Great Lakes Pilotage Rates-2024 Annual Review, 9038-9072 [2024-02410]

Download as PDF 9038 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations Public Participation (Executive Order 13563) The NEA encourages public participation by ensuring its documentation is understandable by the general public, and has written this final rule in compliance with Executive Order 13563 by ensuring its accessibility, consistency, simplicity of language, and overall comprehensibility. List of Subjects in 45 CFR Parts 1149 and 1158 Administrative practice and procedure, Government contracts, Grant programs, Loan programs, Lobbying, Penalties. For the reasons stated in the preamble, the NEA amends 45 CFR chapter XI, subchapter B, as follows: PART 1149—PROGRAM FRAUD CIVIL REMEDIES ACT REGULATIONS 1. The authority citation for part 1149 continues to read as follows: ■ Authority: 5 U.S.C. App. 8G(a)(2); 20 U.S.C. 959; 28 U.S.C. 2461 note; 31 U.S.C. 3801–3812. § 1149.9 [Amended] 2. In § 1149.9 amend paragraph (a)(1) b removing the amount ‘‘$13,507’’ and adding in its place the amount ‘‘$13,945’’. ■ PART 1158—NEW RESTRICTIONS ON LOBBYING 3. The authority citation for part 1158 continues to read as follows: ■ Authority: 20 U.S.C. 959; 28 U.S.C. 2461; 31 U.S.C. 1352. § 1158.400 [Amended] 4. In § 1158.400 amend paragraphs (a), (b), and (e) by: ■ a. Removing the amount ‘‘$23,714’’ and adding in its place the amount ‘‘$24,483’’ wherever it appears; and ■ b. Removing the amount ‘‘$237,268’’ and adding in its place the amount ‘‘$244,958’’ wherever it appears. ■ Appendix A to Part 1158 [Amended] 5. Amend appendix A to part 1158 by: a. Removing the amount ‘‘$23,714’’ and adding in its place the amount ‘‘$24,483’’ wherever it appears. ■ b. Removing the amount ‘‘$237,268’’ and adding in its place the amount ‘‘$244,958’’ wherever it appears. ddrumheller on DSK120RN23PROD with RULES1 ■ ■ Dated: January 10, 2024. Daniel Beattie, Director of Guidelines and Panel Operations. [FR Doc. 2024–00662 Filed 2–8–24; 8:45 am] BILLING CODE 7537–01–P VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 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. Final rule. AGENCY: ACTION: In accordance with the statutory provisions enacted by the Great Lakes Pilotage Act of 1960, the Coast Guard is issuing new pilotage rates for the 2024 shipping season. This rule adjusts the pilotage rates to account for changes in district operating expenses, an increase in the number of pilots, and anticipated inflation. These changes, when combined, result in a 7percent net increase in pilotage costs compared to the 2023 season. DATES: This final rule is effective March 11, 2024. ADDRESSES: To view documents mentioned in this preamble as being available in the docket, go to www.regulations.gov, type USCG–2023– 0438 in the search box and click ‘‘Search.’’ Next, in the Document Type column, select ‘‘Supporting & Related Material.’’ SUMMARY: For information about this document, call or email Mr. Brian Rogers, Commandant, Office of Waterways and Ocean Policy— Great Lakes Pilotage Division (CG– WWM–2), Coast Guard; telephone 410– 360–9260, email Brian.Rogers@uscg.mil. SUPPLEMENTARY INFORMATION: FOR FURTHER INFORMATION CONTACT: Table of Contents for Preamble I. Abbreviations II. Executive Summary III. Basis and Purpose IV. Background V. Discussion of Comments and Changes VI. Summary of the Ratemaking Methodology VII. Historic Methodological and Other Changes VIII. Individual Target Pilot Compensation Benchmark IX. Discussion of Rate Adjustments District One A. Step 1: Recognize Previous Operating Expenses B. Step 2: Project Operating Expenses, Adjusting for Inflation or Deflation C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice Pilot Wage Benchmark E. Step 5: Project Working Capital Fund PO 00000 Frm 00046 Fmt 4700 Sfmt 4700 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. Abbreviations 2023 final rule Great Lakes Pilotage Rates— 2023 Annual Ratemaking and Review of Methodology final rule AMO 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 E:\FR\FM\09FER1.SGM 09FER1 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations 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 II. Executive Summary In accordance with Title 46 of the United States Code (U.S.C.), Chapter 93,1 the Coast Guard regulates pilotage for oceangoing vessels on the Great Lakes and St. Lawrence Seaway— including setting the rates for pilotage services and adjusting them on an annual basis for the upcoming shipping season. The shipping season begins when the locks open in the St. Lawrence Seaway, which allows traffic access to and from the Atlantic Ocean. The opening of the locks varies annually, depending on waterway conditions, but is generally in March or April. The rates, which for the 2024 season range from $430 to $927 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. These rates are the foundation for safe, efficient, and reliable pilotage service to facilitate maritime commerce, protect the marine environment, and comply with National Transportation Safety Board recommendations regarding staffing and pilot fatigue. In accordance with statutory and regulatory requirements, the Coast Guard employs the ratemaking methodology introduced in 2016 2 and last updated in 2022.3 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 rule. In this final rule, we conduct 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 9039 ‘‘2023 final rule’’) (88 FR 12226, published February 27, 2023).4 Per title 46 of the Code of Federal Regulations (CFR), section 404.100(b), via this final rule, the Coast Guard’s Director of the Great Lakes Pilotage (‘‘the Director’’) establishes 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 rule will result in $2,621,471 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 final rule, the Coast Guard is establishing the rates shown in table 1. TABLE 1—CURRENT AND 2024 PILOTAGE RATES ON THE GREAT LAKES Name District One: Designated .............................................. District One: Undesignated .......................................... District Two: Designated .............................................. 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 .......................... District Two: Undesignated .......................................... District Three: Designated ............................................ District Three: Undesignated ........................................ ddrumheller on DSK120RN23PROD with RULES1 Final 2023 pilotage rate Area This rule affects 58 U.S. Registered pilots, 6 apprentice pilots, 3 pilot associations, and the owners and operators of an average of 296 oceangoing vessels that transit the Great Lakes annually. This rule will not affect the Coast Guard’s budget or increase Federal spending. The estimated overall annual regulatory economic impact of this rate change is a net increase of $2,621,471 in estimated payments made by shippers during the 2024 shipping 1 46 U.S.C. 9301–9308. FR 11908, March 7, 2016. 3 87 FR 18488. March 30, 2022. 4 https://www.govinfo.gov/content/pkg/FR-202302-27/pdf/2023-03212.pdf. (Last accessed 5/12/ 2023.) 2 81 VerDate Sep<11>2014 16:19 Feb 08, 2024 season. This rule establishes the 2024 yearly target compensation for pilots on the Great Lakes at $440,658 per pilot (a $16,260 increase, or 3.83 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 rule. Jkt 262001 PO 00000 Frm 00047 Fmt 4700 Sfmt 4700 Final 2024 pilotage rate $876 586 601 $927 608 667 704 834 410 597 836 430 III. Basis and Purpose The legal basis of this rulemaking is 46 U.S.C. Chapter 93,5 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.6 For U.S. Great Lakes pilots, the statute requires the Secretary to ‘‘prescribe by 5 46 6 46 E:\FR\FM\09FER1.SGM U.S.C. 9301–9308. U.S.C. 9302(a)(1). 09FER1 9040 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations regulation rates and charges for pilotage services, giving consideration to the public interest and the costs of providing the services.’’ 7 The statute requires that rates be established or reviewed and adjusted each year, no later than March 1.8 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.9 The Secretary’s duties and authority under 46 U.S.C. Chapter 93 have generally been delegated to the Coast Guard.10 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,11 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.12 The methodology is designed to measure how much revenue each pilotage association would need to cover expenses and to provide 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 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 to facilitate commerce and protect the marine environment 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. IV. 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.13 United States and Canadian ‘‘lakers,’’ which account for most commercial shipping on the Great Lakes, are not affected.14 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. The waters of the Great Lakes and the St. Lawrence Seaway subject to U.S. jurisdiction 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 waters of the St. Lawrence River and Lake Ontario subject to U.S. jurisdiction. The Lakes Pilots Association (LPA) provides pilotage services in District Two, which includes all waters of Lake Erie, the Detroit River, Lake St. Clair, and the St. Clair River subject to U.S. jurisdiction. Finally, the Western Great Lakes Pilots Association (WGLPA) provides pilotage services in District Three, which includes all waters of the St. Mary’s River; Sault Ste. Marie Locks; and Lakes Huron, Michigan, and Superior subject to U.S. jurisdiction. 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.15 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.’’ 16 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. TABLE 2—AREAS OF THE GREAT LAKES AND ST. LAWRENCE SEAWAY Area name 18 Pilotage association Designation One ............. Saint Lawrence Seaway Pilotage Association (SLPA). Lakes Pilots Association (LPA) .......................... Designated ....... Undesignated ... Designated ....... 1 2 5 Undesignated ... 4 Two ............. 7 46 U.S.C. 9303(f). 8 Ibid. ddrumheller on DSK120RN23PROD with RULES1 Area No.17 District 9 Ibid. 10 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. https:// dhsconnect.dhs.gov/org/comp/mgmt/policies/ Delegations/00170.1.pdf. (Last accessed 11/8/2023.) 11 Apprentice pilots and applicant pilots are compensated by the pilot association they are VerDate Sep<11>2014 17:16 Feb 08, 2024 Jkt 262001 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. 12 46 CFR part 404.101–404.110. https:// www.ecfr.gov/current/title-46/chapter-III/part-404. (Last accessed 5/17/23.) 13 See 46 CFR part 401. https://www.ecfr.gov/ current/title-46/chapter-III/part-401 (Last accessed 5/17/23). PO 00000 Frm 00048 Fmt 4700 Sfmt 4700 St. Lawrence River. Lake Ontario. Navigable waters from Southeast Shoal to Port Huron, MI. Lake Erie. 14 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 accessed 5/17/23). 15 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 accessed 5/31/23). 16 46 U.S.C. 9302(a)(1)(B). E:\FR\FM\09FER1.SGM 09FER1 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations 9041 TABLE 2—AREAS OF THE GREAT LAKES AND ST. LAWRENCE SEAWAY—Continued District Three .......... Pilotage association Western Great Lakes Pilots Association (WGLPA). 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 to 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 2022 final rule.19 We summarize the current methodology in section VI., Summary of the Ratemaking Methodology. V. Discussion of Comments and Changes In response to the notice of proposed rulemaking (NPRM) for this ratemaking (88 FR 55629, August 16, 2023) the Coast Guard received six comment submissions. These submissions include one comment filed jointly by the LPA, the SLSPA, and the WGLPA; one filed jointly by the Shipping Federation of Canada, the American Great Lakes Ports Association, and the United States Great Lakes Shipping Association (collectively, the Coalition); one from the president of the Saint Lawrence Seaway Pilots’ Association (SLSPA); one from the president of the LPA; one from the Director of the Port of Monroe; and one from the president of the International Longshoreman Association (ILA). As each of these commenters touched on numerous issues, for each response below, the Coast Guard notes which commenter raised the specific points addressed. In situations where multiple commenters raised similar issues, the Coast Guard provides one response to those issues. ddrumheller on DSK120RN23PROD with RULES1 A. Requests for Additional Pilots One of the major requests made by the commenters was the addition of more pilots due to the increase in traffic, with several commenters pointing to cruise ship traffic as the driving force in the surge of vessels needing pilotage 17 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. 18 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 accessed 5/17/23). 19 87 FR 18488, March 30, 2022. VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 Area No.17 Designation Designated ....... Undesignated ... Undesignated ... I Area name 18 7 6 8 I service. District One stated they estimate a need for three new pilots by 2025, and Districts Two and Three requested one additional pilot each to be added to this rulemaking. The Coast Guard recognizes District One’s need for more pilots going forward, but we believe that this need is addressed by the inclusion of an additional apprentice pilot as proposed in the NPRM. Added to the two existing apprentice pilots that were authorized in the 2023 ratemaking, this inclusion brings the total number of apprentice pilots in District One to three for the 2024 season. These apprentice pilots will be able to accommodate District One’s projected need for three additional fully registered pilots for the 2025 season. The Coast Guard will, therefore, keep the pilot numbers for District One the same as they were in the proposed rule. The LPA, WGLPA, ILA, and Capt. Paul C. Lamarre II all made comments that an additional pilot is needed in both District Two and District Three. After review of the provided documentation, the Coast Guard agrees with these comments. The Coast Guard verified the numbers that LPA provided, which show that another full member pilot is needed to safely provide pilotage service. Based on these comments, our analysis of the increase in demand for pilotage services created by cruise ship traffic,20 and the unanimous recommendation made by the 2023 Great Lake Pilot Advisory Committee (See transcript, pages 87 and 88), the Coast Guard has added an additional pilot to this year’s ratemaking for both Districts Two and Three. For District Two, the Coast Guard reduced the number of apprentice pilots from two to one, since the additional pilot referenced earlier will no longer be an apprentice. B. Bridge Hour Allocation Numerous commenters noted discrepancies in the allocation of bridge hours between designated and undesignated waters for all three 20 At least 76 Great Lakes cruises are listed online as scheduled for the 2024 season. Cruises listed at vikingcruises.com, hl-cruises.com, pearlseacruises.com, and us.ponant.com. (Last accessed 11/29/2023.) PO 00000 Frm 00049 Fmt 4700 Sfmt 4700 St. Mary’s River. Lakes Huron and Michigan. Lake Superior. districts. The error occurs in the ‘‘area’’ field of the data extract provided by the associations, where each trip number is only labeled with the area in which the trip started, rather than noting each area that the trip passed through. This error causes miscalculation of the designated and undesignated bridge hours in Step 7 of the ratemaking methodology, and the transits by vessel class in Step 8. The commenters suggested to instead use monthly reports from SeaPro to provide the necessary bridge hour calculations for Step 7 and to use weight factor reports from SeaPro to provide the transits by vessel class for Step 8. The Coast Guard agrees with these comments and has worked with the pilot associations to correct Steps 7 and 8 using the monthly reports and weight factor reports. The Coast Guard could not verify which trips had been incorrectly attributed to either a designated or undesignated area in the economist extract data set previously provided. The Coast Guard will work with the associations to refine the data extracts provided by the associations to ensure that all fields are correctly specified and interpreted. The reports used for this final rule are available in the docket. We appreciate the commenters who brought this to our attention and will take measures to ensure this error is corrected in data used in future rulemakings. These corrections are set out in further detail in tables 4 and 5. C. Methodology Numerous commenters noted concerns with the methodology by which the Coast Guard calculates this rate. Concerns included that weighting factors should be calculated using bridge hours instead of vessel transits per visit; that the Coast Guard should audit the pilotage program to find operational efficiencies and costsavings; and that the Coast Guard should conduct an annual look-back at expenses to find cost-savings. These comments are outside the scope of the current rulemaking, which does not modify the ratemaking methodology. The Coast Guard appreciates these comments and encourages the stakeholders to request that they be placed on a future GLPAC agenda for E:\FR\FM\09FER1.SGM 09FER1 9042 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations discussion, or to resubmit them during the next full ratemaking in 2027. D. Miscellaneous We received a number of comments that we categorized as ‘‘Miscellaneous’’ and are best addressed one by one. A few commenters urged the Coast Guard to continue having GLPAC meetings in person and in front of a stenographer, while another commenter urged the Coast Guard to investigate a hybrid in-person/virtual set up for future GLPAC meetings. These comments are outside the scope of this rule, but the Coast Guard will continue to engage with stakeholders to determine the best way to hold GLPAC meetings. One commenter asked the Coast Guard to require an anonymous listing of each pilot’s compensation in their annual reports. The Coast Guard disagrees with this recommendation. Compensation of individual pilots is not included in the expense base or methodology, and, therefore, we decline to add a regulatory requirement for pilot associations to publicly report the compensation of individual pilots. The Coast Guard does not use the actual earnings or average earnings; instead, we use target pilot compensation (described in Step 4 of the existing methodology), which the Coast Guard has determined to be reasonable and necessary. Because actual salary values are not used in the ratemaking, the Coast Guard believes that a requirement to report pilot compensation is not in the public interest or necessary to provide for the costs of services. Progress toward pilot retention can be reviewed through pilot turnover and the association’s ability to promptly fill pilot vacancies for fully registered pilots and apprentice pilots. Many commenters took the opportunity to recognize the Director’s authority to add up to three additional pilots in each District. We agree with these commenters that the Director does have such authority, and, based on these comments and the unanimous recommendation at the 2023 GLPAC meeting, the Coast Guard has agreed to add one pilot each to Districts Two and Three, and one apprentice pilot to District One. E. Changes to the Proposed Rule Table 3 summarizes the changes between the 2024 Ratemaking NPRM and this final rule. This table includes changes from the proposed rule that are not based on comments from the NPRM. TABLE 3—CHANGES BETWEEN PROPOSED RULE AND FINAL RULE Change Reasoning Revise number of pilots in District Two from 16 to 17 and adjust number of apprentice pilots from 2 to 1. Revise number of pilots in District Three from 22 to 23. Correct traffic data in Steps 7 and 8 for all districts to reflect discrepancy in the assignment of bridge hours and transits by vessel class to designated and undesignated areas. Update inflation figures: • Updates 2022 Employment Cost Index (ECI) inflation from 4.4%, listed in the NPRM, to 3.9% • Updates 2023 Personal Consumption Expenditures (PCE) inflation from 3.5%, listed in the NPRM, to 3.9%. • Updates 2024 PCE inflation from 2.5%, listed in the NPRM, to 2.6%. Change average vessel population from 277 to 296. Change average customer count from 40 to 41. An additional pilot will help Districts Two and Three handle an expected increase in cruise ship traffic in 2024. F. Changes to Step 7 Bridge Hours and Step 8 Transits These corrections will improve the accuracy of our ratemaking as it pertains to designated and undesignated areas. More recent figures were published since the Coast Guard conducted the analysis for the NPRM. In the 2023 final ratemaking, District Three provided updated traffic data that was used to revise bridge hours and transits by vessel class but was not used to update the Regulatory Flexibility Act analysis. This final rule corrects that oversight. The revised data included additional trips that introduced new vessels and customers to the affected population and relabeled the vessel for trip 26879. Step 7 in the NPRM and the updated figures used for this final rule. Table 4 shows the difference between the published figures for bridge hours in TABLE 4—CHANGES TO STEP 7 BRIDGE HOURS FROM PROPOSED RULE TO FINAL RULE Previously published Updated I Undesignated I Designated Undesignated Difference I Designated Undesignated I Designated District 1 ddrumheller on DSK120RN23PROD with RULES1 2021 ......................................................... 2022 ......................................................... 7,871 8,574 6,188 6,785 7,893 8,356 6,166 6,573 22 ¥218 ¥22 ¥212 5,290 7,668 6,762 8,613 ¥3,536 ¥4,638 3,496 4,638 18,149 2,484 ¥137 ¥32 District 2 2021 ......................................................... 2022 ......................................................... 8,826 12,306 3,266 3,975 District 3 2021 ......................................................... VerDate Sep<11>2014 17:35 Feb 08, 2024 Jkt 262001 18,286 PO 00000 Frm 00050 2,516 Fmt 4700 Sfmt 4700 E:\FR\FM\09FER1.SGM 09FER1 9043 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations TABLE 4—CHANGES TO STEP 7 BRIDGE HOURS FROM PROPOSED RULE TO FINAL RULE—Continued Previously published Updated Undesignated 2022 ......................................................... Designated 23,985 Further, the Coast Guard updated the number of transits by vessel class in Step 8, ‘‘Calculate Average Weighting Factors by Area,’’ using updated Undesignated 4,424 Difference Designated 23,914 weighting factor reports provided by the associations from SeaPro. Table 5 details the changes by area and vessel class for 2022, which will be used in Undesignated 3,345 Designated ¥71 ¥1,079 this final rule; no changes are made to the 2021 figures. TABLE 5—CHANGES TO STEP 8 FROM PROPOSED RULE TO FINAL RULE Area/vessel class Previous Updated Difference Number of Transits (2022) Area 1—Designated Class 2 ......................................................................................................................................... Class 3 ......................................................................................................................................... Class 4 ......................................................................................................................................... 466 104 461 482 106 478 16 2 17 32 358 69 393 41 371 73 401 9 13 4 8 34 184 3 273 117 717 13 1230 83 533 10 957 79 275 3 349 121 478 8 642 42 203 5 293 102 176 344 104 198 392 2 22 48 94 278 385 162 452 482 68 174 97 13 103 6 271 12 95 5 306 ¥1 ¥8 ¥1 35 Area 2—Undesignated Class Class Class Class 1 2 3 4 ......................................................................................................................................... ......................................................................................................................................... ......................................................................................................................................... ......................................................................................................................................... Area 5—Designated Class Class Class Class 1 2 3 4 ......................................................................................................................................... ......................................................................................................................................... ......................................................................................................................................... ......................................................................................................................................... Area 4—Undesignated Class Class Class Class 1 2 3 4 ......................................................................................................................................... ......................................................................................................................................... ......................................................................................................................................... ......................................................................................................................................... Area 7—Designated Class 1 ......................................................................................................................................... Class 2 ......................................................................................................................................... Class 4 ......................................................................................................................................... Area 6—Undesignated Class 1 ......................................................................................................................................... Class 2 ......................................................................................................................................... Class 4 ......................................................................................................................................... Area 8—Undesignated ddrumheller on DSK120RN23PROD with RULES1 Class Class Class Class 1 2 3 4 ......................................................................................................................................... ......................................................................................................................................... ......................................................................................................................................... ......................................................................................................................................... These refinements to the ratemaking continue to promote safe, efficient, and reliable pilotage service on the Great Lakes, and allow each pilotage association to generate sufficient revenue to cover its necessary and reasonable operating expenses, fairly VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 compensate trained and rested pilots, and realize an appropriate revenue to use for improvements. PO 00000 Frm 00051 Fmt 4700 Sfmt 4700 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 E:\FR\FM\09FER1.SGM 09FER1 ddrumheller on DSK120RN23PROD with RULES1 9044 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations 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 in this rule, 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 VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 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 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(b)), the previous year’s target compensation value is first adjusted by actual inflation using the ECI inflation value. If the ECI inflation value is not available, § 404.104(b)(1) and (2) specify the compensation inflation process the Director will use instead. 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 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 PO 00000 Frm 00052 Fmt 4700 Sfmt 4700 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 using any surcharges in this final 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 final 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 final rule we E:\FR\FM\09FER1.SGM 09FER1 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations 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. ddrumheller on DSK120RN23PROD with RULES1 VII. Historic Methodological and Other Changes The Coast Guard is using the existing ratemaking methodology to establish the base rates in this ratemaking. The Coast Guard is not issuing any methodological or other policy changes to the ratemaking within this final rule. According to 46 U.S.C. 9303(f), and restated in 46 CFR 404.100(a), the Coast Guard must establish base rates by a full ratemaking at least once every 5 years. The Coast Guard has determined that the current base rates and methodology still adequately adhere 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),21 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 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),22 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 20088, published April 9, 2020),23 the Coast Guard revised the methodology to accurately capture all costs and revenues associated with Great Lakes 21 https://www.govinfo.gov/content/pkg/FR-201708-31/pdf/2017-18411.pdf (last accessed 5/12/ 2023). 22 https://www.govinfo.gov/content/pkg/FR-201806-05/pdf/2018-11969.pdf (last accessed 5/12/ 2023). 23 https://www.govinfo.gov/content/pkg/FR-202004-09/pdf/2020-06968.pdf (last accessed 5/12/ 2023). VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 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),24 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 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),25 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 issuing the target pilot compensation benchmark in this final rule at the target compensation for the ratemaking year 2023, adjusted for inflation. In an interim ratemaking year, the base target pilot compensation is adjusted annually in accordance with § 404.104(b). The Coast Guard arrived at this 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 March 7, 2016),26 the Coast Guard used the average compensation for a Canadian pilot, plus a 10-percent adjustment. The shipping industry 24 https://www.govinfo.gov/content/pkg/FR-202103-12/pdf/2021-05050.pdf (last accessed 5/12/ 2023). 25 https://www.govinfo.gov/content/pkg/FR-202203-30/pdf/2022-06394.pdf (last accessed 5/12/ 2023). 26 https://www.govinfo.gov/content/pkg/FR-201603-07/pdf/2016-04894.pdf (last accessed 5/12/ 2023). PO 00000 Frm 00053 Fmt 4700 Sfmt 4700 9045 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 (85 FR 20088), 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, and that the 2020 benchmark will be used for future rates (85 FR 20091). The Director determined that the ratemaking provided adequate compensation for pilots. 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 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 E:\FR\FM\09FER1.SGM 09FER1 9046 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations compensation remains competitive and current for upcoming years. Therefore, the Coast Guard does not seek alternative benchmarks for target compensation at this time and, instead, simply adjusts 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 target compensation for 2024 is $440,658 per registered pilot and $158,637 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 1.2 percent for an adjusted value of $429,491. This first adjustment accounts for the difference in actual third quarter 2023 ECI inflation, which is 3.9 percent, and the 2023 PCE estimate of 2.7 percent.27 The second step accounts for projected inflation from 2023 to 2024, which is 2.6 percent.28 Based on the projected 2024 inflation estimate, the target compensation benchmark for 2024 is $440,658 per pilot. The apprentice pilot wage benchmark is 36 percent of the target pilot compensation, or $158,637 ($440,658 × 0.36).29 IX. Discussion of Rate Adjustments In this final rule, based on the policy changes described in the previous section, we are issuing new pilotage rates for 2024. We conducted the 2024 ratemaking as an interim ratemaking, as we last did in 2022 (87 FR 18488). Thus, the Coast Guard adjusted 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 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 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.30 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 6. In the 2021 expenses used as the basis for this final 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 final 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 One are shown in table 6. TABLE 6—2021 RECOGNIZED EXPENSES FOR DISTRICT ONE District One reported operating expenses for 2021 Designated Undesignated St. Lawrence River Lake Ontario Total Applicant Pilot Compensation Salaries ........................................................................................................................................ Employee Benefits ....................................................................................................................... $247,735 10,367 $165,157 6,911 $412,892 17,278 Total Applicant Pilot Compensation ..................................................................................... 258,102 172,068 430,170 Applicant Subsistence ................................................................................................................. Travel ........................................................................................................................................... License Insurance ........................................................................................................................ Payroll taxes ................................................................................................................................ Other—Pilotage Cost ................................................................................................................... 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 ................................................................................................... 7,085 4,722 11,807 ddrumheller on DSK120RN23PROD with RULES1 Other Applicant Cost 27 Employment Cost Index, Total Compensation for Private Industry workers in Transportation and Material Moving, Annual Average, Series ID: CIU2010000520000A. https://beta.bls.gov/ dataViewer/view/timeseries/CIU2010000520000A (Last accessed 11/01/23); and Table 1 Summary of Economic Projections, Median PCE Inflation. VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 https://www.federalreserve.gov/monetarypolicy/ files/fomcprojtabl20220316.pdf (Last accessed 05/ 17/23). 28 Table 1 Summary of Economic Projections, Median Core PCE Inflation June Projection. https:// www.federalreserve.gov/monetarypolicy/files/ fomcprojtabl20230920.pdf (Last accessed 09/2023). PO 00000 Frm 00054 Fmt 4700 Sfmt 4700 29 For more information on the apprentice pilot wage benchmark, see the Coast Guard’s 2022 Annual Review and Revisions to Methodology. 87 FR 18488. 30 These reports are available in the docket for this final rule. E:\FR\FM\09FER1.SGM 09FER1 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations 9047 TABLE 6—2021 RECOGNIZED EXPENSES FOR DISTRICT ONE—Continued District One reported operating expenses for 2021 Designated Undesignated St. Lawrence River Lake Ontario Total Other Pilotage Cost Subsistence ................................................................................................................................. Hotel/Lodging ............................................................................................................................... Travel ........................................................................................................................................... License renewal ........................................................................................................................... Payroll Taxes ............................................................................................................................... License Insurance ........................................................................................................................ 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 .......................................................................................................... 873,410 582,274 1,455,684 Pilot boat expense (Operating) .................................................................................................... Dispatch expense ........................................................................................................................ Employee Benefits ....................................................................................................................... Salaries ........................................................................................................................................ Payroll taxes ................................................................................................................................ 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 Boat and Dispatch Costs .................................................................................... 678,188 452,126 1,130,314 Legal—general counsel ............................................................................................................... Legal—shared counsel (K&L Gates) ........................................................................................... Legal—Coast Guard 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 ............................................................................................................................................ 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 Operating Expenses (OpEx) ....................................................................................... 2,476,529 1,651,018 4,127,547 Pilot Boat and Dispatch Costs Administrative Expenses ddrumheller on DSK120RN23PROD with RULES1 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 VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 Region of the United States for the 2022 inflation rate.31 Because the BLS does not provide forecasted inflation data, we 31 The CPI is defined as ‘‘All Urban Consumers (CPI–U), All Items, 1982–84=100.’’ Series CUUR0200SA0 (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. PO 00000 Frm 00055 Fmt 4700 Sfmt 4700 use economic projections from the Federal Reserve for the 2023 and 2024 inflation modification.32 Based on that information, the calculations for Step 2 are as presented in table 7. 32 The 2023 and 2024 inflation rates are available at https://www.federalreserve.gov/monetarypolicy/ files/fomcprojtabl20230920.pdf. We used the Median Core PCE June Projection found in table 1. (Downloaded September 2023). E:\FR\FM\09FER1.SGM 09FER1 9048 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations TABLE 7—ADJUSTED OPERATING EXPENSES FOR DISTRICT ONE District One Designated Total Operating Expenses (Step 1) ............................................................................................. 2022 Inflation Modification (@8%) .............................................................................................. 2023 Inflation Modification (@3.9%) ........................................................................................... 2024 Inflation Modification (@2.6%) ........................................................................................... Adjusted 2024 Operating Expenses ..................................................................................... $2,476,529 198,122 104,311 72,253 2,851,215 Undesignated $1,651,018 132,081 69,541 48,169 1,900,809 Total $4,127,547 330,203 173,852 120,422 4,752,024 * Figures are rounded to the nearest dollar and may not sum to totals. 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) and rounding introduced in the 2022 ratemaking (87 FR 18488), 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 8. These numbers are used to determine the amount of revenue needed in their respective areas. TABLE 8—AUTHORIZED PILOTS FOR DISTRICT ONE Item District One 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 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 1.2 percent for a value of $429,491. This accounts for the difference in actual third quarter 2023 ECI inflation, which is 3.9 percent, and the 2023 PCE estimate of 2.7 percent.33 34 The second step accounts for projected inflation from 2023 to 2024, which is 2.6 percent.35 Based on the projected 2024 inflation estimate, the target compensation benchmark for 2024 is $440,658 per pilot. The apprentice pilot wage benchmark is 36 percent of the target pilot compensation, or $158,637 ($440,658 × 0.36). 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 9. We estimate that the number of apprentice pilots with limited registration needed for District One in the 2024 season will be three. 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. TABLE 9—TARGET COMPENSATION FOR DISTRICT ONE District One ddrumheller on DSK120RN23PROD with RULES1 Designated Undesignated Total Target Pilot Compensation .......................................................................................................... Number of Pilots .......................................................................................................................... $440,658 10 $440,658 8 $440,658 18 Total Target Pilot Compensation .......................................................................................... $4,406,580 $3,525,264 $7,931,844 Target Apprentice Pilot Compensation ........................................................................................ $158,637 $158,637 $158,637 33 Employment Cost Index, Total Compensation for Private Industry workers in Transportation and Material Moving, Annual Average, Series ID: CIU2010000520000A. https://beta.bls.gov/ dataViewer/view/timeseries/CIU2010000520000A. (Last accessed 11/01/23.) VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 34 Table 1 Summary of Economic Projections, Median PCE Inflation. https:// www.federalreserve.gov/monetarypolicy/files/ fomcprojtabl20220316.pdf. (Last accessed 05/17/ 23.) PO 00000 Frm 00056 Fmt 4700 Sfmt 4700 35 Table 1 Summary of Economic Projections, Median Core PCE Inflation June Projection. https:// www.federalreserve.gov/monetarypolicy/files/ fomcprojtabl20230920.pdf. (Last accessed 09/2023.) E:\FR\FM\09FER1.SGM 09FER1 9049 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations TABLE 9—TARGET COMPENSATION FOR DISTRICT ONE—Continued District One Designated Undesignated Number of Apprentice Pilots ........................................................................................................ ........................ ........................ 3 Total Target Apprentice Pilot Compensation ....................................................................... $285,547 $190,364 $475,911 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 target pilot compensation, and total target apprentice pilot wage for each area, then we find the preceding year’s average annual rate of return for new issues of high-grade corporate securities. Total Using Moody’s data, the number is 4.0742 percent rounded.36 By multiplying the two figures, we obtain the working capital fund contribution for each area, as shown in table 10. TABLE 10—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 target total pilot compensation (from Step 4), total In this step, we add the expenses accrued to derive the total revenue $2,851,215 4,406,580 285,547 7,543,342 307,331 Undesignated $1,900,809 3,525,264 190,364 5,616,437 228,825 Total $4,752,024 7,931,844 475,911 13,159,779 536,156 target apprentice pilot wage (from Step 4), and the working capital fund contribution (from Step 5). We show these calculations in table 11. TABLE 11—REVENUE NEEDED FOR DISTRICT ONE District One 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 ................................................................................................................ 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 from 2013–2020, the Coast Guard used 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, $2,851,215 4,406,580 285,547 307,331 7,850,673 Undesignated $1,900,809 3,525,264 190,364 228,825 5,845,262 Total $4,752,024 7,931,844 475,911 536,156 13,695,935 there are two parts for each calculation. For 2021–2022, the Coast Guard used figures provided by the associations through SeaPro monthly reports. Where bridge hour figures did not match between the monthly reports and the weighted factor reports, the Coast Guard opted to use the figures from the monthly report for Step 7. We show these values in table 12. TABLE 12—TIME ON TASK FOR DISTRICT ONE ddrumheller on DSK120RN23PROD with RULES1 [Hours] District One Designated 2022 ......................................................................................................................................................................... 36 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 16:19 Feb 08, 2024 Jkt 262001 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:// PO 00000 Frm 00057 Fmt 4700 Sfmt 4700 6,573 Undesignated 8,356 fred.stlouisfed.org/series/AAA. (Last accessed 03/ 21/23.) E:\FR\FM\09FER1.SGM 09FER1 9050 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations TABLE 12—TIME ON TASK FOR DISTRICT ONE—Continued [Hours] District One Designated 2021 ......................................................................................................................................................................... 2020 ......................................................................................................................................................................... 2019 ......................................................................................................................................................................... 2018 ......................................................................................................................................................................... 2017 ......................................................................................................................................................................... 2016 ......................................................................................................................................................................... 2015 ......................................................................................................................................................................... 2014 ......................................................................................................................................................................... 2013 ......................................................................................................................................................................... Average .................................................................................................................................................................... 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 Undesignated 6,166 6,265 8,232 6,943 7,605 5,434 5,743 6,810 5,864 6,564 7,893 7,560 8,405 8,445 8,679 6,217 6,667 6,853 5,529 7,460 amount of traffic is as expected. We present the calculations for District One in table 13. TABLE 13—INITIAL RATE CALCULATIONS FOR DISTRICT ONE 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 calculate the average weighting factor $7,850,673 6,564 $1,196 Undesignated $5,845,262 7,460 $784 for each area using the data from each vessel transit from 2014 to 2021, as shown in tables 14 and 15. Data for 2022 was provided by the associations in a weighting factor report. TABLE 14—AVERAGE WEIGHTING FACTOR FOR DISTRICT ONE, DESIGNATED AREAS Number of transits ddrumheller on DSK120RN23PROD with RULES1 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) VerDate Sep<11>2014 ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. 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............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. 16:19 Feb 08, 2024 Jkt 262001 PO 00000 Frm 00058 Fmt 4700 Sfmt 4700 E:\FR\FM\09FER1.SGM 31 41 31 28 54 72 8 10 39 285 295 185 352 559 378 560 315 482 50 28 50 67 86 122 67 52 106 271 251 09FER1 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 39 328 339 213 405 643 435 644 362 554 65 36 65 87 112 159 87 68 138 393 364 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations 9051 TABLE 14—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 ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. 214 285 393 730 427 407 478 1.45 1.45 1.45 1.45 1.45 1.45 1.45 310 413 570 1059 619 590 693 Total ...................................................................................................................................... Average weighting factor (weighted transits ÷ number of transits) ...................................... 7,809 ........................ ........................ 1.29 10,064 ........................ * Figures may not sum due to rounding. TABLE 15—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) Weighting factor Weighted transits ............................................................................................................................. ............................................................................................................................. 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............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. 25 28 18 19 22 30 3 19 41 238 263 169 290 352 366 358 463 371 60 42 28 45 63 58 35 71 73 289 269 222 285 382 326 334 466 401 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 41 274 302 194 334 405 421 412 532 427 78 55 36 59 82 75 46 92 95 419 390 322 413 554 473 484 676 581 Total ...................................................................................................................................... Average weighting factor (weighted transits/number of transits) ......................................... 6,524 ........................ ........................ 1.29 8,435 ........................ ddrumheller on DSK120RN23PROD with RULES1 * Figures may not sum due to rounding. I. Step 9: Calculate Revised Base Rates In this step, we revise the base rates so that the total cost of pilotage will be VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 equal to the revenue needed, after considering the impact of the weighting factors. To do this, the initial base rates PO 00000 Frm 00059 Fmt 4700 Sfmt 4700 calculated in Step 7 are divided by the average weighting factors calculated in Step 8, as shown in table 16. E:\FR\FM\09FER1.SGM 09FER1 9052 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations TABLE 16—REVISED BASE RATES FOR DISTRICT ONE Initial rate (Step 7) Area 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 rates incorporate $1,196 784 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 rates cover operating expenses and infrastructure costs, including average Revised rate (Initial rate ÷ average weighting factor) Average weighting factor (Step 8) 1.29 1.29 $927 608 traffic and weighting factors. Based on the financial information submitted by the pilots, the Director is not establishing any alterations to the rates in this step. We modified § 401.405(a)(1) and (2) to reflect the final rates shown in table 17. TABLE 17—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.37 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. In the 2021 expenses used as the basis for this final 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. Final 2024 pilotage rate $876 586 $927 608 The Coast Guard continues to include apprentice salaries as an allowable expense in the 2024 ratemaking, as this final 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 18. TABLE 18—2021 RECOGNIZED EXPENSES FOR DISTRICT TWO Undesignated Designated Lake Erie Southeast Shoal to Port Huron Reported operating expenses for 2021 Total ddrumheller on DSK120RN23PROD with RULES1 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 5,280 2,976 (2,976) 7,920 4,464 (4,464) 13,200 7,440 (7,440) Other Applicant Cost Applicant Subsistence ................................................................................................................. Hotel/Lodging Costs .................................................................................................................... Hotel/Lodging Costs (D2–21–01) ................................................................................................ 37 These reports are available in the docket for this final rule. VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 PO 00000 Frm 00060 Fmt 4700 Sfmt 4700 E:\FR\FM\09FER1.SGM 09FER1 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations 9053 TABLE 18—2021 RECOGNIZED EXPENSES FOR DISTRICT TWO—Continued Undesignated Designated Lake Erie Southeast Shoal to Port Huron Reported operating expenses for 2021 Total Payroll taxes ................................................................................................................................ 6,901 10,352 17,253 Total Other Applicant Cost ................................................................................................... 12,181 18,272 30,453 Subsistence ................................................................................................................................. Hotel/Lodging ............................................................................................................................... Hotel/Lodging (D2–21–01) ........................................................................................................... Travel ........................................................................................................................................... License renewal ........................................................................................................................... Payroll Taxes ............................................................................................................................... License Insurance ........................................................................................................................ 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 Total Other Pilotage Costs ................................................................................................... 222,320 333,479 555,798 Pilot boat costs ............................................................................................................................ Employee Benefits ....................................................................................................................... Insurance ..................................................................................................................................... Salaries ........................................................................................................................................ Payroll taxes ................................................................................................................................ 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 ............................................................................................. 306,194 459,292 765,486 Legal ............................................................................................................................................ 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 ............................................................................................................................................ 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 2,394,422 Total Operating Expenses (OpEx + Adjustments) ............................................................... 957,768 1,436,655 2,394,422 Other Pilotage Cost Pilot Boat and Dispatch Costs Administrative Expenses ddrumheller on DSK120RN23PROD with RULES1 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 VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 inflation rate.38 Because the BLS does not provide forecasted inflation data, we use economic projections from the Federal Reserve for the 2023 and 2024 38 The CPI is defined as ‘‘All Urban Consumers (CPI–U), All Items, 1982–84=100.’’ Series CUUR0200SA0 (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. PO 00000 Frm 00061 Fmt 4700 Sfmt 4700 inflation modification.39 Based on that information, the calculations for Step 2 are presented in table 19. 39 The 2023 and 2024 inflation rates are available at Table 1 Summary of Economic Projections, Median Core PCE Inflation June Projection. https:// www.federalreserve.gov/monetarypolicy/files/ fomcprojtabl20230920.pdf. (Last accessed 12/4/ 2023). E:\FR\FM\09FER1.SGM 09FER1 9054 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations TABLE 19—ADJUSTED OPERATING EXPENSES FOR DISTRICT TWO District Two Undesignated Total Operating Expenses (Step 1) ............................................................................................. 2022 Inflation Modification (@8%) .............................................................................................. 2023 Inflation Modification (@3.9%) ........................................................................................... 2024 Inflation Modification (@2.6%) ........................................................................................... Adjusted 2024 Operating Expenses ..................................................................................... $957,768 $76,621 40,341 27,943 1,102,673 Designated $1,436,655 114,932 60,512 41,915 1,654,014 Total $2,394,422 191,553 100,853 69,858 2,756,686 * Figures are rounded to the nearest dollar and may not sum to totals. 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 numbers, we estimate that there will be 17 registered pilots in 2024 in District Two, including the additional pilot being granted for 2024. 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 one apprentice pilot in 2024 in District Two. Based on the seasonal staffing model discussed in the 2017 ratemaking (82 FR 41466) and rounding introduced in the 2022 ratemaking (87 FR 18488), 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 20. These numbers are used to determine the amount of revenue needed in their respective areas. TABLE 20—AUTHORIZED PILOTS FOR DISTRICT TWO Item District Two 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 17 9 8 1 * For a detailed calculation, refer to the Great Lakes Pilotage Rates—2017 Annual Review final rule, which contains the staffing model. See 82 FR 41466, table 6 at 41480 (August 31, 2017). D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice Pilot Wage Benchmark In this step, 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 1.2 percent for a value of $429,491. This accounts for the difference in actual third quarter 2023 ECI inflation, which is 3.9 percent, and the 2023 PCE estimate of 2.7 percent.40 41 The second step accounts for projected inflation from 2023 to 2024, which is 2.6 percent.42 Based on the projected 2024 inflation estimate, the target compensation benchmark for 2024 is $440,658 per pilot. The apprentice pilot wage benchmark is 36 percent of the target pilot compensation, or $158,637 ($440,658 × 0.36). 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 21. The Coast Guard estimates that the number of apprentice pilots with limited registration needed for District Two in the 2024 season will be one. 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 21—TARGET COMPENSATION FOR DISTRICT TWO District Two ddrumheller on DSK120RN23PROD with RULES1 Undesignated Designated Total Target Pilot Compensation .......................................................................................................... Number of Pilots .......................................................................................................................... $440,658 8 $440,658 9 $440,658 17 Total Target Pilot Compensation .......................................................................................... 3,525,264 3,965,922 7,491,186 40 Employment Cost Index, Total Compensation for Private Industry workers in Transportation and Material Moving, Annual Average, Series ID: CIU2010000520000A. https://beta.bls.gov/ dataViewer/view/timeseries/CIU2010000520000A. (Last accessed 11/01/23.) VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 41 Table 1 Summary of Economic Projections, Median PCE Inflation. https:// www.federalreserve.gov/monetarypolicy/files/ fomcprojtabl20220316.pdf. (Last accessed 05/17/ 23.) PO 00000 Frm 00062 Fmt 4700 Sfmt 4700 42 Table 1 Summary of Economic Projections, Median Core PCE Inflation June Projection. https:// www.federalreserve.gov/monetarypolicy/files/ fomcprojtabl20230920.pdf (Last accessed 12/4/ 2023). E:\FR\FM\09FER1.SGM 09FER1 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations 9055 TABLE 21—TARGET COMPENSATION FOR DISTRICT TWO—Continued District Two Undesignated Designated Target Apprentice Pilot Compensation ........................................................................................ Number of Apprentice Pilots ........................................................................................................ 158,637 ........................ 158,637 ........................ 158,637 1 Total Target Apprentice Pilot Compensation ....................................................................... 63,455 95,182 158,637 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 target 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 Total number is 4.0742 percent, rounded.43 By multiplying the two figures, we obtain the working capital fund contribution for each area, as shown in table 22. TABLE 22—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 target pilot compensation (from $1,102,673 3,525,264 63,455 4,691,392 191,137 Designated $1,654,014 3,965,922 95,182 5,715,118 232,845 Total $2,756,686 7,491,186 158,637 10,406,509 423,982 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 23. TABLE 23—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 ddrumheller on DSK120RN23PROD with RULES1 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 43 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 16:19 Feb 08, 2024 Jkt 262001 $1,102,673 3,525,264 63,455 191,137 4,882,529 Designated $1,654,014 3,965,922 95,182 232,845 5,947,963 Total $2,756,686 7,491,186 158,637 423,982 10,830,491 calculate the time on task for each district from 2013–2020, the Coast Guard used 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. For 2021–2022, the Coast Guard used figures provided by the associations through SeaPro monthly reports. Where bridge hour figures did not match between the monthly reports and the weighted factor reports, the Coast Guard opted to use the figures from the monthly report for Step 7. We show these values in table 24. 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 accessed 03/21/2023). PO 00000 Frm 00063 Fmt 4700 Sfmt 4700 E:\FR\FM\09FER1.SGM 09FER1 9056 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations TABLE 24—TIME ON TASK FOR DISTRICT TWO [Hours] District Two Year Undesignated 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 Designated ......................................................................................................................................................................... ......................................................................................................................................................................... ......................................................................................................................................................................... ......................................................................................................................................................................... ......................................................................................................................................................................... ......................................................................................................................................................................... ......................................................................................................................................................................... ......................................................................................................................................................................... ......................................................................................................................................................................... ......................................................................................................................................................................... 7,668 5,290 6,232 6,512 6,150 5,139 6,425 6,535 7,856 4,603 8,613 6,762 8,401 7,715 6,655 6,074 5,615 5,967 7,001 4,750 Average ............................................................................................................................................................ 6,241 6,755 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 25. TABLE 25—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 factor for each area using the data from $4,882,529 6,241 $782 Designated $5,947,963 6,755 $881 each vessel transit from 2014–2021, as shown in tables 26 and 27. Data for 2022 was provided by the associations in a weighting factor report. TABLE 26—AVERAGE WEIGHTING FACTOR FOR DISTRICT TWO, UNDESIGNATED AREAS Number of transits ddrumheller on DSK120RN23PROD with RULES1 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) VerDate Sep<11>2014 ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. 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............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. 16:19 Feb 08, 2024 Jkt 262001 PO 00000 Frm 00064 Fmt 4700 Sfmt 4700 E:\FR\FM\09FER1.SGM 31 35 32 21 37 54 1 7 121 356 354 380 222 123 127 165 206 478 20 0 9 12 3 1 1 5 8 636 560 09FER1 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 35 32 21 37 54 1 7 121 409 407 437 255 141 146 190 237 550 26 0 12 16 4 1 1 7 10 922 812 9057 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations TABLE 26—AVERAGE WEIGHTING FACTOR FOR DISTRICT TWO, UNDESIGNATED 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 ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. 468 319 196 210 201 227 642 1.45 1.45 1.45 1.45 1.45 1.45 1.45 679 463 284 305 291 329 931 Total ...................................................................................................................................... Average weighting factor (weighted transits/number of transits) ......................................... 6,268 ........................ ........................ 1.31 8,204 ........................ * Figures may not sum due to rounding. TABLE 27—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 ............................................................................................................................. ............................................................................................................................. 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............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. 20 15 28 15 42 48 7 12 117 237 217 224 127 153 281 342 240 717 8 8 4 4 14 1 5 2 13 359 340 281 185 379 403 405 268 1,230 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 12 117 273 250 258 146 176 323 393 276 825 10 10 5 5 18 1 7 3 17 521 493 407 268 550 584 587 389 1,784 Total ...................................................................................................................................... Average weighting factor (weighted transits/number of transits) ......................................... 6,751 ........................ ........................ 1.32 8,882 ........................ ddrumheller on DSK120RN23PROD with RULES1 * Figures may not sum due to rounding. I. Step 9: Calculate Revised Base Rates In this step, the Coast Guard revises the base rates, so that the total cost of VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 pilotage will be equal to the revenue needed after considering the impact of the weighting factors. To do this, we PO 00000 Frm 00065 Fmt 4700 Sfmt 4700 divide the initial base rates calculated in Step 7 by the average weighting factors calculated in Step 8, as shown in table 28. E:\FR\FM\09FER1.SGM 09FER1 9058 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations TABLE 28—REVISED BASE RATES FOR DISTRICT TWO District Two: Undesignated ........................................................................................ District Two: Designated ............................................................................................ J. Step 10: Review and Finalize Rates In this step, the Director reviews the rates set forth by the staffing model and ensures that they meet the goal of ensuring safe, efficient, and reliable pilotage. To establish this, the Director considers whether the rates incorporate $782 881 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 rates cover operating expenses and infrastructure costs, taking average Revised rate (initial rate ÷ average weighting factor) Average weighting factor (Step 8) Initial rate (Step 7) Area 1.31 1.32 $597 667 traffic and weighting factors into consideration. Based on the financial information submitted by the pilots, the Director is not establishing any alterations to the rates in this step. We modify § 401.405(a)(3) and (4) to reflect the final rates shown in table 29. TABLE 29—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.44 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. In the 2021 expenses used as the basis for this final 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 Final 2024 pilotage rate $601 $667 704 597 final 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 30. TABLE 30—2021 RECOGNIZED EXPENSES FOR DISTRICT THREE Reported operating expenses for 2021 Undesignated Designated Undesignated Lakes Huron and Michigan St. Mary’s River Lake Superior Total ddrumheller on DSK120RN23PROD with RULES1 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 ................................................................................. 394,455 164,414 206,915 765,784 149,993 136,769 (18,162) 55,936 62,519 57,007 (7,570) 23,315 78,680 71,744 (9,527) 29,342 291,192 265,520 (35,260) 108,592 Other Pilotage Costs Pilot subsistence/travel .................................................................................... Hotel/Lodging Cost .......................................................................................... Hotel/Lodging Cost (D3–21–03) ...................................................................... Travel ............................................................................................................... 44 These reports are available in the docket for this final rule. VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 PO 00000 Frm 00066 Fmt 4700 Sfmt 4700 E:\FR\FM\09FER1.SGM 09FER1 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations 9059 TABLE 30—2021 RECOGNIZED EXPENSES FOR DISTRICT THREE—Continued Undesignated Designated Undesignated Reported operating expenses for 2021 Lakes Huron and Michigan St. Mary’s River Lake Superior Total License Insurance—Pilots ............................................................................... Payroll taxes .................................................................................................... Payroll Tax (D3–21–04) ................................................................................... License Insurance ............................................................................................ 881 ........................ 155,779 15,328 367 ........................ 64,931 6,389 462 ........................ 81,715 8,040 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 ................................................................................................ Pilot Boat Coast (D2–21–02) ........................................................................... Dispatch costs ................................................................................................. Employee Benefits ........................................................................................... Insurance ......................................................................................................... Insurance (D3–21–05, D3–21–09) .................................................................. Salaries ............................................................................................................ Payroll taxes .................................................................................................... 445,549 (10,901) 38,156 1,748 20,141 1,735 140,294 123 185,710 (4,544) 15,904 729 8,395 723 58,476 51 233,716 (5,718) 20,015 917 10,565 910 73,592 64 864,975 (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 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 (OpEx) ........................................................... 2,096,160 873,705 1,099,554 4,069,419 Administrative Cost ddrumheller on DSK120RN23PROD with RULES1 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 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 VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 inflation rate.45 Because the BLS does not provide forecasted inflation data, we use economic projections from the 45 The CPI is defined as ‘‘All Urban Consumers (CPI–U), All Items, 1982–84=100.’’ Series CUUR0200SA0 (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. PO 00000 Frm 00067 Fmt 4700 Sfmt 4700 Federal Reserve for the 2023 and 2024 inflation modification.46 Based on that information, the calculations for Step 2 are as presented in table 31. 46 The 2022 and 2023 inflation rates are available at https://www.federalreserve.gov/monetarypolicy/ files/fomcprojtabl20230920.pdf. We used the Median Core PCE June Projection found in table 1. (Downloaded September 2023). E:\FR\FM\09FER1.SGM 09FER1 9060 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations TABLE 31—ADJUSTED OPERATING EXPENSES FOR DISTRICT THREE District Three Undesignated Total Operating Expenses (Step 1) ............................................................................................. 2022 Inflation Modification (@8%) .............................................................................................. 2023 Inflation Modification (@3.9%) ........................................................................................... 2024 Inflation Modification (@2.6%) ........................................................................................... Adjusted 2024 Operating Expenses ..................................................................................... $3,195,714 255,657 134,603 93,235 3,679,209 Designated Total $873,705 69,896 36,800 25,490 1,005,891 $4,069,419 325,553 171,403 118,725 4,685,100 * Figures are rounded to the nearest dollar and may not sum to totals. 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, we estimate that there will be 23 registered pilots in 2024 in District Three, including the additional pilot granted by the Director. 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) and rounding introduced in the 2022 ratemaking (87 FR 18488), 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 32. These numbers are used to determine the amount of revenue needed in their respective areas. TABLE 32—AUTHORIZED PILOTS FOR DISTRICT THREE Item District Three 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 23 5 18 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 1.2 percent for a value of $429,491. This accounts for the difference in actual third quarter 2023 ECI inflation, which is 3.9 percent, and the 2023 PCE estimate of 2.7 percent.47 48 The second step accounts for projected inflation from 2023 to 2024, which is 2.6 percent.49 Based on the projected 2024 inflation estimate, the target compensation benchmark for 2024 is $440,658 per pilot. The apprentice pilot wage benchmark is 36 percent of the target pilot compensation, or $158,637 ($440,658 × 0.36). 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 33. We estimate that the number of apprentice pilots with limited registration needed for District Three in the 2024 season will be two. 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 area, in accordance with the allocation for operating expenses. TABLE 33—TARGET COMPENSATION FOR DISTRICT THREE District Three ddrumheller on DSK120RN23PROD with RULES1 Undesignated Designated Total Target Pilot Compensation .......................................................................................................... $440,658 $440,658 $440,658 Number of Pilots .......................................................................................................................... 18 5 23 Total Target Pilot Compensation .......................................................................................... Target Apprentice Pilot Compensation ........................................................................................ $7,931,844 $158,637 $2,203,290 $158,637 $10,135,134 $158,637 47 Employment Cost Index, Total Compensation for Private Industry workers in Transportation and Material Moving, Annual Average, Series ID: CIU2010000520000A. https://beta.bls.gov/ dataViewer/view/timeseries/CIU2010000520000A. (Last accessed 11/01/23.) VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 48 Table 1 Summary of Economic Projections, Median PCE Inflation. https:// www.federalreserve.gov/monetarypolicy/files/ fomcprojtabl20220316.pdf. (Last accessed 05/17/ 23.) PO 00000 Frm 00068 Fmt 4700 Sfmt 4700 49 Table 1 Summary of Economic Projections, Median Core PCE Inflation June Projection. https:// www.federalreserve.gov/monetarypolicy/files/ fomcprojtabl20230920.pdf (Last accessed 12/4/ 2023). E:\FR\FM\09FER1.SGM 09FER1 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations 9061 TABLE 33—TARGET COMPENSATION FOR DISTRICT THREE—Continued District Three Undesignated Designated Number of Apprentice Pilots ........................................................................................................ ........................ ........................ 2 Total Target Apprentice Pilot Compensation ....................................................................... $250,646 $66,628 $317,274 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 target 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 Total number is 4.0742 percent, rounded.50 By multiplying the two figures, we obtain the working capital fund contribution for each area, as shown in table 34. TABLE 34—WORKING CAPITAL FUND CALCULATION FOR DISTRICT THREE District Three 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, 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 target pilot compensation (from Step 4), and $3,679,209 7,931,844 250,646 11,861,699 483,269 Designated $1,005,891 2,203,290 66,628 3,275,809 133,463 Total $4,685,100 10,135,134 317,274 15,137,508 616,732 the working capital fund contribution (from Step 5). The calculations are shown in table 35. TABLE 35—REVENUE NEEDED FOR DISTRICT THREE District Three 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 ddrumheller on DSK120RN23PROD with RULES1 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. 50 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 16:19 Feb 08, 2024 Jkt 262001 $3,679,209 7,931,844 250,646 483,269 12,344,968 Designated $1,005,891 2,203,290 66,628 133,463 3,409,272 Total $4,685,100 10,135,134 317,274 616,732 15,754,240 To calculate the time on task for each district from 2013–2020, the Coast Guard used 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. For 2021–2022, the Coast Guard used figures provided by the associations through SeaPro monthly reports. Where bridge hour figures did not match between the monthly reports and the weighted factor reports, the Coast Guard opted to use the figures from the monthly report for Step 7. We show these values in table 36. 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 accessed 03/21/2023.) PO 00000 Frm 00069 Fmt 4700 Sfmt 4700 E:\FR\FM\09FER1.SGM 09FER1 9062 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations TABLE 36—TIME ON TASK FOR DISTRICT THREE [Hours] District Three Year Undesignated 2022 ......................................................................................................................................................................... 2021 ......................................................................................................................................................................... 2020 ......................................................................................................................................................................... 2019 ......................................................................................................................................................................... 2018 ......................................................................................................................................................................... 2017 ......................................................................................................................................................................... 2016 ......................................................................................................................................................................... 2015 ......................................................................................................................................................................... 2014 ......................................................................................................................................................................... 2013 ......................................................................................................................................................................... Average .................................................................................................................................................................... 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 23,914 18,149 23,678 24,851 19,967 20,955 23,421 22,824 25,833 17,115 22,071 Designated 3,345 2,484 3,520 3,395 3,455 2,997 2,769 2,696 3,835 2,631 3,113 amount of traffic is as expected. The calculations for District Three are set forth in table 37. TABLE 37—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 factor for each area using the data from $12,344,968 22,071 $559 Designated $3,409,272 3,113 $1,095 each vessel transit from 2014 to 2021, as shown in tables 38 and 39. Data for 2022 was provided by the associations in a weighting factor report. TABLE 38—AVERAGE WEIGHTING FACTOR FOR DISTRICT THREE, UNDESIGNATED AREAS Number of transits Vessel class/year Weighting factor Weighted transits ddrumheller on DSK120RN23PROD with RULES1 Area 6 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 (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) VerDate Sep<11>2014 ............................................................................................................................. ............................................................................................................................. 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............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. 16:19 Feb 08, 2024 Jkt 262001 PO 00000 Frm 00070 Fmt 4700 Sfmt 4700 E:\FR\FM\09FER1.SGM 45 56 136 148 103 173 4 8 162 274 207 236 264 169 279 332 273 452 15 8 10 19 9 9 4 5 3 394 09FER1 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 45 56 136 148 103 173 4 8 162 315 238 271 304 194 321 382 314 520 20 10 13 25 12 12 5 7 4 571 9063 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations TABLE 38—AVERAGE WEIGHTING FACTOR FOR DISTRICT THREE, UNDESIGNATED AREAS—Continued Number of transits Vessel class/year Class Class Class Class Class Class Class Class 4 4 4 4 4 4 4 4 (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) Weighting factor Weighted transits ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. 375 332 367 337 334 339 356 482 1.45 1.45 1.45 1.45 1.45 1.45 1.45 1.45 544 481 532 489 484 492 516 699 Total for Area 6 .................................................................................................................... 6,719 ........................ 8,609 ............................................................................................................................. 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............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. 3 0 4 4 0 0 1 5 12 177 169 174 151 102 120 180 124 95 3 0 7 18 7 6 1 1 5 243 253 204 269 188 254 265 319 306 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 12 204 194 200 174 117 138 207 143 109 4 0 9 23 9 8 1 1 7 352 367 296 390 273 368 384 463 444 Total for Area 8 .................................................................................................................... Combined total ..................................................................................................................... Average weighting factor (weighted transits/number of transits) ......................................... 3,670 10,389 ........................ ........................ ........................ 1.30 4,914 13,522 ........................ Area 8 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) * Figures may not sum due to rounding. TABLE 39—AVERAGE WEIGHTING FACTOR FOR DISTRICT THREE, DESIGNATED AREAS Number of transits ddrumheller on DSK120RN23PROD with RULES1 Vessel class/year Class Class Class Class Class Class Class Class Class Class Class 1 1 1 1 1 1 1 1 1 2 2 (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2014) (2015) VerDate Sep<11>2014 ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. 16:19 Feb 08, 2024 Jkt 262001 PO 00000 Frm 00071 Fmt 4700 Sfmt 4700 E:\FR\FM\09FER1.SGM 27 23 55 62 47 45 15 15 104 221 145 09FER1 Weighting factor 1 1 1 1 1 1 1 1 1 1.15 1.15 Weighted transits 27 23 55 62 47 45 15 15 104 254 167 9064 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations TABLE 39—AVERAGE WEIGHTING FACTOR FOR DISTRICT THREE, DESIGNATED AREAS—Continued Number of transits Vessel class/year Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class 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 (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 ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. 174 170 126 162 218 131 198 15 0 6 14 6 3 1 2 5 321 245 191 234 225 308 336 258 392 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 1.45 200 196 145 186 251 151 228 20 0 8 18 8 4 1 3 7 465 355 277 339 326 447 487 374 568 Total ...................................................................................................................................... Average weighting factor (weighted transits/number of transits) ......................................... 4,500 ........................ ........................ 1.31 5,877 ........................ * Figures may not sum due to rounding. I. Step 9: Calculate Revised Base Rates equal to the revenue needed after considering the impact of the weighting factors. To do this, we divide the initial In this step, we revise the base rates, so that the total cost of pilotage will be base rates calculated in Step 7 by the average weighting factors calculated in Step 8, as shown in table 40. TABLE 40—REVISED BASE RATES FOR DISTRICT THREE District Three: Undesignated ..................................................................................... District Three: Designated ......................................................................................... J. Step 10: Review and Finalize Rates In this step, the Director reviews the rates set forth by the staffing model and ensures that they meet the goal of ensuring safe, efficient, and reliable pilotage. To establish this, the Director considers whether the rates incorporate $559 1,095 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 rates cover operating expenses and infrastructure costs, taking average Revised rate (initial rate ÷ average weighting factor) Average weighting factor (Step 8) Initial rate (Step 7) Area 1.30 1.31 $430 836 traffic and weighting factors into consideration. Based on this information, the Director is not establishing any alterations to the rates in this step. We modified § 401.405(a)(5) and (6) to reflect the rates shown in table 41. ddrumheller on DSK120RN23PROD with RULES1 TABLE 41—FINAL RATES FOR DISTRICT THREE Final 2023 pilotage rate Area Name District Three: Designated .......................................... District Three: Undesignated ...................................... St. Mary’s River .......................................................... Lakes Huron, Michigan, and Superior ....................... X. Regulatory Analyses We developed this rule after considering numerous statutes and VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 Executive orders related to rulemaking. Below we summarize our analyses based on these statutes or Executive orders. PO 00000 Frm 00072 Fmt 4700 Sfmt 4700 Final 2024 pilotage rate $834 410 $836 430 A. Regulatory Planning and Review Executive Orders 12866 (Regulatory Planning and Review), as amended by E:\FR\FM\09FER1.SGM 09FER1 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations 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 both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. The Office of Management and Budget (OMB) has not designated this rule a significant regulatory action under section 3(f) of Executive Order 12866, as amended by Executive Order 14094. Accordingly, OMB has not reviewed this regulatory action. The purpose of this final 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 9065 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 concluded the last full ratemaking in February of 2023.51 For this final rule, the Coast Guard estimates an increase in cost of approximately $2.62 million to industry from 2023 to 2024. This is approximately a 7-percent increase because of the change in revenue needed in 2024 compared to the revenue needed in 2023. See table 42. ddrumheller on DSK120RN23PROD with RULES1 TABLE 42—ECONOMIC IMPACTS DUE TO RATE 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. The Coast Guard is required to review and adjust pilotage rates on the Great Lakes annually. See section III., 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 is an increase in rates for both areas in District One, the designated area for District Two, and both areas in District Three. There is a decrease in rates for the undesignated area in District Two. These changes also lead to a net increase in the cost of service to shippers. The change in per-unit cost to each individual shipper depends on their area of operation. A detailed discussion of our economic impact analysis follows. Costs Benefits Owners and operators of 296 Increase of $2,621,471 due vessels transiting the Great to change in revenue Lakes system annually, 58 needed for 2024 United States Great Lakes ($40,280,666) from revpilots, 6 apprentice pilots, enue needed for 2023 and 3 pilotage associations. ($37,659,195) as shown in table 43. Affected Population This final rule affects United States Great Lakes pilots and apprentice pilots, the 3 pilot associations, and the owners and operators of 296 oceangoing vessels that transit the Great Lakes annually on average from 2020 to 2022. The Coast Guard estimates that there will be 58 registered pilots and 6 apprentice pilots during the 2024 shipping season, an increase of 2 pilots and decrease of 1 apprentice pilot from the proposed numbers in the NPRM. 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 SeaPro to estimate the average annual number of vessels affected by the rate adjustment. SeaPro 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. The associations did not provide updated trip-level billing data for 2022, as they did for 2021, to use to update the number of vessels or customers in this final rule, so we used what was provided in the NPRM. We believe that using 3 years of billing data is a better representation of the vessel population 51 Great Lakes Pilotage Rates—2023 Annual Ratemaking and Review of Methodology (88 FR 12226), published February 27, 2023. VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 PO 00000 Frm 00073 Fmt 4700 Sfmt 4700 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. E:\FR\FM\09FER1.SGM 09FER1 9066 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations currently using pilotage services and impacted by this final rule. We found that 437 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, 407 were foreign-flagged vessels, and 30 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 final rule. From 2020 through 2022, an average of 296 vessels used pilotage services annually.52 On average, 280 of these vessels were foreign-flagged and 16 were U.S.-flagged vessels that voluntarily opted into the pilotage service (these figures are rounded averages). Total Cost to Shippers The rate changes resulting from this adjustment to the rates result in a net increase in the cost of service to shippers. However, the change in perunit cost to each individual shipper is dependent on their area of operation. The Coast Guard estimates the effect of the rate changes on shippers by comparing the total projected revenues needed to cover costs in 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 final rule. The impacts of the rate changes on shippers are estimated from the district pilotage projected revenues (shown in tables 11, 23, and 35 of this preamble). The Coast Guard estimates that, for the 2024 shipping season, the projected revenue needed for all three districts is $40,280,666. To estimate the change in cost to shippers from this final 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 37,659,195.53 This is the best approximation of 2023 revenues, as, at the time of publication of this final rule, the Coast Guard does not have enough audited data available for the 2023 shipping season to revise these projections. Table 43 shows the revenue projections for 2023 and 2024 and details the additional cost increases to shippers by district as a result of the rate changes in traffic in Districts One, Two, and Three. TABLE 43—EFFECT OF THE FINAL RULE BY DISTRICT [U.S. Dollars; Non-discounted] Revenue needed in 2023 Area Revenue needed in 2024 Additional costs of this rule Total, District One ...................................................................................................... Total, District Two ...................................................................................................... Total, District Three ................................................................................................... $12,609,601 10,392,542 14,657,052 $13,695,935 10,830,491 15,754,240 $1,086,334 437,949 1,097,188 System Total ....................................................................................................... 37,659,195 40,280,666 2,621,471 ddrumheller on DSK120RN23PROD with RULES1 * 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 in this final rule. The effect of the rate changes to shippers varies by area and district. After considering the change in pilotage rates, the rate changes lead to affected shippers operating in District One experiencing an increase in payments of $1,086,334 over the previous year. Affected shippers operating in District Two and District Three experienced an increase in payments of $437,949 and $1,097,188, respectively, when compared with 2023. The overall adjustment in payments increased payments by shippers to $2,621,471 across all three districts (a 7-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 44 shows the difference in revenue by revenue-component from 2023 to 2024 and presents each revenuecomponent as a percentage of the total revenue needed. In both 2023 and 2024, the largest revenue-component was target 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 30 percent of total revenue needed in 2024). The large increase in the working capital fund, 59 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 2022.54 52 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. 53 88 FR 12226. See table 42. https:// www.govinfo.gov/content/pkg/FR-2023-02-27/pdf/ 2023-03212.pdf. (Last accessed 5/17/23.) 54 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 accessed 03/ 21/2023.) VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 PO 00000 Frm 00074 Fmt 4700 Sfmt 4700 E:\FR\FM\09FER1.SGM 09FER1 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations 9067 TABLE 44—DIFFERENCE IN REVENUE BY REVENUE-COMPONENT Percentage of total revenue needed in 2023 (%) Revenue needed in 2023 Revenue component Adjusted Operating Expenses ............. Total Target Pilot Compensation ......... Total Target Apprentice Pilot Compensation .......................................... Working Capital Fund .......................... Total Revenue Needed ........................ Revenue needed in 2024 Percentage of total revenue needed in 2024 Difference (2024 revenue– 2023 revenue) Percentage change from previous year (%) $11,984,950 23,766,288 32 63 $12,193,810 25,558,164 30 63 $208,860 1,791,876 2 8 916,700 991,257 37,659,195 2 3 100 951,822 1,576,870 40,280,666 2 4 100 35,122 585,613 2,621,471 4 59 7 * All figures are rounded to the nearest dollar and may not sum. As stated above, we estimate a total increase in revenue needed by the pilot associations of $2,621,471. This represents an increase in revenue needed for target pilot compensation of $1,791,876, for the total apprentice pilot wage benchmark of $35,122, $208,860 for adjusted operating expenses, and $585,613 for an increase in the revenue needed for the working capital fund. The change in revenue needed for pilot compensation, $1,791,876, is due to two factors: (1) The changes to adjust 2023 pilotage compensation to account for the difference between actual ECI inflation 55 (3.9 percent) and predicted PCE inflation 56 (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 $440,658 per pilot in 2024, compared to $424,398 in 2023. The changes to modify the 2023 pilot compensation to account for the difference between predicted and actual inflation increase the 2023 target compensation value by 1.2 percent. As shown in table 45, this inflation adjustment increases total compensation by $5,093 per pilot, and the total revenue needed by $295,381, when accounting for all 58 pilots. TABLE 45—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 × 1.012) ............................................................................................................................. Difference between Adjusted Target 2023 Compensation and Target 2023 Compensation ($429,491¥$424,398) ........................ Increase in total Revenue for 58 Pilots ($5,093 × 58) ........................................................................................................................ $424,398 $429,491 $5,093 $295,381 * All figures are rounded to the nearest dollar and may not sum. Similarly, table 46 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 $1,833 per apprentice pilot, and the total revenue needed by $11,000 when accounting for all six apprentice pilots. TABLE 46—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 × 1.012) ....................................................................................................................................... Difference between Adjusted Target Compensation and Target Compensation ($154,617¥$152,783) .......................................... Increase in total Revenue for Apprentices ($1,833 × 6) ..................................................................................................................... $152,783 $154,617 $1,833 $11,000 * All figures are rounded to the nearest dollar and may not sum. As noted earlier, the Coast Guard predicts that 58 pilots will be needed for the 2024 season. This is two more pilots than in the 2023 final rule, which leads to an estimated $871,130 increase in revenue needed for pilot compensation, as shown in table 47. ddrumheller on DSK120RN23PROD with RULES1 TABLE 47—CHANGE IN REVENUE RESULTING FROM INCREASE OF TWO PILOTS 2024 Target Compensation ................................................................................................................................................................. Total Number of New Pilots ................................................................................................................................................................ Total Cost of new Pilots ($440,658 × 2) ............................................................................................................................................. Difference between Adjusted Target 2023 Compensation and Target 2023 Compensation ($429,491¥$424,398) ........................ Increase in Revenue for 2 Pilots ($5,093 × 2) .................................................................................................................................... 55 Employment Cost Index, Total Compensation for Private Industry workers in Transportation and Material Moving, Annual Average, Series ID: CIU2010000520000A. https://beta.bls.gov/ VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 dataViewer/view/timeseries/CIU2010000520000A. (Last accessed 08/28/23.) 56 Table 1 Summary of Economic Projections, Median PCE Inflation. https:// PO 00000 Frm 00075 Fmt 4700 Sfmt 4700 $440,658 2 $881,316 $5,093 $10,186 www.federalreserve.gov/monetarypolicy/files/ fomcprojtabl20220316.pdf. (Last accessed 5/17/23.) E:\FR\FM\09FER1.SGM 09FER1 9068 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations TABLE 47—CHANGE IN REVENUE RESULTING FROM INCREASE OF TWO PILOTS—Continued Net Increase in total Revenue for 2 Pilots ($881,316¥$10,186) ....................................................................................................... $871,130 * All figures are rounded to the nearest dollar and may not sum. Similarly, the Coast Guard predicts that six apprentice pilots will be needed for the 2024 season. This is the same as in the 2023 season, so there is no estimated change in revenue needed for pilot compensation, apart from the change in inflation accounted for in table 48. Another increase, $647,699, is the result of increasing compensation for the 58 pilots to account for future inflation of 2.6 percent in 2024. This increased total compensation by $11,167 per pilot, as shown in table 48. TABLE 48—CHANGE IN REVENUE RESULTING FROM INFLATING 2023 COMPENSATION TO 2024 Adjusted 2023 Compensation ............................................................................................................................................................. 2024 Target Compensation ($429,491 × 1.026) ................................................................................................................................. Difference between Adjusted 2023 Compensation and Target 2024 Compensation ($440,658¥$429,491) ................................... Increase in total Revenue for 58 Pilots ($11,167 × 58) ...................................................................................................................... $429,491 $440,658 $11,167 $647,699 * All figures are rounded to the nearest dollar and may not sum. Similarly, an increase of $24,122 is the result of increasing compensation for the 6 apprentice pilots to account for future inflation of 2.6 percent in 2024. This increased total compensation by $4,020 per apprentice pilot, as shown in table 49. TABLE 49—CHANGE IN REVENUE RESULTING FROM INFLATING 2023 APPRENTICE PILOT COMPENSATION TO 2024 Adjusted 2023 Compensation ............................................................................................................................................................. 2024 Target Compensation ($440,658 × 36%) ................................................................................................................................... Difference between Adjusted Compensation and Target Compensation ($158,637¥$154,617) ...................................................... Increase in total Revenue for 6 Apprentices ($4,020 × 6) .................................................................................................................. * All figures are rounded to the nearest dollar and may not sum. Table 50 presents the percentage change in revenue by area and revenue2023 projected revenues are from the Great Lakes Pilotage Rate—2023 Annual Review and ddrumheller on DSK120RN23PROD with RULES1 57 The VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 component, excluding surcharges, as they are applied at the district level.57 Revisions to Methodology final rule (88 FR 12226), tables 10, 22, and 34. The 2024 projected revenues are from tables 11, 23, and 35 of this rule. PO 00000 Frm 00076 Fmt 4700 Sfmt 4700 E:\FR\FM\09FER1.SGM 09FER1 $154,617 $158,637 $4,020 $24,122 VerDate Sep<11>2014 17:16 Feb 08, 2024 Jkt 262001 $2,851,215 1,900,809 1,102,673 1,654,014 3,679,209 1,005,891 1,270,338 1,905,503 3,515,118 961,028 2024 $2,599,777 1,733,186 2023 5 5 (13) (13) 10 10 Percentage change Adjusted operating expenses 7,214,766 2,121,990 4,243,980 2,546,388 $4,243,980 3,395,184 2023 7,931,844 2,203,290 3,525,264 3,965,922 $4,406,580 3,525,264 2024 Total target pilot compensation 10 4 (17) 56 4 4 Percentage change 359,942 98,408 61,113 91,670 $183,340 122,227 2023 250,646 66,628 63,455 95,182 $285,547 190,364 2024 (30) (32) 4 4 56 56 Percentage change Total target apprentice pilot compensation 299,795 86,005 150,722 122,828 $189,966 141,941 2023 483,269 133,463 191,137 232,845 $307,331 228,825 2024 61 55 27 90 62 61 Percentage change Working capital fund TABLE 50—DIFFERENCE IN REVENUE BY REVENUE-COMPONENT AND AREA * All figures are rounded to the nearest dollar and may not sum. District One: Designated .......... Undesignated ...... District Two: Undesignated ...... Designated .......... District Three: Undesignated ...... Designated .......... ddrumheller on DSK120RN23PROD with RULES1 11,389,621 3,267,430 5,726,153 4,666,389 $7,217,063 5,392,538 2023 12,344,968 3,409,272 4,882,529 5,947,963 $7,850,673 5,845,262 2024 8.4 4.3 (14.7) 27.5 8.8 8.4 Percentage change Total revenue needed Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations PO 00000 Frm 00077 Fmt 4700 Sfmt 4700 E:\FR\FM\09FER1.SGM 09FER1 9069 9070 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations Benefits This final 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 are available 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 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 final 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.58 As described in section II., Executive Summary, and section X., Regulatory Analyses, of this preamble, we found that 437 unique vessels used pilotage services during the years 2020 through 2022. These vessels are owned by 57 entities, of which 44 are foreign entities that operate primarily outside the United States, and the remaining 13 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.59 Table 51 shows the North American Industry Classification System (NAICS) codes of the U.S. entities and the small entity standard size established by the SBA, either number of employees or annual revenue. TABLE 51—NAICS CODES AND SMALL ENTITIES SIZE STANDARDS NAICS ddrumheller on DSK120RN23PROD with RULES1 238910 425120 483211 484230 488330 488390 523910 561510 561599 713930 813910 Description ............... ............... ............... ............... ............... ............... ............... ............... ............... ............... ............... Small entity size standard Site Preparation Contractors ..................................................................................... Wholesale Trade Agents And Brokers ...................................................................... Inland Water Freight Transportation ......................................................................... Specialized Freight (Except Used Goods) Trucking, Long-Distance ........................ Navigational Services to Shipping ............................................................................. Other Support Activities for Water Transportation .................................................... Miscellaneous Intermediation Travel Agencies ......................................................................................................... All Other Travel Arrangement And Reservation Services ........................................ Marinas ...................................................................................................................... Business Associations ............................................................................................... $19,000,000. 125 Employees. 1,050 Employees. $34,000,000. $47,000,000. $47,000,000. $25,000,000. $32,500,000. $11,000,000. $15,500,000. Of the 13 U.S. entities, 4 exceed the SBA’s small business standards for small entities, and 1 only provided service to a public vessel. To estimate the potential impact on the remaining eight small entities, the Coast Guard used their 2022 invoice data to estimate their pilotage costs in 2024. We first increase their 2022 costs by 16 percent to account for the changes in pilotage rates resulting from the 2023 final rule, then by 7 percent to account for changes resulting from this final rule. Then, we estimated the change in cost to these entities resulting from this final rule by subtracting their estimated 2023 pilotage costs from their estimated 2024 pilotage costs, and found the average costs to small firms is approximately $10,075, with a range of $6,419 to $16,255. We then compared the estimated change in pilotage costs between 2023 and 2024 with each firm’s annual revenue. For two entities, the impact of the change in estimated pilotage expenses is above 1 percent of revenues, at 3.27 percent and 4.28 percent. In addition to the owners and operators discussed previously, three U.S. entities that receive revenue from pilotage services are affected by this final 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’’ 60 with a small-entity size standard of $15,500,000 in annual revenue. 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 are impacted by this final rule. We also did not find any small governmental jurisdictions with populations of fewer than 50,000 people that are impacted by this final rule. Based on this analysis, we conclude this final rule does not affect a substantial number of small entities, nor have a significant economic impact on any of the affected entities. Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact 58 See https://resource.referenceusa.com/. (Last accessed 05/18/2023.) 59 See https://www.sba.gov/document/support-table-size-standards. (Last accessed 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.’’ 60 In previous rulemakings, the associations used a different NAICS code, 483212 Inland Water Passenger Transportation. NAICS code 283212 had a size standard of 500 employees as of the latest SBA small business size table [published March 17, 2023] 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. VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 PO 00000 Frm 00078 Fmt 4700 Sfmt 4700 E:\FR\FM\09FER1.SGM 09FER1 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations on a substantial number of small entities. C. Assistance for Small Entities Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996, Public Law 104– 121, we offer to assist small entities in understanding this rule so that they can better evaluate its effects on them and participate in the rulemaking. If the final rule affects 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 final rule. The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard. Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency’s responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1– 888–REG–FAIR (1–888–734–3247). ddrumheller on DSK120RN23PROD with RULES1 D. Collection of Information This rule calls for no new collection of information nor does it impact an existing collection of information under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501–3520. E. Federalism A rule has implications for federalism under Executive Order 13132 (Federalism) if it has a substantial direct effect on States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this 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 VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 or local governments are expressly prohibited from regulating within this category. Therefore, this rule is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132. It is well settled that States may not regulate in categories reserved for regulation by the Coast Guard. It is also well settled that all of the categories covered in 46 U.S.C. 3306, 3703, 7101, and 8101 (design, construction, alteration, repair, maintenance, operation, equipping, personnel qualification, and manning of vessels), as well as the reporting of casualties and any other category in which Congress intended the Coast Guard to be the sole source of a vessel’s obligations, are within the field foreclosed from regulation by the States. See the Supreme Court’s decision in United States v. Locke and Intertanko v. Locke, 529 U.S. 89, 120 S.Ct. 1135 (2000). F. Unfunded Mandates The Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1531–1538, requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Although this rule will not result in such expenditure, we do discuss the effects of this rule elsewhere in this preamble. G. Taking of Private Property This rule will not cause a taking of private property or otherwise have taking implications under Executive Order 12630 (Governmental Actions and Interference with Constitutionally Protected Property Rights). H. Civil Justice Reform This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988 (Civil Justice Reform) to minimize litigation, eliminate ambiguity, and reduce burden. I. Protection of Children We have analyzed this rule under Executive Order 13045 (Protection of Children from Environmental Health Risks and Safety Risks). This rule is not an economically significant rule and will not create an environmental risk to health or risk to safety that might disproportionately affect children. J. Indian Tribal Governments This rule does not have tribal implications under Executive Order PO 00000 Frm 00079 Fmt 4700 Sfmt 4700 9071 13175 (Consultation and Coordination with Indian Tribal Governments), because it will not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. K. Energy Effects We have analyzed this 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 rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards. M. Environment We have analyzed this rule under Department of Homeland Security Management Directive 023–01, Rev. 1, associated implementing instructions, and Environmental Planning COMDTINST 5090.1 (series), which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (42 U.S.C. 4321–4370f), and have made a determination that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. A Record of Environmental Consideration supporting this determination is available in the docket. For instructions on locating the docket, see the ADDRESSES section of this preamble. This rule categorically excluded under paragraphs A3 and L54 of Appendix A, E:\FR\FM\09FER1.SGM 09FER1 9072 Federal Register / Vol. 89, No. 28 / Friday, February 9, 2024 / Rules and Regulations Table 1 of DHS Instruction Manual 023– 01–001–01, Rev. 1. Paragraph A3 pertains to the promulgation of rules of the following nature: (a) those of a strictly administrative or procedural nature; (b) those that implement, without substantive change, statutory or regulatory requirements; (c) those that implement, without substantive change, procedures, manuals, and other guidance documents; (d) those that interpret or amend an existing regulation without changing its environmental effect; (e) those that provide technical guidance on safety and security matters; and (f) those that provide guidance for the preparation of security plans. Paragraph L54 pertains to regulations which are editorial or procedural. This rule involves 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. This rule is not part of a larger action, and it will not result in significant impacts to the human environment. All changes are consistent with the Coast Guard’s maritime safety missions. List of Subjects in 46 CFR Part 401 Administrative practice and procedure, Great Lakes; Navigation (water), Penalties, Reporting and recordkeeping requirements, Seamen. For the reasons discussed in the preamble, the Coast Guard amends 46 CFR part 401 as follows: 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 $927; (2) Lake Ontario is $608; (3) Lake Erie is $597 (4) The navigable waters from Southeast Shoal to Port Huron, MI is $667; (5) Lakes Huron, Michigan, and Superior is $430; and (6) The St. Mary’s River is $836. * * * * * Dated: January 31, 2024. W.R. Arguin, Rear Admiral, U.S. Coast Guard, Assistant Commandant for Prevention Policy. [FR Doc. 2024–02410 Filed 2–8–24; 8:45 am] BILLING CODE 9110–04–P DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration 50 CFR Part 648 [Docket No. 240205–0038; RTID 0648– XD564] Fisheries of the Northeastern United States; Monkfish Fishery; 2024 Monkfish Specifications National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Final rule. AGENCY: PART 401—GREAT LAKES PILOTAGE REGULATIONS 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. NMFS is implementing specifications for the 2024 monkfish SUMMARY: fishery. This action is necessary to ensure allowable monkfish harvest levels that will prevent overfishing and allow harvesting of optimum yield. This action is intended to establish the allowable 2024 harvest levels, consistent with the Monkfish Fishery Management Plan and previously announced multi-year specifications. The final specifications for the 2024 monkfish fishery are effective May 1, 2024, through April 30, 2025. DATES: FOR FURTHER INFORMATION CONTACT: Spencer Talmage, Fishery Policy Analyst, (978) 281–9232. The New England and Mid-Atlantic Fishery Management Councils (together, the Councils) jointly manage the monkfish fishery. The Monkfish Fishery Management Plan includes a specifications process that requires the Councils to recommend quotas on a triennial basis. This action finalizes 2024 specifications approved by the Councils in Framework Adjustment 13 to the Monkfish Fishery Management Plan, which included specifications for fishing years 2023–2025. On August 11, 2023, NMFS published a final rule approving Framework 13 measures for the 2023 fishing year (88 FR 54495), based on a recent stock assessment update and consistent with the New England Council’s Scientific and Statistical Committee recommendations. At that time, NMFS also projected a continuation of those same specifications for 2024 and 2025. The final total allowable landings in both the Northern and Southern Fishery Management Areas for 2024 are summarized in table 1. The 2024 measures are the same as those implemented in 2023. SUPPLEMENTARY INFORMATION: TABLE 1—MONKFISH SPECIFICATIONS FOR FISHING YEAR 2024 [in metric tons] Northern area ddrumheller on DSK120RN23PROD with RULES1 Catch limits Southern area Acceptable Biological Catch ............................................................................................................................................ Annual Catch Limit .......................................................................................................................................................... Management Uncertainty (3 percent) .............................................................................................................................. Annual Catch Target (Total Allowable Landings + discards) .......................................................................................... Expected Discards ........................................................................................................................................................... 6,224 6,224 187 6,038 729 5,861 5,861 176 5,685 2,205 Total Allowable Landings ......................................................................................................................................... 5,309 3,481 NMFS has reviewed the available information on fishing years 2022 and 2023. There have been no annual catch limit overages, nor is there any new biological information that would VerDate Sep<11>2014 16:19 Feb 08, 2024 Jkt 262001 require altering the projected 2024 specifications. Based on this, we are implementing the fishing year 2024 specifications announced in the Framework 13 final rule. The 2024 PO 00000 Frm 00080 Fmt 4700 Sfmt 4700 specifications will be effective until April 30, 2025. This final rule makes no modification to other management measures for the monkfish fishery (e.g., trip limits, DaysAt-Sea allocations, etc.). E:\FR\FM\09FER1.SGM 09FER1

Agencies

[Federal Register Volume 89, Number 28 (Friday, February 9, 2024)]
[Rules and Regulations]
[Pages 9038-9072]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-02410]


=======================================================================
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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: Final rule.

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SUMMARY: In accordance with the statutory provisions enacted by the 
Great Lakes Pilotage Act of 1960, the Coast Guard is issuing new 
pilotage rates for the 2024 shipping season. This rule adjusts the 
pilotage rates to account for changes in district operating expenses, 
an increase in the number of pilots, and anticipated inflation. These 
changes, when combined, result in a 7-percent net increase in pilotage 
costs compared to the 2023 season.

DATES: This final rule is effective March 11, 2024.

ADDRESSES: To view documents mentioned in this preamble as being 
available in the docket, go to www.regulations.gov, type USCG-2023-0438 
in the search box and click ``Search.'' Next, in the Document Type 
column, select ``Supporting & Related Material.''

FOR FURTHER INFORMATION CONTACT: For information about this document, 
call or email Mr. Brian Rogers, Commandant, Office of Waterways and 
Ocean Policy--Great Lakes Pilotage Division (CG-WWM-2), Coast Guard; 
telephone 410-360-9260, email [email protected].

SUPPLEMENTARY INFORMATION:

Table of Contents for Preamble

I. Abbreviations
II. Executive Summary
III. Basis and Purpose
IV. Background
V. Discussion of Comments and Changes
VI. Summary of the Ratemaking Methodology
VII. Historic Methodological and Other Changes
VIII. Individual Target Pilot Compensation Benchmark
IX. Discussion of Rate Adjustments
District One
    A. Step 1: Recognize Previous Operating Expenses
    B. Step 2: Project Operating Expenses, Adjusting for Inflation 
or Deflation
    C. Step 3: Estimate Number of Registered Pilots and Apprentice 
Pilots
    D. Step 4: Determine Target Pilot Compensation Benchmark and 
Apprentice Pilot Wage Benchmark
    E. Step 5: Project Working Capital Fund
    F. Step 6: Project Needed Revenue
    G. Step 7: Calculate Initial Base Rates
    H. Step 8: Calculate Average Weighting Factors by Area
    I. Step 9: Calculate Revised Base Rates
    J. Step 10: Review and Finalize Rates
District Two
    A. Step 1: Recognize Previous Operating Expenses
    B. Step 2: Project Operating Expenses, Adjusting for Inflation 
or Deflation
    C. Step 3: Estimate Number of Registered Pilots and Apprentice 
Pilots
    D. Step 4: Determine Target Pilot Compensation Benchmark and 
Apprentice Pilot Wage Benchmark
    E. Step 5: Project Working Capital Fund
    F. Step 6: Project Needed Revenue
    G. Step 7: Calculate Initial Base Rates
    H. Step 8: Calculate Average Weighting Factors by Area
    I. Step 9: Calculate Revised Base Rates
    J. Step 10: Review and Finalize Rates
District Three
    A. Step 1: Recognize Previous Operating Expenses
    B. Step 2: Project Operating Expenses, Adjusting for Inflation 
or Deflation
    C. Step 3: Estimate Number of Registered Pilots and Apprentice 
Pilots
    D. Step 4: Determine Target Pilot Compensation Benchmark and 
Apprentice Pilot Wage Benchmark
    E. Step 5: Project Working Capital Fund
    F. Step 6: Project Needed Revenue
    G. Step 7: Calculate Initial Base Rates
    H. Step 8: Calculate Average Weighting Factors by Area
    I. Step 9: Calculate Revised Base Rates
    J. Step 10: Review and Finalize Rates
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. Abbreviations

2023 final rule Great Lakes Pilotage Rates--2023 Annual Ratemaking 
and Review of Methodology final rule
AMO 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

[[Page 9039]]

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

II. Executive Summary

    In accordance with Title 46 of the United States Code (U.S.C.), 
Chapter 93,\1\ the Coast Guard regulates pilotage for oceangoing 
vessels on the Great Lakes and St. Lawrence Seaway--including setting 
the rates for pilotage services and adjusting them on an annual basis 
for the upcoming shipping season. The shipping season begins when the 
locks open in the St. Lawrence Seaway, which allows traffic access to 
and from the Atlantic Ocean. The opening of the locks varies annually, 
depending on waterway conditions, but is generally in March or April. 
The rates, which for the 2024 season range from $430 to $927 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. These 
rates are the foundation for safe, efficient, and reliable pilotage 
service to facilitate maritime commerce, protect the marine 
environment, and comply with National Transportation Safety Board 
recommendations regarding staffing and pilot fatigue.
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    \1\ 46 U.S.C. 9301-9308.
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    In accordance with statutory and regulatory requirements, the Coast 
Guard employs the ratemaking methodology introduced in 2016 \2\ and 
last updated in 2022.\3\ 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 rule.
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    \2\ 81 FR 11908, March 7, 2016.
    \3\ 87 FR 18488. March 30, 2022.
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    In this final rule, we conduct 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).\4\ Per title 46 of the Code of Federal Regulations (CFR), 
section 404.100(b), via this final rule, the Coast Guard's Director of 
the Great Lakes Pilotage (``the Director'') establishes base pilotage 
rates by an interim ratemaking pursuant to Sec. Sec.  404.101 through 
404.110.
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    \4\ https://www.govinfo.gov/content/pkg/FR-2023-02-27/pdf/2023-03212.pdf. (Last accessed 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 rule will result in $2,621,471 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 final rule, the 
Coast Guard is establishing the rates shown in table 1.

                           Table 1--Current and 2024 Pilotage Rates on the Great Lakes
----------------------------------------------------------------------------------------------------------------
                                                                                    Final 2023      Final 2024
                     Area                                     Name                 pilotage rate   pilotage rate
----------------------------------------------------------------------------------------------------------------
District One: Designated......................  St. Lawrence River..............            $876            $927
District One: Undesignated....................  Lake Ontario....................             586             608
District Two: Designated......................  Navigable waters from Southeast              601             667
                                                 Shoal to Port Huron, MI.
District Two: Undesignated....................  Lake Erie.......................             704             597
District Three: Designated....................  St. Mary's River................             834             836
District Three: Undesignated..................  Lakes Huron, Michigan, and                   410             430
                                                 Superior.
----------------------------------------------------------------------------------------------------------------

    This rule affects 58 U.S. Registered pilots, 6 apprentice pilots, 3 
pilot associations, and the owners and operators of an average of 296 
oceangoing vessels that transit the Great Lakes annually. This rule 
will not affect the Coast Guard's budget or increase Federal spending. 
The estimated overall annual regulatory economic impact of this rate 
change is a net increase of $2,621,471 in estimated payments made by 
shippers during the 2024 shipping season. This rule establishes the 
2024 yearly target compensation for pilots on the Great Lakes at 
$440,658 per pilot (a $16,260 increase, or 3.83 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 rule.

III. Basis and Purpose

    The legal basis of this rulemaking is 46 U.S.C. Chapter 93,\5\ 
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.\6\ For U.S. Great Lakes pilots, the statute requires the 
Secretary to ``prescribe by

[[Page 9040]]

regulation rates and charges for pilotage services, giving 
consideration to the public interest and the costs of providing the 
services.'' \7\ The statute requires that rates be established or 
reviewed and adjusted each year, no later than March 1.\8\ 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.\9\ The 
Secretary's duties and authority under 46 U.S.C. Chapter 93 have 
generally been delegated to the Coast Guard.\10\
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    \5\ 46 U.S.C. 9301-9308.
    \6\ 46 U.S.C. 9302(a)(1).
    \7\ 46 U.S.C. 9303(f).
    \8\ Ibid.
    \9\ Ibid.
    \10\ 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. https://dhsconnect.dhs.gov/org/comp/mgmt/policies/Delegations/00170.1.pdf. (Last accessed 11/8/
2023.)
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    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,\11\ acquiring and implementing technological advances, and 
training personnel and partners.
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    \11\ 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.
---------------------------------------------------------------------------

    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.\12\ The methodology is designed to measure how much 
revenue each pilotage association would need to cover expenses and to 
provide 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.
---------------------------------------------------------------------------

    \12\ 46 CFR part 404.101-404.110. https://www.ecfr.gov/current/title-46/chapter-III/part-404. (Last accessed 5/17/23.)
---------------------------------------------------------------------------

    The purpose of this 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 to facilitate commerce 
and protect the marine environment 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.

IV. 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.\13\ United States and Canadian 
``lakers,'' which account for most commercial shipping on the Great 
Lakes, are not affected.\14\ 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.
---------------------------------------------------------------------------

    \13\ See 46 CFR part 401. https://www.ecfr.gov/current/title-46/chapter-III/part-401 (Last accessed 5/17/23).
    \14\ 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 accessed 5/17/
23).
---------------------------------------------------------------------------

    The waters of the Great Lakes and the St. Lawrence Seaway subject 
to U.S. jurisdiction 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 waters of the St. Lawrence River and Lake 
Ontario subject to U.S. jurisdiction. The Lakes Pilots Association 
(LPA) provides pilotage services in District Two, which includes all 
waters of Lake Erie, the Detroit River, Lake St. Clair, and the St. 
Clair River subject to U.S. jurisdiction. Finally, the Western Great 
Lakes Pilots Association (WGLPA) provides pilotage services in District 
Three, which includes all waters of the St. Mary's River; Sault Ste. 
Marie Locks; and Lakes Huron, Michigan, and Superior subject to U.S. 
jurisdiction.
    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.\15\ 
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.'' \16\ 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.
---------------------------------------------------------------------------

    \15\ 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 accessed 5/31/23).
    \16\ 46 U.S.C. 9302(a)(1)(B).

                            Table 2--Areas of the Great Lakes and St. Lawrence Seaway
----------------------------------------------------------------------------------------------------------------
                                                                                  Area
        District           Pilotage association           Designation           No.\17\       Area name \18\
----------------------------------------------------------------------------------------------------------------
One....................  Saint Lawrence Seaway    Designated.................          1  St. Lawrence River.
                          Pilotage Association    Undesignated...............          2  Lake Ontario.
                          (SLPA).
Two....................  Lakes Pilots             Designated.................          5  Navigable waters from
                          Association (LPA).                                               Southeast Shoal to
                                                                                           Port Huron, MI.
                                                  Undesignated...............          4  Lake Erie.

[[Page 9041]]

 
Three..................  Western Great Lakes      Designated.................          7  St. Mary's River.
                          Pilots Association      Undesignated...............          6  Lakes Huron and
                          (WGLPA).                Undesignated...............          8   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 to 
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 2022 final rule.\19\ We summarize the 
current methodology in section VI., Summary of the Ratemaking 
Methodology.
---------------------------------------------------------------------------

    \17\ 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.
    \18\ 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 accessed 5/17/23).
    \19\ 87 FR 18488, March 30, 2022.
---------------------------------------------------------------------------

V. Discussion of Comments and Changes

    In response to the notice of proposed rulemaking (NPRM) for this 
ratemaking (88 FR 55629, August 16, 2023) the Coast Guard received six 
comment submissions. These submissions include one comment filed 
jointly by the LPA, the SLSPA, and the WGLPA; one filed jointly by the 
Shipping Federation of Canada, the American Great Lakes Ports 
Association, and the United States Great Lakes Shipping Association 
(collectively, the Coalition); one from the president of the Saint 
Lawrence Seaway Pilots' Association (SLSPA); one from the president of 
the LPA; one from the Director of the Port of Monroe; and one from the 
president of the International Longshoreman Association (ILA).
    As each of these commenters touched on numerous issues, for each 
response below, the Coast Guard notes which commenter raised the 
specific points addressed. In situations where multiple commenters 
raised similar issues, the Coast Guard provides one response to those 
issues.

A. Requests for Additional Pilots

    One of the major requests made by the commenters was the addition 
of more pilots due to the increase in traffic, with several commenters 
pointing to cruise ship traffic as the driving force in the surge of 
vessels needing pilotage service. District One stated they estimate a 
need for three new pilots by 2025, and Districts Two and Three 
requested one additional pilot each to be added to this rulemaking.
    The Coast Guard recognizes District One's need for more pilots 
going forward, but we believe that this need is addressed by the 
inclusion of an additional apprentice pilot as proposed in the NPRM. 
Added to the two existing apprentice pilots that were authorized in the 
2023 ratemaking, this inclusion brings the total number of apprentice 
pilots in District One to three for the 2024 season. These apprentice 
pilots will be able to accommodate District One's projected need for 
three additional fully registered pilots for the 2025 season. The Coast 
Guard will, therefore, keep the pilot numbers for District One the same 
as they were in the proposed rule.
    The LPA, WGLPA, ILA, and Capt. Paul C. Lamarre II all made comments 
that an additional pilot is needed in both District Two and District 
Three. After review of the provided documentation, the Coast Guard 
agrees with these comments. The Coast Guard verified the numbers that 
LPA provided, which show that another full member pilot is needed to 
safely provide pilotage service. Based on these comments, our analysis 
of the increase in demand for pilotage services created by cruise ship 
traffic,\20\ and the unanimous recommendation made by the 2023 Great 
Lake Pilot Advisory Committee (See transcript, pages 87 and 88), the 
Coast Guard has added an additional pilot to this year's ratemaking for 
both Districts Two and Three. For District Two, the Coast Guard reduced 
the number of apprentice pilots from two to one, since the additional 
pilot referenced earlier will no longer be an apprentice.
---------------------------------------------------------------------------

    \20\ At least 76 Great Lakes cruises are listed online as 
scheduled for the 2024 season. Cruises listed at vikingcruises.com, 
hl-cruises.com, pearlseacruises.com, and us.ponant.com. (Last 
accessed 11/29/2023.)
---------------------------------------------------------------------------

B. Bridge Hour Allocation

    Numerous commenters noted discrepancies in the allocation of bridge 
hours between designated and undesignated waters for all three 
districts. The error occurs in the ``area'' field of the data extract 
provided by the associations, where each trip number is only labeled 
with the area in which the trip started, rather than noting each area 
that the trip passed through. This error causes miscalculation of the 
designated and undesignated bridge hours in Step 7 of the ratemaking 
methodology, and the transits by vessel class in Step 8. The commenters 
suggested to instead use monthly reports from SeaPro to provide the 
necessary bridge hour calculations for Step 7 and to use weight factor 
reports from SeaPro to provide the transits by vessel class for Step 8.
    The Coast Guard agrees with these comments and has worked with the 
pilot associations to correct Steps 7 and 8 using the monthly reports 
and weight factor reports. The Coast Guard could not verify which trips 
had been incorrectly attributed to either a designated or undesignated 
area in the economist extract data set previously provided. The Coast 
Guard will work with the associations to refine the data extracts 
provided by the associations to ensure that all fields are correctly 
specified and interpreted.
    The reports used for this final rule are available in the docket. 
We appreciate the commenters who brought this to our attention and will 
take measures to ensure this error is corrected in data used in future 
rulemakings. These corrections are set out in further detail in tables 
4 and 5.

C. Methodology

    Numerous commenters noted concerns with the methodology by which 
the Coast Guard calculates this rate. Concerns included that weighting 
factors should be calculated using bridge hours instead of vessel 
transits per visit; that the Coast Guard should audit the pilotage 
program to find operational efficiencies and cost-savings; and that the 
Coast Guard should conduct an annual look-back at expenses to find 
cost-savings. These comments are outside the scope of the current 
rulemaking, which does not modify the ratemaking methodology. The Coast 
Guard appreciates these comments and encourages the stakeholders to 
request that they be placed on a future GLPAC agenda for

[[Page 9042]]

discussion, or to resubmit them during the next full ratemaking in 
2027.

D. Miscellaneous

    We received a number of comments that we categorized as 
``Miscellaneous'' and are best addressed one by one.
    A few commenters urged the Coast Guard to continue having GLPAC 
meetings in person and in front of a stenographer, while another 
commenter urged the Coast Guard to investigate a hybrid in-person/
virtual set up for future GLPAC meetings. These comments are outside 
the scope of this rule, but the Coast Guard will continue to engage 
with stakeholders to determine the best way to hold GLPAC meetings.
    One commenter asked the Coast Guard to require an anonymous listing 
of each pilot's compensation in their annual reports. The Coast Guard 
disagrees with this recommendation. Compensation of individual pilots 
is not included in the expense base or methodology, and, therefore, we 
decline to add a regulatory requirement for pilot associations to 
publicly report the compensation of individual pilots. The Coast Guard 
does not use the actual earnings or average earnings; instead, we use 
target pilot compensation (described in Step 4 of the existing 
methodology), which the Coast Guard has determined to be reasonable and 
necessary. Because actual salary values are not used in the ratemaking, 
the Coast Guard believes that a requirement to report pilot 
compensation is not in the public interest or necessary to provide for 
the costs of services. Progress toward pilot retention can be reviewed 
through pilot turnover and the association's ability to promptly fill 
pilot vacancies for fully registered pilots and apprentice pilots.
    Many commenters took the opportunity to recognize the Director's 
authority to add up to three additional pilots in each District. We 
agree with these commenters that the Director does have such authority, 
and, based on these comments and the unanimous recommendation at the 
2023 GLPAC meeting, the Coast Guard has agreed to add one pilot each to 
Districts Two and Three, and one apprentice pilot to District One.

E. Changes to the Proposed Rule

    Table 3 summarizes the changes between the 2024 Ratemaking NPRM and 
this final rule. This table includes changes from the proposed rule 
that are not based on comments from the NPRM.

          Table 3--Changes Between Proposed Rule and Final Rule
------------------------------------------------------------------------
                 Change                             Reasoning
------------------------------------------------------------------------
Revise number of pilots in District Two  An additional pilot will help
 from 16 to 17 and adjust number of       Districts Two and Three handle
 apprentice pilots from 2 to 1. Revise    an expected increase in cruise
 number of pilots in District Three       ship traffic in 2024.
 from 22 to 23.
Correct traffic data in Steps 7 and 8    These corrections will improve
 for all districts to reflect             the accuracy of our ratemaking
 discrepancy in the assignment of         as it pertains to designated
 bridge hours and transits by vessel      and undesignated areas.
 class to designated and undesignated
 areas.
Update inflation figures:                More recent figures were
 Updates 2022 Employment Cost     published since the Coast
 Index (ECI) inflation from 4.4%,         Guard conducted the analysis
 listed in the NPRM, to 3.9%              for the NPRM.
     Updates 2023 Personal
     Consumption Expenditures (PCE)
     inflation from 3.5%, listed in the
     NPRM, to 3.9%.
     Updates 2024 PCE inflation
     from 2.5%, listed in the NPRM, to
     2.6%.
Change average vessel population from    In the 2023 final ratemaking,
 277 to 296. Change average customer      District Three provided
 count from 40 to 41.                     updated traffic data that was
                                          used to revise bridge hours
                                          and transits by vessel class
                                          but was not used to update the
                                          Regulatory Flexibility Act
                                          analysis. This final rule
                                          corrects that oversight. The
                                          revised data included
                                          additional trips that
                                          introduced new vessels and
                                          customers to the affected
                                          population and relabeled the
                                          vessel for trip 26879.
------------------------------------------------------------------------

F. Changes to Step 7 Bridge Hours and Step 8 Transits

    Table 4 shows the difference between the published figures for 
bridge hours in Step 7 in the NPRM and the updated figures used for 
this final rule.

                                        Table 4--Changes to Step 7 Bridge Hours from Proposed Rule to Final Rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                  Previously published                                                Updated                       Difference
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Undesignated     Designated     Undesignated     Designated     Undesignated     Designated
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       District 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
2021....................................................           7,871           6,188           7,893           6,166              22             -22
2022....................................................           8,574           6,785           8,356           6,573            -218            -212
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       District 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
2021....................................................           8,826           3,266           5,290           6,762          -3,536           3,496
2022....................................................          12,306           3,975           7,668           8,613          -4,638           4,638
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       District 3
--------------------------------------------------------------------------------------------------------------------------------------------------------
2021....................................................          18,286           2,516          18,149           2,484            -137             -32

[[Page 9043]]

 
2022....................................................          23,985           4,424          23,914           3,345             -71          -1,079
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Further, the Coast Guard updated the number of transits by vessel 
class in Step 8, ``Calculate Average Weighting Factors by Area,'' using 
updated weighting factor reports provided by the associations from 
SeaPro. Table 5 details the changes by area and vessel class for 2022, 
which will be used in this final rule; no changes are made to the 2021 
figures.

                           Table 5--Changes to Step 8 From Proposed Rule to Final Rule
----------------------------------------------------------------------------------------------------------------
                        Area/vessel class                            Previous         Updated       Difference
----------------------------------------------------------------------------------------------------------------
                                                                             Number of Transits (2022)
----------------------------------------------------------------------------------------------------------------
                                               Area 1--Designated
----------------------------------------------------------------------------------------------------------------
Class 2.........................................................             466             482              16
Class 3.........................................................             104             106               2
Class 4.........................................................             461             478              17
----------------------------------------------------------------------------------------------------------------
                                              Area 2--Undesignated
----------------------------------------------------------------------------------------------------------------
Class 1.........................................................              32              41               9
Class 2.........................................................             358             371              13
Class 3.........................................................              69              73               4
Class 4.........................................................             393             401               8
----------------------------------------------------------------------------------------------------------------
                                               Area 5--Designated
----------------------------------------------------------------------------------------------------------------
Class 1.........................................................              34             117              83
Class 2.........................................................             184             717             533
Class 3.........................................................               3              13              10
Class 4.........................................................             273            1230             957
----------------------------------------------------------------------------------------------------------------
                                              Area 4--Undesignated
----------------------------------------------------------------------------------------------------------------
Class 1.........................................................              79             121              42
Class 2.........................................................             275             478             203
Class 3.........................................................               3               8               5
Class 4.........................................................             349             642             293
----------------------------------------------------------------------------------------------------------------
                                               Area 7--Designated
----------------------------------------------------------------------------------------------------------------
Class 1.........................................................             102             104               2
Class 2.........................................................             176             198              22
Class 4.........................................................             344             392              48
----------------------------------------------------------------------------------------------------------------
                                              Area 6--Undesignated
----------------------------------------------------------------------------------------------------------------
Class 1.........................................................              94             162              68
Class 2.........................................................             278             452             174
Class 4.........................................................             385             482              97
----------------------------------------------------------------------------------------------------------------
                                              Area 8--Undesignated
----------------------------------------------------------------------------------------------------------------
Class 1.........................................................              13              12              -1
Class 2.........................................................             103              95              -8
Class 3.........................................................               6               5              -1
Class 4.........................................................             271             306              35
----------------------------------------------------------------------------------------------------------------

    These refinements to the ratemaking continue to promote safe, 
efficient, and reliable pilotage service on the Great Lakes, and allow 
each pilotage association to generate sufficient revenue to cover its 
necessary and reasonable operating expenses, fairly compensate trained 
and rested pilots, and realize an appropriate revenue to use for 
improvements.

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

[[Page 9044]]

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 rule, 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(b)), the 
previous year's target compensation value is first adjusted by actual 
inflation using the ECI inflation value. If the ECI inflation value is 
not available, Sec.  404.104(b)(1) and (2) specify the compensation 
inflation process the Director will use instead.
    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 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 using any surcharges in this final 
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 final 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 final rule we

[[Page 9045]]

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 using the existing ratemaking methodology to 
establish the base rates in this ratemaking. The Coast Guard is not 
issuing any methodological or other policy changes to the ratemaking 
within this final rule.
    According to 46 U.S.C. 9303(f), and restated in 46 CFR 404.100(a), 
the Coast Guard must establish base rates by a full ratemaking at least 
once every 5 years. The Coast Guard has determined that the current 
base rates and methodology still adequately adhere 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),\21\ 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 Rate 
Adjustments, of this preamble.
---------------------------------------------------------------------------

    \21\ https://www.govinfo.gov/content/pkg/FR-2017-08-31/pdf/2017-18411.pdf (last accessed 5/12/2023).
---------------------------------------------------------------------------

    In the 2018 ratemaking, Great Lakes Pilotage Rates--2018 Annual 
Review and Revisions to Methodology (83 FR 26162, published June 5, 
2018),\22\ the Coast Guard adopted a new approach in the methodology 
for the compensation benchmark, based upon United States mariners, 
rather than Canadian working pilots.
---------------------------------------------------------------------------

    \22\ https://www.govinfo.gov/content/pkg/FR-2018-06-05/pdf/2018-11969.pdf (last accessed 5/12/2023).
---------------------------------------------------------------------------

    In the 2020 ratemaking, Great Lakes Pilotage Rates--2020 Annual 
Review and Revisions to Methodology (85 FR 20088, published April 9, 
2020),\23\ 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.
---------------------------------------------------------------------------

    \23\ https://www.govinfo.gov/content/pkg/FR-2020-04-09/pdf/2020-06968.pdf (last accessed 5/12/2023).
---------------------------------------------------------------------------

    The 2021 ratemaking, Great Lakes Pilotage Rates--2021 Annual Review 
and Revisions to Methodology (86 FR 14184, published March 12, 
2021),\24\ 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 ECI. That change ensures that the target pilot compensation 
reimbursed to the association remains current with inflation and 
competitive with industry pay increases.
---------------------------------------------------------------------------

    \24\ https://www.govinfo.gov/content/pkg/FR-2021-03-12/pdf/2021-05050.pdf (last accessed 5/12/2023).
---------------------------------------------------------------------------

    The 2022 ratemaking, Great Lakes Pilotage Rates--2022 Annual Review 
and Revisions to Methodology (87 FR 18488, published March 30, 
2022),\25\ 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.
---------------------------------------------------------------------------

    \25\ https://www.govinfo.gov/content/pkg/FR-2022-03-30/pdf/2022-06394.pdf (last accessed 5/12/2023).
---------------------------------------------------------------------------

VIII. Individual Target Pilot Compensation Benchmark

    The Coast Guard is issuing the target pilot compensation benchmark 
in this final rule at the target compensation for the ratemaking year 
2023, adjusted for inflation. In an interim ratemaking year, the base 
target pilot compensation is adjusted annually in accordance with Sec.  
404.104(b). The Coast Guard arrived at this 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 March 7, 2016),\26\ 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.
---------------------------------------------------------------------------

    \26\ https://www.govinfo.gov/content/pkg/FR-2016-03-07/pdf/2016-04894.pdf (last accessed 5/12/2023).
---------------------------------------------------------------------------

    In the 2020 interim year ratemaking final rule (85 FR 20088), 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, and that the 2020 
benchmark will be used for future rates (85 FR 20091). The Director 
determined that the ratemaking provided adequate compensation for 
pilots.
    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

[[Page 9046]]

compensation remains competitive and current for upcoming years.
    Therefore, the Coast Guard does not seek alternative benchmarks for 
target compensation at this time and, instead, simply adjusts 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 target compensation for 2024 is $440,658 per registered pilot 
and $158,637 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 1.2 percent for an adjusted value 
of $429,491. This first adjustment accounts for the difference in 
actual third quarter 2023 ECI inflation, which is 3.9 percent, and the 
2023 PCE estimate of 2.7 percent.\27\ The second step accounts for 
projected inflation from 2023 to 2024, which is 2.6 percent.\28\ Based 
on the projected 2024 inflation estimate, the target compensation 
benchmark for 2024 is $440,658 per pilot. The apprentice pilot wage 
benchmark is 36 percent of the target pilot compensation, or $158,637 
($440,658 x 0.36).\29\
---------------------------------------------------------------------------

    \27\ Employment Cost Index, Total Compensation for Private 
Industry workers in Transportation and Material Moving, Annual 
Average, Series ID: CIU2010000520000A. https://beta.bls.gov/dataViewer/view/timeseries/CIU2010000520000A (Last accessed 11/01/
23); and Table 1 Summary of Economic Projections, Median PCE 
Inflation. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220316.pdf (Last accessed 05/17/23).
    \28\ Table 1 Summary of Economic Projections, Median Core PCE 
Inflation June Projection. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230920.pdf (Last accessed 09/
2023).
    \29\ For more information on the apprentice pilot wage 
benchmark, see the Coast Guard's 2022 Annual Review and Revisions to 
Methodology. 87 FR 18488.
---------------------------------------------------------------------------

IX. Discussion of Rate Adjustments

    In this final rule, based on the policy changes described in the 
previous section, we are issuing new pilotage rates for 2024. We 
conducted the 2024 ratemaking as an interim ratemaking, as we last did 
in 2022 (87 FR 18488). Thus, the Coast Guard adjusted 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 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 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.\30\ 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 6.
---------------------------------------------------------------------------

    \30\ These reports are available in the docket for this final 
rule.
---------------------------------------------------------------------------

    In the 2021 expenses used as the basis for this final 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 final 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 One are shown in table 
6.

                               Table 6--2021 Recognized Expenses for District One
----------------------------------------------------------------------------------------------------------------
                                                                    Designated     Undesignated
                                                                 --------------------------------
        District One reported operating expenses for 2021          St. Lawrence                        Total
                                                                       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
----------------------------------------------------------------------------------------------------------------

[[Page 9047]]

 
                                               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 Boat 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--Coast Guard 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 Operating Expenses (OpEx).............................       2,476,529       1,651,018       4,127,547
----------------------------------------------------------------------------------------------------------------

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.\31\ Because the BLS does not provide forecasted 
inflation data, we use economic projections from the Federal Reserve 
for the 2023 and 2024 inflation modification.\32\ Based on that 
information, the calculations for Step 2 are as presented in table 7.
---------------------------------------------------------------------------

    \31\ The CPI is defined as ``All Urban Consumers (CPI-U), All 
Items, 1982-84=100.'' Series CUUR0200SA0 (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.
    \32\ The 2023 and 2024 inflation rates are available at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230920.pdf. We used the Median Core PCE June 
Projection found in table 1. (Downloaded September 2023).

[[Page 9048]]



                              Table 7--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 (@3.9%).............................         104,311          69,541         173,852
2024 Inflation Modification (@2.6%).............................          72,253          48,169         120,422
    Adjusted 2024 Operating Expenses............................       2,851,215       1,900,809       4,752,024
----------------------------------------------------------------------------------------------------------------
* Figures are rounded to the nearest dollar and may not sum to totals.

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) and rounding introduced in the 2022 ratemaking (87 FR 18488), 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 8. These numbers are used to determine the amount of revenue 
needed in their respective areas.

               Table 8--Authorized Pilots for District One
------------------------------------------------------------------------
                          Item                             District One
------------------------------------------------------------------------
Maximum Number of Pilots (per Sec.   401.220(a)) *......              18
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 1.2 
percent for a value of $429,491. This accounts for the difference in 
actual third quarter 2023 ECI inflation, which is 3.9 percent, and the 
2023 PCE estimate of 2.7 percent.^{33 34} The second step 
accounts for projected inflation from 2023 to 2024, which is 2.6 
percent.³⁵ Based on the projected 2024 inflation estimate, 
the target compensation benchmark for 2024 is $440,658 per pilot. The 
apprentice pilot wage benchmark is 36 percent of the target pilot 
compensation, or $158,637 ($440,658 x 0.36).
---------------------------------------------------------------------------

    \33\ Employment Cost Index, Total Compensation for Private 
Industry workers in Transportation and Material Moving, Annual 
Average, Series ID: CIU2010000520000A. https://beta.bls.gov/dataViewer/view/timeseries/CIU2010000520000A. (Last accessed 11/01/
23.)
    \34\ Table 1 Summary of Economic Projections, Median PCE 
Inflation. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220316.pdf. (Last accessed 05/17/23.)
    \35\ Table 1 Summary of Economic Projections, Median Core PCE 
Inflation June Projection. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230920.pdf. (Last accessed 09/
2023.)
---------------------------------------------------------------------------

    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 9. We estimate 
that the number of apprentice pilots with limited registration needed 
for District One in the 2024 season will be three. 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.

                                  Table 9--Target Compensation for District One
----------------------------------------------------------------------------------------------------------------
                                                                                   District One
                                                                 -----------------------------------------------
                                                                    Designated     Undesignated        Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation.......................................        $440,658        $440,658        $440,658
Number of Pilots................................................              10               8              18
                                                                 -----------------------------------------------
    Total Target Pilot Compensation.............................      $4,406,580      $3,525,264      $7,931,844
----------------------------------------------------------------------------------------------------------------
Target Apprentice Pilot Compensation............................        $158,637        $158,637        $158,637

[[Page 9049]]

 
Number of Apprentice Pilots.....................................  ..............  ..............               3
                                                                 -----------------------------------------------
    Total Target Apprentice Pilot Compensation..................        $285,547        $190,364        $475,911
----------------------------------------------------------------------------------------------------------------

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 target pilot compensation, and total target apprentice 
pilot wage for each area, 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.\36\ By multiplying the two figures, we obtain the working 
capital fund contribution for each area, as shown in table 10.
---------------------------------------------------------------------------

    \36\ 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 accessed 03/21/23.)

                           Table 10--Working Capital Fund Calculation for District One
----------------------------------------------------------------------------------------------------------------
                                                                                   District One
                                                                 -----------------------------------------------
                                                                    Designated     Undesignated        Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................      $2,851,215      $1,900,809      $4,752,024
Total Target Pilot Compensation (Step 4)........................       4,406,580       3,525,264       7,931,844
Total Target Apprentice Pilot Compensation (Step 4).............         285,547         190,364         475,911
Total 2024 Expenses.............................................       7,543,342       5,616,437      13,159,779
Working Capital Fund (4.0742%)..................................         307,331         228,825         536,156
----------------------------------------------------------------------------------------------------------------

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 target 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 11.

                                    Table 11--Revenue Needed for District One
----------------------------------------------------------------------------------------------------------------
                                                                                   District One
                                                                 -----------------------------------------------
                                                                    Designated     Undesignated        Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................      $2,851,215      $1,900,809      $4,752,024
Total Target Pilot Compensation (Step 4)........................       4,406,580       3,525,264       7,931,844
Total Target Apprentice Pilot Compensation (Step 4).............         285,547         190,364         475,911
Working Capital Fund (Step 5)...................................         307,331         228,825         536,156
Total Revenue Needed............................................       7,850,673       5,845,262      13,695,935
----------------------------------------------------------------------------------------------------------------

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 
from 2013-2020, the Coast Guard used 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. For 
2021-2022, the Coast Guard used figures provided by the associations 
through SeaPro monthly reports. Where bridge hour figures did not match 
between the monthly reports and the weighted factor reports, the Coast 
Guard opted to use the figures from the monthly report for Step 7. We 
show these values in table 12.

                 Table 12--Time on Task for District One
                                 [Hours]
------------------------------------------------------------------------
                                                   District One
                                         -------------------------------
                                            Designated     Undesignated
------------------------------------------------------------------------
2022....................................           6,573           8,356

[[Page 9050]]

 
2021....................................           6,166           7,893
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.................................           6,564           7,460
------------------------------------------------------------------------

    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 13.

          Table 13--Initial Rate Calculations for District One
------------------------------------------------------------------------
                                                   District One
                                         -------------------------------
                                            Designated     Undesignated
------------------------------------------------------------------------
Revenue needed (Step 6).................      $7,850,673      $5,845,262
Average time on task (hours)............           6,564           7,460
Initial rate............................          $1,196            $784
------------------------------------------------------------------------

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 to 2021, as 
shown in tables 14 and 15. Data for 2022 was provided by the 
associations in a weighting factor report.

                      Table 14--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)..................................................             482            1.15             554
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)..................................................             106             1.3             138
Class 4 (2014)..................................................             271            1.45             393
Class 4 (2015)..................................................             251            1.45             364

[[Page 9051]]

 
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)..................................................             478            1.45             693
                                                                 -----------------------------------------------
    Total.......................................................           7,809  ..............          10,064
    Average weighting factor (weighted transits / number of       ..............            1.29  ..............
     transits)..................................................
----------------------------------------------------------------------------------------------------------------
* Figures may not sum due to rounding.


                     Table 15--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)..................................................              41               1              41
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)..................................................             371            1.15             427
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)..................................................              73             1.3              95
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)..................................................             401            1.45             581
                                                                 -----------------------------------------------
    Total.......................................................           6,524  ..............           8,435
    Average weighting factor (weighted transits/number of         ..............            1.29  ..............
     transits)..................................................
----------------------------------------------------------------------------------------------------------------
* Figures may not sum due to rounding.

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 16.

[[Page 9052]]



                                  Table 16--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...............................          $1,196                1.29                 $927
District One: Undesignated.............................             784                1.29                  608
----------------------------------------------------------------------------------------------------------------

J. Step 10: Review and Finalize Rates
    In this step, the Director reviews the rates set forth by the 
staffing model and ensures that they meet the goal of ensuring safe, 
efficient, and reliable pilotage. To establish this, the Director 
considers whether the rates incorporate appropriate compensation for 
pilots to handle heavy traffic periods, and whether there are enough 
pilots to handle those heavy traffic periods. The Director also 
considers whether the rates cover operating expenses and infrastructure 
costs, including average traffic and weighting factors. Based on the 
financial information submitted by the pilots, the Director is not 
establishing any alterations to the rates in this step. We modified 
Sec.  401.405(a)(1) and (2) to reflect the final rates shown in table 
17.

                                     Table 17--Final Rates for District One
----------------------------------------------------------------------------------------------------------------
                                                                                   Final 2023       Final 2024
                     Area                                    Name                pilotage rate    pilotage rate
----------------------------------------------------------------------------------------------------------------
District One: Designated.....................  St. Lawrence River.............             $876             $927
District One: Undesignated...................  Lake Ontario...................              586              608
----------------------------------------------------------------------------------------------------------------

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.\37\ 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.
---------------------------------------------------------------------------

    \37\ These reports are available in the docket for this final 
rule.
---------------------------------------------------------------------------

    In the 2021 expenses used as the basis for this final 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 final 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 
18.

                               Table 18--2021 Recognized Expenses for District Two
----------------------------------------------------------------------------------------------------------------
                                                                   Undesignated     Designated
                                                                 --------------------------------
              Reported operating expenses for 2021                                   Southeast         Total
                                                                     Lake Erie     Shoal 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 Costs.............................................           2,976           4,464           7,440
Hotel/Lodging Costs (D2-21-01)..................................         (2,976)         (4,464)         (7,440)

[[Page 9053]]

 
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 costs................................................          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...........................................................           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 + Admin +             957,768       1,436,655       2,394,422
     Capital)...................................................
                                                                 -----------------------------------------------
    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.\38\ Because the BLS does not provide forecasted 
inflation data, we use economic projections from the Federal Reserve 
for the 2023 and 2024 inflation modification.\39\ Based on that 
information, the calculations for Step 2 are presented in table 19.
---------------------------------------------------------------------------

    \38\ The CPI is defined as ``All Urban Consumers (CPI-U), All 
Items, 1982-84=100.'' Series CUUR0200SA0 (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.
    \39\ The 2023 and 2024 inflation rates are available at Table 1 
Summary of Economic Projections, Median Core PCE Inflation June 
Projection. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230920.pdf. (Last accessed 12/4/2023).

[[Page 9054]]



                             Table 19--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 (@3.9%).............................          40,341          60,512         100,853
2024 Inflation Modification (@2.6%).............................          27,943          41,915          69,858
    Adjusted 2024 Operating Expenses............................       1,102,673       1,654,014       2,756,686
----------------------------------------------------------------------------------------------------------------
* Figures are rounded to the nearest dollar and may not sum to totals.

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 17 
registered pilots in 2024 in District Two, including the additional 
pilot being granted for 2024. 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 one 
apprentice pilot in 2024 in District Two.
    Based on the seasonal staffing model discussed in the 2017 
ratemaking (82 FR 41466) and rounding introduced in the 2022 ratemaking 
(87 FR 18488), 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 20. These numbers are used to determine the 
amount of revenue needed in their respective areas.

              Table 20--Authorized Pilots for District Two
------------------------------------------------------------------------
                          Item                             District Two
------------------------------------------------------------------------
Maximum Number of Pilots (per Sec.   401.220(a)) *......              16
2024 Authorized Pilots (total)..........................              17
Pilots Assigned to Designated Areas.....................               9
Pilots Assigned to Undesignated Areas...................               8
2024 Apprentice Pilots..................................               1
------------------------------------------------------------------------
* For a detailed calculation, refer to the Great Lakes Pilotage Rates--
  2017 Annual Review final rule, which contains the staffing model. See
  82 FR 41466, table 6 at 41480 (August 31, 2017).

D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice 
Pilot Wage Benchmark
    In this step, 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 1.2 percent for a value of $429,491. This accounts for the 
difference in actual third quarter 2023 ECI inflation, which is 3.9 
percent, and the 2023 PCE estimate of 2.7 percent.^{40 41} The 
second step accounts for projected inflation from 2023 to 2024, which 
is 2.6 percent.\42\ Based on the projected 2024 inflation estimate, the 
target compensation benchmark for 2024 is $440,658 per pilot. The 
apprentice pilot wage benchmark is 36 percent of the target pilot 
compensation, or $158,637 ($440,658 x 0.36).
---------------------------------------------------------------------------

    \40\ Employment Cost Index, Total Compensation for Private 
Industry workers in Transportation and Material Moving, Annual 
Average, Series ID: CIU2010000520000A. https://beta.bls.gov/dataViewer/view/timeseries/CIU2010000520000A. (Last accessed 11/01/
23.)
    \41\ Table 1 Summary of Economic Projections, Median PCE 
Inflation. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220316.pdf. (Last accessed 05/17/23.)
    \42\ Table 1 Summary of Economic Projections, Median Core PCE 
Inflation June Projection. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230920.pdf (Last accessed 12/4/
2023).
---------------------------------------------------------------------------

    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 21. The Coast Guard estimates that the number of apprentice 
pilots with limited registration needed for District Two in the 2024 
season will be one. 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 21--Target Compensation for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                   District Two
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation.......................................        $440,658        $440,658        $440,658
Number of Pilots................................................               8               9              17
                                                                 -----------------------------------------------
    Total Target Pilot Compensation.............................       3,525,264       3,965,922       7,491,186
----------------------------------------------------------------------------------------------------------------

[[Page 9055]]

 
Target Apprentice Pilot Compensation............................         158,637         158,637         158,637
Number of Apprentice Pilots.....................................  ..............  ..............               1
                                                                 -----------------------------------------------
    Total Target Apprentice Pilot Compensation..................          63,455          95,182         158,637
----------------------------------------------------------------------------------------------------------------

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 target 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.\43\ By multiplying the two figures, we obtain the working 
capital fund contribution for each area, as shown in table 22.
---------------------------------------------------------------------------

    \43\ 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 accessed 03/21/2023).

                           Table 22--Working Capital Fund Calculation for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                   District Two
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................      $1,102,673      $1,654,014      $2,756,686
Total Target Pilot Compensation (Step 4)........................       3,525,264       3,965,922       7,491,186
Total Target Apprentice Pilot Compensation (Step 4).............          63,455          95,182         158,637
Total 2024 Expenses.............................................       4,691,392       5,715,118      10,406,509
Working Capital Fund (4.0742%)..................................         191,137         232,845         423,982
----------------------------------------------------------------------------------------------------------------

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 target 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 23.

                                    Table 23--Revenue Needed for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                   District Two
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................      $1,102,673      $1,654,014      $2,756,686
Total Target Pilot Compensation (Step 4)........................       3,525,264       3,965,922       7,491,186
Total Target Apprentice Pilot Compensation (Step 4).............          63,455          95,182         158,637
Working Capital Fund (Step 5)...................................         191,137         232,845         423,982
Total Revenue Needed............................................       4,882,529       5,947,963      10,830,491
----------------------------------------------------------------------------------------------------------------

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 
from 2013-2020, the Coast Guard used 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. For 
2021-2022, the Coast Guard used figures provided by the associations 
through SeaPro monthly reports. Where bridge hour figures did not match 
between the monthly reports and the weighted factor reports, the Coast 
Guard opted to use the figures from the monthly report for Step 7. We 
show these values in table 24.

[[Page 9056]]



                 Table 24--Time on Task for District Two
                                 [Hours]
------------------------------------------------------------------------
                                                   District Two
                  Year                   -------------------------------
                                           Undesignated     Designated
------------------------------------------------------------------------
2022....................................           7,668           8,613
2021....................................           5,290           6,762
2020....................................           6,232           8,401
2019....................................           6,512           7,715
2018....................................           6,150           6,655
2017....................................           5,139           6,074
2016....................................           6,425           5,615
2015....................................           6,535           5,967
2014....................................           7,856           7,001
2013....................................           4,603           4,750
                                         -------------------------------
    Average.............................           6,241           6,755
------------------------------------------------------------------------

    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 25.

          Table 25--Initial Rate Calculations for District Two
------------------------------------------------------------------------
                                           Undesignated     Designated
------------------------------------------------------------------------
Revenue needed (Step 6).................      $4,882,529      $5,947,963
Average time on task (hours)............           6,241           6,755
Initial rate............................            $782            $881
------------------------------------------------------------------------

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 2014-2021, as shown in tables 26 and 27. 
Data for 2022 was provided by the associations in a weighting factor 
report.

                     Table 26--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)..................................................             121               1             121
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)..................................................             478            1.15             550
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)..................................................               8             1.3              10
Class 4 (2014)..................................................             636            1.45             922
Class 4 (2015)..................................................             560            1.45             812

[[Page 9057]]

 
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
Class 4 (2022)..................................................             642            1.45             931
                                                                 -----------------------------------------------
    Total.......................................................           6,268  ..............           8,204
    Average weighting factor (weighted transits/number of         ..............            1.31  ..............
     transits)..................................................
----------------------------------------------------------------------------------------------------------------
* Figures may not sum due to rounding.


                      Table 27--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)..................................................             117               1             117
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)..................................................             717            1.15             825
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)..................................................              13             1.3              17
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)..................................................           1,230            1.45           1,784
                                                                 -----------------------------------------------
    Total.......................................................           6,751  ..............           8,882
    Average weighting factor (weighted transits/number of         ..............            1.32  ..............
     transits)..................................................
----------------------------------------------------------------------------------------------------------------
* Figures may not sum due to rounding.

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 28.

[[Page 9058]]



                                  Table 28--Revised Base Rates for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                                 Revised rate
                                                          Initial rate    Average weighting    (initial rate /
                          Area                              (Step 7)       factor (Step 8)    average weighting
                                                                                                   factor)
----------------------------------------------------------------------------------------------------------------
District Two: Undesignated.............................            $782                1.31                 $597
District Two: Designated...............................             881                1.32                  667
----------------------------------------------------------------------------------------------------------------

J. Step 10: Review and Finalize Rates
    In this step, the Director reviews the rates set forth by the 
staffing model and ensures that they meet the goal of ensuring safe, 
efficient, and reliable pilotage. To establish this, the Director 
considers whether the rates incorporate appropriate compensation for 
pilots to handle heavy traffic periods, and whether there are enough 
pilots to handle those heavy traffic periods. The Director also 
considers whether the rates 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 establishing any alterations to the rates in this step. 
We modify Sec.  401.405(a)(3) and (4) to reflect the final rates shown 
in table 29.

                                     Table 29--Final Rates for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                   Final 2023       Final 2024
                     Area                                    Name                pilotage rate    pilotage rate
----------------------------------------------------------------------------------------------------------------
District Two: Designated.....................  Navigable waters from Southeast             $601             $667
                                                Shoal to Port Huron, MI.
District Two: Undesignated...................  Lake Erie......................              704              597
----------------------------------------------------------------------------------------------------------------

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.\44\ 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.
---------------------------------------------------------------------------

    \44\ These reports are available in the docket for this final 
rule.
---------------------------------------------------------------------------

    In the 2021 expenses used as the basis for this final 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 final 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 
30.

                              Table 30--2021 Recognized Expenses for District Three
----------------------------------------------------------------------------------------------------------------
                                                   Undesignated     Designated     Undesignated
                                                 ------------------------------------------------
      Reported operating expenses for 2021          Lakes Huron     St. Mary's                         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

[[Page 9059]]

 
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
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 (OpEx).............       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 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.\45\ Because the BLS does not provide forecasted 
inflation data, we use economic projections from the Federal Reserve 
for the 2023 and 2024 inflation modification.\46\ Based on that 
information, the calculations for Step 2 are as presented in table 31.
---------------------------------------------------------------------------

    \45\ The CPI is defined as ``All Urban Consumers (CPI-U), All 
Items, 1982-84=100.'' Series CUUR0200SA0 (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.
    \46\ The 2022 and 2023 inflation rates are available at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230920.pdf. We used the Median Core PCE June 
Projection found in table 1. (Downloaded September 2023).

[[Page 9060]]



                            Table 31--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 (@3.9%).............................         134,603          36,800         171,403
2024 Inflation Modification (@2.6%).............................          93,235          25,490         118,725
    Adjusted 2024 Operating Expenses............................       3,679,209       1,005,891       4,685,100
----------------------------------------------------------------------------------------------------------------
* Figures are rounded to the nearest dollar and may not sum to totals.

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 23 
registered pilots in 2024 in District Three, including the additional 
pilot granted by the Director. 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) and rounding introduced in the 2022 ratemaking (87 FR 18488), 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 32. These numbers are used to determine the amount of revenue 
needed in their respective areas.

             Table 32--Authorized Pilots for District Three
------------------------------------------------------------------------
                          Item                            District Three
------------------------------------------------------------------------
Maximum Number of Pilots (per Sec.   401.220(a)) *......              22
2024 Authorized Pilots (total)..........................              23
Pilots Assigned to Designated Areas.....................               5
Pilots Assigned to Undesignated Areas...................              18
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 1.2 
percent for a value of $429,491. This accounts for the difference in 
actual third quarter 2023 ECI inflation, which is 3.9 percent, and the 
2023 PCE estimate of 2.7 percent.^{47 48} The second step 
accounts for projected inflation from 2023 to 2024, which is 2.6 
percent.\49\ Based on the projected 2024 inflation estimate, the target 
compensation benchmark for 2024 is $440,658 per pilot. The apprentice 
pilot wage benchmark is 36 percent of the target pilot compensation, or 
$158,637 ($440,658 x 0.36).
---------------------------------------------------------------------------

    \47\ Employment Cost Index, Total Compensation for Private 
Industry workers in Transportation and Material Moving, Annual 
Average, Series ID: CIU2010000520000A. https://beta.bls.gov/dataViewer/view/timeseries/CIU2010000520000A. (Last accessed 11/01/
23.)
    \48\ Table 1 Summary of Economic Projections, Median PCE 
Inflation. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220316.pdf. (Last accessed 05/17/23.)
    \49\ Table 1 Summary of Economic Projections, Median Core PCE 
Inflation June Projection. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230920.pdf (Last accessed 12/4/
2023).
---------------------------------------------------------------------------

    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 33. We 
estimate that the number of apprentice pilots with limited registration 
needed for District Three in the 2024 season will be two. 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 area, in accordance with the allocation for operating 
expenses.

                                Table 33--Target Compensation for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                  District Three
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation.......................................        $440,658        $440,658        $440,658
                                                                 -----------------------------------------------
Number of Pilots................................................              18               5              23
----------------------------------------------------------------------------------------------------------------
    Total Target Pilot Compensation.............................      $7,931,844      $2,203,290     $10,135,134
Target Apprentice Pilot Compensation............................        $158,637        $158,637        $158,637

[[Page 9061]]

 
Number of Apprentice Pilots.....................................  ..............  ..............               2
                                                                 -----------------------------------------------
    Total Target Apprentice Pilot Compensation..................        $250,646         $66,628        $317,274
----------------------------------------------------------------------------------------------------------------

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 target 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.\50\ By multiplying the two figures, we obtain the working 
capital fund contribution for each area, as shown in table 34.
---------------------------------------------------------------------------

    \50\ 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 accessed 03/21/2023.)

                          Table 34--Working Capital Fund Calculation for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                  District Three
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................      $3,679,209      $1,005,891      $4,685,100
Total Target Pilot Compensation (Step 4)........................       7,931,844       2,203,290      10,135,134
Total Target Apprentice Pilot Compensation (Step 4).............         250,646          66,628         317,274
Total 2024 Expenses.............................................      11,861,699       3,275,809      15,137,508
Working Capital Fund (4.0742%)..................................         483,269         133,463         616,732
----------------------------------------------------------------------------------------------------------------

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 target pilot compensation 
(from Step 4), and the working capital fund contribution (from Step 5). 
The calculations are shown in table 35.

                                   Table 35--Revenue Needed for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                  District Three
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................      $3,679,209      $1,005,891      $4,685,100
Total Target Pilot Compensation (Step 4)........................       7,931,844       2,203,290      10,135,134
Total Target Apprentice Pilot Compensation (Step 4).............         250,646          66,628         317,274
Working Capital Fund (Step 5)...................................         483,269         133,463         616,732
Total Revenue Needed............................................      12,344,968       3,409,272      15,754,240
----------------------------------------------------------------------------------------------------------------

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 from 2013-2020, the Coast Guard used 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. For 
2021-2022, the Coast Guard used figures provided by the associations 
through SeaPro monthly reports. Where bridge hour figures did not match 
between the monthly reports and the weighted factor reports, the Coast 
Guard opted to use the figures from the monthly report for Step 7. We 
show these values in table 36.

[[Page 9062]]



                Table 36--Time on Task for District Three
                                 [Hours]
------------------------------------------------------------------------
                                                  District Three
                  Year                   -------------------------------
                                           Undesignated     Designated
------------------------------------------------------------------------
2022....................................          23,914           3,345
2021....................................          18,149           2,484
2020....................................          23,678           3,520
2019....................................          24,851           3,395
2018....................................          19,967           3,455
2017....................................          20,955           2,997
2016....................................          23,421           2,769
2015....................................          22,824           2,696
2014....................................          25,833           3,835
2013....................................          17,115           2,631
Average.................................          22,071           3,113
------------------------------------------------------------------------

    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 37.

         Table 37--Initial Rate Calculations for District Three
------------------------------------------------------------------------
                                           Undesignated     Designated
------------------------------------------------------------------------
Revenue needed (Step 6).................     $12,344,968      $3,409,272
Average time on task (hours)............          22,071           3,113
Initial rate............................            $559          $1,095
------------------------------------------------------------------------

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 to 2021, as shown in tables 38 and 
39. Data for 2022 was provided by the associations in a weighting 
factor report.

                    Table 38--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)..................................................             162               1             162
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)..................................................             452            1.15             520
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

[[Page 9063]]

 
Class 4 (2015)..................................................             375            1.45             544
Class 4 (2016)..................................................             332            1.45             481
Class 4 (2017)..................................................             367            1.45             532
Class 4 (2018)..................................................             337            1.45             489
Class 4 (2019)..................................................             334            1.45             484
Class 4 (2020)..................................................             339            1.45             492
Class 4 (2021)..................................................             356            1.45             516
Class 4 (2022)..................................................             482            1.45             699
                                                                 -----------------------------------------------
    Total for Area 6............................................           6,719  ..............           8,609
----------------------------------------------------------------------------------------------------------------
                                                     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)..................................................              12               1              12
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)..................................................              95            1.15             109
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)..................................................               5             1.3               7
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)..................................................             306            1.45             444
                                                                 -----------------------------------------------
    Total for Area 8............................................           3,670  ..............           4,914
    Combined total..............................................          10,389  ..............          13,522
    Average weighting factor (weighted transits/number of         ..............            1.30  ..............
     transits)..................................................
----------------------------------------------------------------------------------------------------------------
* Figures may not sum due to rounding.


                     Table 39--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)..................................................             104               1             104
Class 2 (2014)..................................................             221            1.15             254
Class 2 (2015)..................................................             145            1.15             167

[[Page 9064]]

 
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)..................................................             198            1.15             228
Class 3 (2014)..................................................              15             1.3              20
Class 3 (2015)..................................................               0             1.3               0
Class 3 (2016)..................................................               6             1.3               8
Class 3 (2017)..................................................              14             1.3              18
Class 3 (2018)..................................................               6             1.3               8
Class 3 (2019)..................................................               3             1.3               4
Class 3 (2020)..................................................               1             1.3               1
Class 3 (2021)..................................................               2             1.3               3
Class 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)..................................................             392            1.45             568
                                                                 -----------------------------------------------
    Total.......................................................           4,500  ..............           5,877
    Average weighting factor (weighted transits/number of         ..............            1.31  ..............
     transits)..................................................
----------------------------------------------------------------------------------------------------------------
* Figures may not sum due to rounding.

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 40.

                                 Table 40--Revised Base Rates for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                                 Revised rate
                                                          Initial rate    Average weighting    (initial rate /
                          Area                              (Step 7)       factor (Step 8)    average weighting
                                                                                                   factor)
----------------------------------------------------------------------------------------------------------------
District Three: Undesignated...........................            $559                1.30                 $430
District Three: Designated.............................           1,095                1.31                  836
----------------------------------------------------------------------------------------------------------------

J. Step 10: Review and Finalize Rates

    In this step, the Director reviews the rates set forth by the 
staffing model and ensures that they meet the goal of ensuring safe, 
efficient, and reliable pilotage. To establish this, the Director 
considers whether the rates incorporate appropriate compensation for 
pilots to handle heavy traffic periods, and whether there are enough 
pilots to handle those heavy traffic periods. The Director also 
considers whether the rates cover operating expenses and infrastructure 
costs, taking average traffic and weighting factors into consideration. 
Based on this information, the Director is not establishing any 
alterations to the rates in this step. We modified Sec.  401.405(a)(5) 
and (6) to reflect the rates shown in table 41.

                                    Table 41--Final Rates for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                   Final 2023       Final 2024
                     Area                                    Name                pilotage rate    pilotage rate
----------------------------------------------------------------------------------------------------------------
District Three: Designated...................  St. Mary's River...............             $834             $836
District Three: Undesignated.................  Lakes Huron, Michigan, and                   410              430
                                                Superior.
----------------------------------------------------------------------------------------------------------------

X. Regulatory Analyses

    We developed this rule after considering numerous statutes and 
Executive orders related to rulemaking. Below we summarize our analyses 
based on these statutes or Executive orders.

A. Regulatory Planning and Review

    Executive Orders 12866 (Regulatory Planning and Review), as amended 
by

[[Page 9065]]

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 both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility.
    The Office of Management and Budget (OMB) has not designated this 
rule a significant regulatory action under section 3(f) of Executive 
Order 12866, as amended by Executive Order 14094. Accordingly, OMB has 
not reviewed this regulatory action.
    The purpose of this final 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 concluded the last full 
ratemaking in February of 2023.\51\
---------------------------------------------------------------------------

    \51\ Great Lakes Pilotage Rates--2023 Annual Ratemaking and 
Review of Methodology (88 FR 12226), published February 27, 2023.
---------------------------------------------------------------------------

    For this final rule, the Coast Guard estimates an increase in cost 
of approximately $2.62 million to industry from 2023 to 2024. This is 
approximately a 7-percent increase because of the change in revenue 
needed in 2024 compared to the revenue needed in 2023. See table 42.

                                 Table 42--Economic Impacts Due to Rate 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 296 vessels        $2,621,471 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, 58 United   ($40,280,666) from    operating
                            pilotage rates        States Great Lakes    revenue needed for    expenses. Promotes
                            annually.             pilots, 6             2023 ($37,659,195)    safe, efficient,
                                                  apprentice pilots,    as shown in table     and reliable
                                                  and 3 pilotage        43.                   pilotage service
                                                  associations.                               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 III., 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 is an increase in rates for both areas in 
District One, the designated area for District Two, and both areas in 
District Three. There is a decrease in rates for the undesignated area 
in District Two. These changes also lead to a net increase in the cost 
of service to shippers. The change in per-unit cost to each individual 
shipper depends on their area of operation.
    A detailed discussion of our economic impact analysis follows.
Affected Population
    This final rule affects United States Great Lakes pilots and 
apprentice pilots, the 3 pilot associations, and the owners and 
operators of 296 oceangoing vessels that transit the Great Lakes 
annually on average from 2020 to 2022. The Coast Guard estimates that 
there will be 58 registered pilots and 6 apprentice pilots during the 
2024 shipping season, an increase of 2 pilots and decrease of 1 
apprentice pilot from the proposed numbers in the NPRM. 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 SeaPro to estimate the average annual number of 
vessels affected by the rate adjustment. SeaPro 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. The associations did not provide updated trip-
level billing data for 2022, as they did for 2021, to use to update the 
number of vessels or customers in this final rule, so we used what was 
provided in the NPRM. We believe that using 3 years of billing data is 
a better representation of the vessel population

[[Page 9066]]

currently using pilotage services and impacted by this final rule.
    We found that 437 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, 407 were foreign-flagged vessels, and 30 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 
final rule. From 2020 through 2022, an average of 296 vessels used 
pilotage services annually.\52\ On average, 280 of these vessels were 
foreign-flagged and 16 were U.S.-flagged vessels that voluntarily opted 
into the pilotage service (these figures are rounded averages).
---------------------------------------------------------------------------

    \52\ Some vessels entered the Great Lakes multiple times in a 
single year, affecting the average number of unique vessels using 
pilotage services in any given year.
---------------------------------------------------------------------------

Total Cost to Shippers
    The rate changes resulting from this adjustment to the rates result 
in a net increase in the cost of service to shippers. However, the 
change in per-unit cost to each individual shipper is dependent on 
their area of operation.
    The Coast Guard estimates the effect of the rate changes on 
shippers by comparing the total projected revenues needed to cover 
costs in 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 final rule.
    The impacts of the rate changes on shippers are estimated from the 
district pilotage projected revenues (shown in tables 11, 23, and 35 of 
this preamble). The Coast Guard estimates that, for the 2024 shipping 
season, the projected revenue needed for all three districts is 
$40,280,666.
    To estimate the change in cost to shippers from this final 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.\53\ This is the best approximation of 2023 revenues, as, at 
the time of publication of this final rule, the Coast Guard does not 
have enough audited data available for the 2023 shipping season to 
revise these projections. Table 43 shows the revenue projections for 
2023 and 2024 and details the additional cost increases to shippers by 
district as a result of the rate changes in traffic in Districts One, 
Two, and Three.
---------------------------------------------------------------------------

    \53\ 88 FR 12226. See table 42. https://www.govinfo.gov/content/pkg/FR-2023-02-27/pdf/2023-03212.pdf. (Last accessed 5/17/23.)

                                 Table 43--Effect of the Final Rule by District
                                         [U.S. Dollars; Non-discounted]
----------------------------------------------------------------------------------------------------------------
                                                         Revenue needed in  Revenue needed in   Additional costs
                          Area                                  2023               2024           of this rule
----------------------------------------------------------------------------------------------------------------
Total, District One....................................        $12,609,601        $13,695,935         $1,086,334
Total, District Two....................................         10,392,542         10,830,491            437,949
Total, District Three..................................         14,657,052         15,754,240          1,097,188
                                                        --------------------------------------------------------
    System Total.......................................         37,659,195         40,280,666          2,621,471
----------------------------------------------------------------------------------------------------------------
* 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 in this final rule. 
The effect of the rate changes to shippers varies by area and district. 
After considering the change in pilotage rates, the rate changes lead 
to affected shippers operating in District One experiencing an increase 
in payments of $1,086,334 over the previous year. Affected shippers 
operating in District Two and District Three experienced an increase in 
payments of $437,949 and $1,097,188, respectively, when compared with 
2023. The overall adjustment in payments increased payments by shippers 
to $2,621,471 across all three districts (a 7-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 44 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 target 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 30 percent of total revenue needed in 2024). The large 
increase in the working capital fund, 59 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.\54\
---------------------------------------------------------------------------

    \54\ 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 accessed 03/21/2023.)

[[Page 9067]]



                                                  Table 44--Difference in Revenue by Revenue-Component
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Percentage of                                                      Percentage
                                                        Revenue needed   total revenue  Revenue needed   Percentage of     Difference      change from
                   Revenue component                        in 2023     needed in 2023      in 2024      total revenue   (2024 revenue-   previous year
                                                                              (%)                       needed in 2024   2023 revenue)         (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses...........................     $11,984,950              32     $12,193,810              30         $208,860                2
Total Target Pilot Compensation.......................      23,766,288              63      25,558,164              63        1,791,876                8
Total Target Apprentice Pilot Compensation............         916,700               2         951,822               2           35,122                4
Working Capital Fund..................................         991,257               3       1,576,870               4          585,613               59
Total Revenue Needed..................................      37,659,195             100      40,280,666             100        2,621,471                7
--------------------------------------------------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    As stated above, we estimate a total increase in revenue needed by 
the pilot associations of $2,621,471. This represents an increase in 
revenue needed for target pilot compensation of $1,791,876, for the 
total apprentice pilot wage benchmark of $35,122, $208,860 for adjusted 
operating expenses, and $585,613 for an increase in the revenue needed 
for the working capital fund.
    The change in revenue needed for pilot compensation, $1,791,876, is 
due to two factors: (1) The changes to adjust 2023 pilotage 
compensation to account for the difference between actual ECI inflation 
\55\ (3.9 percent) and predicted PCE inflation \56\ (2.7 percent) for 
2023; and (2) projected inflation of pilotage compensation in Step 2 of 
the methodology, using predicted inflation through 2024.
---------------------------------------------------------------------------

    \55\ Employment Cost Index, Total Compensation for Private 
Industry workers in Transportation and Material Moving, Annual 
Average, Series ID: CIU2010000520000A. https://beta.bls.gov/dataViewer/view/timeseries/CIU2010000520000A. (Last accessed 08/28/
23.)
    \56\ Table 1 Summary of Economic Projections, Median PCE 
Inflation. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220316.pdf. (Last accessed 5/17/23.)
---------------------------------------------------------------------------

    The target compensation is $440,658 per pilot in 2024, compared to 
$424,398 in 2023. The changes to modify the 2023 pilot compensation to 
account for the difference between predicted and actual inflation 
increase the 2023 target compensation value by 1.2 percent. As shown in 
table 45, this inflation adjustment increases total compensation by 
$5,093 per pilot, and the total revenue needed by $295,381, when 
accounting for all 58 pilots.

  Table 45--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 1.012)...........        $429,491
Difference between Adjusted Target 2023 Compensation and          $5,093
 Target 2023 Compensation ($429,491-$424,398)...........
Increase in total Revenue for 58 Pilots ($5,093 x 58)...        $295,381
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    Similarly, table 46 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 $1,833 per apprentice pilot, and the total 
revenue needed by $11,000 when accounting for all six apprentice 
pilots.

  Table 46--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 1.012)................        $154,617
Difference between Adjusted Target Compensation and               $1,833
 Target Compensation ($154,617-$152,783)................
Increase in total Revenue for Apprentices ($1,833 x 6)..         $11,000
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    As noted earlier, the Coast Guard predicts that 58 pilots will be 
needed for the 2024 season. This is two more pilots than in the 2023 
final rule, which leads to an estimated $871,130 increase in revenue 
needed for pilot compensation, as shown in table 47.

    Table 47--Change in Revenue Resulting From Increase of Two Pilots
------------------------------------------------------------------------
 
------------------------------------------------------------------------
2024 Target Compensation................................        $440,658
Total Number of New Pilots..............................               2
Total Cost of new Pilots ($440,658 x 2).................        $881,316
Difference between Adjusted Target 2023 Compensation and          $5,093
 Target 2023 Compensation ($429,491-$424,398)...........
Increase in Revenue for 2 Pilots ($5,093 x 2)...........         $10,186

[[Page 9068]]

 
Net Increase in total Revenue for 2 Pilots ($881,316-           $871,130
 $10,186)...............................................
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    Similarly, the Coast Guard predicts that six apprentice pilots will 
be needed for the 2024 season. This is the same as in the 2023 season, 
so there is no estimated change in revenue needed for pilot 
compensation, apart from the change in inflation accounted for in table 
48.
    Another increase, $647,699, is the result of increasing 
compensation for the 58 pilots to account for future inflation of 2.6 
percent in 2024. This increased total compensation by $11,167 per 
pilot, as shown in table 48.

 Table 48--Change in Revenue Resulting From Inflating 2023 Compensation
                                 to 2024
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Adjusted 2023 Compensation..............................        $429,491
2024 Target Compensation ($429,491 x 1.026).............        $440,658
Difference between Adjusted 2023 Compensation and Target         $11,167
 2024 Compensation ($440,658-$429,491)..................
Increase in total Revenue for 58 Pilots ($11,167 x 58)..        $647,699
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    Similarly, an increase of $24,122 is the result of increasing 
compensation for the 6 apprentice pilots to account for future 
inflation of 2.6 percent in 2024. This increased total compensation by 
$4,020 per apprentice pilot, as shown in table 49.

  Table 49--Change in Revenue Resulting From Inflating 2023 Apprentice
                       Pilot Compensation to 2024
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Adjusted 2023 Compensation..............................        $154,617
2024 Target Compensation ($440,658 x 36%)...............        $158,637
Difference between Adjusted Compensation and Target               $4,020
 Compensation ($158,637-$154,617).......................
Increase in total Revenue for 6 Apprentices ($4,020 x 6)         $24,122
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    Table 50 presents the percentage change in revenue by area and 
revenue-component, excluding surcharges, as they are applied at the 
district level.\57\
---------------------------------------------------------------------------

    \57\ 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 11, 23, and 35 of this rule.

[[Page 9069]]



                                                                                      Table 50--Difference in Revenue by Revenue-Component and Area
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Adjusted operating expenses      Total target pilot compensation     Total target apprentice pilot           Working capital fund              Total revenue needed
                                                           ----------------------------------------------------------------------            compensation           --------------------------------------------------------------------
                                                                                                                                 -----------------------------------
                                                                                     Percent-                           Percent-                           Percent-                           Percent-                          Percent-
                                                               2023        2024        age        2023        2024        age        2023        2024        age        2023        2024        age        2023        2024        age
                                                                                      change                             change                             change                             change                            change
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
District One:
    Designated............................................  $2,599,777  $2,851,215        10   $4,243,980  $4,406,580         4     $183,340    $285,547        56     $189,966    $307,331        62   $7,217,063  $7,850,673       8.8
    Undesignated..........................................   1,733,186   1,900,809        10    3,395,184   3,525,264         4      122,227     190,364        56      141,941     228,825        61    5,392,538   5,845,262       8.4
District Two:
    Undesignated..........................................   1,270,338   1,102,673      (13)    4,243,980   3,525,264      (17)       61,113      63,455         4      150,722     191,137        27    5,726,153   4,882,529    (14.7)
    Designated............................................   1,905,503   1,654,014      (13)    2,546,388   3,965,922        56       91,670      95,182         4      122,828     232,845        90    4,666,389   5,947,963      27.5
District Three:
    Undesignated..........................................   3,515,118   3,679,209         5    7,214,766   7,931,844        10      359,942     250,646      (30)      299,795     483,269        61   11,389,621  12,344,968       8.4
    Designated............................................     961,028   1,005,891         5    2,121,990   2,203,290         4       98,408      66,628      (32)       86,005     133,463        55    3,267,430   3,409,272      4.3
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.


[[Page 9070]]

Benefits
    This final 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 are available 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 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 final 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.\58\ As described in section II., 
Executive Summary, and section X., Regulatory Analyses, of this 
preamble, we found that 437 unique vessels used pilotage services 
during the years 2020 through 2022. These vessels are owned by 57 
entities, of which 44 are foreign entities that operate primarily 
outside the United States, and the remaining 13 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.\59\ Table 51 shows the North American 
Industry Classification System (NAICS) codes of the U.S. entities and 
the small entity standard size established by the SBA, either number of 
employees or annual revenue.
---------------------------------------------------------------------------

    \58\ See https://resource.referenceusa.com/. (Last accessed 05/
18/2023.)
    \59\ See https://www.sba.gov/document/support--table-size-standards. (Last accessed 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 51--NAICS Codes and Small Entities Size Standards
------------------------------------------------------------------------
                                                      Small entity size
          NAICS                   Description              standard
------------------------------------------------------------------------
238910...................  Site Preparation          $19,000,000.
                            Contractors.
425120...................  Wholesale Trade Agents    125 Employees.
                            And Brokers.
483211...................  Inland Water Freight      1,050 Employees.
                            Transportation.
484230...................  Specialized Freight       $34,000,000.
                            (Except Used Goods)
                            Trucking, Long-Distance.
488330...................  Navigational Services to  $47,000,000.
                            Shipping.
488390...................  Other Support Activities  $47,000,000.
                            for Water
                            Transportation.
523910...................  Miscellaneous
                            Intermediation
561510...................  Travel Agencies.........  $25,000,000.
561599...................  All Other Travel          $32,500,000.
                            Arrangement And
                            Reservation Services.
713930...................  Marinas.................  $11,000,000.
813910...................  Business Associations...  $15,500,000.
------------------------------------------------------------------------

    Of the 13 U.S. entities, 4 exceed the SBA's small business 
standards for small entities, and 1 only provided service to a public 
vessel. To estimate the potential impact on the remaining eight small 
entities, the Coast Guard used their 2022 invoice data to estimate 
their pilotage costs in 2024. We first increase their 2022 costs by 16 
percent to account for the changes in pilotage rates resulting from the 
2023 final rule, then by 7 percent to account for changes resulting 
from this final rule. Then, we estimated the change in cost to these 
entities resulting from this final rule by subtracting their estimated 
2023 pilotage costs from their estimated 2024 pilotage costs, and found 
the average costs to small firms is approximately $10,075, with a range 
of $6,419 to $16,255. We then compared the estimated change in pilotage 
costs between 2023 and 2024 with each firm's annual revenue. For two 
entities, the impact of the change in estimated pilotage expenses is 
above 1 percent of revenues, at 3.27 percent and 4.28 percent.
    In addition to the owners and operators discussed previously, three 
U.S. entities that receive revenue from pilotage services are affected 
by this final 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'' 
\60\ with a small-entity size standard of $15,500,000 in annual 
revenue. 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.
---------------------------------------------------------------------------

    \60\ In previous rulemakings, the associations used a different 
NAICS code, 483212 Inland Water Passenger Transportation. NAICS code 
283212 had a size standard of 500 employees as of the latest SBA 
small business size table [published March 17, 2023] 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 are impacted by this final rule. We also 
did not find any small governmental jurisdictions with populations of 
fewer than 50,000 people that are impacted by this final rule. Based on 
this analysis, we conclude this final rule does not affect a 
substantial number of small entities, nor have a significant economic 
impact on any of the affected entities.
    Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that 
this rule will not have a significant economic impact

[[Page 9071]]

on a substantial number of small entities.

C. Assistance for Small Entities

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

D. Collection of Information

    This rule calls for no new collection of information nor does it 
impact an existing collection of information under the Paperwork 
Reduction Act of 1995, 44 U.S.C. 3501-3520.

E. Federalism

    A rule has implications for federalism under Executive Order 13132 
(Federalism) if it has a substantial direct effect on States, on the 
relationship between the National Government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. We have analyzed this 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 rule is consistent with the fundamental 
federalism principles and preemption requirements described in 
Executive Order 13132.
    It is well settled that States may not regulate in categories 
reserved for regulation by the Coast Guard. It is also well settled 
that all of the categories covered in 46 U.S.C. 3306, 3703, 7101, and 
8101 (design, construction, alteration, repair, maintenance, operation, 
equipping, personnel qualification, and manning of vessels), as well as 
the reporting of casualties and any other category in which Congress 
intended the Coast Guard to be the sole source of a vessel's 
obligations, are within the field foreclosed from regulation by the 
States. See the Supreme Court's decision in United States v. Locke and 
Intertanko v. Locke, 529 U.S. 89, 120 S.Ct. 1135 (2000).

F. Unfunded Mandates

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

G. Taking of Private Property

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

H. Civil Justice Reform

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

I. Protection of Children

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

J. Indian Tribal Governments

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

K. Energy Effects

    We have analyzed this 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 rule does not use technical standards. Therefore, we did not 
consider the use of voluntary consensus standards.

M. Environment

    We have analyzed this rule under Department of Homeland Security 
Management Directive 023-01, Rev. 1, associated implementing 
instructions, and Environmental Planning COMDTINST 5090.1 (series), 
which guide the Coast Guard in complying with the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have made 
a determination that this action is one of a category of actions that 
do not individually or cumulatively have a significant effect on the 
human environment. A Record of Environmental Consideration supporting 
this determination is available in the docket. For instructions on 
locating the docket, see the ADDRESSES section of this preamble. This 
rule categorically excluded under paragraphs A3 and L54 of Appendix A,

[[Page 9072]]

Table 1 of DHS Instruction Manual 023-01-001-01, Rev. 1. Paragraph A3 
pertains to the promulgation of rules of the following nature: (a) 
those of a strictly administrative or procedural nature; (b) those that 
implement, without substantive change, statutory or regulatory 
requirements; (c) those that implement, without substantive change, 
procedures, manuals, and other guidance documents; (d) those that 
interpret or amend an existing regulation without changing its 
environmental effect; (e) those that provide technical guidance on 
safety and security matters; and (f) those that provide guidance for 
the preparation of security plans. Paragraph L54 pertains to 
regulations which are editorial or procedural.
    This rule involves 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. This rule 
is not part of a larger action, and it will not result in significant 
impacts to the human environment. All changes are consistent with the 
Coast Guard's maritime safety missions.

List of Subjects in 46 CFR Part 401

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

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

PART 401--GREAT LAKES PILOTAGE REGULATIONS

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

    Authority:  46 U.S.C. 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 $927;
    (2) Lake Ontario is $608;
    (3) Lake Erie is $597
    (4) The navigable waters from Southeast Shoal to Port Huron, MI is 
$667;
    (5) Lakes Huron, Michigan, and Superior is $430; and
    (6) The St. Mary's River is $836.
* * * * *

    Dated: January 31, 2024.
W.R. Arguin,
Rear Admiral, U.S. Coast Guard, Assistant Commandant for Prevention 
Policy.
[FR Doc. 2024-02410 Filed 2-8-24; 8:45 am]
BILLING CODE 9110-04-P

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