Great Lakes Pilotage Rates-2025 Annual Review, 100810-100838 [2024-29128]

Download as PDF 100810 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations (5) Employment and training services activities in accordance with §§ 309.65(b) and 309.121. * * * * * ■ 12. Amend § 309.155 by: ■ a. Removing the word ‘‘and’’ at the end of paragraph (e); ■ b. Redesignating paragraph (f) as paragraph (g); and ■ c. Adding a new paragraph (f). The addition reads as follows: § 309.155 What uses of Tribal IV–D program funds are not allowable? * * * * * (f) Any expenditures under § 309.121 for subsidized employment or payment of cash, checks, reimbursements, or any other form of payment that can be legally converted to currency provided to the noncustodial parent; and * * * * * [FR Doc. 2024–29081 Filed 12–11–24; 8:45 am] BILLING CODE 4184–41–P DEPARTMENT OF HOMELAND SECURITY Coast Guard 46 CFR Part 401 [Docket No. USCG–2024–0406] RIN 1625–AC94 Great Lakes Pilotage Rates—2025 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 2025. 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 2024 season. DATES: This final rule is effective January 13, 2025. ADDRESSES: To view documents mentioned in this preamble as being available in the docket, go to www.regulations.gov, type USCG–2024– 0406 in the search box and click ‘‘Search.’’ Next, in the Document Type column, select ‘‘Supporting & Related Material.’’ khammond on DSK9W7S144PROD with RULES SUMMARY: For information about this document, call or email Mr. Brian Rogers, Commandant, Office of Waterways and Ocean Policy— FOR FURTHER INFORMATION CONTACT: VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 Great Lakes Pilotage Division (CG– WWM–2), Coast Guard; telephone 410– 360–9260, email Brian.Rogers@uscg.mil. SUPPLEMENTARY INFORMATION: Table of Contents for Preamble I. Abbreviations II. Basis and Purpose, and Regulatory History III. Background IV. Final Pilotage Rates for 2025 V. Discussion of Comments and Changes VI. Summary of the Ratemaking Methodology VII. Discussion of the Rate Adjustments District One A. Step 1: Recognize Previous Operating Expenses B. Step 2: Project Operating Expenses, Adjusting for Inflation or Deflation C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice Pilot Wage Benchmark E. Step 5: Project Working Capital Fund F. Step 6: Project Needed Revenue G. Step 7: Calculate Initial Base Rates H. Step 8: Calculate Average Weighting Factors by Area I. Step 9: Calculate Revised Base Rates J. Step 10: Review and Finalize Rates District Two A. Step 1: Recognize Previous Operating Expenses B. Step 2: Project Operating Expenses, Adjusting for Inflation or Deflation C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice Pilot Wage Benchmark E. Step 5: Project Working Capital Fund F. Step 6: Project Needed Revenue G. Step 7: Calculate Initial Base Rates H. Step 8: Calculate Average Weighting Factors by Area I. Step 9: Calculate Revised Base Rates J. Step 10: Review and Finalize Rates District Three A. Step 1: Recognize Previous Operating Expenses B. Step 2: Project Operating Expenses, Adjusting for Inflation or Deflation C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice Pilot Wage Benchmark E. Step 5: Project Working Capital Fund F. Step 6: Project Needed Revenue G. Step 7: Calculate Initial Base Rates H. Step 8: Calculate Average Weighting Factors by Area I. Step 9: Calculate Revised Base Rates J. Step 10: Review and Finalize Rates VIII. Regulatory Analyses A. Regulatory Planning and Review B. Small Entities C. Assistance for Small Entities D. Collection of Information E. Federalism F. Unfunded Mandates G. Taking of Private Property H. Civil Justice Reform I. Protection of Children J. Indian Tribal Governments PO 00000 Frm 00090 Fmt 4700 Sfmt 4700 K. Energy Effects L. Technical Standards M. Environment I. Abbreviations 2023 final rule Great Lakes Pilotage Rates— 2023 Annual Ratemaking and Review of Methodology 2024 final rule Great Lakes Pilotage Rates— 2024 Annual Review 2025 Ratemaking NPRM Great Lakes Pilotage Rates—2025 Annual Review notice of proposed rulemaking APA American Pilots’ Association BLS Bureau of Labor Statistics CFR Code of Federal Regulations 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 GLPAC Great Lakes Pilotage Advisory Committee LPA Lakes Pilots Association MOU Memorandum of Understanding 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 Pilots Association U.S.C. United States Code WGLPA Western Great Lakes Pilots Association II. Basis and Purpose, and Regulatory History The legal basis of this rulemaking is 46 U.S.C. Chapter 93,1 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.2 For U.S. Great Lakes Pilots, the statute requires the Secretary to ‘‘prescribe by regulation rates and charges for pilotage services, giving consideration to the public interest and the costs of providing the services.’’ Title 46 of the U.S.C. 9303(f) also requires that rates be established or reviewed and adjusted each year, no later than March 1. The Secretary’s duties and authority under 46 U.S.C. Chapter 93 have generally been delegated to the Coast Guard.3 The purpose of this final rule is to issue new pilotage rates for 2025 by revising a base rate established in 2023. 1 46 U.S.C. 9301–9308. U.S.C. 9302(a)(1). 3 Department of Homeland Security Delegation No. 00170.1 (II)(92)(f), Revision No. 01.4. The Secretary retains the authority under Section 9307 to establish, and appoint members to, a Great Lakes Pilotage Advisory Committee. 2 46 E:\FR\FM\13DER1.SGM 13DER1 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations The Coast Guard believes that the new rates will continue to promote our goal, as outlined in 46 CFR 404.1(a), to promote safe, efficient, and reliable pilotage service in the Great Lakes by generating sufficient revenue for each pilot association, to reimburse its necessary and reasonable operating expenses, fairly compensate trained and rested Pilots, and provide appropriate funds to use for improvements. III. Background 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. The pilotage rates for the 2025 season range from $440 to $986 per pilot hour, depending on which of the specific six areas pilotage service is provided, and are paid by shippers to the pilot associations. There are three American pilotage districts on the Great Lakes, each represented by a pilot association.4 Each pilotage district is further divided into ‘‘designated’’ and ‘‘undesignated’’ areas. Designated areas, classified as such by Presidential Proclamation, are waters in which pilots must direct the navigation of vessels at all times.5 Undesignated areas are open bodies of water where pilots must only ‘‘be on board and available to direct the navigation of the vessel’’ at the discretion of the vessel master.6 For these reasons, pilotage rates in designated areas can be significantly higher than those in undesignated areas. The three pilot associations, which are the exclusive U.S. source of Registered Pilots on the Great Lakes, use the revenue from the shippers 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. 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, infrastructure maintenance, and compensation for Pilots and Apprentice Pilots.7 The actual demand for service dictates the compensation amount for United States Registered Pilots. We divide that amount by the historic 10year average for pilotage demand. We recognize that in years where demand for pilotage services exceeds the 10-year average, pilot associations will accrue more revenue than projected, while in years where demand is below average, they will take in less. We believe over the long term, however, this scheme 100811 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. For this final rule, we conducted our annual review and interim adjustment to the base pilotage rates for 2025. 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). This final rule is an interim ratemaking under 46 CFR 404.100(b). IV. Final Pilotage Rates for 2025 In this final rule, we set new pilotage rates for 2025. We conducted this 2025 ratemaking as an interim ratemaking, as we did with the ‘‘Great Lakes Pilotage Rates—2024 Annual Review’’ final rule (hereafter the 2024 final rule) (89 FR 9038, published February 9, 2024). Thus, the Coast Guard adjusts the compensation benchmark following the interim ratemaking procedures under § 404.100(b), rather than following the procedures for a full ratemaking under § 404.100(a). The Coast Guard is setting the rates shown in table 1. TABLE 1—CURRENT AND 2025 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. Marys River ...................................................... Lakes Huron, Michigan, and Superior ................... District Two: Undesignated ..................................... District Three: Designated ...................................... District Three: Undesignated .................................. khammond on DSK9W7S144PROD with RULES Final 2024 pilotage rate Area Final 2025 pilotage rate $927 608 667 $986 643 753 597 836 430 576 825 440 This final rule affects 61 U.S. Great Lakes Pilots, 3 Apprentice Pilots, 3 pilot associations, and the owners and operators of an average of 280 oceangoing vessels that transit the Great Lakes annually. This final rule will not affect the Coast Guard’s budget or increase Federal spending because foreign shippers, foreign cruise ships, and vessels requesting voluntary pilotage pay these rates directly to the respective pilot association The estimated overall annual regulatory economic impact of this rate change will be a net increase of $2,879,028 in payments made by the foreign shippers, foreign cruise ships, and vessels requesting voluntary pilotage service, which is a 7-percent increase from operating costs in the 2024 shipping season. This represents an increase in revenue needed for target Pilot compensation, a decrease 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. 4 The Saint Lawrence Seaway Pilots Association provides pilotage services in District One, which includes all U.S. waters of the St. Lawrence River and Lake Ontario. The Lakes Pilots Association provides pilotage services in District Two, which includes all U.S. waters of Lake Erie, the Detroit River, Lake St. Clair, and the St. Clair River. Finally, the Western Great Lakes Pilots Association provides pilotage services in District Three, which includes all U.S. waters of the St. Marys River; Sault Ste. Marie Locks; and Lakes Huron, Michigan, and Superior. 5 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; accessed 10/25/2024. 6 46 U.S.C. 9302(a)(1)(B). 7 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. VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 PO 00000 Frm 00091 Fmt 4700 Sfmt 4700 E:\FR\FM\13DER1.SGM 13DER1 100812 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations This final rule establishes the 2025 yearly target compensation for Pilots on the Great Lakes at $464,317 per Pilot (a $23,659, or 5.37 percent, increase over their 2024 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 VIII., Regulatory Analyses, in this preamble, provides the regulatory impact analyses of this final rule. khammond on DSK9W7S144PROD with RULES V. Discussion of Comments and Changes We received three comments in response to the notice of proposed rulemaking (NPRM) for this this final rule, titled ‘‘Great Lakes Pilotage Rates— 2025 Annual Review’’ (hereafter 2025 Ratemaking NPRM) (89 FR 63334, published August 5, 2024). We made no changes to the rates in response to those comments. One anonymous commenter was concerned that the ratemaking methodology was not accurately capturing trends in demand, citing this year’s rate increase in District One as surprising, given that transits and time on task have gone down over the past couple of seasons. While the ratemaking methodology itself is not included in the scope of this rule, we note that the 10-year rolling average is designed to minimize volatility in the ratemaking. This decision has been confirmed by the courts as a ‘‘rational choice.’’ Am. Great Lake Ports Assn. v. United States Coast Guard.8 Another commenter, representing three trade associations, suggested that the Coast Guard should use Federal Open Market Committee (FOMC) Projections for the inflation numbers used in Step 2 of the methodology. Modifying the ratemaking methodology is outside the scope of this rule—since this is an interim ratemaking—but we will consider this suggestion in the next full ratemaking.9 The same commenter supported the elimination of the Working Capital Fund in Step 5 of the ratemaking process. We appreciate the commenter’s support, but elimination of the Working Capital Fund is outside the scope of this rule and will be addressed in next year’s full ratemaking. This commenter also supported District One’s efforts to improve their dispatch operations and suggested that 8 443 F. Supp. 3d 44 (D.D.C. 2020). commenter also submitted an earlier comment requesting an extension for the comment period. 9 This VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 Districts Two and Three make similar efforts. Pilotage association dispatch operations are outside the scope of this rulemaking, but we will take the comment under advisement for potential future rulemakings. This commenter suggested that the Coast Guard should update the Memorandum of Understanding (MOU) between the U.S. Coast Guard and the Canadian Great Lakes Pilotage Authority because that ‘‘document provides for the coordination of services, including the division of dispatch activity and the sharing of work assignments.’’ The MOU is outside the scope of this rulemaking, but we will take this comment under advisement and communicate it to the relevant parties. The commenter urged the Coast Guard to make individual pilot compensation publicly available. The Coast Guard will not accommodate this request. 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 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 individual 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. Concerns about equity among the pilots are outside the scope of this rulemaking. The commenter’s last suggestion was that the Coast Guard should conduct a line-by-line inspection of pilot association expenses to determine if they meet the ‘‘necessary and reasonable’’ standard. This is a suggested change to the methodology, which is outside the scope of this rule. We will consider this comment for the next full ratemaking. The last comment, from the Western Great Lakes Pilots Association (WGLPA), contained three requests for the Coast Guard. First, WGLPA requested an upward adjustment of $47,924 based on legal expenses related to negotiations of the collective bargaining agreement between the WGLPA and the International Longshoremen’s Association. However, the only evidence of these charges was a letter from WGLPA’s outside counsel. In order to make a change to the expenses, the Coast Guard would need PO 00000 Frm 00092 Fmt 4700 Sfmt 4700 to see verifiable and detailed evidence that explains those charges. For legal work, a detailed record of an attorney’s billable hours would be sufficient. Even with this information, we may not be able to recognize this expense as the other pilot associations perform this function without incurring substantial legal expenses. We would also need additional justification to determine if this was a necessary expense, and if so, whether all or some portion of the expense is a reasonable amount to include in the association’s expense base. Second, WGLPA requested an upward adjustment of $45,296 based on a 2023 arbitration ruling that found that wages were owed for work performed by their dispatch team. These are 2023 expenses and, therefore, cannot be added to this year’s ratemaking. If properly submitted next year to CohnReznick (the thirdparty firm under contract to create revenue and expense reports for the three pilot association expenses), the expenses will be evaluated in next year’s ratemaking. Last, WGLPA alleged that they did not have sufficient opportunity to engage with the Coast Guard and CohnReznick to adequately provide explanation or documentation for certain expenses. The Coast Guard disagrees with this assertion. According to our records, the opportunity to provide documentation and information to CohnReznick commenced on August 10, 2023, and concluded on January 24, 2024, a day before the draft report was generated. We believe WGLPA had sufficient time to organize and segregate records to comply with the Coast Guard contract to perform this work. Additionally, the Director confirmed with CohnReznick personnel that they verbally communicated the project timeline to WGLPA personnel during the initial ‘‘prepared by client’’ phone call on August 10, 2023, and, on the same day, emailed the WGLPA with a list of documents and information the WGLPA would need to provide in order to successfully produce the report. The only change from the NPRM results from updated inflation data becoming available since the publication of the proposed rule. Table 2 summarizes the changes between the 2025 Ratemaking NPRM and this final rule. This table includes changes from the proposed rule that are not based on comments from the NPRM. E:\FR\FM\13DER1.SGM 13DER1 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 100813 TABLE 2—CHANGES BETWEEN THE NPRM AND FINAL RULE Change Reasoning khammond on DSK9W7S144PROD with RULES Updates 2023 Employment Cost Index (ECI) inflation from 5.1%, listed in the NPRM, to 5.6%. Updates 2024 Personal Consumption Expenditures (PCE) inflation from 2.4%, listed in the NPRM, to 2.8%. Updates 2025 PCE inflation from 2.2%, listed in the NPRM, to 2.3%. VI. Summary of the Ratemaking Methodology The ratemaking methodology, outlined in 46 CFR 404.101 through 404.110, consists of 10 steps that are designed to account for the revenues needed and total traffic expected in each district. The first several steps of the methodology establish base pilotage rates. Additional steps to incorporate the weighting factors are necessary to establish the final pilotage 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 U.S. Coast Guard’s Director of the Great Lakes Pilotage (Director) uses an independent third party to review each pilot association’s audited operating expenses from each of the three pilot associations. Operating expenses include all allowable expenses, minus Pilot and Apprentice Pilot 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 2025 rates in this final rule, we began with the audited expenses from the shipping activity in 2022. While each pilot 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 VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 More recent figures were published since the Coast Guard conducted the analysis for the NPRM. develops the 2025 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 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 are needed for each district. To do this, we employ a ‘‘staffing model,’’ described in § 401.220, paragraphs (a)(1) through (3), to estimate how many Pilots would be needed to handle shipping during the beginning and close of the season. This number provides guidance to the Director in approving an appropriate number of Pilots. At the September 7, 2023 Great Lakes Pilotage Advisory Committee (GLPAC) meeting, there was a unanimous recommendation for an August 1 cutoff date to allow an Apprentice Pilot, who has completed all their training, to be recognized as a fully registered Pilot in the rate.10 The Coast Guard agrees that this change is both necessary and reasonable, as it provides the proper compensation based on the most accurate data. If an Apprentice Pilot is scheduled to complete training and becomes a fully registered Pilot before August 1, they will be counted as a fully registered Pilot in the rate; if they do not meet the August 1 deadline, those funds may be adjusted in the proceeding rate for up to the full amount. In addition, if a fully registered Pilot retires, or an Apprentice Pilot resigns, and has been counted in the rate, the proceeding rate may be adjusted accordingly for up to the full amount. In Step 4 of the ratemaking calculation, we determine the number of Pilots provided by the pilot associations (see § 404.103) and use that figure to 10 Transcript of United States Coast Guard GLPAC Meeting at 97 (Sept. 7, 2023), https:// www.regulations.gov/document/USCG-2023-04380009; accessed 10/25/2024. PO 00000 Frm 00093 Fmt 4700 Sfmt 4700 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)(1)), the Director adjusts the previous year’s individual target Pilot compensation by the difference between the previous year’s BLS ECI for the Transportation and Materials sector and the FOMC median economic projections for PCE inflation value used to inflate the previous year’s target Pilot compensation. In the second part of Step 4, (§ 404.104(b)(2)), the Director then adjusts that value by the FOMC median economic projections for PCE inflation for the upcoming year. In the final part of Step 4, § 404.104(c) and (d), the Director determines the total target 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. Based on the total Pilot compensation, the Director determines the individual Apprentice Pilot wage benchmark at the rate of 36 percent of the individual target Pilot compensation, as calculated according to paragraphs (a) or (b) of this section. 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 target 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 expenses for each area and district (from Step 2) is E:\FR\FM\13DER1.SGM 13DER1 100814 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations added to the total target 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 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 pilot association to reimburse necessary and reasonable operating expenses; compensating trained and rested pilots fairly; and providing appropriate revenue for improvements. VII. Discussion of the Rate Adjustments 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 2022 expenses and revenues. 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. Adjustments have been made by the auditors and are explained in the auditor’s reports, which are available in the docket for this rulemaking, where indicated under the ADDRESSES portion of this preamble. The recognized operating expenses for District One are shown in table 3. TABLE 3—2022 RECOGNIZED EXPENSES FOR DISTRICT ONE District One Reported operating expenses for 2022 Applicant Pilot Compensation: Salaries ............................................................................................................... Employee benefits .............................................................................................. Undesignated St. Lawrence River Lake Ontario Total $35,411 11,628 $23,608 7,752 $59,019 19,380 47,039 31,360 78,399 148,350 31,222 535,016 228,222 98,900 20,815 356,678 152,148 247,250 52,037 891,694 380,370 Total Other Pilotage Costs .......................................................................... Pilot Boat and Dispatch Costs: Pilot boat costs ................................................................................................... Dispatch costs .................................................................................................... Salaries ............................................................................................................... 942,810 628,541 1,571,351 178,691 232,196 253,761 119,127 154,798 169,174 297,818 386,994 422,935 Total Pilot and Dispatch Costs .................................................................... Administrative Expenses: Legal ................................................................................................................... Legal—shared counsel (K&L Gates) .................................................................. Legal—USCG Litigation ..................................................................................... Insurance ............................................................................................................ Employee benefits .............................................................................................. Payroll Taxes ...................................................................................................... Other taxes ......................................................................................................... Real Estate taxes ............................................................................................... Travel .................................................................................................................. Depreciation/Auto leasing/Other ......................................................................... Interest ................................................................................................................ 664,648 443,099 1,107,747 301 6,178 61,625 44,603 47,517 48,433 81,576 23,000 23,098 108,836 20,257 201 4,119 41,083 29,735 31,678 32,288 54,384 15,333 15,399 72,558 13,504 502 10,297 102,708 74,338 79,195 80,721 135,960 38,333 38,497 181,394 33,761 Total Applicant Pilot Compensation ............................................................ Other Pilotage Cost: Pilot Subsistence ................................................................................................ Hotel/Lodging Costs ........................................................................................... Travel .................................................................................................................. Payroll Taxes ...................................................................................................... khammond on DSK9W7S144PROD with RULES Designated VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 PO 00000 Frm 00094 Fmt 4700 Sfmt 4700 E:\FR\FM\13DER1.SGM 13DER1 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 100815 TABLE 3—2022 RECOGNIZED EXPENSES FOR DISTRICT ONE—Continued District One Reported operating expenses for 2022 Designated Undesignated St. Lawrence River Lake Ontario Total American Pilots’ Association (APA) Dues .......................................................... Dues and subscriptions ...................................................................................... Utilities ................................................................................................................ Salaries ............................................................................................................... Accounting/Professional fees ............................................................................. Applicant Pilot Training .............................................................................................. Other expenses ......................................................................................................... 32,927 4,560 40,478 223,539 9,900 69,383 19,083 21,951 3,040 26,986 149,026 6,600 46,255 12,722 54,878 7,600 67,464 372,565 16,500 115,638 31,805 Total Administrative Expenses .................................................................... 865,294 576,862 1,442,156 Total Expenses (OPEX + Applicant + Pilot Boats + Admin + Capital) ..................... 2,519,791 1,679,862 4,199,653 B. Step 2: Project Operating Expenses, Adjusting for Inflation or Deflation In accordance with the text in § 404.102, having identified the recognized 2022 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 2023 inflation rate.11 Because the BLS does not provide forecasted inflation data, we use economic projections from the Federal Reserve for the 2024 and 2025 inflation modification.12 Based on that information, the calculations for Step 2 are as presented in table 4. TABLE 4—ADJUSTED OPERATING EXPENSES FOR DISTRICT ONE District One Designated Total 2023 2024 2025 Undesignated Total Operating Expenses (Step 1) ........................................................................... Inflation Modification (@3.8%) ......................................................................... Inflation Modification (@2.8%) ......................................................................... Inflation Modification (@2.3%) ......................................................................... $2,519,791 95,752 73,235 61,842 $1,679,862 63,835 48,824 41,228 $4,199,653 159,587 122,059 103,070 Adjusted 2025 Operating Expenses ................................................................... 2,750,620 1,833,749 4,584,369 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. In the past, this was done using the staffing model and the process described in § 404.103. During the 2023 GLPAC meeting, there was a unanimous recommendation by the GLPAC that, after 2024, the Director be given discretion to increase the staffing model plus three Pilots per District, based on industry demand and to ensure shipping reliability.13 Additionally, the previous staffing model’s maximum is now considered the minimum in regard to the number of Pilots needed in each district.14 We determine the number of fully registered Pilots based on data provided by the St. Lawrence Seaway Pilots Association (SLSPA) as well as the previously mentioned recommendation. We determine the number of Apprentice Pilots based on input from the district on anticipated retirements and staffing needs. These numbers can be found in table 5. TABLE 5—AUTHORIZED PILOTS FOR DISTRICT ONE Item khammond on DSK9W7S144PROD with RULES 2025 2025 2025 2025 District One Authorized Pilots (total) ........................................................................................................................................................ Pilots Assigned to Designated Areas ................................................................................................................................... Pilots Assigned to Undesignated Areas ............................................................................................................................... Apprentice Pilots ................................................................................................................................................................... 11 The CPI is defined as ‘‘All Urban Consumers (CPI–U), All Items, 1982–4=100.’’ Series CUUR0200SA0 (Downloaded February 22, 2024). Available at https://www.bls.gov/cpi/data.htm., All Urban Consumers (Current Series), multiscreen VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 data, not seasonally adjusted, 0200 Midwest, Current, All Items, Monthly, 12-month Percent Change and Annual Data; accessed 10/25/2024. 12 The 2024 and 2025 inflation rates are available at https://www.federalreserve.gov/monetarypolicy/ PO 00000 Frm 00095 Fmt 4700 Sfmt 4700 20 11 9 1 files/fomcprojtabl20240918.pdf. We used the Core PCE June Projection found in table 1; accessed 10/ 02/2024. 13 Transcript, supra note 8, at 89–90. 14 Id. at 57–58. E:\FR\FM\13DER1.SGM 13DER1 100816 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice Pilot Wage Benchmark In this step, we determine the total target 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 2024 target compensation benchmark of $440,658 by 3.0 percent for a value of $453,878. This accounts for the difference in actual third quarter 2024 ECI inflation, which is 5.6 percent, and the 2024 PCE estimate of 2.6 percent.15 16 The second step accounts for projected inflation from 2024 to 2025, which is 2.3 percent.17 Based on the projected 2025 inflation estimate, the target compensation benchmark for 2025 is $464,317 per pilot. The Apprentice Pilot wage benchmark is 36 percent of the target Pilot compensation, or $167,154 ($464,317 × 0.36). In accordance with § 404.104(c), we use the revised target individual compensation level to derive the total target Pilot compensation by multiplying the individual target compensation by the estimated number of Registered Pilots for District One, as shown in table 6. We estimate that the number of Apprentice Pilots needed will be one for District One in the 2025 rulemaking. The total target wages for Apprentice Pilots 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 6—TARGET COMPENSATION FOR DISTRICT ONE District One Designated Undesignated Total Target Pilot Compensation ........................................................................................ Number of Pilots ........................................................................................................ $464,317 11 $464,317 9 $464,317 20 Total Target Pilot Compensation ........................................................................ Target Apprentice Pilot Compensation ...................................................................... Number of Apprentice Pilots ...................................................................................... 5,107,487 167,154 .............................. 4,178,853 167,154 .............................. 9,286,340 167,154 1 Total Target Apprentice Pilot Compensation ..................................................... 100,292 66,862 167,154 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 4.8100 percent, rounded.18 By multiplying the two figures, we obtain the working capital fund contribution for each area, as shown in table 7. TABLE 7—WORKING CAPITAL FUND CALCULATION FOR DISTRICT ONE District One Designated Total Adjusted Operating Expenses (Step 2) ..................................................................... Total Target Pilot Compensation (Step 4) ................................................................. Total Target Apprentice Pilot Compensation (Step 4) .............................................. $2,750,620 5,107,487 100,292 $1,833,749 4,178,853 66,862 $4,584,369 9,286,340 167,154 Total 2025 Expenses .......................................................................................... 7,958,399 6,079,464 14,037,863 Working Capital Fund (4.8100%) .............................................................................. 382,799 292,422 675,221 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 khammond on DSK9W7S144PROD with RULES Undesignated 15 Employment Cost Index, Total Compensation for Private Industry workers in Transportation and Material Moving, Annual Average, Series ID: CIU2010000520000A. https://www.bls.gov/ news.release/eci.t05.htm; accessed 10/31/2024. 16 2.6 percent was the latest figure available for the 2024 final rule. Table 1, Summary of Economic Projections, Median Core PCE Inflation June Projection. https://www.federalreserve.gov/ VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 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 8. monetarypolicy/files/fomcproj tabl20230920.pdf;.accessed05/31/2024. 17 Table 1, Summary of Economic Projections, Median Core PCE Inflation June Projection. https:// www.federalreserve.gov/monetarypolicy/files/ fomcprojtabl20240918.pdf; accessed 10/02/2024. 18 Moody’s Seasoned Aaa Corporate Bond Yield, average of 2023 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; accessed 10/25/ 2024. PO 00000 Frm 00096 Fmt 4700 Sfmt 4700 E:\FR\FM\13DER1.SGM 13DER1 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 100817 TABLE 8—REVENUE NEEDED FOR DISTRICT ONE District One Designated Undesignated Total Adjusted Operating Expenses (Step 2) ..................................................................... Total Target Pilot Compensation (Step 4) ................................................................. Total Target Apprentice Pilot Compensation (Step 4) .............................................. Working Capital Fund (Step 5) .................................................................................. $2,750,620 5,107,487 100,292 382,799 $1,833,749 4,178,853 66,862 292,422 $4,584,369 9,286,340 167,154 675,221 Total Revenue Needed ...................................................................................... 8,341,198 6,371,886 14,713,084 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 entails calculating the 10-year traffic average in District One, using the total time on task or Pilot bridge hours. To calculate the time on task for each district, the Coast Guard used billing data from SeaPro. Because we calculate separate figures for designated and undesignated waters, there are two parts for each calculation. We show these values in table 9. TABLE 9—TIME ON TASK FOR DISTRICT ONE [Hours] District One Year Designated 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Undesignated ............................................................................................................................................................. ............................................................................................................................................................. ............................................................................................................................................................. ............................................................................................................................................................. ............................................................................................................................................................. ............................................................................................................................................................. ............................................................................................................................................................. ............................................................................................................................................................. ............................................................................................................................................................. ............................................................................................................................................................. 5,810 6,577 6,166 6,265 8,232 6,943 7,605 5,434 5,743 6,810 7,650 8,356 7,893 7,560 8,405 8,445 8,679 6,217 6,667 6,853 Average ................................................................................................................................................ 6,559 7,673 Next, we derive the initial hourly rate by dividing the revenue needed by the average number of hours for each area. This produces an initial rate, which is necessary to produce the revenue needed for each area, assuming the amount of traffic is as expected. We present the calculations for District One in table 10. TABLE 10—INITIAL RATE CALCULATIONS FOR DISTRICT ONE Designated Revenue needed (Step 6) ........................................................................................................................... Average time on task (hours) ...................................................................................................................... Initial rate ..................................................................................................................................................... H. Step 8: Calculate Average Weighting Factors by Area In this step, the Coast Guard calculates the average weighting factor for each designated and undesignated area by first collecting the weighting factors, set forth in 46 CFR 401.400, for each vessel trip. Using the weight factor report from SeaPro, we calculate the Undesignated $8,341,198 6,559 $1,272 $6,371,886 7,673 $830 average weighting factor for each area using the data from each vessel transit from 2014 onward, as shown in tables 11 and 12. khammond on DSK9W7S144PROD with RULES TABLE 11—AVERAGE WEIGHTING FACTOR FOR DISTRICT ONE, DESIGNATED AREAS Number of transits Vessel class/year Class Class Class Class Class Class 1 1 1 1 1 1 (2014) (2015) (2016) (2017) (2018) (2019) VerDate Sep<11>2014 ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... 16:42 Dec 12, 2024 Jkt 265001 PO 00000 Frm 00097 Fmt 4700 Sfmt 4700 Weighting factor 31 41 31 28 54 72 E:\FR\FM\13DER1.SGM Weighted transits * 1 1 1 1 1 1 13DER1 31 41 31 28 54 72 100818 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations TABLE 11—AVERAGE WEIGHTING FACTOR FOR DISTRICT ONE, DESIGNATED AREAS—Continued Number of transits Vessel class/year Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class 1 1 1 1 2 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 4 (2020) (2021) (2022) (2023) (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) Weighting factor Weighted transits * ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... 8 10 39 19 285 295 185 352 559 378 560 315 462 481 50 28 50 67 86 122 67 52 103 34 271 251 214 285 393 730 427 407 446 420 1 1 1 1 1.15 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 1.3 1.45 1.45 1.45 1.45 1.45 1.45 1.45 1.45 1.45 1.45 8 10 39 19 328 339 213 405 643 435 644 362 531 553 65 36 65 87 112 159 87 68 134 44 393 364 310 413 570 1059 619 590 647 609 Total .................................................................................................................... 8,708 .............................. 11,216 Average weighting factor (weighted transits ÷ number of transits) ........................... .............................. 1.29 .............................. * Weighted transits are rounded to the nearest whole number for presentation, but the Total calculation uses unrounded figures. TABLE 12—AVERAGE WEIGHTING FACTOR FOR DISTRICT ONE, UNDESIGNATED AREAS Number of transits khammond on DSK9W7S144PROD with RULES 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 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 3 3 3 3 3 (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) (2014) (2015) (2016) (2017) (2018) VerDate Sep<11>2014 ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... 16:42 Dec 12, 2024 Jkt 265001 PO 00000 Frm 00098 Fmt 4700 Sfmt 4700 Weighting factor 25 28 18 19 22 30 3 19 27 31 238 263 169 290 352 366 358 463 349 346 60 42 28 45 63 E:\FR\FM\13DER1.SGM Weighted transits * 1 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 1.15 1.3 1.3 1.3 1.3 1.3 13DER1 25 28 18 19 22 30 3 19 27 31 274 302 194 334 405 421 412 532 401 398 78 55 36 59 82 100819 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations TABLE 12—AVERAGE WEIGHTING FACTOR FOR DISTRICT ONE, UNDESIGNATED AREAS—Continued Number of transits Vessel class/year Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class 3 3 3 3 3 4 4 4 4 4 4 4 4 4 4 (2019) (2020) (2021) (2022) (2023) (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) Weighting factor Weighted transits * ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... 58 35 71 65 44 289 269 222 285 382 326 334 466 386 328 1.3 1.3 1.3 1.3 1.3 1.45 1.45 1.45 1.45 1.45 1.45 1.45 1.45 1.45 1.45 75 46 92 85 57 419 390 322 413 554 473 484 676 560 476 Total .................................................................................................................... 7,214 .............................. 9,326 Average weighting factor (weighted transits ÷ number of transits) ........................... .............................. 1.29 .............................. * Weighted transits are rounded to the nearest whole number for presentation, but the Total calculation uses unrounded figures. rates in this step so that the total costs of pilotage will be equal to the revenue needed. To do this, we divide the initial I. Step 9: Calculate Revised Base Rates After considering the impact of the weighting factors, we revise the base base rates calculated in Step 7 by the average weighting factors calculated in Step 8, as shown in table 13. TABLE 13—REVISED BASE RATES FOR DISTRICT ONE Initial rate (Step 7) Area District One: Designated ............................................................................................ District One: Undesignated ........................................................................................ $1,272 830 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 will cover operating expenses and infrastructure J. Step 10: Review and Finalize Rates In this step, the Director reviews the base pilotage rates calculated in § 404.109 of this part to ensure it meets the goal of ensuring safe, efficient, and reliable pilotage service. To establish this, the Director considers whether the Average weighting factor (Step 8) 1.29 1.29 Revised rate (initial rate ÷ average weighting factor) $986 643 costs, including average traffic and weighting factors. Based on these considerations, the Director did not propose any alterations to the rates in this step. We modified § 401.405(a)(1) and (2) to reflect the final rates shown in table 14. TABLE 14—FINAL RATES FOR DISTRICT ONE Name District One: Designated ......................................... District One: Undesignated ..................................... St. Lawrence River ................................................. Lake Ontario ........................................................... District Two A. Step 1: Recognize Previous Operating Expenses khammond on DSK9W7S144PROD with RULES Final 2024 pilotage rate Area 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 VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 reports for each association’s 2022 expenses and revenues. For accounting purposes, the financial reports divide expenses into designated and undesignated areas. For costs generally accrued by the pilot associations, such as employee benefits, the cost is divided between the designated and undesignated areas on a pro rata basis. Adjustments have been made by the PO 00000 Frm 00099 Fmt 4700 Sfmt 4700 $927 608 Final 2025 pilotage rate $986 643 auditors and are explained in the auditor’s reports, which are available in the docket for this rulemaking, where indicated under the ADDRESSES portion of the preamble. The recognized operating expenses for District Two are shown in table 15. E:\FR\FM\13DER1.SGM 13DER1 100820 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations TABLE 15—2022 RECOGNIZED EXPENSES FOR DISTRICT TWO District Two Reported operating expenses for 2022 Undesignated Designated Lake Erie Southeast Shoal to Port Huron Total Applicant Pilot Compensation .................................................................................... Employee benefits ..................................................................................................... $236,674 60 $355,011 90 $591,685 150 Total Other Applicant Cost .......................................................................... Other Pilotage Cost: Pilot Subsistence ................................................................................................ Hotel/Lodging Costs ........................................................................................... Hotel/Lodging (D2–22–01) ................................................................................. Travel .................................................................................................................. License renewal .................................................................................................. Payroll Taxes ...................................................................................................... License Insurance .............................................................................................. 236,734 355,101 591,835 93,840 70,468 (70,080) 57,324 396 20,068 10,362 140,760 105,703 (105,120) 85,985 594 30,101 15,543 234,600 176,171 (175,200) 143,309 990 50,169 25,905 Total Other Pilotage Costs .......................................................................... Pilot Boat and Dispatch Costs: Pilot boat expense costs .................................................................................... Employee Benefits .............................................................................................. Employee Benefits (D2–22–02) ......................................................................... Insurance ............................................................................................................ Salaries ............................................................................................................... 182,378 273,566 455,944 100,642 40,409 46,599 9,257 171,763 150,963 60,613 69,899 13,886 257,645 251,605 101,022 116,498 23,143 429,408 Total Pilot and Dispatch Costs .................................................................... Administrative Expenses: Legal ................................................................................................................... Legal—shared counsel (K&L Gates) .................................................................. Insurance ............................................................................................................ Employee benefits .............................................................................................. Employee benefits (D2–22–02) .......................................................................... Payroll Taxes ...................................................................................................... Other taxes ......................................................................................................... Real Estate taxes ............................................................................................... Travel .................................................................................................................. Depreciation/Auto leasing/Other ......................................................................... APA Dues ........................................................................................................... Dues and subscriptions ...................................................................................... Utilities ................................................................................................................ Salaries ............................................................................................................... Accounting/Professional fees ............................................................................. Pilot Training ....................................................................................................... Other expenses .................................................................................................. 368,670 553,006 921,676 18 3,210 15,698 19,884 14,208 134,123 8,862 8,754 24,482 19,136 14,843 470 27,009 78,662 15,850 17,661 10,306 27 4,816 23,547 29,827 21,312 201,184 13,294 13,130 36,723 28,703 22,264 704 40,513 117,994 23,775 26,491 15,458 45 8,026 39,245 49,711 35,520 335,307 22,156 21,884 61,205 47,839 37,107 1,174 67,522 196,656 39,625 44,152 25,764 Total Administrative Expenses .................................................................... 413,176 619,762 1,032,938 Total Expenses (OPEX + Applicant + Pilot Boats + Admin + Capital) ..................... 1,200,958 1,801,435 3,002,393 B. Step 2: Project Operating Expenses, Adjusting for Inflation or Deflation In accordance with the text in § 404.102, having identified the recognized 2022 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 2023 inflation rate.19 Because the BLS does not provide forecasted inflation data, we use economic projections from the Federal Reserve for the 2024 and 2025 inflation modification.20 Based on that information, the calculations for Step 2 are presented in table 16. TABLE 16—ADJUSTED OPERATING EXPENSES FOR DISTRICT TWO khammond on DSK9W7S144PROD with RULES District Two Undesignated Total 2023 2024 2025 Operating Expenses (Step 1) ........................................................................... Inflation Modification (@3.8%) ......................................................................... Inflation Modification (@2.8%) ......................................................................... Inflation Modification (@2.3%) ......................................................................... 19 CPI, supra note 10. VerDate Sep<11>2014 18:47 Dec 12, 2024 20 Core Jkt 265001 PO 00000 Designated $1,200,958 45,636 34,905 29,474 $1,801,435 68,455 52,357 44,212 PCE June Projection, supra note 11. Frm 00100 Fmt 4700 Sfmt 4700 E:\FR\FM\13DER1.SGM 13DER1 Total $3,002,393 114,091 87,262 73,686 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 100821 TABLE 16—ADJUSTED OPERATING EXPENSES FOR DISTRICT TWO—Continued District Two Undesignated Adjusted 2025 Operating Expenses ................................................................... C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots In accordance with the text in § 404.103, the Coast Guard estimates the number of fully registered Pilots in each district. In the past, this was done using the staffing model and the process described in § 404.103. During the 2023 GLPAC meeting, there was a unanimous Designated 1,310,973 recommendation by the GLPAC that, after 2024, the Director be given discretion to increase the staffing model plus three Pilots per District, based on industry demand and to ensure shipping reliability.21 Additionally, the previous staffing model’s maximum is now considered the minimum in regard to the number of Pilots needed in each district.22 1,966,459 Total 3,277,432 We determine the number of fully registered Pilots based on data provided by the Lakes Pilots Association (LPA) as well as the previous mentioned recommendation. We determine the number of Apprentice Pilots based on input from the district on anticipated retirements and staffing needs. These numbers can be found in table 17. TABLE 17—AUTHORIZED PILOTS FOR DISTRICT TWO Item District Two 2025 Authorized Pilots (total) ........................................................................................................................................................ Pilots Assigned to Designated Areas ............................................................................................................................................ Pilots Assigned to Undesignated Areas ........................................................................................................................................ 2025 Apprentice Pilots ................................................................................................................................................................... D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice Pilot Wage Benchmark In this step, we determine the total target 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 2024 target compensation benchmark of $440,658 by 3.0 percent for a value of $453,878. This accounts for the difference in actual third quarter 2024 ECI inflation, which is 5.6 percent, and the 2024 PCE estimate of 2.6 percent.23 24 The second step accounts for projected inflation from 2024 to 2025, which is 2.3 percent.25 Based on the projected 2025 inflation estimate, the target compensation benchmark for 2025 is $464,317 per Pilot. The Apprentice Pilot wage benchmark is 36 percent of the target Pilot compensation, or $167,154 ($464,317 × 0.36). 17 10 7 1 In accordance with § 404.104(c), we used the revised target individual compensation level to derive the total target Pilot compensation by multiplying the individual target compensation by the estimated number of Registered Pilots for District Two, as shown in table 18. The total target wages for Apprentice Pilots 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 18—TARGET COMPENSATION FOR DISTRICT TWO District Two Undesignated Total Target Pilot Compensation ........................................................................................ Number of Pilots ........................................................................................................ $464,317 7 $464,317 10 $464,317 17 Total Target Pilot Compensation ........................................................................ Target Apprentice Pilot Compensation ...................................................................... Number of Apprentice Pilots ...................................................................................... $3,250,219 $167,154 .............................. $4,643,170 $167,154 .............................. $7,893,389 $167,154 1 Total Target Apprentice Pilot Compensation ..................................................... $66,862 $100,292 $167,154 E. Step 5: Project Working Capital Fund khammond on DSK9W7S144PROD with RULES Designated Next, the Coast Guard calculates the working capital fund revenues needed for each area. We first add the figures for projected operating expenses, total 21 Transcript, supra note 8 at 89–90. at 57–58. 23 ECI, supra note 14. 22 Id. VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 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 4.8100 percent, rounded.26 By multiplying the two figures, we obtain the working capital fund contribution for each area, as shown in table 19. 24 Median Core PCE Inflation June Projection, supra note 15. 25 Median Core PCE Inflation June Projection, supra note 16. 26 Moody’s Seasoned Aaa Corporate Bond Yield, supra note 17. PO 00000 Frm 00101 Fmt 4700 Sfmt 4700 E:\FR\FM\13DER1.SGM 13DER1 100822 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations TABLE 19—WORKING CAPITAL FUND CALCULATION FOR DISTRICT TWO District Two Undesignated Designated Total Adjusted Operating Expenses (Step 2) ..................................................................... Total Target Pilot Compensation (Step 4) ................................................................. Total Target Apprentice Pilot Compensation (Step 4) .............................................. $1,310,973 3,250,219 66,862 $1,966,459 4,643,170 100,292 $3,277,432 7,893,389 167,154 Total 2025 Expenses .......................................................................................... 4,628,054 6,709,921 11,337,975 Working Capital Fund (4.8100%) .............................................................................. 222,609 322,747 545,356 F. Step 6: Project Needed Revenue In this step, the Coast Guard adds all the expenses accrued to derive the total Step 4), total target Apprentice Pilot wage (from Step 4), and the working capital fund contribution (from Step 5). We show these calculations in table 20. revenue needed for each area. These expenses include the projected operating expenses (from Step 2), the total target Pilot compensation (from TABLE 20—REVENUE NEEDED FOR DISTRICT TWO District Two Undesignated Designated Total Adjusted Operating Expenses (Step 2) ..................................................................... Total Target Pilot Compensation (Step 4) ................................................................. Total Target Apprentice Pilot Compensation (Step 4) .............................................. Working Capital Fund (Step 5) .................................................................................. $1,310,973 3,250,219 66,862 222,609 $1,966,459 4,643,170 100,292 322,747 $3,277,432 7,893,389 167,154 545,356 Total Revenue Needed ...................................................................................... 4,850,663 7,032,668 11,883,331 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 entails calculating the 10-year traffic average in District Two, using the total time on task or Pilot bridge hours. To calculate the time on task for each district, the Coast Guard used billing data from SeaPro. Because we calculate separate figures for designated and undesignated waters, there are two parts for each calculation. We show these values in table 21. TABLE 21—TIME ON TASK FOR DISTRICT TWO TABLE 21—TIME ON TASK FOR DISTRICT TWO—Continued [Hours] [Hours] District Two District Two Year Year Undesignated 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... 6,424 7,695 5,290 6,232 6,512 6,150 5,139 6,425 6,535 7,856 Undesignated Designated 8,092 9,044 6,762 8,401 7,715 6,655 6,074 5,615 5,967 7,001 Average 6,426 Designated 7,133 Next, we derive the initial hourly rate by dividing the revenue needed by the average number of hours for each area. This produces an initial rate, which is necessary to produce the revenue needed for each area, assuming the amount of traffic is as expected. We present the calculations for District Two in table 22. TABLE 22—INITIAL RATE CALCULATIONS FOR DISTRICT TWO Undesignated khammond on DSK9W7S144PROD with RULES 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 VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 factors, set forth in 46 CFR 401.400, for each vessel trip. Using the weight factor report from SeaPro, we calculate the average weighting factor for each area using the data from each vessel transit PO 00000 Frm 00102 Fmt 4700 Sfmt 4700 $4,850,663 6,426 $755 Designated $7,032,668 7,133 $986 from 2014 onward, as shown in tables 23 and 24. E:\FR\FM\13DER1.SGM 13DER1 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 100823 TABLE 23—AVERAGE WEIGHTING FACTOR FOR DISTRICT TWO, UNDESIGNATED AREAS Number of transits Vessel class/year Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 4 (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) Weighting factor Weighted transits * ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. 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............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. 31 35 32 21 37 54 1 7 57 54 356 354 380 222 123 127 165 206 202 152 20 0 9 12 3 1 1 5 2 2 636 560 468 319 196 210 201 227 208 169 1 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 1.15 1.3 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 1.45 31 35 32 21 37 54 1 7 57 54 409 407 437 255 141 146 190 237 232 175 26 0 12 16 4 1 1 7 3 3 922 812 679 463 284 305 291 329 302 245 Total ...................................................................................................................................... 5,865 ........................ 7,662 Average weighting factor (weighted transits ÷ number of transits) ............................................. ........................ 1.31 ........................ * Weighted transits are rounded to the nearest whole number for presentation, but the Total calculation uses unrounded figures. TABLE 24—AVERAGE WEIGHTING FACTOR FOR DISTRICT TWO, DESIGNATED AREAS Number of transits khammond on DSK9W7S144PROD with RULES Vessel class/year 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 1 2 2 2 2 2 2 2 2 2 (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) VerDate Sep<11>2014 ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. 16:42 Dec 12, 2024 Jkt 265001 PO 00000 Frm 00103 Fmt 4700 Sfmt 4700 E:\FR\FM\13DER1.SGM 20 15 28 15 42 48 7 12 53 56 237 217 224 127 153 281 342 240 327 13DER1 Weighting factor 1 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 Weighted transits * 20 15 28 15 42 48 7 12 53 56 273 250 258 146 176 323 393 276 376 100824 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations TABLE 24—AVERAGE WEIGHTING FACTOR FOR DISTRICT TWO, DESIGNATED AREAS—Continued Number of transits Vessel class/year Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class 2 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 4 (2023) (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) Weighting factor Weighted transits * ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. ............................................................................................................................. 312 8 8 4 4 14 1 5 2 4 5 359 340 281 185 379 403 405 268 391 349 1.15 1.3 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 1.45 359 10 10 5 5 18 1 7 3 5 7 521 493 407 268 550 584 587 389 567 506 Total ...................................................................................................................................... 6,171 ........................ 8,069 Average weighting factor (weighted transits÷number of transits) ............................................... ........................ 1.31 ........................ * Weighted transits are rounded to the nearest whole number for presentation, but the Total calculation uses unrounded figures. I. Step 9: Calculate Revised Base Rates rates in this step so that the total costs of pilotage will be equal to the revenue needed. To do this, we divide the initial After considering the impact of the weighting factors, we revise the base base rates calculated in Step 7 by the average weighting factors calculated in Step 8, as shown in table 25. TABLE 25—REVISED BASE RATES FOR DISTRICT TWO Initial rate (Step 7) Area Average weighting factor (Step 8) Revised rate (initial rate ÷ average weighting factor) 1.31 1.31 $576 753 District Two: Undesignated ........................................................................................ District Two: Designated ............................................................................................ $755 986 J. Step 10: Review and Finalize Rates In this step, the Director reviews the base pilotage rates calculated in § 404.109 of this part to ensure it meets the goal of ensuring safe, efficient, and reliable pilotage service. To establish this, the Director considers whether the costs, including average traffic and weighting factors. Based on these considerations, the Director did not propose any alterations to the rates in this step. We modified § 401.405(a)(3) and (4) to reflect the final rates shown in table 26. 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 will cover operating expenses and infrastructure TABLE 26—FINAL RATES FOR DISTRICT TWO Name District Two: Designated .............................................. Navigable waters from Southeast Shoal to Port Huron, MI. Lake Erie ...................................................................... District Two: Undesignated .......................................... khammond on DSK9W7S144PROD with RULES Final 2024 pilotage rate Area District Three A. Step 1: Recognize Previous Operating Expenses Step 1 in our ratemaking methodology requires that the Coast Guard review VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 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 2022 expenses and PO 00000 Frm 00104 Fmt 4700 Sfmt 4700 Final 2025 pilotage rate $667 $753 597 576 revenues. 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, E:\FR\FM\13DER1.SGM 13DER1 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations the cost is divided between the designated and undesignated areas on a pro rata basis. Adjustments have been made by the auditors and are explained in the auditor’s reports, which are available in the docket for this rulemaking, where indicated in the ADDRESSES portion of the preamble. 100825 The recognized operating expenses for District Three are shown in table 27. TABLE 27—2022 RECOGNIZED EXPENSES FOR DISTRICT THREE District Three Reported Operating Expenses for 2022 Undesignated Designated Undesignated Lakes Huron and Michigan St. Marys River Lake Superior Applicant Cost: Salaries ............................................................................. Salaries (D3–22–04) ......................................................... Applicant Benefits ............................................................. Total Applicant Cost .................................................. Other Pilotage Costs: Pilot subsistence ............................................................... Pilot subsistence (D3–22–06) .......................................... Hotel/Lodging Cost ........................................................... Hotel/Lodging Cost (D3–22–01) ....................................... Travel ................................................................................ Travel (D3–22–01), (D3–22–03) ...................................... License Renewal .............................................................. Payroll taxes (D3–22–04) ................................................. License Insurance ............................................................ khammond on DSK9W7S144PROD with RULES Total Other Pilotage Costs ........................................ Pilot Boat and Dispatch Costs: Pilot boat costs ................................................................. Pilot Boat Costs (D3–22–03) ............................................ Dispatch costs .................................................................. Dispatch costs .................................................................. Insurance .......................................................................... Total $417,221 (173,587) 54,874 $154,305 (64,199) 20,295 $177,126 (73,694) 23,296 $748,652 (311,480) 98,465 298,508 110,401 126,728 535,637 168,607 7,664 163,971 (22,392) 233,386 (54,224) 315 192,009 17,757 62,357 2,834 60,643 (8,282) 86,315 (20,054) 117 71,013 6,567 71,580 3,254 69,612 (9,506) 99,081 (23,020) 134 81,515 7,539 302,544 13,752 294,225 (40,180) 418,783 (97,298) 566 344,537 31,863 707,093 261,510 300,189 1,268,792 536,327 (9,518) 162,843 (25,243) 26,193 198,355 (3,520) 60,226 (9,336) 9,687 227,691 (4,041) 69,133 (10,717) 11,120 962,373 (17,079) 292,201 (45,296) 47,000 Total Pilot Boat and Dispatch Costs ......................... Administrative Cost: Legal ................................................................................. Legal (D3–22–05) ............................................................. Legal—shared counsel (K&L Gates) ................................ Insurance .......................................................................... Employee benefits ............................................................ Employee benefits (D3–22–03) ........................................ Payroll Tax ........................................................................ Payroll Tax (D3–22–05) ................................................... Other taxes ....................................................................... Real Estate Taxes ............................................................ Depreciation/Auto leasing/Other ....................................... APA Dues ......................................................................... APA Dues (D3–22–02) ..................................................... Dues and subscriptions .................................................... Utilities .............................................................................. Utilities (D3–22–03) .......................................................... Salaries ............................................................................. Accounting/Professional fees ........................................... Pilot Training ..................................................................... Other expenses ................................................................ Other expenses (D3–22–07) ............................................ 690,602 255,412 293,186 1,239,200 58,159 (48,792) 4,473 22,952 137,044 (6,129) 50,962 (13,015) 4,924 1,524 163,196 24,610 (1,231) 15,716 45,613 (5,449) 47,719 28,079 45,010 23,172 (1,250) 21,510 (18,045) 1,654 8,489 50,684 (2,267) 18,848 (4,813) 1,821 564 60,356 9,102 (455) 5,812 16,869 (2,015) 17,648 10,385 16,646 8,570 (462) 24,691 (20,714) 1,899 9,744 58,180 (2,602) 21,635 (5,525) 2,090 647 69,283 10,448 (522) 6,672 19,364 (2,313) 20,259 11,921 19,108 9,837 (531) 104,360 (87,551) 8,026 41,185 245,908 (10,998) 91,445 (23,354) 8,835 2,735 292,835 44,160 (2,208) 28,200 81,846 (9,778) 85,626 50,385 80,764 41,579 (2,243) Total Administrative Expenses .................................. 597,287 220,901 253,571 1,071,759 Total Operating Expenses (Other Costs + Applicant Cost + Pilot Boats + Admin) ............................................................ 2,293,490 848,224 973,674 4,115,388 B. Step 2: Project Operating Expenses, Adjusting for Inflation or Deflation In accordance with the text in § 404.102, having identified the recognized 2022 operating expenses in VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 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 PO 00000 Frm 00105 Fmt 4700 Sfmt 4700 United States for the 2023 inflation rate.27 Because the BLS does not provide forecasted inflation data, we use economic projections from the Federal 27 CPI, E:\FR\FM\13DER1.SGM supra note 10. 13DER1 100826 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations Reserve for the 2024 and 2025 inflation modification.28 Based on that information, the calculations for Step 2 are as presented in table 28. TABLE 28—ADJUSTED OPERATING EXPENSES FOR DISTRICT THREE District Three Undesignated Total 2023 2024 2025 Designated Total Operating Expenses (Step 1) ........................................................................... Inflation Modification (@3.8%) ......................................................................... Inflation Modification (@2.8%) ......................................................................... Inflation Modification (@2.3%) ......................................................................... $3,267,164 124,152 94,957 80,184 $848,224 32,233 24,653 20,818 $4,115,388 156,385 119,610 101,002 Adjusted 2025 Operating Expenses ................................................................... 3,566,457 925,928 4,492,385 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. In the past, this was done using the staffing model and the process described in § 404.103. During the 2023 GLPAC meeting, there was a unanimous recommendation by the GLPAC that, after 2024, the Director be given discretion to increase the staffing model plus three Pilots per District, based on industry demand and to ensure shipping reliability. 29 Additionally, the previous staffing model’s maximum are now considered the minimum regarding the number of Pilots needed in each district.30 We determine the number of fully registered Pilots based on data provided by the WGLPA, as well as the previous mentioned recommendation. We determine the number of Apprentice Pilots based on input from the district on anticipated retirements and staffing needs. These numbers can be found in table 29. TABLE 29—AUTHORIZED PILOTS FOR DISTRICT THREE Item District Three 2025 Authorized Pilots (total) ........................................................................................................................................................ Pilots Assigned to Designated Areas ............................................................................................................................................ Pilots Assigned to Undesignated Areas ........................................................................................................................................ 2025 Apprentice Pilots ................................................................................................................................................................... D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice Pilot Wage Benchmark In this step, we determine the total target 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 2024 target compensation benchmark of $440,658 by 3.0 percent for a value of $453,878. This accounts for the difference in actual third quarter 2024 ECI inflation, which is 5.6 percent, and the 2024 PCE estimate of 2.6 percent. 31 32 The second step accounts for projected inflation from 2024 to 2025, which is 2.3 percent.33 Based on the projected 2025 inflation estimate, the target compensation benchmark for 2025 is $464,317 per pilot. The apprentice pilot wage benchmark is 36 percent of the target Pilot compensation, or $167,154 ($464,317 × 0.36). In accordance with § 404.104(c), we use the revised target individual 24 5 19 1 compensation level to derive the total target Pilot compensation by multiplying the individual target compensation by the estimated number of Registered Pilots for District Three, as shown in table 30. We estimate that the number of Apprentice Pilots needed for District Three in the 2024 season will be one. The total target wages for Apprentice Pilots are allocated with 21 percent for the designated area, and 79 percent for the undesignated areas, in accordance with the allocation for operating expenses. TABLE 30—TARGET COMPENSATION FOR DISTRICT THREE District Three khammond on DSK9W7S144PROD with RULES Undesignated Designated Total Target Pilot Compensation ........................................................................................ Number of Pilots ........................................................................................................ $464,317 19 $464,317 5 $464,317 24 Total Target Pilot Compensation ........................................................................ Target Apprentice Pilot Compensation ...................................................................... Number of Apprentice Pilots ...................................................................................... $8,822,023 $167,154 .............................. $2,321,585 $167,154 .............................. $11,143,608 $167,154 1 Total Target Apprentice Pilot Compensation ..................................................... $132,052 $35,102 $167,154 28 Core PCE June Projection, supra note 11. supra note 8, at 89–90. 30 Id. at 57–58. 29 Transcript, VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 31 ECI, supra note 14. Core PCE Inflation June Projection, supra note 15. 32 Median PO 00000 Frm 00106 Fmt 4700 Sfmt 4700 33 Median Core PCE Inflation June Projection, supra note 16. E:\FR\FM\13DER1.SGM 13DER1 100827 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 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 4.8100 percent, rounded.34 By multiplying the two figures, we obtain the working capital fund contribution for each area, as shown in table 31. TABLE 31—WORKING CAPITAL FUND CALCULATION FOR DISTRICT THREE District Three Undesignated Designated Total Adjusted Operating Expenses (Step 2) ..................................................................... Total Target Pilot Compensation (Step 4) ................................................................. Total Target Apprentice Pilot Compensation (Step 4) .............................................. $3,566,457 8,822,023 132,052 $925,928 2,321,585 35,102 $4,492,385 11,143,608 167,154 Total 2025 Expenses .......................................................................................... Working Capital Fund (4.8100%) .............................................................................. 12,520,532 602,238 3,282,615 157,894 15,803,147 760,132 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), and the working capital fund contribution (from Step 5). The calculations are shown in table 32. TABLE 32—REVENUE NEEDED FOR DISTRICT THREE District Three Undesignated Designated Total Adjusted Operating Expenses (Step 2) ..................................................................... Total Target Pilot Compensation (Step 4) ................................................................. Total Target Apprentice Pilot Compensation (Step 4) .............................................. Working Capital Fund (Step 5) .................................................................................. $3,566,457 8,822,023 132,052 602,238 $925,928 2,321,585 35,102 157,894 $4,492,385 11,143,608 167,154 760,132 Total Revenue Needed ...................................................................................... 13,122,770 3,440,509 16,563,279 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 Three using the total time on task or Pilot bridge hours. To calculate the time on task for each district, the Coast Guard used billing data from SeaPro. Because we calculate separate figures for designated and undesignated waters, there are two parts for each calculation. We show these values in table 33. TABLE 33—TIME ON TASK FOR DISTRICT THREE [Hours] District Three Year khammond on DSK9W7S144PROD with RULES Undesignated 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Designated ............................................................................................................................................................. ............................................................................................................................................................. ............................................................................................................................................................. ............................................................................................................................................................. ............................................................................................................................................................. ............................................................................................................................................................. ............................................................................................................................................................. ............................................................................................................................................................. ............................................................................................................................................................. ............................................................................................................................................................. 25,690 24,148 18,149 23,678 24,851 19,967 20,955 23,421 22,824 25,833 3,501 3,426 2,484 3,520 3,395 3,455 2,997 2,769 2,696 3,835 Average ................................................................................................................................................ 22,952 3,208 34 Moody’s Seasoned Aaa Corporate Bond Yield, supra note 17. VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 PO 00000 Frm 00107 Fmt 4700 Sfmt 4700 E:\FR\FM\13DER1.SGM 13DER1 100828 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 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 Three in table 34. TABLE 34—INITIAL RATE CALCULATIONS FOR DISTRICT THREE Undesignated Revenue needed (Step 6) ........................................................................................................................... Average time on task (hours) ...................................................................................................................... Initial rate ..................................................................................................................................................... H. Step 8: Calculate Average Weighting Factors by Area In this step, 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 the weight factor report from SeaPro, we calculate the average weighting factor for each area using the data from each vessel transit Designated $13,122,770 22,952 $572 $3,440,509 3,208 $1,073 from 2014 onward, as shown in tables 35 and 36. Transits are listed in both the bridge hour report and the weight factor report. For this step, the Coast Guard uses the transits from the weight factor report. TABLE 35—AVERAGE WEIGHTING FACTOR FOR DISTRICT THREE, UNDESIGNATED AREAS Number of transits Vessel class/year Weighting factor Weighted transits * khammond on DSK9W7S144PROD with RULES 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 Class Class Class Class Class Class Class Class Class Class Class Class 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 4 (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... 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........................................................................................................... ........................................................................................................... ........................................................................................................... 45 56 136 148 103 173 4 8 116 155 274 207 236 264 169 279 332 273 276 295 15 8 10 19 9 9 4 5 3 5 394 375 332 367 337 334 339 356 363 356 1 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 1.15 1.3 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 1.45 45 56 136 148 103 173 4 8 116 155 315 238 271 304 194 321 382 314 317 339 20 10 13 25 12 12 5 7 4 7 571 544 481 532 489 484 492 516 526 516 Total for Area 6 .................................................................................................. 7,189 .............................. 9,205 3 0 4 1 1 1 3 0 4 Area 8 Class 1 (2014) ........................................................................................................... Class 1 (2015) ........................................................................................................... Class 1 (2016) ........................................................................................................... VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 PO 00000 Frm 00108 Fmt 4700 Sfmt 4700 E:\FR\FM\13DER1.SGM 13DER1 100829 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations TABLE 35—AVERAGE WEIGHTING FACTOR FOR DISTRICT THREE, UNDESIGNATED AREAS—Continued Number of transits Vessel class/year Class Class Class Class Class Class Class Class Class Class Class Class Class Class Class 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 2 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 4 (2017) (2018) (2019) (2020) (2021) (2022) (2023) (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) Weighting factor Weighted transits * 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........................................................................................................... 4 0 0 1 5 10 5 177 169 174 151 102 120 180 124 89 118 3 0 7 18 7 6 1 1 6 0 243 253 204 269 188 254 265 319 243 268 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 1.15 1.3 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 1.45 4 0 0 1 5 10 5 204 194 200 174 117 138 207 143 102 136 4 0 9 23 9 8 1 1 8 0 352 367 296 390 273 368 384 463 352 389 Total for Area 8 .................................................................................................. 3,991 .............................. 5,344 Combined total ............................................................................................ 11,180 .............................. 14,549 Average weighting factor (weighted transits ÷ number of transits) ........................... .............................. 1.30 .............................. * Weighted transits are rounded to the nearest whole number for presentation, but the Total calculation uses unrounded figures. TABLE 36—AVERAGE WEIGHTING FACTOR FOR DISTRICT THREE, DESIGNATED AREAS Number of transits khammond on DSK9W7S144PROD with RULES Vessel class/year 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 1 2 2 2 2 2 2 2 2 2 2 (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) VerDate Sep<11>2014 ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... 16:42 Dec 12, 2024 Jkt 265001 PO 00000 Frm 00109 Fmt 4700 Sfmt 4700 Weighting factor 27 23 55 62 47 45 15 15 74 68 221 145 174 170 126 162 218 131 162 142 E:\FR\FM\13DER1.SGM Weighted transits * 1 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 1.15 13DER1 27 23 55 62 47 45 15 15 74 68 254 167 200 196 145 186 251 151 186 163 100830 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations TABLE 36—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 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 4 (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) (2014) (2015) (2016) (2017) (2018) (2019) (2020) (2021) (2022) (2023) Weighting factor Weighted transits * ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... 15 0 6 14 6 3 1 2 5 0 321 245 191 234 225 308 336 258 249 300 1.3 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 1.45 20 0 8 18 8 4 1 3 7 0 465 355 277 339 326 447 487 374 361 435 Total .................................................................................................................... 4,801 .............................. 6,264 Average weighting factor (weighted transits ÷ number of transits) ........................... .............................. 1.30 .............................. * Weighted transits are rounded to the nearest whole number for presentation, but the Total calculation uses unrounded figures. I. Step 9: Calculate Revised Base Rates rates in this step so that the total costs of pilotage will be equal to the revenue needed. To do this, we divide the initial After considering the impact of the weighting factors, we revise the base base rates calculated in Step 7 by the average weighting factors calculated in Step 8, as shown in table 37. TABLE 37—REVISED BASE RATES FOR DISTRICT THREE Initial rate (Step 7) Area District Three: Undesignated ..................................................................................... District Three: Designated ......................................................................................... J. Step 10: Review and Finalize Rates In this step, the Director reviews the base pilotage rates calculated in § 404.109 of this part to ensure it meets the goal of ensuring safe, efficient, and reliable pilotage service. To establish this, the Director considers whether the Average weighting factor (Step 8) Revised rate (initial rate ÷ average weighting factor) 1.30 1.30 $440 825 $572 1,073 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 will cover operating expenses and infrastructure costs, including average traffic and weighting factors. Based on these considerations, the Director did not propose any alterations to the rates in this step. We modified § 401.405(a)(5) and (6) to reflect the rates shown in table 38. khammond on DSK9W7S144PROD with RULES TABLE 38—FINAL RATES FOR DISTRICT THREE Final 2024 pilotage rate Area Name District Three: Designated ...................................... District Three: Undesignated .................................. St. Marys River ...................................................... Lakes Huron, Michigan, and Superior ................... VIII. Regulatory Analyses A. Regulatory Planning and Review We developed this final rule after considering numerous statutes and Executive orders related to rulemaking. A summary of our analyses based on these statutes or Executive orders follows. Executive Orders 12866 (Regulatory Planning and Review), as amended by Executive Order 14094 (Modernizing Regulatory Review), and 13563 (Improving Regulation and Regulatory Review) direct agencies to assess the VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 PO 00000 Frm 00110 Fmt 4700 Sfmt 4700 $836 430 Final 2025 pilotage rate $825 440 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. E:\FR\FM\13DER1.SGM 13DER1 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations Executive Order 13563 emphasizes the importance of quantifying costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. The Office of Management and Budget (OMB) has not designated this final 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 2023.35 For this final rule, the Coast Guard estimates an increase in cost of approximately 100831 $2.88 million to industry. This is approximately a 7-percent increase because of the change in revenue needed in 2025 compared to the revenue needed in 2024. Primarily driving this 7-percent increase is the addition of 3 pilots compared to the 2024 season, as well as general increases in inflation and the rate of return used for the working capital fund. See table 39. TABLE 39—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. Owners and operators of 280 vessels transiting the Great Lakes system annually, 61 United States Great Lakes Pilots, 3 Apprentice Pilots, and 3 pilot associations. khammond on DSK9W7S144PROD with RULES The Coast Guard is required to review and adjust pilotage rates on the Great Lakes annually. See Section II., Basis and Purpose, and Regulatory History, 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 in 2025 to generate sufficient revenues for each district to reimburse its necessary and reasonable operating expenses, to fairly compensate properly trained and rested Pilots, and to 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 the undesignated area in District Three. There is also a decrease in rates for the undesignated area for District Two and the designated area for District Three. These changes 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 280 oceangoing vessels that transit the Great Lakes annually, on average, from 2021 to 2023. The Coast Guard estimates that there will be 61 Registered Pilots and 3 35 88 FR 12226. VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 Costs Benefits Increase of $2,879,028 due to change in revenue needed for 2025 ($43,159,694) from revenue needed for 2024 ($40,280,666) as shown in table 41. 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. Apprentice Pilots during 2025, an increase of three Pilots from the 2024 season. The shippers affected by these rate changes are those owners and operators of domestic vessels operating ‘‘on register’’ (engaged in foreign trade) and the owners and operators of nonCanadian 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 2021 through 2023 from 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. We believe that using 3 years of billing data is a better representation of the vessel population currently using pilotage services and impacted by this rule. We found that 484 unique vessels used pilotage services during the years 2021 through 2023. That is, these vessels had a Pilot dispatched to the vessel and billing information was recorded in SeaPro. Of these vessels, 451 were foreign-flagged vessels, and 33 were U.S.-flagged vessels. U.S.-flagged vessels not operating on register are not required to have a Registered Pilot, per 46 U.S.C. 9302, but 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 2021 through 2023 as the best representation of vessels estimated to be affected by the rates in this final rule. From 2021 through 2023, an average of 280 vessels used pilotage services annually.36 On average, 268 of these vessels were foreign-flagged, and 13 were U.S.-flagged vessels that voluntarily opted into the pilotage service (these figures are rounded averages). 36 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. PO 00000 Frm 00111 Fmt 4700 Sfmt 4700 E:\FR\FM\13DER1.SGM 13DER1 100832 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 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 depends 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 2024 with the total projected revenues to cover costs in 2025. We set pilotage rates so that pilot associations receive enough revenue to cover their necessary and reasonable expenses. Shippers pay these rates when they engage a Pilot, as required by 46 U.S.C. 9302. Therefore, the aggregate payments of shippers to pilot associations are equal to the projected necessary revenues for pilot associations. The revenues each year represent the total costs that shippers must pay for pilotage services. The change in revenue from the previous year is the additional cost to shippers discussed in this rule. The impacts of the rate changes on shippers are estimated from the district pilotage projected revenues (shown in tables 8, 20, and 32 of this preamble). The Coast Guard estimates that, for 2025, the projected revenue needed for all three districts is $43,159,694. To estimate the change in cost to shippers from this final rule, the Coast Guard compared the 2025 total projected revenues to the 2024 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 2024 final rule, we estimated the total projected revenue needed for 2024 as $40,280,666.37 This is the best approximation of 2024 revenues, as, at the time of publication of this final rule, the Coast Guard does not have enough audited data available for 2024 to revise these projections. Table 40 shows the revenue projections for 2024 and 2025 and details the additional cost increases to shippers by area and district as a result of the rate changes on traffic in Districts One, Two, and Three. TABLE 40—EFFECT OF THE FINAL RULE BY AREA AND DISTRICT [U.S. Dollars; non-discounted] Revenue needed in 2024 Area Revenue needed in 2025 Additional costs of this rule Total, District One ...................................................................................................... Total, District Two ...................................................................................................... Total, District Three ................................................................................................... $13,695,935 10,830,491 15,754,240 $14,713,084 11,883,331 16,563,279 $1,017,149 1,052,840 809,039 System Total ....................................................................................................... 40,280,666 43,159,694 2,879,028 * All figures are rounded to the nearest dollar and may not sum. The resulting difference between the projected revenue in 2024 and the projected revenue in 2025 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 will lead to affected shippers operating in District One experiencing an increase in payments of $1,017,149 over the previous year. Affected shippers operating in District Two and District Three will experience an increase in payments of $1,052,840 and $809,039, respectively, when compared with 2024. The overall adjustment in payments will increase payments by shippers of $2,879,028 across all three districts (a 7percent increase when compared with 2024). Again, because the Coast Guard reviews and sets rates for Great Lakes pilotage annually, we estimate the impacts as single-year costs, rather than annualizing them over a 10-year period. Table 41 shows the difference in revenue by revenue-component from 2024 to 2025 and presents each revenuecomponent as a percentage of the total revenue needed. In both 2024 and 2025, the largest revenue component was target pilotage compensation (63 percent of total revenue needed in 2024, and 66 percent of total revenue needed in 2025), followed by operating expenses (30 percent of total revenue needed in 2024, and 29 percent of total revenue needed in 2025). The large increase in the working capital fund, 26 percent from 2024 to 2025, is driven by an increase in the Target Rate of Return on Investment, from 4.0742 percent in 2022 to 4.8100 percent in 2023.38 TABLE 41—DIFFERENCE IN REVENUE BY REVENUE-COMPONENT Revenue needed in 2024 khammond on DSK9W7S144PROD with RULES Revenue component Percentage of total revenue needed in 2024 Revenue needed in 2025 Percentage of total revenue needed in 2025 Difference (2025 revenue— 2024 revenue) Percentage change from previous year Adjusted Operating Expenses .......................................................... Total Target Pilot Compensation ...................................................... Total Target Apprentice Pilot Compensation .................................... Working Capital Fund ....................................................................... $12,193,810 25,558,164 951,822 1,576,870 30 63 2 4 $12,354,186 28,323,337 501,462 1,980,709 29 66 1 5 $160,376 2,765,173 (450,360) 403,839 1 11 (47) 26 Total Revenue Needed .............................................................. 40,280,666 100 43,159,694 100 2,879,028 7 * All figures are rounded to the nearest dollar and may not sum. As stated previously, we estimate that there will be a total increase of 37 2024 final rule (89 FR 9066), Table 43. VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 $2,879,028 in revenue needed by the pilot associations. This represents an increase in revenue needed for target Pilot compensation of $2,765,173; a 38 Moody’s Seasoned Aaa Corporate Bond Yield, supra note 17. PO 00000 Frm 00112 Fmt 4700 Sfmt 4700 E:\FR\FM\13DER1.SGM 13DER1 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations decrease in revenue needed for the total target Apprentice Pilot wage benchmark of ($450,360); an increase in the revenue needed for adjusted operating expenses of $160,376; and an increase in the revenue needed for the working capital fund of $403,839. The change in revenue needed for Pilot compensation, $2,765,173, is due to three factors: (1) The changes to adjust 2024 pilotage compensation to account for the difference between actual ECI inflation 39 (5.6 percent) and predicted PCE inflation 40 (2.6 percent) for 2024; (2) projected inflation of pilotage compensation in Step 2 of the methodology, using predicted inflation through 2025; 41 and (3) an increase of three authorized Pilots. The target compensation is $464,317 per Pilot in 2025, compared to $440,658 in 2024. The changes modify the 2024 100833 Pilot compensation to account for the difference between predicted and actual inflation and will increase the 2024 target compensation value by 3.0 percent. As shown in table 42, this inflation adjustment increases total compensation by $13,220 per Pilot, and the total revenue needed by $806,404, when accounting for all 61 Pilots. TABLE 42—CHANGE IN REVENUE RESULTING FROM THE CHANGE TO INFLATION OF PILOT COMPENSATION CALCULATION IN STEP 4 2024 Target Pilot Compensation ................................................................................................................................................... Adjusted 2024 Compensation ($440,658 × 1.03) ......................................................................................................................... Difference between Adjusted Target 2024 Compensation and Target 2024 Compensation ($453,878¥$440,658) .................. Increase in total Revenue for 61 Pilots ($13,220 × 61) ................................................................................................................ $440,658 453,878 13,220 806,404 * All figures are rounded to the nearest dollar and may not sum. Similarly, table 43 shows the impact of the difference between predicted and actual inflation on the target Apprentice Pilot compensation benchmark. The inflation adjustment increases the compensation benchmark by $4,759 per Apprentice Pilot, and the total revenue needed by $14,277 when accounting for all three Apprentice Pilots. TABLE 43—CHANGE IN REVENUE RESULTING FROM THE CHANGE TO INFLATION OF APPRENTICE PILOT COMPENSATION CALCULATION IN STEP 4 2024 Target Apprentice Pilot Compensation ................................................................................................................................ Adjusted 2024 Compensation ($158,637 × 1.03) ......................................................................................................................... Difference between Adjusted Target 2024 Compensation and Target Compensation ($163,396¥$158,637) ........................... Increase in total Revenue for Apprentices ($4,759 × 3) ............................................................................................................... $158,637 163,396 4,759 14,277 * All figures are rounded to the nearest dollar and may not sum. The Coast Guard predicts that 61 Pilots will be needed for the 2025 season. This is an increase of three Pilots from the 2024 season. Table 44 shows the increase of $1,353,292 in revenue needed for Pilot compensation. To avoid double counting, this value excludes the change in revenue resulting from the change to adjust 2024 Pilot compensation to account for the difference between actual and predicted inflation. TABLE 44—CHANGE IN REVENUE RESULTING FROM INCREASE OF THREE PILOTS 2025 Target Compensation ........................................................................................................................................................... Total Number of New Pilots .......................................................................................................................................................... Total Cost of new Pilots (464,317 × 3) ......................................................................................................................................... Difference between Adjusted Target 2024 Compensation and Target 2024 Compensation (453,878¥440,658) ...................... Increase in total Revenue for 3 Pilots (13,220 × 3) ...................................................................................................................... Net Increase in total Revenue for 3 Pilots (1,392,951¥39,659) .................................................................................................. $464,317 3 $1,392,951 $13,220 $39,659 $1,353,292 khammond on DSK9W7S144PROD with RULES * All figures are rounded to the nearest dollar and may not sum. 39 ECI, supra note 14. VerDate Sep<11>2014 16:42 Dec 12, 2024 40 Median Core PCE Inflation June Projection, supra note 15. Jkt 265001 PO 00000 Frm 00113 Fmt 4700 Sfmt 4700 41 Median Core PCE Inflation June Projection, supra note 16. E:\FR\FM\13DER1.SGM 13DER1 100834 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations Similarly, the Coast Guard predicts that three Apprentice Pilots will be needed for the 2025 season. This will be a decrease of three Apprentice Pilots from the 2024 season. Table 45 shows the decrease of ($487,185) in revenue needed solely for Apprentice Pilot compensation. To avoid double counting, this value excludes the change in revenue resulting from the change to adjust 2024 Apprentice Pilot compensation to account for the difference between actual and predicted inflation. TABLE 45—CHANGE IN REVENUE RESULTING FROM DECREASE OF THREE APPRENTICE PILOTS 2025 Apprentice Target Compensation ......................................................................................................................................... Total Number of New Apprentices ................................................................................................................................................ Total Cost of new Apprentices ($167,154 × ¥3) .......................................................................................................................... Difference between Adjusted Target 2024 Compensation and Target 2024 Compensation ($163,396¥$158,637) .................. Increase in total Revenue for –3 Apprentices ($4,759 × ¥3) ...................................................................................................... Net Increase in total Revenue for –3 Apprentices (¥$501,462¥¥$14,277) .............................................................................. $167,154 ¥3 ($501,462) $4,759 ($14,277) ($487,185) * All figures are rounded to the nearest dollar and may not sum. Another $605,477 increase is the result of increasing compensation for the 61 Pilots, to account for future inflation of 2.3 percent in 2025. This increases total compensation by $10,439 per Pilot, as shown in table 46. TABLE 46—CHANGE IN REVENUE RESULTING FROM INFLATING 2024 COMPENSATION TO 2025 Adjusted 2024 Compensation ....................................................................................................................................................... 2025 Target Compensation ($453,878 × 1.023) ........................................................................................................................... Difference between Adjusted 2024 Compensation and Target 2025 Compensation ($464,317¥$453,878) ............................. Increase in total Revenue for 58 Pilots ($10,439 × 58) ................................................................................................................ $453,878 464,317 10,439 605,477 * All figures are rounded to the nearest dollar and may not sum. Similarly, a $22,548 increase is the result of increasing compensation for the three Apprentice Pilots, to account for future inflation of 2.3 percent in 2025. This increases total compensation by $3,758 per Apprentice Pilot, as shown in table 47. TABLE 47—CHANGE IN REVENUE RESULTING FROM INFLATING 2024 APPRENTICE PILOT COMPENSATION TO 2025 Adjusted 2024 Compensation ....................................................................................................................................................... 2025 Target Compensation ($464,317 × 36%) ............................................................................................................................. Difference between Adjusted Compensation and Target Compensation ($167,154¥$163,396) ................................................ Increase in total Revenue for 6 Apprentices ($3,758 × 6) ............................................................................................................ khammond on DSK9W7S144PROD with RULES * All figures are rounded to the nearest dollar and may not sum. Table 48 presents the percentage change in revenue by area and revenue- component, excluding surcharges, as they are applied at the district level.42 42 The 2024 projected revenues are from the 2024 final rule (89 FR 9038), tables 11, 23, and 35. The 2025 projected revenues are from tables 8, 20, and 32 of this final rule. VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 PO 00000 Frm 00114 Fmt 4700 Sfmt 4700 E:\FR\FM\13DER1.SGM 13DER1 $163,396 167,154 3,758 22,548 VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 1,310,973 1,966,459 3,566,457 1,102,673 1,654,014 3,679,209 925,928 1,833,749 1,900,809 1,005,891 $2,750,620 2025 $2,851,215 2024 Adjusted operating expenses (8) (3) 19 19 (4) (4) Percentage change 2,203,290 7,931,844 3,965,922 3,525,264 3,525,264 $4,406,580 2024 2,321,585 8,822,023 4,643,170 3,250,219 4,178,853 $5,107,487 2025 Total target pilot compensation 5 11 17 (8) 19 16 Percentage change 66,628 250,646 95,182 63,455 190,364 $285,547 2024 35,102 132,052 100,292 66,862 66,862 $100,292 2025 (47) (47) 5 5 (65) (65) Percentage change Total target apprentice pilot compensation 133,463 483,269 232,845 191,137 228,825 $307,331 2024 157,894 602,238 322,747 222,609 292,422 $382,799 2025 Working capital fund TABLE 48—DIFFERENCE IN REVENUE BY REVENUE-COMPONENT AND AREA * All figures are rounded to the nearest dollar and may not sum. District One: Designated ................ District One: Undesignated ............ District Two: Undesignated ............ District Two: Designated ................ District Three: Undesignated ............ District Three: Designated ................ khammond on DSK9W7S144PROD with RULES 18 25 39 16 28 25 Percentage change 3,409,272 12,344,968 5,947,963 4,882,529 5,845,262 $7,850,673 2024 3,440,509 13,122,770 7,032,668 4,850,663 6,371,886 $8,341,198 2025 Total revenue needed 0.9 6.3 18.2 (0.7) 9.0 6.2 Percentage change Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations PO 00000 Frm 00115 Fmt 4700 Sfmt 4700 E:\FR\FM\13DER1.SGM 13DER1 100835 100836 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations Benefits B. Small Entities Under the Regulatory Flexibility Act, 5 U.S.C. 601–612, we considered whether this final rule will have a significant economic impact on a substantial number of small entities. The term ‘‘small entities’’ comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. For 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.43 As described in Section VIII., Regulatory Analyses, of 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 that pilot associations produce enough revenue to fund future improvements. The rate changes also help recruit and retain Pilots, which ensures enough Pilots to meet peak shipping demand, helping to reduce delays caused by Pilot shortages. this preamble, we found that 484 unique vessels used pilotage services during the years 2021 through 2023. These vessels are owned by 63 entities, of which 49 are foreign entities that operate primarily outside the United States, and the remaining 14 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.44 Table 49 shows the North American Industry Classification System (NAICS) codes of the U.S. entities, and the small entity standard size established by the SBA. TABLE 49—NAICS CODES AND SMALL ENTITIES SIZE STANDARDS Description 238910 .................................................... 423860 .................................................... Site Preparation Contractors ................................................................................. Transportation Equipment and Supplies (except Motor Vehicle) Merchant Wholesalers. Navigational Services to Shipping ......................................................................... Other Support Activities for Water Transportation ................................................ Administrative Management and General Management Consulting Services ...... Travel Agencies ..................................................................................................... Remediation Services ............................................................................................ Marinas .................................................................................................................. 488330 488390 541611 561510 562910 713930 khammond on DSK9W7S144PROD with RULES Small entity size standard NAICS .................................................... .................................................... .................................................... .................................................... .................................................... .................................................... $19,000,000. 175 Employees. $47,000,000. $47,000,000. $24,500,000. $25,000,000. $25,000,000. $11,000,000. Of the 14 U.S. entities, four exceed the SBA’s small business standards for small entities. To estimate the potential impact on the remaining 10 small entities, the Coast Guard used their 2023 invoice data to estimate their pilotage costs in 2025. We increased their 2023 costs to account for the changes in pilotage rates resulting from this final rule and the 2024 final rule. We estimated the change in cost to these entities resulting from this final rule by subtracting their estimated 2024 pilotage costs from their estimated 2025 pilotage costs and found the average costs to small firms are approximately $13,643, with a range of $1,411 to $42,691. We then compared the estimated change in pilotage costs between 2024 and 2025 with each firm’s annual revenue. In all but one case, the impact of the change in estimated pilotage expenses will be below 1 percent of revenues. For one entity, the impact will be 6.9 percent of revenues. In addition to the owners and operators discussed previously, three U.S. entities that receive revenue from pilotage services will be affected by this final rule. These are the three pilot associations that provide and manage pilotage services within the Great Lakes districts. District One, SLSPA, uses the NAICS code ‘‘Inland Water Freight Transportation’’ with a small-entity size standard of 1,050 employees. District Two, ‘‘LPA’’ uses the NAICS code, ‘‘Business Associations’’ with a smallentity size standard of $15,500,000 in revenue. District Three, ‘‘WGLPA’’ did not have a registered NAICS code through ReferenceUSA. All three associations are considered small entities. Finally, the Coast Guard did not find any small not-for-profit organizations that are independently owned and operated and are not dominant in their fields that will be impacted by this final rule. We also did not find any small governmental jurisdictions with populations of fewer than 50,000 people that will be impacted by this final rule. Based on this analysis, we conclude this final rule will not have a significant economic impact on a substantial number of small entities. Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that this final rule will not have a significant economic impact on a substantial number of small entities. 43 See Resources for Reference Solutions Users, ReferenceUSA, https://resource.referenceusa.com; accessed 04/22/2024. 44 See Table of Size Standards, https:// www.sba.gov/document/support--table-size- standards; accessed 05/01/24. 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. VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 PO 00000 Frm 00116 Fmt 4700 Sfmt 4700 C. Assistance for Small Entities Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996, Public Law 104– 121, we want to assist small entities in understanding this final rule so that they can better evaluate its effects on them and participate in the rulemaking. The Coast Guard will not retaliate against small entities that question or complain about this final rule or any policy or action of the Coast Guard. Small businesses may send comments on the actions of Federal employees E:\FR\FM\13DER1.SGM 13DER1 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations 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 final rule calls for no new collection of information under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501–3520. E. Federalism A final 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 final 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.’’ 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 final rule is consistent with the fundamental federalism principles and preemption requirements described in Executive Order 13132. khammond on DSK9W7S144PROD with RULES F. Unfunded Mandates The Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1531–1538, requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100 million (adjusted for inflation) or more in any one year. Although this final rule will not result in such an expenditure, we do discuss the effects of this final rule elsewhere in this preamble. VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 G. Taking of Private Property This final 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 final 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 final rule under Executive Order 13045 (Protection of Children from Environmental Health Risks and Safety Risks). This final rule is not an economically significant final rule and will not create an environmental risk to health or risk to safety that might disproportionately affect children. J. Indian Tribal Governments This final 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 final 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, and the Administrator of OMB’s Office of Information and Regulatory Affairs has not designated it as a significant energy action. 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., PO 00000 Frm 00117 Fmt 4700 Sfmt 4700 100837 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 final rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards. M. Environment We have analyzed this final 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 determined 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 final rule is categorically excluded under paragraphs A3 and L54 of Appendix A, Table 1 of the Department of Homeland Security (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 final rule involves adjusting the pilotage rates for 2025 to account for changes in district operating expenses, changes in the number of pilots, and anticipated inflation. All changes are consistent with the Coast Guard’s maritime safety missions. List of Subjects in 46 CFR Part 401 Administrative practice and procedure, Great Lakes; Navigation (water), Penalties, Reporting and recordkeeping requirements, Seamen. E:\FR\FM\13DER1.SGM 13DER1 100838 Federal Register / Vol. 89, No. 240 / Friday, December 13, 2024 / Rules and Regulations For the reasons discussed in the preamble, the Coast Guard amends 46 CFR part 401 as follows: PART 401—GREAT LAKES PILOTAGE REGULATIONS additional spectrum allocations for ITS use, addresses the issue of reimbursing the transition costs of DSRC incumbents, and encourages the development of industry standards. This final rule is effective February 11, 2025. Existing licenses for DSRC systems may be renewed as necessary following this effective date but only for a period not to exceed December 14, 2026. DATES: 1. The authority citation for part 401 is revised to read as follows: ■ Authority: 46 U.S.C. 2103, 2104(a), 6101, 7701, 8105, 9303, 9304; DHS Delegation No. 00170.1, Revision No. 01.4, 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 $986; (2) Lake Ontario is $643; (3) Lake Erie is $576; (4) The navigable waters from Southeast Shoal to Port Huron, MI is $753; (5) Lakes Huron, Michigan, and Superior is $440; and (6) The St. Marys River is $825. * * * * * FOR FURTHER INFORMATION CONTACT: Jamie Coleman of the Office of Engineering and Technology, at Jamie.Coleman@fcc.gov or 202–418– 2705. This is a summary of the Commission’s Second Report and Order, ET Docket No. 19– 138, FCC 24–123, adopted on November 20, 2024, and released on November 21, 2024. The full text of this document is available for public inspection and can be downloaded at https://docs.fcc.gov/ public/attachments/FCC-24-123A1.pdf. Alternative formats are available for people with disabilities (Braille, large print, electronic files, audio format) by sending an email to fcc504@fcc.gov or calling the Commission’s Consumer and Governmental Affairs Bureau at (202) 418–0530 (voice), (202) 418–0432 (TTY). SUPPLEMENTARY INFORMATION: Dated: December 6, 2024. A.M. Beach, Captain, U.S. Coast Guard, Acting, Assistant Commandant for Prevention Policy. [FR Doc. 2024–29128 Filed 12–12–24; 8:45 am] BILLING CODE 9110–04–P Procedural Matters FEDERAL COMMUNICATIONS COMMISSION 47 CFR Parts 1, 90, 95, and 97 [ET Docket No. 19–138; FCC 24–123; FR ID 265055] Use of the 5.850–5.925 GHz Band Federal Communications Commission. ACTION: Final rule. AGENCY: In this document, the Federal Communications Commission (Commission) adopts rules and takes other steps to further address the transition of 5.9 GHz Intelligent Transportation System (ITS) operations from Dedicated Short Range Communications (DSRC)-based technology to cellular-vehicle-toeverything (C–V2X)-based technology. Specifically, the Commission adopts technical and operational rules governing devices using C–V2X-based technology, eliminates the DSRC requirement for communications zone designations, finalizes the timeline for sunsetting the use of DSRC-based technology, addresses the issue of khammond on DSK9W7S144PROD with RULES SUMMARY: VerDate Sep<11>2014 16:42 Dec 12, 2024 Jkt 265001 Regulatory Flexibility Act. The Regulatory Flexibility Act of 1980, as amended (RFA), requires that an agency prepare a regulatory flexibility analysis for notice and comment rulemakings, unless the agency certifies that ‘‘the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities.’’ Accordingly, we have prepared a Final Regulatory Flexibility Analysis (FRFA) concerning the possible impact of the rule changes contained in the Second Report and Order on small entities. The FRFA is set forth in Appendix B of the FCC document, https://docs.fcc.gov/ public/attachments/FCC-24-123A1.pdf. Congressional Review Act. The Commission has determined, and the Administrator of the Office of Information and Regulatory Affairs, Office of Management and Budget concurs, that this rule is ‘‘major’’ under the Congressional Review Act, 5 U.S.C. 804(2). The Commission will send a copy of this Second Report and Order to Congress and the Government Accountability Office pursuant to 5 U.S.C. 801(a)(1)(A). PO 00000 Frm 00118 Fmt 4700 Sfmt 4700 Synopsis Introduction The Intelligent Transportation System (ITS) holds promise to improve transportation safety and mobility by integrating advanced communications technologies into vehicles and infrastructure. The connected vehicle ecosystem of the future will make the nation’s transportation system more flexible, resilient, and safe. This ecosystem requires technical and operational rules governing devices using C–V2X (cellular-vehicle-toeverything) based technology. In the First Report and Order of the Federal Communications Commission’s (FCC) proceeding, 86 FR 23281 (May 1, 2021), the Commission retained the upper 30 megahertz portion (5.895–5.925 GHz) of the 5.850–5.925 GHz (5.9 GHz) band for ITS operations. The Commission also required the ITS service to transition from Dedicated Short Range Communications (DSRC)-based technology to C–V2X-based technology as the connected mobility platform for implementing the future of ITS communications in the United States. In the Second Report and Order, the Commission further addresses the transition of 5.9 GHz ITS operations from DSRC to C–V2X by codifying C– V2X technical parameters in the Commission’s rules, including band usage, message priority, and channel bandwidth. The Commission promulgates rules governing equivalent isotropically radiated power (EIRP) and out-of-band emissions (OOBE) limits for C–V2X on-board units (OBUs) and roadside units (RSUs), and antenna height limits for RSUs. In addition, the Commission encourages the development of industry standards and finalizes the timeline for sunsetting the use of DSRC-based technology. Finally, the Commission addresses the issues of additional spectrum allocations for ITS use and reimbursing the transition costs of DSRC incumbents. Background The Commission adopted the First Report and Order in 2020, wherein it concluded that the most efficient use of the 75 megahertz of spectrum in the 5.9 GHz band would be achieved by expanding unlicensed operations in the lower 45 megahertz of the band (5.850– 5.895 GHz), and designating the upper 30 megahertz of the band (5.895–5.925 GHz) for the ITS service using C–V2X technology. Among other considerations, the Commission made this decision because (1) the DSRC services once contemplated for operations across the full 5.9 GHz band E:\FR\FM\13DER1.SGM 13DER1

Agencies

[Federal Register Volume 89, Number 240 (Friday, December 13, 2024)]
[Rules and Regulations]
[Pages 100810-100838]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-29128]


=======================================================================
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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

46 CFR Part 401

[Docket No. USCG-2024-0406]
RIN 1625-AC94


Great Lakes Pilotage Rates--2025 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 2025. 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 2024 season.

DATES: This final rule is effective January 13, 2025.

ADDRESSES: To view documents mentioned in this preamble as being 
available in the docket, go to www.regulations.gov, type USCG-2024-0406 
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. Basis and Purpose, and Regulatory History
III. Background
IV. Final Pilotage Rates for 2025
V. Discussion of Comments and Changes
VI. Summary of the Ratemaking Methodology
VII. Discussion of the Rate Adjustments
    District One
    A. Step 1: Recognize Previous Operating Expenses
    B. Step 2: Project Operating Expenses, Adjusting for Inflation 
or Deflation
    C. Step 3: Estimate Number of Registered Pilots and Apprentice 
Pilots
    D. Step 4: Determine Target Pilot Compensation Benchmark and 
Apprentice Pilot Wage Benchmark
    E. Step 5: Project Working Capital Fund
    F. Step 6: Project Needed Revenue
    G. Step 7: Calculate Initial Base Rates
    H. Step 8: Calculate Average Weighting Factors by Area
    I. Step 9: Calculate Revised Base Rates
    J. Step 10: Review and Finalize Rates
    District Two
    A. Step 1: Recognize Previous Operating Expenses
    B. Step 2: Project Operating Expenses, Adjusting for Inflation 
or Deflation
    C. Step 3: Estimate Number of Registered Pilots and Apprentice 
Pilots
    D. Step 4: Determine Target Pilot Compensation Benchmark and 
Apprentice Pilot Wage Benchmark
    E. Step 5: Project Working Capital Fund
    F. Step 6: Project Needed Revenue
    G. Step 7: Calculate Initial Base Rates
    H. Step 8: Calculate Average Weighting Factors by Area
    I. Step 9: Calculate Revised Base Rates
    J. Step 10: Review and Finalize Rates
    District Three
    A. Step 1: Recognize Previous Operating Expenses
    B. Step 2: Project Operating Expenses, Adjusting for Inflation 
or Deflation
    C. Step 3: Estimate Number of Registered Pilots and Apprentice 
Pilots
    D. Step 4: Determine Target Pilot Compensation Benchmark and 
Apprentice Pilot Wage Benchmark
    E. Step 5: Project Working Capital Fund
    F. Step 6: Project Needed Revenue
    G. Step 7: Calculate Initial Base Rates
    H. Step 8: Calculate Average Weighting Factors by Area
    I. Step 9: Calculate Revised Base Rates
    J. Step 10: Review and Finalize Rates
VIII. Regulatory Analyses
    A. Regulatory Planning and Review
    B. Small Entities
    C. Assistance for Small Entities
    D. Collection of Information
    E. Federalism
    F. Unfunded Mandates
    G. Taking of Private Property
    H. Civil Justice Reform
    I. Protection of Children
    J. Indian Tribal Governments
    K. Energy Effects
    L. Technical Standards
    M. Environment

I. Abbreviations

2023 final rule Great Lakes Pilotage Rates--2023 Annual Ratemaking 
and Review of Methodology
2024 final rule Great Lakes Pilotage Rates--2024 Annual Review
2025 Ratemaking NPRM Great Lakes Pilotage Rates--2025 Annual Review 
notice of proposed rulemaking
APA American Pilots' Association
BLS Bureau of Labor Statistics
CFR Code of Federal Regulations
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
GLPAC Great Lakes Pilotage Advisory Committee
LPA Lakes Pilots Association
MOU Memorandum of Understanding
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 Pilots Association
U.S.C. United States Code
WGLPA Western Great Lakes Pilots Association

II. Basis and Purpose, and Regulatory History

    The legal basis of this rulemaking is 46 U.S.C. Chapter 93,\1\ 
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.\2\ For U.S. Great Lakes Pilots, the statute requires the 
Secretary to ``prescribe by regulation rates and charges for pilotage 
services, giving consideration to the public interest and the costs of 
providing the services.'' Title 46 of the U.S.C. 9303(f) also requires 
that rates be established or reviewed and adjusted each year, no later 
than March 1. The Secretary's duties and authority under 46 U.S.C. 
Chapter 93 have generally been delegated to the Coast Guard.\3\
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    \1\ 46 U.S.C. 9301-9308.
    \2\ 46 U.S.C. 9302(a)(1).
    \3\ Department of Homeland Security Delegation No. 00170.1 
(II)(92)(f), Revision No. 01.4. The Secretary retains the authority 
under Section 9307 to establish, and appoint members to, a Great 
Lakes Pilotage Advisory Committee.
---------------------------------------------------------------------------

    The purpose of this final rule is to issue new pilotage rates for 
2025 by revising a base rate established in 2023.

[[Page 100811]]

The Coast Guard believes that the new rates will continue to promote 
our goal, as outlined in 46 CFR 404.1(a), to promote safe, efficient, 
and reliable pilotage service in the Great Lakes by generating 
sufficient revenue for each pilot association, to reimburse its 
necessary and reasonable operating expenses, fairly compensate trained 
and rested Pilots, and provide appropriate funds to use for 
improvements.

III. Background

    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. The pilotage 
rates for the 2025 season range from $440 to $986 per pilot hour, 
depending on which of the specific six areas pilotage service is 
provided, and are paid by shippers to the pilot associations.
    There are three American pilotage districts on the Great Lakes, 
each represented by a pilot association.\4\ Each pilotage district is 
further divided into ``designated'' and ``undesignated'' areas. 
Designated areas, classified as such by Presidential Proclamation, are 
waters in which pilots must direct the navigation of vessels at all 
times.\5\ Undesignated areas are open bodies of water where pilots must 
only ``be on board and available to direct the navigation of the 
vessel'' at the discretion of the vessel master.\6\ For these reasons, 
pilotage rates in designated areas can be significantly higher than 
those in undesignated areas.
---------------------------------------------------------------------------

    \4\ The Saint Lawrence Seaway Pilots Association provides 
pilotage services in District One, which includes all U.S. waters of 
the St. Lawrence River and Lake Ontario. The Lakes Pilots 
Association provides pilotage services in District Two, which 
includes all U.S. waters of Lake Erie, the Detroit River, Lake St. 
Clair, and the St. Clair River. Finally, the Western Great Lakes 
Pilots Association provides pilotage services in District Three, 
which includes all U.S. waters of the St. Marys River; Sault Ste. 
Marie Locks; and Lakes Huron, Michigan, and Superior.
    \5\ 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; accessed 10/25/2024.
    \6\ 46 U.S.C. 9302(a)(1)(B).
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    The three pilot associations, which are the exclusive U.S. source 
of Registered Pilots on the Great Lakes, use the revenue from the 
shippers 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. 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, infrastructure maintenance, and compensation for 
Pilots and Apprentice Pilots.\7\
---------------------------------------------------------------------------

    \7\ 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 actual demand for service dictates the compensation amount for 
United States Registered Pilots. We divide that amount by the historic 
10-year average for pilotage demand. We recognize that in years where 
demand for pilotage services exceeds the 10-year average, pilot 
associations will accrue more revenue than projected, while in years 
where demand is below average, they will take in less. We believe over 
the long term, however, this scheme 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.
    For this final rule, we conducted our annual review and interim 
adjustment to the base pilotage rates for 2025. 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). This final rule is an interim ratemaking under 46 CFR 
404.100(b).

IV. Final Pilotage Rates for 2025

    In this final rule, we set new pilotage rates for 2025. We 
conducted this 2025 ratemaking as an interim ratemaking, as we did with 
the ``Great Lakes Pilotage Rates--2024 Annual Review'' final rule 
(hereafter the 2024 final rule) (89 FR 9038, published February 9, 
2024). Thus, the Coast Guard adjusts the compensation benchmark 
following the interim ratemaking procedures under Sec.  404.100(b), 
rather than following the procedures for a full ratemaking under Sec.  
404.100(a).
    The Coast Guard is setting the rates shown in table 1.

                           Table 1--Current and 2025 Pilotage Rates on the Great Lakes
----------------------------------------------------------------------------------------------------------------
                                                                                Final 2024         Final 2025
                    Area                                  Name                pilotage rate      pilotage rate
----------------------------------------------------------------------------------------------------------------
District One: Designated...................  St. Lawrence River...........               $927               $986
District One: Undesignated.................  Lake Ontario.................                608                643
District Two: Designated...................  Navigable waters from                        667                753
                                              Southeast Shoal to Port
                                              Huron, MI.
District Two: Undesignated.................  Lake Erie....................                597                576
District Three: Designated.................  St. Marys River..............                836                825
District Three: Undesignated...............  Lakes Huron, Michigan, and                   430                440
                                              Superior.
----------------------------------------------------------------------------------------------------------------

    This final rule affects 61 U.S. Great Lakes Pilots, 3 Apprentice 
Pilots, 3 pilot associations, and the owners and operators of an 
average of 280 oceangoing vessels that transit the Great Lakes 
annually. This final rule will not affect the Coast Guard's budget or 
increase Federal spending because foreign shippers, foreign cruise 
ships, and vessels requesting voluntary pilotage pay these rates 
directly to the respective pilot association The estimated overall 
annual regulatory economic impact of this rate change will be a net 
increase of $2,879,028 in payments made by the foreign shippers, 
foreign cruise ships, and vessels requesting voluntary pilotage 
service, which is a 7-percent increase from operating costs in the 2024 
shipping season. This represents an increase in revenue needed for 
target Pilot compensation, a decrease 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.

[[Page 100812]]

    This final rule establishes the 2025 yearly target compensation for 
Pilots on the Great Lakes at $464,317 per Pilot (a $23,659, or 5.37 
percent, increase over their 2024 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 VIII., Regulatory Analyses, in this preamble, provides 
the regulatory impact analyses of this final rule.

V. Discussion of Comments and Changes

    We received three comments in response to the notice of proposed 
rulemaking (NPRM) for this this final rule, titled ``Great Lakes 
Pilotage Rates--2025 Annual Review'' (hereafter 2025 Ratemaking NPRM) 
(89 FR 63334, published August 5, 2024). We made no changes to the 
rates in response to those comments.
    One anonymous commenter was concerned that the ratemaking 
methodology was not accurately capturing trends in demand, citing this 
year's rate increase in District One as surprising, given that transits 
and time on task have gone down over the past couple of seasons. While 
the ratemaking methodology itself is not included in the scope of this 
rule, we note that the 10-year rolling average is designed to minimize 
volatility in the ratemaking. This decision has been confirmed by the 
courts as a ``rational choice.'' Am. Great Lake Ports Assn. v. United 
States Coast Guard.\8\
---------------------------------------------------------------------------

    \8\ 443 F. Supp. 3d 44 (D.D.C. 2020).
---------------------------------------------------------------------------

    Another commenter, representing three trade associations, suggested 
that the Coast Guard should use Federal Open Market Committee (FOMC) 
Projections for the inflation numbers used in Step 2 of the 
methodology. Modifying the ratemaking methodology is outside the scope 
of this rule--since this is an interim ratemaking--but we will consider 
this suggestion in the next full ratemaking.\9\
---------------------------------------------------------------------------

    \9\ This commenter also submitted an earlier comment requesting 
an extension for the comment period.
---------------------------------------------------------------------------

    The same commenter supported the elimination of the Working Capital 
Fund in Step 5 of the ratemaking process. We appreciate the commenter's 
support, but elimination of the Working Capital Fund is outside the 
scope of this rule and will be addressed in next year's full 
ratemaking.
    This commenter also supported District One's efforts to improve 
their dispatch operations and suggested that Districts Two and Three 
make similar efforts. Pilotage association dispatch operations are 
outside the scope of this rulemaking, but we will take the comment 
under advisement for potential future rulemakings.
    This commenter suggested that the Coast Guard should update the 
Memorandum of Understanding (MOU) between the U.S. Coast Guard and the 
Canadian Great Lakes Pilotage Authority because that ``document 
provides for the coordination of services, including the division of 
dispatch activity and the sharing of work assignments.'' The MOU is 
outside the scope of this rulemaking, but we will take this comment 
under advisement and communicate it to the relevant parties.
    The commenter urged the Coast Guard to make individual pilot 
compensation publicly available. The Coast Guard will not accommodate 
this request. 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 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 
individual 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. Concerns about equity among the pilots are outside the scope 
of this rulemaking.
    The commenter's last suggestion was that the Coast Guard should 
conduct a line-by-line inspection of pilot association expenses to 
determine if they meet the ``necessary and reasonable'' standard. This 
is a suggested change to the methodology, which is outside the scope of 
this rule. We will consider this comment for the next full ratemaking.
    The last comment, from the Western Great Lakes Pilots Association 
(WGLPA), contained three requests for the Coast Guard. First, WGLPA 
requested an upward adjustment of $47,924 based on legal expenses 
related to negotiations of the collective bargaining agreement between 
the WGLPA and the International Longshoremen's Association. However, 
the only evidence of these charges was a letter from WGLPA's outside 
counsel. In order to make a change to the expenses, the Coast Guard 
would need to see verifiable and detailed evidence that explains those 
charges. For legal work, a detailed record of an attorney's billable 
hours would be sufficient. Even with this information, we may not be 
able to recognize this expense as the other pilot associations perform 
this function without incurring substantial legal expenses. We would 
also need additional justification to determine if this was a necessary 
expense, and if so, whether all or some portion of the expense is a 
reasonable amount to include in the association's expense base.
    Second, WGLPA requested an upward adjustment of $45,296 based on a 
2023 arbitration ruling that found that wages were owed for work 
performed by their dispatch team. These are 2023 expenses and, 
therefore, cannot be added to this year's ratemaking. If properly 
submitted next year to CohnReznick (the third-party firm under contract 
to create revenue and expense reports for the three pilot association 
expenses), the expenses will be evaluated in next year's ratemaking.
    Last, WGLPA alleged that they did not have sufficient opportunity 
to engage with the Coast Guard and CohnReznick to adequately provide 
explanation or documentation for certain expenses. The Coast Guard 
disagrees with this assertion. According to our records, the 
opportunity to provide documentation and information to CohnReznick 
commenced on August 10, 2023, and concluded on January 24, 2024, a day 
before the draft report was generated. We believe WGLPA had sufficient 
time to organize and segregate records to comply with the Coast Guard 
contract to perform this work. Additionally, the Director confirmed 
with CohnReznick personnel that they verbally communicated the project 
timeline to WGLPA personnel during the initial ``prepared by client'' 
phone call on August 10, 2023, and, on the same day, emailed the WGLPA 
with a list of documents and information the WGLPA would need to 
provide in order to successfully produce the report.
    The only change from the NPRM results from updated inflation data 
becoming available since the publication of the proposed rule. Table 2 
summarizes the changes between the 2025 Ratemaking NPRM and this final 
rule. This table includes changes from the proposed rule that are not 
based on comments from the NPRM.

[[Page 100813]]



            Table 2--Changes Between the NPRM and Final Rule
------------------------------------------------------------------------
                 Change                             Reasoning
------------------------------------------------------------------------
Updates 2023 Employment Cost Index       More recent figures were
 (ECI) inflation from 5.1%, listed in     published since the Coast
 the NPRM, to 5.6%.                       Guard conducted the analysis
                                          for the NPRM.
Updates 2024 Personal Consumption
 Expenditures (PCE) inflation from
 2.4%, listed in the NPRM, to 2.8%.
Updates 2025 PCE inflation from 2.2%,
 listed in the NPRM, to 2.3%.
------------------------------------------------------------------------

VI. Summary of the Ratemaking Methodology

    The ratemaking methodology, outlined in 46 CFR 404.101 through 
404.110, consists of 10 steps that are designed to account for the 
revenues needed and total traffic expected in each district. The first 
several steps of the methodology establish base pilotage rates. 
Additional steps to incorporate the weighting factors are necessary to 
establish the final pilotage 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 U.S. Coast Guard's Director of the Great Lakes Pilotage 
(Director) uses an independent third party to review each pilot 
association's audited operating expenses from each of the three pilot 
associations. Operating expenses include all allowable expenses, minus 
Pilot and Apprentice Pilot 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 2025 rates in 
this final rule, we began with the audited expenses from the shipping 
activity in 2022.
    While each pilot 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 2025 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 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 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.
    At the September 7, 2023 Great Lakes Pilotage Advisory Committee 
(GLPAC) meeting, there was a unanimous recommendation for an August 1 
cutoff date to allow an Apprentice Pilot, who has completed all their 
training, to be recognized as a fully registered Pilot in the rate.\10\ 
The Coast Guard agrees that this change is both necessary and 
reasonable, as it provides the proper compensation based on the most 
accurate data. If an Apprentice Pilot is scheduled to complete training 
and becomes a fully registered Pilot before August 1, they will be 
counted as a fully registered Pilot in the rate; if they do not meet 
the August 1 deadline, those funds may be adjusted in the proceeding 
rate for up to the full amount. In addition, if a fully registered 
Pilot retires, or an Apprentice Pilot resigns, and has been counted in 
the rate, the proceeding rate may be adjusted accordingly for up to the 
full amount.
---------------------------------------------------------------------------

    \10\ Transcript of United States Coast Guard GLPAC Meeting at 97 
(Sept. 7, 2023), https://www.regulations.gov/document/USCG-2023-0438-0009; accessed 10/25/2024.
---------------------------------------------------------------------------

    In Step 4 of the ratemaking calculation, we determine the number of 
Pilots provided by the pilot 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)(1)), the Director adjusts the previous 
year's individual target Pilot compensation by the difference between 
the previous year's BLS ECI for the Transportation and Materials sector 
and the FOMC median economic projections for PCE inflation value used 
to inflate the previous year's target Pilot compensation.
    In the second part of Step 4, (Sec.  404.104(b)(2)), the Director 
then adjusts that value by the FOMC median economic projections for PCE 
inflation for the upcoming year.
    In the final part of Step 4, Sec.  404.104(c) and (d), the Director 
determines the total target 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. Based on the total Pilot 
compensation, the Director determines the individual Apprentice Pilot 
wage benchmark at the rate of 36 percent of the individual target Pilot 
compensation, as calculated according to paragraphs (a) or (b) of this 
section.
    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 
target 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 expenses for each area and district (from Step 2) 
is

[[Page 100814]]

added to the total target 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 pilot association 
to reimburse necessary and reasonable operating expenses; compensating 
trained and rested pilots fairly; and providing appropriate revenue for 
improvements.

VII. Discussion of the Rate Adjustments

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 2022 expenses and revenues. 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. Adjustments have been made by 
the auditors and are explained in the auditor's reports, which are 
available in the docket for this rulemaking, where indicated under the 
ADDRESSES portion of this preamble.
    The recognized operating expenses for District One are shown in 
table 3.

                               Table 3--2022 Recognized Expenses for District One
----------------------------------------------------------------------------------------------------------------
                                                                               District One
                                                        --------------------------------------------------------
                                                             Designated        Undesignated
          Reported operating expenses for 2022          --------------------------------------
                                                            St. Lawrence                             Total
                                                               River           Lake Ontario
----------------------------------------------------------------------------------------------------------------
Applicant Pilot Compensation:
    Salaries...........................................            $35,411            $23,608            $59,019
    Employee benefits..................................             11,628              7,752             19,380
                                                        --------------------------------------------------------
        Total Applicant Pilot Compensation.............             47,039             31,360             78,399
Other Pilotage Cost:
    Pilot Subsistence..................................            148,350             98,900            247,250
    Hotel/Lodging Costs................................             31,222             20,815             52,037
    Travel.............................................            535,016            356,678            891,694
    Payroll Taxes......................................            228,222            152,148            380,370
                                                        --------------------------------------------------------
        Total Other Pilotage Costs.....................            942,810            628,541          1,571,351
Pilot Boat and Dispatch Costs:
    Pilot boat costs...................................            178,691            119,127            297,818
    Dispatch costs.....................................            232,196            154,798            386,994
    Salaries...........................................            253,761            169,174            422,935
                                                        --------------------------------------------------------
        Total Pilot and Dispatch Costs.................            664,648            443,099          1,107,747
Administrative Expenses:
    Legal..............................................                301                201                502
    Legal--shared counsel (K&L Gates)..................              6,178              4,119             10,297
    Legal--USCG Litigation.............................             61,625             41,083            102,708
    Insurance..........................................             44,603             29,735             74,338
    Employee benefits..................................             47,517             31,678             79,195
    Payroll Taxes......................................             48,433             32,288             80,721
    Other taxes........................................             81,576             54,384            135,960
    Real Estate taxes..................................             23,000             15,333             38,333
    Travel.............................................             23,098             15,399             38,497
    Depreciation/Auto leasing/Other....................            108,836             72,558            181,394
    Interest...........................................             20,257             13,504             33,761

[[Page 100815]]

 
    American Pilots' Association (APA) Dues............             32,927             21,951             54,878
    Dues and subscriptions.............................              4,560              3,040              7,600
    Utilities..........................................             40,478             26,986             67,464
    Salaries...........................................            223,539            149,026            372,565
    Accounting/Professional fees.......................              9,900              6,600             16,500
Applicant Pilot Training...............................             69,383             46,255            115,638
Other expenses.........................................             19,083             12,722             31,805
                                                        --------------------------------------------------------
        Total Administrative Expenses..................            865,294            576,862          1,442,156
----------------------------------------------------------------------------------------------------------------
Total Expenses (OPEX + Applicant + Pilot Boats + Admin           2,519,791          1,679,862          4,199,653
 + Capital)............................................
----------------------------------------------------------------------------------------------------------------

B. Step 2: Project Operating Expenses, Adjusting for Inflation or 
Deflation
    In accordance with the text in Sec.  404.102, having identified the 
recognized 2022 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 
2023 inflation rate.\11\ Because the BLS does not provide forecasted 
inflation data, we use economic projections from the Federal Reserve 
for the 2024 and 2025 inflation modification.\12\ Based on that 
information, the calculations for Step 2 are as presented in table 4.
---------------------------------------------------------------------------

    \11\ The CPI is defined as ``All Urban Consumers (CPI-U), All 
Items, 1982-4=100.'' Series CUUR0200SA0 (Downloaded February 22, 
2024). 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; accessed 10/25/2024.
    \12\ The 2024 and 2025 inflation rates are available at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20240918.pdf. We used the Core PCE June Projection found 
in table 1; accessed 10/02/2024.

                              Table 4--Adjusted Operating Expenses for District One
----------------------------------------------------------------------------------------------------------------
                                                                               District One
                                                        --------------------------------------------------------
                                                             Designated        Undesignated          Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)......................         $2,519,791         $1,679,862         $4,199,653
2023 Inflation Modification (@3.8%)....................             95,752             63,835            159,587
2024 Inflation Modification (@2.8%)....................             73,235             48,824            122,059
2025 Inflation Modification (@2.3%)....................             61,842             41,228            103,070
                                                        --------------------------------------------------------
    Adjusted 2025 Operating Expenses...................          2,750,620          1,833,749          4,584,369
----------------------------------------------------------------------------------------------------------------

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. In 
the past, this was done using the staffing model and the process 
described in Sec.  404.103. During the 2023 GLPAC meeting, there was a 
unanimous recommendation by the GLPAC that, after 2024, the Director be 
given discretion to increase the staffing model plus three Pilots per 
District, based on industry demand and to ensure shipping 
reliability.\13\ Additionally, the previous staffing model's maximum is 
now considered the minimum in regard to the number of Pilots needed in 
each district.\14\
---------------------------------------------------------------------------

    \13\ Transcript, supra note 8, at 89-90.
    \14\ Id. at 57-58.
---------------------------------------------------------------------------

    We determine the number of fully registered Pilots based on data 
provided by the St. Lawrence Seaway Pilots Association (SLSPA) as well 
as the previously mentioned recommendation. We determine the number of 
Apprentice Pilots based on input from the district on anticipated 
retirements and staffing needs. These numbers can be found in table 5.

               Table 5--Authorized Pilots for District One
------------------------------------------------------------------------
                         Item                             District One
------------------------------------------------------------------------
2025 Authorized Pilots (total).......................                 20
2025 Pilots Assigned to Designated Areas.............                 11
2025 Pilots Assigned to Undesignated Areas...........                  9
2025 Apprentice Pilots...............................                  1
------------------------------------------------------------------------


[[Page 100816]]

D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice 
Pilot Wage Benchmark
    In this step, we determine the total target 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 2024 target compensation benchmark of $440,658 by 3.0 
percent for a value of $453,878. This accounts for the difference in 
actual third quarter 2024 ECI inflation, which is 5.6 percent, and the 
2024 PCE estimate of 2.6 percent.^{15 16}
---------------------------------------------------------------------------

    \15\ Employment Cost Index, Total Compensation for Private 
Industry workers in Transportation and Material Moving, Annual 
Average, Series ID: CIU2010000520000A. https://www.bls.gov/news.release/eci.t05.htm; accessed 10/31/2024.
    \16\ 2.6 percent was the latest figure available for the 2024 
final rule. Table 1, Summary of Economic Projections, Median Core 
PCE Inflation June Projection. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230920.pdf;.accessed05/31/2024.
---------------------------------------------------------------------------

    The second step accounts for projected inflation from 2024 to 2025, 
which is 2.3 percent.\17\ Based on the projected 2025 inflation 
estimate, the target compensation benchmark for 2025 is $464,317 per 
pilot. The Apprentice Pilot wage benchmark is 36 percent of the target 
Pilot compensation, or $167,154 ($464,317 x 0.36).
---------------------------------------------------------------------------

    \17\ Table 1, Summary of Economic Projections, Median Core PCE 
Inflation June Projection. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20240918.pdf; accessed 10/02/2024.
---------------------------------------------------------------------------

    In accordance with Sec.  404.104(c), we use the revised target 
individual compensation level to derive the total target Pilot 
compensation by multiplying the individual target compensation by the 
estimated number of Registered Pilots for District One, as shown in 
table 6. We estimate that the number of Apprentice Pilots needed will 
be one for District One in the 2025 rulemaking. The total target wages 
for Apprentice Pilots 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 6--Target Compensation for District One
----------------------------------------------------------------------------------------------------------------
                                                                               District One
                                                        --------------------------------------------------------
                                                             Designated        Undesignated          Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation..............................           $464,317           $464,317           $464,317
Number of Pilots.......................................                 11                  9                 20
                                                        --------------------------------------------------------
    Total Target Pilot Compensation....................          5,107,487          4,178,853          9,286,340
Target Apprentice Pilot Compensation...................            167,154            167,154            167,154
Number of Apprentice Pilots............................  .................  .................                  1
                                                        --------------------------------------------------------
    Total Target Apprentice Pilot Compensation.........            100,292             66,862            167,154
----------------------------------------------------------------------------------------------------------------

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 4.8100 percent, 
rounded.\18\ By multiplying the two figures, we obtain the working 
capital fund contribution for each area, as shown in table 7.
---------------------------------------------------------------------------

    \18\ Moody's Seasoned Aaa Corporate Bond Yield, average of 2023 
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; accessed 10/25/2024.

                           Table 7--Working Capital Fund Calculation for District One
----------------------------------------------------------------------------------------------------------------
                                                                               District One
                                                        --------------------------------------------------------
                                                             Designated        Undesignated          Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)...................         $2,750,620         $1,833,749         $4,584,369
Total Target Pilot Compensation (Step 4)...............          5,107,487          4,178,853          9,286,340
Total Target Apprentice Pilot Compensation (Step 4)....            100,292             66,862            167,154
                                                        --------------------------------------------------------
    Total 2025 Expenses................................          7,958,399          6,079,464         14,037,863
----------------------------------------------------------------------------------------------------------------
Working Capital Fund (4.8100%).........................            382,799            292,422            675,221
----------------------------------------------------------------------------------------------------------------

F. Step 6: Project Needed Revenue
    In this step, we add the expenses accrued to derive the total 
revenue needed for each area. These expenses include the projected 
operating expenses (from Step 2), the total 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 8.

[[Page 100817]]



                                    Table 8--Revenue Needed for District One
----------------------------------------------------------------------------------------------------------------
                                                                               District One
                                                        --------------------------------------------------------
                                                             Designated        Undesignated          Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)...................         $2,750,620         $1,833,749         $4,584,369
Total Target Pilot Compensation (Step 4)...............          5,107,487          4,178,853          9,286,340
Total Target Apprentice Pilot Compensation (Step 4)....            100,292             66,862            167,154
Working Capital Fund (Step 5)..........................            382,799            292,422            675,221
                                                        --------------------------------------------------------
    Total Revenue Needed...............................          8,341,198          6,371,886         14,713,084
----------------------------------------------------------------------------------------------------------------

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 entails calculating 
the 10-year traffic average in District One, using the total time on 
task or Pilot bridge hours. To calculate the time on task for each 
district, the Coast Guard used billing data from SeaPro. Because we 
calculate separate figures for designated and undesignated waters, 
there are two parts for each calculation. We show these values in table 
9.

                 Table 9--Time on Task for District One
                                 [Hours]
------------------------------------------------------------------------
                                                District One
               Year                -------------------------------------
                                        Designated        Undesignated
------------------------------------------------------------------------
2023..............................              5,810              7,650
2022..............................              6,577              8,356
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
                                   -------------------------------------
    Average.......................              6,559              7,673
------------------------------------------------------------------------

    Next, we derive the initial hourly rate by dividing the revenue 
needed by the average number of hours for each area. This produces an 
initial rate, which is necessary to produce the revenue needed for each 
area, assuming the amount of traffic is as expected. We present the 
calculations for District One in table 10.

          Table 10--Initial Rate Calculations for District One
------------------------------------------------------------------------
                                        Designated        Undesignated
------------------------------------------------------------------------
Revenue needed (Step 6)...........         $8,341,198         $6,371,886
Average time on task (hours)......              6,559              7,673
Initial rate......................             $1,272               $830
------------------------------------------------------------------------

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 the weight factor report from SeaPro, we calculate the 
average weighting factor for each area using the data from each vessel 
transit from 2014 onward, as shown in tables 11 and 12.

                      Table 11--Average Weighting Factor for District One, Designated Areas
----------------------------------------------------------------------------------------------------------------
                                                             Number of                         Weighted transits
                   Vessel class/year                          transits       Weighting factor          *
----------------------------------------------------------------------------------------------------------------
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

[[Page 100818]]

 
Class 1 (2020).........................................                  8                  1                  8
Class 1 (2021).........................................                 10                  1                 10
Class 1 (2022).........................................                 39                  1                 39
Class 1 (2023).........................................                 19                  1                 19
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).........................................                462               1.15                531
Class 2 (2023).........................................                481               1.15                553
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).........................................                103                1.3                134
Class 3 (2023).........................................                 34                1.3                 44
Class 4 (2014).........................................                271               1.45                393
Class 4 (2015).........................................                251               1.45                364
Class 4 (2016).........................................                214               1.45                310
Class 4 (2017).........................................                285               1.45                413
Class 4 (2018).........................................                393               1.45                570
Class 4 (2019).........................................                730               1.45               1059
Class 4 (2020).........................................                427               1.45                619
Class 4 (2021).........................................                407               1.45                590
Class 4 (2022).........................................                446               1.45                647
Class 4 (2023).........................................                420               1.45                609
                                                        --------------------------------------------------------
    Total..............................................              8,708  .................             11,216
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits / number of  .................               1.29  .................
 transits).............................................
----------------------------------------------------------------------------------------------------------------
* Weighted transits are rounded to the nearest whole number for presentation, but the Total calculation uses
  unrounded figures.


                     Table 12--Average Weighting Factor for District One, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
                                                             Number of                         Weighted transits
                   Vessel class/year                          transits       Weighting factor          *
----------------------------------------------------------------------------------------------------------------
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).........................................                 27                  1                 27
Class 1 (2023).........................................                 31                  1                 31
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).........................................                349               1.15                401
Class 2 (2023).........................................                346               1.15                398
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

[[Page 100819]]

 
Class 3 (2019).........................................                 58                1.3                 75
Class 3 (2020).........................................                 35                1.3                 46
Class 3 (2021).........................................                 71                1.3                 92
Class 3 (2022).........................................                 65                1.3                 85
Class 3 (2023).........................................                 44                1.3                 57
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).........................................                386               1.45                560
Class 4 (2023).........................................                328               1.45                476
                                                        --------------------------------------------------------
    Total..............................................              7,214  .................              9,326
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits / number of  .................               1.29  .................
 transits).............................................
----------------------------------------------------------------------------------------------------------------
* Weighted transits are rounded to the nearest whole number for presentation, but the Total calculation uses
  unrounded figures.

I. Step 9: Calculate Revised Base Rates
    After considering the impact of the weighting factors, we revise 
the base rates in this step so that the total costs of pilotage will be 
equal to the revenue needed. 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 13.

                                  Table 13--Revised Base Rates for District One
----------------------------------------------------------------------------------------------------------------
                                                                                                  Revised rate
                                                            Initial rate    Average weighting   (initial rate /
                          Area                                (Step 7)       factor (Step 8)   average weighting
                                                                                                    factor)
----------------------------------------------------------------------------------------------------------------
District One: Designated...............................             $1,272               1.29               $986
District One: Undesignated.............................                830               1.29                643
----------------------------------------------------------------------------------------------------------------

J. Step 10: Review and Finalize Rates
    In this step, the Director reviews the base pilotage rates 
calculated in Sec.  404.109 of this part to ensure it meets the goal of 
ensuring safe, efficient, and reliable pilotage service. 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 will cover operating expenses 
and infrastructure costs, including average traffic and weighting 
factors. Based on these considerations, the Director did not propose 
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 14.

                                     Table 14--Final Rates for District One
----------------------------------------------------------------------------------------------------------------
                                                                                Final 2024         Final 2025
                    Area                                  Name                pilotage rate      pilotage rate
----------------------------------------------------------------------------------------------------------------
District One: Designated...................  St. Lawrence River...........               $927               $986
District One: Undesignated.................  Lake Ontario.................                608                643
----------------------------------------------------------------------------------------------------------------

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 2022 expenses and revenues. 
For accounting purposes, the financial reports divide expenses into 
designated and undesignated areas. For costs generally accrued by the 
pilot associations, such as employee benefits, the cost is divided 
between the designated and undesignated areas on a pro rata basis. 
Adjustments have been made by the auditors and are explained in the 
auditor's reports, which are available in the docket for this 
rulemaking, where indicated under the ADDRESSES portion of the 
preamble.
    The recognized operating expenses for District Two are shown in 
table 15.

[[Page 100820]]



                               Table 15--2022 Recognized Expenses for District Two
----------------------------------------------------------------------------------------------------------------
                                                                               District Two
                                                        --------------------------------------------------------
                                                            Undesignated        Designated
          Reported operating expenses for 2022          --------------------------------------
                                                                             Southeast Shoal         Total
                                                             Lake Erie        to Port Huron
----------------------------------------------------------------------------------------------------------------
Applicant Pilot Compensation...........................           $236,674           $355,011           $591,685
Employee benefits......................................                 60                 90                150
                                                        --------------------------------------------------------
        Total Other Applicant Cost.....................            236,734            355,101            591,835
Other Pilotage Cost:
    Pilot Subsistence..................................             93,840            140,760            234,600
    Hotel/Lodging Costs................................             70,468            105,703            176,171
    Hotel/Lodging (D2-22-01)...........................           (70,080)          (105,120)          (175,200)
    Travel.............................................             57,324             85,985            143,309
    License renewal....................................                396                594                990
    Payroll Taxes......................................             20,068             30,101             50,169
    License Insurance..................................             10,362             15,543             25,905
                                                        --------------------------------------------------------
        Total Other Pilotage Costs.....................            182,378            273,566            455,944
Pilot Boat and Dispatch Costs:
    Pilot boat expense costs...........................            100,642            150,963            251,605
    Employee Benefits..................................             40,409             60,613            101,022
    Employee Benefits (D2-22-02).......................             46,599             69,899            116,498
    Insurance..........................................              9,257             13,886             23,143
    Salaries...........................................            171,763            257,645            429,408
                                                        --------------------------------------------------------
        Total Pilot and Dispatch Costs.................            368,670            553,006            921,676
Administrative Expenses:
    Legal..............................................                 18                 27                 45
    Legal--shared counsel (K&L Gates)..................              3,210              4,816              8,026
    Insurance..........................................             15,698             23,547             39,245
    Employee benefits..................................             19,884             29,827             49,711
    Employee benefits (D2-22-02).......................             14,208             21,312             35,520
    Payroll Taxes......................................            134,123            201,184            335,307
    Other taxes........................................              8,862             13,294             22,156
    Real Estate taxes..................................              8,754             13,130             21,884
    Travel.............................................             24,482             36,723             61,205
    Depreciation/Auto leasing/Other....................             19,136             28,703             47,839
    APA Dues...........................................             14,843             22,264             37,107
    Dues and subscriptions.............................                470                704              1,174
    Utilities..........................................             27,009             40,513             67,522
    Salaries...........................................             78,662            117,994            196,656
    Accounting/Professional fees.......................             15,850             23,775             39,625
    Pilot Training.....................................             17,661             26,491             44,152
    Other expenses.....................................             10,306             15,458             25,764
                                                        --------------------------------------------------------
        Total Administrative Expenses..................            413,176            619,762          1,032,938
----------------------------------------------------------------------------------------------------------------
Total Expenses (OPEX + Applicant + Pilot Boats + Admin           1,200,958          1,801,435          3,002,393
 + Capital)............................................
----------------------------------------------------------------------------------------------------------------

B. Step 2: Project Operating Expenses, Adjusting for Inflation or 
Deflation
    In accordance with the text in Sec.  404.102, having identified the 
recognized 2022 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 
2023 inflation rate.\19\ Because the BLS does not provide forecasted 
inflation data, we use economic projections from the Federal Reserve 
for the 2024 and 2025 inflation modification.\20\ Based on that 
information, the calculations for Step 2 are presented in table 16.
---------------------------------------------------------------------------

    \19\ CPI, supra note 10.
    \20\ Core PCE June Projection, supra note 11.

                             Table 16--Adjusted Operating Expenses for District Two
----------------------------------------------------------------------------------------------------------------
                                                                               District Two
                                                        --------------------------------------------------------
                                                            Undesignated        Designated           Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)......................         $1,200,958         $1,801,435         $3,002,393
2023 Inflation Modification (@3.8%)....................             45,636             68,455            114,091
2024 Inflation Modification (@2.8%)....................             34,905             52,357             87,262
2025 Inflation Modification (@2.3%)....................             29,474             44,212             73,686
                                                        --------------------------------------------------------

[[Page 100821]]

 
    Adjusted 2025 Operating Expenses...................          1,310,973          1,966,459          3,277,432
----------------------------------------------------------------------------------------------------------------

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. In 
the past, this was done using the staffing model and the process 
described in Sec.  404.103. During the 2023 GLPAC meeting, there was a 
unanimous recommendation by the GLPAC that, after 2024, the Director be 
given discretion to increase the staffing model plus three Pilots per 
District, based on industry demand and to ensure shipping 
reliability.\21\ Additionally, the previous staffing model's maximum is 
now considered the minimum in regard to the number of Pilots needed in 
each district.\22\
---------------------------------------------------------------------------

    \21\ Transcript, supra note 8 at 89-90.
    \22\ Id. at 57-58.
---------------------------------------------------------------------------

    We determine the number of fully registered Pilots based on data 
provided by the Lakes Pilots Association (LPA) as well as the previous 
mentioned recommendation. We determine the number of Apprentice Pilots 
based on input from the district on anticipated retirements and 
staffing needs. These numbers can be found in table 17.

              Table 17--Authorized Pilots for District Two
------------------------------------------------------------------------
                         Item                             District Two
------------------------------------------------------------------------
2025 Authorized Pilots (total).......................                 17
Pilots Assigned to Designated Areas..................                 10
Pilots Assigned to Undesignated Areas................                  7
2025 Apprentice Pilots...............................                  1
------------------------------------------------------------------------

D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice 
Pilot Wage Benchmark
    In this step, we determine the total target 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 2024 target compensation benchmark of $440,658 by 3.0 
percent for a value of $453,878. This accounts for the difference in 
actual third quarter 2024 ECI inflation, which is 5.6 percent, and the 
2024 PCE estimate of 2.6 percent.^{23 24} The second step 
accounts for projected inflation from 2024 to 2025, which is 2.3 
percent.\25\ Based on the projected 2025 inflation estimate, the target 
compensation benchmark for 2025 is $464,317 per Pilot. The Apprentice 
Pilot wage benchmark is 36 percent of the target Pilot compensation, or 
$167,154 ($464,317 x 0.36).
---------------------------------------------------------------------------

    \23\ ECI, supra note 14.
    \24\ Median Core PCE Inflation June Projection, supra note 15.
    \25\ Median Core PCE Inflation June Projection, supra note 16.
---------------------------------------------------------------------------

    In accordance with Sec.  404.104(c), we used the revised target 
individual compensation level to derive the total target Pilot 
compensation by multiplying the individual target compensation by the 
estimated number of Registered Pilots for District Two, as shown in 
table 18. The total target wages for Apprentice Pilots 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 18--Target Compensation for District Two
----------------------------------------------------------------------------------------------------------------
                                                                               District Two
                                                        --------------------------------------------------------
                                                            Undesignated        Designated           Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation..............................           $464,317           $464,317           $464,317
Number of Pilots.......................................                  7                 10                 17
                                                        --------------------------------------------------------
    Total Target Pilot Compensation....................         $3,250,219         $4,643,170         $7,893,389
Target Apprentice Pilot Compensation...................           $167,154           $167,154           $167,154
Number of Apprentice Pilots............................  .................  .................                  1
                                                        --------------------------------------------------------
    Total Target Apprentice Pilot Compensation.........            $66,862           $100,292           $167,154
----------------------------------------------------------------------------------------------------------------

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 4.8100 percent, 
rounded.\26\ By multiplying the two figures, we obtain the working 
capital fund contribution for each area, as shown in table 19.
---------------------------------------------------------------------------

    \26\ Moody's Seasoned Aaa Corporate Bond Yield, supra note 17.

[[Page 100822]]



                           Table 19--Working Capital Fund Calculation for District Two
----------------------------------------------------------------------------------------------------------------
                                                                               District Two
                                                        --------------------------------------------------------
                                                            Undesignated        Designated           Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)...................         $1,310,973         $1,966,459         $3,277,432
Total Target Pilot Compensation (Step 4)...............          3,250,219          4,643,170          7,893,389
Total Target Apprentice Pilot Compensation (Step 4)....             66,862            100,292            167,154
                                                        --------------------------------------------------------
    Total 2025 Expenses................................          4,628,054          6,709,921         11,337,975
----------------------------------------------------------------------------------------------------------------
Working Capital Fund (4.8100%).........................            222,609            322,747            545,356
----------------------------------------------------------------------------------------------------------------

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 20.

                                    Table 20--Revenue Needed for District Two
----------------------------------------------------------------------------------------------------------------
                                                                               District Two
                                                        --------------------------------------------------------
                                                            Undesignated        Designated           Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)...................         $1,310,973         $1,966,459         $3,277,432
Total Target Pilot Compensation (Step 4)...............          3,250,219          4,643,170          7,893,389
Total Target Apprentice Pilot Compensation (Step 4)....             66,862            100,292            167,154
Working Capital Fund (Step 5)..........................            222,609            322,747            545,356
                                                        --------------------------------------------------------
    Total Revenue Needed...............................          4,850,663          7,032,668         11,883,331
----------------------------------------------------------------------------------------------------------------

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 entails calculating 
the 10-year traffic average in District Two, using the total time on 
task or Pilot bridge hours. To calculate the time on task for each 
district, the Coast Guard used billing data from SeaPro. Because we 
calculate separate figures for designated and undesignated waters, 
there are two parts for each calculation. We show these values in table 
21.

                 Table 21--Time on Task for District Two
                                 [Hours]
------------------------------------------------------------------------
                                                   District Two
                  Year                   -------------------------------
                                           Undesignated     Designated
------------------------------------------------------------------------
2023....................................           6,424           8,092
2022....................................           7,695           9,044
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
                                         -------------------------------
    Average.............................           6,426           7,133
------------------------------------------------------------------------

    Next, we derive the initial hourly rate by dividing the revenue 
needed by the average number of hours for each area. This produces an 
initial rate, which is necessary to produce the revenue needed for each 
area, assuming the amount of traffic is as expected. We present the 
calculations for District Two in table 22.

          Table 22--Initial Rate Calculations for District Two
------------------------------------------------------------------------
                                       Undesignated        Designated
------------------------------------------------------------------------
Revenue needed (Step 6)...........         $4,850,663         $7,032,668
Average time on task (hours)......              6,426              7,133
Initial rate......................               $755               $986
------------------------------------------------------------------------

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 the weight factor report from SeaPro, we calculate the 
average weighting factor for each area using the data from each vessel 
transit from 2014 onward, as shown in tables 23 and 24.

[[Page 100823]]



                     Table 23--Average Weighting Factor for District Two, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
                                                                     Number of       Weighting       Weighted
                        Vessel class/year                            transits         factor        transits *
----------------------------------------------------------------------------------------------------------------
Class 1 (2014)..................................................              31               1              31
Class 1 (2015)..................................................              35               1              35
Class 1 (2016)..................................................              32               1              32
Class 1 (2017)..................................................              21               1              21
Class 1 (2018)..................................................              37               1              37
Class 1 (2019)..................................................              54               1              54
Class 1 (2020)..................................................               1               1               1
Class 1 (2021)..................................................               7               1               7
Class 1 (2022)..................................................              57               1              57
Class 1 (2023)..................................................              54               1              54
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)..................................................             202            1.15             232
Class 2 (2023)..................................................             152            1.15             175
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)..................................................               2             1.3               3
Class 3 (2023)..................................................               2             1.3               3
Class 4 (2014)..................................................             636            1.45             922
Class 4 (2015)..................................................             560            1.45             812
Class 4 (2016)..................................................             468            1.45             679
Class 4 (2017)..................................................             319            1.45             463
Class 4 (2018)..................................................             196            1.45             284
Class 4 (2019)..................................................             210            1.45             305
Class 4 (2020)..................................................             201            1.45             291
Class 4 (2021)..................................................             227            1.45             329
Class 4 (2022)..................................................             208            1.45             302
Class 4 (2023)..................................................             169            1.45             245
                                                                 -----------------------------------------------
    Total.......................................................           5,865  ..............           7,662
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits / number of           ..............            1.31  ..............
 transits)......................................................
----------------------------------------------------------------------------------------------------------------
* Weighted transits are rounded to the nearest whole number for presentation, but the Total calculation uses
  unrounded figures.


                      Table 24--Average Weighting Factor for District Two, Designated Areas
----------------------------------------------------------------------------------------------------------------
                                                                     Number of       Weighting       Weighted
                        Vessel class/year                            transits         factor        transits *
----------------------------------------------------------------------------------------------------------------
Class 1 (2014)..................................................              20               1              20
Class 1 (2015)..................................................              15               1              15
Class 1 (2016)..................................................              28               1              28
Class 1 (2017)..................................................              15               1              15
Class 1 (2018)..................................................              42               1              42
Class 1 (2019)..................................................              48               1              48
Class 1 (2020)..................................................               7               1               7
Class 1 (2021)..................................................              12               1              12
Class 1 (2022)..................................................              53               1              53
Class 1 (2023)..................................................              56               1              56
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)..................................................             327            1.15             376

[[Page 100824]]

 
Class 2 (2023)..................................................             312            1.15             359
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)..................................................               4             1.3               5
Class 3 (2023)..................................................               5             1.3               7
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)..................................................             391            1.45             567
Class 4 (2023)..................................................             349            1.45             506
                                                                 -----------------------------------------------
    Total.......................................................           6,171  ..............           8,069
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits/number of transits).  ..............            1.31  ..............
----------------------------------------------------------------------------------------------------------------
* Weighted transits are rounded to the nearest whole number for presentation, but the Total calculation uses
  unrounded figures.

I. Step 9: Calculate Revised Base Rates
    After considering the impact of the weighting factors, we revise 
the base rates in this step so that the total costs of pilotage will be 
equal to the revenue needed. To do this, we divide the initial base 
rates calculated in Step 7 by the average weighting factors calculated 
in Step 8, as shown in table 25.

                                  Table 25--Revised Base Rates for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                                  Revised rate
                                                            Initial rate    Average weighting   (initial rate /
                          Area                                (Step 7)       factor (Step 8)   average weighting
                                                                                                    factor)
----------------------------------------------------------------------------------------------------------------
District Two: Undesignated.............................               $755               1.31               $576
District Two: Designated...............................                986               1.31                753
----------------------------------------------------------------------------------------------------------------

J. Step 10: Review and Finalize Rates
    In this step, the Director reviews the base pilotage rates 
calculated in Sec.  404.109 of this part to ensure it meets the goal of 
ensuring safe, efficient, and reliable pilotage service. 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 will cover operating expenses 
and infrastructure costs, including average traffic and weighting 
factors. Based on these considerations, the Director did not propose 
any alterations to the rates in this step. We modified Sec.  
401.405(a)(3) and (4) to reflect the final rates shown in table 26.

                                     Table 26--Final Rates for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                    Final 2024      Final 2025
                     Area                                     Name                 pilotage rate   pilotage rate
----------------------------------------------------------------------------------------------------------------
District Two: Designated......................  Navigable waters from Southeast             $667            $753
                                                 Shoal to Port Huron, MI.
District Two: Undesignated....................  Lake Erie.......................             597             576
----------------------------------------------------------------------------------------------------------------

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 2022 expenses and revenues. 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,

[[Page 100825]]

the cost is divided between the designated and undesignated areas on a 
pro rata basis. Adjustments have been made by the auditors and are 
explained in the auditor's reports, which are available in the docket 
for this rulemaking, where indicated in the ADDRESSES portion of the 
preamble.
    The recognized operating expenses for District Three are shown in 
table 27.

                              Table 27--2022 Recognized Expenses for District Three
----------------------------------------------------------------------------------------------------------------
                                                                    District Three
                                     ---------------------------------------------------------------------------
                                         Undesignated        Designated        Undesignated
Reported Operating Expenses for 2022 ---------------------------------------------------------
                                       Lakes Huron and                                               Total
                                           Michigan       St. Marys  River    Lake  Superior
----------------------------------------------------------------------------------------------------------------
Applicant Cost:
    Salaries........................           $417,221           $154,305           $177,126           $748,652
    Salaries (D3-22-04).............          (173,587)           (64,199)           (73,694)          (311,480)
    Applicant Benefits..............             54,874             20,295             23,296             98,465
                                     ---------------------------------------------------------------------------
        Total Applicant Cost........            298,508            110,401            126,728            535,637
Other Pilotage Costs:
    Pilot subsistence...............            168,607             62,357             71,580            302,544
    Pilot subsistence (D3-22-06)....              7,664              2,834              3,254             13,752
    Hotel/Lodging Cost..............            163,971             60,643             69,612            294,225
    Hotel/Lodging Cost (D3-22-01)...           (22,392)            (8,282)            (9,506)           (40,180)
    Travel..........................            233,386             86,315             99,081            418,783
    Travel (D3-22-01), (D3-22-03)...           (54,224)           (20,054)           (23,020)           (97,298)
    License Renewal.................                315                117                134                566
    Payroll taxes (D3-22-04)........            192,009             71,013             81,515            344,537
    License Insurance...............             17,757              6,567              7,539             31,863
                                     ---------------------------------------------------------------------------
        Total Other Pilotage Costs..            707,093            261,510            300,189          1,268,792
Pilot Boat and Dispatch Costs:
    Pilot boat costs................            536,327            198,355            227,691            962,373
    Pilot Boat Costs (D3-22-03).....            (9,518)            (3,520)            (4,041)           (17,079)
    Dispatch costs..................            162,843             60,226             69,133            292,201
    Dispatch costs..................           (25,243)            (9,336)           (10,717)           (45,296)
    Insurance.......................             26,193              9,687             11,120             47,000
                                     ---------------------------------------------------------------------------
        Total Pilot Boat and                    690,602            255,412            293,186          1,239,200
         Dispatch Costs.............
Administrative Cost:
    Legal...........................             58,159             21,510             24,691            104,360
    Legal (D3-22-05)................           (48,792)           (18,045)           (20,714)           (87,551)
    Legal--shared counsel (K&L                    4,473              1,654              1,899              8,026
     Gates).........................
    Insurance.......................             22,952              8,489              9,744             41,185
    Employee benefits...............            137,044             50,684             58,180            245,908
    Employee benefits (D3-22-03)....            (6,129)            (2,267)            (2,602)           (10,998)
    Payroll Tax.....................             50,962             18,848             21,635             91,445
    Payroll Tax (D3-22-05)..........           (13,015)            (4,813)            (5,525)           (23,354)
    Other taxes.....................              4,924              1,821              2,090              8,835
    Real Estate Taxes...............              1,524                564                647              2,735
    Depreciation/Auto leasing/Other.            163,196             60,356             69,283            292,835
    APA Dues........................             24,610              9,102             10,448             44,160
    APA Dues (D3-22-02).............            (1,231)              (455)              (522)            (2,208)
    Dues and subscriptions..........             15,716              5,812              6,672             28,200
    Utilities.......................             45,613             16,869             19,364             81,846
    Utilities (D3-22-03)............            (5,449)            (2,015)            (2,313)            (9,778)
    Salaries........................             47,719             17,648             20,259             85,626
    Accounting/Professional fees....             28,079             10,385             11,921             50,385
    Pilot Training..................             45,010             16,646             19,108             80,764
    Other expenses..................             23,172              8,570              9,837             41,579
    Other expenses (D3-22-07).......            (1,250)              (462)              (531)            (2,243)
                                     ---------------------------------------------------------------------------
        Total Administrative                    597,287            220,901            253,571          1,071,759
         Expenses...................
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Other               2,293,490            848,224            973,674          4,115,388
 Costs + Applicant Cost + Pilot
 Boats + Admin).....................
----------------------------------------------------------------------------------------------------------------

B. Step 2: Project Operating Expenses, Adjusting for Inflation or 
Deflation
    In accordance with the text in Sec.  404.102, having identified the 
recognized 2022 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 2023 inflation rate.\27\ Because the BLS does not 
provide forecasted inflation data, we use economic projections from the 
Federal

[[Page 100826]]

Reserve for the 2024 and 2025 inflation modification.\28\ Based on that 
information, the calculations for Step 2 are as presented in table 28.
---------------------------------------------------------------------------

    \27\ CPI, supra note 10.
    \28\ Core PCE June Projection, supra note 11.

                            Table 28--Adjusted Operating Expenses for District Three
----------------------------------------------------------------------------------------------------------------
                                                                              District Three
                                                        --------------------------------------------------------
                                                            Undesignated        Designated           Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)......................         $3,267,164           $848,224         $4,115,388
2023 Inflation Modification (@3.8%)....................            124,152             32,233            156,385
2024 Inflation Modification (@2.8%)....................             94,957             24,653            119,610
2025 Inflation Modification (@2.3%)....................             80,184             20,818            101,002
                                                        --------------------------------------------------------
    Adjusted 2025 Operating Expenses...................          3,566,457            925,928          4,492,385
----------------------------------------------------------------------------------------------------------------

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. In 
the past, this was done using the staffing model and the process 
described in Sec.  404.103. During the 2023 GLPAC meeting, there was a 
unanimous recommendation by the GLPAC that, after 2024, the Director be 
given discretion to increase the staffing model plus three Pilots per 
District, based on industry demand and to ensure shipping reliability. 
\29\ Additionally, the previous staffing model's maximum are now 
considered the minimum regarding the number of Pilots needed in each 
district.\30\
---------------------------------------------------------------------------

    \29\ Transcript, supra note 8, at 89-90.
    \30\ Id. at 57-58.
---------------------------------------------------------------------------

    We determine the number of fully registered Pilots based on data 
provided by the WGLPA, as well as the previous mentioned 
recommendation. We determine the number of Apprentice Pilots based on 
input from the district on anticipated retirements and staffing needs. 
These numbers can be found in table 29.

             Table 29--Authorized Pilots for District Three
------------------------------------------------------------------------
                         Item                            District Three
------------------------------------------------------------------------
2025 Authorized Pilots (total).......................                 24
Pilots Assigned to Designated Areas..................                  5
Pilots Assigned to Undesignated Areas................                 19
2025 Apprentice Pilots...............................                  1
------------------------------------------------------------------------

D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice 
Pilot Wage Benchmark
    In this step, we determine the total target 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 2024 target compensation benchmark of $440,658 by 3.0 
percent for a value of $453,878. This accounts for the difference in 
actual third quarter 2024 ECI inflation, which is 5.6 percent, and the 
2024 PCE estimate of 2.6 percent. \31\ \32\ The second step accounts 
for projected inflation from 2024 to 2025, which is 2.3 percent.\33\ 
Based on the projected 2025 inflation estimate, the target compensation 
benchmark for 2025 is $464,317 per pilot. The apprentice pilot wage 
benchmark is 36 percent of the target Pilot compensation, or $167,154 
($464,317 x 0.36).
---------------------------------------------------------------------------

    \31\ ECI, supra note 14.
    \32\ Median Core PCE Inflation June Projection, supra note 15.
    \33\ Median Core PCE Inflation June Projection, supra note 16.
---------------------------------------------------------------------------

    In accordance with Sec.  404.104(c), we use the revised target 
individual compensation level to derive the total target Pilot 
compensation by multiplying the individual target compensation by the 
estimated number of Registered Pilots for District Three, as shown in 
table 30. We estimate that the number of Apprentice Pilots needed for 
District Three in the 2024 season will be one. The total target wages 
for Apprentice Pilots are allocated with 21 percent for the designated 
area, and 79 percent for the undesignated areas, in accordance with the 
allocation for operating expenses.

                                Table 30--Target Compensation for District Three
----------------------------------------------------------------------------------------------------------------
                                                                              District Three
                                                        --------------------------------------------------------
                                                            Undesignated        Designated           Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation..............................           $464,317           $464,317           $464,317
Number of Pilots.......................................                 19                  5                 24
                                                        --------------------------------------------------------
    Total Target Pilot Compensation....................         $8,822,023         $2,321,585        $11,143,608
Target Apprentice Pilot Compensation...................           $167,154           $167,154           $167,154
Number of Apprentice Pilots............................  .................  .................                  1
                                                        --------------------------------------------------------
    Total Target Apprentice Pilot Compensation.........           $132,052            $35,102           $167,154
----------------------------------------------------------------------------------------------------------------


[[Page 100827]]

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 4.8100 percent, 
rounded.\34\ By multiplying the two figures, we obtain the working 
capital fund contribution for each area, as shown in table 31.
---------------------------------------------------------------------------

    \34\ Moody's Seasoned Aaa Corporate Bond Yield, supra note 17.

                          Table 31--Working Capital Fund Calculation for District Three
----------------------------------------------------------------------------------------------------------------
                                                                              District Three
                                                        --------------------------------------------------------
                                                            Undesignated        Designated           Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)...................         $3,566,457           $925,928         $4,492,385
Total Target Pilot Compensation (Step 4)...............          8,822,023          2,321,585         11,143,608
Total Target Apprentice Pilot Compensation (Step 4)....            132,052             35,102            167,154
                                                        --------------------------------------------------------
    Total 2025 Expenses................................         12,520,532          3,282,615         15,803,147
Working Capital Fund (4.8100%).........................            602,238            157,894            760,132
----------------------------------------------------------------------------------------------------------------

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), and the working capital fund contribution 
(from Step 5). The calculations are shown in table 32.

                                   Table 32--Revenue Needed for District Three
----------------------------------------------------------------------------------------------------------------
                                                                              District Three
                                                        --------------------------------------------------------
                                                            Undesignated        Designated           Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)...................         $3,566,457           $925,928         $4,492,385
Total Target Pilot Compensation (Step 4)...............          8,822,023          2,321,585         11,143,608
Total Target Apprentice Pilot Compensation (Step 4)....            132,052             35,102            167,154
Working Capital Fund (Step 5)..........................            602,238            157,894            760,132
                                                        --------------------------------------------------------
    Total Revenue Needed...............................         13,122,770          3,440,509         16,563,279
----------------------------------------------------------------------------------------------------------------

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 Three using the total time on task or 
Pilot bridge hours. To calculate the time on task for each district, 
the Coast Guard used billing data from SeaPro. Because we calculate 
separate figures for designated and undesignated waters, there are two 
parts for each calculation. We show these values in table 33.

                Table 33--Time on Task for District Three
                                 [Hours]
------------------------------------------------------------------------
                                               District Three
               Year                -------------------------------------
                                       Undesignated        Designated
------------------------------------------------------------------------
2023..............................             25,690              3,501
2022..............................             24,148              3,426
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
                                   -------------------------------------
    Average.......................             22,952              3,208
------------------------------------------------------------------------


[[Page 100828]]

    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 Three in table 34.

         Table 34--Initial Rate Calculations for District Three
------------------------------------------------------------------------
                                       Undesignated        Designated
------------------------------------------------------------------------
Revenue needed (Step 6)...........        $13,122,770         $3,440,509
Average time on task (hours)......             22,952              3,208
Initial rate......................               $572             $1,073
------------------------------------------------------------------------

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 the weight factor report from SeaPro, we calculate the 
average weighting factor for each area using the data from each vessel 
transit from 2014 onward, as shown in tables 35 and 36. Transits are 
listed in both the bridge hour report and the weight factor report. For 
this step, the Coast Guard uses the transits from the weight factor 
report.

                    Table 35--Average Weighting Factor for District Three, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
                                                             Number of                         Weighted transits
                   Vessel class/year                          transits       Weighting factor          *
----------------------------------------------------------------------------------------------------------------
                                                     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).........................................                116                  1                116
Class 1 (2023).........................................                155                  1                155
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).........................................                276               1.15                317
Class 2 (2023).........................................                295               1.15                339
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 3 (2023).........................................                  5                1.3                  7
Class 4 (2014).........................................                394               1.45                571
Class 4 (2015).........................................                375               1.45                544
Class 4 (2016).........................................                332               1.45                481
Class 4 (2017).........................................                367               1.45                532
Class 4 (2018).........................................                337               1.45                489
Class 4 (2019).........................................                334               1.45                484
Class 4 (2020).........................................                339               1.45                492
Class 4 (2021).........................................                356               1.45                516
Class 4 (2022).........................................                363               1.45                526
Class 4 (2023).........................................                356               1.45                516
                                                        --------------------------------------------------------
    Total for Area 6...................................              7,189  .................              9,205
----------------------------------------------------------------------------------------------------------------
                                                     Area 8
----------------------------------------------------------------------------------------------------------------
Class 1 (2014).........................................                  3                  1                  3
Class 1 (2015).........................................                  0                  1                  0
Class 1 (2016).........................................                  4                  1                  4

[[Page 100829]]

 
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).........................................                 10                  1                 10
Class 1 (2023).........................................                  5                  1                  5
Class 2 (2014).........................................                177               1.15                204
Class 2 (2015).........................................                169               1.15                194
Class 2 (2016).........................................                174               1.15                200
Class 2 (2017).........................................                151               1.15                174
Class 2 (2018).........................................                102               1.15                117
Class 2 (2019).........................................                120               1.15                138
Class 2 (2020).........................................                180               1.15                207
Class 2 (2021).........................................                124               1.15                143
Class 2 (2022).........................................                 89               1.15                102
Class 2 (2023).........................................                118               1.15                136
Class 3 (2014).........................................                  3                1.3                  4
Class 3 (2015).........................................                  0                1.3                  0
Class 3 (2016).........................................                  7                1.3                  9
Class 3 (2017).........................................                 18                1.3                 23
Class 3 (2018).........................................                  7                1.3                  9
Class 3 (2019).........................................                  6                1.3                  8
Class 3 (2020).........................................                  1                1.3                  1
Class 3 (2021).........................................                  1                1.3                  1
Class 3 (2022).........................................                  6                1.3                  8
Class 3 (2023).........................................                  0                1.3                  0
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).........................................                243               1.45                352
Class 4 (2023).........................................                268               1.45                389
                                                        --------------------------------------------------------
    Total for Area 8...................................              3,991  .................              5,344
                                                        --------------------------------------------------------
        Combined total.................................             11,180  .................             14,549
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits / number of  .................               1.30  .................
 transits).............................................
----------------------------------------------------------------------------------------------------------------
* Weighted transits are rounded to the nearest whole number for presentation, but the Total calculation uses
  unrounded figures.


                     Table 36--Average Weighting Factor for District Three, Designated Areas
----------------------------------------------------------------------------------------------------------------
                                                             Number of                         Weighted transits
                   Vessel class/year                          transits       Weighting factor          *
----------------------------------------------------------------------------------------------------------------
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).........................................                 74                  1                 74
Class 1 (2023).........................................                 68                  1                 68
Class 2 (2014).........................................                221               1.15                254
Class 2 (2015).........................................                145               1.15                167
Class 2 (2016).........................................                174               1.15                200
Class 2 (2017).........................................                170               1.15                196
Class 2 (2018).........................................                126               1.15                145
Class 2 (2019).........................................                162               1.15                186
Class 2 (2020).........................................                218               1.15                251
Class 2 (2021).........................................                131               1.15                151
Class 2 (2022).........................................                162               1.15                186
Class 2 (2023).........................................                142               1.15                163

[[Page 100830]]

 
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 3 (2023).........................................                  0                1.3                  0
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).........................................                249               1.45                361
Class 4 (2023).........................................                300               1.45                435
                                                        --------------------------------------------------------
    Total..............................................              4,801  .................              6,264
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits / number of  .................               1.30  .................
 transits).............................................
----------------------------------------------------------------------------------------------------------------
* Weighted transits are rounded to the nearest whole number for presentation, but the Total calculation uses
  unrounded figures.

I. Step 9: Calculate Revised Base Rates
    After considering the impact of the weighting factors, we revise 
the base rates in this step so that the total costs of pilotage will be 
equal to the revenue needed. To do this, we divide the initial base 
rates calculated in Step 7 by the average weighting factors calculated 
in Step 8, as shown in table 37.

                                 Table 37--Revised Base Rates for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                                  Revised rate
                                                            Initial rate    Average weighting   (initial rate /
                          Area                                (Step 7)       factor (Step 8)   average weighting
                                                                                                    factor)
----------------------------------------------------------------------------------------------------------------
District Three: Undesignated...........................               $572               1.30               $440
District Three: Designated.............................              1,073               1.30                825
----------------------------------------------------------------------------------------------------------------

J. Step 10: Review and Finalize Rates
    In this step, the Director reviews the base pilotage rates 
calculated in Sec.  404.109 of this part to ensure it meets the goal of 
ensuring safe, efficient, and reliable pilotage service. 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 will cover operating expenses 
and infrastructure costs, including average traffic and weighting 
factors. Based on these considerations, the Director did not propose 
any alterations to the rates in this step. We modified Sec.  
401.405(a)(5) and (6) to reflect the rates shown in table 38.

                                    Table 38--Final Rates for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                Final 2024         Final 2025
                    Area                                  Name                pilotage rate      pilotage rate
----------------------------------------------------------------------------------------------------------------
District Three: Designated.................  St. Marys River..............               $836               $825
District Three: Undesignated...............  Lakes Huron, Michigan, and                   430                440
                                              Superior.
----------------------------------------------------------------------------------------------------------------

VIII. Regulatory Analyses

    We developed this final rule after considering numerous statutes 
and Executive orders related to rulemaking. A summary of our analyses 
based on these statutes or Executive orders follows.

A. Regulatory Planning and Review

    Executive Orders 12866 (Regulatory Planning and Review), as amended 
by Executive Order 14094 (Modernizing Regulatory Review), and 13563 
(Improving Regulation and Regulatory Review) direct agencies to assess 
the costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits--including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity.

[[Page 100831]]

Executive Order 13563 emphasizes the importance of quantifying costs 
and benefits, reducing costs, harmonizing rules, and promoting 
flexibility.
    The Office of Management and Budget (OMB) has not designated this 
final 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.\35\ For this final rule, the Coast Guard estimates an 
increase in cost of approximately $2.88 million to industry. This is 
approximately a 7-percent increase because of the change in revenue 
needed in 2025 compared to the revenue needed in 2024. Primarily 
driving this 7-percent increase is the addition of 3 pilots compared to 
the 2024 season, as well as general increases in inflation and the rate 
of return used for the working capital fund. See table 39.
---------------------------------------------------------------------------

    \35\ 88 FR 12226.

                                 Table 39--Economic Impacts Due to Rate Changes
----------------------------------------------------------------------------------------------------------------
                                                           Affected
             Change                   Description         population             Costs             Benefits
----------------------------------------------------------------------------------------------------------------
Rate changes....................  In accordance with  Owners and          Increase of         New rates cover an
                                   46 U.S.C. Chapter   operators of 280    $2,879,028 due to   association's
                                   93, the Coast       vessels             change in revenue   necessary and
                                   Guard is required   transiting the      needed for 2025     reasonable
                                   to review and       Great Lakes         ($43,159,694)       operating
                                   adjust pilotage     system annually,    from revenue        expenses.
                                   rates annually.     61 United States    needed for 2024     Promotes safe,
                                                       Great Lakes         ($40,280,666) as    efficient, and
                                                       Pilots, 3           shown in table 41.  reliable pilotage
                                                       Apprentice                              service on the
                                                       Pilots, and 3                           Great Lakes.
                                                       pilot                                   Provides fair
                                                       associations.                           compensation,
                                                                                               adequate
                                                                                               training, and
                                                                                               sufficient rest
                                                                                               periods for
                                                                                               Pilots. Ensures
                                                                                               the association
                                                                                               receives
                                                                                               sufficient
                                                                                               revenues to fund
                                                                                               future
                                                                                               improvements.
----------------------------------------------------------------------------------------------------------------

    The Coast Guard is required to review and adjust pilotage rates on 
the Great Lakes annually. See Section II., Basis and Purpose, and 
Regulatory History, 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 in 2025 to 
generate sufficient revenues for each district to reimburse its 
necessary and reasonable operating expenses, to fairly compensate 
properly trained and rested Pilots, and to 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 the undesignated area in District Three. There is 
also a decrease in rates for the undesignated area for District Two and 
the designated area for District Three. These changes 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 280 oceangoing vessels that transit the Great Lakes 
annually, on average, from 2021 to 2023. The Coast Guard estimates that 
there will be 61 Registered Pilots and 3 Apprentice Pilots during 2025, 
an increase of three Pilots from the 2024 season. The shippers affected 
by these rate changes are those owners and operators of domestic 
vessels operating ``on register'' (engaged in foreign trade) and the 
owners and operators of non-Canadian foreign vessels on routes within 
the Great Lakes system. These owners and operators must have Pilots or 
pilotage service as required by 46 U.S.C. 9302. There is no minimum 
tonnage limit or exemption for these vessels. The statute applies only 
to commercial vessels, not to recreational vessels. United States-
flagged vessels not operating on register, and Canadian ``lakers,'' 
which account for most commercial shipping on the Great Lakes, are not 
required by 46 U.S.C. 9302 to have pilots. However, these United 
States- and Canadian-flagged lakers may voluntarily choose to engage a 
Great Lakes Registered Pilot. Vessels that are U.S.-flagged may opt to 
have a Pilot for varying reasons, such as unfamiliarity with designated 
waters and ports, or for insurance purposes.
    The Coast Guard used billing information from the years 2021 
through 2023 from 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. We believe that using 3 years of billing data 
is a better representation of the vessel population currently using 
pilotage services and impacted by this rule.
    We found that 484 unique vessels used pilotage services during the 
years 2021 through 2023. That is, these vessels had a Pilot dispatched 
to the vessel and billing information was recorded in SeaPro. Of these 
vessels, 451 were foreign-flagged vessels, and 33 were U.S.-flagged 
vessels. U.S.-flagged vessels not operating on register are not 
required to have a Registered Pilot, per 46 U.S.C. 9302, but 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 2021 through 2023 as the best 
representation of vessels estimated to be affected by the rates in this 
final rule. From 2021 through 2023, an average of 280 vessels used 
pilotage services annually.\36\ On average, 268 of these vessels were 
foreign-flagged, and 13 were U.S.-flagged vessels that voluntarily 
opted into the pilotage service (these figures are rounded averages).
---------------------------------------------------------------------------

    \36\ 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.

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

[[Page 100832]]

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 depends 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 2024 with the total projected revenues to cover costs in 2025. 
We set pilotage rates so that pilot associations receive enough revenue 
to cover their necessary and reasonable expenses. Shippers pay these 
rates when they engage a Pilot, as required by 46 U.S.C. 9302. 
Therefore, the aggregate payments of shippers to pilot associations are 
equal to the projected necessary revenues for pilot associations. The 
revenues each year represent the total costs that shippers must pay for 
pilotage services. The change in revenue from the previous year is the 
additional cost to shippers discussed in this rule.
    The impacts of the rate changes on shippers are estimated from the 
district pilotage projected revenues (shown in tables 8, 20, and 32 of 
this preamble). The Coast Guard estimates that, for 2025, the projected 
revenue needed for all three districts is $43,159,694.
    To estimate the change in cost to shippers from this final rule, 
the Coast Guard compared the 2025 total projected revenues to the 2024 
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 2024 final 
rule, we estimated the total projected revenue needed for 2024 as 
$40,280,666.\37\ This is the best approximation of 2024 revenues, as, 
at the time of publication of this final rule, the Coast Guard does not 
have enough audited data available for 2024 to revise these 
projections. Table 40 shows the revenue projections for 2024 and 2025 
and details the additional cost increases to shippers by area and 
district as a result of the rate changes on traffic in Districts One, 
Two, and Three.
---------------------------------------------------------------------------

    \37\ 2024 final rule (89 FR 9066), Table 43.

                             Table 40--Effect of the Final Rule by Area and District
                                         [U.S. Dollars; non-discounted]
----------------------------------------------------------------------------------------------------------------
                                                         Revenue needed in  Revenue needed in   Additional costs
                          Area                                  2024               2025           of this rule
----------------------------------------------------------------------------------------------------------------
Total, District One....................................        $13,695,935        $14,713,084         $1,017,149
Total, District Two....................................         10,830,491         11,883,331          1,052,840
Total, District Three..................................         15,754,240         16,563,279            809,039
                                                        --------------------------------------------------------
    System Total.......................................         40,280,666         43,159,694          2,879,028
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    The resulting difference between the projected revenue in 2024 and 
the projected revenue in 2025 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 will 
lead to affected shippers operating in District One experiencing an 
increase in payments of $1,017,149 over the previous year. Affected 
shippers operating in District Two and District Three will experience 
an increase in payments of $1,052,840 and $809,039, respectively, when 
compared with 2024. The overall adjustment in payments will increase 
payments by shippers of $2,879,028 across all three districts (a 7-
percent increase when compared with 2024). Again, because the Coast 
Guard reviews and sets rates for Great Lakes pilotage annually, we 
estimate the impacts as single-year costs, rather than annualizing them 
over a 10-year period.
    Table 41 shows the difference in revenue by revenue-component from 
2024 to 2025 and presents each revenue-component as a percentage of the 
total revenue needed. In both 2024 and 2025, the largest revenue 
component was target pilotage compensation (63 percent of total revenue 
needed in 2024, and 66 percent of total revenue needed in 2025), 
followed by operating expenses (30 percent of total revenue needed in 
2024, and 29 percent of total revenue needed in 2025). The large 
increase in the working capital fund, 26 percent from 2024 to 2025, is 
driven by an increase in the Target Rate of Return on Investment, from 
4.0742 percent in 2022 to 4.8100 percent in 2023.\38\
---------------------------------------------------------------------------

    \38\ Moody's Seasoned Aaa Corporate Bond Yield, supra note 17.

                                                  Table 41--Difference in Revenue by Revenue-Component
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Percentage                   Percentage
                                                                                   of total                     of total   Difference (2025   Percentage
                       Revenue component                         Revenue needed    revenue    Revenue needed    revenue     revenue-- 2024   change from
                                                                     in 2024      needed in       in 2025      needed in       revenue)        previous
                                                                                     2024                         2025                           year
--------------------------------------------------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses....................................     $12,193,810           30     $12,354,186           29          $160,376            1
Total Target Pilot Compensation................................      25,558,164           63      28,323,337           66         2,765,173           11
Total Target Apprentice Pilot Compensation.....................         951,822            2         501,462            1         (450,360)         (47)
Working Capital Fund...........................................       1,576,870            4       1,980,709            5           403,839           26
                                                                ----------------------------------------------------------------------------------------
    Total Revenue Needed.......................................      40,280,666          100      43,159,694          100         2,879,028            7
--------------------------------------------------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    As stated previously, we estimate that there will be a total 
increase of $2,879,028 in revenue needed by the pilot associations. 
This represents an increase in revenue needed for target Pilot 
compensation of $2,765,173; a

[[Page 100833]]

decrease in revenue needed for the total target Apprentice Pilot wage 
benchmark of ($450,360); an increase in the revenue needed for adjusted 
operating expenses of $160,376; and an increase in the revenue needed 
for the working capital fund of $403,839.
    The change in revenue needed for Pilot compensation, $2,765,173, is 
due to three factors: (1) The changes to adjust 2024 pilotage 
compensation to account for the difference between actual ECI inflation 
\39\ (5.6 percent) and predicted PCE inflation \40\ (2.6 percent) for 
2024; (2) projected inflation of pilotage compensation in Step 2 of the 
methodology, using predicted inflation through 2025; \41\ and (3) an 
increase of three authorized Pilots.
---------------------------------------------------------------------------

    \39\ ECI, supra note 14.
    \40\ Median Core PCE Inflation June Projection, supra note 15.
    \41\ Median Core PCE Inflation June Projection, supra note 16.
---------------------------------------------------------------------------

    The target compensation is $464,317 per Pilot in 2025, compared to 
$440,658 in 2024. The changes modify the 2024 Pilot compensation to 
account for the difference between predicted and actual inflation and 
will increase the 2024 target compensation value by 3.0 percent. As 
shown in table 42, this inflation adjustment increases total 
compensation by $13,220 per Pilot, and the total revenue needed by 
$806,404, when accounting for all 61 Pilots.

  Table 42--Change in Revenue Resulting From the Change to Inflation of
                Pilot Compensation Calculation in Step 4
------------------------------------------------------------------------
 
------------------------------------------------------------------------
2024 Target Pilot Compensation.......................           $440,658
Adjusted 2024 Compensation ($440,658 x 1.03).........            453,878
Difference between Adjusted Target 2024 Compensation              13,220
 and Target 2024 Compensation ($453,878-$440,658)....
Increase in total Revenue for 61 Pilots ($13,220 x               806,404
 61).................................................
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    Similarly, table 43 shows the impact of the difference between 
predicted and actual inflation on the target Apprentice Pilot 
compensation benchmark. The inflation adjustment increases the 
compensation benchmark by $4,759 per Apprentice Pilot, and the total 
revenue needed by $14,277 when accounting for all three Apprentice 
Pilots.

  Table 43--Change in Revenue Resulting From the Change to Inflation of
           Apprentice Pilot Compensation Calculation in Step 4
------------------------------------------------------------------------
 
------------------------------------------------------------------------
2024 Target Apprentice Pilot Compensation............           $158,637
Adjusted 2024 Compensation ($158,637 x 1.03).........            163,396
Difference between Adjusted Target 2024 Compensation               4,759
 and Target Compensation ($163,396-$158,637).........
Increase in total Revenue for Apprentices ($4,759 x               14,277
 3)..................................................
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    The Coast Guard predicts that 61 Pilots will be needed for the 2025 
season. This is an increase of three Pilots from the 2024 season. Table 
44 shows the increase of $1,353,292 in revenue needed for Pilot 
compensation. To avoid double counting, this value excludes the change 
in revenue resulting from the change to adjust 2024 Pilot compensation 
to account for the difference between actual and predicted inflation.

   Table 44--Change in Revenue Resulting From Increase of Three Pilots
------------------------------------------------------------------------
 
------------------------------------------------------------------------
2025 Target Compensation.............................           $464,317
Total Number of New Pilots...........................                  3
Total Cost of new Pilots (464,317 x 3)...............         $1,392,951
Difference between Adjusted Target 2024 Compensation             $13,220
 and Target 2024 Compensation (453,878-440,658)......
Increase in total Revenue for 3 Pilots (13,220 x 3)..            $39,659
Net Increase in total Revenue for 3 Pilots (1,392,951-        $1,353,292
 39,659).............................................
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.


[[Page 100834]]

    Similarly, the Coast Guard predicts that three Apprentice Pilots 
will be needed for the 2025 season. This will be a decrease of three 
Apprentice Pilots from the 2024 season. Table 45 shows the decrease of 
($487,185) in revenue needed solely for Apprentice Pilot compensation. 
To avoid double counting, this value excludes the change in revenue 
resulting from the change to adjust 2024 Apprentice Pilot compensation 
to account for the difference between actual and predicted inflation.

 Table 45--Change in Revenue Resulting From Decrease of Three Apprentice
                                 Pilots
------------------------------------------------------------------------
 
------------------------------------------------------------------------
2025 Apprentice Target Compensation..................           $167,154
Total Number of New Apprentices......................                 -3
Total Cost of new Apprentices ($167,154 x -3)........         ($501,462)
Difference between Adjusted Target 2024 Compensation              $4,759
 and Target 2024 Compensation ($163,396-$158,637)....
Increase in total Revenue for -3 Apprentices ($4,759           ($14,277)
 x -3)...............................................
Net Increase in total Revenue for -3 Apprentices (-           ($487,185)
 $501,462--$14,277)..................................
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    Another $605,477 increase is the result of increasing compensation 
for the 61 Pilots, to account for future inflation of 2.3 percent in 
2025. This increases total compensation by $10,439 per Pilot, as shown 
in table 46.

 Table 46--Change in Revenue Resulting From Inflating 2024 Compensation
                                 to 2025
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Adjusted 2024 Compensation...........................           $453,878
2025 Target Compensation ($453,878 x 1.023)..........            464,317
Difference between Adjusted 2024 Compensation and                 10,439
 Target 2025 Compensation ($464,317-$453,878)........
Increase in total Revenue for 58 Pilots ($10,439 x               605,477
 58).................................................
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    Similarly, a $22,548 increase is the result of increasing 
compensation for the three Apprentice Pilots, to account for future 
inflation of 2.3 percent in 2025. This increases total compensation by 
$3,758 per Apprentice Pilot, as shown in table 47.
---------------------------------------------------------------------------

    \42\ The 2024 projected revenues are from the 2024 final rule 
(89 FR 9038), tables 11, 23, and 35. The 2025 projected revenues are 
from tables 8, 20, and 32 of this final rule.

  Table 47--Change in Revenue Resulting From Inflating 2024 Apprentice
                       Pilot Compensation to 2025
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Adjusted 2024 Compensation...........................           $163,396
2025 Target Compensation ($464,317 x 36%)............            167,154
Difference between Adjusted Compensation and Target                3,758
 Compensation ($167,154-$163,396)....................
Increase in total Revenue for 6 Apprentices ($3,758 x             22,548
 6)..................................................
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    Table 48 presents the percentage change in revenue by area and 
revenue-component, excluding surcharges, as they are applied at the 
district level.\42\

[[Page 100835]]



                                                                                      Table 48--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           -----------------------------------------------------------------------
                                                                                                                               ----------------------------------
                                                        2024         2025     Percentage      2024         2025     Percentage                        Percentage     2024       2025    Percentage      2024         2025     Percentage
                                                                                change                                change       2024       2025      change                            change                                change
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
District One:                                        $2,851,215   $2,750,620        (4)    $4,406,580   $5,107,487         16    $285,547   $100,292       (65)    $307,331   $382,799         25    $7,850,673   $8,341,198        6.2
Designated........................................
District One:                                         1,900,809    1,833,749        (4)     3,525,264    4,178,853         19     190,364     66,862       (65)     228,825    292,422         28     5,845,262    6,371,886        9.0
Undesignated......................................
District Two:                                         1,102,673    1,310,973         19     3,525,264    3,250,219        (8)      63,455     66,862          5     191,137    222,609         16     4,882,529    4,850,663      (0.7)
Undesignated......................................
District Two:                                         1,654,014    1,966,459         19     3,965,922    4,643,170         17      95,182    100,292          5     232,845    322,747         39     5,947,963    7,032,668       18.2
Designated........................................
District Three:                                       3,679,209    3,566,457        (3)     7,931,844    8,822,023         11     250,646    132,052       (47)     483,269    602,238         25    12,344,968   13,122,770        6.3
Undesignated......................................
District Three:                                       1,005,891      925,928        (8)     2,203,290    2,321,585          5      66,628     35,102       (47)     133,463    157,894         18     3,409,272    3,440,509        0.9
Designated........................................
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.


[[Page 100836]]

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 that pilot associations produce enough revenue 
to fund future improvements. The rate changes also help recruit and 
retain Pilots, which ensures enough Pilots to meet peak shipping 
demand, helping to reduce delays caused by Pilot shortages.

B. Small Entities

    Under the Regulatory Flexibility Act, 5 U.S.C. 601-612, we 
considered whether this final rule will have a significant economic 
impact on a substantial number of small entities. The term ``small 
entities'' comprises small businesses, not-for-profit organizations 
that are independently owned and operated and are not dominant in their 
fields, and governmental jurisdictions with populations of less than 
50,000.
    For 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.\43\ As described in Section VIII., 
Regulatory Analyses, of this preamble, we found that 484 unique vessels 
used pilotage services during the years 2021 through 2023. These 
vessels are owned by 63 entities, of which 49 are foreign entities that 
operate primarily outside the United States, and the remaining 14 
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.\44\ Table 49 shows the North 
American Industry Classification System (NAICS) codes of the U.S. 
entities, and the small entity standard size established by the SBA.
---------------------------------------------------------------------------

    \43\ See Resources for Reference Solutions Users, ReferenceUSA, 
https://resource.referenceusa.com; accessed 04/22/2024.
    \44\ See Table of Size Standards, https://www.sba.gov/document/support--table-size-standards; accessed 05/01/24. 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 49--NAICS Codes and Small Entities Size Standards
----------------------------------------------------------------------------------------------------------------
                  NAICS                              Description                 Small entity size standard
----------------------------------------------------------------------------------------------------------------
238910..................................  Site Preparation Contractors....  $19,000,000.
423860..................................  Transportation Equipment and      175 Employees.
                                           Supplies (except Motor Vehicle)
                                           Merchant Wholesalers.
488330..................................  Navigational Services to          $47,000,000.
                                           Shipping.
488390..................................  Other Support Activities for      $47,000,000.
                                           Water Transportation.
541611..................................  Administrative Management and     $24,500,000.
                                           General Management Consulting
                                           Services.
561510..................................  Travel Agencies.................  $25,000,000.
562910..................................  Remediation Services............  $25,000,000.
713930..................................  Marinas.........................  $11,000,000.
----------------------------------------------------------------------------------------------------------------

    Of the 14 U.S. entities, four exceed the SBA's small business 
standards for small entities. To estimate the potential impact on the 
remaining 10 small entities, the Coast Guard used their 2023 invoice 
data to estimate their pilotage costs in 2025. We increased their 2023 
costs to account for the changes in pilotage rates resulting from this 
final rule and the 2024 final rule. We estimated the change in cost to 
these entities resulting from this final rule by subtracting their 
estimated 2024 pilotage costs from their estimated 2025 pilotage costs 
and found the average costs to small firms are approximately $13,643, 
with a range of $1,411 to $42,691. We then compared the estimated 
change in pilotage costs between 2024 and 2025 with each firm's annual 
revenue. In all but one case, the impact of the change in estimated 
pilotage expenses will be below 1 percent of revenues. For one entity, 
the impact will be 6.9 percent of revenues.
    In addition to the owners and operators discussed previously, three 
U.S. entities that receive revenue from pilotage services will be 
affected by this final rule. These are the three pilot associations 
that provide and manage pilotage services within the Great Lakes 
districts. District One, SLSPA, uses the NAICS code ``Inland Water 
Freight Transportation'' with a small-entity size standard of 1,050 
employees. District Two, ``LPA'' uses the NAICS code, ``Business 
Associations'' with a small-entity size standard of $15,500,000 in 
revenue. District Three, ``WGLPA'' did not have a registered NAICS code 
through ReferenceUSA. All three associations are considered small 
entities.
    Finally, the Coast Guard did not find any small not-for-profit 
organizations that are independently owned and operated and are not 
dominant in their fields that will be impacted by this final rule. We 
also did not find any small governmental jurisdictions with populations 
of fewer than 50,000 people that will be impacted by this final rule. 
Based on this analysis, we conclude this final rule will not have a 
significant economic impact on a substantial number of small entities.
    Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that 
this final rule will not have a significant economic impact on a 
substantial number of small entities.

C. Assistance for Small Entities

    Under section 213(a) of the Small Business Regulatory Enforcement 
Fairness Act of 1996, Public Law 104-121, we want to assist small 
entities in understanding this final rule so that they can better 
evaluate its effects on them and participate in the rulemaking. The 
Coast Guard will not retaliate against small entities that question or 
complain about this final rule or any policy or action of the Coast 
Guard.
    Small businesses may send comments on the actions of Federal 
employees

[[Page 100837]]

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 final rule calls for no new collection of information under 
the Paperwork Reduction Act of 1995, 44 U.S.C. 3501-3520.

E. Federalism

    A final 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 final 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.'' 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 final rule is consistent with the fundamental 
federalism principles and preemption requirements described in 
Executive Order 13132.

F. Unfunded Mandates

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

G. Taking of Private Property

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

J. Indian Tribal Governments

    This final 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 final 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, and the Administrator of OMB's Office 
of Information and Regulatory Affairs has not designated it as a 
significant energy action.

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 final rule does not use technical standards. Therefore, we did 
not consider the use of voluntary consensus standards.

M. Environment

    We have analyzed this final 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 
determined 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 final rule 
is categorically excluded under paragraphs A3 and L54 of Appendix A, 
Table 1 of the Department of Homeland Security (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 final rule involves adjusting the pilotage rates for 2025 to 
account for changes in district operating expenses, changes in the 
number of pilots, and anticipated inflation. All changes are consistent 
with the Coast Guard's maritime safety missions.

List of Subjects in 46 CFR Part 401

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


[[Page 100838]]


    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 is revised to read as follows:

    Authority:  46 U.S.C. 2103, 2104(a), 6101, 7701, 8105, 9303, 
9304; DHS Delegation No. 00170.1, Revision No. 01.4, paragraphs 
(II)(92)(a), (d), (e), (f).


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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 $986;
    (2) Lake Ontario is $643;
    (3) Lake Erie is $576;
    (4) The navigable waters from Southeast Shoal to Port Huron, MI is 
$753;
    (5) Lakes Huron, Michigan, and Superior is $440; and
    (6) The St. Marys River is $825.
* * * * *

    Dated: December 6, 2024.
A.M. Beach,
Captain, U.S. Coast Guard, Acting, Assistant Commandant for Prevention 
Policy.
[FR Doc. 2024-29128 Filed 12-12-24; 8:45 am]
BILLING CODE 9110-04-P

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