Great Lakes Pilotage Rates-2024 Annual Review, 55629-55660 [2023-17474]
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Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Proposed Rules
IV. Basis and Purpose
V. Background
VI. Summary of the Ratemaking Methodology
VII. Historic Methodological and Other
Changes
VIII. Individual Target Pilot Compensation
Benchmark
IX. Discussion of Proposed Rate Adjustments
requests for guidance or clarification,
and requests for adjustment or
exception shall be addressed to the
Administration for Strategic
Preparedness and Response, U.S.
Department of Health and Human
Services, Washington, DC 20201. Ref:
HRPAS, or email aspr.dpa@hhs.gov.
District One
Dated: July 24, 2023.
Xavier Becerra,
Secretary, U.S. Department of Health, and
Human Services.
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
[FR Doc. 2023–15952 Filed 8–15–23; 8:45 am]
BILLING CODE 4150–37–P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
46 CFR Part 401
[Docket No. USCG–2023–0438]
RIN 1625–AC89
Great Lakes Pilotage Rates—2024
Annual Review
Coast Guard, DHS.
Notice of proposed rulemaking.
AGENCY:
ACTION:
In accordance with the
statutory provisions enacted by the
Great Lakes Pilotage Act of 1960, the
Coast Guard is proposing new pilotage
rates for the 2024 shipping season. The
Coast Guard estimates that this
proposed rule would result in
approximately a 5-percent increase in
operating costs compared to the 2023
season.
SUMMARY:
Comments and related material
must be received by the Coast Guard on
or before September 15, 2023.
ADDRESSES: You may submit comments
identified by docket number USCG–
2023–0438 using the Federal Decision
Making Portal at www.regulations.gov.
See the ‘‘Public Participation and
Request for Comments’’ portion of the
SUPPLEMENTARY INFORMATION section for
further instructions on submitting
comments.
DATES:
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.
SUPPLEMENTARY INFORMATION:
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FOR FURTHER INFORMATION CONTACT:
Table of Contents for Preamble
I. Public Participation and Request for
Comments
II. Abbreviations
III. Executive Summary
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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
X. 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
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I. Public Participation and Request for
Comments
The Coast Guard views public
participation as essential to effective
rulemaking and will consider all
comments and material received during
the comment period. Your comment can
help shape the outcome of this
rulemaking. If you submit a comment,
please include the docket number for
this rulemaking, indicate the specific
section of this document to which each
comment applies, and provide a reason
for each suggestion or recommendation.
Submitting comments. We encourage
you to submit comments through the
Federal Decision Making Portal at
www.regulations.gov. To do so, go to
www.regulations.gov, type USCG–2023–
0438 in the search box and click
‘‘Search.’’ Next, look for this document
in the Search Results column, and click
on it. Then click on the Comment
option. If you cannot submit your
material by using www.regulations.gov,
call or email the person in the FOR
FURTHER INFORMATION CONTACT section of
this proposed rule for alternate
instructions.
Viewing material in docket. To view
documents mentioned in this proposed
rule as being available in the docket,
find the docket as described in the
previous paragraph, and then select
‘‘Supporting & Related Material’’ in the
Document Type column. Public
comments will also be placed in our
online docket and can be viewed by
following instructions on the
www.regulations.gov Frequently Asked
Questions web page. This web page also
explains how to subscribe for email
alerts that will notify you when
comments are posted or if a final rule is
published. We review all comments
received, but we will only post
comments that address the topic of the
proposed rule. We may choose not to
post off-topic, inappropriate, or
duplicate comments that we receive.
Personal information. We accept
anonymous comments. Comments we
post to www.regulations.gov will
include any personal information you
have provided. For more about privacy
and submissions to the docket in
response to this document, see DHS’s
eRulemaking System of Records notice
(85 FR 14226, March 11, 2020).
Public meeting. We do not plan to
hold a public meeting, but we will
consider doing so if we determine from
public comments that a meeting would
be helpful. We would issue a separate
Federal Register notice to announce the
date, time, and location of such a
meeting.
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Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Proposed Rules
II. Abbreviations
2023 final rule Great Lakes Pilotage Rates—
2023 Annual Ratemaking and Review of
Methodology final rule
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
U.S.C. United States Code
WGLPA Western Great Lakes Pilots
Association
III. 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 2024 season range
from a proposed $413 to $925 per pilot
hour (depending on which of the
specific 6 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.
In accordance with statutory and
regulatory requirements, the Coast
Guard employs the ratemaking
methodology introduced in 2016 and
finalized in 2023. 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 section
VI., Summary of the Ratemaking
Methodology, in the preamble to this
proposed rule.
In this notice of proposed rulemaking
(NPRM), we are conducting our annual
review and interim adjustment to the
base pilotage rates for 2024. The Coast
Guard last conducted a full ratemaking
in 2023, with the ‘‘Great Lakes Pilotage
Rates—2023 Annual Ratemaking and
Review of Methodology’’ final rule
(hereafter the ‘‘2023 final rule’’) (88 FR
12226, published February 27, 2023).2
Per title 46 of the Code of Federal
Regulations (CFR), section 404.100(b),
via this NPRM, the Coast Guard’s
Director of the Great Lakes Pilotage
(‘‘the Director’’) proposes to establish
base pilotage rates by an interim
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 caused by unexpected
events, such as those caused by the
COVID–19 pandemic. The Coast Guard
estimates that this proposed rule would
result in $1,914,438 of additional costs.
This represents an increase in revenue
needed for target pilot compensation, an
increase in revenue needed for the total
apprentice pilot wage benchmark, an
increase in the revenue needed for
adjusted operating expenses, and an
increase in the revenue needed for the
working capital fund.
Based on the ratemaking model
discussed in this NPRM, the Coast
Guard is proposing the rates shown in
table 1.
TABLE 1—CURRENT AND PROPOSED 2024 PILOTAGE RATES ON THE GREAT LAKES
Area
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District
District
District
District
District
District
One: Designated .......................................
One: Undesignated ...................................
Two: Designated .......................................
Two: Undesignated ...................................
Three: Designated ....................................
Three: Undesignated ................................
This proposed rule would affect 56
U.S. Great Lakes pilots, 7 apprentice
pilots, 3 pilot associations, and the
owners and operators of an average of
277 oceangoing vessels that transit the
Great Lakes annually. This proposed
rule is not economically significant
under Executive Order 12866 and
would not affect the Coast Guard’s
1 46
U.S.C. 9301–9308.
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Final 2023
pilotage rate
Name
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 .................................
budget or increase Federal spending.
The estimated overall annual regulatory
economic impact of this rate change
would be a net increase of $1,914,438 in
estimated payments made by shippers
during the 2024 shipping season. This
proposed rule would establish the 2024
yearly target compensation for pilots on
the Great Lakes at $442,403 per pilot (a
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$925
606
660
586
805
413
$18,005 increase, or 4.24 percent, over
their 2023 target compensation).
Because the Coast Guard must review,
and, if necessary, adjust rates each year,
we analyze these as single-year costs
and do not annualize them over 10
years. Section X., Regulatory Analyses,
in this preamble provides the regulatory
impact analyses of this proposed rule.
2 https://www.govinfo.gov/content/pkg/FR-202302-27/pdf/2023-03212.pdf (last visited 5/12/2023).
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$876
586
601
704
834
410
Proposed
2024 pilotage
rate
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Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Proposed Rules
IV. Basis and Purpose
The legal basis of this rulemaking is
46 U.S.C. Chapter 93,3 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.4
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.’’ 5 The statute
requires that rates be established or
reviewed and adjusted each year, no
later than March 1.6 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.7 The
Secretary’s duties and authority under
46 U.S.C. Chapter 93 have generally
been delegated to the Coast Guard.8
Each pilot association is an
independent business and is the sole
provider of pilotage services in its
district of operation. Each pilot
association is responsible for funding its
own operating expenses, maintaining
infrastructure, compensating pilots and
apprentice pilots,9 acquiring and
implementing technological advances,
and training personnel and partners.
The Coast Guard uses a 10-step
ratemaking methodology to derive a
pilotage rate, based on the estimated
amount of traffic, which covers these
expenses.10 The methodology is
designed to measure how much revenue
3 46
U.S.C. 9301–9308.
U.S.C. 9302(a)(1).
5 46 U.S.C. 9303(f).
6 Ibid.
7 Ibid.
8 Department of Homeland Security (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.
9 Apprentice pilots and applicant pilots are
compensated by the pilot association they are
training with, which is funded through the pilotage
rates. The ratemaking methodology accounts for an
apprentice pilot wage benchmark in Step 4 per 46
CFR 404.104(d). The applicant pilot salaries are
included in the pilot associations’ operating
expenses used in Step 1 per 46 CFR 404.101.
10 46 CFR part 404.101–404.110. https://
www.ecfr.gov/current/title-46/chapter-III/part-404
(Last visited 5/17/23).
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4 46
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each pilotage association would need to
cover expenses and to provide
competitive compensation to registered
pilots. Since the Coast Guard cannot
guarantee demand for pilotage services,
target pilot compensation for registered
pilots is a goal. The actual demand for
service dictates the actual compensation
for the registered pilots. We then divide
that amount by the historic 10-year
average for pilotage demand. We
recognize that, in years where traffic is
above average, pilot associations will
accrue more revenue than projected
while, in years where traffic is below
average, they will take in less. We
believe that, over the long term,
however, this system ensures that
infrastructure will be maintained, and
that pilots will receive adequate
compensation and work a reasonable
number of hours, with adequate rest
between assignments, to ensure
retention of highly trained personnel.
The purpose of this proposed rule is
to issue new pilotage rates for the 2024
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 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.
V. Background
Pursuant to 46 U.S.C. 9303, the Coast
Guard regulates shipping practices and
rates on the Great Lakes. Under Coast
Guard regulations, all vessels engaged in
foreign trade (often referred to as
‘‘salties’’) are required to engage United
States or Canadian pilots during their
transit through the regulated waters.11
United States and Canadian ‘‘lakers,’’
which account for most commercial
shipping on the Great Lakes, are not
affected.12 Generally, vessels are
assigned a United States or Canadian
pilot, depending on the order in which
11 See 46 CFR part 401. https://www.ecfr.gov/
current/title-46/chapter-III/part-401 (Last visited 5/
17/23).
12 46 U.S.C. 9302(f). A ‘‘laker’’ is a commercial
cargo vessel especially designed for and generally
limited to use on the Great Lakes. https://
uscode.house.gov/view.xhtml?req=granuleid:U.S.C.prelim-title46-section9302&num=0&edition=prelim
(Last visited 5/17/23).
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they transit a particular area of the Great
Lakes, and do not choose the pilot they
receive. If a vessel is assigned a U.S.
pilot, that pilot will be assigned by the
pilotage association responsible for the
district in which the vessel is operating,
and the vessel operator will pay the
pilotage association for the pilotage
services. The Great Lakes Pilotage
Authority (Canadian) (GLPA)
establishes the rates for Canadian
registered pilots.
The U.S. waters of the Great Lakes
and the St. Lawrence Seaway are
divided into three pilotage districts.
Pilotage in each district is provided by
an association certified by the Director
to operate a pilotage pool. The Saint
Lawrence Seaway Pilotage Association
(SLSPA) provides pilotage services in
District One, which includes all U.S.
waters of the St. Lawrence River and
Lake Ontario. The Lakes Pilots
Association (LPA) provides pilotage
services in District Two, which includes
all U.S. waters of Lake Erie, the Detroit
River, Lake St. Clair, and the St. Clair
River. Finally, the Western Great Lakes
Pilots Association (WGLPA) provides
pilotage services in District Three,
which includes all U.S. waters of the St.
Mary’s River; Sault Ste. Marie Locks;
and Lakes Huron, Michigan, and
Superior.
Each pilotage district is further
divided into ‘‘designated’’ and
‘‘undesignated’’ areas, depicted in table
2. Designated areas, classified as such
by Presidential Proclamation, are waters
in which pilots must direct the
navigation of vessels at all times.13
Undesignated areas are open bodies of
water not subject to the same pilotage
requirements. While working in
undesignated areas, pilots must ‘‘be on
board and available to direct the
navigation of the vessel at the discretion
of and subject to the customary
authority of the master.’’ 14 For these
reasons, pilotage rates in designated
areas can be significantly higher than
those in undesignated areas. Table 2
shows the districts and areas of the
Great Lakes and St. Lawrence Seaway.
13 Presidential Proclamation 3385, Designation of
restricted waters under the Great Lakes Pilotage Act
of 1960, December 22, 1960 (https://
www.archives.gov/federal-register/codification/
proclamations/03385.html) (Last visited 5/31/23).
14 46 U.S.C. 9302(a)(l)(B).
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TABLE 2—AREAS OF THE GREAT LAKES AND ST. LAWRENCE SEAWAY
District
Pilotage
association
Designation
One .............................................
Saint Lawrence Seaway Pilotage
Association (SLPSA).
Designated .......
1
St. Lawrence River.
Two .............................................
Lakes Pilots Association (LPA) ...
Undesignated ...
Designated .......
2
5
Three ..........................................
Western Great Lakes Pilots Association (WGLPA).
Undesignated ...
Designated .......
4
7
Lake Ontario.
Navigable waters from Southeast Shoal
to Port Huron, MI.
Lake Erie.
St. Marys River.
Undesignated ...
Undesignated ...
6
8
Lakes Huron and Michigan.
Lake Superior.
Over the past several years, the Coast
Guard has adjusted the Great Lakes
pilotage ratemaking methodology per
our authority in 46 U.S.C. 9303(f) to
conduct annual reviews of base pilotage
rates and adjust such base rates in each
intervening year in consideration of the
public interest and the costs of
providing the services. The current
methodology was finalized in the 2023
final rule.17 We summarize the current
methodology in the following section.
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VI. Summary of the Ratemaking
Methodology
As stated previously, the ratemaking
methodology, outlined in 46 CFR
404.101 through 404.110, consists of 10
steps that are designed to account for
the revenues needed and total traffic
expected in each district. The first
several steps of the methodology
establish base pilotage rates. Additional
steps to incorporate the weighting
factors are necessary to establish the
final pilot rates. The result is an hourly
rate, determined separately for each of
the areas administered by the Coast
Guard.
In Step 1, ‘‘Recognize previous
operating expenses,’’ (§ 404.101), the
Director reviews audited operating
expenses from each of the three pilotage
associations. Operating expenses
include all allowable expenses, minus
wages and benefits. This number forms
the baseline amount that each
association is budgeted. Because of the
time delay between when the
association submits raw numbers and
when the Coast Guard receives audited
numbers, this number is 3 years behind
the projected year of expenses.
Therefore, in calculating the 2024 rates
15 Area 3 is the Welland Canal, which is serviced
exclusively by the Canadian GLPA and,
accordingly, is not included in the United States
pilotage rate structure.
16 The areas are listed by name at 46 CFR 401.405.
https://www.ecfr.gov/current/title-46/chapter-III/
part-401/subpart-D/section-401.405 (Last visited 5/
17/23).
17 88 FR 12226.
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Area
Number 15
in this proposal, we begin with the
audited expenses from the 2021
shipping season.
While each pilotage association
operates in an entire district (including
both designated and undesignated
areas), the Coast Guard determines costs
by area. We allocate certain operating
expenses to designated areas and certain
operating expenses to undesignated
areas. In some cases, we can allocate the
costs based on where they are accrued.
For example, we can allocate the costs
of insurance for apprentice pilots who
operate in undesignated areas only. In
other situations, such as general legal
expenses, expenses are distributed
between designated and undesignated
waters on a pro rata basis, based upon
the proportion of income forecasted
from the respective portions of the
district.
In Step 2, ‘‘Project operating
expenses, adjusting for inflation or
deflation,’’ (§ 404.102), the Director
develops the 2024 projected operating
expenses. To do this, we apply inflation
adjustors for 3 years to the operating
expense baseline received in Step 1. The
inflation factors are from the Bureau of
Labor Statistics’ (BLS) Consumer Price
Index (CPI) for the Midwest Region, or,
if not available, the Federal Open
Market Committee (FOMC) median
economic projections for Personal
Consumption Expenditures (PCE)
inflation. This step produces the total
operating expenses for each area and
district.
In Step 3, ‘‘Estimate number of
registered pilots and apprentice pilots,’’
(§ 404.103), the Director calculates how
many registered and apprentice pilots,
including apprentice pilots with limited
registrations, are needed for each
district. To do this, we employ a
‘‘staffing model,’’ described in
§ 401.220, paragraphs (a)(1) through (3),
to estimate how many pilots would be
needed to handle shipping during the
beginning and close of the season. This
number provides guidance to the
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Area Name 16
Director in approving an appropriate
number of pilots.
For the purpose of the ratemaking
calculation, we determine the number of
pilots provided by the pilotage
associations (see § 404.103) and use that
figure to determine how many pilots
need to be compensated via the pilotage
fees collected.
In the first part of Step 4, ‘‘Determine
target pilot compensation benchmark
and apprentice pilot wage benchmark,’’
(§ 404.104(a)), the Director determines
the revenue needed for pilot
compensation in each area and district
and calculates the total compensation
for each pilot using a ‘‘compensation
benchmark.’’
In the second part of Step 4,
(§ 404.104(c)), the Director determines
the total compensation figure for each
district. To do this, the Director
multiplies the compensation benchmark
by the number of pilots for each area
and district (from Step 3), producing a
figure for total pilot compensation.
In Step 5, ‘‘Project working capital
fund,’’ (§ 404.105), the Director
calculates an added value to pay for
needed capital improvements and other
non-recurring expenses, such as
technology investments and
infrastructure maintenance. This value
is calculated by adding the total
operating expenses (derived in Step 2)
to the total pilot compensation and the
total target apprentice pilot wage
(derived in Step 4), then by multiplying
that figure by the preceding year’s
average annual rate of return for new
issues of high-grade corporate securities.
This figure constitutes the ‘‘working
capital fund’’ for each area and district.
In Step 6, ‘‘Project needed revenue,’’
(§ 404.106), the Director simply adds the
totals produced by the preceding steps.
The projected operating expense for
each area and district (from Step 2) is
added to the total pilot compensation,
including apprentice pilot wage
benchmarks (from Step 4), and the
working capital fund contribution (from
Step 5). The total figure, calculated
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separately for each area and district, is
the ‘‘needed revenue.’’
In Step 7, ‘‘Calculate initial base
rates,’’ (§ 404.107), the Director
calculates an hourly pilotage rate to
cover the needed revenue, as calculated
in Step 6. This step consists of first
calculating the 10-year average of traffic
hours for each area. Next, we divide the
revenue needed in each area (calculated
in Step 6) by the 10-year average of
traffic hours to produce an initial base
rate.
An additional element, the
‘‘weighting factor,’’ is required under
§ 401.400. Pursuant to that section,
ships pay a multiple of the ‘‘base rate’’,
as calculated in Step 7, by a number
ranging from 1.0 (for the smallest ships,
or ‘‘Class I’’ vessels) to 1.45 (for the
largest ships, or ‘‘Class IV’’ vessels).
This significantly increases the revenue
collected, and we need to account for
the added revenue produced by the
weighting factors to ensure that shippers
are not overpaying for pilotage services.
We do this in the next step.
In Step 8, ‘‘Calculate average
weighting factors by Area,’’ (§ 404.108),
the Director calculates how much extra
revenue, as a percentage of total
revenue, has historically been produced
by the weighting factors in each area.
We do this by using a historical average
of the applied weighting factors for each
year since 2014 (the first year the
current weighting factors were applied).
In Step 9, ‘‘Calculate revised base
rates,’’ (§ 404.109), the Director modifies
the base rates by accounting for the
extra revenue generated by the
weighting factors. We do this by
dividing the initial pilotage rate for each
area (from Step 7) by the corresponding
average weighting factor (from Step 8),
to produce a revised rate.
In Step 10, ‘‘Review and finalize
rates,’’ (§ 404.110), often referred to
informally as ‘‘Director’s discretion’’,
the Director reviews the revised base
rates (from Step 9) to ensure that they
meet the goals set forth in 46 U.S.C.
9303(f) and 46 CFR 404.1(a), which
include promoting efficient, safe, and
reliable pilotage service on the Great
Lakes; generating sufficient revenue for
each pilotage association to reimburse
necessary and reasonable operating
expenses; compensating trained and
rested pilots fairly; and providing
appropriate revenue for improvements.
After the base rates are set, § 401.401
permits the Coast Guard to apply
surcharges. We are not proposing to use
any surcharges in this proposed rule. In
previous ratemakings, where apprentice
pilot wages were not built into the rate,
the Coast Guard used surcharges to
cover applicant pilot compensation in
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those years to help with applicant
recruitment. In this proposed rule, we
include the applicant trainee
compensation in the district’s operating
expenses used in Step 1. Consistent
with the 2021, 2022, and 2023
rulemakings, in this proposed rule, we
continue to believe that the pilot
associations are able to plan for the
costs associated with hiring applicant
pilots to fill pilot vacancies without
relying on the Coast Guard to impose
surcharges to help with recruiting.
VII. Historic Methodological and Other
Changes
The Coast Guard is proposing to use
the existing ratemaking methodology for
establishing the base rates in this
interim ratemaking. The Coast Guard is
not proposing any methodological or
other policy changes to the ratemaking
within this NPRM.
According to 46 U.S.C. 9303(f), and
restated in 46 CFR 404.100(a), the Coast
Guard must only establish base rates by
a full ratemaking at least once every 5
years. The Coast Guard has determined
that the current base rate and
methodology still adequately adheres to
the Coast Guard’s goals 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 methodology 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, Great Lakes
Pilotage Rates—2017 Annual Review
(82 FR 41466, published August 31,
2017),18 the Coast Guard modified the
methodology to account for the
additional revenue produced by the
application of weighting factors. This is
discussed in detail in Steps 7 through 9
for each district, in section IX.,
Discussion of Proposed Rate
Adjustments, of this preamble.
In the 2018 ratemaking, Great Lakes
Pilotage Rates—2018 Annual Review
and Revisions to Methodology (83 FR
26162, published June 5, 2018),19 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, Great Lakes
Pilotage Rates—2020 Annual Review
and Revisions to Methodology (85 FR
18 https://www.govinfo.gov/content/pkg/FR-201708-31/pdf/2017-18411.pdf (last visited 5/12/2023).
19 https://www.govinfo.gov/content/pkg/FR-201806-05/pdf/2018-11969.pdf (last visited 5/12/2023).
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55633
20088, published April 9, 2020),20 the
Coast Guard revised the methodology to
accurately capture all costs and
revenues associated with Great Lakes
pilotage requirements and to produce an
hourly rate that adequately and
accurately compensates pilots and
covers expenses.
The 2021 ratemaking, Great Lakes
Pilotage Rates—2021 Annual Review
and Revisions to Methodology (86 FR
14184, published March 12, 2021),21
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, Great Lakes
Pilotage Rates—2022 Annual Review
and Revisions to Methodology (87 FR
18488, published March 30, 2022),22
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 that the ratemaking
does not undercount the pilot need
presented by the staffing model and
association circumstances.
VIII. Individual Target Pilot
Compensation Benchmark
The Coast Guard is proposing to set
the target pilot compensation
benchmark in this NPRM at the target
compensation for the ratemaking year
2023, adjusted for inflation. In an
interim ratemaking year, the base target
pilot compensation would be adjusted
annually in accordance with
§ 404.104(b). The Coast Guard arrived at
this proposed compensation benchmark
as explained in the following
paragraphs.
Before 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, Great Lakes Pilotage Rates—
2016 Annual Review and Changes to
Methodology (81 FR 11908, published
20 https://www.govinfo.gov/content/pkg/FR-202004-09/pdf/2020-06968.pdf (last visited 5/12/2023).
21 https://www.govinfo.gov/content/pkg/FR-202103-12/pdf/2021-05050.pdf (last visited 5/12/2023).
22 https://www.govinfo.gov/content/pkg/FR-202203-30/pdf/2022-06394.pdf (last visited 5/12/2023).
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March 7, 2016),23 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). The 2018
final rule adjusted the AMOU 2015 data
for inflation using Federal Open Market
FOMC median economic projections for
PCE inflation.
In the 2020 interim year ratemaking
final rule,24 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 (85 FR 20091).
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 (85 FR 20091).
Based on our experience over the past
four ratemakings (2020–2023), 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
§ 404.104(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
23 https://www.govinfo.gov/content/pkg/FR-201603-07/pdf/2016-04894.pdf (last visited 5/12/2023).
24 85 FR 20088.
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pilotage service. 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 proposes
to not seek alternative benchmarks for
target compensation at this time and,
instead, to simply adjust the amount of
target pilot compensation for inflation
as our target compensation benchmark
for 2024, as shown in Step 4. This target
compensation benchmark approach has
advanced and will continue to advance
the Coast Guard’s goals through rate and
compensation stability while also
promoting recruitment and retention of
qualified U.S. pilots.
The proposed compensation
benchmark for 2024 is $442,403 per
registered pilot and $159,265 per
apprentice pilot, using the 2023
compensation as a benchmark. We
follow the procedure outlined in
paragraph (b) of § 404.104, which
adjusts the existing compensation
benchmark for inflation. We use a twostep process to adjust target pilot
compensation for inflation. First, we
adjust the 2023 target compensation
benchmark of $424,398 by 1.7 percent
for an adjusted value of $431,613. This
first adjustment accounts for the
difference in actual first quarter 2023
ECI inflation, which is 4.4 percent, and
the 2023 PCE estimate of 2.7 percent.25
The second step accounts for projected
inflation from 2023 to 2024, which is
2.5 percent.26 Based on the projected
2024 inflation estimate, the proposed
target compensation benchmark for
2024 is $442,403 per pilot. The
proposed apprentice pilot wage
benchmark is 36 percent of the target
pilot compensation, or $159,265
($442,403 × 0.36).27
25 Employment Cost Index, Total Compensation
for Private Industry workers in Transportation and
Material Moving, Annual Average, Series ID:
CIU2010000520000A. https://www.bls.gov/
news.release/eci.t05.htm (Last visited 04/28/23);
and Table 1 Summary of Economic Projections, PCE
Inflation. https://www.federalreserve.gov/
monetarypolicy/files/fomcprojtabl20220316.pdf
(Last visited 05/17/23).
26 Table 1 Summary of Economic Projections, PCE
Inflation December Projection. https://
www.federalreserve.gov/monetarypolicy/files/
fomcprojtabl20230322.pdf (Last visited 03/2023).
27 For more information on the proposed
apprentice pilot wage benchmark, see the Coast
Guard’s 2022 Annual Review and Revisions to
Methodology. 87 FR 18488.
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IX. Discussion of Proposed Rate
Adjustments
In this NPRM, based on the proposed
policy changes described in the
previous section, we are proposing new
pilotage rates for 2024. We propose to
conduct the 2024 ratemaking as an
interim ratemaking, as we last did in
2022 (87 FR 18488). Thus, the Coast
Guard proposes to adjust the
compensation benchmark following the
interim ratemaking year procedures
under § 404.100(b) rather than the
procedures for a full ratemaking year in
§ 404.100(a).
This section discusses the proposed
rate changes using the ratemaking steps
provided in 46 CFR part 404. We will
detail all 10 steps of the ratemaking
procedure for each of the 3 districts to
show how we arrive at the proposed
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, we
begin by reviewing the independent
accountant’s financial reports for each
association’s 2021 expenses and
revenues.28 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, the cost is divided
between the designated and
undesignated areas on a pro rata basis.
The recognized operating expenses for
District One are shown in table 3.
Adjustments have been made by the
auditors and are explained in the
auditor’s reports, which are available in
the docket for this rulemaking, where
indicated under the Public Participation
and Request for Comments portion of
the preamble.
In the 2021 expenses used as the basis
for this proposed rule, districts used the
term ‘‘applicant’’ to describe applicant
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 2021,
which includes both applicant and
apprentice pilots. The term
‘‘apprentice’’ is used to distinguish
apprentice pilot wages and describe the
28 These reports are available in the docket for
this proposed rule.
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impacts of the ratemaking going
forward.
The Coast Guard continues to include
apprentice salaries as an allowable
expense in the 2024 ratemaking, as this
proposed rule is based on 2021
operating expenses, when salaries were
still an allowable expense. 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
55635
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).
TABLE 3—2021 RECOGNIZED EXPENSES FOR DISTRICT ONE
Designated
Undesignated
St. Lawrence River
Lake Ontario
District One Reported Operating Expenses for 2021
Total
lotter on DSK11XQN23PROD with PROPOSALS1
Applicant Pilot Compensation:
Salaries .....................................................................................................................
Employee Benefits ....................................................................................................
$247,735
10,367
$165,157
6,911
$412,892
17,278
Total Applicant Pilot Compensation ..................................................................
Other Applicant Cost:
Applicant Subsistence ..............................................................................................
Travel ........................................................................................................................
License Insurance ....................................................................................................
Payroll taxes .............................................................................................................
Other—Pilotage Cost ................................................................................................
258,102
172,068
430,170
1,723
1,832
752
1,945
833
1,148
1,221
502
1,296
555
2,871
3,053
1,254
3,241
1,388
Total Other Applicant Cost ................................................................................
Other Pilotage Cost:
Subsistence ..............................................................................................................
Hotel/Lodging ............................................................................................................
Travel ........................................................................................................................
License renewal ........................................................................................................
Payroll Taxes ............................................................................................................
License Insurance ....................................................................................................
7,085
4,722
11,807
133,993
32,424
453,718
1,200
198,901
53,174
89,329
21,616
302,478
800
132,601
35,450
223,322
54,040
756,196
2,000
331,502
88,624
Total Other Pilotage Costs ................................................................................
Pilot Boat and Dispatch Costs:
Pilot boat expense (Operating) ................................................................................
Dispatch expense .....................................................................................................
Employee Benefits ....................................................................................................
Salaries .....................................................................................................................
Payroll taxes .............................................................................................................
873,410
582,274
1,455,684
200,672
167,291
50,560
249,396
10,269
133,782
111,527
33,707
166,264
6,846
334,454
278,818
84,267
415,660
17,115
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 ..............................................................................................................
Interest ......................................................................................................................
APA Dues .................................................................................................................
APA Dues (D1–21–01) .............................................................................................
Dues and subscriptions ............................................................................................
Utilities ......................................................................................................................
Salaries .....................................................................................................................
Accounting/Professional fees ...................................................................................
Pilot Training .............................................................................................................
Applicant Pilot Training .............................................................................................
Other .........................................................................................................................
678,188
452,126
1,130,314
1,078
4,402
14,641
44,108
4,470
42,464
79,200
22,918
1,568
186,517
54,271
25,250
2,971
4,320
41,343
73,890
4,320
4,680
18,911
28,422
719
2,935
9,760
29,405
2,980
28,310
52,800
15,278
1,045
124,345
36,180
16,834
1,980
2,880
27,562
49,260
2,880
3,120
12,607
18,948
1,797
7,337
24,401
73,513
7,450
70,774
132,000
38,196
2,613
310,862
90,451
42,084
4,951
7,200
68,905
123,150
7,200
7,800
31,518
47,370
Total Administrative Expenses ..........................................................................
659,744
439,828
1,099,572
Total Expenses (OPEX + Applicant + Pilot Boats + Admin + Capital) ............
2,476,529
1,651,018
4,127,547
Total Operating Expenses (OpEx + Adjustments) ............................................
2,476,529
1,651,018
4,127,547
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B. Step 2: Project Operating Expenses,
Adjusting for Inflation or Deflation
In accordance with the text in
§ 404.102, having identified the
recognized 2021 operating expenses in
Step 1, the next step is to estimate the
current year’s operating expenses by
adjusting for inflation over the 3-year
period. We calculate inflation using the
BLS data from the CPI for the Midwest
Region of the United States for the 2022
inflation rate.29 Because the BLS does
not provide forecasted inflation data, we
use economic projections from the
Federal Reserve for the 2023 and 2024
inflation modification.30 Based on that
information, the calculations for Step 2
are as presented in table 4.
TABLE 4—ADJUSTED OPERATING EXPENSES FOR DISTRICT ONE
District One
Designated
Total
2022
2023
2024
Undesignated
Total
Operating Expenses (Step 1) .............................................................................................
Inflation Modification (@8%) ..............................................................................................
Inflation Modification (@3.5%) ...........................................................................................
Inflation Modification (@2.5%) ...........................................................................................
$2,476,529
198,122
93,613
69,207
$1,651,018
132,081
62,408
46,138
$4,127,547
330,203
156,021
115,345
Adjusted 2024 Operating Expenses .....................................................................................
2,837,471
1,891,645
4,729,116
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. We determine the number of
fully registered pilots based on data
provided by the SLSPA. Using these
numbers, we estimate that there will be
18 registered pilots in 2024 in District
One. We determine the number of
apprentice pilots based on input from
the district on anticipated retirements
and staffing needs. Using these
numbers, we estimate that there will be
three apprentice pilots in 2024 in
District One. Based on the seasonal
staffing model discussed in the 2017
ratemaking (82 FR 41466), a certain
number of pilots are assigned to
designated waters, and a certain number
of pilots are assigned to undesignated
waters, as shown in table 5. These
numbers are used to determine the
amount of revenue needed in their
respective areas.
TABLE 5—AUTHORIZED PILOTS FOR DISTRICT ONE
Item
District One
Proposed Maximum Number of Pilots (per § 401.220(a)) * ...........................................................................................................
2024 Authorized Pilots (total) ........................................................................................................................................................
Pilots Assigned to Designated Areas ............................................................................................................................................
Pilots Assigned to Undesignated Areas ........................................................................................................................................
2024 Apprentice Pilots ...................................................................................................................................................................
18
18
10
8
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).
D. Step 4: Determine Target Pilot
Compensation Benchmark and
Apprentice Pilot Wage Benchmark
lotter on DSK11XQN23PROD with PROPOSALS1
In this step, we determine the total
pilot compensation for each area.
Because we are issuing an ‘‘interim’’
ratemaking this year, we follow the
procedure outlined in paragraph (b) of
§ 404.104, which adjusts the existing
compensation benchmark by inflation.
First, we adjust the 2023 target
compensation benchmark of $424,398
by 1.7 percent for a value of $431,613.
This accounts for the difference in
actual first quarter 2023 ECI inflation,
which is 4.4 percent, and the 2023 PCE
29 The CPI is defined as ‘‘All Urban Consumers
(CPI–U), All Items, 1982–4=100.’’ Series
CUUR0200SAO (Downloaded March 21, 2023).
Available at https://www.bls.gov/cpi/data.htm., All
Urban Consumers (Current Series), multiscreen
data, not seasonally adjusted, 0200 Midwest,
Current, All Items, Monthly, 12-month Percent
Change and Annual Data.
30 The 2022 and 2023 inflation rates are available
at https://www.federalreserve.gov/monetarypolicy/
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estimate of 2.7 percent.31 32 The second
step accounts for projected inflation
from 2023 to 2024, which is 2.5
percent.33 Based on the projected 2024
inflation estimate, the proposed target
compensation benchmark for 2024 is
$442,403 per pilot. The proposed
apprentice pilot wage benchmark is 36
percent of the target pilot compensation,
or $159,265 ($442,403 × 0.36).
Next, the Coast Guard certifies that
the number of pilots estimated for 2024
is less than or equal to the number
permitted under the staffing model in
§ 401.220(a). The staffing model
suggests that District One needs 18
pilots, which is less than or equal to the
number of registered pilots provided by
the pilot association. In accordance with
§ 404.104(c), we use 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 6. We estimate that the
number of apprentice pilots with
limited registration needed will be three
for District One in the 2024 season. The
total target wages for apprentices are
allocated with 60 percent for the
designated area and 40 percent for the
undesignated area, in accordance with
the allocation for operating expenses.
files/fomcprojtabl20230322.pdf. We used the Core
PCE December Projection found in table 1.
(Downloaded April 2023).
31 Employment Cost Index, Total Compensation
for Private Industry workers in Transportation and
Material Moving, Annual Average, Series ID:
CIU2010000520000A. https://www.bls.gov/
news.release/eci.t05.htm (Last visited 04/28/23).
32 Table 1 Summary of Economic Projections, PCE
Inflation. https://www.federalreserve.gov/
monetarypolicy/files/fomcprojtabl20220316.pdf
(Last visited 05/17/23).
33 Table 1 Summary of Economic Projections, PCE
Inflation December Projection. https://
www.federalreserve.gov/monetarypolicy/files/
fomcprojtabl20230322.pdf (Last visited 03/2023).
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TABLE 6—TARGET COMPENSATION FOR DISTRICT ONE
District One
Target Pilot Compensation ..........................................................................................................
Number of Pilots ..........................................................................................................................
Total Target Pilot Compensation .................................................................................................
Target Apprentice Pilot Compensation ........................................................................................
Number of Apprentice Pilots ........................................................................................................
Total Target Apprentice Pilot Compensation ..............................................................................
E. Step 5: Project Working Capital Fund
Next, the Coast Guard calculates the
working capital fund revenues needed
for each area. We first add the figures for
projected operating expenses, total pilot
Designated
Undesignated
Total
$442,403
10
4,424,030
159,265
........................
286,677
$442,403
8
3,539,224
159,265
........................
191,118
$442,403
18
7,963,254
159,265
3
477,795
compensation, and total target
apprentice pilot wage for each area, and
then, we find the preceding year’s
average annual rate of return for new
issues of high-grade corporate securities.
Using Moody’s data, the number is
4.0742 percent rounded.34 By
multiplying the two figures, we obtain
the working capital fund contribution
for each area, as shown in table 7.
TABLE 7—WORKING CAPITAL FUND CALCULATION FOR DISTRICT ONE
District One
Designated
Adjusted Operating Expenses (Step 2) .......................................................................................
Total Target Pilot Compensation (Step 4) ...................................................................................
Total Target Apprentice Pilot Compensation (Step 4) ................................................................
Total 2024 Expenses ...................................................................................................................
Working Capital Fund (4.0742%) ................................................................................................
F. Step 6: Project Needed Revenue
needed for each area. These expenses
include the projected operating
expenses (from Step 2), the total pilot
compensation (from Step 4), total target
In this step, we add the expenses
accrued to derive the total revenue
$2,837,471
4,424,030
286,677
7,548,178
307,525
Undesignated
$1,891,645
3,539,224
191,118
5,621,987
229,049
Total
$4,729,116
7,963,254
477,795
13,170,165
536,574
apprentice pilot wage (from Step 4), and
the working capital fund contribution
(from Step 5). We show these
calculations in table 8.
TABLE 8—REVENUE NEEDED FOR DISTRICT ONE
District One
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) ....................................................................................................
$2,837,471
4,424,030
286,677
307,525
$1,891,645
3,539,224
191,118
229,049
$4,729,116
7,963,254
477,795
536,574
Total Revenue Needed ........................................................................................................
7,855,703
5,851,036
13,706,739
G. Step 7: Calculate Initial Base Rates
Having determined the revenue
needed for each area in the previous six
steps, we divide that number by the
expected number of traffic hours to
develop an hourly rate.
lotter on DSK11XQN23PROD with PROPOSALS1
Undesignated
34 Moody’s Seasoned Aaa Corporate Bond Yield,
average of 2022 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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Step 7 is a two-part process. The first
part is calculating the 10-year traffic
average 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 SeaPro. The data is pulled
from the system filtering by district,
year, job status (including only
processed jobs), and flagging code
(including only U.S. jobs). Because we
calculate separate figures for designated
and undesignated waters, there are two
parts for each calculation. We show
these values in table 9.
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 (Last visited 03/21/
23).
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55638
Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Proposed Rules
TABLE 9—TIME ON TASK FOR DISTRICT ONE
[Hours]
District One
Year
Designated
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
Undesignated
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
6,785
6,188
6,265
8,232
6,943
7,605
5,434
5,743
6,810
5,864
8,574
7,871
7,560
8,405
8,445
8,679
6,217
6,667
6,853
5,529
Average ............................................................................................................................................................
6,587
7,480
Next, we derive 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. We
present the calculations for District One
in table 10.
TABLE 10—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 data, we
$7,855,703
6,587
1,193
Undesignated
$5,851,036
7,480
782
calculate the average weighting factor
for each area using the data from each
vessel transit from 2014 onward, as
shown in tables 11 and 12.
TABLE 11—AVERAGE WEIGHTING FACTOR FOR DISTRICT ONE, DESIGNATED AREAS
Number of
transits
lotter on DSK11XQN23PROD with PROPOSALS1
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
1
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
2
3
3
3
3
3
3
3
3
3
4
4
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
(2014)
(2015)
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.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
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31
41
31
28
54
72
8
10
39
285
295
185
352
559
378
560
315
466
50
28
50
67
86
122
67
52
104
271
251
16AUP1
Weighting
factor
1
1
1
1
1
1
1
1
1
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.3
1.3
1.3
1.3
1.3
1.3
1.3
1.3
1.3
1.45
1.45
Weighted
transits
31
41
31
28
54
72
8
10
39
328
339
213
405
643
435
644
362
536
65
36
65
87
112
159
87
68
135
393
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Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Proposed Rules
55639
TABLE 11—AVERAGE WEIGHTING FACTOR FOR DISTRICT ONE, DESIGNATED AREAS—Continued
Number of
transits
Vessel class/year
Class
Class
Class
Class
Class
Class
Class
4
4
4
4
4
4
4
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
Weighting
factor
Weighted
transits
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
214
285
393
730
427
407
461
1.45
1.45
1.45
1.45
1.45
1.45
1.45
310
413
570
1059
619
590
668
Total ......................................................................................................................................
7,774
........................
10,019
Average weighting factor (weighted transits ÷ number of transits) ..............................
........................
1.29
........................
TABLE 12—AVERAGE WEIGHTING FACTOR FOR DISTRICT ONE, 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
Class
Class
Class
Class
1
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
2
3
3
3
3
3
3
3
3
3
4
4
4
4
4
4
4
4
4
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
Weighted
transits
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
25
28
18
19
22
30
3
19
32
238
263
169
290
352
366
358
463
358
60
42
28
45
63
58
35
71
69
289
269
222
285
382
326
334
466
393
1
1
1
1
1
1
1
1
1
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.3
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
1.45
25
28
18
19
22
30
3
19
32
274
302
194
334
405
421
412
532
412
78
55
36
59
82
75
46
92
90
419
390
322
413
554
473
484
676
570
Total ......................................................................................................................................
6,490
........................
8,395
Average weighting factor (weighted transits/number of transits) ..................................
........................
1.29
........................
I. Step 9: Calculate Revised Base Rates
lotter on DSK11XQN23PROD with PROPOSALS1
Weighting
factor
In this step, we revise the base rates
so that the total cost of pilotage will be
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equal to the revenue needed, after
considering the impact of the weighting
factors. To do this, the initial base rates
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calculated in Step 7 are divided by the
average weighting factors calculated in
Step 8, as shown in table 13.
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Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Proposed Rules
TABLE 13—REVISED BASE RATES FOR DISTRICT ONE
District One: Designated ..............................................................................................
District One: Undesignated ..........................................................................................
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 proposed rates
Average weighting
factor
(Step 8)
Initial rate
(Step 7)
Area
$1,193
782
incorporate appropriate compensation
for pilots to handle heavy traffic periods
and whether there are enough pilots to
handle those heavy traffic periods. The
Director also considers whether the
proposed rates would cover operating
expenses and infrastructure costs,
Revised rate
(initial rate ÷
average weighting
factor)
1.29
1.29
$925
606
including average traffic and weighting
factions. Based on the financial
information submitted by the pilots, the
Director is not proposing any alterations
to the rates in this step. We propose to
modify § 401.405(a)(1) and (2) to reflect
the final rates shown in table 14.
TABLE 14—PROPOSED FINAL RATES FOR DISTRICT ONE
Final 2023
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 our ratemaking methodology
requires that the Coast Guard review
and recognize the previous year’s
operating expenses (§ 404.101). To do
so, we begin by reviewing the
independent accountant’s financial
reports for each association’s 2021
expenses and revenues.35 For
accounting purposes, the financial
reports divide expenses into designated
and undesignated areas. For costs
generally accrued by the pilot
associations, such as employee benefits,
the cost is divided between the
designated and undesignated areas on a
pro rata basis.
Adjustments have been made by the
auditors and are explained in the
auditor’s reports, which are available in
the docket for this rulemaking, where
indicated under the Public Participation
and Request for Comments portion of
the preamble.
In the 2021 expenses used as the basis
for this proposed rule, districts used the
term ‘‘applicant’’ to describe applicant
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 2021,
which includes both applicant and
apprentice pilots. The term
‘‘apprentice’’ is used to distinguish
apprentice pilot wages and describe the
Proposed 2024
pilotage rate
$876
586
$925
606
impacts of the ratemaking going
forward.
The Coast Guard continues to include
apprentice salaries as an allowable
expense in the 2024 ratemaking, as this
proposed rule is based on 2021
operating expenses, when salaries were
still an allowable expense. 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 15.
TABLE 15—2021 RECOGNIZED EXPENSES FOR DISTRICT TWO
District Two
lotter on DSK11XQN23PROD with PROPOSALS1
Reported Operating Expenses for 2021
Undesignated
Designated
Lake Erie
Southeast Shoal
to Port Huron
Total
Applicant Pilot Compensation:
Salaries .............................................................................................................................
Employee Benefits ............................................................................................................
$79,538
11,066
$119,306
16,599
$198,844
27,665
Total Applicant Pilot Compensation ..........................................................................
90,604
135,905
226,509
Other Applicant Cost:
Applicant Subsistence ......................................................................................................
Hotel/Lodging Cost ...........................................................................................................
Hotel/Lodging Cost (D2–21–01) .......................................................................................
5,280
2,976
(2,976)
7,920
4,464
(4,464)
13,200
7,440
(7,440)
35 These reports are available in the docket for
this proposed rule.
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Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Proposed Rules
55641
TABLE 15—2021 RECOGNIZED EXPENSES FOR DISTRICT TWO—Continued
District Two
Reported Operating Expenses for 2021
Undesignated
Designated
Lake Erie
Southeast Shoal
to Port Huron
Payroll taxes .....................................................................................................................
6,901
10,352
17,253
Total Other Applicant Cost ........................................................................................
Other Pilotage Cost:
Subsistence ......................................................................................................................
Hotel/Lodging ....................................................................................................................
Hotel/Lodging (D2–21–01) ...............................................................................................
Travel ................................................................................................................................
License renewal ................................................................................................................
Payroll Taxes ....................................................................................................................
License Insurance ............................................................................................................
12,181
18,272
30,453
73,921
62,496
(55,307)
42,625
1,958
87,620
9,007
110,880
93,744
(82,960)
63,937
2,938
131,430
13,510
184,800
156,240
(138,267)
106,562
4,896
219,050
22,517
222,320
333,479
555,798
60,067
80,273
4,317
148,260
13,277
90,101
120,410
6,475
222,391
19,915
150,168
200,683
10,792
370,651
33,192
Total Pilot and Dispatch Costs ..................................................................................
Administrative Expenses:
Legal—general counsel ....................................................................................................
Legal—shared counsel (K&L Gates) ................................................................................
Office Rent ........................................................................................................................
Insurance ..........................................................................................................................
Employee benefits ............................................................................................................
Payroll Taxes ....................................................................................................................
Other taxes .......................................................................................................................
Real Estate taxes .............................................................................................................
Travel ................................................................................................................................
Depreciation ......................................................................................................................
Interest ..............................................................................................................................
APA Dues .........................................................................................................................
Dues and subscriptions ....................................................................................................
Utilities ..............................................................................................................................
Salaries .............................................................................................................................
Accounting/Professional fees ...........................................................................................
Pilot Training .....................................................................................................................
Applicant Pilot Training .....................................................................................................
Other .................................................................................................................................
306,194
459,292
765,486
2,186
7,167
27,627
15,084
35,010
5,161
55,252
7,879
8,688
11,121
2
14,683
505
24,356
48,532
17,846
23,909
209
21,252
3,278
10,751
41,440
22,627
52,516
7,741
82,879
11,819
13,033
16,682
2
22,025
757
36,535
72,797
26,769
35,864
313
31,879
5,464
17,918
69,067
37,711
87,526
12,902
138,131
19,698
21,721
27,803
4
36,708
1,262
60,891
121,329
44,615
59,773
522
53,131
Total Administrative Expenses ..................................................................................
326,469
489,707
816,176
Total Expenses (OPEX + Applicant + Pilot Boats + Admin + Capital) .............
957,768
1,436,655
2,394,423
Total Directors Adjustments ......................................................................................
........................
............................
........................
Total Operating Expenses (OpEx + Adjustments) .............................................
957,768
1,436,655
2,394,422
Total Other Pilotage Costs ........................................................................................
Pilot Boat and Dispatch Costs:
Pilot boat expense (Operating) ........................................................................................
Employee Benefits ............................................................................................................
Insurance ..........................................................................................................................
Salaries .............................................................................................................................
Payroll taxes .....................................................................................................................
B. Step 2: Project Operating Expenses,
Adjusting for Inflation or Deflation
In accordance with the text in
§ 404.102, having identified the
recognized 2021 operating expenses in
Step 1, the next step is to estimate the
lotter on DSK11XQN23PROD with PROPOSALS1
Total
36 The CPI is defined as ‘‘All Urban Consumers
(CPI–U), All Items, 1982–4=100.’’ Series
CUUR0200SAO (Downloaded March 21, 2023).
Available at https://www.bls.gov/cpi/data.htm., All
Urban Consumers (Current Series), multiscreen
VerDate Sep<11>2014
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Jkt 259001
current year’s operating expenses by
adjusting for inflation over the 3-year
period. We calculate inflation using the
BLS data from the CPI for the Midwest
Region of the United States for the 2022
inflation rate.36 Because the BLS does
not provide forecasted inflation data, we
use economic projections from the
Federal Reserve for the 2023 and 2024
inflation modification.37 Based on that
information, the calculations for Step 2
are presented in table 16:
data, not seasonally adjusted, 0200 Midwest,
Current, All Items, Monthly, 12-month Percent
Change and Annual Data.
37 The 2023 and 2024 inflation rates are available
at https://www.federalreserve.gov/monetarypolicy/
files/fomcprojtabl20230322.pdf. We used the Core
PCE December Projection found in table 1. (Last
visited 04/2023).
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55642
Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Proposed Rules
TABLE 16—ADJUSTED OPERATING EXPENSES FOR DISTRICT TWO
District Two
Undesignated
Total Operating Expenses (Step 1) .............................................................................................
2022 Inflation Modification (@8%) ..............................................................................................
2023 Inflation Modification (@3.5%) ...........................................................................................
2024 Inflation Modification (@2.5%) ...........................................................................................
Adjusted 2024 Operating Expenses ............................................................................................
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. We determine the number of
fully registered pilots based on data
provided by the LPA. Using these
$957,768
76,621
36,204
26,765
1,097,358
Designated
$1,436,655
114,932
54,306
40,147
1,646,040
Total
$2,394,422
191,553
90,510
66,912
2,743,397
model discussed in the 2017 ratemaking
(82 FR 41466), a certain number of
pilots are assigned to designated waters,
and a certain number of pilots are
assigned to undesignated waters, as
shown in table 17. These numbers are
used to determine the amount of
revenue needed in their respective
areas.
numbers, we estimate that there will be
16 registered pilots in 2024 in District
Two. We determine the number of
apprentice pilots based on input from
the district on anticipated retirements
and staffing needs. Using these
numbers, we estimate that there will be
two apprentice pilots in 2024 in District
Two. Based on the seasonal staffing
TABLE 17—AUTHORIZED PILOTS FOR DISTRICT TWO
Item
District Two
Proposed Maximum Number of Pilots (per § 401.220(a)) * ...........................................................................................................
2024 Authorized Pilots (total) ........................................................................................................................................................
Pilots Assigned to Designated Areas ............................................................................................................................................
Pilots Assigned to Undesignated Areas ........................................................................................................................................
2024 Apprentice Pilots ...................................................................................................................................................................
16
16
7
9
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).
D. Step 4: Determine Target Pilot
Compensation Benchmark and
Apprentice Pilot Wage Benchmark
In this step, we determine the total
pilot compensation for each area.
Because we are issuing an interim
ratemaking this year, we follow the
procedure outlined in paragraph (b) of
§ 404.104, which adjusts the existing
compensation benchmark by inflation.
First, we adjust the 2023 target
compensation benchmark of $424,398
by 1.7 percent for a value of $431,613.
This accounts for the difference in
actual first quarter 2023 ECI inflation,
which is 4.4 percent, and the 2023 PCE
estimate of 2.7 percent.38 39 The second
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 18. The
Coast Guard estimates that the number
of apprentice pilots with limited
registration needed will be two for
District Two in the 2024 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.
step accounts for projected inflation
from 2023 to 2024, which is 2.5
percent.40 Based on the projected 2024
inflation estimate, the proposed target
compensation benchmark for 2024 is
$442,403 per pilot. The proposed
apprentice pilot wage benchmark is 36
percent of the target pilot compensation,
or $159,265 ($442,403 × 0.36).
Next, the Coast Guard certifies that
the number of pilots estimated for 2024
is less than or equal to the number
permitted under the staffing model in
§ 401.220(a). The staffing model
suggests that District Two needs 16
pilots, which is less than or equal to the
number of registered pilots provided by
TABLE 18—TARGET COMPENSATION FOR DISTRICT TWO
lotter on DSK11XQN23PROD with PROPOSALS1
District Two
Target Pilot Compensation ..........................................................................................................
Number of Pilots ..........................................................................................................................
Total Target Pilot Compensation .................................................................................................
Target Apprentice Pilot Compensation ........................................................................................
Number of Apprentice Pilots ........................................................................................................
38 Employment Cost Index, Total Compensation
for Private Industry workers in Transportation and
Material Moving, Annual Average, Series ID:
CIU2010000520000A. https://www.bls.gov/
news.release/eci.t05.htm (Last visited 04/28/23).
VerDate Sep<11>2014
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Jkt 259001
Undesignated
Designated
$442,403
9
3,981,627
159,265
........................
$442,403
7
3,096,821
159,265
........................
39 Table 1 Summary of Economic Projections, PCE
Inflation. https://www.federalreserve.gov/
monetarypolicy/files/fomcprojtabl20220316.pdf
(Last visited 5/17/23).
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Total
$442,403
16
7,078,448
159,265
2
40 Table 1 Summary of Economic Projections, PCE
Inflation December Projection. https://
www.federalreserve.gov/monetarypolicy/files/
fomcprojtabl20230322.pdf (Last visited 03/2023).
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55643
Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Proposed Rules
TABLE 18—TARGET COMPENSATION FOR DISTRICT TWO—Continued
District Two
Undesignated
Total Target Apprentice Pilot Compensation ..............................................................................
E. Step 5: Project Working Capital Fund
Next, the Coast Guard calculates the
working capital fund revenues needed
for each area. We first add the figures for
projected operating expenses, total pilot
compensation, and total target
apprentice pilot wage for each area, and
then we find the preceding year’s
average annual rate of return for new
issues of high-grade corporate securities.
Designated
127,412
Total
191,118
318,530
Using Moody’s data, the number is
4.0742 percent, rounded.41 By
multiplying the two figures, we obtain
the working capital fund contribution
for each area, as shown in table 19.
TABLE 19—WORKING CAPITAL FUND CALCULATION FOR DISTRICT TWO
District Two
Undesignated
Adjusted Operating Expenses (Step 2) .......................................................................................
Total Target Pilot Compensation (Step 4) ...................................................................................
Total Target Apprentice Pilot Compensation (Step 4) ................................................................
Total 2024 Expenses ...................................................................................................................
Working Capital Fund (4.0742%) ................................................................................................
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),
$1,097,358
3,981,627
127,412
5,206,397
212,117
Designated
$1,646,040
3,096,821
191,118
4,933,979
201,019
Total
$2,743,398
7,078,448
318,530
10,140,376
413,135
total target apprentice pilot wage (from
Step 4), and the working capital fund
contribution (from Step 5). We show
these calculations in table 20.
TABLE 20—REVENUE NEEDED FOR DISTRICT TWO
District Two
Undesignated
Adjusted Operating Expenses (Step 2) .......................................................................................
Total Target Pilot Compensation (Step 4) ...................................................................................
Total Target Apprentice Pilot Compensation (Step 4) ................................................................
Working Capital Fund (Step 5) ....................................................................................................
Total Revenue Needed ................................................................................................................
G. Step 7: Calculate Initial Base Rates
Having determined the revenue
needed for each area in the previous six
steps, the Coast Guard divides that
number by the expected number of
traffic hours to develop an hourly rate.
Step 7 is a two-part process. In the first
part, we calculate the 10-year traffic
average 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. We pull the data from
the system filtering by district, year, job
$1,097,358
3,981,627
127,412
212,117
5,418,514
Designated
$1,646,040
3,096,821
191,118
201,019
5,134,998
Total
$2,743,398
7,078,448
318,530
413,136
10,553,511
status (we only include processed jobs),
and flagging code (we only include U.S.
jobs). Because we calculate separate
figures for designated and undesignated
waters, there are two parts for each
calculation. We show these values in
table 21.
TABLE 21—TIME ON TASK FOR DISTRICT TWO
[Hours]
District Two
Year
lotter on DSK11XQN23PROD with PROPOSALS1
Undesignated
2022
2021
2020
2019
2018
2017
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
41 Moody’s Seasoned Aaa Corporate Bond Yield,
average of 2022 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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16:28 Aug 15, 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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12,306
8,826
6,232
6,512
6,150
5,139
Designated
3,975
3,226
8,401
7,715
6,655
6,074
fred.stlouisfed.org/series/AAA. (Last visited 03/21/
2023).
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55644
Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Proposed Rules
TABLE 21—TIME ON TASK FOR DISTRICT TWO—Continued
[Hours]
District Two
Year
Undesignated
2016
2015
2014
2013
Designated
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
6,425
6,535
7,856
4,603
5,615
5,967
7,001
4,750
Average ............................................................................................................................................................
7,058
5,938
Next, we derive 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. We
present the calculations for District Two
in table 22.
TABLE 22—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, we calculate the average
weighting factor for each designated and
undesignated area. We collect the
weighting factors, set forth in 46 CFR
401.400, for each vessel trip. Using this
data, we calculate the average weighting
$5,418,514
7,058
768
Designated
$5,134,998
5,938
865
factor for each area using the data from
each vessel transit from 2014 onward, as
shown in tables 23 and 24.
TABLE 23—AVERAGE WEIGHTING FACTOR FOR DISTRICT TWO, UNDESIGNATED AREAS
Number of
transits
lotter on DSK11XQN23PROD with PROPOSALS1
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
Class
Class
Class
1
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
2
3
3
3
3
3
3
3
3
3
4
4
4
4
4
4
4
4
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
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.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
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31
35
32
21
37
54
1
7
79
356
354
380
222
123
127
165
206
275
20
0
9
12
3
1
1
5
3
636
560
468
319
196
210
201
227
16AUP1
Weighting
factor
1
1
1
1
1
1
1
1
1
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.3
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
Weighted
transits
31
35
32
21
37
54
1
7
79
409
407
437
255
141
146
190
237
316
26
0
12
16
4
1
1
7
4
922
812
679
463
284
305
291
329
55645
Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Proposed Rules
TABLE 23—AVERAGE WEIGHTING FACTOR FOR DISTRICT TWO, UNDESIGNATED AREAS—Continued
Number of
transits
Vessel class/year
Weighting
factor
Weighted
transits
Class 4 (2022) .............................................................................................................................
349
1.45
506
Total ......................................................................................................................................
5,725
........................
7,497
Average weighting factor (weighted transits/number of transits) ..................................
........................
1.31
........................
TABLE 24—AVERAGE WEIGHTING FACTOR FOR DISTRICT TWO, DESIGNATED 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
Class
Class
Class
Class
1
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
2
3
3
3
3
3
3
3
3
3
4
4
4
4
4
4
4
4
4
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
Weighting
factor
Weighted
transits
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
20
15
28
15
42
48
7
12
34
237
217
224
127
153
281
342
240
184
8
8
4
4
14
1
5
2
3
359
340
281
185
379
403
405
268
273
1
1
1
1
1
1
1
1
1
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.3
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
1.45
20
15
28
15
42
48
7
12
34
273
250
258
146
176
323
393
276
212
10
10
5
5
18
1
7
3
4
521
493
407
268
550
584
587
389
396
Total ......................................................................................................................................
5,168
........................
6,785
Average weighting factor (weighted transits/number of transits) ..................................
........................
1.31
........................
I. Step 9: Calculate Revised Base Rates
pilotage will be equal to the revenue
needed after considering the impact of
the weighting factors. To do this, we
divide the initial base rates calculated in
In this step, the Coast Guard revises
the base rates so that the total cost of
Step 7 by the average weighting factors
calculated in Step 8, as shown in table
25.
lotter on DSK11XQN23PROD with PROPOSALS1
TABLE 25—REVISED BASE RATES FOR DISTRICT TWO
Initial rate
(Step 7)
Area
District Two: Undesignated ..........................................................................................................
District Two: Designated ..............................................................................................................
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$768
865
16AUP1
Average
weighting
factor
(Step 8)
1.31
1.31
Revised rate
(initial rate ÷
average
weighting
factor)
$586
660
55646
Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Proposed Rules
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 proposed rates
incorporate appropriate compensation
for pilots to handle heavy traffic
periods, and whether there are enough
pilots to handle those heavy traffic
periods. The Director also considers
whether the proposed rates would cover
operating expenses and infrastructure
costs, taking average traffic and
weighting factors into consideration.
Based on the financial information
submitted by the pilots, the Director is
not proposing any alterations to the
rates in this step. We propose to modify
§ 401.405(a)(3) and (4) to reflect the final
rates shown in table 26.
TABLE 26—PROPOSED FINAL RATES FOR DISTRICT TWO
Final 2023
pilotage rate
Area
Name
District Two: Designated ..........................................
Navigable waters from Southeast Shoal to Port
Huron, MI.
Lake Erie ..................................................................
District Two: Undesignated ......................................
District Three
A. Step 1: Recognize Previous Operating
Expenses
Step 1 in our ratemaking methodology
requires that the Coast Guard review
and recognize the previous year’s
operating expenses (§ 404.101). To do
so, we review the independent
accountant’s financial reports for each
association’s 2021 expenses and
revenues.42 For accounting purposes,
the financial reports divide expenses
into designated and undesignated areas.
For costs generally accrued by the pilot
associations, such as employee benefits,
the cost is divided between the
designated and undesignated areas on a
pro rata basis.
Adjustments have been made by the
auditors and are explained in the
auditor’s reports, which are available in
the docket for this rulemaking, where
indicated under the Public Participation
and Request for Comments portion of
the preamble.
In the 2021 expenses used as the basis
for this proposed rule, districts used the
term ‘‘applicant’’ to describe applicant
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 in 2021,
which includes both applicant and
apprentice pilots. The term
‘‘apprentice’’ is used to distinguish
apprentice pilot wages and to describe
the impacts of the ratemaking going
forward.
Proposed 2024
pilotage rate
$601
$660
704
586
The Coast Guard continues to include
apprentice salaries as an allowable
expense in the 2024 ratemaking, as this
proposed rule is based on 2021
operating expenses, when salaries were
still an allowable expense. 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 27.
TABLE 27—2021 RECOGNIZED EXPENSES FOR DISTRICT THREE
District Three
lotter on DSK11XQN23PROD with PROPOSALS1
Reported operating expenses for 2021
Undesignated
Designated
Undesignated
Lakes Huron
and Michigan
St. Marys
River
Lake Superior
Total
Applicant Cost:
Applicant Salaries .....................................................................................
Applicant Benefits .....................................................................................
$336,149
58,306
$140,111
24,303
$176,330
30,585
$652,590
113,194
Total Applicant Cost ..........................................................................
394,455
164,414
206,915
765,784
Other Pilotage Costs:
Pilot subsistence/travel .............................................................................
Hotel/Lodging Cost ...................................................................................
Hotel/Lodging Cost (D3–21–03) ...............................................................
Travel ........................................................................................................
License Insurance—Pilots ........................................................................
Payroll taxes .............................................................................................
Payroll Tax (D3–21–04) ............................................................................
License Insurance ....................................................................................
149,993
136,769
(18,162)
55,936
881
........................
155,779
15,328
62,519
57,007
(7,570)
23,315
367
........................
64,931
6,389
78,680
71,744
(9,527)
29,342
462
........................
81,715
8,040
291,192
265,520
(35,260)
108,592
1,710
........................
302,425
29,757
Total Other Pilotage Costs ................................................................
496,524
206,958
260,456
963,938
Pilot Boat and Dispatch costs:
Pilot boat costs .........................................................................................
445,549
185,710
233,716
864,975
42 These reports are available in the docket for
this proposed rule.
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Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Proposed Rules
55647
TABLE 27—2021 RECOGNIZED EXPENSES FOR DISTRICT THREE—Continued
District Three
Reported operating expenses for 2021
Designated
Undesignated
Lakes Huron
and Michigan
St. Marys
River
Lake Superior
Total
Pilot Boat Coast (D2–21–02) ...................................................................
Dispatch costs ..........................................................................................
Employee Benefits ....................................................................................
Insurance ..................................................................................................
Insurance (D3–21–05, D3–21–09) ...........................................................
Salaries .....................................................................................................
Payroll taxes .............................................................................................
(10,901)
38,156
1,748
20,141
1,735
140,294
123
(4,544)
15,904
729
8,395
723
58,476
51
(5,718)
20,015
917
10,565
910
73,592
64
(21,163)
74,074
3,394
39,101
3,369
272,363
238
Total Pilot boat and dispatch costs ...................................................
636,845
265,444
334,061
1,236,350
Administrative Cost
Legal—general counsel ............................................................................
Legal—shared counsel (K&L Gates) ........................................................
Legal—shared counsel (K&L Gates) (D3–21–07) ....................................
Travel ........................................................................................................
Travel (D3–21–03) ....................................................................................
Insurance ..................................................................................................
Insurance (D3–21–05, D3–21–09) ...........................................................
Employee benefits ....................................................................................
Payroll Tax ................................................................................................
Other taxes ...............................................................................................
Other taxes (D3–21–02) ...........................................................................
Real Estate Taxes ....................................................................................
Depreciation/Auto leasing/Other ...............................................................
Depreciation/Auto leasing/Other (D3–21–02) ...........................................
Interest ......................................................................................................
APA Dues .................................................................................................
APA Dues (D3–21–08) .............................................................................
Dues and subscriptions ............................................................................
Salaries .....................................................................................................
Utilities ......................................................................................................
Utilities (D3–21–03) ..................................................................................
Accounting/Professional fees ...................................................................
Pilot Training .............................................................................................
Other expenses ........................................................................................
9,560
6,227
(1,307)
58,104
(14,093)
29,480
(5,112)
126,390
54,544
25,489
(25,006)
1,396
112,215
(4,465)
3,432
25,946
(1,297)
4,044
63,591
41,681
(34,248)
22,765
44,259
24,741
3,985
2,595
(545)
24,219
(5,874)
12,288
(2,131)
52,681
22,735
10,624
(10,423)
582
46,772
(1,861)
1,431
10,814
(541)
1,685
26,506
17,373
(14,275)
9,489
18,448
10,312
5,015
3,266
(686)
30,479
(7,393)
15,464
(2,681)
66,299
28,611
13,370
(13,117)
732
58,863
(2,342)
1,800
13,610
(680)
2,121
33,357
21,864
(17,965)
11,941
23,216
12,978
18,560
12,088
(2,538)
112,802
(27,360)
57,232
(9,924)
245,369
105,890
49,483
(48,545)
2,710
217,850
(8,668)
6,663
50,370
(2,519)
7,850
123,454
80,919
(66,488)
44,195
85,923
48,032
Total Administrative Expenses ..........................................................
568,336
236,889
298,122
1,103,347
Total Operating Expenses (Other Costs+ Applicant Cost +
Pilot Boats + Admin) ...............................................................
2,096,160
873,705
1,099,554
4,069,419
Directors Adjustments—Applicant Surcharge Collected ..........................
........................
........................
........................
........................
Total Directors Adjustments .....................................................................
........................
........................
........................
........................
Total Operating Expenses (OpEx + Adjustments) ...................................
2,096,160
873,705
1,099,554
4,069,419
B. Step 2: Project Operating Expenses,
Adjusting for Inflation or Deflation
In accordance with the text in
§ 404.102, having identified the 2021
operating expenses in Step 1, the next
step is to estimate the current year’s
lotter on DSK11XQN23PROD with PROPOSALS1
Undesignated
43 The CPI is defined as ‘‘All Urban Consumers
(CPI–U), All Items, 1982–4=100.’’ Series
CUUR0200SAO (Downloaded March 21, 2023).
Available at https://www.bls.gov/cpi/data.htm., All
Urban Consumers (Current Series), multiscreen
VerDate Sep<11>2014
16:28 Aug 15, 2023
Jkt 259001
operating expenses by adjusting those
expenses for inflation over the 3-year
period. We calculate inflation using the
BLS data from the CPI for the Midwest
Region of the United States for the 2022
inflation rate.43 Because the BLS does
not provide forecasted inflation data, we
use economic projections from the
Federal Reserve for the 2023 and 2024
inflation modification.44 Based on that
information, the calculations for Step 2
are as presented in table 28:
data, not seasonally adjusted, 0200 Midwest,
Current, All Items, Monthly, 12-month Percent
Change and Annual Data.
44 The 2023 and 2024 inflation rates are available
at https://www.federalreserve.gov/monetarypolicy/
files/fomcprojtabl20230322.pdf. We used the Core
PCE December Projection found in table 1. (Last
visited 04/2023).
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55648
Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Proposed Rules
TABLE 28—ADJUSTED OPERATING EXPENSES FOR DISTRICT THREE
District Three
Undesignated
Total
2022
2023
2024
Designated
Total
Operating Expenses (Step 1) .............................................................................................
Inflation Modification (@8%) ..............................................................................................
Inflation Modification (@3.5%) ...........................................................................................
Inflation Modification (@2.5%) ...........................................................................................
$3,195,714
255,657
120,798
89,304
$873,705
69,896
33,026
24,416
$4,069,419
325,553
153,824
113,720
Adjusted 2024 Operating Expenses .....................................................................................
3,661,473
1,001,043
4,662,516
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 registered pilots in each
district. We determine the number of
registered pilots based on data provided
by the WGLPA. Using these numbers,
seasonal staffing model discussed in the
2017 ratemaking (82 FR 41466), a
certain number of pilots are assigned to
designated waters, and a certain number
of pilots are assigned to undesignated
waters, as shown in table 29. These
numbers are used to determine the
amount of revenue needed in their
respective areas.
we estimate that there will be 22
registered pilots in 2024 in District
Three. We 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 two apprentice pilots in
2024 in District Three. Based on the
TABLE 29—AUTHORIZED PILOTS FOR DISTRICT THREE
Item
District Three
Proposed Maximum Number of Pilots (per § 401.220(a)) * .............................................................................................................
2024 Authorized Pilots (total) ..........................................................................................................................................................
Pilots Assigned to Designated Areas ..............................................................................................................................................
Pilots Assigned to Undesignated Areas ..........................................................................................................................................
2024 Apprentice Pilots .....................................................................................................................................................................
22
22
5
17
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).
D. Step 4: Determine Target Pilot
Compensation Benchmark and
Apprentice Pilot Wage Benchmark
In this step, we determine the total
pilot compensation for each area.
Because we are issuing an ‘‘interim’’
ratemaking this year, we follow the
procedure outlined in paragraph (b) of
§ 404.104, which adjusts the existing
compensation benchmark by inflation.
First, we adjust the 2023 target
compensation benchmark of $424,398
by 1.7 percent for a value of $431,613.
This accounts for the difference in
actual first quarter 2023 ECI inflation,
which is 4.4 percent, and the 2023 PCE
estimate of 2.7 percent.45 46 The second
association. In accordance with
§ 404.104(c), we use 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 Three, as
shown in table 30. We estimate that the
number of apprentice pilots with
limited registration needed will be two
for District Three in the 2024 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.
step accounts for projected inflation
from 2023 to 2024, which is 2.5
percent.47 Based on the projected 2024
inflation estimate, the proposed target
compensation benchmark for 2024 is
$442,403 per pilot. The proposed
apprentice pilot wage benchmark is 36
percent of the target pilot compensation,
or $159,265 ($442,403 × 0.36).
Next, we certify that the number of
pilots estimated for 2024 is less than or
equal to the number permitted under
the staffing model in § 401.220(a). The
staffing model suggests that District
Three needs 22 pilots, which is less
than or equal to the number of
registered pilots provided by the pilot
TABLE 30—TARGET COMPENSATION FOR DISTRICT THREE
lotter on DSK11XQN23PROD with PROPOSALS1
District Three
Target Pilot Compensation ..........................................................................................................
Number of Pilots ..........................................................................................................................
Total Target Pilot Compensation ..........................................................................................
Target Apprentice Pilot Compensation ........................................................................................
Number of Apprentice Pilots ........................................................................................................
45 Employment Cost Index, Total Compensation
for Private Industry workers in Transportation and
Material Moving, Annual Average, Series ID:
CIU2010000520000A. https://www.bls.gov/
news.release/eci.t05.htm (Last visited 04/28/23).
VerDate Sep<11>2014
16:28 Aug 15, 2023
Jkt 259001
Undesignated
Designated
$442,403
17
$7,520,851
$159,265
........................
$442,403
5
$2,212,015
$159,265
........................
46 Table 1 Summary of Economic Projections, PCE
Inflation. https://www.federalreserve.gov/
monetarypolicy/files/fomcprojtabl20220316.pdf
(Last visited 05/17/23).
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Total
$442,403
22
$9,732,866
$159,265
2
47 Table 1 Summary of Economic Projections, PCE
Inflation December Projection. https://
www.federalreserve.gov/monetarypolicy/files/
fomcprojtabl20230322.pdf (Last visited 03/2023).
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55649
Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Proposed Rules
TABLE 30—TARGET COMPENSATION FOR DISTRICT THREE—Continued
District Three
Undesignated
Total Target Apprentice Pilot Compensation .......................................................................
E. Step 5: Project Working Capital Fund
Next, the Coast Guard calculates the
working capital fund revenues needed
for each area. We first add the figures for
projected operating expenses, total pilot
compensation, and total target
apprentice pilot wage for each area, and
then, we find the preceding year’s
average annual rate of return for new
issues of high-grade corporate securities.
Designated
$251,639
Total
$66,891
$318,530
Using Moody’s data, the number is
4.0742 percent, rounded.48 By
multiplying the two figures, we obtain
the working capital fund contribution
for each area, as shown in table 31.
TABLE 31—WORKING CAPITAL FUND CALCULATION FOR DISTRICT THREE
District Three
Undesignated
Designated
Adjusted Operating Expenses (Step 2) .......................................................................................
Total Target Pilot Compensation (Step 4) ...........................................................................
Total Target Apprentice Pilot Compensation (Step 4) .........................................................
Total 2024 Expenses ............................................................................................................
Working Capital Fund (4.0742%) ................................................................................................
$3,661,473
$7,520,851
$251,639
$11,433,963
$465,839
F. Step 6: Project Needed Revenue
working capital fund contribution (from
Step 5). The calculations are shown in
table 32.
In this step, we add 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
$1,001,043
$2,212,015
$66,891
$3,279,949
$133,631
Total
$4,662,516
$9,732,866
$318,530
$14,713,912
$599,470
TABLE 32—REVENUE NEEDED FOR DISTRICT THREE
District Three
Undesignated
Designated
Adjusted Operating Expenses (Step 2) .......................................................................................
Total Target Pilot Compensation (Step 4) ...........................................................................
Total Target Apprentice Pilot Compensation (Step 4) .........................................................
Working Capital Fund (Step 5) ....................................................................................................
Total Revenue Needed ........................................................................................................
$3,661,473
$7,520,851
$251,639
$465,839
$11,899,802
G. Step 7: Calculate Initial Base Rates
filtering by district, year, job status
(including only processed jobs), and
flagging code (including only U.S. jobs).
Because we calculate separate figures
for designated and undesignated waters,
there are two parts for each calculation.
We show these values in table 33.
Having determined the revenue
needed for each area in the previous six
steps, we divide that number by the
expected number of traffic hours to
develop an hourly rate. Step 7 is a two-
part process. In the first part, the 10-year
traffic average 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
$1,001,043
$2,212,015
$66,891
$133,631
$3,413,580
Total
$4,662,516
$9,732,866
$318,530
$599,470
$15,313,382
TABLE 33—TIME ON TASK FOR DISTRICT THREE (HOURS)
District Three
Year
lotter on DSK11XQN23PROD with PROPOSALS1
Undesignated
2022
2021
2020
2019
2018
2017
2016
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
.........................................................................................................................................................................
48 Moody’s Seasoned Aaa Corporate Bond Yield,
average of 2022 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
VerDate Sep<11>2014
16:28 Aug 15, 2023
Jkt 259001
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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23,985
18,286
24,178
24,851
19,967
20,955
23,421
Designated
4,424
2,516
3,682
3,395
3,455
2,997
2,769
fred.stlouisfed.org/series/AAA. (Last visited 03/21/
2023).
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16AUP1
55650
Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Proposed Rules
TABLE 33—TIME ON TASK FOR DISTRICT THREE (HOURS)—Continued
District Three
Year
Undesignated
Designated
2015 .........................................................................................................................................................................
2014 .........................................................................................................................................................................
2013 .........................................................................................................................................................................
22,824
25,833
17,115
2,696
3,835
2,631
Average ............................................................................................................................................................
22,142
3,240
Next, we derive 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 34.
TABLE 34—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, we calculate the average
weighting factor for each designated and
undesignated area. We collect the
weighting factors, set forth in 46 CFR
401.400, for each vessel trip. Using this
data, we calculate the average weighting
$11,899,802
22,142
$537
Designated
$3,413,580
3,240
$1,054
factor for each area using the data from
each vessel transit from 2014 onward, as
shown in tables 35 and 36.
TABLE 35—AVERAGE WEIGHTING FACTOR FOR DISTRICT THREE, UNDESIGNATED AREAS
Number of
transits
lotter on DSK11XQN23PROD with PROPOSALS1
Vessel class/year
Area 6
Class 1
Class 1
Class 1
Class 1
Class 1
Class 1
Class 1
Class 1
Class 1
Class 2
Class 2
Class 2
Class 2
Class 2
Class 2
Class 2
Class 2
Class 2
Class 3
Class 3
Class 3
Class 3
Class 3
Class 3
Class 3
Class 3
Class 3
Class 4
Class 4
Class 4
Class 4
Class 4
Class 4
Class 4
Class 4
Class 4
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
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.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
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45
56
136
148
103
173
4
8
94
274
207
236
264
169
279
332
273
278
15
8
10
19
9
9
4
5
3
394
375
332
367
337
334
339
365
385
16AUP1
Weighting
factor
1
1
1
1
1
1
1
1
1
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.3
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
1.45
Weighted
transits
45
56
136
148
103
173
4
8
94
315
238
271
304
194
321
382
314
320
20
10
13
25
12
12
5
7
4
571
544
481
532
489
484
492
529
558
55651
Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Proposed Rules
TABLE 35—AVERAGE WEIGHTING FACTOR FOR DISTRICT THREE, UNDESIGNATED AREAS—Continued
Number of
transits
Vessel class/year
Weighting
factor
Weighted
transits
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 1 (2022) .............................................................................................................................
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 2 (2022) .............................................................................................................................
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 3 (2022) .............................................................................................................................
Class 4 (2014) .............................................................................................................................
Class 4 (2015) .............................................................................................................................
Class 4 (2016) .............................................................................................................................
Class 4 (2017) .............................................................................................................................
Class 4 (2018) .............................................................................................................................
Class 4 (2019) .............................................................................................................................
Class 4 (2020) .............................................................................................................................
Class 4 (2021) .............................................................................................................................
Class 4 (2022) .............................................................................................................................
6,380
........................
8,200
3
0
4
4
0
0
1
5
13
177
169
174
151
102
120
180
124
103
3
0
7
18
7
6
1
1
6
243
253
204
269
188
254
265
319
271
1
1
1
1
1
1
1
1
1
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.3
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
1.45
3
0
4
4
0
0
1
5
13
204
194
200
174
117
138
207
143
118
4
0
9
23
9
8
1
1
8
352
367
296
390
273
368
384
463
393
Total for Area 8 ....................................................................................................................
Combined total .....................................................................................................................
Average weighting factor (weighted transits/number of transits) ..................................
3,645
10,025
........................
........................
........................
1.30
4,874
13,074
........................
TABLE 36—AVERAGE WEIGHTING FACTOR FOR DISTRICT THREE, DESIGNATED AREAS
Number of
transits
lotter on DSK11XQN23PROD with PROPOSALS1
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
1
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
2
3
3
3
3
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
(2014)
(2015)
(2016)
(2017)
(2018)
(2019)
(2020)
(2021)
(2022)
(2014)
(2015)
(2016)
(2017)
VerDate Sep<11>2014
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.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
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27
23
55
62
47
45
15
15
102
221
145
174
170
126
162
218
131
176
15
0
6
14
16AUP1
Weighting
factor
1
1
1
1
1
1
1
1
1
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.15
1.3
1.3
1.3
1.3
Weighted
transits
27
23
55
62
47
45
15
15
102
254
167
200
196
145
186
251
151
202
20
0
8
18
55652
Federal Register / Vol. 88, No. 157 / Wednesday, August 16, 2023 / Proposed Rules
TABLE 36—AVERAGE WEIGHTING FACTOR FOR DISTRICT THREE, DESIGNATED AREAS—Continued
Vessel class/year
Number of
transits
Weighting
factor
Weighted
transits
Class 3 (2018) .............................................................................................................................
Class 3 (2019) .............................................................................................................................
Class 3 (2020) .............................................................................................................................
Class 3 (2021) .............................................................................................................................
Class 3 (2022) .............................................................................................................................
Class 4 (2014) .............................................................................................................................
Class 4 (2015) .............................................................................................................................
Class 4 (2016) .............................................................................................................................
Class 4 (2017) .............................................................................................................................
Class 4 (2018) .............................................................................................................................
Class 4 (2019) .............................................................................................................................
Class 4 (2020) .............................................................................................................................
Class 4 (2021) .............................................................................................................................
Class 4 (2022) .............................................................................................................................
Total ......................................................................................................................................
Average weighting factor (weighted transits/number of transits) ..................................
6
3
1
2
5
321
245
191
234
225
308
336
258
344
4,428
........................
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
1.45
........................
1.31
8
4
1
3
7
465
355
277
339
326
447
487
374
499
5,780
........................
I. Step 9: Calculate Revised Base Rates
In this step, we revise the base rates
so that the total cost of pilotage will be
equal to the revenue needed, after
considering the impact of the weighting
factors. To do this, we divide the initial
base rates calculated in Step 7 by the
average weighting factors calculated in
Step 8, as shown in table 37.
TABLE 37—REVISED BASE RATES FOR DISTRICT THREE
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 proposed rates
Average
weighting
factor
(Step 8)
Initial rate
(Step 7)
incorporate appropriate compensation
for pilots to handle heavy traffic
periods, and whether there are enough
pilots to handle those heavy traffic
periods. The Director also considers
whether the proposed rates would cover
operating expenses and infrastructure
$537
$1,054
1.30
1.31
Revised rate
(initial rate ÷
average
weighting
factor)
$413
$805
costs, taking average traffic and
weighting factors into consideration.
Based on this information, the Director
is not proposing any alterations to the
rates in this step. We propose to modify
§ 401.405(a)(5) and (6) to reflect the
proposed rates shown in table 38.
TABLE 38—PROPOSED FINAL RATES FOR DISTRICT THREE
Name
District Three: Designated ........................................
District Three: Undesignated ....................................
St. Marys River .........................................................
Lakes Huron, Michigan, and Superior ......................
X. Regulatory Analyses
lotter on DSK11XQN23PROD with PROPOSALS1
Final 2023
pilotage rate
Area
We developed this proposed rule after
considering numerous statutes and
Executive orders related to rulemaking.
A summary of our analyses based on
these statutes or Executive orders
follows.
A. Regulatory Planning and Review
Executive Orders 12866 (Regulatory
Planning and Review), as amended by
Executive Order 14094 (Modernizing
Regulatory Review), and 13563
(Improving Regulation and Regulatory
VerDate Sep<11>2014
16:28 Aug 15, 2023
Jkt 259001
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 costs and benefits, reducing
costs, harmonizing rules, and promoting
flexibility.
The Office of Management and Budget
(OMB) has not designated this rule a
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$834
410
Proposed 2024
pilotage rate
$805
413
significant regulatory action under
section 3(f) of Executive Order 12866, as
amended by Executive Order 14094.
Accordingly, OMB has not reviewed
this regulatory action.
The purpose of this proposed rule is
to establish new 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 Coast Guard
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concluded the last full ratemaking in
February of 2023.49 For this NPRM, the
Coast Guard estimates an increase in
cost of approximately $1.91 million to
industry. This is approximately a 5percent increase because of the change
in revenue needed in 2024 compared to
the revenue needed in 2023. See table
39.
TABLE 39—ECONOMIC IMPACTS DUE TO PROPOSED CHANGES
Change
Description
Affected population
Rate changes ....
In accordance with 46 U.S.C.
Chapter 93, the Coast
Guard is required to review
and adjust pilotage rates
annually.
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The Coast Guard is required to review
and adjust pilotage rates on the Great
Lakes annually. See section IV., Basis
and Purpose, of this preamble for
detailed discussions of the legal basis
and purpose for this rulemaking. Based
on our annual review for this
rulemaking, we are adjusting the
pilotage rates for the 2024 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 would
be an increase in rates for both areas in
District One, the designated area for
District Two, and the undesignated area
in District Three. The result would be a
decrease in rates for the undesignated
area for District Two and the designated
area for District Three. These changes
would also lead to a net increase in the
cost of service to shippers. The change
in per-unit cost to each individual
shipper would depend on their area of
operation.
A detailed discussion of our economic
impact analysis follows.
Affected Population
This proposed rule affects United
States Great Lakes pilots and apprentice
pilots, the 3 pilot associations, and the
owners and operators of 277 oceangoing
vessels that transit the Great Lakes
annually on average from 2020 to 2022.
The Coast Guard estimates that there
will be 56 registered pilots and 7
apprentice pilots during the 2024
shipping season. The shippers affected
49 Great Lakes Pilotage Rates—2023 Annual
Ratemaking and Review of Methodology (88 FR
12226), published February 27, 2023.
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Costs
Benefits
Owners and operators of 277 Increase of $1,914,438 due
vessels transiting the Great
to change in revenue
Lakes system annually, 56
needed for 2024
United States Great Lakes
($39,573,633) from revpilots, 7 apprentice pilots,
enue needed for 2023
and 3 pilotage associations.
($37,659,195) as shown in
table 40.
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.
by these rate changes are those owners
and operators of domestic vessels
operating ‘‘on register’’ (engaged in
foreign trade) and the 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, 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 2020 through
2022 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, we use a 10-year average
to estimate the traffic. We used 3 years
of the most recent billing data to
estimate the affected population. When
we reviewed 10 years of the most recent
billing data, we found the data included
vessels that have not used pilotage
services in recent years. We believe that
using 3 years of billing data is a better
representation of the vessel population
currently using pilotage services and
impacted by this proposed rule.
We found that 444 unique vessels
used pilotage services during the years
2020 through 2022. That is, these
vessels had a pilot dispatched to the
vessel, and billing information was
recorded in SeaPro. Of these vessels,
412 were foreign-flagged vessels and 32
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 2020 through 2022 as the
best representation of vessels estimated
to be affected by the rates in this
proposed rule. From 2020 through 2022,
an average of 277 vessels used pilotage
services annually.50 On average, 266 of
these vessels were foreign-flagged and
11 were U.S.-flagged vessels that
voluntarily opted into the pilotage
service (these figures are rounded
averages).
50 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.
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Total Cost to Shippers
The rate changes resulting from this
adjustment to the rates would result in
a net increase in the cost of service to
shippers. However, the change in per-
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unit cost to each individual shipper
would be 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 2023 with the
total projected revenues to cover costs
in 2024. We set pilotage rates so 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 proposed rule.
The impacts of the rate changes on
shippers are estimated from the district
pilotage projected revenues (shown in
tables 8, 20, and 32 of this preamble).
The Coast Guard estimates that, for the
2024 shipping season, the projected
revenue needed for all three districts is
$39,573,633.
To estimate the change in cost to
shippers from this proposed rule, the
Coast Guard compared the 2024 total
projected revenues to the 2023 projected
revenues. Because we review and
prescribe 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 2023 final
rule, we estimated the total projected
revenue needed for 2023 as
37,659,195.51 This is the best
approximation of 2023 revenues, as, at
the time of publication of this proposed
rule, the Coast Guard does not have
enough audited data available for the
2023 shipping season to revise these
projections. Table 40 shows the revenue
projections for 2023 and 2024 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 40—EFFECT OF THE PROPOSED RULE BY AREA AND DISTRICT
[U.S. dollars; non-discounted]
Revenue needed
in 2023
Revenue needed
in 2024
Total, District One ............................................................................................................
Total, District Two ............................................................................................................
Total, District Three .........................................................................................................
$12,609,601
10,392,542
14,657,052
$13,706,739
10,553,511
15,313,382
$1,097,138
160,969
656,330
System Total .............................................................................................................
37,659,195
39,573,633
1,914,438
Area
Additional costs
of this rule
* All figures are rounded to the nearest dollar and may not sum.
The resulting difference between the
projected revenue in 2023 and the
projected revenue in 2024 is the annual
change in payments from shippers to
pilots as a result of the rate changes
proposed by this NPRM. The effect of
the rate changes to shippers would vary
by area and district. After considering
the change in pilotage rates, the
proposed rate changes would lead to
affected shippers operating in District
One experiencing an increase in
payments of $1,097,138 over the
previous year. Affected shippers
operating in District Two and District
Three would experience an increase in
payments of $160,969 and $656,330,
respectively, when compared with 2023.
The overall adjustment in payments
would increase payments by shippers of
$1,914,438 across all three districts (a 5percent increase when compared with
2023). Again, because the Coast Guard
reviews and sets rates for Great Lakes
pilotage annually, we estimate the
impacts as single-year costs rather than
annualizing them over a 10-year period.
Table 41 shows the difference in
revenue by revenue-component from
2023 to 2024 and presents each revenue-
component as a percentage of the total
revenue needed. In both 2023 and 2024,
the largest revenue-component was
pilotage compensation (63 percent of
total revenue needed in 2023, and 63
percent of total revenue needed in
2024), followed by operating expenses
(32 percent of total revenue needed in
2023, and 31 percent of total revenue
needed in 2024). The large increase in
the working capital fund, 56 percent
from 2023 to 2024, is driven by a large
increase in the Target Rate of Return on
Investment from 2.7033 percent in 2021
to 4.0742 percent in 2022.52
TABLE 41—DIFFERENCE IN REVENUE BY REVENUE-COMPONENT
Revenue
needed
in 2023
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Revenue component
Percentage
of total
revenue
needed
in 2023
Revenue
needed
in 2024
Percentage
of total
revenue
needed
in 2024
Difference
(2024 revenue—
2023 revenue)
Percentage
change from
previous year
Adjusted Operating Expenses .......................
Total Target Pilot Compensation ...................
Total Target Apprentice Pilot Compensation
Working Capital Fund ....................................
$11,984,950
23,766,288
916,700
991,257
32
63
2
3
$12,135,029
24,774,568
1,114,856
1,549,180
31
63
3
4
$150,079
1,008,280
198,156
557,923
1
4
22
56
Total Revenue Needed ...........................
37,659,195
100
39,573,633
100
1,914,438
5
* All figures are rounded to the nearest dollar and may not sum.
51 88 FR 12226, 12252. See table 42. https://
www.govinfo.gov/content/pkg/FR-2023-02-27/pdf/
2023-03212.pdf (Last visited 5/17/23).
52 Moody’s Seasoned Aaa Corporate Bond Yield,
average of 2022 monthly data. The Coast Guard uses
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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
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2023).
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As stated above, we estimate that
there would be a total increase in
revenue needed by the pilot associations
of $1,914,438. This represents an
increase in revenue needed for target
pilot compensation of $1,008,280, an
increase in revenue needed for the total
apprentice pilot wage benchmark of
$198,156, an increase in the revenue
needed for adjusted operating expenses
of $150,079, and an increase in the
revenue needed for the working capital
fund of $557,923.
The change in revenue needed for
pilot compensation, $1,008,280, is due
to two factors: (1) The changes to adjust
2023 pilotage compensation to account
for the difference between actual ECI
inflation 53 (4.4 percent) and predicted
PCE inflation 54 (2.7 percent) for 2023;
and (2) projected inflation of pilotage
compensation in Step 2 of the
methodology, using predicted inflation
through 2024.
The target compensation is $442,403
per pilot in 2024, compared to $424,398
55655
in 2023. The proposed changes to
modify the 2023 pilot compensation to
account for the difference between
predicted and actual inflation would
increase the 2023 target compensation
value by 1.7 percent. As shown in table
42, this inflation adjustment increases
total compensation by $7,215 per pilot,
and the total revenue needed by
$404,027, when accounting for all 56
pilots.
TABLE 42—CHANGE IN REVENUE RESULTING FROM THE CHANGE TO INFLATION OF PILOT COMPENSATION CALCULATION
IN STEP 4
2023 Target Pilot Compensation .............................................................................................................................................................
Adjusted 2023 Compensation ($424,398 × 1.017) .................................................................................................................................
Difference between Adjusted Target 2023 Compensation and Target 2023 Compensation ($431,613¥$424,398) ............................
Increase in total Revenue for 56 Pilots ($7,215 × 56) ............................................................................................................................
$424,398
431,613
7,215
404,027
*All figures are rounded to the nearest dollar and may not sum.
Similarly, table 43 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 $2,597 per
apprentice pilot, and the total revenue
needed by $18,181 when accounting for
all seven apprentice pilots.
TABLE 43—CHANGE IN REVENUE RESULTING FROM THE CHANGE TO INFLATION OF APPRENTICE PILOT COMPENSATION
CALCULATION IN STEP 4
Target Apprentice Pilot Compensation ....................................................................................................................................................
Adjusted Compensation ($152,783 × 1.017) ...........................................................................................................................................
Difference between Adjusted Target Compensation and Target Compensation ($155,381¥$152,783) ..............................................
Increase in total Revenue for Apprentices ($2,597 × 7) .........................................................................................................................
$152,783
155,381
2,597
18,181
*All figures are rounded to the nearest dollar and may not sum.
As noted earlier, the Coast Guard
predicts that 56 pilots would be needed
for the 2024 season. This is the same
number of pilots as the 2023 season, so
we do not estimate a change in revenue
needed for pilot compensation separate
from the changes to inflation.
Similarly, the Coast Guard predicts
that seven apprentice pilots would be
needed for the 2024 season. This would
be an increase of one from the 2023
season. Table 44 shows the increase of
$156,668 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 2023 apprentice pilotage
compensation to account for the
difference between actual and predicted
inflation.
TABLE 44—CHANGE IN REVENUE RESULTING FROM INCREASE OF ONE APPRENTICE PILOT
2024 Apprentice Target Compensation ...................................................................................................................................................
Total Number of New Apprentices ..........................................................................................................................................................
Total Cost of new Apprentices ($159,265 × 1) .......................................................................................................................................
Difference between Adjusted Target 2023 Compensation and Target 2023 Compensation ($159,265¥$155,381) ............................
Increase in total Revenue for due to increase of 1 apprentice ($2,597 × 1) ..........................................................................................
Net Increase in total Revenue for increase of 1¥Apprentice (159,265¥$2,597) .................................................................................
$159,265
1
159,265
2,597
2,597
156,668
*All figures are rounded to the nearest dollar and may not sum.
Another increase, $604,253, would be
the result of increasing compensation
for the 56 pilots to account for future
inflation of 2.5 percent in 2024. This
would increase total compensation by
$10,790 per pilot, as shown in table 45.
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TABLE 45—CHANGE IN REVENUE RESULTING FROM INFLATING 2023 COMPENSATION TO 2024
Adjusted 2023 Compensation .................................................................................................................................................................
2024 Target Compensation ($431,613 × 1.025) .....................................................................................................................................
Difference between Adjusted 2023 Compensation and Target 2024 Compensation $442,403¥$431,613) .........................................
53 Employment Cost Index, Total Compensation
for Private Industry workers in Transportation and
Material Moving, Annual Average, Series ID:
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news.release/eci.t05.htm (Last visited 04/28/23).
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$431,613
442,403
10,790
54 Table 1 Summary of Economic Projections, PCE
Inflation December Projection. https://
www.federalreserve.gov/monetarypolicy/files/
fomcprojtabl20220316.pdf (Last visited 5/17/23).
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TABLE 45—CHANGE IN REVENUE RESULTING FROM INFLATING 2023 COMPENSATION TO 2024—Continued
Increase in total Revenue for 56 Pilots ($10,790 × 56) ..........................................................................................................................
604,253
*All figures are rounded to the nearest dollar and may not sum.
Similarly, an increase of $27,191
would be the result of increasing
compensation for the 7 apprentice pilots
to account for future inflation of 2.5
percent in 2024. This would increase
total compensation by $3,884 per
apprentice pilot, as shown in table 46.
TABLE 46—CHANGE IN REVENUE RESULTING FROM INFLATING 2023 APPRENTICE PILOT COMPENSATION TO 2024
Adjusted 2023 Compensation .................................................................................................................................................................
2024 Target Compensation ($442,403 × 36%) .......................................................................................................................................
Difference between Adjusted Compensation and Target Compensation ($159,265¥$155,381) ..........................................................
Increase in total Revenue for 7 Apprentices ($3,884 × 7) ......................................................................................................................
$155,381
159,265
3,884
27,191
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*All figures are rounded to the nearest dollar and may not sum.
Table 47 presents the percentage
change in revenue by area and revenue-
component, excluding surcharges, as
they are applied at the district level.55
55 The 2023 projected revenues are from the Great
Lakes Pilotage Rate-2023 Annual Review and
Revisions to Methodology final rule (88 FR 12226),
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tables 10, 22, and 34. The 2024 projected revenues
are from tables 8, 20, and 32 of this proposed rule.
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Benefits
B. Small Entities
Under the Regulatory Flexibility Act,
5 U.S.C. 601–612, we have considered
whether this proposed rule would have
a significant economic impact on a
substantial number of small entities.
The term ‘‘small entities’’ comprises
small businesses, not-for-profit
organizations that are independently
owned and operated and are not
dominant in their fields, and
governmental jurisdictions with
populations of less than 50,000.
For this proposed rule, the Coast
Guard reviewed recent company size
and ownership data for the vessels
identified in SeaPro, and we reviewed
business revenue and size data provided
by publicly available sources such as
ReferenceUSA.56 As described in
section X., Regulatory Analyses, and
This proposed 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 enough pilots to meet peak
shipping demand, helping to reduce
delays caused by pilot shortages.
section III., Executive Summary, of this
preamble, we found that 444 unique
vessels used pilotage services during the
years 2020 through 2022. These vessels
are owned by 53 entities, of which 47
are foreign entities that operate
primarily outside the United States, and
the remaining 6 entities are U.S.
entities. We 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.57 Table 48 shows the North
American Industry Classification
System (NAICS) codes of the U.S.
entities and the small entity standard
size established by the SBA.
TABLE 48—NAICS CODES AND SMALL ENTITIES SIZE STANDARDS
NAICS
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238910
425120
483211
483212
484230
488330
561599
713930
813910
Description
............................................
............................................
............................................
............................................
............................................
............................................
............................................
............................................
............................................
Small entity size standard
Site Preparation Contractors .................................................................
Wholesale Trade Agents And Brokers ..................................................
Inland Water Freight Transportation ......................................................
Inland Water Transportation ..................................................................
Specialized Freight (Except Used Goods) Trucking, Long-Distance ....
Navigational Services to Shipping .........................................................
All Other Travel Arrangement And Reservation Services .....................
Marinas ..................................................................................................
Business Associations ...........................................................................
$19,000,000.
125 Employees.
1,050 Employees.
550 Employees.
$34,000,000.
$47,000,000.
$32,500,000.
$11,000,000.
$15,500,000.
Of the six U.S. entities, two exceed
the SBA’s small business standards for
small entities. To estimate the potential
impact on the remaining four small
entities, the Coast Guard used their 2022
invoice data to estimate their pilotage
costs in 2024. We increased their 2022
costs to account for the changes in
pilotage rates resulting from this
proposed rule and the 2023 final rule.
We estimated the change in cost to these
entities resulting from this proposed
rule by subtracting their estimated 2023
pilotage costs from their estimated 2024
pilotage costs and found the average
costs to small firms would be
approximately $7,345.04, with a range
of $4,198.62 to $11,322.27. We then
compared the estimated change in
pilotage costs between 2023 and 2024
with each firm’s annual revenue. In all
but one case, the impact of the change
in estimated pilotage expenses would be
below 1 percent of revenues. For one
entity, the impact would be 1.62 percent
of revenues.
In addition to the owners and
operators discussed previously, three
U.S. entities that receive revenue from
pilotage services would be affected by
this proposed rule. These are the three
pilot associations that provide and
manage pilotage services within the
Great Lakes districts. These associations
are designated collectively as the Lake
Carrier’s Association, as well as
individually by each separate district
association, all with the same NAICS
code, ‘‘Business Association’’ 58 with a
small-entity size standard of
$15,500,000. Based on the reported
revenues from audit reports, the
associations individually qualify as
small entities, but are not considered
small by the reported revenue of the
Lake Carrier’s Association.
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 would be impacted by this
proposed rule. We also did not find any
small governmental jurisdictions with
populations of fewer than 50,000 people
that would be impacted by this
proposed rule. Based on this analysis,
we conclude this proposed rule would
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 proposed
rule would not have a significant
economic impact on a substantial
number of small entities. If you think
that your business, organization, or
governmental jurisdiction qualifies as a
small entity and that this proposed rule
would have a significant economic
impact on it, please submit a comment
to the docket at the address listed in the
Public Participation and Request for
56 See https://resource.referenceusa.com/ (Last
visited 05/18/2023).
57 See https://www.sba.gov/document/support-table-size-standards (Last visited 5/17/23). 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.
58 In previous rulemakings, the associations used
a different NAICS code, 483212 Inland Water
Passenger Transportation, which had a size
standard of 500 employees (as of the latest SBA
[published March 17, 2023] small business size
table, that NAICS has a small business size
threshold of 550 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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Comments section of this preamble. In
your comment, explain why you think
it qualifies and how and to what degree
this proposed rule would economically
affect it.
C. Assistance for Small Entities
Under section 213(a) of the Small
Business Regulatory Enforcement
Fairness Act of 1996, Public Law 104–
121, we want to assist small entities in
understanding this proposed rule so that
they can better evaluate its effects on
them and participate in the rulemaking.
If the proposed rule would affect your
small business, organization, or
governmental jurisdiction and you have
questions concerning its provisions or
options for compliance, please call or
email the person in the FOR FURTHER
INFORMATION CONTACT section of this
proposed rule. The Coast Guard will not
retaliate against small entities that
question or complain about this
proposed 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).
lotter on DSK11XQN23PROD with PROPOSALS1
D. Collection of Information
This proposed rule would call for no
new collection of information under the
Paperwork Reduction Act of 1995, 44
U.S.C. 3501–3520.
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. We have
analyzed this proposed rule under
Executive Order 13132 and have
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
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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 proposed 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 proposed
rule would 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 million (adjusted for inflation) or
more in any one year. Although this
proposed rule would not result in such
an expenditure, we do discuss the
potential effects of this proposed rule
elsewhere in this preamble.
G. Taking of Private Property
This proposed rule would not cause a
taking of private property or otherwise
have taking implications under
Executive Order 12630 (Governmental
Actions and Interference with
Constitutionally Protected Property
Rights).
H. Civil Justice Reform
This proposed rule meets applicable
standards in sections 3(a) and 3(b)(2) of
Executive Order 12988, (Civil Justice
Reform), to minimize litigation,
eliminate ambiguity, and reduce
burden.
I. Protection of Children
We have analyzed this proposed rule
under Executive Order 13045
(Protection of Children from
Environmental Health Risks and Safety
PO 00000
Frm 00074
Fmt 4702
Sfmt 4702
55659
Risks). This proposed rule is not an
economically significant rule and would
not create an environmental risk to
health or risk to safety that might
disproportionately affect children.
J. Indian Tribal Governments
This proposed rule does not have
tribal implications under Executive
Order 13175 (Consultation and
Coordination with Indian Tribal
Governments), because it would not
have a substantial direct effect on one or
more Indian tribes, on the relationship
between the Federal Government and
Indian tribes, or on the distribution of
power and responsibilities between the
Federal Government and Indian tribes.
K. Energy Effects
We have analyzed this proposed rule
under Executive Order 13211 (Actions
Concerning Regulations That
Significantly Affect Energy Supply,
Distribution, or Use). We have
determined that it is not a ‘‘significant
energy action’’ under that order because
it is not a ‘‘significant regulatory action’’
under 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 would be inconsistent
with applicable law or otherwise
impractical. Voluntary consensus
standards are technical standards (e.g.,
specifications of materials, performance,
design, or operation; test methods;
sampling procedures; and related
management systems practices) that are
developed or adopted by voluntary
consensus standards bodies.
This proposed rule does not use
technical standards. Therefore, we did
not consider the use of voluntary
consensus standards.
M. Environment
We have analyzed this proposed rule
under Department of Homeland
Security Management Directive 023–01,
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
preliminary determination that this
action is one of a category of actions that
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lotter on DSK11XQN23PROD with PROPOSALS1
do not individually or cumulatively
have a significant effect on the human
environment. A preliminary Record of
Environmental Consideration
supporting this determination is
available in the docket. For instructions
on locating the docket, see the Public
Participation and Request for Comments
section of this preamble. This proposed
rule would be 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
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16:28 Aug 15, 2023
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security plans. Paragraph L54 pertains
to regulations which are editorial or
procedural.
This proposed rule involves adjusting
the pilotage rates for the 2024 shipping
season to account for changes in district
operating expenses, changes in the
number of pilots, and anticipated
inflation. All changes are consistent
with the Coast Guard’s maritime safety
missions. We seek any comments or
information that may lead to the
discovery of a significant environmental
impact from this proposed rule.
List of Subjects in 46 CFR Part 401
Administrative practice and
procedure, Great Lakes, Navigation
(water), Penalties, Reporting and
recordkeeping requirements, Seamen.
For the reasons discussed in the
preamble, the Coast Guard proposes to
amend 46 CFR part 401 as follows:
PART 401—GREAT LAKES PILOTAGE
REGULATIONS
1. The authority citation for part 401
continues to read as follows:
■
PO 00000
Frm 00075
Fmt 4702
Sfmt 9990
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 $925;
(2) Lake Ontario is $606;
(3) Lake Erie is $586;
(4) The navigable waters from
Southeast Shoal to Port Huron, MI is
$660;
(5) Lakes Huron, Michigan, and
Superior is $413; and
(6) The St. Mary’s River is $805.
*
*
*
*
*
Dated: August 10, 2023.
W.R. Arguin,
Rear Admiral, U.S. Coast Guard, Assistant
Commandant for Prevention Policy.
[FR Doc. 2023–17474 Filed 8–15–23; 8:45 am]
BILLING CODE 9110–04–P
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]]>Agencies
[Federal Register Volume 88, Number 157 (Wednesday, August 16, 2023)]
[Proposed Rules]
[Pages 55629-55660]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-17474]
=======================================================================
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DEPARTMENT OF HOMELAND SECURITY
Coast Guard
46 CFR Part 401
[Docket No. USCG-2023-0438]
RIN 1625-AC89
Great Lakes Pilotage Rates--2024 Annual Review
AGENCY: Coast Guard, DHS.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: In accordance with the statutory provisions enacted by the
Great Lakes Pilotage Act of 1960, the Coast Guard is proposing new
pilotage rates for the 2024 shipping season. The Coast Guard estimates
that this proposed rule would result in approximately a 5-percent
increase in operating costs compared to the 2023 season.
DATES: Comments and related material must be received by the Coast
Guard on or before September 15, 2023.
ADDRESSES: You may submit comments identified by docket number USCG-
2023-0438 using the Federal Decision Making Portal at
www.regulations.gov. See the ``Public Participation and Request for
Comments'' portion of the SUPPLEMENTARY INFORMATION section for further
instructions on submitting comments.
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].
SUPPLEMENTARY INFORMATION:
Table of Contents for Preamble
I. Public Participation and Request for Comments
II. Abbreviations
III. Executive Summary
IV. Basis and Purpose
V. Background
VI. Summary of the Ratemaking Methodology
VII. Historic Methodological and Other Changes
VIII. Individual Target Pilot Compensation Benchmark
IX. Discussion of Proposed 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
X. 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. Public Participation and Request for Comments
The Coast Guard views public participation as essential to
effective rulemaking and will consider all comments and material
received during the comment period. Your comment can help shape the
outcome of this rulemaking. If you submit a comment, please include the
docket number for this rulemaking, indicate the specific section of
this document to which each comment applies, and provide a reason for
each suggestion or recommendation.
Submitting comments. We encourage you to submit comments through
the Federal Decision Making Portal at www.regulations.gov. To do so, go
to www.regulations.gov, type USCG-2023-0438 in the search box and click
``Search.'' Next, look for this document in the Search Results column,
and click on it. Then click on the Comment option. If you cannot submit
your material by using www.regulations.gov, call or email the person in
the FOR FURTHER INFORMATION CONTACT section of this proposed rule for
alternate instructions.
Viewing material in docket. To view documents mentioned in this
proposed rule as being available in the docket, find the docket as
described in the previous paragraph, and then select ``Supporting &
Related Material'' in the Document Type column. Public comments will
also be placed in our online docket and can be viewed by following
instructions on the www.regulations.gov Frequently Asked Questions web
page. This web page also explains how to subscribe for email alerts
that will notify you when comments are posted or if a final rule is
published. We review all comments received, but we will only post
comments that address the topic of the proposed rule. We may choose not
to post off-topic, inappropriate, or duplicate comments that we
receive.
Personal information. We accept anonymous comments. Comments we
post to www.regulations.gov will include any personal information you
have provided. For more about privacy and submissions to the docket in
response to this document, see DHS's eRulemaking System of Records
notice (85 FR 14226, March 11, 2020).
Public meeting. We do not plan to hold a public meeting, but we
will consider doing so if we determine from public comments that a
meeting would be helpful. We would issue a separate Federal Register
notice to announce the date, time, and location of such a meeting.
[[Page 55630]]
II. Abbreviations
2023 final rule Great Lakes Pilotage Rates--2023 Annual Ratemaking
and Review of Methodology final rule
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
U.S.C. United States Code
WGLPA Western Great Lakes Pilots Association
III. 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 2024 season range from a proposed $413 to $925
per pilot hour (depending on which of the specific 6 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 and
finalized in 2023. 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 section
VI., Summary of the Ratemaking Methodology, in the preamble to this
proposed rule.
In this notice of proposed rulemaking (NPRM), we are conducting our
annual review and interim adjustment to the base pilotage rates for
2024. The Coast Guard last conducted a full ratemaking in 2023, with
the ``Great Lakes Pilotage Rates--2023 Annual Ratemaking and Review of
Methodology'' final rule (hereafter the ``2023 final rule'') (88 FR
12226, published February 27, 2023).\2\ Per title 46 of the Code of
Federal Regulations (CFR), section 404.100(b), via this NPRM, the Coast
Guard's Director of the Great Lakes Pilotage (``the Director'')
proposes to establish base pilotage rates by an interim ratemaking
pursuant to Sec. Sec. 404.101 through 404.110.
---------------------------------------------------------------------------
\2\ https://www.govinfo.gov/content/pkg/FR-2023-02-27/pdf/2023-03212.pdf (last visited 5/12/2023).
---------------------------------------------------------------------------
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 caused by unexpected events, such as
those caused by the COVID-19 pandemic. The Coast Guard estimates that
this proposed rule would result in $1,914,438 of additional costs. This
represents an increase in revenue needed for target pilot compensation,
an increase in revenue needed for the total apprentice pilot wage
benchmark, an increase in the revenue needed for adjusted operating
expenses, and an increase in the revenue needed for the working capital
fund.
Based on the ratemaking model discussed in this NPRM, the Coast
Guard is proposing the rates shown in table 1.
Table 1--Current and Proposed 2024 Pilotage Rates on the Great Lakes
----------------------------------------------------------------------------------------------------------------
Final 2023 Proposed 2024
Area Name pilotage rate pilotage rate
----------------------------------------------------------------------------------------------------------------
District One: Designated...................... St. Lawrence River.............. $876 $925
District One: Undesignated.................... Lake Ontario.................... 586 606
District Two: Designated...................... Navigable waters from Southeast 601 660
Shoal to Port Huron, MI.
District Two: Undesignated.................... Lake Erie....................... 704 586
District Three: Designated.................... St. Mary's River................ 834 805
District Three: Undesignated.................. Lakes Huron, Michigan, and 410 413
Superior.
----------------------------------------------------------------------------------------------------------------
This proposed rule would affect 56 U.S. Great Lakes pilots, 7
apprentice pilots, 3 pilot associations, and the owners and operators
of an average of 277 oceangoing vessels that transit the Great Lakes
annually. This proposed rule is not economically significant under
Executive Order 12866 and would not affect the Coast Guard's budget or
increase Federal spending. The estimated overall annual regulatory
economic impact of this rate change would be a net increase of
$1,914,438 in estimated payments made by shippers during the 2024
shipping season. This proposed rule would establish the 2024 yearly
target compensation for pilots on the Great Lakes at $442,403 per pilot
(a $18,005 increase, or 4.24 percent, over their 2023 target
compensation). Because the Coast Guard must review, and, if necessary,
adjust rates each year, we analyze these as single-year costs and do
not annualize them over 10 years. Section X., Regulatory Analyses, in
this preamble provides the regulatory impact analyses of this proposed
rule.
[[Page 55631]]
IV. Basis and Purpose
The legal basis of this rulemaking is 46 U.S.C. Chapter 93,\3\
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.\4\ 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.'' \5\ The statute requires that rates be
established or reviewed and adjusted each year, no later than March
1.\6\ 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.\7\ The Secretary's duties and authority under 46 U.S.C.
Chapter 93 have generally been delegated to the Coast Guard.\8\
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\3\ 46 U.S.C. 9301-9308.
\4\ 46 U.S.C. 9302(a)(1).
\5\ 46 U.S.C. 9303(f).
\6\ Ibid.
\7\ Ibid.
\8\ Department of Homeland Security (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.
---------------------------------------------------------------------------
Each pilot association is an independent business and is the sole
provider of pilotage services in its district of operation. Each pilot
association is responsible for funding its own operating expenses,
maintaining infrastructure, compensating pilots and apprentice
pilots,\9\ acquiring and implementing technological advances, and
training personnel and partners.
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\9\ Apprentice pilots and applicant pilots are compensated by
the pilot association they are training with, which is funded
through the pilotage rates. The ratemaking methodology accounts for
an apprentice pilot wage benchmark in Step 4 per 46 CFR 404.104(d).
The applicant pilot salaries are included in the pilot associations'
operating expenses used in Step 1 per 46 CFR 404.101.
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The Coast Guard uses a 10-step ratemaking methodology to derive a
pilotage rate, based on the estimated amount of traffic, which covers
these expenses.\10\ The methodology is designed to measure how much
revenue each pilotage association would need to cover expenses and to
provide competitive compensation to registered pilots. Since the Coast
Guard cannot guarantee demand for pilotage services, target pilot
compensation for registered pilots is a goal. The actual demand for
service dictates the actual compensation for the registered pilots. We
then divide that amount by the historic 10-year average for pilotage
demand. We recognize that, in years where traffic is above average,
pilot associations will accrue more revenue than projected while, in
years where traffic is below average, they will take in less. We
believe that, over the long term, however, this system ensures that
infrastructure will be maintained, and that pilots will receive
adequate compensation and work a reasonable number of hours, with
adequate rest between assignments, to ensure retention of highly
trained personnel.
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\10\ 46 CFR part 404.101-404.110. https://www.ecfr.gov/current/title-46/chapter-III/part-404 (Last visited 5/17/23).
---------------------------------------------------------------------------
The purpose of this proposed rule is to issue new pilotage rates
for the 2024 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 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.
V. Background
Pursuant to 46 U.S.C. 9303, the Coast Guard regulates shipping
practices and rates on the Great Lakes. Under Coast Guard regulations,
all vessels engaged in foreign trade (often referred to as ``salties'')
are required to engage United States or Canadian pilots during their
transit through the regulated waters.\11\ United States and Canadian
``lakers,'' which account for most commercial shipping on the Great
Lakes, are not affected.\12\ Generally, vessels are assigned a United
States or Canadian pilot, depending on the order in which they transit
a particular area of the Great Lakes, and do not choose the pilot they
receive. If a vessel is assigned a U.S. pilot, that pilot will be
assigned by the pilotage association responsible for the district in
which the vessel is operating, and the vessel operator will pay the
pilotage association for the pilotage services. The Great Lakes
Pilotage Authority (Canadian) (GLPA) establishes the rates for Canadian
registered pilots.
---------------------------------------------------------------------------
\11\ See 46 CFR part 401. https://www.ecfr.gov/current/title-46/chapter-III/part-401 (Last visited 5/17/23).
\12\ 46 U.S.C. 9302(f). A ``laker'' is a commercial cargo vessel
especially designed for and generally limited to use on the Great
Lakes. https://uscode.house.gov/view.xhtml?req=granuleid:U.S.C.-prelim-title46-section9302&num=0&edition=prelim (Last visited 5/17/
23).
---------------------------------------------------------------------------
The U.S. waters of the Great Lakes and the St. Lawrence Seaway are
divided into three pilotage districts. Pilotage in each district is
provided by an association certified by the Director to operate a
pilotage pool. The Saint Lawrence Seaway Pilotage Association (SLSPA)
provides pilotage services in District One, which includes all U.S.
waters of the St. Lawrence River and Lake Ontario. The Lakes Pilots
Association (LPA) provides pilotage services in District Two, which
includes all U.S. waters of Lake Erie, the Detroit River, Lake St.
Clair, and the St. Clair River. Finally, the Western Great Lakes Pilots
Association (WGLPA) provides pilotage services in District Three, which
includes all U.S. waters of the St. Mary's River; Sault Ste. Marie
Locks; and Lakes Huron, Michigan, and Superior.
Each pilotage district is further divided into ``designated'' and
``undesignated'' areas, depicted in table 2. Designated areas,
classified as such by Presidential Proclamation, are waters in which
pilots must direct the navigation of vessels at all times.\13\
Undesignated areas are open bodies of water not subject to the same
pilotage requirements. While working in undesignated areas, pilots must
``be on board and available to direct the navigation of the vessel at
the discretion of and subject to the customary authority of the
master.'' \14\ For these reasons, pilotage rates in designated areas
can be significantly higher than those in undesignated areas. Table 2
shows the districts and areas of the Great Lakes and St. Lawrence
Seaway.
---------------------------------------------------------------------------
\13\ Presidential Proclamation 3385, Designation of restricted
waters under the Great Lakes Pilotage Act of 1960, December 22, 1960
(https://www.archives.gov/federal-register/codification/proclamations/03385.html) (Last visited 5/31/23).
\14\ 46 U.S.C. 9302(a)(l)(B).
[[Page 55632]]
Table 2--Areas of the Great Lakes and St. Lawrence Seaway
----------------------------------------------------------------------------------------------------------------
Pilotage Area
District association Designation Number \15\ Area Name \16\
----------------------------------------------------------------------------------------------------------------
One............................. Saint Lawrence Designated.............. 1 St. Lawrence
Seaway Pilotage River.
Association
(SLPSA).
Undesignated............ 2 Lake Ontario.
Two............................. Lakes Pilots Designated.............. 5 Navigable waters
Association (LPA). from Southeast
Shoal to Port
Huron, MI.
Undesignated............ 4 Lake Erie.
Three........................... Western Great Lakes Designated.............. 7 St. Marys River.
Pilots Association
(WGLPA).
Undesignated............ 6 Lakes Huron and
Michigan.
Undesignated............ 8 Lake Superior.
----------------------------------------------------------------------------------------------------------------
Over the past several years, the Coast Guard has adjusted the Great
Lakes pilotage ratemaking methodology per our authority in 46 U.S.C.
9303(f) to conduct annual reviews of base pilotage rates and adjust
such base rates in each intervening year in consideration of the public
interest and the costs of providing the services. The current
methodology was finalized in the 2023 final rule.\17\ We summarize the
current methodology in the following section.
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\15\ Area 3 is the Welland Canal, which is serviced exclusively
by the Canadian GLPA and, accordingly, is not included in the United
States pilotage rate structure.
\16\ The areas are listed by name at 46 CFR 401.405. https://www.ecfr.gov/current/title-46/chapter-III/part-401/subpart-D/section-401.405 (Last visited 5/17/23).
\17\ 88 FR 12226.
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VI. Summary of the Ratemaking Methodology
As stated previously, the ratemaking methodology, outlined in 46
CFR 404.101 through 404.110, consists of 10 steps that are designed to
account for the revenues needed and total traffic expected in each
district. The first several steps of the methodology establish base
pilotage rates. Additional steps to incorporate the weighting factors
are necessary to establish the final pilot rates. The result is an
hourly rate, determined separately for each of the areas administered
by the Coast Guard.
In Step 1, ``Recognize previous operating expenses,'' (Sec.
404.101), the Director reviews audited operating expenses from each of
the three pilotage associations. Operating expenses include all
allowable expenses, minus wages and benefits. This number forms the
baseline amount that each association is budgeted. Because of the time
delay between when the association submits raw numbers and when the
Coast Guard receives audited numbers, this number is 3 years behind the
projected year of expenses. Therefore, in calculating the 2024 rates in
this proposal, we begin with the audited expenses from the 2021
shipping season.
While each pilotage association operates in an entire district
(including both designated and undesignated areas), the Coast Guard
determines costs by area. We allocate certain operating expenses to
designated areas and certain operating expenses to undesignated areas.
In some cases, we can allocate the costs based on where they are
accrued. For example, we can allocate the costs of insurance for
apprentice pilots who operate in undesignated areas only. In other
situations, such as general legal expenses, expenses are distributed
between designated and undesignated waters on a pro rata basis, based
upon the proportion of income forecasted from the respective portions
of the district.
In Step 2, ``Project operating expenses, adjusting for inflation or
deflation,'' (Sec. 404.102), the Director develops the 2024 projected
operating expenses. To do this, we apply inflation adjustors for 3
years to the operating expense baseline received in Step 1. The
inflation factors are from the Bureau of Labor Statistics' (BLS)
Consumer Price Index (CPI) for the Midwest Region, or, if not
available, the Federal Open Market Committee (FOMC) median economic
projections for Personal Consumption Expenditures (PCE) inflation. This
step produces the total operating expenses for each area and district.
In Step 3, ``Estimate number of registered pilots and apprentice
pilots,'' (Sec. 404.103), the Director calculates how many registered
and apprentice pilots, including apprentice pilots with limited
registrations, are needed for each district. To do this, we employ a
``staffing model,'' described in Sec. 401.220, paragraphs (a)(1)
through (3), to estimate how many pilots would be needed to handle
shipping during the beginning and close of the season. This number
provides guidance to the Director in approving an appropriate number of
pilots.
For the purpose of the ratemaking calculation, we determine the
number of pilots provided by the pilotage associations (see Sec.
404.103) and use that figure to determine how many pilots need to be
compensated via the pilotage fees collected.
In the first part of Step 4, ``Determine target pilot compensation
benchmark and apprentice pilot wage benchmark,'' (Sec. 404.104(a)),
the Director determines the revenue needed for pilot compensation in
each area and district and calculates the total compensation for each
pilot using a ``compensation benchmark.''
In the second part of Step 4, (Sec. 404.104(c)), the Director
determines the total compensation figure for each district. To do this,
the Director multiplies the compensation benchmark by the number of
pilots for each area and district (from Step 3), producing a figure for
total pilot compensation.
In Step 5, ``Project working capital fund,'' (Sec. 404.105), the
Director calculates an added value to pay for needed capital
improvements and other non-recurring expenses, such as technology
investments and infrastructure maintenance. This value is calculated by
adding the total operating expenses (derived in Step 2) to the total
pilot compensation and the total target apprentice pilot wage (derived
in Step 4), then by multiplying that figure by the preceding year's
average annual rate of return for new issues of high-grade corporate
securities. This figure constitutes the ``working capital fund'' for
each area and district.
In Step 6, ``Project needed revenue,'' (Sec. 404.106), the
Director simply adds the totals produced by the preceding steps. The
projected operating expense for each area and district (from Step 2) is
added to the total pilot compensation, including apprentice pilot wage
benchmarks (from Step 4), and the working capital fund contribution
(from Step 5). The total figure, calculated
[[Page 55633]]
separately for each area and district, is the ``needed revenue.''
In Step 7, ``Calculate initial base rates,'' (Sec. 404.107), the
Director calculates an hourly pilotage rate to cover the needed
revenue, as calculated in Step 6. This step consists of first
calculating the 10-year average of traffic hours for each area. Next,
we divide the revenue needed in each area (calculated in Step 6) by the
10-year average of traffic hours to produce an initial base rate.
An additional element, the ``weighting factor,'' is required under
Sec. 401.400. Pursuant to that section, ships pay a multiple of the
``base rate'', as calculated in Step 7, by a number ranging from 1.0
(for the smallest ships, or ``Class I'' vessels) to 1.45 (for the
largest ships, or ``Class IV'' vessels). This significantly increases
the revenue collected, and we need to account for the added revenue
produced by the weighting factors to ensure that shippers are not
overpaying for pilotage services. We do this in the next step.
In Step 8, ``Calculate average weighting factors by Area,'' (Sec.
404.108), the Director calculates how much extra revenue, as a
percentage of total revenue, has historically been produced by the
weighting factors in each area. We do this by using a historical
average of the applied weighting factors for each year since 2014 (the
first year the current weighting factors were applied).
In Step 9, ``Calculate revised base rates,'' (Sec. 404.109), the
Director modifies the base rates by accounting for the extra revenue
generated by the weighting factors. We do this by dividing the initial
pilotage rate for each area (from Step 7) by the corresponding average
weighting factor (from Step 8), to produce a revised rate.
In Step 10, ``Review and finalize rates,'' (Sec. 404.110), often
referred to informally as ``Director's discretion'', the Director
reviews the revised base rates (from Step 9) to ensure that they meet
the goals set forth in 46 U.S.C. 9303(f) and 46 CFR 404.1(a), which
include promoting efficient, safe, and reliable pilotage service on the
Great Lakes; generating sufficient revenue for each pilotage
association to reimburse necessary and reasonable operating expenses;
compensating trained and rested pilots fairly; and providing
appropriate revenue for improvements.
After the base rates are set, Sec. 401.401 permits the Coast Guard
to apply surcharges. We are not proposing to use any surcharges in this
proposed rule. In previous ratemakings, where apprentice pilot wages
were not built into the rate, the Coast Guard used surcharges to cover
applicant pilot compensation in those years to help with applicant
recruitment. In this proposed rule, we include the applicant trainee
compensation in the district's operating expenses used in Step 1.
Consistent with the 2021, 2022, and 2023 rulemakings, in this proposed
rule, we continue to believe that the pilot associations are able to
plan for the costs associated with hiring applicant pilots to fill
pilot vacancies without relying on the Coast Guard to impose surcharges
to help with recruiting.
VII. Historic Methodological and Other Changes
The Coast Guard is proposing to use the existing ratemaking
methodology for establishing the base rates in this interim ratemaking.
The Coast Guard is not proposing any methodological or other policy
changes to the ratemaking within this NPRM.
According to 46 U.S.C. 9303(f), and restated in 46 CFR 404.100(a),
the Coast Guard must only establish base rates by a full ratemaking at
least once every 5 years. The Coast Guard has determined that the
current base rate and methodology still adequately adheres to the Coast
Guard's goals 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 methodology 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, Great Lakes Pilotage Rates--2017 Annual
Review (82 FR 41466, published August 31, 2017),\18\ the Coast Guard
modified the methodology to account for the additional revenue produced
by the application of weighting factors. This is discussed in detail in
Steps 7 through 9 for each district, in section IX., Discussion of
Proposed Rate Adjustments, of this preamble.
---------------------------------------------------------------------------
\18\ https://www.govinfo.gov/content/pkg/FR-2017-08-31/pdf/2017-18411.pdf (last visited 5/12/2023).
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In the 2018 ratemaking, Great Lakes Pilotage Rates--2018 Annual
Review and Revisions to Methodology (83 FR 26162, published June 5,
2018),\19\ the Coast Guard adopted a new approach in the methodology
for the compensation benchmark, based upon United States mariners,
rather than Canadian working pilots.
---------------------------------------------------------------------------
\19\ https://www.govinfo.gov/content/pkg/FR-2018-06-05/pdf/2018-11969.pdf (last visited 5/12/2023).
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In the 2020 ratemaking, Great Lakes Pilotage Rates--2020 Annual
Review and Revisions to Methodology (85 FR 20088, published April 9,
2020),\20\ the Coast Guard revised the methodology to accurately
capture all costs and revenues associated with Great Lakes pilotage
requirements and to produce an hourly rate that adequately and
accurately compensates pilots and covers expenses.
---------------------------------------------------------------------------
\20\ https://www.govinfo.gov/content/pkg/FR-2020-04-09/pdf/2020-06968.pdf (last visited 5/12/2023).
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The 2021 ratemaking, Great Lakes Pilotage Rates--2021 Annual Review
and Revisions to Methodology (86 FR 14184, published March 12,
2021),\21\ 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.
---------------------------------------------------------------------------
\21\ https://www.govinfo.gov/content/pkg/FR-2021-03-12/pdf/2021-05050.pdf (last visited 5/12/2023).
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The 2022 ratemaking, Great Lakes Pilotage Rates--2022 Annual Review
and Revisions to Methodology (87 FR 18488, published March 30,
2022),\22\ 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 that the ratemaking does
not undercount the pilot need presented by the staffing model and
association circumstances.
---------------------------------------------------------------------------
\22\ https://www.govinfo.gov/content/pkg/FR-2022-03-30/pdf/2022-06394.pdf (last visited 5/12/2023).
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VIII. Individual Target Pilot Compensation Benchmark
The Coast Guard is proposing to set the target pilot compensation
benchmark in this NPRM at the target compensation for the ratemaking
year 2023, adjusted for inflation. In an interim ratemaking year, the
base target pilot compensation would be adjusted annually in accordance
with Sec. 404.104(b). The Coast Guard arrived at this proposed
compensation benchmark as explained in the following paragraphs.
Before 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, Great Lakes Pilotage Rates--2016 Annual Review and
Changes to Methodology (81 FR 11908, published
[[Page 55634]]
March 7, 2016),\23\ 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). The 2018 final rule adjusted the AMOU 2015 data for
inflation using Federal Open Market FOMC median economic projections
for PCE inflation.
---------------------------------------------------------------------------
\23\ https://www.govinfo.gov/content/pkg/FR-2016-03-07/pdf/2016-04894.pdf (last visited 5/12/2023).
---------------------------------------------------------------------------
In the 2020 interim year ratemaking final rule,\24\ 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 (85 FR 20091). 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 (85 FR 20091).
---------------------------------------------------------------------------
\24\ 85 FR 20088.
---------------------------------------------------------------------------
Based on our experience over the past four ratemakings (2020-2023),
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. 404.104(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 service. 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 proposes to not seek alternative
benchmarks for target compensation at this time and, instead, to simply
adjust the amount of target pilot compensation for inflation as our
target compensation benchmark for 2024, as shown in Step 4. This target
compensation benchmark approach has advanced and will continue to
advance the Coast Guard's goals through rate and compensation stability
while also promoting recruitment and retention of qualified U.S.
pilots.
The proposed compensation benchmark for 2024 is $442,403 per
registered pilot and $159,265 per apprentice pilot, using the 2023
compensation as a benchmark. We follow the procedure outlined in
paragraph (b) of Sec. 404.104, which adjusts the existing compensation
benchmark for inflation. We use a two-step process to adjust target
pilot compensation for inflation. First, we adjust the 2023 target
compensation benchmark of $424,398 by 1.7 percent for an adjusted value
of $431,613. This first adjustment accounts for the difference in
actual first quarter 2023 ECI inflation, which is 4.4 percent, and the
2023 PCE estimate of 2.7 percent.\25\ The second step accounts for
projected inflation from 2023 to 2024, which is 2.5 percent.\26\ Based
on the projected 2024 inflation estimate, the proposed target
compensation benchmark for 2024 is $442,403 per pilot. The proposed
apprentice pilot wage benchmark is 36 percent of the target pilot
compensation, or $159,265 ($442,403 x 0.36).\27\
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\25\ Employment Cost Index, Total Compensation for Private
Industry workers in Transportation and Material Moving, Annual
Average, Series ID: CIU2010000520000A. https://www.bls.gov/news.release/eci.t05.htm (Last visited 04/28/23); and Table 1
Summary of Economic Projections, PCE Inflation. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220316.pdf
(Last visited 05/17/23).
\26\ Table 1 Summary of Economic Projections, PCE Inflation
December Projection. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230322.pdf (Last visited 03/2023).
\27\ For more information on the proposed apprentice pilot wage
benchmark, see the Coast Guard's 2022 Annual Review and Revisions to
Methodology. 87 FR 18488.
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IX. Discussion of Proposed Rate Adjustments
In this NPRM, based on the proposed policy changes described in the
previous section, we are proposing new pilotage rates for 2024. We
propose to conduct the 2024 ratemaking as an interim ratemaking, as we
last did in 2022 (87 FR 18488). Thus, the Coast Guard proposes to
adjust the compensation benchmark following the interim ratemaking year
procedures under Sec. 404.100(b) rather than the procedures for a full
ratemaking year in Sec. 404.100(a).
This section discusses the proposed rate changes using the
ratemaking steps provided in 46 CFR part 404. We will detail all 10
steps of the ratemaking procedure for each of the 3 districts to show
how we arrive at the proposed 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, we begin by
reviewing the independent accountant's financial reports for each
association's 2021 expenses and revenues.\28\ 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, the cost is divided between the designated and
undesignated areas on a pro rata basis. The recognized operating
expenses for District One are shown in table 3.
---------------------------------------------------------------------------
\28\ These reports are available in the docket for this proposed
rule.
---------------------------------------------------------------------------
Adjustments have been made by the auditors and are explained in the
auditor's reports, which are available in the docket for this
rulemaking, where indicated under the Public Participation and Request
for Comments portion of the preamble.
In the 2021 expenses used as the basis for this proposed rule,
districts used the term ``applicant'' to describe applicant 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 2021, which
includes both applicant and apprentice pilots. The term ``apprentice''
is used to distinguish apprentice pilot wages and describe the
[[Page 55635]]
impacts of the ratemaking going forward.
The Coast Guard continues to include apprentice salaries as an
allowable expense in the 2024 ratemaking, as this proposed rule is
based on 2021 operating expenses, when salaries were still an allowable
expense. 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).
Table 3--2021 Recognized Expenses for District One
----------------------------------------------------------------------------------------------------------------
Designated Undesignated
District One Reported Operating Expenses for 2021 -------------------------------------- Total
St. Lawrence River Lake Ontario
----------------------------------------------------------------------------------------------------------------
Applicant Pilot Compensation:
Salaries.............................................. $247,735 $165,157 $412,892
Employee Benefits..................................... 10,367 6,911 17,278
-----------------------------------------------------
Total Applicant Pilot Compensation................ 258,102 172,068 430,170
Other Applicant Cost:
Applicant Subsistence................................. 1,723 1,148 2,871
Travel................................................ 1,832 1,221 3,053
License Insurance..................................... 752 502 1,254
Payroll taxes......................................... 1,945 1,296 3,241
Other--Pilotage Cost.................................. 833 555 1,388
-----------------------------------------------------
Total Other Applicant Cost........................ 7,085 4,722 11,807
Other Pilotage Cost:
Subsistence........................................... 133,993 89,329 223,322
Hotel/Lodging......................................... 32,424 21,616 54,040
Travel................................................ 453,718 302,478 756,196
License renewal....................................... 1,200 800 2,000
Payroll Taxes......................................... 198,901 132,601 331,502
License Insurance..................................... 53,174 35,450 88,624
-----------------------------------------------------
Total Other Pilotage Costs........................ 873,410 582,274 1,455,684
Pilot Boat and Dispatch Costs:
Pilot boat expense (Operating)........................ 200,672 133,782 334,454
Dispatch expense...................................... 167,291 111,527 278,818
Employee Benefits..................................... 50,560 33,707 84,267
Salaries.............................................. 249,396 166,264 415,660
Payroll taxes......................................... 10,269 6,846 17,115
-----------------------------------------------------
Total Pilot and Dispatch Costs.................... 678,188 452,126 1,130,314
Administrative Expenses:
Legal--general counsel................................ 1,078 719 1,797
Legal--shared counsel (K&L Gates)..................... 4,402 2,935 7,337
Legal--USCG Litigation................................ 14,641 9,760 24,401
Insurance............................................. 44,108 29,405 73,513
Employee benefits..................................... 4,470 2,980 7,450
Payroll Taxes......................................... 42,464 28,310 70,774
Other taxes........................................... 79,200 52,800 132,000
Real Estate taxes..................................... 22,918 15,278 38,196
Travel................................................ 1,568 1,045 2,613
Depreciation.......................................... 186,517 124,345 310,862
Interest.............................................. 54,271 36,180 90,451
APA Dues.............................................. 25,250 16,834 42,084
APA Dues (D1-21-01)................................... 2,971 1,980 4,951
Dues and subscriptions................................ 4,320 2,880 7,200
Utilities............................................. 41,343 27,562 68,905
Salaries.............................................. 73,890 49,260 123,150
Accounting/Professional fees.......................... 4,320 2,880 7,200
Pilot Training........................................ 4,680 3,120 7,800
Applicant Pilot Training.............................. 18,911 12,607 31,518
Other................................................. 28,422 18,948 47,370
-----------------------------------------------------
Total Administrative Expenses..................... 659,744 439,828 1,099,572
-----------------------------------------------------
Total Expenses (OPEX + Applicant + Pilot Boats + 2,476,529 1,651,018 4,127,547
Admin + Capital).................................
-----------------------------------------------------
Total Operating Expenses (OpEx + Adjustments)..... 2,476,529 1,651,018 4,127,547
----------------------------------------------------------------------------------------------------------------
[[Page 55636]]
B. Step 2: Project Operating Expenses, Adjusting for Inflation or
Deflation
In accordance with the text in Sec. 404.102, having identified the
recognized 2021 operating expenses in Step 1, the next step is to
estimate the current year's operating expenses by adjusting for
inflation over the 3-year period. We calculate inflation using the BLS
data from the CPI for the Midwest Region of the United States for the
2022 inflation rate.\29\ Because the BLS does not provide forecasted
inflation data, we use economic projections from the Federal Reserve
for the 2023 and 2024 inflation modification.\30\ Based on that
information, the calculations for Step 2 are as presented in table 4.
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\29\ The CPI is defined as ``All Urban Consumers (CPI-U), All
Items, 1982-4=100.'' Series CUUR0200SAO (Downloaded March 21, 2023).
Available at https://www.bls.gov/cpi/data.htm., All Urban Consumers
(Current Series), multiscreen data, not seasonally adjusted, 0200
Midwest, Current, All Items, Monthly, 12-month Percent Change and
Annual Data.
\30\ The 2022 and 2023 inflation rates are available at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230322.pdf. We used the Core PCE December Projection
found in table 1. (Downloaded April 2023).
Table 4--Adjusted Operating Expenses for District One
----------------------------------------------------------------------------------------------------------------
District One
-----------------------------------------------
Designated Undesignated Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)............................... $2,476,529 $1,651,018 $4,127,547
2022 Inflation Modification (@8%)............................... 198,122 132,081 330,203
2023 Inflation Modification (@3.5%)............................. 93,613 62,408 156,021
2024 Inflation Modification (@2.5%)............................. 69,207 46,138 115,345
-----------------------------------------------
Adjusted 2024 Operating Expenses............................ 2,837,471 1,891,645 4,729,116
----------------------------------------------------------------------------------------------------------------
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. We
determine the number of fully registered pilots based on data provided
by the SLSPA. Using these numbers, we estimate that there will be 18
registered pilots in 2024 in District One. We determine the number of
apprentice pilots based on input from the district on anticipated
retirements and staffing needs. Using these numbers, we estimate that
there will be three apprentice pilots in 2024 in District One. Based on
the seasonal staffing model discussed in the 2017 ratemaking (82 FR
41466), a certain number of pilots are assigned to designated waters,
and a certain number of pilots are assigned to undesignated waters, as
shown in table 5. These numbers are used to determine the amount of
revenue needed in their respective areas.
Table 5--Authorized Pilots for District One
------------------------------------------------------------------------
Item District One
------------------------------------------------------------------------
Proposed Maximum Number of Pilots (per Sec. 18
401.220(a)) *.......................................
2024 Authorized Pilots (total)....................... 18
Pilots Assigned to Designated Areas.................. 10
Pilots Assigned to Undesignated Areas................ 8
2024 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).
D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice
Pilot Wage Benchmark
In this step, we determine the total pilot compensation for each
area. Because we are issuing an ``interim'' ratemaking this year, we
follow the procedure outlined in paragraph (b) of Sec. 404.104, which
adjusts the existing compensation benchmark by inflation. First, we
adjust the 2023 target compensation benchmark of $424,398 by 1.7
percent for a value of $431,613. This accounts for the difference in
actual first quarter 2023 ECI inflation, which is 4.4 percent, and the
2023 PCE estimate of 2.7 percent.31 32 The second step
accounts for projected inflation from 2023 to 2024, which is 2.5
percent.\33\ Based on the projected 2024 inflation estimate, the
proposed target compensation benchmark for 2024 is $442,403 per pilot.
The proposed apprentice pilot wage benchmark is 36 percent of the
target pilot compensation, or $159,265 ($442,403 x 0.36).
---------------------------------------------------------------------------
\31\ Employment Cost Index, Total Compensation for Private
Industry workers in Transportation and Material Moving, Annual
Average, Series ID: CIU2010000520000A. https://www.bls.gov/news.release/eci.t05.htm (Last visited 04/28/23).
\32\ Table 1 Summary of Economic Projections, PCE Inflation.
https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220316.pdf (Last visited 05/17/23).
\33\ Table 1 Summary of Economic Projections, PCE Inflation
December Projection. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230322.pdf (Last visited 03/2023).
---------------------------------------------------------------------------
Next, the Coast Guard certifies that the number of pilots estimated
for 2024 is less than or equal to the number permitted under the
staffing model in Sec. 401.220(a). The staffing model suggests that
District One needs 18 pilots, which is less than or equal to the number
of registered pilots provided by the pilot association. In accordance
with Sec. 404.104(c), we use 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 6. We estimate
that the number of apprentice pilots with limited registration needed
will be three for District One in the 2024 season. The total target
wages for apprentices are allocated with 60 percent for the designated
area and 40 percent for the undesignated area, in accordance with the
allocation for operating expenses.
[[Page 55637]]
Table 6--Target Compensation for District One
----------------------------------------------------------------------------------------------------------------
District One
-----------------------------------------------
Designated Undesignated Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation....................................... $442,403 $442,403 $442,403
Number of Pilots................................................ 10 8 18
Total Target Pilot Compensation................................. 4,424,030 3,539,224 7,963,254
Target Apprentice Pilot Compensation............................ 159,265 159,265 159,265
Number of Apprentice Pilots..................................... .............. .............. 3
Total Target Apprentice Pilot Compensation...................... 286,677 191,118 477,795
----------------------------------------------------------------------------------------------------------------
E. Step 5: Project Working Capital Fund
Next, the Coast Guard calculates the working capital fund revenues
needed for each area. We first add the figures for projected operating
expenses, total pilot compensation, and total target apprentice pilot
wage for each area, and then, we find the preceding year's average
annual rate of return for new issues of high-grade corporate
securities. Using Moody's data, the number is 4.0742 percent
rounded.\34\ By multiplying the two figures, we obtain the working
capital fund contribution for each area, as shown in table 7.
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\34\ Moody's Seasoned Aaa Corporate Bond Yield, average of 2022
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 (Last visited 03/21/23).
Table 7--Working Capital Fund Calculation for District One
----------------------------------------------------------------------------------------------------------------
District One
-----------------------------------------------
Designated Undesignated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $2,837,471 $1,891,645 $4,729,116
Total Target Pilot Compensation (Step 4)........................ 4,424,030 3,539,224 7,963,254
Total Target Apprentice Pilot Compensation (Step 4)............. 286,677 191,118 477,795
Total 2024 Expenses............................................. 7,548,178 5,621,987 13,170,165
Working Capital Fund (4.0742%).................................. 307,525 229,049 536,574
----------------------------------------------------------------------------------------------------------------
F. Step 6: Project Needed Revenue
In this step, we add 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). We show these
calculations in table 8.
Table 8--Revenue Needed for District One
----------------------------------------------------------------------------------------------------------------
District One
-----------------------------------------------
Designated Undesignated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $2,837,471 $1,891,645 $4,729,116
Total Target Pilot Compensation (Step 4)........................ 4,424,030 3,539,224 7,963,254
Total Target Apprentice Pilot Compensation (Step 4)............. 286,677 191,118 477,795
Working Capital Fund (Step 5)................................... 307,525 229,049 536,574
-----------------------------------------------
Total Revenue Needed........................................ 7,855,703 5,851,036 13,706,739
----------------------------------------------------------------------------------------------------------------
G. Step 7: Calculate Initial Base Rates
Having determined the revenue needed for each area in the previous
six steps, we divide that number by the expected number of traffic
hours to develop an hourly rate.
Step 7 is a two-part process. The first part is calculating the 10-
year traffic average 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 SeaPro. The data is pulled from
the system filtering by district, year, job status (including only
processed jobs), and flagging code (including only U.S. jobs). Because
we calculate separate figures for designated and undesignated waters,
there are two parts for each calculation. We show these values in table
9.
[[Page 55638]]
Table 9--Time on Task for District One
[Hours]
------------------------------------------------------------------------
District One
Year -------------------------------
Designated Undesignated
------------------------------------------------------------------------
2022.................................... 6,785 8,574
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
-------------------------------
Average............................. 6,587 7,480
------------------------------------------------------------------------
Next, we derive 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. We present the
calculations for District One in table 10.
Table 10--Initial Rate Calculations for District One
------------------------------------------------------------------------
Designated Undesignated
------------------------------------------------------------------------
Revenue needed (Step 6)................. $7,855,703 $5,851,036
Average time on task (hours)............ 6,587 7,480
Initial rate............................ 1,193 782
------------------------------------------------------------------------
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 data, we calculate the average weighting factor for
each area using the data from each vessel transit from 2014 onward, as
shown in tables 11 and 12.
Table 11--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 1 (2022).................................................. 39 1 39
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 2 (2022).................................................. 466 1.15 536
Class 3 (2014).................................................. 50 1.3 65
Class 3 (2015).................................................. 28 1.3 36
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 3 (2022).................................................. 104 1.3 135
Class 4 (2014).................................................. 271 1.45 393
Class 4 (2015).................................................. 251 1.45 364
[[Page 55639]]
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
Class 4 (2022).................................................. 461 1.45 668
-----------------------------------------------
Total....................................................... 7,774 .............. 10,019
-----------------------------------------------
Average weighting factor (weighted transits / number of .............. 1.29 ..............
transits)..............................................
----------------------------------------------------------------------------------------------------------------
Table 12--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 1 (2022).................................................. 32 1 32
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 2 (2022).................................................. 358 1.15 412
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 3 (2022).................................................. 69 1.3 90
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
Class 4 (2022).................................................. 393 1.45 570
-----------------------------------------------
Total....................................................... 6,490 .............. 8,395
-----------------------------------------------
Average weighting factor (weighted transits/number of .............. 1.29 ..............
transits)..............................................
----------------------------------------------------------------------------------------------------------------
I. Step 9: Calculate Revised Base Rates
In this step, we revise the base rates so that the total cost of
pilotage will be 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 13.
[[Page 55640]]
Table 13--Revised Base Rates for District One
----------------------------------------------------------------------------------------------------------------
Revised rate
Initial rate Average weighting (initial rate /
Area (Step 7) factor (Step 8) average weighting
factor)
----------------------------------------------------------------------------------------------------------------
District One: Designated................................ $1,193 1.29 $925
District One: Undesignated.............................. 782 1.29 606
----------------------------------------------------------------------------------------------------------------
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 proposed rates incorporate appropriate
compensation for pilots to handle heavy traffic periods and whether
there are enough pilots to handle those heavy traffic periods. The
Director also considers whether the proposed rates would 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 proposing any alterations to the rates
in this step. We propose to modify Sec. 401.405(a)(1) and (2) to
reflect the final rates shown in table 14.
Table 14--Proposed Final Rates for District One
----------------------------------------------------------------------------------------------------------------
Final 2023 Proposed 2024
Area Name pilotage rate pilotage rate
----------------------------------------------------------------------------------------------------------------
District One: Designated..................... St. Lawrence River............. $876 $925
District One: Undesignated................... Lake Ontario................... 586 606
----------------------------------------------------------------------------------------------------------------
District Two
A. Step 1: Recognize Previous Operating Expenses
Step 1 in our ratemaking methodology requires that the Coast Guard
review and recognize the previous year's operating expenses (Sec.
404.101). To do so, we begin by reviewing the independent accountant's
financial reports for each association's 2021 expenses and
revenues.\35\ For accounting purposes, the financial reports divide
expenses into designated and undesignated areas. For costs generally
accrued by the pilot associations, such as employee benefits, the cost
is divided between the designated and undesignated areas on a pro rata
basis.
---------------------------------------------------------------------------
\35\ These reports are available in the docket for this proposed
rule.
---------------------------------------------------------------------------
Adjustments have been made by the auditors and are explained in the
auditor's reports, which are available in the docket for this
rulemaking, where indicated under the Public Participation and Request
for Comments portion of the preamble.
In the 2021 expenses used as the basis for this proposed rule,
districts used the term ``applicant'' to describe applicant 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 2021, 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 2024 ratemaking, as this proposed rule is
based on 2021 operating expenses, when salaries were still an allowable
expense. 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
15.
Table 15--2021 Recognized Expenses for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-------------------------------------------------
Undesignated Designated
Reported Operating Expenses for 2021 ----------------------------------
Southeast Shoal Total
Lake Erie to Port Huron
----------------------------------------------------------------------------------------------------------------
Applicant Pilot Compensation:
Salaries.................................................. $79,538 $119,306 $198,844
Employee Benefits......................................... 11,066 16,599 27,665
-------------------------------------------------
Total Applicant Pilot Compensation.................... 90,604 135,905 226,509
-------------------------------------------------
Other Applicant Cost:
Applicant Subsistence..................................... 5,280 7,920 13,200
Hotel/Lodging Cost........................................ 2,976 4,464 7,440
Hotel/Lodging Cost (D2-21-01)............................. (2,976) (4,464) (7,440)
[[Page 55641]]
Payroll taxes............................................. 6,901 10,352 17,253
-------------------------------------------------
Total Other Applicant Cost............................ 12,181 18,272 30,453
Other Pilotage Cost:
Subsistence............................................... 73,921 110,880 184,800
Hotel/Lodging............................................. 62,496 93,744 156,240
Hotel/Lodging (D2-21-01).................................. (55,307) (82,960) (138,267)
Travel.................................................... 42,625 63,937 106,562
License renewal........................................... 1,958 2,938 4,896
Payroll Taxes............................................. 87,620 131,430 219,050
License Insurance......................................... 9,007 13,510 22,517
-------------------------------------------------
Total Other Pilotage Costs............................ 222,320 333,479 555,798
Pilot Boat and Dispatch Costs:
Pilot boat expense (Operating)............................ 60,067 90,101 150,168
Employee Benefits......................................... 80,273 120,410 200,683
Insurance................................................. 4,317 6,475 10,792
Salaries.................................................. 148,260 222,391 370,651
Payroll taxes............................................. 13,277 19,915 33,192
-------------------------------------------------
Total Pilot and Dispatch Costs........................ 306,194 459,292 765,486
Administrative Expenses:
Legal--general counsel.................................... 2,186 3,278 5,464
Legal--shared counsel (K&L Gates)......................... 7,167 10,751 17,918
Office Rent............................................... 27,627 41,440 69,067
Insurance................................................. 15,084 22,627 37,711
Employee benefits......................................... 35,010 52,516 87,526
Payroll Taxes............................................. 5,161 7,741 12,902
Other taxes............................................... 55,252 82,879 138,131
Real Estate taxes......................................... 7,879 11,819 19,698
Travel.................................................... 8,688 13,033 21,721
Depreciation.............................................. 11,121 16,682 27,803
Interest.................................................. 2 2 4
APA Dues.................................................. 14,683 22,025 36,708
Dues and subscriptions.................................... 505 757 1,262
Utilities................................................. 24,356 36,535 60,891
Salaries.................................................. 48,532 72,797 121,329
Accounting/Professional fees.............................. 17,846 26,769 44,615
Pilot Training............................................ 23,909 35,864 59,773
Applicant Pilot Training.................................. 209 313 522
Other..................................................... 21,252 31,879 53,131
-------------------------------------------------
Total Administrative Expenses......................... 326,469 489,707 816,176
-------------------------------------------------
Total Expenses (OPEX + Applicant + Pilot Boats + 957,768 1,436,655 2,394,423
Admin + Capital).................................
-------------------------------------------------
Total Directors Adjustments........................... .............. ................ ..............
-------------------------------------------------
Total Operating Expenses (OpEx + Adjustments)..... 957,768 1,436,655 2,394,422
----------------------------------------------------------------------------------------------------------------
B. Step 2: Project Operating Expenses, Adjusting for Inflation or
Deflation
In accordance with the text in Sec. 404.102, having identified the
recognized 2021 operating expenses in Step 1, the next step is to
estimate the current year's operating expenses by adjusting for
inflation over the 3-year period. We calculate inflation using the BLS
data from the CPI for the Midwest Region of the United States for the
2022 inflation rate.\36\ Because the BLS does not provide forecasted
inflation data, we use economic projections from the Federal Reserve
for the 2023 and 2024 inflation modification.\37\ Based on that
information, the calculations for Step 2 are presented in table 16:
---------------------------------------------------------------------------
\36\ The CPI is defined as ``All Urban Consumers (CPI-U), All
Items, 1982-4=100.'' Series CUUR0200SAO (Downloaded March 21, 2023).
Available at https://www.bls.gov/cpi/data.htm., All Urban Consumers
(Current Series), multiscreen data, not seasonally adjusted, 0200
Midwest, Current, All Items, Monthly, 12-month Percent Change and
Annual Data.
\37\ The 2023 and 2024 inflation rates are available at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230322.pdf. We used the Core PCE December Projection
found in table 1. (Last visited 04/2023).
[[Page 55642]]
Table 16--Adjusted Operating Expenses for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)............................... $957,768 $1,436,655 $2,394,422
2022 Inflation Modification (@8%)............................... 76,621 114,932 191,553
2023 Inflation Modification (@3.5%)............................. 36,204 54,306 90,510
2024 Inflation Modification (@2.5%)............................. 26,765 40,147 66,912
Adjusted 2024 Operating Expenses................................ 1,097,358 1,646,040 2,743,397
----------------------------------------------------------------------------------------------------------------
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. We
determine the number of fully registered pilots based on data provided
by the LPA. Using these numbers, we estimate that there will be 16
registered pilots in 2024 in District Two. We determine the number of
apprentice pilots based on input from the district on anticipated
retirements and staffing needs. Using these numbers, we estimate that
there will be two apprentice pilots in 2024 in District Two. Based on
the seasonal staffing model discussed in the 2017 ratemaking (82 FR
41466), a certain number of pilots are assigned to designated waters,
and a certain number of pilots are assigned to undesignated waters, as
shown in table 17. These numbers are used to determine the amount of
revenue needed in their respective areas.
Table 17--Authorized Pilots for District Two
------------------------------------------------------------------------
Item District Two
------------------------------------------------------------------------
Proposed Maximum Number of Pilots (per Sec. 16
401.220(a)) *.......................................
2024 Authorized Pilots (total)....................... 16
Pilots Assigned to Designated Areas.................. 7
Pilots Assigned to Undesignated Areas................ 9
2024 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).
D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice
Pilot Wage Benchmark
In this step, we determine the total pilot compensation for each
area. Because we are issuing an interim ratemaking this year, we follow
the procedure outlined in paragraph (b) of Sec. 404.104, which adjusts
the existing compensation benchmark by inflation. First, we adjust the
2023 target compensation benchmark of $424,398 by 1.7 percent for a
value of $431,613. This accounts for the difference in actual first
quarter 2023 ECI inflation, which is 4.4 percent, and the 2023 PCE
estimate of 2.7 percent.38 39 The second step accounts for
projected inflation from 2023 to 2024, which is 2.5 percent.\40\ Based
on the projected 2024 inflation estimate, the proposed target
compensation benchmark for 2024 is $442,403 per pilot. The proposed
apprentice pilot wage benchmark is 36 percent of the target pilot
compensation, or $159,265 ($442,403 x 0.36).
---------------------------------------------------------------------------
\38\ Employment Cost Index, Total Compensation for Private
Industry workers in Transportation and Material Moving, Annual
Average, Series ID: CIU2010000520000A. https://www.bls.gov/news.release/eci.t05.htm (Last visited 04/28/23).
\39\ Table 1 Summary of Economic Projections, PCE Inflation.
https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220316.pdf (Last visited 5/17/23).
\40\ Table 1 Summary of Economic Projections, PCE Inflation
December Projection. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230322.pdf (Last visited 03/2023).
---------------------------------------------------------------------------
Next, the Coast Guard certifies that the number of pilots estimated
for 2024 is less than or equal to the number permitted under the
staffing model in Sec. 401.220(a). The staffing model suggests that
District Two needs 16 pilots, which is less than or equal to 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 18. The Coast
Guard estimates that the number of apprentice pilots with limited
registration needed will be two for District Two in the 2024 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 18--Target Compensation for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation....................................... $442,403 $442,403 $442,403
Number of Pilots................................................ 9 7 16
Total Target Pilot Compensation................................. 3,981,627 3,096,821 7,078,448
Target Apprentice Pilot Compensation............................ 159,265 159,265 159,265
Number of Apprentice Pilots..................................... .............. .............. 2
[[Page 55643]]
Total Target Apprentice Pilot Compensation...................... 127,412 191,118 318,530
----------------------------------------------------------------------------------------------------------------
E. Step 5: Project Working Capital Fund
Next, the Coast Guard calculates the working capital fund revenues
needed for each area. We first add the figures for projected operating
expenses, total pilot compensation, and total target apprentice pilot
wage for each area, and then we find the preceding year's average
annual rate of return for new issues of high-grade corporate
securities. Using Moody's data, the number is 4.0742 percent,
rounded.\41\ By multiplying the two figures, we obtain the working
capital fund contribution for each area, as shown in table 19.
---------------------------------------------------------------------------
\41\ Moody's Seasoned Aaa Corporate Bond Yield, average of 2022
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. (Last visited 03/21/2023).
Table 19--Working Capital Fund Calculation for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $1,097,358 $1,646,040 $2,743,398
Total Target Pilot Compensation (Step 4)........................ 3,981,627 3,096,821 7,078,448
Total Target Apprentice Pilot Compensation (Step 4)............. 127,412 191,118 318,530
Total 2024 Expenses............................................. 5,206,397 4,933,979 10,140,376
Working Capital Fund (4.0742%).................................. 212,117 201,019 413,135
----------------------------------------------------------------------------------------------------------------
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). We
show these calculations in table 20.
Table 20--Revenue Needed for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $1,097,358 $1,646,040 $2,743,398
Total Target Pilot Compensation (Step 4)........................ 3,981,627 3,096,821 7,078,448
Total Target Apprentice Pilot Compensation (Step 4)............. 127,412 191,118 318,530
Working Capital Fund (Step 5)................................... 212,117 201,019 413,136
Total Revenue Needed............................................ 5,418,514 5,134,998 10,553,511
----------------------------------------------------------------------------------------------------------------
G. Step 7: Calculate Initial Base Rates
Having determined the revenue needed for each area in the previous
six steps, the Coast Guard divides that number by the expected number
of traffic hours to develop an hourly rate. Step 7 is a two-part
process. In the first part, we calculate the 10-year traffic average 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. We pull the data from the system filtering by
district, year, job status (we only include processed jobs), and
flagging code (we only include U.S. jobs). Because we calculate
separate figures for designated and undesignated waters, there are two
parts for each calculation. We show these values in table 21.
Table 21--Time on Task for District Two
[Hours]
------------------------------------------------------------------------
District Two
Year -------------------------------
Undesignated Designated
------------------------------------------------------------------------
2022.................................... 12,306 3,975
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
[[Page 55644]]
2016.................................... 6,425 5,615
2015.................................... 6,535 5,967
2014.................................... 7,856 7,001
2013.................................... 4,603 4,750
-------------------------------
Average............................. 7,058 5,938
------------------------------------------------------------------------
Next, we derive 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. We present the
calculations for District Two in table 22.
Table 22--Initial Rate Calculations for District Two
------------------------------------------------------------------------
Undesignated Designated
------------------------------------------------------------------------
Revenue needed (Step 6)................. $5,418,514 $5,134,998
Average time on task (hours)............ 7,058 5,938
Initial rate............................ 768 865
------------------------------------------------------------------------
H. Step 8: Calculate Average Weighting Factors by Area
In this step, we calculate the average weighting factor for each
designated and undesignated area. We collect the weighting factors, set
forth in 46 CFR 401.400, for each vessel trip. Using this data, we
calculate the average weighting factor for each area using the data
from each vessel transit from 2014 onward, as shown in tables 23 and
24.
Table 23--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 1 (2022).................................................. 79 1 79
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 2 (2022).................................................. 275 1.15 316
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 3 (2022).................................................. 3 1.3 4
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
[[Page 55645]]
Class 4 (2022).................................................. 349 1.45 506
-----------------------------------------------
Total....................................................... 5,725 .............. 7,497
-----------------------------------------------
Average weighting factor (weighted transits/number of .............. 1.31 ..............
transits)..............................................
----------------------------------------------------------------------------------------------------------------
Table 24--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 1 (2022).................................................. 34 1 34
Class 2 (2014).................................................. 237 1.15 273
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 2 (2022).................................................. 184 1.15 212
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 3 (2022).................................................. 3 1.3 4
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
Class 4 (2022).................................................. 273 1.45 396
-----------------------------------------------
Total....................................................... 5,168 .............. 6,785
-----------------------------------------------
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 will be equal to the revenue needed after
considering the impact of the weighting factors. To do this, we divide
the initial base rates calculated in Step 7 by the average weighting
factors calculated in Step 8, as shown in table 25.
Table 25--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...................................... $768 1.31 $586
District Two: Designated........................................ 865 1.31 660
----------------------------------------------------------------------------------------------------------------
[[Page 55646]]
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 proposed rates incorporate appropriate
compensation for pilots to handle heavy traffic periods, and whether
there are enough pilots to handle those heavy traffic periods. The
Director also considers whether the proposed rates would cover
operating expenses and infrastructure costs, taking average traffic and
weighting factors into consideration. Based on the financial
information submitted by the pilots, the Director is not proposing any
alterations to the rates in this step. We propose to modify Sec.
401.405(a)(3) and (4) to reflect the final rates shown in table 26.
Table 26--Proposed Final Rates for District Two
----------------------------------------------------------------------------------------------------------------
Final 2023 Proposed 2024
Area Name pilotage rate pilotage rate
----------------------------------------------------------------------------------------------------------------
District Two: Designated.................... Navigable waters from $601 $660
Southeast Shoal to Port
Huron, MI.
District Two: Undesignated.................. Lake Erie..................... 704 586
----------------------------------------------------------------------------------------------------------------
District Three
A. Step 1: Recognize Previous Operating Expenses
Step 1 in our ratemaking methodology requires that the Coast Guard
review and recognize the previous year's operating expenses (Sec.
404.101). To do so, we review the independent accountant's financial
reports for each association's 2021 expenses and revenues.\42\ For
accounting purposes, the financial reports divide expenses into
designated and undesignated areas. For costs generally accrued by the
pilot associations, such as employee benefits, the cost is divided
between the designated and undesignated areas on a pro rata basis.
---------------------------------------------------------------------------
\42\ These reports are available in the docket for this proposed
rule.
---------------------------------------------------------------------------
Adjustments have been made by the auditors and are explained in the
auditor's reports, which are available in the docket for this
rulemaking, where indicated under the Public Participation and Request
for Comments portion of the preamble.
In the 2021 expenses used as the basis for this proposed rule,
districts used the term ``applicant'' to describe applicant 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 in 2021, which
includes both applicant and apprentice pilots. The term ``apprentice''
is used to distinguish apprentice pilot wages and to describe the
impacts of the ratemaking going forward.
The Coast Guard continues to include apprentice salaries as an
allowable expense in the 2024 ratemaking, as this proposed rule is
based on 2021 operating expenses, when salaries were still an allowable
expense. 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
27.
Table 27--2021 Recognized Expenses for District Three
----------------------------------------------------------------------------------------------------------------
District Three
---------------------------------------------------------------
Undesignated Designated Undesignated
Reported operating expenses for 2021 ------------------------------------------------
Lakes Huron St. Marys Total
and Michigan River Lake Superior
----------------------------------------------------------------------------------------------------------------
Applicant Cost:
Applicant Salaries.......................... $336,149 $140,111 $176,330 $652,590
Applicant Benefits.......................... 58,306 24,303 30,585 113,194
---------------------------------------------------------------
Total Applicant Cost.................... 394,455 164,414 206,915 765,784
----------------------------------------------------------------------------------------------------------------
Other Pilotage Costs:
Pilot subsistence/travel.................... 149,993 62,519 78,680 291,192
Hotel/Lodging Cost.......................... 136,769 57,007 71,744 265,520
Hotel/Lodging Cost (D3-21-03)............... (18,162) (7,570) (9,527) (35,260)
Travel...................................... 55,936 23,315 29,342 108,592
License Insurance--Pilots................... 881 367 462 1,710
Payroll taxes............................... .............. .............. .............. ..............
Payroll Tax (D3-21-04)...................... 155,779 64,931 81,715 302,425
License Insurance........................... 15,328 6,389 8,040 29,757
---------------------------------------------------------------
Total Other Pilotage Costs.............. 496,524 206,958 260,456 963,938
----------------------------------------------------------------------------------------------------------------
Pilot Boat and Dispatch costs:
Pilot boat costs............................ 445,549 185,710 233,716 864,975
[[Page 55647]]
Pilot Boat Coast (D2-21-02)................. (10,901) (4,544) (5,718) (21,163)
Dispatch costs.............................. 38,156 15,904 20,015 74,074
Employee Benefits........................... 1,748 729 917 3,394
Insurance................................... 20,141 8,395 10,565 39,101
Insurance (D3-21-05, D3-21-09).............. 1,735 723 910 3,369
Salaries.................................... 140,294 58,476 73,592 272,363
Payroll taxes............................... 123 51 64 238
---------------------------------------------------------------
Total Pilot boat and dispatch costs..... 636,845 265,444 334,061 1,236,350
----------------------------------------------------------------------------------------------------------------
Administrative Cost
Legal--general counsel...................... 9,560 3,985 5,015 18,560
Legal--shared counsel (K&L Gates)........... 6,227 2,595 3,266 12,088
Legal--shared counsel (K&L Gates) (D3-21-07) (1,307) (545) (686) (2,538)
Travel...................................... 58,104 24,219 30,479 112,802
Travel (D3-21-03)........................... (14,093) (5,874) (7,393) (27,360)
Insurance................................... 29,480 12,288 15,464 57,232
Insurance (D3-21-05, D3-21-09).............. (5,112) (2,131) (2,681) (9,924)
Employee benefits........................... 126,390 52,681 66,299 245,369
Payroll Tax................................. 54,544 22,735 28,611 105,890
Other taxes................................. 25,489 10,624 13,370 49,483
Other taxes (D3-21-02)...................... (25,006) (10,423) (13,117) (48,545)
Real Estate Taxes........................... 1,396 582 732 2,710
Depreciation/Auto leasing/Other............. 112,215 46,772 58,863 217,850
Depreciation/Auto leasing/Other (D3-21-02).. (4,465) (1,861) (2,342) (8,668)
Interest.................................... 3,432 1,431 1,800 6,663
APA Dues.................................... 25,946 10,814 13,610 50,370
APA Dues (D3-21-08)......................... (1,297) (541) (680) (2,519)
Dues and subscriptions...................... 4,044 1,685 2,121 7,850
Salaries.................................... 63,591 26,506 33,357 123,454
Utilities................................... 41,681 17,373 21,864 80,919
Utilities (D3-21-03)........................ (34,248) (14,275) (17,965) (66,488)
Accounting/Professional fees................ 22,765 9,489 11,941 44,195
Pilot Training.............................. 44,259 18,448 23,216 85,923
Other expenses.............................. 24,741 10,312 12,978 48,032
---------------------------------------------------------------
Total Administrative Expenses........... 568,336 236,889 298,122 1,103,347
---------------------------------------------------------------
Total Operating Expenses (Other 2,096,160 873,705 1,099,554 4,069,419
Costs+ Applicant Cost + Pilot Boats
+ Admin)...........................
---------------------------------------------------------------
Directors Adjustments--Applicant Surcharge .............. .............. .............. ..............
Collected..................................
---------------------------------------------------------------
Total Directors Adjustments................. .............. .............. .............. ..............
---------------------------------------------------------------
Total Operating Expenses (OpEx + 2,096,160 873,705 1,099,554 4,069,419
Adjustments)...............................
----------------------------------------------------------------------------------------------------------------
B. Step 2: Project Operating Expenses, Adjusting for Inflation or
Deflation
In accordance with the text in Sec. 404.102, having identified the
2021 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. We calculate inflation using the BLS
data from the CPI for the Midwest Region of the United States for the
2022 inflation rate.\43\ Because the BLS does not provide forecasted
inflation data, we use economic projections from the Federal Reserve
for the 2023 and 2024 inflation modification.\44\ Based on that
information, the calculations for Step 2 are as presented in table 28:
---------------------------------------------------------------------------
\43\ The CPI is defined as ``All Urban Consumers (CPI-U), All
Items, 1982-4=100.'' Series CUUR0200SAO (Downloaded March 21, 2023).
Available at https://www.bls.gov/cpi/data.htm., All Urban Consumers
(Current Series), multiscreen data, not seasonally adjusted, 0200
Midwest, Current, All Items, Monthly, 12-month Percent Change and
Annual Data.
\44\ The 2023 and 2024 inflation rates are available at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230322.pdf. We used the Core PCE December Projection
found in table 1. (Last visited 04/2023).
[[Page 55648]]
Table 28--Adjusted Operating Expenses for District Three
----------------------------------------------------------------------------------------------------------------
District Three
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)............................... $3,195,714 $873,705 $4,069,419
2022 Inflation Modification (@8%)............................... 255,657 69,896 325,553
2023 Inflation Modification (@3.5%)............................. 120,798 33,026 153,824
2024 Inflation Modification (@2.5%)............................. 89,304 24,416 113,720
-----------------------------------------------
Adjusted 2024 Operating Expenses............................ 3,661,473 1,001,043 4,662,516
----------------------------------------------------------------------------------------------------------------
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 registered pilots in each district. We
determine the number of registered pilots based on data provided by the
WGLPA. Using these numbers, we estimate that there will be 22
registered pilots in 2024 in District Three. We 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 two apprentice pilots in 2024 in District
Three. Based on the seasonal staffing model discussed in the 2017
ratemaking (82 FR 41466), a certain number of pilots are assigned to
designated waters, and a certain number of pilots are assigned to
undesignated waters, as shown in table 29. These numbers are used to
determine the amount of revenue needed in their respective areas.
Table 29--Authorized Pilots for District Three
------------------------------------------------------------------------
Item District Three
------------------------------------------------------------------------
Proposed Maximum Number of Pilots (per Sec. 22
401.220(a)) *........................................
2024 Authorized Pilots (total)........................ 22
Pilots Assigned to Designated Areas................... 5
Pilots Assigned to Undesignated Areas................. 17
2024 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).
D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice
Pilot Wage Benchmark
In this step, we determine the total pilot compensation for each
area. Because we are issuing an ``interim'' ratemaking this year, we
follow the procedure outlined in paragraph (b) of Sec. 404.104, which
adjusts the existing compensation benchmark by inflation. First, we
adjust the 2023 target compensation benchmark of $424,398 by 1.7
percent for a value of $431,613. This accounts for the difference in
actual first quarter 2023 ECI inflation, which is 4.4 percent, and the
2023 PCE estimate of 2.7 percent.45 46 The second step
accounts for projected inflation from 2023 to 2024, which is 2.5
percent.\47\ Based on the projected 2024 inflation estimate, the
proposed target compensation benchmark for 2024 is $442,403 per pilot.
The proposed apprentice pilot wage benchmark is 36 percent of the
target pilot compensation, or $159,265 ($442,403 x 0.36).
---------------------------------------------------------------------------
\45\ Employment Cost Index, Total Compensation for Private
Industry workers in Transportation and Material Moving, Annual
Average, Series ID: CIU2010000520000A. https://www.bls.gov/news.release/eci.t05.htm (Last visited 04/28/23).
\46\ Table 1 Summary of Economic Projections, PCE Inflation.
https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220316.pdf (Last visited 05/17/23).
\47\ Table 1 Summary of Economic Projections, PCE Inflation
December Projection. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230322.pdf (Last visited 03/2023).
---------------------------------------------------------------------------
Next, we certify that the number of pilots estimated for 2024 is
less than or equal to the number permitted under the staffing model in
Sec. 401.220(a). The staffing model suggests that District Three needs
22 pilots, which is less than or equal to the number of registered
pilots provided by the pilot association. In accordance with Sec.
404.104(c), we use 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 Three, as shown in table 30. We estimate that the number of
apprentice pilots with limited registration needed will be two for
District Three in the 2024 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 30--Target Compensation for District Three
----------------------------------------------------------------------------------------------------------------
District Three
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation....................................... $442,403 $442,403 $442,403
Number of Pilots................................................ 17 5 22
Total Target Pilot Compensation............................. $7,520,851 $2,212,015 $9,732,866
Target Apprentice Pilot Compensation............................ $159,265 $159,265 $159,265
Number of Apprentice Pilots..................................... .............. .............. 2
[[Page 55649]]
Total Target Apprentice Pilot Compensation.................. $251,639 $66,891 $318,530
----------------------------------------------------------------------------------------------------------------
E. Step 5: Project Working Capital Fund
Next, the Coast Guard calculates the working capital fund revenues
needed for each area. We first add the figures for projected operating
expenses, total pilot compensation, and total target apprentice pilot
wage for each area, and then, we find the preceding year's average
annual rate of return for new issues of high-grade corporate
securities. Using Moody's data, the number is 4.0742 percent,
rounded.\48\ By multiplying the two figures, we obtain the working
capital fund contribution for each area, as shown in table 31.
---------------------------------------------------------------------------
\48\ Moody's Seasoned Aaa Corporate Bond Yield, average of 2022
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. (Last visited 03/21/2023).
Table 31--Working Capital Fund Calculation for District Three
----------------------------------------------------------------------------------------------------------------
District Three
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $3,661,473 $1,001,043 $4,662,516
Total Target Pilot Compensation (Step 4).................... $7,520,851 $2,212,015 $9,732,866
Total Target Apprentice Pilot Compensation (Step 4)......... $251,639 $66,891 $318,530
Total 2024 Expenses......................................... $11,433,963 $3,279,949 $14,713,912
Working Capital Fund (4.0742%).................................. $465,839 $133,631 $599,470
----------------------------------------------------------------------------------------------------------------
F. Step 6: Project Needed Revenue
In this step, we add 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 32.
Table 32--Revenue Needed for District Three
----------------------------------------------------------------------------------------------------------------
District Three
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $3,661,473 $1,001,043 $4,662,516
Total Target Pilot Compensation (Step 4).................... $7,520,851 $2,212,015 $9,732,866
Total Target Apprentice Pilot Compensation (Step 4)......... $251,639 $66,891 $318,530
Working Capital Fund (Step 5)................................... $465,839 $133,631 $599,470
Total Revenue Needed........................................ $11,899,802 $3,413,580 $15,313,382
----------------------------------------------------------------------------------------------------------------
G. Step 7: Calculate Initial Base Rates
Having determined the revenue needed for each area in the previous
six steps, we divide that number by the expected number of traffic
hours to develop an hourly rate. Step 7 is a two-part process. In the
first part, the 10-year traffic average 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 we calculate separate figures for
designated and undesignated waters, there are two parts for each
calculation. We show these values in table 33.
Table 33--Time on Task for District Three (Hours)
------------------------------------------------------------------------
District Three
Year -------------------------------
Undesignated Designated
------------------------------------------------------------------------
2022.................................... 23,985 4,424
2021.................................... 18,286 2,516
2020.................................... 24,178 3,682
2019.................................... 24,851 3,395
2018.................................... 19,967 3,455
2017.................................... 20,955 2,997
2016.................................... 23,421 2,769
[[Page 55650]]
2015.................................... 22,824 2,696
2014.................................... 25,833 3,835
2013.................................... 17,115 2,631
-------------------------------
Average............................. 22,142 3,240
------------------------------------------------------------------------
Next, we derive 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 34.
Table 34--Initial Rate Calculations for District Three
------------------------------------------------------------------------
Undesignated Designated
------------------------------------------------------------------------
Revenue needed (Step 6)................. $11,899,802 $3,413,580
Average time on task (hours)............ 22,142 3,240
Initial rate............................ $537 $1,054
------------------------------------------------------------------------
H. Step 8: Calculate Average Weighting Factors by Area
In this step, we calculate the average weighting factor for each
designated and undesignated area. We collect the weighting factors, set
forth in 46 CFR 401.400, for each vessel trip. Using this data, we
calculate the average weighting factor for each area using the data
from each vessel transit from 2014 onward, as shown in tables 35 and
36.
Table 35--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 1 (2022).................................................. 94 1 94
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 2 (2022).................................................. 278 1.15 320
Class 3 (2014).................................................. 15 1.3 20
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 3 (2022).................................................. 3 1.3 4
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).................................................. 365 1.45 529
Class 4 (2022).................................................. 385 1.45 558
-----------------------------------------------
[[Page 55651]]
Total for Area 6............................................ 6,380 .............. 8,200
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 1 (2022).................................................. 13 1 13
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 2 (2022).................................................. 103 1.15 118
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 3 (2022).................................................. 6 1.3 8
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
Class 4 (2022).................................................. 271 1.45 393
-----------------------------------------------
Total for Area 8............................................ 3,645 .............. 4,874
Combined total.............................................. 10,025 .............. 13,074
Average weighting factor (weighted transits/number of .............. 1.30 ..............
transits)..............................................
----------------------------------------------------------------------------------------------------------------
Table 36--Average Weighting Factor for District Three, Designated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits
----------------------------------------------------------------------------------------------------------------
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
Class 1 (2022).................................................. 102 1 102
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 2 (2022).................................................. 176 1.15 202
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
[[Page 55652]]
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 3 (2022).................................................. 5 1.3 7
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
Class 4 (2022).................................................. 344 1.45 499
Total....................................................... 4,428 .............. 5,780
Average weighting factor (weighted transits/number of .............. 1.31 ..............
transits)..............................................
----------------------------------------------------------------------------------------------------------------
I. Step 9: Calculate Revised Base Rates
In this step, we revise the base rates so that the total cost of
pilotage will be equal to the revenue needed, after considering the
impact of the weighting factors. To do this, we divide the initial base
rates calculated in Step 7 by the average weighting factors calculated
in Step 8, as shown in table 37.
Table 37--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.................................... $537 1.30 $413
District Three: Designated...................................... $1,054 1.31 $805
----------------------------------------------------------------------------------------------------------------
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 proposed rates incorporate appropriate
compensation for pilots to handle heavy traffic periods, and whether
there are enough pilots to handle those heavy traffic periods. The
Director also considers whether the proposed rates would cover
operating expenses and infrastructure costs, taking average traffic and
weighting factors into consideration. Based on this information, the
Director is not proposing any alterations to the rates in this step. We
propose to modify Sec. 401.405(a)(5) and (6) to reflect the proposed
rates shown in table 38.
Table 38--Proposed Final Rates for District Three
----------------------------------------------------------------------------------------------------------------
Final 2023 Proposed 2024
Area Name pilotage rate pilotage rate
----------------------------------------------------------------------------------------------------------------
District Three: Designated.................. St. Marys River............... $834 $805
District Three: Undesignated................ Lakes Huron, Michigan, and 410 413
Superior.
----------------------------------------------------------------------------------------------------------------
X. Regulatory Analyses
We developed this proposed rule after considering numerous statutes
and Executive orders related to rulemaking. A summary of our analyses
based on these statutes or Executive orders follows.
A. Regulatory Planning and Review
Executive Orders 12866 (Regulatory Planning and Review), as amended
by Executive Order 14094 (Modernizing Regulatory 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 costs and
benefits, reducing costs, harmonizing rules, and 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, as amended by Executive Order 14094. Accordingly, OMB has
not reviewed this regulatory action.
The purpose of this proposed rule is to establish new 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 Coast Guard
[[Page 55653]]
concluded the last full ratemaking in February of 2023.\49\ For this
NPRM, the Coast Guard estimates an increase in cost of approximately
$1.91 million to industry. This is approximately a 5-percent increase
because of the change in revenue needed in 2024 compared to the revenue
needed in 2023. See table 39.
---------------------------------------------------------------------------
\49\ Great Lakes Pilotage Rates--2023 Annual Ratemaking and
Review of Methodology (88 FR 12226), published February 27, 2023.
Table 39--Economic Impacts Due to Proposed Changes
----------------------------------------------------------------------------------------------------------------
Change Description Affected population Costs Benefits
----------------------------------------------------------------------------------------------------------------
Rate changes............. In accordance with Owners and operators Increase of New rates cover an
46 U.S.C. Chapter of 277 vessels $1,914,438 due to association's
93, the Coast Guard transiting the change in revenue necessary and
is required to Great Lakes system needed for 2024 reasonable
review and adjust annually, 56 United ($39,573,633) from operating
pilotage rates States Great Lakes revenue needed for expenses.
annually. pilots, 7 2023 ($37,659,195) Promotes safe,
apprentice pilots, as shown in table efficient, and
and 3 pilotage 40. reliable pilotage
associations. 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.
----------------------------------------------------------------------------------------------------------------
The Coast Guard is required to review and adjust pilotage rates on
the Great Lakes annually. See section IV., Basis and Purpose, of this
preamble for detailed discussions of the legal basis and purpose for
this rulemaking. Based on our annual review for this rulemaking, we are
adjusting the pilotage rates for the 2024 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 would be an increase in rates for both
areas in District One, the designated area for District Two, and the
undesignated area in District Three. The result would be a decrease in
rates for the undesignated area for District Two and the designated
area for District Three. These changes would also lead to a net
increase in the cost of service to shippers. The change in per-unit
cost to each individual shipper would depend on their area of
operation.
A detailed discussion of our economic impact analysis follows.
Affected Population
This proposed rule affects United States Great Lakes pilots and
apprentice pilots, the 3 pilot associations, and the owners and
operators of 277 oceangoing vessels that transit the Great Lakes
annually on average from 2020 to 2022. The Coast Guard estimates that
there will be 56 registered pilots and 7 apprentice pilots during the
2024 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 the 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, 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 2020
through 2022 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, we use a 10-year average to estimate the
traffic. We used 3 years of the most recent billing data to estimate
the affected population. When we reviewed 10 years of the most recent
billing data, we found the data included vessels that have not used
pilotage services in recent years. We believe that using 3 years of
billing data is a better representation of the vessel population
currently using pilotage services and impacted by this proposed rule.
We found that 444 unique vessels used pilotage services during the
years 2020 through 2022. That is, these vessels had a pilot dispatched
to the vessel, and billing information was recorded in SeaPro. Of these
vessels, 412 were foreign-flagged vessels and 32 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 2020 through 2022 as the best
representation of vessels estimated to be affected by the rates in this
proposed rule. From 2020 through 2022, an average of 277 vessels used
pilotage services annually.\50\ On average, 266 of these vessels were
foreign-flagged and 11 were U.S.-flagged vessels that voluntarily opted
into the pilotage service (these figures are rounded averages).
---------------------------------------------------------------------------
\50\ 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 would
result in a net increase in the cost of service to shippers. However,
the change in per-
[[Page 55654]]
unit cost to each individual shipper would be 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 2023 with the total projected revenues to cover costs in 2024.
We set pilotage rates so 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 proposed rule.
The impacts of the rate changes on shippers are estimated from the
district pilotage projected revenues (shown in tables 8, 20, and 32 of
this preamble). The Coast Guard estimates that, for the 2024 shipping
season, the projected revenue needed for all three districts is
$39,573,633.
To estimate the change in cost to shippers from this proposed rule,
the Coast Guard compared the 2024 total projected revenues to the 2023
projected revenues. Because we review and prescribe 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 2023 final
rule, we estimated the total projected revenue needed for 2023 as
37,659,195.\51\ This is the best approximation of 2023 revenues, as, at
the time of publication of this proposed rule, the Coast Guard does not
have enough audited data available for the 2023 shipping season to
revise these projections. Table 40 shows the revenue projections for
2023 and 2024 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.
---------------------------------------------------------------------------
\51\ 88 FR 12226, 12252. See table 42. https://www.govinfo.gov/content/pkg/FR-2023-02-27/pdf/2023-03212.pdf (Last visited 5/17/23).
Table 40--Effect of the Proposed Rule by Area and District
[U.S. dollars; non-discounted]
----------------------------------------------------------------------------------------------------------------
Revenue needed Revenue needed Additional costs
Area in 2023 in 2024 of this rule
----------------------------------------------------------------------------------------------------------------
Total, District One....................................... $12,609,601 $13,706,739 $1,097,138
Total, District Two....................................... 10,392,542 10,553,511 160,969
Total, District Three..................................... 14,657,052 15,313,382 656,330
-----------------------------------------------------
System Total.......................................... 37,659,195 39,573,633 1,914,438
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.
The resulting difference between the projected revenue in 2023 and
the projected revenue in 2024 is the annual change in payments from
shippers to pilots as a result of the rate changes proposed by this
NPRM. The effect of the rate changes to shippers would vary by area and
district. After considering the change in pilotage rates, the proposed
rate changes would lead to affected shippers operating in District One
experiencing an increase in payments of $1,097,138 over the previous
year. Affected shippers operating in District Two and District Three
would experience an increase in payments of $160,969 and $656,330,
respectively, when compared with 2023. The overall adjustment in
payments would increase payments by shippers of $1,914,438 across all
three districts (a 5-percent increase when compared with 2023). Again,
because the Coast Guard reviews and sets rates for Great Lakes pilotage
annually, we estimate the impacts as single-year costs rather than
annualizing them over a 10-year period.
Table 41 shows the difference in revenue by revenue-component from
2023 to 2024 and presents each revenue-component as a percentage of the
total revenue needed. In both 2023 and 2024, the largest revenue-
component was pilotage compensation (63 percent of total revenue needed
in 2023, and 63 percent of total revenue needed in 2024), followed by
operating expenses (32 percent of total revenue needed in 2023, and 31
percent of total revenue needed in 2024). The large increase in the
working capital fund, 56 percent from 2023 to 2024, is driven by a
large increase in the Target Rate of Return on Investment from 2.7033
percent in 2021 to 4.0742 percent in 2022.\52\
---------------------------------------------------------------------------
\52\ Moody's Seasoned Aaa Corporate Bond Yield, average of 2022
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. (Last visited 03/21/2023).
Table 41--Difference in Revenue by Revenue-Component
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percentage Percentage
Revenue of total Revenue of total Difference Percentage
Revenue component needed in revenue needed in revenue (2024 revenue-- change from
2023 needed in 2024 needed in 2023 revenue) previous year
2023 2024
--------------------------------------------------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses.................................... $11,984,950 32 $12,135,029 31 $150,079 1
Total Target Pilot Compensation................................ 23,766,288 63 24,774,568 63 1,008,280 4
Total Target Apprentice Pilot Compensation..................... 916,700 2 1,114,856 3 198,156 22
Working Capital Fund........................................... 991,257 3 1,549,180 4 557,923 56
----------------------------------------------------------------------------------------
Total Revenue Needed....................................... 37,659,195 100 39,573,633 100 1,914,438 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.
[[Page 55655]]
As stated above, we estimate that there would be a total increase
in revenue needed by the pilot associations of $1,914,438. This
represents an increase in revenue needed for target pilot compensation
of $1,008,280, an increase in revenue needed for the total apprentice
pilot wage benchmark of $198,156, an increase in the revenue needed for
adjusted operating expenses of $150,079, and an increase in the revenue
needed for the working capital fund of $557,923.
The change in revenue needed for pilot compensation, $1,008,280, is
due to two factors: (1) The changes to adjust 2023 pilotage
compensation to account for the difference between actual ECI inflation
\53\ (4.4 percent) and predicted PCE inflation \54\ (2.7 percent) for
2023; and (2) projected inflation of pilotage compensation in Step 2 of
the methodology, using predicted inflation through 2024.
---------------------------------------------------------------------------
\53\ Employment Cost Index, Total Compensation for Private
Industry workers in Transportation and Material Moving, Annual
Average, Series ID: CIU2010000520000A. https://www.bls.gov/news.release/eci.t05.htm (Last visited 04/28/23).
\54\ Table 1 Summary of Economic Projections, PCE Inflation
December Projection. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220316.pdf (Last visited 5/17/23).
---------------------------------------------------------------------------
The target compensation is $442,403 per pilot in 2024, compared to
$424,398 in 2023. The proposed changes to modify the 2023 pilot
compensation to account for the difference between predicted and actual
inflation would increase the 2023 target compensation value by 1.7
percent. As shown in table 42, this inflation adjustment increases
total compensation by $7,215 per pilot, and the total revenue needed by
$404,027, when accounting for all 56 pilots.
Table 42--Change in Revenue Resulting From the Change to Inflation of
Pilot Compensation Calculation in Step 4
------------------------------------------------------------------------
------------------------------------------------------------------------
2023 Target Pilot Compensation............................. $424,398
Adjusted 2023 Compensation ($424,398 x 1.017).............. 431,613
Difference between Adjusted Target 2023 Compensation and 7,215
Target 2023 Compensation ($431,613-$424,398)..............
Increase in total Revenue for 56 Pilots ($7,215 x 56)...... 404,027
------------------------------------------------------------------------
*All figures are rounded to the nearest dollar and may not sum.
Similarly, table 43 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 $2,597 per apprentice pilot, and the total
revenue needed by $18,181 when accounting for all seven apprentice
pilots.
Table 43--Change in Revenue Resulting From the Change to Inflation of
Apprentice Pilot Compensation Calculation in Step 4
------------------------------------------------------------------------
------------------------------------------------------------------------
Target Apprentice Pilot Compensation....................... $152,783
Adjusted Compensation ($152,783 x 1.017)................... 155,381
Difference between Adjusted Target Compensation and Target 2,597
Compensation ($155,381-$152,783)..........................
Increase in total Revenue for Apprentices ($2,597 x 7)..... 18,181
------------------------------------------------------------------------
*All figures are rounded to the nearest dollar and may not sum.
As noted earlier, the Coast Guard predicts that 56 pilots would be
needed for the 2024 season. This is the same number of pilots as the
2023 season, so we do not estimate a change in revenue needed for pilot
compensation separate from the changes to inflation.
Similarly, the Coast Guard predicts that seven apprentice pilots
would be needed for the 2024 season. This would be an increase of one
from the 2023 season. Table 44 shows the increase of $156,668 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 2023 apprentice pilotage
compensation to account for the difference between actual and predicted
inflation.
Table 44--Change in Revenue Resulting From Increase of One Apprentice
Pilot
------------------------------------------------------------------------
------------------------------------------------------------------------
2024 Apprentice Target Compensation........................ $159,265
Total Number of New Apprentices............................ 1
Total Cost of new Apprentices ($159,265 x 1)............... 159,265
Difference between Adjusted Target 2023 Compensation and 2,597
Target 2023 Compensation ($159,265-$155,381)..............
Increase in total Revenue for due to increase of 1 2,597
apprentice ($2,597 x 1)...................................
Net Increase in total Revenue for increase of 1-Apprentice 156,668
(159,265-$2,597)..........................................
------------------------------------------------------------------------
*All figures are rounded to the nearest dollar and may not sum.
Another increase, $604,253, would be the result of increasing
compensation for the 56 pilots to account for future inflation of 2.5
percent in 2024. This would increase total compensation by $10,790 per
pilot, as shown in table 45.
Table 45--Change in Revenue Resulting From Inflating 2023 Compensation
to 2024
------------------------------------------------------------------------
------------------------------------------------------------------------
Adjusted 2023 Compensation................................. $431,613
2024 Target Compensation ($431,613 x 1.025)................ 442,403
Difference between Adjusted 2023 Compensation and Target 10,790
2024 Compensation $442,403-$431,613)......................
[[Page 55656]]
Increase in total Revenue for 56 Pilots ($10,790 x 56)..... 604,253
------------------------------------------------------------------------
*All figures are rounded to the nearest dollar and may not sum.
Similarly, an increase of $27,191 would be the result of increasing
compensation for the 7 apprentice pilots to account for future
inflation of 2.5 percent in 2024. This would increase total
compensation by $3,884 per apprentice pilot, as shown in table 46.
Table 46--Change in Revenue Resulting From Inflating 2023 Apprentice
Pilot Compensation to 2024
------------------------------------------------------------------------
------------------------------------------------------------------------
Adjusted 2023 Compensation................................. $155,381
2024 Target Compensation ($442,403 x 36%).................. 159,265
Difference between Adjusted Compensation and Target 3,884
Compensation ($159,265-$155,381)..........................
Increase in total Revenue for 7 Apprentices ($3,884 x 7)... 27,191
------------------------------------------------------------------------
*All figures are rounded to the nearest dollar and may not sum.
Table 47 presents the percentage change in revenue by area and
revenue-component, excluding surcharges, as they are applied at the
district level.\55\
---------------------------------------------------------------------------
\55\ The 2023 projected revenues are from the Great Lakes
Pilotage Rate-2023 Annual Review and Revisions to Methodology final
rule (88 FR 12226), tables 10, 22, and 34. The 2024 projected
revenues are from tables 8, 20, and 32 of this proposed rule.
---------------------------------------------------------------------------
[[Page 55657]]
[GRAPHIC] [TIFF OMITTED] TP16AU23.002
[[Page 55658]]
Benefits
This proposed 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 enough 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, we have
considered whether this proposed rule would have a significant economic
impact on a substantial number of small entities. The term ``small
entities'' comprises small businesses, not-for-profit organizations
that are independently owned and operated and are not dominant in their
fields, and governmental jurisdictions with populations of less than
50,000.
For this proposed rule, the Coast Guard reviewed recent company
size and ownership data for the vessels identified in SeaPro, and we
reviewed business revenue and size data provided by publicly available
sources such as ReferenceUSA.\56\ As described in section X.,
Regulatory Analyses, and section III., Executive Summary, of this
preamble, we found that 444 unique vessels used pilotage services
during the years 2020 through 2022. These vessels are owned by 53
entities, of which 47 are foreign entities that operate primarily
outside the United States, and the remaining 6 entities are U.S.
entities. We 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.\57\ Table 48 shows the North American
Industry Classification System (NAICS) codes of the U.S. entities and
the small entity standard size established by the SBA.
---------------------------------------------------------------------------
\56\ See https://resource.referenceusa.com/ (Last visited 05/18/
2023).
\57\ See https://www.sba.gov/document/support--table-size-standards (Last visited 5/17/23). 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.
Table 48--NAICS Codes and Small Entities Size Standards
------------------------------------------------------------------------
Small entity
NAICS Description size standard
------------------------------------------------------------------------
238910........................ Site Preparation $19,000,000.
Contractors.
425120........................ Wholesale Trade Agents 125 Employees.
And Brokers.
483211........................ Inland Water Freight 1,050 Employees.
Transportation.
483212........................ Inland Water 550 Employees.
Transportation.
484230........................ Specialized Freight $34,000,000.
(Except Used Goods)
Trucking, Long-
Distance.
488330........................ Navigational Services $47,000,000.
to Shipping.
561599........................ All Other Travel $32,500,000.
Arrangement And
Reservation Services.
713930........................ Marinas............... $11,000,000.
813910........................ Business Associations. $15,500,000.
------------------------------------------------------------------------
Of the six U.S. entities, two exceed the SBA's small business
standards for small entities. To estimate the potential impact on the
remaining four small entities, the Coast Guard used their 2022 invoice
data to estimate their pilotage costs in 2024. We increased their 2022
costs to account for the changes in pilotage rates resulting from this
proposed rule and the 2023 final rule. We estimated the change in cost
to these entities resulting from this proposed rule by subtracting
their estimated 2023 pilotage costs from their estimated 2024 pilotage
costs and found the average costs to small firms would be approximately
$7,345.04, with a range of $4,198.62 to $11,322.27. We then compared
the estimated change in pilotage costs between 2023 and 2024 with each
firm's annual revenue. In all but one case, the impact of the change in
estimated pilotage expenses would be below 1 percent of revenues. For
one entity, the impact would be 1.62 percent of revenues.
In addition to the owners and operators discussed previously, three
U.S. entities that receive revenue from pilotage services would be
affected by this proposed rule. These are the three pilot associations
that provide and manage pilotage services within the Great Lakes
districts. These associations are designated collectively as the Lake
Carrier's Association, as well as individually by each separate
district association, all with the same NAICS code, ``Business
Association'' \58\ with a small-entity size standard of $15,500,000.
Based on the reported revenues from audit reports, the associations
individually qualify as small entities, but are not considered small by
the reported revenue of the Lake Carrier's Association.
---------------------------------------------------------------------------
\58\ In previous rulemakings, the associations used a different
NAICS code, 483212 Inland Water Passenger Transportation, which had
a size standard of 500 employees (as of the latest SBA [published
March 17, 2023] small business size table, that NAICS has a small
business size threshold of 550 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 would be impacted by this proposed rule.
We also did not find any small governmental jurisdictions with
populations of fewer than 50,000 people that would be impacted by this
proposed rule. Based on this analysis, we conclude this proposed rule
would 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 proposed rule would not have a significant economic impact on a
substantial number of small entities. If you think that your business,
organization, or governmental jurisdiction qualifies as a small entity
and that this proposed rule would have a significant economic impact on
it, please submit a comment to the docket at the address listed in the
Public Participation and Request for
[[Page 55659]]
Comments section of this preamble. In your comment, explain why you
think it qualifies and how and to what degree this proposed rule would
economically affect it.
C. Assistance for Small Entities
Under section 213(a) of the Small Business Regulatory Enforcement
Fairness Act of 1996, Public Law 104-121, we want to assist small
entities in understanding this proposed rule so that they can better
evaluate its effects on them and participate in the rulemaking. If the
proposed rule would affect your small business, organization, or
governmental jurisdiction and you have questions concerning its
provisions or options for compliance, please call or email the person
in the FOR FURTHER INFORMATION CONTACT section of this proposed rule.
The Coast Guard will not retaliate against small entities that question
or complain about this proposed rule or any policy or action of the
Coast Guard.
Small businesses may send comments on the actions of Federal
employees who enforce, or otherwise determine compliance with, Federal
regulations to the Small Business and Agriculture Regulatory
Enforcement Ombudsman and the Regional Small Business Regulatory
Fairness Boards. The Ombudsman evaluates these actions annually and
rates each agency's responsiveness to small business. If you wish to
comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR
(1-888-734-3247).
D. Collection of Information
This proposed rule would call for no new collection of information
under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501-3520.
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. We have analyzed this proposed rule under Executive Order
13132 and have 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 proposed 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 proposed rule would 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 million (adjusted for
inflation) or more in any one year. Although this proposed rule would
not result in such an expenditure, we do discuss the potential effects
of this proposed rule elsewhere in this preamble.
G. Taking of Private Property
This proposed rule would not cause a taking of private property or
otherwise have taking implications under Executive Order 12630
(Governmental Actions and Interference with Constitutionally Protected
Property Rights).
H. Civil Justice Reform
This proposed rule meets applicable standards in sections 3(a) and
3(b)(2) of Executive Order 12988, (Civil Justice Reform), to minimize
litigation, eliminate ambiguity, and reduce burden.
I. Protection of Children
We have analyzed this proposed rule under Executive Order 13045
(Protection of Children from Environmental Health Risks and Safety
Risks). This proposed rule is not an economically significant rule and
would not create an environmental risk to health or risk to safety that
might disproportionately affect children.
J. Indian Tribal Governments
This proposed rule does not have tribal implications under
Executive Order 13175 (Consultation and Coordination with Indian Tribal
Governments), because it would not have a substantial direct effect on
one or more Indian tribes, on the relationship between the Federal
Government and Indian tribes, or on the distribution of power and
responsibilities between the Federal Government and Indian tribes.
K. Energy Effects
We have analyzed this proposed rule under Executive Order 13211
(Actions Concerning Regulations That Significantly Affect Energy
Supply, Distribution, or Use). We have determined that it is not a
``significant energy action'' under that order because it is not a
``significant regulatory action'' under 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
would be inconsistent with applicable law or otherwise impractical.
Voluntary consensus standards are technical standards (e.g.,
specifications of materials, performance, design, or operation; test
methods; sampling procedures; and related management systems practices)
that are developed or adopted by voluntary consensus standards bodies.
This proposed rule does not use technical standards. Therefore, we
did not consider the use of voluntary consensus standards.
M. Environment
We have analyzed this proposed rule under Department of Homeland
Security Management Directive 023-01, 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 preliminary determination that this action is one of a category of
actions that
[[Page 55660]]
do not individually or cumulatively have a significant effect on the
human environment. A preliminary Record of Environmental Consideration
supporting this determination is available in the docket. For
instructions on locating the docket, see the Public Participation and
Request for Comments section of this preamble. This proposed rule would
be 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 proposed rule involves adjusting the pilotage rates for the
2024 shipping season to account for changes in district operating
expenses, changes in the number of pilots, and anticipated inflation.
All changes are consistent with the Coast Guard's maritime safety
missions. We seek any comments or information that may lead to the
discovery of a significant environmental impact from this proposed
rule.
List of Subjects in 46 CFR Part 401
Administrative practice and procedure, Great Lakes, Navigation
(water), Penalties, Reporting and recordkeeping requirements, Seamen.
For the reasons discussed in the preamble, the Coast Guard proposes
to amend 46 CFR part 401 as follows:
PART 401--GREAT LAKES PILOTAGE REGULATIONS
0
1. The authority citation for part 401 continues to read as follows:
Authority: 46 U.S.C. 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 $925;
(2) Lake Ontario is $606;
(3) Lake Erie is $586;
(4) The navigable waters from Southeast Shoal to Port Huron, MI is
$660;
(5) Lakes Huron, Michigan, and Superior is $413; and
(6) The St. Mary's River is $805.
* * * * *
Dated: August 10, 2023.
W.R. Arguin,
Rear Admiral, U.S. Coast Guard, Assistant Commandant for Prevention
Policy.
[FR Doc. 2023-17474 Filed 8-15-23; 8:45 am]
BILLING CODE 9110-04-P
