Federal Register: October 30, 2009 (Volume 74, Number 209)
DOCID: fr30oc09-26 FR Doc E9-26212
DEPARTMENT OF HOMELAND SECURITY
Coast Guard
CFR Citation: 46 CFR Part 401
Docket ID: [Docket No. USCG-2009-0883]
RIN ID: RIN 1625-AB39
NOTICE: PROPOSED RULES
DOCID: fr30oc09-26
DOCUMENT ACTION: Notice of proposed rulemaking.
SUBJECT CATEGORY:
Great Lakes Pilotage Rates--2010 Annual Review and Adjustment
DATES: Comments and related material must reach the Docket Management Facility on or before November 30, 2009.
DOCUMENT SUMMARY:
The Coast Guard proposes to update the rates for pilotage on the Great Lakes by 5.07% to generate sufficient revenue to cover allowable expenses, target pilot compensation, and return on investment. The proposed update reflects an August 1, 2010 increase in benchmark contractual wages and benefits and an adjustment for inflation. This rulemaking promotes the Coast Guard strategic goal of maritime safety.
SUMMARY:
Great Lakes Pilotage Rates; 2010 Annual Review and Adjustment
SUPPLEMENTAL INFORMATION
Table of Contents
I. Public Participation and Request for Comments
A. Submitting Comments
B. Viewing Comments and Documents
C. Privacy Act
D. Public Meeting
II. Abbreviations
III. Background and Purpose
IV. Discussion of the Proposed Rule
V. Regulatory Analyses
A. Regulatory Planning and Review
B. Small Entities
C. Assistance for Small Entities
D. Collection of Information
E. Federalism
F. Unfunded Mandates Reform Act
G. Taking of Private Property
H. Civil Justice Reform
I. Protection of Children
J. Indian Tribal Governments
K. Energy Effects
L. Technical Standards
M. Environment
I. Public Participation and Request for Comments
We encourage you to participate in this rulemaking by submitting comments and related materials. All comments received will be posted, without change, to http://www.regulations.gov and will include any personal information you have provided. We have an agreement with the Department of Transportation to use the Docket Management Facility. A. Submitting Comments
If you submit a comment, please include the docket number for this rulemaking, (USCG20090883), indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation. You may submit your comments and material online or by fax, mail, or hand delivery, but please use only one of these means. We recommend that you include your name and a mailing address, an email address, or a phone number in the body of your document so that we can contact you if we have questions regarding your submission.
To submit your comment online, go to http://www.regulations.gov, click on the ``submit a comment'' box, which will then become highlighted in blue. In the ``Document Type'' drop down menu select ``Proposed Rule'' and insert ``USCG20090883'' in the ``Keyword'' box. Click ``Search'' then click on the balloon shape in the ``Actions'' column. If you submit your comments by mail or hand delivery, submit them in an unbound format, no larger than 8\1/2\ by 11 inches, suitable for copying and electronic filing. If you submit comments by mail and would like to know that they reached the Facility, please enclose a stamped, selfaddressed postcard or envelope.
We will consider all comments and material received during the comment period and may change this proposed rule based on your comments.
B. Viewing Comments and Documents
To view comments, as well as documents mentioned in this preamble as being available in the docket, go to http://www.regulations.gov, click on the ``read comments'' box, which will then become highlighted in blue. In the ``Keyword'' box insert ``USCG20090883'' and click ``Search.'' Click the ``Open Docket Folder'' in the ``Actions'' column. If you do not have access to the internet, you may view the docket online by visiting the Docket Management Facility in Room W12140 on the ground floor of the Department of Transportation West Building, 1200 New Jersey Avenue, SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. We have an agreement with the Department of Transportation to use the Docket Management Facility.
C. Privacy Act
Anyone can search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review a Privacy Act system of records notice regarding our public dockets in the January 17, 2008 issue of the Federal Register (73 FR 3316).
D. Public Meeting
We do not plan to hold a public meeting. But you may submit a
request for one to the Docket Management Facility at the address under
ADDRESSES explaining why one would be beneficial. If we determine that
one would aid this rulemaking, we will hold one at a time and place announced by a later notice in the Federal Register.
II. Abbreviations
AMOU American Maritime Officers Union
MISLE Marine Information for Safety and Law Enforcement
NAICS North American Industry Classification System
[[Page 56154]]
NEPA National Environmental Policy Act of 1969
NPRM Notice of Proposed Rulemaking
NVMC National Vessel Movement Center
OMB Office of Management and Budget
III. Background and Purpose
This notice of proposed rulemaking (NPRM) is issued pursuant to Coast Guard regulations in 46 CFR Parts 401404. Those regulations implement the Great Lakes Pilotage Act of 1960, 46 U.S.C. Chapter 93, which requires foreignflag vessels and U.S.flag vessels engaged in foreign trade to use federally registered Great Lakes pilots while transiting the St. Lawrence Seaway and the Great Lakes system, and which requires the Secretary of Homeland Security to ``prescribe by regulation rates and charges for pilotage services, giving consideration to the public interest and the costs of providing the services.'' 46 U.S.C. 9303(f).
The U.S. waters of the Great Lakes and the St. Lawrence Seaway are divided into three pilotage Districts. Pilotage in each District is provided by an association certified by the Coast Guard Director of Great Lakes Pilotage to operate a pilotage pool. It is important to note that, while the Coast Guard sets rates, it does not control the actual compensation that pilots receive. This is determined by each of the three District associations, which use different compensation practices.
District One, consisting of Areas 1 and 2, includes all U.S. waters of the St. Lawrence River and Lake Ontario. District Two, consisting of Areas 4 and 5, includes all U.S. waters of Lake Erie, the Detroit River, Lake St. Clair, and the St. Clair River. District Three, consisting of Areas 6, 7, and 8, includes all U.S. waters of the St. Mary's River, Sault Ste. Marie Locks, and Lakes Michigan, Huron, and Superior. Area 3 is the Welland Canal, which is serviced exclusively by the Canadian Great Lakes Pilotage Authority and, accordingly, is not included in the U.S. rate structure. Areas 1, 5, and 7 have been designated by Presidential Proclamation, pursuant to the Great Lakes Pilotage Act of 1960, to be waters in which pilots must at all times be fully engaged in the navigation of vessels in their charge. Areas 2, 4, 6, and 8 have not been so designated because they are open bodies of water. Under the Great Lakes Pilotage Act of 1960, pilots assigned to vessels in these areas are only required to ``be on board and available to direct the navigation of the vessel at the discretion of and subject to the customary authority of the master.'' 46 U.S.C. 9302(a)(1)(B).
The Coast Guard pilotage regulations require annual reviews of pilotage rates and the setting of new rates at least once every five years, or sooner, if annual reviews show a need. 46 CFR 404.1. To assist in calculating pilotage rates, the pilotage associations are required to submit to the Coast Guard annual financial statements prepared by certified public accounting firms. In addition, every fifth year, in connection with the mandatory rate adjustment, the Coast Guard contracts with an independent accounting firm to conduct a full audit of the accounts and records of the pilotage associations and prepare and submit financial reports relevant to the ratemaking process. In those years when a full ratemaking is conducted, the Coast Guard generates the pilotage rates using Appendix A to 46 CFR part 404. Between the fiveyear full ratemaking intervals, the Coast Guard annually reviews the pilotage rates using Appendix C to Part 404, and adjusts rates when deemed appropriate. Terms and formulas used in Appendix A and Appendix C are defined in Appendix B to Part 404.
The last full ratemaking using the Appendix A methodology was published on April 3, 2006 (71 FR 16501). Since then, rates have been reviewed under Appendix C and adjusted annually: 2007 (72 FR 53158, Sep. 18, 2007); 2008 (interim rule 73 FR 15092, Mar. 21, 2008; final rule 74 FR 220, Jan. 5, 2009); 2009 (74 FR 18669, Jul. 21, 2009). The present rulemaking proposes a rate adjustment for the 2010 shipping season, based on an Appendix C review. At the conclusion of this ratemaking cycle and during the latter portion of the 2010 navigation season, we anticipate publishing an NPRM proposing a rate adjustment based upon an Appendix A 5year review and full audit of the pilot association books and records.
IV. Discussion of the Proposed Rule
The pilotage regulations require that pilotage rates be reviewed annually. If the annual review shows that pilotage rates are within a reasonable range of the base target pilot compensation set in the previous ratemaking, no adjustment to the rates will be initiated. However, if the annual review indicates that an adjustment is necessary, then the Coast Guard will establish new pilotage rates pursuant to 46 CFR 404.10.
A. Proposed Pilotage Rate ChangesSummarized
The Appendix C to 46 CFR 404 ratemaking methodology is intended for use during the years between Appendix A full ratemaking reviews and adjustments. This section summarizes the rate changes proposed for 2010, and then discusses in detail how the proposed changes were calculated under Appendix C.
We are proposing an increase of 5.07% across all Districts over the
last pilotage rate adjustment. This reflects an August 1, 2010,
increase in benchmark contractual wages and benefits and an inflation
adjustment. This rate increase would not go into effect until August 1,
2010. Actual rate increases vary by Area, and are summarized in Table 1.
Table 12010 Area Rate Changes
Then the
proposed
percentage
If pilotage service is required in: increases over
the current rate
is:
Area 1 (Designated waters)............................ 4.65
Area 2 (Undesignated waters).......................... 5.33
Area 4 (Undesignated waters).......................... 5.47
Area 5 (Designated waters)............................ 4.96
Area 6 (Undesignated waters).......................... 5.27
Area 7 (Designated waters)............................ 4.73
Area 8 (Undesignated waters).......................... 5.17
Overall Rate Change (percentage change in overall 5.07 prospective unit costs/base unit costs; see Table 18)
[[Page 56155]]
Rates for cancellation, delay, or interruption in rendering services (46 CFR 401.420), and basic rates and charges for carrying a U.S. pilot beyond the normal change point, or for boarding at other than the normal boarding point (46 CFR 401.428), have been increased by 5.07% in all Areas.
B. Calculating the Rate Adjustment
The Appendix C ratemaking calculation involves eight steps:
Step 1: Calculate the total economic costs for the base period (i.e. pilot compensation expense plus all other recognized expenses plus the return element) and divide by the total bridge hours used in setting the base period rates;
Step 2: Calculate the ``expense multiplier,'' the ratio of other expenses and the return element to pilot compensation for the base period;
Step 3: Calculate an annual ``projection of target pilot compensation'' using the same procedures found in Step 2 of Appendix A;
Step 4: Increase the projected pilot compensation in Step 3 by the expense multiplier in Step 2;
Step 5: Adjust the result in Step 4, as required, for inflation or deflation;
Step 6: Divide the result in Step 5 by projected bridge hours to determine total unit costs;
Step 7: Divide prospective unit costs in Step 6 by the base period unit costs in Step 1; and
Step 8: Adjust the base period rates by the percentage changes in unit cost in Step 7.
The base data used to calculate each of the eight steps comes from the 2009 Appendix C review. The Coast Guard also used the most recent union contracts between the American Maritime Officers Union (AMOU) and vessel owners and operators on the Great Lakes to determine target pilot compensation. Bridge hour projections for the 2010 season have been obtained from historical data, pilots, and industry. All documents and records used in this rate calculation have been placed in the public docket for this rulemaking and are available for review at the addresses listed under ADDRESSES.
Some values may not total exactly due to format rounding for presentation in charts and explanations in this section. The rounding does not affect the integrity or truncate the real value of all calculations in the ratemaking methodology described below. Also, please note that in previous rulemakings we calculated an expense multiplier for each District. This was unnecessary because Appendix C calculations are based on Area figures, not District figures. District figures, where they are shown in the following tables, now reflect only the arithmetical totals for each of the District's Areas.
Step 1: Calculate the total economic cost for the base period. In
this step, for each Area, we add the total cost of target pilot
compensation, all other recognized expenses, and the return element
(net income plus interest). We divide this sum by the total bridge
hours for each Area. The result is the cost in each Area of providing
pilotage service per bridge hour for the base period. Tables 2 through 4 summarize the Step 1 calculations:
Table 2Total Economic Cost for Base Period (2009), Areas in District One
Area 1 St. Area 2 Lake Total* District
Lawrence River Ontario One
Base operating expense (less base return element)... $538,155 $547,489 $1,085,644
Base target pilot compensation...................... + $1,617,955 + $981,589 + $2,599,544
Base return element................................. + $10,763 + $16,425 + $27,188
Subtotal\*\..................................... = $2,166,873 = $1,545,503 = $3,712,376
Base bridge hours................................... / 5,203 / 5,650 / 10,853
Base cost per bridge hour........................... = $416.47 = $273.54 = $342.06
*As explained in the text preceding Step 1, District totals have been expressed differently from previous
rulemakings. This accounts for slight differences between the District totals shown in Table 16 of the 2009 final rule and the District totals shown in this table.
Table 3Total Economic Cost for Base Period (2009), Areas in District Two
Area 5 Southeast
Area 4 Lake Erie Shoal to Port Total* District
Huron, MI Two
Base operating expense.............................. $502,087 $789,202 $1,291,289
Base target pilot compensation...................... + $785,271 + $1,617,955 + $2,403,226
Base return element................................. + $25,104 + $31,568 + $56,672
Subtotal........................................ = $1,312,463 = $2,438,725 = $3,751,188
Base bridge hours................................... / 7,320 / 5,097 / 12,417
Base cost per bridge hour........................... = $179.30 = $478.46 = $302.10 *See footnote to Table 2.
Table 4Total Economic Cost for Base Period (2009), Areas in District Three
Area 6 Lakes Huron Area 7 St. Mary's Area 8 Lake Total* District
and Michigan River Superior Three
Base operating expense.......... $814,358 $398,461 $641,580 $1,854,399
Base target pilot compensation.. + $1,570,542 + $1,078,637 + $1,374,224 + $4,023,403
Base return element............. + $32,574 + $11,954 + $19,247 + $63,776
Subtotal.................... = $2,417,474 = $1,489,052 = $2,035,052 = $5,941,578 [[Page 56156]]
Base bridge hours............... / 13,406 / 3,259 / 11,630 / 28,295
Base cost per bridge hour....... = $180.33 = $456.90 = $174.98 = $209.99 *See footnote to Table 2.
Step 2. Calculate the expense multiplier. In this step, for each
Area, we add the base operating expense and the base return element.
Then, we divide the sum by the base target pilot compensation to get
the expense multiplier for each Area. Tables 5 through 7 show the Step 2 calculations.
Table 5Expense Multiplier, Areas in District One
Area 1 St. Area 2 Lake
Lawrence River Ontario Total District One
Base operating expense.............................. $538,155 $547,489 $1,085,644
Base return element................................. + $10,763 + $16,425 + $27,188
Subtotal........................................ = $548,918 = $563,914 = $1,112,832
Base target pilot compensation...................... / $1,617,955 / $981,589 $2,599,544
Expense multiplier.................................. 0.33927 0.57449 n/a
Table 6Expense Multiplier, Areas in District Two
Area 5 Southeast
Area 4 Lake Erie Shoal to Port Total District Two
Huron, MI
Base operating expense.............................. $502,087 $789,202 $1,291,289
Base return element................................. + $25,104 + $31,568 + $56,672
Subtotal............................................ = $527,192 = $820,770 = $1,347,962
Base target pilot compensation...................... / $785,271 / $1,617,955 $2,403,226
Expense multiplier.................................. 0.67135 0.50729 n/a
Table 7Expense Multiplier, Areas in District Three
Area 6 Lakes Huron Area 7 St. Mary's Area 8 Lake Total District
and Michigan River Superior Three
Base operating Expense.......... $814,358 $398,461 $641,580 $1,854,399
Base return element............. + $32,574 + $11,954 + $19,247 + $63,776
Subtotal.................... = $846,932 = $410,415 = $660,828 = $1,918,175 Base target pilot compensation.. / $1,570,542 / $1,078,637 / $1,374,224 $4,023,403 Expense multiplier.............. 0.53926 0.38049 0.48087 n/a
Step 3. Calculate annual projection of target pilot compensation.
In this step, we determine the new target rate of compensation and the
new number of pilots needed in each pilotage Area, to determine the new target pilot compensation for each Area.
(a) Determine new target rate of compensation. Target pilot
compensation is based on the average annual compensation of first mates
and masters on U.S. Great Lakes vessels. For pilots in undesignated
waters, we approximate the first mates' compensation and, in designated
waters, we approximate the master's compensation (first mates' wages
multiplied by 150% plus benefits). To determine first mates' and
masters' average annual compensation, we use data from the most recent
AMOU contracts with the U.S. companies engaged in Great Lakes shipping.
Where different AMOU agreements apply to different companies, we
apportion the compensation provided by each agreement according to the
percentage of tonnage represented by companies under each agreement.
As of May 2009, there are two current AMOU contracts, which we designate Agreement A and Agreement B. Agreement A applies to vessels operated by Key Lakes, Inc., and Agreement B applies to all vessels operated by American Steamship Co. and Mittal Steel USA, Inc.
Both Agreement A and Agreement B provide for a 3% wage increase effective August 1, 2010. Under Agreement A, the daily wage rate will be increased from $262.73 to $270.61. Under Agreement B, the daily wage rate will be increased from $323.86 to $333.57.
To calculate monthly wages, we apply Agreement A and Agreement B
monthly multipliers of 54.5 and 49.5, respectively, to the daily rate. [[Page 56157]]
Agreement A's 54.5 multiplier represents 30.5 average working days,
15.5 vacation days, 4 days for four weekends, 3 bonus days, and 1.5
holidays. Agreement B's 49.5 multiplier represents 30.5 average working days, 16 vacation days, and 3 bonus days.
To calculate average annual compensation, we multiply monthly figures by 9 months, the length of the Great Lakes shipping season.
Table 8 shows new wage calculations based on Agreements A and B effective August 1, 2010.
Table 8Wages
Pilots on
Pilots on designated waters
Monthly component undesignated (undesignated x
waters 150%)
FOR FURTHER INFORMATION CONTACT
For questions on this proposed rule, call Mr. Paul M. Wasserman, Chief, Great Lakes Pilotage Branch, Commandant (CG54122), U.S. Coast Guard, at 2023721535, by fax 202 3721929, or by email at Paul.M.Wasserman@uscg.mil. If you have questions on viewing or submitting material to the docket, call Renee V. Wright, Program Manager, Docket Operations, telephone 2023669826.