear and timely regulations, policy, and
direction to the affected population.
F. Temporary Pilot Services
The LPA requested recuperation of operating expenses related to
wages paid to a retired pilot, which they needed on a temporary
registration to meet demand surges. The Coast Guard agrees with the
recommendation and finds this is a necessary and reasonable cost
related to the costs of providing pilotage. In addition, at the most
recent GLPAC meeting, on September 13, 2022, the appointed members
unanimously agreed that this expense should be an allowable operating
expense. The Coast Guard posted a summary of the GLPAC meeting minutes,
titled, ``GLPAC Sept 13, 2022, Meeting Memorandum for the Record USCG''
to the rulemaking docket, USCG-2022-0370, on September 20, 2022. A
subsequent ``GLPAC Sept 13, 2022, Meeting Memorandum for the Record
v2,'' posted on October 3, 2022, made unrelated corrections to Coast
Guard statements and replaced the original September 20, 2022, version.
The ``Memorandum for the Record'' summarizes the GLPAC discussion and
approval of the temporary pilot wages as an operating expense. The
Coast Guard plans to issue guidelines regarding the reimbursement of
temporary registered pilot costs.
The GLPAC consists of the three pilot association presidents and
four additional members representing the ports, vessel operators,
shippers, and labor organizations, who all concurred with adding this
expense to meet the shipping demands for timely service. The expenses
associated with the hiring of a temporary pilot in the operating
expenses are included in this
[[Page 12231]]
ratemaking, in Step 1 of the methodology.
G. Bridge Hours
The WGLPA made a comment that the number of hours for District
Three ``Time on Task'' should be amended to reflect 3,520 hours in
their designated area in 2020, 23,678 hours in their undesignated area
in 2020, 2,516 hours in their designated area in 2021, and 18,286 hours
in their undesignated area for 2021. The Coast Guard agrees with this
comment. Previous figures, extracted from the data the Coast Guard
received, was inaccurate. The Coast Guard has detailed this difference
in trips in the ``SeaPro Sept 27 2022 Error Conversation Memorandum for
the Record'', which can be found at www.regulations.gov/document/USCG-2022-0370-0019. After reviewing the updated numbers, the Coast Guard
agrees to incorporate the commenter's submitted numbers into the
rulemaking.
V. Discussion of Methodological and Other Changes
The Coast Guard is using the existing ratemaking methodology for
establishing the base rates in this full ratemaking. The Coast Guard is
not issuing any methodological or other policy changes to the
ratemaking within this final rule.
According to 46 U.S.C. 9303(f), and restated in 46 CFR 404.100(a),
the Coast Guard must establish base rates by a full ratemaking at least
once every 5 years. The Coast Guard determined that the current base
rate and methodology still adequately adheres to the Coast Guard's
goals of safety through rate and compensation stability, while
promoting recruitment and retention of qualified U.S. registered
pilots. The Coast Guard has made several changes to the ratemaking over
the last several years in consideration of the public interest and the
costs of providing services. The recent changes and their impacts are
summarized as follows.
In the 2017 ratemaking (82 FR 41466, August 31, 2017), the Coast
Guard modified the methodology to account for the additional revenue
produced by the application of weighting factors (discussed in detail
in Steps 7 through 9 for each district, in section VII of this
preamble).
In the 2018 ratemaking (83 FR 26162, June 5, 2018), the Coast Guard
adopted a new approach in the methodology for the compensation
benchmark, based upon United States mariners rather than Canadian
working pilots.
In the 2020 ratemaking (85 FR 20088, April 9, 2020), the Coast
Guard revised the methodology to accurately capture all costs and
revenues associated with Great Lakes pilotage requirements and produce
an hourly rate that adequately and accurately compensates pilots and
covers expenses.
The 2021 ratemaking (86 FR 14184, March 12, 2021) changed the
inflation calculation in Step 4, Sec. 404.104(b) for interim
ratemakings, so that the previous year's target compensation value is
first adjusted by actual inflation value using the Employment Cost
Index (ECI). That change ensures that the target pilot compensation
reimbursed to the association remains current with inflation and
competitive with industry pay increases.
The 2022 ratemaking (87 FR 18488, March 30, 2022) implemented an
apprentice pilot wage benchmark in Steps 3 and 4 to provide
predictability and stability to pilot associations training apprentice
pilots. The 2022 final rule also codified rounding up the staffing
model's final number to ensure the ratemaking does not undercount the
pilot need presented by the staffing model and association
circumstances.
Table 2 summarizes the changes between the 2023 Ratemaking NPRM and
this final rule.
Table 2--Changes Between Proposed Rule and Final Rule
------------------------------------------------------------------------
Change Reasoning
------------------------------------------------------------------------
Revise number of pilots in District Two District Two reported that one
from 15 to 16 and adjust apprentice of their two apprentice pilots
pilots from 2 to 1. listed in the NPRM would
become a fully registered
pilot for the 2023 season.
Correct traffic data for District Three District Three commented that
to reflect discrepancy in the the hours listed in Step 7
assignment of bridge hours to were incorrect and provided a
designated and undesignated areas. corrected sheet of traffic
hours, which correctly
attribute hours between the
designated and undesignated
areas. See further details
below.
Update inflation figures............... More recent figures were
Updates 2021 Employment Cost published since the Coast
Index (ECI) inflation from 5.1%, Guard conducted the analysis
listed in the NPRM, to 5.7%. for the NPRM.
Updates 2022 Personal
Consumption Expenditures (PCE)
inflation from 2.7%, listed in the
NPRM, to 4.3%.
Updates 2023 PCE inflation
from 2.3%, listed in the NPRM, to
2.7%.
------------------------------------------------------------------------
Using the corrected traffic data for 2020, the Coast Guard removed
34 trips from District Three that occurred before March 24, 2020 (the
opening of the 2020 season). The Coast Guard identified eight
incorrectly specified trips with errors or missing data in the ``Area''
and/or ``District'' columns.\12\ With these corrections, the total
bridge hours decreased by 500 hours for the undesignated areas and
decreased by 162 hours for the designated areas. Similarly, for 2021,
the Coast Guard removed 19 trips that occurred before March 21, 2021
(the opening of the 2021 season) and identified 12 incorrectly
specified trips with errors or missing data in the ``Area'' and/or
``District'' columns. The 2021 total bridge hours increased by 67 hours
for the undesignated areas and decreased by 68 hours for the designated
area. Table 3 shows the difference between the published figures for
bridge hours in Step 7 and the updated figures used for this final
rule.
---------------------------------------------------------------------------
\12\ The ``Area'' column is a written description either as Lake
(undesignated) or River (designated), while ``District'' is the
numerical Area, six, seven, or eight. An example of an incorrect
specification was a trip described as Lake in the ``Area'' column,
and area seven in the ``District'' column, meaning it was listed as
simultaneously designated and undesignated.
[[Page 12232]]
Table 3--Changes to Step 7 Bridge Hours From Proposed Rule to Final Rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
Previously published Updated Difference
--------------------------------------------------------------------------------------------------------------------------------------------------------
Undesignated Designated Undesignated Designated Undesignated Designated
--------------------------------------------------------------------------------------------------------------------------------------------------------
2020.................................................... 24,178 3,682 23,678 3,520 -500 -162
Average................................................. 21,106 2,930 21,056 2,914 -50 -16
2021.................................................... 18,219 2,584 18,286 2,516 67 -68
Average................................................. 21,327 3,021 21,284 2,998 -43 -23
--------------------------------------------------------------------------------------------------------------------------------------------------------
Further, the Coast Guard updated Step 8, ``Average Weighting Factor
by Area'' to reflect the changes in the number of transits by vessel
class in each area. This includes corrections to the 8 incorrectly
specified trips in 2020, the 12 incorrectly specified trips in 2021,
and the general corrections from the change in bridge hours in the
updated data provided by District Three. Table 4 details the changes by
area and vessel class for both 2020 and 2021 which will be used in this
final rule. The Coast Guard will not otherwise publish a correction to
the previously published 2020 data used in the 2022 ratemaking.
Table 4--Changes to Step 8 From Proposed Rule to Final Rule
----------------------------------------------------------------------------------------------------------------
Number of transits
-----------------------------------------------
Area/vessel class Previously
published Updated Difference
----------------------------------------------------------------------------------------------------------------
Area 6--Undesignated
----------------------------------------------------------------------------------------------------------------
Class 1 (2021).................................................. 7 8 1
Class 2 (2020).................................................. 395 332 -63
Class 2 (2021).................................................. 261 273 12
Class 3 (2021).................................................. 7 5 -2
Class 4 (2020).................................................. 413 339 -74
Class 4 (2021).................................................. 312 356 44
----------------------------------------------------------------------------------------------------------------
Area 7--Designated
----------------------------------------------------------------------------------------------------------------
Class 1 (2020).................................................. 16 15 -1
Class 1 (2021).................................................. 12 15 3
Class 2 (2020).................................................. 250 218 -32
Class 2 (2021).................................................. 128 131 3
Class 3 (2020).................................................. 4 1 -3
Class 4 (2020).................................................. 385 336 -49
Class 4 (2021).................................................. 299 258 -41
----------------------------------------------------------------------------------------------------------------
Area 8--Undesignated
----------------------------------------------------------------------------------------------------------------
Class 1 (2021).................................................. 4 5 1
Class 2 (2020).................................................. 239 180 -59
Class 2 (2021).................................................. 96 124 28
Class 3 (2020).................................................. 2 1 -1
Class 4 (2020).................................................. 456 265 -191
Class 4 (2021).................................................. 182 319 137
----------------------------------------------------------------------------------------------------------------
These refinements to the methodology continue to promote safe,
efficient, and reliable pilotage service on the Great Lakes, and allow
each pilotage association to generate sufficient revenue to cover its
necessary and reasonable operating expenses, fairly compensate trained
and rested pilots, and realize an appropriate revenue to use for
improvements.
[[Page 12233]]
VI. Individual Target Pilot Compensation Benchmark
The Coast Guard is issuing the target pilot compensation benchmark
in this ratemaking at the target compensation for the ratemaking year
2022, adjusted for inflation. In a full ratemaking year, per 46 CFR
404.104(a), the Director determines a base individual target pilot
compensation using a compensation benchmark in consideration of
relevant currently available non-proprietary information. The Director
may make necessary and reasonable adjustments to the benchmark if
circumstances require. The compensation benchmark will be used in Step
4 of the existing methodology. In the following interim year
ratemakings, the base target pilot compensation will be adjusted
annually in accordance with Sec. 404.104(b). How the Coast Guard
arrived at this compensation benchmark is explained below.
Prior to 2016, the Coast Guard based the compensation benchmark on
data provided by the American Maritime Officers Union (AMOU) regarding
its contract for first mates on the Great Lakes. However, in 2016, the
AMOU elected to no longer provide this data to the Coast Guard. In the
2016 ratemaking (81 FR 11907, March 7, 2016), the Coast Guard used the
average compensation for a Canadian pilot plus a 10-percent adjustment.
The shipping industry challenged the compensation benchmark, and the
court found that the Coast Guard did not adequately support the 10-
percent addition to the Canadian GLPA compensation benchmark. American
Great Lakes Ports Association v. Zukunft, 296 F.Supp. 3d 27, 48 (D.D.C.
2017), aff'd sub nom. American Great Lakes Ports Association v.
Schultz, 962 F.3d 510 (D.C. Cir. 2020). The Coast Guard then based the
2018 full ratemaking compensation benchmark on data provided by the
AMOU, regarding its contract for first mates on the Great Lakes in the
2011 to 2015 period (83 FR 26162, June 5, 2018). The 2018 final rule
adjusted the AMOU 2015 data for inflation using Federal Open Market
Committee median economic projections for PCE inflation.
In the 2020 interim year ratemaking final rule, the Coast Guard
established its most recent pilot compensation benchmark. Given the
lack of access to AMOU data, the Coast Guard did not rely on the AMOU
aggregated wage and benefit information as the basis for the
compensation benchmark. Instead, the Coast Guard adopted the 2019
target pilot compensation (with inflation) as our compensation
benchmark going forward. The Coast Guard stated in the 2020 final rule
that no other United States or Canadian pilot compensation data was
appropriate to use as a benchmark at that time. See 85 FR 20088, 20091
(April 9, 2020). The Director determined that the ratemaking provided
adequate compensation for pilots. In the 2020 ratemaking, the Coast
Guard announced that the 2020 benchmark will be used for future rates.
See 85 FR 20091 (April 9, 2020).
Based on our experience over the past three ratemakings (2020-
2022), the Director continues to believe that the level of target pilot
compensation for those years provided an appropriate level of
compensation for U.S.-registered pilots. According to Sec. 404.101(a),
the Director may make necessary and reasonable adjustments to the
benchmark based on current information. However, current circumstances
do not indicate that an adjustment, other than for inflation, is
necessary. The Director bases this decision on the fact that there is
no indication that registered pilots are resigning due to their
compensation, or that this compensation benchmark is causing shortfalls
in achieving reliable pilotage. The Coast Guard also does not believe
that the pilot compensation benchmark is too high relative to the
expertise required to perform the job. The compensation will continue
to be adjusted annually, in accordance with published inflation rates,
which will ensure the compensation remains competitive and current for
upcoming years.
Therefore, the Coast Guard is not seeking alternative benchmarks
for target compensation at this time and, instead, will simply adjust
the amount of target pilot compensation for inflation as our target
compensation benchmark for 2023, as shown in Step 4. This target
compensation benchmark approach has advanced and will continue to
advance the Coast Guard's goals of safety through rate and compensation
stability while also promoting recruitment and retention of qualified
U.S. pilots.
The compensation benchmark for 2023 is $399,266 per registered
pilot and $143,736 per apprentice pilot, using the 2022 compensation as
a benchmark. The Coast Guard then follows the procedure outlined in
paragraph (b) of Sec. 404.104, which adjusts the existing compensation
benchmark for inflation using a two-step process. First, the Coast
Guard adjusts the 2022 target compensation benchmark of $399,266 by 3.5
percent, for an adjusted value of $413,240. This first adjustment
accounts for the difference in actual first quarter 2022 ECI inflation,
which is 5.7 percent, and the 2022 PCE estimate of 2.2
percent.13 14 The second step accounts for projected
inflation from 2022 to 2023, which is 2.7 percent.\15\ Based on the
projected 2023 inflation estimate, the target compensation benchmark
for 2023 is $424,398 per pilot. The apprentice pilot wage benchmark is
36 percent of the target pilot compensation, or $152,783 ($424,398 x
0.36).
---------------------------------------------------------------------------
\13\ Employment Cost Index, Total Compensation for Private
Industry workers in Transportation and Material Moving, Annual
Average, Series ID: CIU2010000520000A. Accessed September 29, 2022.
https://www.bls.gov/news.release/eci.t05.htm.
\14\ Table 1 Summary of Economic Projections, PCE Inflation June
Projection. Accessed September 2022 https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220921.pdf.
\15\ Table 1 Summary of Economic Projections, PCE Inflation
December Projection. Accessed March 2022 https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220316.pdf..
---------------------------------------------------------------------------
VII. Discussion of Rate Adjustments
In this final rule, based on the policy changes described in the
previous section, the Coast Guard is issuing new pilotage rates for
2023. The Coast Guard is conducting the 2023 ratemaking as a full
ratemaking, as was done in 2018 (83 FR 26162). Thus, the Coast Guard
adjusted the compensation benchmark following the full ratemaking year
procedures under Sec. 404.100(a) rather than following the procedure
for an interim ratemaking year under Sec. 404.100(b).
This section discusses the rate changes using the ratemaking steps
provided in 46 CFR part 404. The Coast Guard details all 10 steps of
the ratemaking procedure for each of the 3 districts to show how the
Coast Guard arrives at the new rates.
District One
A. Step 1: Recognize Previous Operating Expenses
Step 1 in the ratemaking methodology requires that the Coast Guard
review and recognize the operating expenses for the last full year for
which figures are available (Sec. 404.101). To do so, the Coast Guard
begins by reviewing the independent accountant's financial reports for
each association's 2020 expenses and revenues.\16\ For accounting
purposes, the financial reports divide expenses into designated and
undesignated areas. For costs accrued by the pilot associations
generally, such as employee benefits, for example, the cost is divided
between the designated and undesignated areas on a pro rata basis.
---------------------------------------------------------------------------
\16\ These reports are available in the docket for this
rulemaking.
---------------------------------------------------------------------------
In the 2020 expenses used as the basis for this rulemaking,
districts used the term ``applicant'' to describe applicant
[[Page 12234]]
trainees and persons who will be called apprentices (applicant pilots),
under the definition of ``apprentice pilot'', which was introduced in
the 2022 final rule. Therefore, when describing past expenses, the term
``applicant'' is used to match what was reported from 2020, which
includes both applicant and apprentice pilots. The term ``apprentice''
is used to distinguish apprentice pilot wages and describe the impacts
of the ratemaking going forward.
The Coast Guard will continue to include apprentice salaries as an
allowable expense in the 2023 ratemaking, as it is based on 2020
operating expenses, when salaries were still an allowable expense. The
apprentice salaries paid in the years 2020 and 2021 have not been
reimbursed in the ratemaking as of publication of this rule. Applicant
salaries (including applicant trainees and apprentice pilots) will
continue to be an allowable operating expense through the 2024
ratemaking, which uses operating expenses from 2021, when the wages for
apprentice pilots were still authorized as operating expenses.
Beginning with the 2025 ratemaking, apprentice pilot salaries will
no longer be included as a 2022 operating expense, because apprentice
pilot wages will have already been factored into the ratemaking Steps 3
and 4 in calculation of the 2022 rates. Beginning in 2025, the
applicant salaries' operating expenses for 2022 will consist of only
applicant trainees (those who are not yet apprentice pilots). The
recognized operating expenses for District One are shown in table 5.
Table 5--2020 Recognized Expenses for District One
----------------------------------------------------------------------------------------------------------------
District One
-----------------------------------------------
Designated Undesignated
Reported operating expenses for 2020 --------------------------------
St. Lawrence Total
River Lake Ontario
----------------------------------------------------------------------------------------------------------------
Applicant Pilot Compensation:
Salaries.................................................... $257,250 $171,500 $428,750
Employee Benefits........................................... 13,633 9,089 22,722
Applicant Subsistence/Travel................................ 14,901 9,934 24,835
Applicant License Insurance................................. 1,771 1,181 2,952
Applicant Payroll Tax....................................... 20,823 13,882 34,705
-----------------------------------------------
Total Applicant Pilot Compensation...................... 308,378 205,586 513,964
Other Pilot Cost:
Subsistence/Travel- Pilot................................... 575,475 383,650 959,125
Hotel/Lodging Cost.......................................... 32,802 21,868 54,671
License Insurance-Pilots.................................... 45,859 30,573 76,432
Payroll Taxes-Pilots........................................ 188,318 125,546 313,864
Other....................................................... 26,433 17,621 44,054
-----------------------------------------------
Total other pilotage costs.............................. 868,887 579,258 1,448,145
Pilot Boat and Dispatch Costs:
Pilot Boat Expense (Operating).............................. 325,904 217,269 543,173
Pilot Boat Cost (D1-20-01).................................. 104,658 69,772 174,430
Dispatch Expense............................................ 139,916 93,277 233,193
Payroll Taxes............................................... 22,930 15,287 38,217
-----------------------------------------------
Total Pilot and Dispatch Costs.......................... 593,408 395,605 989,013
Administrative Expenses:
Legal-General Counsel....................................... 3,124 2,083 5,207
Legal-Shared Counsel (K&L Gates)............................ 62,906 41,937 104,843
Legal-USCG Litigation....................................... 8,793 5,862 14,655
Insurance................................................... 35,040 23,360 58,400
Employee Benefits........................................... 5,541 3,694 9,235
Payroll Taxes............................................... 6,511 4,341 10,852
Other Taxes................................................. 69,000 46,000 115,000
Real Estate Taxes........................................... 23,298 15,532 38,830
Travel...................................................... 21,516 14,344 35,860
Depreciation................................................ 152,071 101,381 253,452
Certified Public Accountant (CPA) Deduction (D1-19-01)...... (44,623) (29,748) (74,371)
Interest.................................................... 36,924 24,616 61,540
CPA Deduction (D1-19-01).................................... (18,710) (12,473) (31,183)
American Pilots' Association (APA) Dues..................... 27,172 18,115 45,287
Dues and Subscriptions...................................... 4,080 2,720 6,800
Utilities................................................... 15,618 10,412 26,030
Salaries.................................................... 69,848 46,565 116,413
Accounting/Professional Fees................................ 8,220 5,480 13,700
Other....................................................... 55,213 36,809 92,022
Applicant Administrative Expense
Pilot Training.............................................. 26,787 17,858 44,645
Supplies.................................................... 481 320 801
-----------------------------------------------
Total Administrative Expenses........................... 568,810 379,208 948,018
----------------------------------------------------------------------------------------------------------------
Total Expenses (OpEx + Applicant + Pilot Boats + Admin + 2,339,483 1,559,657 3,899,140
Capital).......................................................
[[Page 12235]]
Director's Adjustments--Applicant Surcharge Collected....... (10,814) (7,209) (18,024)
-----------------------------------------------
Director's Adjustments--Applicant Salaries.................. (19,379) (12,919) (32,298)
-----------------------------------------------
Total Director's Adjustments............................ (30,193) (20,129) (50,322)
Total Operating Expenses (OpEx + Adjustments)....... 2,309,290 1,539,528 3,848,818
----------------------------------------------------------------------------------------------------------------
B. Step 2: Project Operating Expenses, Adjusting for Inflation or
Deflation
In accordance with the text in Sec. 404.102, having identified the
recognized 2020 operating expenses in Step 1, the next step is to
estimate the current year's operating expenses by adjusting those
expenses for inflation over the 3-year period. The Coast Guard
calculates inflation using the BLS data from the CPI for the Midwest
Region of the United States for the 2021 inflation rate.\17\ Because
the BLS does not provide forecasted inflation data, the Coast Guard
uses economic projections from the Federal Reserve for the 2022 and
2023 inflation modification.\18\ Based on that information, the
calculations for Step 2 are as presented in table 6.
---------------------------------------------------------------------------
\17\ The 2021 inflation rate is available at https://data.bls.gov/pdq/SurveyOutputServlet?data_tool=dropmap&series_id=CUUR0200SA0,CUUS0200SA0. Specifically, the CPI is defined as ``All Urban Consumers (CPI-
U), All Items, 1982-4=100.'' Series CUUS0200SAO. (Downloaded
September 2022.)
\18\ The 2022 and 2023 inflation rates are available at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220921.pdf. We used the Core PCE Inflation June
Projection found in table 2. (Downloaded September 2022.)
Table 6--Adjusted Operating Expenses for District One
----------------------------------------------------------------------------------------------------------------
District One
-----------------------------------------------
Designated Undesignated Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)............................... $2,309,290 $1,539,528 $3,848,818
2021 Inflation Modification (@5.1%)............................. 117,774 78,516 196,290
2022 Inflation Modification (@4.3%)............................. 104,364 69,576 173,940
2023 Inflation Modification (@2.7%)............................. 68,349 45,566 113,915
-----------------------------------------------
Adjusted 2023 Operating Expenses............................ 2,599,777 1,733,186 4,332,963
----------------------------------------------------------------------------------------------------------------
C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots
In accordance with the text in Sec. 404.103, the Coast Guard
estimates the number of fully registered pilots in each district. The
Coast Guard determines the number of fully registered pilots based on
data provided by the SLSPA. Using these numbers, the Coast Guard
estimates that there will be 18 registered pilots in 2023 in District
One. The Coast Guard determines the number of apprentice pilots based
on input from the district on anticipated retirements and staffing
needs. Using these numbers, the Coast Guard estimates that there will
be two apprentice pilots in 2023 in District One. Based on the seasonal
staffing model discussed in the 2017 ratemaking (see 82 FR 41466
(August 31, 2017)), a certain number of pilots are assigned to
designated waters and a certain number to undesignated waters, as shown
in table 7. These numbers are used to determine the amount of revenue
needed in their respective areas.
Table 7--Authorized Pilots for District One
------------------------------------------------------------------------
Item District One
------------------------------------------------------------------------
Maximum Number of Pilots (per Sec. 401.220(a)) *...... 18
2023 Authorized Pilots (total).......................... 18
Pilots Assigned to Designated Areas..................... 10
Pilots Assigned to Undesignated Areas................... 8
2023 Apprentice Pilots.................................. 2
------------------------------------------------------------------------
* For a detailed calculation, refer to the Great Lakes Pilotage Rates--
2017 Annual Review final rule, which contains the staffing model. See
82 FR 41466, table 6 at 41480 (August 31, 2017).
[[Page 12236]]
D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice
Pilot Wage Benchmark
In this step, the Coast Guard determines the total pilot
compensation for each area. Because a full ratemaking is being issued
this year, the Coast Guard follows the procedure outlined in paragraph
(a) of Sec. 404.104, which requires developing a benchmark after
considering the most relevant currently available non-proprietary
information. In accordance with the discussion in section VI.
``Individual Target Pilot Compensation Benchmark'' of this preamble,
the compensation benchmark for 2023 uses the 2022 compensation of
$399,266 per registered pilot as a base, then adjusts for inflation
following the procedure outlined in paragraph (a) of Sec. 404.104. The
target pilot compensation for 2023 is $424,398 per pilot. The
apprentice pilot wage benchmark is 36 percent of the target pilot
compensation, or $152,783 ($424,398 x 0.36).
Next, the Coast Guard certifies that the number of pilots estimated
for 2023 is less than or equal to the number permitted under the
staffing model in Sec. 401.220(a). The staffing model suggests that
the number of pilots needed is 18 pilots for District One, which is
less than or equal to 18, the number of registered pilots provided by
the pilot association. In accordance with Sec. 404.104(c), the Coast
Guard uses the revised target individual compensation level to derive
the total pilot compensation by multiplying the individual target
compensation by the estimated number of registered pilots for District
One, as shown in table 8. The Coast Guard estimates that the number of
apprentice pilots with limited registration needed will be two for
District One in the 2023 season. The total target wages for apprentices
are allocated at 60 percent for the designated area and 40 percent for
the undesignated area, in accordance with the allocation for operating
expenses.
Table 8--Target Compensation for District One
----------------------------------------------------------------------------------------------------------------
District One
-----------------------------------------------
Designated Undesignated Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation....................................... $424,398 $424,398 $424,398
Number of Pilots................................................ 10 8 18
-----------------------------------------------
Total Target Pilot Compensation............................. $4,243,980 $3,395,184 $7,639,164
Target Apprentice Pilot Compensation............................ $152,783 $152,783 $152,783
Number of Apprentice Pilots..................................... .............. .............. 2
-----------------------------------------------
Total Target Apprentice Pilot Compensation.................. $183,340 $122,227 $305,567
----------------------------------------------------------------------------------------------------------------
E. Step 5: Project Working Capital Fund
Next, the Coast Guard calculates the working capital fund revenues
needed for each area by first adding the figures for projected
operating expenses, total pilot compensation, and total target
apprentice pilot wage for each area and then finding the preceding
year's average annual rate of return for new issues of high-grade
corporate securities. Using Moody's data, the number is 2.7033
percent.\19\ By multiplying the two figures, the Coast Guard obtains
the working capital fund contribution for each area, as shown in table
9.
---------------------------------------------------------------------------
\19\ Moody's Seasoned Aaa Corporate Bond Yield, average of 2021
monthly data. The Coast Guard uses the most recent year of complete
data. Moody's is taken from Moody's Investors Service, which is a
bond credit rating business of Moody's Corporation. Bond ratings are
based on creditworthiness and risk. The rating of ``Aaa'' is the
highest bond rating assigned with the lowest credit risk. See
https://fred.stlouisfed.org/series/AAA. (Downloaded March 4, 2022.)
Table 9--Working Capital Fund Calculation for District One
----------------------------------------------------------------------------------------------------------------
District One
-----------------------------------------------
Designated Undesignated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $2,599,777 $1,733,186 $4,332,963
Total Target Pilot Compensation (Step 4)........................ 4,243,980 3,395,184 7,639,164
Total Target Apprentice Pilot Compensation (Step 4)............. 183,340 122,227 305,567
-----------------------------------------------
Total 2023 Expenses......................................... 7,027,097 5,250,597 12,277,694
----------------------------------------------------------------------------------------------------------------
Working Capital Fund (2.7%)..................................... 189,966 141,941 331,907
----------------------------------------------------------------------------------------------------------------
F. Step 6: Project Needed Revenue
In this step, the Coast Guards adds all the expenses accrued to
derive the total revenue needed for each area. These expenses include
the projected operating expenses (from Step 2), the total pilot
compensation (from Step 4), total target apprentice pilot wage, (from
Step 4) and the working capital fund contribution (from Step 5). These
calculations are shown in table 10.
Table 10--Revenue Needed for District One
----------------------------------------------------------------------------------------------------------------
District One
-----------------------------------------------
Designated Undesignated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $2,599,777 $1,733,186 $4,332,963
[[Page 12237]]
Total Target Pilot Compensation (Step 4)........................ 4,243,980 3,395,184 7,639,164
Total Target Apprentice Pilot Compensation (Step 4)............. 183,340 122,227 305,567
Working Capital Fund (Step 5)................................... 189,966 141,941 331,907
-----------------------------------------------
Total Revenue Needed........................................ 7,217,063 5,392,538 12,609,601
----------------------------------------------------------------------------------------------------------------
G. Step 7: Calculate Initial Base Rates
Having determined the revenue needed for each area in the previous
six steps, to develop an hourly rate, the Coast Guard divides that
number by the expected number of hours of traffic.
Step 7 is a two-part process. The first part is calculating the 10-
year average of traffic in District One, using the total time on task
or pilot bridge hours. To calculate the time on task for each district,
the Coast Guard uses billing data from the GLPMS. The data is pulled
from the system filtering by district, year, job status (including only
closed jobs), and flagging code (including only U.S. jobs). Because
separate figures are calculated for designated and undesignated waters,
there are two parts for each calculation, as shown in table 11.
Table 11--Time on Task for District One
[Hours]
------------------------------------------------------------------------
District One
Year ----------------------------
Designated Undesignated
------------------------------------------------------------------------
2021....................................... 6,188 7,871
2020....................................... 6,265 7,560
2019....................................... 8,232 8,405
2018....................................... 6,943 8,445
2017....................................... 7,605 8,679
2016....................................... 5,434 6,217
2015....................................... 5,743 6,667
2014....................................... 6,810 6,853
2013....................................... 5,864 5,529
2012....................................... 4,771 5,121
----------------------------
Average.................................. 6,386 7,135
------------------------------------------------------------------------
Next, the Coast Guard derives the initial hourly rate by dividing
the revenue needed by the average number of hours for each area. This
produces an initial rate, which is necessary to produce the revenue
needed for each area, assuming the amount of traffic is as expected.
The calculations for District One are presented in table 12.
Table 12--Initial Rate Calculations for District One
------------------------------------------------------------------------
Designated Undesignated
------------------------------------------------------------------------
Revenue needed (Step 6)................. $7,217,063 $5,392,538
Average time on task (hours)............ 6,386 7,135
Initial rate............................ 1,130 756
------------------------------------------------------------------------
H. Step 8: Calculate Average Weighting Factors by Area
In this step, the Coast Guard calculates the average weighting
factor for each designated and undesignated area by first collecting
the weighting factors, set forth in 46 CFR 401.400, for each vessel
trip. Using this database, the average weighting factor for each area
is calculated, using the data from each vessel transit from 2014
onward, as shown in tables 13 and 14.
Table 13--Average Weighting Factor for District One, Designated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014).................................................. 31 1 31
Class 1 (2015).................................................. 41 1 41
Class 1 (2016).................................................. 31 1 31
Class 1 (2017).................................................. 28 1 28
Class 1 (2018).................................................. 54 1 54
Class 1 (2019).................................................. 72 1 72
Class 1 (2020).................................................. 8 1 8
Class 1 (2021).................................................. 10 1 10
Class 2 (2014).................................................. 285 1.15 328
Class 2 (2015).................................................. 295 1.15 339
Class 2 (2016).................................................. 185 1.15 213
Class 2 (2017).................................................. 352 1.15 405
Class 2 (2018).................................................. 559 1.15 643
Class 2 (2019).................................................. 378 1.15 435
Class 2 (2020).................................................. 560 1.15 644
Class 2 (2021).................................................. 315 1.15 362
Class 3 (2014).................................................. 50 1.3 65
Class 3 (2015).................................................. 28 1.3 36
[[Page 12238]]
Class 3 (2016).................................................. 50 1.3 65
Class 3 (2017).................................................. 67 1.3 87
Class 3 (2018).................................................. 86 1.3 112
Class 3 (2019).................................................. 122 1.3 159
Class 3 (2020).................................................. 67 1.3 87
Class 3 (2021).................................................. 52 1.3 68
Class 4 (2014).................................................. 271 1.45 393
Class 4 (2015).................................................. 251 1.45 364
Class 4 (2016).................................................. 214 1.45 310
Class 4 (2017).................................................. 285 1.45 413
Class 4 (2018).................................................. 393 1.45 570
Class 4 (2019).................................................. 730 1.45 1059
Class 4 (2020).................................................. 427 1.45 619
Class 4 (2021).................................................. 407 1.45 590
-----------------------------------------------
Total....................................................... 6,704 .............. 8,640
-----------------------------------------------
Average weighting factor (weighted transits / number of .............. 1.29 ..............
transits)......................................................
----------------------------------------------------------------------------------------------------------------
Table 14--Average Weighting Factor for District One, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014).................................................. 25 1 25
Class 1 (2015).................................................. 28 1 28
Class 1 (2016).................................................. 18 1 18
Class 1 (2017).................................................. 19 1 19
Class 1 (2018).................................................. 22 1 22
Class 1 (2019).................................................. 30 1 30
Class 1 (2020).................................................. 3 1 3
Class 1 (2021).................................................. 19 1 19
Class 2 (2014).................................................. 238 1.15 274
Class 2 (2015).................................................. 263 1.15 302
Class 2 (2016).................................................. 169 1.15 194
Class 2 (2017).................................................. 290 1.15 334
Class 2 (2018).................................................. 352 1.15 405
Class 2 (2019).................................................. 366 1.15 421
Class 2 (2020).................................................. 358 1.15 412
Class 2 (2021).................................................. 463 1.15 532
Class 3 (2014).................................................. 60 1.3 78
Class 3 (2015).................................................. 42 1.3 55
Class 3 (2016).................................................. 28 1.3 36
Class 3 (2017).................................................. 45 1.3 59
Class 3 (2018).................................................. 63 1.3 82
Class 3 (2019).................................................. 58 1.3 75
Class 3 (2020).................................................. 35 1.3 46
Class 3 (2021).................................................. 71 1.3 92
Class 4 (2014).................................................. 289 1.45 419
Class 4 (2015).................................................. 269 1.45 390
Class 4 (2016).................................................. 222 1.45 322
Class 4 (2017).................................................. 285 1.45 413
Class 4 (2018).................................................. 382 1.45 554
Class 4 (2019).................................................. 326 1.45 473
Class 4 (2020).................................................. 334 1.45 484
Class 4 (2021).................................................. 466 1.45 676
-----------------------------------------------
Total....................................................... 5,638 .............. 7,291
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits / number of .............. .............. 1.29
transits)......................................................
----------------------------------------------------------------------------------------------------------------
I. Step 9: Calculate Revised Base Rates
In this step, the Coast Guard revises the base rates so that the
total cost of pilotage is equal to the revenue needed after considering
the impact of the weighting factors. To do this, the initial base rates
calculated in Step 7 are divided by the average weighting factors
calculated in Step 8, as shown in table 15.
[[Page 12239]]
Table 15--Revised Base Rates for District One
----------------------------------------------------------------------------------------------------------------
Revised rate
Average (initial rate
Area Initial rate weighting average /
(Step 7) factor (Step weighting
8) factor)
----------------------------------------------------------------------------------------------------------------
District One: Designated........................................ $1,130 1.29 $876
District One: Undesignated...................................... 756 1.29 586
----------------------------------------------------------------------------------------------------------------
J. Step 10: Review and Finalize Rates
In this step, the Director reviews the rates set forth by the
staffing model and ensures that they meet the goal of ensuring safe,
efficient, and reliable pilotage. To establish this, the Director
considers whether the rates incorporate appropriate compensation for
pilots to handle heavy traffic periods and whether there is a
sufficient number of pilots to handle those heavy traffic periods. The
Director also considers whether the rates will cover operating expenses
and infrastructure costs, including average traffic and weighting
factions. Based on the financial information submitted by the pilots,
the Director is not issuing any alterations to the rates in this step.
By means of this rule, Sec. 401.405(a)(1) and (2) are modified to
reflect the final rates shown in table 16.
Table 16--Final Rates for District One
----------------------------------------------------------------------------------------------------------------
Final 2022 Final 2023
Area Name pilotage rate pilotage rate
----------------------------------------------------------------------------------------------------------------
District One: Designated...................... St. Lawrence River.............. $834 $876
District One: Undesignated.................... Lake Ontario.................... 568 586
----------------------------------------------------------------------------------------------------------------
District Two
A. Step 1: Recognize Previous Operating Expenses
Step 1 in the ratemaking methodology requires that the Coast Guard
review and recognize the operating expenses of the last full year for
which figures are available (Sec. 404.101). To do so, the Coast Guard
begins by reviewing the independent accountant's financial reports for
each association's 2020 expenses and revenues.\20\ For accounting
purposes, the financial reports divide expenses into designated and
undesignated areas. For costs accrued by the pilot associations
generally, such as employee benefits, for example, the cost is divided
between the designated and undesignated areas on a pro rata basis.
---------------------------------------------------------------------------
\20\ These reports are available in the docket for this
rulemaking.
---------------------------------------------------------------------------
In the 2020 expenses used as the basis for this rulemaking,
districts used the term ``applicant'' to describe applicant trainees
and persons who will be called apprentices (applicant pilots), under
the definition introduced by the 2022 final rule. Therefore, when
describing past expenses, the term ``applicant'' is used to match what
was reported from 2020, which includes both applicant and apprentice
pilots. The term ``apprentice'' is used to distinguish apprentice pilot
wages and describe the impacts of the ratemaking going forward.
The Coast Guard continues to include apprentice salaries as an
allowable expense in the 2023 ratemaking, as it is based on 2020
operating expenses, when salaries were still an allowable expense. The
apprentice salaries paid in the years 2020 and 2021 have not been
reimbursed in the ratemaking as of publication of this rule. Applicant
salaries (including applicant trainees and apprentice pilots) will
continue to be an allowable operating expense through the 2024
ratemaking, which uses operating expenses from 2021, where the wages
for apprentice pilots were still authorized as operating expenses.
Beginning with the 2025 ratemaking, apprentice pilot salaries will
no longer be included as a 2022 operating expense, because apprentice
pilot wages will have already been factored into the ratemaking Steps 3
and 4 in calculation of the 2022 rates. Beginning in 2025, the
applicant salaries' operating expenses for 2022 will consist of only
applicant trainees (those who are not yet apprentice pilots). The
recognized operating expenses for District Two are shown in table 17.
Table 17--2020 Recognized Expenses for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-----------------------------------------------
Undesignated Designated
Reported operating expenses for 2020 --------------------------------
Southeast Total
Lake Erie Shoal to Port
Huron
----------------------------------------------------------------------------------------------------------------
Applicant Salaries.............................................. $101,810 $152,715 $254,525
Applicant Health Insurance...................................... 12,706 19,058 31,764
Applicant Subsistence/Travel.................................... 6,732 10,098 16,830
Applicant Hotel/Lodging Cost.................................... 3,652 5,478 9,130
[[Page 12240]]
Applicant Payroll Tax........................................... 4,888 7,332 12,220
-----------------------------------------------
Total Applicant Cost........................................ 129,788 194,681 324,469
Pilot Subsistence/Travel........................................ 124,953 187,427 312,380
Hotel/Lodging Cost.............................................. 40,744 61,116 101,860
License Renewal................................................. 1,606 2,409 4,015
Payroll Taxes................................................... 94,996 142,495 237,491
Insurance....................................................... 8,666 12,999 21,665
-----------------------------------------------
Total Other Pilotage Costs.................................. 270,965 406,446 677,411
Pilot Boat and Dispatch Costs:
Pilot Boat Cost............................................. 218,840 328,261 547,101
Employee Benefits........................................... 92,554 138,831 231,385
Payroll taxes............................................... 13,565 20,347 33,912
-----------------------------------------------
Total Pilot Boat and Dispatch Costs..................... 324,959 487,439 812,398
Administrative Expense:
Legal--General Counsel...................................... 4,016 6,024 10,040
Legal--Shared Counsel (K&L Gates)........................... 9,898 14,846 24,744
Legal--Shared Counsel (K&L Gates) (D2-20-01)................ 3,233 4,850 8,083
Office Rent................................................. 27,627 41,440 69,067
Insurance................................................... 12,357 18,536 30,893
Employee Benefits........................................... 157,650 236,476 394,126
Payroll Taxes............................................... 5,007 7,510 12,517
Other Taxes................................................. 43,400 65,100 108,500
Real Estate Taxes........................................... 8,285 12,427 20,712
Depreciation/Auto Lease/Other............................... 7,783 11,674 19,457
Interest.................................................... 114 171 285
APA Dues.................................................... 14,683 22,025 36,708
Dues and Subscriptions...................................... 819 1,229 2,048
Utilities................................................... 18,453 27,679 46,132
Salaries--Admin Employees................................... 50,250 75,374 125,624
Accounting.................................................. 14,360 21,540 35,900
Pilot Training.............................................. 146 219 365
Other....................................................... 24,604 36,906 61,510
-----------------------------------------------
Total Administrative Expenses........................... 402,685 604,026 1,006,711
----------------------------------------------------------------------------------------------------------------
Total OpEx (Pilot Costs + Applicant Cost + Pilot Boats + Admin). 1,128,397 1,692,592 2,820,989
===============================================
TOTAL DIRECTOR'S ADJUSTMENTS................................ .............. .............. ..............
-----------------------------------------------
Total Operating Expenses (OpEx + Adjustments)........... 1,128,397 1,692,592 2,820,989
----------------------------------------------------------------------------------------------------------------
B. Step 2: Project Operating Expenses, Adjusting for Inflation or
Deflation
In accordance with the text in Sec. 404.102, having identified the
recognized 2020 operating expenses in Step 1, the next step is to
estimate the current year's operating expenses by adjusting those
expenses for inflation over the 3-year period. The Coast Guard
calculates inflation using the BLS data from the CPI for the Midwest
Region of the United States for the 2021 inflation rate.\21\ Because
the BLS does not provide forecasted inflation data, economic
projections are used from the Federal Reserve for the 2022 and 2023
inflation modification.\22\ Based on that information, the calculations
for Step 2 are as presented in table 18.
---------------------------------------------------------------------------
\21\ The 2021 inflation rate is available at https://data.bls.gov/pdq/SurveyOutputServlet?data_tool=dropmap&series_id=CUUR0200SA0,CUUS0200SA0. Specifically, the CPI is defined as ``All Urban Consumers (CPI-
U), All Items, 1982-4=100.'' Series CUUS0200SAO. (Downloaded
September 2022.)
\22\ The 2022 and 2023 inflation rates are available at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220921.pdf. We used the Core PCE Inflation June
Projection found in table 1. (Downloaded September 2022.)
[[Page 12241]]
Table 18--Adjusted Operating Expenses for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)............................... $1,128,397 $1,692,592 $2,820,989
2021 Inflation Modification (@5.1%)............................. 57,548 86,322 143,870
2022 Inflation Modification (@4.3%)............................. 50,996 76,493 127,489
2023 Inflation Modification (@2.7%)............................. 33,397 50,096 83,493
-----------------------------------------------
Adjusted 2023 Operating Expenses............................ 1,270,338 1,905,503 3,175,841
----------------------------------------------------------------------------------------------------------------
C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots
In accordance with the text in Sec. 404.103, the Coast Guard
estimates the number of fully registered pilots in each district. The
Coast Guard determines the number of fully registered pilots based on
data provided by the LPA. Using these numbers, the Coast Guard
estimates that there will be 16 registered pilots in 2023 in District
Two. The Coast Guard determines the number of apprentice pilots based
on input from the district on anticipated retirements and staffing
needs. Using these numbers, the Coast Guard estimates that there will
be one apprentice pilot in 2023 in District Two. Based on the seasonal
staffing model discussed in the 2017 ratemaking (see 82 FR 41466), a
certain number of pilots are assigned to designated waters and a
certain number to undesignated waters, as shown in table 19. These
numbers are used to determine the amount of revenue needed in their
respective areas.
Table 19--Authorized Pilots for District Two
------------------------------------------------------------------------
Item District Two
------------------------------------------------------------------------
Maximum Number of Pilots (per Sec. 401.220(a)) *...... 16
2023 Authorized Pilots (total).......................... 16
Pilots Assigned to Designated Areas..................... 6
Pilots Assigned to Undesignated Areas................... 10
2023 Apprentice Pilots.................................. 1
------------------------------------------------------------------------
* For a detailed calculation, refer to the Great Lakes Pilotage Rates--
2017 Annual Review final rule, which contains the staffing model. See
82 FR 41466, table 6 at 41480 (August 31, 2017).
D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice
Pilot Wage Benchmark
In this step, the Coast Guard determines the total pilot
compensation for each area. Because a full ratemaking is being issued
this year, the Coast Guard follows the procedure outlined in paragraph
(a) of Sec. 404.104, which requires developing a benchmark after
considering the most relevant currently available non-proprietary
information. In accordance with the discussion in section V of this
preamble, the compensation benchmark for 2023 uses the 2022
compensation of $399,266 per registered pilot as a base, then adjusts
for inflation following the procedure outlined in paragraph (b) of
Sec. 404.104. The target pilot compensation for 2023 is $424,398 per
pilot. The apprentice pilot wage benchmark is 36 percent of the target
pilot compensation, or $152,783 ($424,398 x 0.36).
Next, the Coast Guard certifies that the number of pilots estimated
for 2023 is less than or equal to the number permitted under the
staffing model in Sec. 401.220(a). The staffing model suggests that
the number of pilots needed is 16 pilots for District Two, which is
less than or equal to 16, the number of registered pilots provided by
the pilot association. In accordance with Sec. 404.104(c), the Coast
Guard uses the revised target individual compensation level to derive
the total pilot compensation by multiplying the individual target
compensation by the estimated number of registered pilots for District
Two, as shown in table 20. The Coast Guard estimates that the number of
apprentice pilots with limited registration needed will be one for
District Two in the 2023 season. The total target wages for apprentices
are allocated at 60 percent for the designated area and 40 percent for
the undesignated area, in accordance with the allocation for operating
expenses.
Table 20--Target Compensation for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation....................................... $424,398 $424,398 $424,398
Number of Pilots................................................ 10 6 16
-----------------------------------------------
Total Target Pilot Compensation............................. $4,243,980 $2,546,388 $6,790,368
Target Apprentice Pilot Compensation............................ $152,783 $152,783 $152,783
Number of Apprentice Pilots..................................... .............. .............. 1
-----------------------------------------------
Total Target Apprentice Pilot Compensation.................. $61,113.39 $91,669.89 $152,783
----------------------------------------------------------------------------------------------------------------
[[Page 12242]]
E. Step 5: Project Working Capital Fund
Next, the Coast Guard calculates the working capital fund revenues
needed for each area by first adding the figures for projected
operating expenses, total pilot compensation, and total target
apprentice pilot wage for each area and then finding the preceding
year's average annual rate of return for new issues of high-grade
corporate securities. Using Moody's data, the number is 2.7033
percent.\23\ By multiplying the two figures, the Coast Guard obtains
the working capital fund contribution for each area, as shown in table
21.
---------------------------------------------------------------------------
\23\ Moody's Seasoned Aaa Corporate Bond Yield, average of 2021
monthly data. The Coast Guard uses the most recent year of complete
data. Moody's is taken from Moody's Investors Service, which is a
bond credit rating business of Moody's Corporation. Bond ratings are
based on creditworthiness and risk. The rating of ``Aaa'' is the
highest bond rating assigned with the lowest credit risk. See
https://fred.stlouisfed.org/series/AAA. (Downloaded March 4, 2022.)
Table 21--Working Capital Fund Calculation for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $1,270,338 $1,905,503 $3,175,841
Total Target Pilot Compensation (Step 4)........................ 4,243,980 2,546,388 6,790,368
Total Target Apprentice Pilot Compensation (Step 4)............. 61,113 91,670 152,783
-----------------------------------------------
Total 2023 Expenses......................................... 5,575,431 4,543,561 10,118,992
----------------------------------------------------------------------------------------------------------------
Working Capital Fund (2.7%)..................................... 150,722 122,828 273,550
----------------------------------------------------------------------------------------------------------------
F. Step 6: Project Needed Revenue
In this step, the Coast Guard adds all the expenses accrued to
derive the total revenue needed for each area. These expenses include
the projected operating expenses (from Step 2), the total pilot
compensation (from Step 4), total target apprentice pilot wage, (from
Step 4) and the working capital fund contribution (from Step 5). These
calculations are shown in table 22.
Table 22--Revenue Needed for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $1,270,338 $1,905,503 $3,175,841
Total Target Pilot Compensation (Step 4)........................ 4,243,980 2,546,388 6,790,368
Total Target Apprentice Pilot Compensation (Step 4)............. 61,113 91,670 152,783
Working Capital Fund (Step 5)................................... 150,722 122,828 273,550
-----------------------------------------------
Total Revenue Needed........................................ 5,726,153 4,666,389 10,392,542
----------------------------------------------------------------------------------------------------------------
G. Step 7: Calculate Initial Base Rates
Having determined the revenue needed for each area in the previous
six steps, to develop an hourly rate, the Coast Guard divides that
number by the expected number of hours of traffic. Step 7 is a two-part
process. In the first part, the Coast Guard calculates the 10-year
average of traffic in District Two, using the total time on task or
pilot bridge hours. To calculate the time on task for each district,
the Coast Guard uses billing data from SeaPro, pulling the data from
the system filtering by district, year, job status (including only
processed jobs), and flagging code (including only U.S. jobs). Because
separate figures are calculated for designated and undesignated waters,
there are two parts for each calculation, as shown in table 23.
Table 23--Time on Task for District Two
[Hours]
------------------------------------------------------------------------
District Two
Year -------------------------------
Undesignated Designated
------------------------------------------------------------------------
2021.................................... 8,826 3,226
2020.................................... 6,232 8,401
2019.................................... 6,512 7,715
2018.................................... 6,150 6,655
2017.................................... 5,139 6,074
2016.................................... 6,425 5,615
2015.................................... 6,535 5,967
2014.................................... 7,856 7,001
2013.................................... 4,603 4,750
2012.................................... 3,848 3,922
-------------------------------
Average............................... 6,213 5,933
------------------------------------------------------------------------
[[Page 12243]]
Next, the Coast Guard derives the initial hourly rate by dividing
the revenue needed by the average number of hours for each area. This
produces an initial rate, which is necessary to produce the revenue
needed for each area, assuming the amount of traffic is as expected.
The calculations for District Two are presented in table 24.
Table 24--Initial Rate Calculations for District Two
------------------------------------------------------------------------
Undesignated Designated
------------------------------------------------------------------------
Revenue needed (Step 6)................. $5,726,153 $4,666,389
Average time on task (hours)............ 6,213 5,933
Initial rate............................ $922 $787
------------------------------------------------------------------------
H. Step 8: Calculate Average Weighting Factors by Area
In this step, the Coast Guard calculate the average weighting
factor for each designated and undesignated area by first collecting
the weighting factors, set forth in 46 CFR 401.400, for each vessel
trip. Using this database, the Coast Guard calculates the average
weighting factor for each area using the data from each vessel transit
from 2014 onward, as shown in tables 25 and 26.
Table 25--Average Weighting Factor for District Two, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014).................................................. 31 1 31
Class 1 (2015).................................................. 35 1 35
Class 1 (2016).................................................. 32 1 32
Class 1 (2017).................................................. 21 1 21
Class 1 (2018).................................................. 37 1 37
Class 1 (2019).................................................. 54 1 54
Class 1 (2020).................................................. 1 1 1
Class 1 (2021).................................................. 7 1 7
Class 2 (2014).................................................. 356 1.15 409
Class 2 (2015).................................................. 354 1.15 407
Class 2 (2016).................................................. 380 1.15 437
Class 2 (2017).................................................. 222 1.15 255
Class 2 (2018).................................................. 123 1.15 141
Class 2 (2019).................................................. 127 1.15 146
Class 2 (2020).................................................. 165 1.15 190
Class 2 (2021).................................................. 206 1.15 237
Class 3 (2014).................................................. 20 1.3 26
Class 3 (2015).................................................. 0 1.3 0
Class 3 (2016).................................................. 9 1.3 12
Class 3 (2017).................................................. 12 1.3 16
Class 3 (2018).................................................. 3 1.3 4
Class 3 (2019).................................................. 1 1.3 1
Class 3 (2020).................................................. 1 1.3 1
Class 3 (2021).................................................. 5 1.3 7
Class 4 (2014).................................................. 636 1.45 922
Class 4 (2015).................................................. 560 1.45 812
Class 4 (2016).................................................. 468 1.45 679
Class 4 (2017).................................................. 319 1.45 463
Class 4 (2018).................................................. 196 1.45 284
Class 4 (2019).................................................. 210 1.45 305
Class 4 (2020).................................................. 201 1.45 291
Class 4 (2021).................................................. 227 1.45 329
-----------------------------------------------
Total....................................................... 5,019 .............. 6,592
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits / number of .............. 1.31 ..............
transits)......................................................
----------------------------------------------------------------------------------------------------------------
Table 26--Average Weighting Factor for District Two, Designated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014).................................................. 20 1 20
Class 1 (2015).................................................. 15 1 15
Class 1 (2016).................................................. 28 1 28
Class 1 (2017).................................................. 15 1 15
Class 1 (2018).................................................. 42 1 42
Class 1 (2019).................................................. 48 1 48
Class 1 (2020).................................................. 7 1 7
Class 1 (2021).................................................. 12 1 12
Class 2 (2014).................................................. 237 1.15 273
[[Page 12244]]
Class 2 (2015).................................................. 217 1.15 250
Class 2 (2016).................................................. 224 1.15 258
Class 2 (2017).................................................. 127 1.15 146
Class 2 (2018).................................................. 153 1.15 176
Class 2 (2019).................................................. 281 1.15 323
Class 2 (2020).................................................. 342 1.15 393
Class 2 (2021).................................................. 240 1.15 276
Class 3 (2014).................................................. 8 1.3 10
Class 3 (2015).................................................. 8 1.3 10
Class 3 (2016).................................................. 4 1.3 5
Class 3 (2017).................................................. 4 1.3 5
Class 3 (2018).................................................. 14 1.3 18
Class 3 (2019).................................................. 1 1.3 1
Class 3 (2020).................................................. 5 1.3 7
Class 3 (2021).................................................. 2 1.3 3
Class 4 (2014).................................................. 359 1.45 521
Class 4 (2015).................................................. 340 1.45 493
Class 4 (2016).................................................. 281 1.45 407
Class 4 (2017).................................................. 185 1.45 268
Class 4 (2018).................................................. 379 1.45 550
Class 4 (2019).................................................. 403 1.45 584
Class 4 (2020).................................................. 405 1.45 587
Class 4 (2021).................................................. 268 1.45 389
-----------------------------------------------
Total....................................................... 4,674 .............. 6,140
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits / number of .............. 1.31 ..............
transits)......................................................
----------------------------------------------------------------------------------------------------------------
I. Step 9: Calculate Revised Base Rates
In this step, the Coast Guard revises the base rates so that the
total cost of pilotage is equal to the revenue needed after considering
the impact of the weighting factors. To do this, the initial base rates
calculated in Step 7 are divided by the average weighting factors
calculated in Step 8, as shown in table 27.
Table 27--Revised Base Rates for District Two
----------------------------------------------------------------------------------------------------------------
Revised rate
Average (initial rate/
Area Initial rate weighting average
(Step 7) factor (Step weighting
8) factor)
----------------------------------------------------------------------------------------------------------------
District Two: Undesignated...................................... $922 1.31 $704
District Two: Designated........................................ 787 1.31 601
----------------------------------------------------------------------------------------------------------------
J. Step 10: Review and Finalize Rates
In this step, the Director reviews the rates set forth by the
staffing model and ensures that they meet the goal of ensuring safe,
efficient, and reliable pilotage. To establish this, the Director
considers whether the rates incorporate appropriate compensation for
pilots to handle heavy traffic periods, and whether there is a
sufficient number of pilots to handle those heavy traffic periods. The
Director also considers whether the rates will cover operating expenses
and infrastructure costs and takes average traffic and weighting
factors into consideration. Based on the financial information
submitted by the pilots, the Director is not issuing any alterations to
the rates in this step. By means of this rule, Sec. 401.405(a)(3) and
(4) are modified to reflect the final rates shown in table 28.
Table 28--Final Rates for District Two
----------------------------------------------------------------------------------------------------------------
Final 2022 Final 2023
Area Name pilotage rate pilotage rate
----------------------------------------------------------------------------------------------------------------
District Two: Designated...................... Navigable waters from Southeast $536 $601
Shoal to Port Huron, MI.
District Two: Undesignated.................... Lake Erie....................... 610 704
----------------------------------------------------------------------------------------------------------------
[[Page 12245]]
District Three
A. Step 1: Recognize Previous Operating Expenses
Step 1 in the ratemaking methodology requires that the Coast Guard
review and recognize the operating expenses of the last year for which
figures are available (Sec. 404.101). To do so, the Coast Guard begins
by reviewing the independent accountant's financial reports for each
association's 2020 expenses and revenues.\24\ For accounting purposes,
the financial reports divide expenses into designated and undesignated
areas. For costs accrued by the pilot associations generally, such as
employee benefits, for example, the cost is divided between the
designated and undesignated areas on a pro rata basis.
---------------------------------------------------------------------------
\24\ These reports are available in the docket for this
rulemaking.
---------------------------------------------------------------------------
In the 2020 expenses used as the basis for this rulemaking,
districts used the term ``applicant'' to describe applicant trainees
and persons who will be called apprentices (applicant pilots), under
the definition introduced by the 2022 final rule. Therefore, when
describing past expenses, the term ``applicant'' is used to match what
was reported from 2020, which includes both applicant and apprentice
pilots. The term ``apprentice'' is used to distinguish apprentice pilot
wages and describe the impacts of the ratemaking going forward.
The Coast Guard continues to include apprentice salaries as an
allowable expense in the 2023 ratemaking, as it is based on 2020
operating expenses, when salaries were still an allowable expense. The
apprentice salaries paid in the years 2020 and 2021 have not been
reimbursed in the ratemaking as of publication of this rule. Applicant
salaries (including applicant trainees and apprentice pilots) will
continue to be an allowable operating expense through the 2024
ratemaking, which uses operating expenses from 2021, where the wages
for apprentice pilots were still authorized as operating expenses.
Beginning with the 2025 ratemaking, apprentice pilot salaries will
no longer be included as a 2022 operating expense, because apprentice
pilot wages will have already been factored into the ratemaking Steps 3
and 4 in calculation of the 2022 rates. Beginning in 2025, the
applicant salaries' operating expenses for 2022 will consist of only
applicant trainees (those who are not yet apprentice pilots). The
recognized operating expenses for District Three are shown in table 29.
Table 29--2020 Recognized Expenses for District Three
----------------------------------------------------------------------------------------------------------------
District Three
---------------------------------------------------------------
Undesignated Designated Undesignated
Reported operating expenses for 2020 ------------------------------------------------
Lakes Huron St. Mary's Total
and Michigan River Lake Superior
----------------------------------------------------------------------------------------------------------------
Other Pilotage Costs:
Pilot Subsistence/Travel.................... $284,547 $118,603 $149,261 $552,411
Hotel/Lodging Cost.......................... 87,208 36,349 45,745 169,302
License Insurance--Pilots................... 16,749 6,981 8,786 32,516
Payroll Taxes............................... .............. .............. .............. ..............
Payroll Tax (D3-19-01)...................... 151,266 63,049 79,348 293,663
Other....................................... 6,505 2,711 3,412 12,628
---------------------------------------------------------------
Total Other Pilotage Costs.............. 546,275 227,693 286,552 1,060,520
Applicant Cost:
Applicant Salaries.......................... 340,677 141,998 178,705 661,380
Applicant Benefits.......................... 66,083 27,544 34,665 128,292
Applicant Payroll Tax....................... 25,711 10,717 13,487 49,915
Applicant Hotel/Lodging..................... 31,313 13,052 16,425 60,790
---------------------------------------------------------------
Total Applicant Cost.................... 463,784 193,311 243,282 900,377
Pilot Boat and Dispatch costs:
Pilot Boat Costs............................ 515,075 214,689 270,187 999,951
Dispatch Costs.............................. 112,008 46,686 58,755 217,449
Employee Benefits........................... 41,153 17,153 21,587 79,893
Payroll Taxes............................... 16,771 6,991 8,798 32,560
---------------------------------------------------------------
Total Pilot Boat and Dispatch costs..... 685,007 285,519 359,327 1,329,853
Administrative Cost:
Legal--General Counsel...................... 1,921 801 1,008 3,730
Legal--Shared Counsel (K&L Gates)........... 21,650 9,024 11,357 42,031
Legal--Shared Counsel (K&L Gates) CPA 3,601 1,501 1,889 6,991
Deduction (D3-20-03).......................
Legal--USCG Litigation...................... 8,575 3,574 4,498 16,647
Insurance................................... 18,811 7,841 9,867 36,519
Employee Benefits........................... 80,117 33,394 42,026 155,537
Payroll Tax................................. 8,101 3,377 4,250 15,728
Other Taxes................................. 15,797 6,584 8,286 30,667
Real Estate Taxes........................... 2,001 834 1,050 3,885
Depreciation/Auto Leasing/Other............. 61,096 25,465 32,048 118,609
Interest.................................... 2,940 1,225 1,542 5,707
APA Dues.................................... 23,860 9,945 12,516 46,321
Dues and Subscriptions...................... 4,971 2,072 2,607 9,650
Salaries.................................... 50,795 21,172 26,645 98,612
Utilities................................... 54,212 22,596 28,438 105,246
[[Page 12246]]
Accounting/Professional Fees................ 23,823 9,930 12,496 46,249
Other Expenses.............................. 38,507 16,050 20,199 74,756
Other Expenses CPA Deduction (D3-18-01)..... (4,684) (1,952) (2,457) (9,093)
---------------------------------------------------------------
Total Administrative Expenses........... 416,094 173,433 218,265 807,792
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Other Costs + 2,111,160 879,956 1,107,426 4,098,542
Applicant Cost + Pilot Boats + Admin)..........
Director's Adjustments--Applicant Surcharge (63,120) (26,309) (33,110) (122,539)
Collected..................................
Total Director's Adjustments............ (63,120) (26,309) (33,110) (122,539)
---------------------------------------------------------------
Total Operating Expenses (OpEx + 2,048,040 853,647 1,074,316 3,976,003
Adjustments).......................
----------------------------------------------------------------------------------------------------------------
B. Step 2: Project Operating Expenses, Adjusting for Inflation or
Deflation
In accordance with the text in Sec. 404.103, having identified the
recognized 2020 operating expenses in Step 1, the next step is to
estimate the current year's operating expenses by adjusting those
expenses for inflation over the 3-year period. The Coast Guard
calculates inflation using the BLS data from the CPI for the Midwest
Region of the United States for the 2021 inflation rate.\25\ Because
the BLS does not provide forecasted inflation data, economic
projections are used from the Federal Reserve for the 2022 and 2023
inflation modification.\26\ Based on that information, the calculations
for Step 2 are as presented in table 30.
---------------------------------------------------------------------------
\25\ The 2021 inflation rate is available at https://data.bls.gov/pdq/SurveyOutputServlet?data_tool=dropmap&series_id=CUUR0200SA0,CUUS0200SA0. Specifically, the CPI is defined as ``All Urban Consumers (CPI-
U), All Items, 1982-4=100.'' Series CUUS0200SAO. (Downloaded
September 2022.)
\26\ The 2022 and 2023 inflation rates are available at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220921.pdf. We used the Core PCE Inflation June
Projection found in table 1. (Downloaded September 2022.)
Table 30--Adjusted Operating Expenses for District Three
----------------------------------------------------------------------------------------------------------------
District Three
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)............................... $3,122,356 $853,647 $3,976,003
2021 Inflation Modification (@5.1%)............................. 159,240 43,536 202,776
2022 Inflation Modification (@4.3%)............................. 141,109 38,579 179,688
2023 Inflation Modification (@2.7%)............................. 92,413 25,266 117,679
-----------------------------------------------
Adjusted 2023 Operating Expenses............................ 3,515,118 961,028 4,476,146
----------------------------------------------------------------------------------------------------------------
C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots
In accordance with the text in Sec. 404.103, the Coast Guard
estimate the number of registered pilots in each district. The Coast
Guard determines the number of registered pilots based on data provided
by the WGLPA. Using these numbers, the Coast Guard estimates that there
will be 22 registered pilots in 2023 in District Three. The Coast Guard
determine the number of apprentice pilots based on input from the
district on anticipated retirements and staffing needs. Using these
numbers, the Coast Guard estimates that there will be three apprentice
pilots in 2023 in District Three. Based on the seasonal staffing model
discussed in the 2017 ratemaking (see 82 FR 41466), a certain number of
pilots are assigned to designated waters and a certain number to
undesignated waters, as shown in table 31. These numbers are used to
determine the amount of revenue needed in their respective areas.
Table 31--Authorized Pilots for District Three
------------------------------------------------------------------------
Item District Three
------------------------------------------------------------------------
Maximum Number of Pilots (per Sec. 401.220(a)) *...... 22
2023 Authorized Pilots (total).......................... 22
Pilots Assigned to Designated Areas..................... 5
Pilots Assigned to Undesignated Areas................... 17
2023 Apprentice Pilots.................................. 3
------------------------------------------------------------------------
* For a detailed calculation, refer to the Great Lakes Pilotage Rates--
2017 Annual Review final rule, which contains the staffing model. See
82 FR 41466, table 6 at 41480 (August 31, 2017).
[[Page 12247]]
D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice
Pilot Wage Benchmark
In this step, the Coast Guard determine the total pilot
compensation for each area. Because a full ratemaking is being issued
this year, the Coast Guard follows the procedure outlined in paragraph
(a) of Sec. 404.104, which requires developing a benchmark after
considering the most relevant currently available non-proprietary
information. In accordance with the discussion in section V of this
preamble, the compensation benchmark for 2023 uses the 2022
compensation of $399,266 per registered pilot as a base, then adjusts
for inflation following the procedure outlined in paragraph (b) of
Sec. 404.104. The target pilot compensation for 2023 is $424,398 per
pilot. The apprentice pilot wage benchmark is 36 percent of the target
pilot compensation, or $152,783 ($424,398 x 0.36).
Next, the Coast Guard certifies that the number of pilots estimated
for 2023 is less than or equal to the number permitted under the
staffing model in Sec. 401.220(a). The staffing model suggests that
the number of pilots needed is 22 pilots for District Three, which is
less than or equal to 22, the number of registered pilots provided by
the pilot association. In accordance with Sec. 404.104(c), the revised
target individual compensation level is used to derive the total pilot
compensation by multiplying the individual target compensation by the
estimated number of registered pilots for District Three, as shown in
table 32. The Coast Guard estimates that the number of apprentice
pilots with limited registration needed will be three for District
Three in the 2023 season. The total target wages for apprentices are
allocated with 21 percent for the designated area, and 79 percent (52
percent + 27 percent) for the undesignated areas, in accordance with
the allocation for operating expenses.
Table 32--Target Compensation for District Three
----------------------------------------------------------------------------------------------------------------
District Three
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation....................................... $424,398 $424,398 $424,398
Number of Pilots................................................ 17 5 22
-----------------------------------------------
Total Target Pilot Compensation............................. $7,214,766 $2,121,990 $9,336,756
Target Apprentice Pilot Compensation............................ $152,783 $152,783 $152,783
Number of Apprentice Pilots..................................... .............. .............. 3
-----------------------------------------------
Total Target Apprentice Pilot Compensation.................. $359,942 $98,408 $458,350
----------------------------------------------------------------------------------------------------------------
E. Step 5: Project Working Capital Fund
Next, the Coast Guard calculates the working capital fund revenues
needed for each area by first adding the figures for projected
operating expenses, total pilot compensation, and total target
apprentice pilot wage for each area and then finding the preceding
year's average annual rate of return for new issues of high-grade
corporate securities. Using Moody's data, the number is 2.7033
percent.\27\ By multiplying the two figures, the working capital fund
contribution for each area is obtained, as shown in table 33.
---------------------------------------------------------------------------
\27\ Moody's Seasoned Aaa Corporate Bond Yield, average of 2021
monthly data. The Coast Guard uses the most recent year of complete
data. Moody's is taken from Moody's Investors Service, which is a
bond credit rating business of Moody's Corporation. Bond ratings are
based on creditworthiness and risk. The rating of ``Aaa'' is the
highest bond rating assigned with the lowest credit risk. See
https://fred.stlouisfed.org/series/AAA. (Downloaded March 4, 2022).
Table 33--Working Capital Fund Calculation for District Three
----------------------------------------------------------------------------------------------------------------
District Three
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $3,515,118 $961,028 $4,476,146
Total Target Pilot Compensation (Step 4)........................ 7,214,766 2,121,990 9,336,756
Total Target Apprentice Pilot Compensation (Step 4)............. 359,942 98,408 458,350
-----------------------------------------------
Total 2023 Expenses......................................... 11,089,826 3,181,425 14,271,252
----------------------------------------------------------------------------------------------------------------
Working Capital Fund (2.7%)..................................... 299,795 86,005 385,800
----------------------------------------------------------------------------------------------------------------
F. Step 6: Project Needed Revenue
In this step, the Coast Guard adds all the expenses accrued to
derive the total revenue needed for each area. These expenses include
the projected operating expenses (from Step 2), the total pilot
compensation (from Step 4), and the working capital fund contribution
(from Step 5). The calculations are shown in table 34.
Table 34--Revenue Needed for District Three
----------------------------------------------------------------------------------------------------------------
District Three
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $3,515,118 $961,028 $4,476,146
[[Page 12248]]
Total Target Pilot Compensation (Step 4)........................ 7,214,766 2,121,990 9,336,756
Total Target Apprentice Pilot Compensation (Step 4)............. 359,942 98,408 458,350
Working Capital Fund (Step 5)................................... 299,795 86,005 385,800
-----------------------------------------------
Total Revenue Needed........................................ 11,389,621 3,267,430 14,657,052
----------------------------------------------------------------------------------------------------------------
G. Step 7: Calculate Initial Base Rates
Having determined the revenue needed for each area in the previous
six steps, to develop an hourly rate, the Coast Guard divides that
number by the expected number of hours of traffic. Step 7 is a two-part
process. In the first part, the 10-year average of traffic in District
Three is calculated using the total time on task or pilot bridge hours.
To calculate the time on task for each district, the Coast Guard uses
billing data from SeaPro, pulling the data from the system filtering by
district, year, job status (including only processed jobs), and
flagging code (including only U.S. jobs). Because separate figures for
designated and undesignated waters are calculated, there are two parts
for each calculation, as shown in table 35.
Table 35--Time on Task for District Three
[Hours]
------------------------------------------------------------------------
District Three
Year ----------------------------
Undesignated Designated
------------------------------------------------------------------------
2021....................................... 18,286 2,516
2020....................................... 23,678 3,520
2019....................................... 24,851 3,395
2018....................................... 19,967 3,455
2017....................................... 20,955 2,997
2016....................................... 23,421 2,769
2015....................................... 22,824 2,696
2014....................................... 25,833 3,835
2013....................................... 17,115 2,631
2012....................................... 15,906 2,163
----------------------------
Average................................ 21,284 2,998
------------------------------------------------------------------------
Next, the Coast Guard derives the initial hourly rate by dividing
the revenue needed by the average number of hours for each area. This
produces an initial rate, which is necessary to produce the revenue
needed for each area, assuming the amount of traffic is as expected.
The calculations for District Three are set forth in table 36.
Table 36--Initial Rate Calculations for District Three
------------------------------------------------------------------------
Undesignated Designated
------------------------------------------------------------------------
Revenue needed (Step 6)................. $11,389,621 $3,267,430
Average time on task (hours)............ 21,284 2,998
Initial rate............................ $535 $1,090
------------------------------------------------------------------------
H. Step 8: Calculate Average Weighting Factors by Area
In this step, the Coast Guard calculates the average weighting
factor for each designated and undesignated area by first collecting
the weighting factors, set forth in 46 CFR 401.400, for each vessel
trip. Using this database, the Coast Guard calculates the average
weighting factor for each area using the data from each vessel transit
from 2014 onward, as shown in tables 37 and 38.
Table 37--Average Weighting Factor for District Three, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits
----------------------------------------------------------------------------------------------------------------
Area 6:
Class 1 (2014).............................................. 45 1 45
Class 1 (2015).............................................. 56 1 56
Class 1 (2016).............................................. 136 1 136
Class 1 (2017).............................................. 148 1 148
Class 1 (2018).............................................. 103 1 103
Class 1 (2019).............................................. 173 1 173
Class 1 (2020).............................................. 4 1 4
Class 1 (2021).............................................. 8 1 8
Class 2 (2014).............................................. 274 1.15 315
Class 2 (2015).............................................. 207 1.15 238
Class 2 (2016).............................................. 236 1.15 271
Class 2 (2017).............................................. 264 1.15 304
Class 2 (2018).............................................. 169 1.15 194
Class 2 (2019).............................................. 279 1.15 321
Class 2 (2020).............................................. 332 1.15 382
Class 2 (2021).............................................. 273 1.15 314
Class 3 (2014).............................................. 15 1.3 20
[[Page 12249]]
Class 3 (2015).............................................. 8 1.3 10
Class 3 (2016).............................................. 10 1.3 13
Class 3 (2017).............................................. 19 1.3 25
Class 3 (2018).............................................. 9 1.3 12
Class 3 (2019).............................................. 9 1.3 12
Class 3 (2020).............................................. 4 1.3 5
Class 3 (2021).............................................. 5 1.3 7
Class 4 (2014).............................................. 394 1.45 571
Class 4 (2015).............................................. 375 1.45 544
Class 4 (2016).............................................. 332 1.45 481
Class 4 (2017).............................................. 367 1.45 532
Class 4 (2018).............................................. 337 1.45 489
Class 4 (2019).............................................. 334 1.45 484
Class 4 (2020).............................................. 339 1.45 492
Class 4 (2021).............................................. 356 1.45 516
-----------------------------------------------
Total for Area 6........................................ 5,620 .............. 7,224
Area 8:
Class 1 (2014).............................................. 3 1 3
Class 1 (2015).............................................. 0 1 0
Class 1 (2016).............................................. 4 1 4
Class 1 (2017).............................................. 4 1 4
Class 1 (2018).............................................. 0 1 0
Class 1 (2019).............................................. 0 1 0
Class 1 (2020).............................................. 1 1 1
Class 1 (2021).............................................. 5 1 5
Class 2 (2014).............................................. 177 1.15 204
Class 2 (2015).............................................. 169 1.15 194
Class 2 (2016).............................................. 174 1.15 200
Class 2 (2017).............................................. 151 1.15 174
Class 2 (2018).............................................. 102 1.15 117
Class 2 (2019).............................................. 120 1.15 138
Class 2 (2020).............................................. 180 1.15 207
Class 2 (2021).............................................. 124 1.15 143
Class 3 (2014).............................................. 3 1.3 4
Class 3 (2015).............................................. 0 1.3 0
Class 3 (2016).............................................. 7 1.3 9
Class 3 (2017).............................................. 18 1.3 23
Class 3 (2018).............................................. 7 1.3 9
Class 3 (2019).............................................. 6 1.3 8
Class 3 (2020).............................................. 1 1.3 1
Class 3 (2021).............................................. 1 1.3 1
Class 4 (2014).............................................. 243 1.45 352
Class 4 (2015).............................................. 253 1.45 367
Class 4 (2016).............................................. 204 1.45 296
Class 4 (2017).............................................. 269 1.45 390
Class 4 (2018).............................................. 188 1.45 273
Class 4 (2019).............................................. 254 1.45 368
Class 4 (2020).............................................. 265 1.45 384
Class 4 (2021).............................................. 319 1.45 463
-----------------------------------------------
Total for Area 8........................................ 3,252 .............. 4342
----------------------------------------------------------------------------------------------------------------
Combined total...................................... 8,872 .............. 11,566
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits/number of transits). .............. 1.30 ..............
----------------------------------------------------------------------------------------------------------------
Table 38--Average Weighting Factor for District Three, Designated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits
----------------------------------------------------------------------------------------------------------------
Area 7:
Class 1 (2014).............................................. 27 1 27
Class 1 (2015).............................................. 23 1 23
Class 1 (2016).............................................. 55 1 55
Class 1 (2017).............................................. 62 1 62
Class 1 (2018).............................................. 47 1 47
Class 1 (2019).............................................. 45 1 45
Class 1 (2020).............................................. 15 1 15
Class 1 (2021).............................................. 15 1 15
[[Page 12250]]
Class 2 (2014).............................................. 221 1.15 254
Class 2 (2015).............................................. 145 1.15 167
Class 2 (2016).............................................. 174 1.15 200
Class 2 (2017).............................................. 170 1.15 196
Class 2 (2018).............................................. 126 1.15 145
Class 2 (2019).............................................. 162 1.15 186
Class 2 (2020).............................................. 218 1.15 251
Class 2 (2021).............................................. 131 1.15 151
Class 3 (2014).............................................. 15 1.3 20
Class 3 (2015).............................................. 0 1.3 0
Class 3 (2016).............................................. 6 1.3 8
Class 3 (2017).............................................. 14 1.3 18
Class 3 (2018).............................................. 6 1.3 8
Class 3 (2019).............................................. 3 1.3 4
Class 3 (2020).............................................. 1 1.3 1
Class 3 (2021).............................................. 2 1.3 3
Class 4 (2014).............................................. 321 1.45 465
Class 4 (2015).............................................. 245 1.45 355
Class 4 (2016).............................................. 191 1.45 277
Class 4 (2017).............................................. 234 1.45 339
Class 4 (2018).............................................. 225 1.45 326
Class 4 (2019).............................................. 308 1.45 447
Class 4 (2020).............................................. 336 1.45 487
Class 4 (2021).............................................. 258 1.45 374
-----------------------------------------------
Total................................................... 3,801 .............. 4970
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits/number of transits). .............. 1.31 ..............
----------------------------------------------------------------------------------------------------------------
I. Step 9: Calculate Revised Base Rates
In this step, the Coast Guard revises the base rates so that the
total cost of pilotage is equal to the revenue needed after considering
the impact of the weighting factors. To do this, the Coast Guard
divides the initial base rates calculated in Step 7 by the average
weighting factors calculated in Step 8, as shown in table 39.
Table 39--Revised Base Rates for District Three
----------------------------------------------------------------------------------------------------------------
Revised rate
Average (initial rate
Area Initial rate weighting average
(Step 7) factor (Step weighting
8) factor)
----------------------------------------------------------------------------------------------------------------
District Three: Undesignated.................................... $535 1.30 $410
District Three: Designated...................................... 1,090 1.31 834
----------------------------------------------------------------------------------------------------------------
J. Step 10: Review and Finalize Rates
In this step, the Director reviews the rates set forth by the
staffing model and ensures that they meet the goal of ensuring safe,
efficient, and reliable pilotage. To establish this, the Director
considers whether the rates incorporate appropriate compensation for
pilots to handle heavy traffic periods and whether there is a
sufficient number of pilots to handle those heavy traffic periods. The
Director also considers whether the rates will cover operating expenses
and infrastructure costs and takes average traffic and weighting
factors into consideration. Based on this information, the Director is
not issuing any alterations to the rates in this step. By means of this
rule, Sec. 401.405(a)(5) and (6) are modified to reflect the final
rates shown in table 40.
Table 40--Final Rates for District Three
----------------------------------------------------------------------------------------------------------------
Final 2022 Final 2023
Area Name pilotage rate pilotage rate
----------------------------------------------------------------------------------------------------------------
District Three: Designated.................... St. Mary's River................ $662 $834
District Three: Undesignated.................. Lakes Huron, Michigan, and 342 410
Superior.
----------------------------------------------------------------------------------------------------------------
VIII. Regulatory Analyses
The Coast Guard developed this rule after considering numerous
statutes and Executive orders related to rulemaking. Below, the Coast
Guard summarizes its analyses based on these statutes or Executive
orders.
[[Page 12251]]
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.
The Office of Management and Budget (OMB) has not designated this
rule a significant regulatory action under section 3(f) of Executive
Order 12866. A regulatory analysis follows.
The purpose of this rule is to establish new base pilotage rates,
as 46 U.S.C. 9303(f) requires that rates be established or reviewed and
adjusted each year. The statute also requires that base rates 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. The last full ratemaking was concluded in June
of 2018.\28\ For this ratemaking, the Coast Guard estimates an increase
in cost of approximately $5.17 million to industry. This is
approximately a 16-percent increase because of the change in revenue
needed in 2023 compared to the revenue needed in 2022.
---------------------------------------------------------------------------
\28\ Great Lakes Pilotage Rates--2018 Annual Review and
Revisions to Methodology (83 FR 26162), published June 5, 2018.
Table 41--Economic Impacts Due to Changes
----------------------------------------------------------------------------------------------------------------
Affected
Change Description population Costs Benefits
----------------------------------------------------------------------------------------------------------------
Rate changes.................... In accordance with Owners and Increase of New rates cover an
46 U.S.C. Chapter operators of 285 $5,172,200 due to association's
93, the Coast vessels change in revenue necessary and
Guard is required transiting the needed for 2023 reasonable
to review and Great Lakes ($37,659,195) operating
adjust base system annually, from revenue expenses.
pilotage rates 56 United States needed for 2022 Promotes safe,
annually. Great Lakes ($32,486,995) as efficient, and
pilots, 6 shown in table 42. reliable pilotage
apprentice service on the
pilots, and 3 Great Lakes.
pilotage Provides fair
associations. compensation,
adequate
training, and
sufficient rest
periods for
pilots.
Ensures the
association
receives
sufficient
revenues to fund
future
improvements.
----------------------------------------------------------------------------------------------------------------
The Coast Guard is required to review and adjust pilotage rates on
the Great Lakes annually. See section III of this preamble for detailed
discussions of the legal basis and purpose for this rulemaking. Based
on the annual review for this rulemaking, the Coast Guard is adjusting
the pilotage rates for the 2023 shipping season to generate sufficient
revenues for each district to reimburse its necessary and reasonable
operating expenses, fairly compensate properly trained and rested
pilots, and provide an appropriate working capital fund to use for
improvements. The result is an increase in rates for all areas in
District One, District Two, and District Three. These changes also lead
to a net increase in the cost of service to shippers. The change in
per-unit cost to each individual shipper is dependent on their area of
operation.
A detailed discussion of the economic impact analysis follows.
Affected Population
This rule affects United States Great Lakes pilots and apprentice
pilots, the 3 pilot associations, and the owners and operators of 285
oceangoing vessels that transit the Great Lakes annually on average
from 2019 to 2021. The Coast Guard estimates that there will be 56
registered pilots and 6 apprentice pilots during the 2023 shipping
season. The shippers affected by these rate changes are those owners
and operators of domestic vessels operating ``on register'' (engaged in
foreign trade) and owners and operators of non-Canadian foreign vessels
on routes 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. United States-flagged vessels not operating on register, and
Canadian ``lakers,'' which account for most commercial shipping on the
Great Lakes, are not required by 46 U.S.C. 9302 to have pilots.
However, these United States- and Canadian-flagged lakers may
voluntarily choose to engage a Great Lakes registered pilot. Vessels
that are U.S.-flagged may opt to have a pilot for varying reasons, such
as unfamiliarity with designated waters and ports, or for insurance
purposes.
The Coast Guard used billing information from the years 2019
through 2021 from the GLPMS to estimate the average annual number of
vessels affected by the rate adjustment. The GLPMS tracks data related
to managing and coordinating the dispatch of pilots on the Great Lakes,
and billing in accordance with the services. As described in Step 7 of
the ratemaking methodology, the Coast Guard uses a 10-year average to
estimate the traffic and used 3 years of the most recent billing data
to estimate the affected population. When 10 years of the most recent
billing data was reviewed, the Coast Guard found the data included
vessels that have not used pilotage services in recent years;
therefore, using 3 years of billing data is a better representation of
the vessel population that is currently using pilotage services and is
impacted by this rulemaking.
The Coast Guard found that 424 unique vessels used pilotage
services during the years 2019 through 2021. That is, these vessels had
a pilot dispatched to the vessel, and billing information was recorded
in the GLPMS or SeaPro. Of these vessels, 397 were foreign-flagged
vessels and 27 were U.S.-flagged vessels. As stated previously, U.S.-
flagged vessels not operating on register are not required to have a
registered pilot per 46 U.S.C. 9302, but they can voluntarily choose to
have one.
Numerous factors affect vessel traffic, which varies from year to
year. Therefore, rather than using the total number of vessels over the
time period, the Coast Guard took an average of the unique vessels
using pilotage services from the years 2019 through 2021 as the best
representation of vessels estimated to be affected by the rates in this
[[Page 12252]]
rulemaking. From 2019 through 2021, an average of 285 vessels used
pilotage services annually.\29\ On average, 273 of these vessels were
foreign-flagged and 12 were U.S.-flagged vessels that voluntarily opted
into the pilotage service (these figures are rounded averages).
---------------------------------------------------------------------------
\29\ Some vessels entered the Great Lakes multiple times in a
single year, affecting the average number of unique vessels using
pilotage services in any given year.
---------------------------------------------------------------------------
Total Cost to Shippers
The rate changes resulting from this adjustment to the rates result
in a net increase in the cost of service to shippers. However, the
change in per unit cost to each individual shipper is dependent on
their area of operation.
The Coast Guard estimates the effect of the rate changes on
shippers by comparing the total projected revenues needed to cover
costs in 2022 with the total projected revenues to cover costs in 2023.
The Coast Guard sets pilotage rates so that pilot associations receive
enough revenue to cover their necessary and reasonable expenses.
Shippers pay these rates when they engage a pilot as required by 46
U.S.C. 9302. Therefore, the aggregate payments of shippers to pilot
associations are equal to the projected necessary revenues for pilot
associations. The revenues each year represent the total costs that
shippers must pay for pilotage services. The change in revenue from the
previous year is the additional cost to shippers discussed in this
rule.
The impacts of the rate changes on shippers are estimated from the
district pilotage projected revenues (shown in tables 10, 22, and 34 of
this preamble). The Coast Guard estimates that for the 2023 shipping
season, the projected revenue needed for all three districts is
$37,659,195.
To estimate the change in cost to shippers from this rule, the
Coast Guard compared the 2023 total projected revenues to the 2022
projected revenues. Because the Coast Guard reviews and prescribes
rates for Great Lakes pilotage annually, the effects are estimated as a
single-year cost rather than annualized over a 10-year period. In the
2022 rulemaking, the total projected revenue needed for 2022 is
estimated as $32,486,994.\30\ This is the best approximation of 2022
revenues, as, at the time of publication of this rule, the Coast Guard
does not have enough audited data available for the 2022 shipping
season to revise these projections. Table 42 shows the revenue
projections for 2022 and 2023 and details the additional cost increases
to shippers by area and district as a result of the rate changes on
traffic in Districts One, Two, and Three.
---------------------------------------------------------------------------
\30\ 87 FR 18488, see table 42. https://www.govinfo.gov/content/pkg/FR-2022-03-30/pdf/2022-06394.pdf.
Table 42--Effect of the Rule by Area and District
[U.S. dollars; non-discounted]
----------------------------------------------------------------------------------------------------------------
Additional
Area Revenue needed Revenue needed costs of this
in 2022 in 2023 rule
----------------------------------------------------------------------------------------------------------------
Total, District One............................................. $11,791,695 $12,609,601 $817,906
Total, District Two............................................. 8,786,882 10,392,542 1,605,660
Total, District Three........................................... 11,908,418 14,657,052 2,748,633
-----------------------------------------------
System Total................................................ 32,486,995 37,659,195 5,172,199
----------------------------------------------------------------------------------------------------------------
Note: All figures are rounded to the nearest dollar and may not sum.
The resulting difference between the projected revenue in 2022 and
the projected revenue in 2023 is the annual change in payments from
shippers to pilots as a result of the rate changes by this rule. The
effect of the rate changes to shippers will vary by area and district.
After taking into account the change in pilotage rates, the rate
changes will lead to affected shippers operating in District One
experiencing an increase in payments of $817,906 over the previous
year. District Two and District Three will experience an increase in
payments of $1,605,660 and $2,748,633, respectively, when compared with
2022. The overall adjustment in payments will be an increase in
payments by shippers of $5,172,199 across all three districts (a 16-
percent increase when compared with 2022). Again, because the Coast
Guard reviews and sets rates for Great Lakes pilotage annually, the
impacts are estimated as single-year costs rather than being annualized
over a 10-year period.
Table 43 shows the difference in revenue by revenue-component from
2022 to 2023 and presents each revenue-component as a percentage of the
total revenue needed. In both 2022 and 2023, the largest revenue-
component was pilotage compensation (63 percent of total revenue needed
in 2022, and 63 percent of total revenue needed in 2023), followed by
operating expenses (31 percent of total revenue needed in 2022, and 32
percent of total revenue needed in 2023).
Table 43--Difference in Revenue by Revenue-Component
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percentage of Percentage of Difference (2023 Percentage
Revenue component Revenue needed total revenue Revenue needed total revenue revenue- 2022 change from
in 2022 needed in 2022 in 2023 needed in 2023 revenue) previous year
--------------------------------------------------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses........................... $10,045,658 31 $11,984,950 32 $1,939,292 19
Total Target Pilot Compensation....................... 20,362,566 63 23,766,288 63 3,403,722 17
Total Target Apprentice Pilot Compensation............ 1,293,622 4 916,700 2 (376,922) (29)
Working Capital Fund.................................. 785,149 2 991,257 3 206,108 26
-------------------------------------------------------------------------------------------------
Total Revenue Needed.............................. 32,486,995 100 37,659,195 100 5,172,199 16
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: All figures are rounded to the nearest dollar and may not sum.
[[Page 12253]]
As stated above, the Coast Guard estimates that there will be a
total increase in revenue needed by the pilot associations of
$5,172,200. This represents an increase in revenue needed for target
pilot compensation of $3,403,722, a decrease in revenue needed for
total apprentice pilot wage benchmark of ($376,922), an increase in the
revenue needed for adjusted operating expenses of $1,939,292, and an
increase in the revenue needed for the working capital fund of
$206,108. Of the $5,172,200 total change in revenue, $1,461,677 (28
percent) results from changes in inflation, $2,052,118 (40 percent)
results from changes in the number of pilots, ($443,258) (-9 percent)
results from the decrease in the number of apprentice pilots, and
$2,101,662 (41 percent) results from other changes in traffic.
The change in revenue needed for pilot compensation, $3,403,722, is
due to three factors: (1) The changes to adjust 2022 pilotage
compensation to account for the difference between actual ECI inflation
\31\ (5.7 percent) and predicted PCE inflation \32\ (2.2 percent) for
2022; (2) an increase of two pilots in District Two and three pilots in
District Three compared to 2022; and (3) projected inflation of
pilotage compensation in Step 2 of the methodology, using predicted
inflation through 2024.
---------------------------------------------------------------------------
\31\ Employment Cost Index, Total Compensation for Private
Industry workers in Transportation and Material Moving, Annual
Average, Series ID: CIU2010000520000A. Accessed September 29, 2022.
https://www.bls.gov/news.release/eci.t05.htm.
\32\ Table 1 Summary of Economic Projections, PCE Inflation June
Projection. Accessed September, 2022 https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220921.pdf.
---------------------------------------------------------------------------
The target compensation is $424,398 per pilot in 2023, compared to
$399,266 in 2022. The changes to modify the 2022 pilot compensation to
account for the difference between predicted and actual inflation will
increase the 2022 target compensation value by 3.5 percent. As shown in
table 44, this inflation adjustment increases total compensation by
$13,974 per pilot, and the total revenue needed by $782,561 when
accounting for all 56 pilots.
Table 44--Change in Revenue Resulting From the Change to Inflation of
Pilot Compensation Calculation in Step 4
------------------------------------------------------------------------
------------------------------------------------------------------------
2022 Target Pilot Compensation.......................... $399,266
Adjusted 2022 Compensation ($399,266 x 1.035)........... 413,240
Difference between Adjusted Target 2022 Compensation and 13,974
Target 2022 Compensation ($413,240-$399,266)...........
Increase in total Revenue for 56 Pilots ($13,974 x 56).. 782,561
------------------------------------------------------------------------
Note: All figures are rounded to the nearest dollar and may not sum.
Similarly, table 45 shows the impact of the difference between
predicted and actual inflation on the target apprentice pilot
compensation benchmark. The inflation adjustment increases the
compensation benchmark by $5,031 per apprentice pilot, and the total
revenue needed by $30,185 when accounting for all 6 apprentice pilots.
Table 45--Change in Revenue Resulting From the Change to Inflation of
Apprentice Pilot Compensation Calculation in Step 4
------------------------------------------------------------------------
------------------------------------------------------------------------
Target Apprentice Pilot Compensation.................... $143,736
Adjusted Compensation ($143,736 x 1.035)................ 148,767
Difference between Adjusted Target Compensation and 5,031
Target Compensation ($148,767-$143,736)................
Increase in total Revenue for Apprentices ($5,031 x 6).. 30,185
------------------------------------------------------------------------
Note: All figures are rounded to the nearest dollar and may not sum.
As noted earlier, the Coast Guard predicts that 56 pilots will be
needed for the 2023 season. This will be an increase of five pilots
compared to the 2022 season. The difference reflects an increase of two
pilots in District Two and three pilots in District Three. Table 46
shows the increase of $2,052,118 in revenue needed solely for pilot
compensation. As noted previously, to avoid double counting, this value
excludes the change in revenue resulting from the change to adjust 2022
pilotage compensation to account for the difference between actual and
predicted inflation.
Table 46--Change in Revenue Resulting From Increase of Five Pilots
------------------------------------------------------------------------
------------------------------------------------------------------------
2023 Target Compensation................................ $424,398
Total Number of New Pilots.............................. 5
Total Cost of New Pilots ($424,398 x 5)................. $2,121,990
Difference between Adjusted Target 2022 Compensation and $13,974
Target 2022 Compensation ($413,240-$399,266)...........
Increase in total Revenue for 5 Pilots ($13,974 x 5).... $69,872
Net Increase in total Revenue for 5 Pilots ($2,121,990- $2,052,118
$69,872)...............................................
------------------------------------------------------------------------
Note: All figures are rounded to the nearest dollar and may not sum.
[[Page 12254]]
Similarly, the Coast Guard predicts that six apprentice pilots will
be needed for the 2023 season. This will be a decrease of three
apprentices from the 2022 season. The difference reflects a decrease of
one apprentice for District Two and two apprentices for District Three.
Table 47 shows the decrease of ($443,258) in revenue needed solely for
apprentice pilot compensation. As noted previously, to avoid double
counting, this value excludes the change in revenue resulting from the
change to adjust 2022 apprentice pilotage compensation to account for
the difference between actual and predicted inflation.
---------------------------------------------------------------------------
\33\ The 2022 projected revenues are from the Great Lakes
Pilotage Rate--2022 Annual Review and Revisions to Methodology final
rule (86 FR 14184), tables 9, 21, and 33. The 2023 projected
revenues are from tables 10, 22, and 34 of this final rule.
Table 47--Change in Revenue Resulting From Decrease of Three Apprentices
------------------------------------------------------------------------
------------------------------------------------------------------------
2023 Apprentice Target Compensation..................... $152,783
Total Number of New Apprentices......................... (3)
Total Cost of New Apprentices ($152,783 x -3)........... ($458,350)
Difference between Adjusted Target 2022 Compensation and $5,031
Target 2022 Compensation ($148,767-$143,736)...........
Increase in total Revenue for -3 Apprentices ($5,031 [x - ($15,092)
3).....................................................
Net Increase in total Revenue for -3 Apprentices (- ($443,258)
$458,350--$15,092).....................................
------------------------------------------------------------------------
Note: All figures are rounded to the nearest dollar and may not sum.
Another increase, $624,831, will be the result of increasing
compensation for the 56 pilots to account for future inflation of 2.7
percent in 2023. This will increase total compensation by $11,158 per
pilot.
Table 48--Change in Revenue Resulting From Inflating 2022 Compensation
to 2023
------------------------------------------------------------------------
------------------------------------------------------------------------
Adjusted 2022 Compensation.............................. $413,240
2023 Target Compensation ($413,240 x 1.027)............. 424,398
Difference between Adjusted 2022 Compensation and Target 11,158
2023 Compensation $424,398-$413,240)...................
Increase in total Revenue for 56 Pilots ($11,158 x 56).. 624,831
------------------------------------------------------------------------
Note: All figures are rounded to the nearest dollar and may not sum.
Similarly, an increase of $24,101 will be the result of increasing
compensation for the 6 apprentice pilots to account for future
inflation of 2.7 percent in 2023. This will increase total compensation
by $4,017 per apprentice pilot, as shown in table 49.
Table 49--Change in Revenue Resulting From Inflating 2022 Apprentice
Pilot Compensation to 2023
------------------------------------------------------------------------
------------------------------------------------------------------------
Adjusted 2022 Compensation.............................. $148,767
2023 Target Compensation ($424,398 x 36%)............... 152,783
Difference between Adjusted Compensation and Target 4,017
Compensation $152,783-$148,767)........................
Increase in total Revenue for 6 Apprentices ($4,017 x 6) 24,101
------------------------------------------------------------------------
Note: All figures are rounded to the nearest dollar and may not sum.
Table 50 presents the percentage change in revenue by area and
revenue-component, excluding surcharges, as they are applied at the
district level.\33\
[[Page 12255]]
Table 50--Difference in Revenue by Revenue-Component and Area
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Adjusted operating expenses Total target pilot compensation Total target apprentice pilot Working capital fund Total revenue needed
------------------------------------------------------------------------ compensation -----------------------------------------------------------------------
------------------------------------
2022 2023 Percentage 2022 2023 Percentage Percentage 2022 2023 Percentage 2022 2023 Percentage
change change 2022 2023 change change change
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
District One: Designated............................ $2,419,401 $2,599,777 7 $4,165,143 $4,243,980 2 $172,483 $183,340 6.3 $163,077 $189,966 16 $6,747,621 $7,217,063 7.0
District One: Undesignated.......................... 1,613,051 1,733,186 7 3,309,117 3,395,184 3 114,989 122,227 6.3 121,906 141,941 16 5,044,074 5,392,538 6.9
District Two: Undesignated.......................... 1,078,929 1,270,338 18 3,366,611 4,243,980 26 172,483 61,113 (64.6) 110,101 150,722 37 4,555,641 5,726,153 25.7
District Two: Designated............................ 1,618,395 1,905,503 18 2,510,585 2,546,388 1 114,989 91,670 (20.3) 102,261 122,828 20 4,231,241 4,666,389 10.3
District Three: Undesignated........................ 2,603,961 3,515,118 35 6,556,746 7,214,766 10 567,756 359,942 (37) 226,880 299,795 32 9,387,588 11,389,621 21.3
District Three: Designated.......................... 711,920 961,028 35 1,747,987 2,121,990 21 150,923 98,408 (35) 60,924 86,005 41 2,520,831 3,267,430 29.6
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: All figures are rounded to the nearest dollar and may not sum.
[[Page 12256]]
Benefits
This rule allows the Coast Guard to meet the requirements in 46
U.S.C. 9303 to review the rates for pilotage services on the Great
Lakes. The rate changes promote safe, efficient, and reliable pilotage
service on the Great Lakes by (1) ensuring that rates cover an
association's operating expenses, (2) providing fair pilot
compensation, adequate training, and sufficient rest periods for
pilots, and (3) ensuring pilot associations produce enough revenue to
fund future improvements. The rate changes also help recruit and retain
pilots, which ensures a sufficient number of pilots to meet peak
shipping demand, helping to reduce delays caused by pilot shortages.
B. Small Entities
Under the Regulatory Flexibility Act, 5 U.S.C. 601-612, the Coast
Guard has considered whether this rule will 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.
For the rule, the Coast Guard reviewed recent company size and
ownership data for the vessels identified in the GLPMS, and we reviewed
business revenue and size data provided by publicly available sources
such as ReferenceUSA.\34\ As described in section VIII.A of this
preamble, the Coast Guard found that 285 unique vessels used pilotage
services on average during the years 2019 through 2021. These vessels
are owned by 59 entities, of which 44 are foreign entities that operate
primarily outside the United States, and the remaining 15 entities are
U.S. entities. The Coast Guard compared the revenue and employee data
found in the company search to the Small Business Administration's
(SBA) small business threshold as defined in the SBA's ``Table of Size
Standards'' for small businesses to determine how many of these
companies are considered small entities.\35\ Table 51 shows the North
American Industry Classification System (NAICS) codes of the U.S.
entities and the small entity standard size established by the SBA.
---------------------------------------------------------------------------
\34\ See https://resource.referenceusa.com/.
\35\ See https://www.sba.gov/document/support--table-size-standards. SBA has established a ``Table of Size Standards'' for
small businesses that sets small business size standards by NAICS
code. A size standard, which is usually stated in number of
employees or average annual receipts (``revenues''), represents the
largest size that a business (including its subsidiaries and
affiliates) may be in order to remain classified as a small business
for SBA and Federal contracting programs. Accessed April 2022.
Table 51--NAICS Codes and Small Entities Size Standards
------------------------------------------------------------------------
Small entity size
NAICS Description standard
------------------------------------------------------------------------
238910............. Site Preparation $16,500,000.
Contractors.
423860............. Transportation Equipment 150 Employees.
And Supplies.
425120............. Wholesale Trade Agents 100 Employees.
And Brokers.
483212............. Inland Water Passenger 500 Employees.
Transportation.
484230............. Specialized Freight $30,000.
(Except Used Goods)
Trucking.
488330............. Navigational Services to $41,500,000.
Shipping.
561510............. Travel Agencies......... $22,000,000.
561599............. All Other Travel $22,000,000.
Arrangement And
Reservation Services.
713930............. Marinas................. $8,000,000.
813910............. Business Associations... $8,000,000.
------------------------------------------------------------------------
Of the 15 U.S. entities, 8 exceed the SBA's small business
standards for small entities. To estimate the potential impact on the
seven small entities, the Coast Guard used their 2021 invoice data to
estimate their pilotage costs in 2023. Of the seven small entities,
from 2019 to 2021, only five used pilotage services in 2021. The Coast
Guard increased their 2021 costs to account for the changes in pilotage
rates resulting from this rule and the Great Lakes Pilotage Rates--2021
Annual Review and Revisions to Methodology final rule (86 FR 14184).
The Coast Guard estimated the change in cost to these entities
resulting from this rule by subtracting their estimated 2022 pilotage
costs from their estimated 2023 pilotage costs and found the average
costs to small firms will be approximately $29,311, with a range of
$810 to $109,314. The estimated change in pilotage costs between 2022
and 2023 was then compared with each firm's annual revenue. In all but
one case, the impact of the change in estimated pilotage expenses were
below 1 percent of revenues. For one uniquely small entity, the change
in impact will be 4.19 percent of revenues, as this entity reports
revenue approximately 10 times less than the next largest small entity.
In addition to the owners and operators discussed previously, three
U.S. entities that receive revenue from pilotage services will be
affected by this rule. These are the three pilot associations that
provide and manage pilotage services within the Great Lakes districts.
These associations are designated with the same NAICS code as Business
Associations \36\ with a small-entity size standard of $8,000,000.
Based on the reported revenues from audit reports, none of the
associations qualify as small entities.
---------------------------------------------------------------------------
\36\ In previous rulemakings, the associations used a different
NAICS code, 483212 Inland Water Passenger Transportation, which had
a size standard of 500 employees and, therefore, designated the
associations as small entities. The change in NAICS code comes from
an update to the association's ReferenceUSA profile in February
2022.
---------------------------------------------------------------------------
Finally, the Coast Guard did not find any small not-for-profit
organizations that are independently owned and operated and are not
dominant in their fields that will be impacted by this rule. The Coast
Guard also did not find any small governmental jurisdictions with
populations of fewer than 50,000 people that will be impacted by this
rule. Based on this analysis, the Coast Guard concludes this rulemaking
will not affect a substantial number of small entities, nor have a
significant economic impact on any of the affected entities.
Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that
this rule will not have a significant economic impact on a substantial
number of small entities.
C. Assistance for Small Entities
Under section 213(a) of the Small Business Regulatory Enforcement
Fairness Act of 1996, Public Law 104-121, the Coast Guard offers 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).
[[Page 12257]]
D. Collection of Information
This rule calls for no new collection of information nor does it
revise an existing collection of information under the Paperwork
Reduction Act of 1995, 44 U.S.C. 3501-3520.
E. Federalism
A rule has implications for federalism under Executive Order 13132
(Federalism) if it has a substantial direct effect on 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. The Coast Guard has analyzed this rule under Executive
Order 13132 and determined that it is consistent with the fundamental
federalism principles and preemption requirements described in
Executive Order 13132. Our analysis follows.
Congress directed the Coast Guard to establish ``rates and charges
for pilotage services.'' See 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 fundamental
federalism principles and preemption requirements described in
Executive Order 13132.
While it is well settled that States may not regulate in categories
in which Congress intended the Coast Guard to be the sole source of a
vessel's obligations, the Coast Guard recognizes the key role that
State and local governments may have in making regulatory
determinations. Additionally, for rules with federalism implications
and preemptive effect, Executive Order 13132 specifically directs
agencies to consult with State and local governments during the
rulemaking process. If you believe this rule will have implications for
federalism under Executive Order 13132, please call or email the person
listed in the FOR FURTHER INFORMATION CONTACT section of this preamble.
F. Unfunded Mandates
The Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1531-1538,
requires Federal agencies to assess the effects of their discretionary
regulatory actions. In particular, the Act addresses actions that may
result in the expenditure by a State, local, or Tribal government, in
the aggregate, or by the private sector of $100,000,000 (adjusted for
inflation) or more in any one year. Although this rule will not result
in such expenditure, the effects of this rule are discussed 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 Executive Order 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 Executive Order 12988 (Civil Justice Reform) to minimize litigation,
eliminate ambiguity, and reduce burden.
I. Protection of Children
The Coast Guard has analyzed this rule under Executive Order 13045
(Protection of Children from Environmental Health Risks and Safety
Risks). This rule is not an economically significant rule and will 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 Executive Order
13175 (Consultation and Coordination with Indian Tribal Governments),
because it will 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
The Coast Guard has analyzed this rule under Executive Order 13211
(Actions Concerning Regulations That Significantly Affect Energy
Supply, Distribution, or Use) and have determined that it is not a
``significant energy action'' under that order because it is not a
``significant regulatory action'' under Executive Order 12866 and is
not likely to have a significant adverse effect on the supply,
distribution, or use of energy.
L. Technical Standards
The National Technology Transfer and Advancement Act, codified as a
note to 15 U.S.C. 272, directs agencies to use voluntary consensus
standards in their regulatory activities unless the agency provides
Congress, through OMB, with an explanation of why using these standards
will 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, the Coast
Guard did not consider the use of voluntary consensus standards.
M. Environment
The Coast Guard has analyzed this rule under Department of Homeland
Security Management Directive 023-01, Rev. 1, associated implementing
instructions, and Environmental Planning COMDTINST 5090.1 (series),
which guide the Coast Guard in complying with the National
Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have made
a determination that this action is one of a category of actions that
do not individually or cumulatively have a significant effect on the
human environment. A Record of Environmental Consideration supporting
this determination is available in the docket. For instructions on
locating the docket, see the ADDRESSES section of this preamble. This
rule is categorically excluded under paragraphs A3 and L54 of Appendix
A, Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. Paragraph
A3 pertains to the promulgation of rules of the following nature: (a)
those of a strictly administrative or procedural nature; (b) those that
implement, without substantive change, statutory or regulatory
requirements; (c) those that implement, without substantive change,
procedures, manuals, and other guidance documents; (d) those that
interpret or amend an existing regulation without changing its
environmental effect; (e) those that provide technical guidance on
safety and security matters; and (f) those that provide guidance for
the preparation of security plans. Paragraph L54 pertains to
regulations which are editorial or procedural.
This rule involves setting or adjusting the pilotage rates for the
2023 shipping season to account for changes in district operating
expenses, changes in the number of pilots, and anticipated inflation.
These changes are consistent with, and promote, the Coast Guard's
maritime safety mission.
[[Page 12258]]
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 is
amending 46 CFR part 401 as follows:
PART 401--GREAT LAKES PILOTAGE REGULATIONS
0
1. The authority citation for part 401 is revised to read as follows:
Authority: 46 U.S.C. 2103, 2104(a), 6101, 7701, 8105, 9303,
9304; DHS Delegation No. 00170.1, Revision No. 01.3, paragraphs
(II)(92)(a), (d), (e), (f).
0
2. Amend Sec. 401.405 by revising paragraphs (a)(1) through (6) to
read as follows:
Sec. 401.405 Pilotage rates and charges.
(a) * * *
(1) The St. Lawrence River is $876;
(2) Lake Ontario is $586;
(3) Lake Erie is $704;
(4) The navigable waters from Southeast Shoal to Port Huron, MI is
$601;
(5) Lakes Huron, Michigan, and Superior is $410; and
(6) The St. Mary's River is $834.
* * * * *
Dated: February 8, 2023.
W.R. Arguin,
Rear Admiral, U.S. Coast Guard, Assistant Commandant for Prevention
Policy.
[FR Doc. 2023-03212 Filed 2-24-23; 8:45 am]
BILLING CODE 9110-04-P
