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Rule2024-02410

Great Lakes Pilotage Rates-2024 Annual Review

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Published

February 9, 2024

Effective

March 11, 2024

Issuing agencies

Homeland Security DepartmentCoast Guard

Abstract

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

Full Text

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<title>Federal Register, Volume 89 Issue 28 (Friday, February 9, 2024)</title>
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[Federal Register Volume 89, Number 28 (Friday, February 9, 2024)]
[Rules and Regulations]
[Pages 9038-9072]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-02410]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

46 CFR Part 401

[Docket No. USCG-2023-0438]
RIN 1625-AC89

Great Lakes Pilotage Rates--2024 Annual Review

AGENCY: Coast Guard, DHS.

ACTION: Final rule.

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

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

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

FOR FURTHER INFORMATION CONTACT: For information about this document,
call or email Mr. Brian Rogers, Commandant, Office of Waterways and
Ocean Policy--Great Lakes Pilotage Division (CG-WWM-2), Coast Guard;
telephone 410-360-9260, email <a href="/cdn-cgi/l/email-protection#efad9d868e81c1bd80888a9d9caf9a9c8c88c1828683">[email&#160;protected]</a>.

SUPPLEMENTARY INFORMATION:

Table of Contents for Preamble

I. Abbreviations
II. Executive Summary
III. Basis and Purpose
IV. Background
V. Discussion of Comments and Changes
VI. Summary of the Ratemaking Methodology
VII. Historic Methodological and Other Changes
VIII. Individual Target Pilot Compensation Benchmark
IX. Discussion of Rate Adjustments
District One
A. Step 1: Recognize Previous Operating Expenses
B. Step 2: Project Operating Expenses, Adjusting for Inflation
or Deflation
C. Step 3: Estimate Number of Registered Pilots and Apprentice
Pilots
D. Step 4: Determine Target Pilot Compensation Benchmark and
Apprentice Pilot Wage Benchmark
E. Step 5: Project Working Capital Fund
F. Step 6: Project Needed Revenue
G. Step 7: Calculate Initial Base Rates
H. Step 8: Calculate Average Weighting Factors by Area
I. Step 9: Calculate Revised Base Rates
J. Step 10: Review and Finalize Rates
District Two
A. Step 1: Recognize Previous Operating Expenses
B. Step 2: Project Operating Expenses, Adjusting for Inflation
or Deflation
C. Step 3: Estimate Number of Registered Pilots and Apprentice
Pilots
D. Step 4: Determine Target Pilot Compensation Benchmark and
Apprentice Pilot Wage Benchmark
E. Step 5: Project Working Capital Fund
F. Step 6: Project Needed Revenue
G. Step 7: Calculate Initial Base Rates
H. Step 8: Calculate Average Weighting Factors by Area
I. Step 9: Calculate Revised Base Rates
J. Step 10: Review and Finalize Rates
District Three
A. Step 1: Recognize Previous Operating Expenses
B. Step 2: Project Operating Expenses, Adjusting for Inflation
or Deflation
C. Step 3: Estimate Number of Registered Pilots and Apprentice
Pilots
D. Step 4: Determine Target Pilot Compensation Benchmark and
Apprentice Pilot Wage Benchmark
E. Step 5: Project Working Capital Fund
F. Step 6: Project Needed Revenue
G. Step 7: Calculate Initial Base Rates
H. Step 8: Calculate Average Weighting Factors by Area
I. Step 9: Calculate Revised Base Rates
J. Step 10: Review and Finalize Rates
X. Regulatory Analyses
A. Regulatory Planning and Review
B. Small Entities
C. Assistance for Small Entities
D. Collection of Information
E. Federalism
F. Unfunded Mandates
G. Taking of Private Property
H. Civil Justice Reform
I. Protection of Children
J. Indian Tribal Governments
K. Energy Effects
L. Technical Standards
M. Environment

I. Abbreviations

2023 final rule Great Lakes Pilotage Rates--2023 Annual Ratemaking
and Review of Methodology final rule
AMO American Maritime Officers Union
APA American Pilots' Association
BLS Bureau of Labor Statistics
CFR Code of Federal Regulations
CPA Certified public accountant
CPI Consumer Price Index
DHS Department of Homeland Security
Director U.S. Coast Guard's Director of the Great Lakes Pilotage
ECI Employment Cost Index
FOMC Federal Open Market Committee
FR Federal Register
GLPA Great Lakes Pilotage Authority (Canadian)
GLPAC Great Lakes Pilotage Advisory Committee
GLPMS Great Lakes Pilotage Management System

[[Page 9039]]

LPA Lakes Pilots Association
NAICS North American Industry Classification System
NPRM Notice of proposed rulemaking
OMB Office of Management and Budget
PCE Personal Consumption Expenditures
Sec. Section
SBA Small Business Administration
SLSPA Saint Lawrence Seaway Pilotage Association
U.S.C. United States Code
WGLPA Western Great Lakes Pilots Association

II. Executive Summary

In accordance with Title 46 of the United States Code (U.S.C.),
Chapter 93,\1\ the Coast Guard regulates pilotage for oceangoing
vessels on the Great Lakes and St. Lawrence Seaway--including setting
the rates for pilotage services and adjusting them on an annual basis
for the upcoming shipping season. The shipping season begins when the
locks open in the St. Lawrence Seaway, which allows traffic access to
and from the Atlantic Ocean. The opening of the locks varies annually,
depending on waterway conditions, but is generally in March or April.
The rates, which for the 2024 season range from $430 to $927 per pilot
hour (depending on which of the specific 6 areas pilotage service is
provided), are paid by shippers to the pilot associations. The three
pilot associations, which are the exclusive U.S. source of registered
pilots on the Great Lakes, use this revenue to cover operating
expenses, maintain infrastructure, compensate apprentice and registered
pilots, acquire and implement technological advances, train new
personnel, and provide for continuing professional development. These
rates are the foundation for safe, efficient, and reliable pilotage
service to facilitate maritime commerce, protect the marine
environment, and comply with National Transportation Safety Board
recommendations regarding staffing and pilot fatigue.
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\1\ 46 U.S.C. 9301-9308.
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In accordance with statutory and regulatory requirements, the Coast
Guard employs the ratemaking methodology introduced in 2016 \2\ and
last updated in 2022.\3\ Our ratemaking methodology calculates the
revenue needed for each pilotage association (operating expenses,
compensation for the number of pilots, and anticipated inflation), and
then divides that amount by the expected demand for pilotage services
over the course of the coming year to produce an hourly rate. This is a
10-step methodology to calculate rates, which is explained in detail in
section VI., Summary of the Ratemaking Methodology, in the preamble to
this rule.
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\2\ 81 FR 11908, March 7, 2016.
\3\ 87 FR 18488. March 30, 2022.
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In this final rule, we conduct our annual review and interim
adjustment to the base pilotage rates for 2024. The Coast Guard last
conducted a full ratemaking in 2023, with the ``Great Lakes Pilotage
Rates--2023 Annual Ratemaking and Review of Methodology'' final rule
(hereafter the ``2023 final rule'') (88 FR 12226, published February
27, 2023).\4\ Per title 46 of the Code of Federal Regulations (CFR),
section 404.100(b), via this final rule, the Coast Guard's Director of
the Great Lakes Pilotage (``the Director'') establishes base pilotage
rates by an interim ratemaking pursuant to Sec. Sec. 404.101 through
404.110.
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\4\ <a href="https://www.govinfo.gov/content/pkg/FR-2023-02-27/pdf/2023-03212.pdf">https://www.govinfo.gov/content/pkg/FR-2023-02-27/pdf/2023-03212.pdf</a>. (Last accessed 5/12/2023.)
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The Coast Guard sets base rates to meet the goal of promoting safe,
efficient, and reliable pilotage service on the Great Lakes by
generating sufficient revenue for each pilotage association to
reimburse its necessary and reasonable operating expenses, fairly
compensate trained and rested pilots, and provide appropriate funds to
use for improvements. A 10-year average is used when calculating
traffic to smooth out anomalies caused by unexpected events, such as
those caused by the COVID-19 pandemic. The Coast Guard estimates that
this rule will result in $2,621,471 of additional costs. This
represents an increase in revenue needed for target pilot compensation,
an increase in revenue needed for the total apprentice pilot wage
benchmark, an increase in the revenue needed for adjusted operating
expenses, and an increase in the revenue needed for the working capital
fund.
Based on the ratemaking model discussed in this final rule, the
Coast Guard is establishing the rates shown in table 1.

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

This rule affects 58 U.S. Registered pilots, 6 apprentice pilots, 3
pilot associations, and the owners and operators of an average of 296
oceangoing vessels that transit the Great Lakes annually. This rule
will not affect the Coast Guard's budget or increase Federal spending.
The estimated overall annual regulatory economic impact of this rate
change is a net increase of $2,621,471 in estimated payments made by
shippers during the 2024 shipping season. This rule establishes the
2024 yearly target compensation for pilots on the Great Lakes at
$440,658 per pilot (a $16,260 increase, or 3.83 percent, over their
2023 target compensation). Because the Coast Guard must review, and, if
necessary, adjust rates each year, we analyze these as single-year
costs and do not annualize them over 10 years. Section X., Regulatory
Analyses, in this preamble provides the regulatory impact analyses of
this rule.

III. Basis and Purpose

The legal basis of this rulemaking is 46 U.S.C. Chapter 93,\5\
which requires foreign merchant vessels and United States vessels
operating ``on register'' (meaning United States vessels engaged in
foreign trade) to use United States or Canadian pilots while transiting
the United States waters of the St. Lawrence Seaway and the Great Lakes
system.\6\ For U.S. Great Lakes pilots, the statute requires the
Secretary to ``prescribe by

[[Page 9040]]

regulation rates and charges for pilotage services, giving
consideration to the public interest and the costs of providing the
services.'' \7\ The statute requires that rates be established or
reviewed and adjusted each year, no later than March 1.\8\ The statute
also requires that base rates be established by a full ratemaking at
least once every 5 years, and, in years when base rates are not
established, they must be reviewed and, if necessary, adjusted.\9\ The
Secretary's duties and authority under 46 U.S.C. Chapter 93 have
generally been delegated to the Coast Guard.\10\
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\5\ 46 U.S.C. 9301-9308.
\6\ 46 U.S.C. 9302(a)(1).
\7\ 46 U.S.C. 9303(f).
\8\ Ibid.
\9\ Ibid.
\10\ Department of Homeland Security (DHS) Delegation No.
00170.1 (II)(92)(f), Revision No. 01.3. The Secretary retains the
authority under section 9307 to establish, and appoint members to, a
Great Lakes Pilotage Advisory Committee. <a href="https://dhsconnect.dhs.gov/org/comp/mgmt/policies/Delegations/00170.1.pdf">https://dhsconnect.dhs.gov/org/comp/mgmt/policies/Delegations/00170.1.pdf</a>. (Last accessed 11/8/
2023.)
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Each pilot association is an independent business and is the sole
provider of pilotage services in its district of operation. Each pilot
association is responsible for funding its own operating expenses,
maintaining infrastructure, compensating pilots and apprentice
pilots,\11\ acquiring and implementing technological advances, and
training personnel and partners.
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\11\ Apprentice pilots and applicant pilots are compensated by
the pilot association they are training with, which is funded
through the pilotage rates. The ratemaking methodology accounts for
an apprentice pilot wage benchmark in Step 4 per 46 CFR 404.104(d).
The applicant pilot salaries are included in the pilot associations'
operating expenses used in Step 1 per 46 CFR 404.101.
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The Coast Guard uses a 10-step ratemaking methodology to derive a
pilotage rate, based on the estimated amount of traffic, which covers
these expenses.\12\ The methodology is designed to measure how much
revenue each pilotage association would need to cover expenses and to
provide compensation to registered pilots. Since the Coast Guard cannot
guarantee demand for pilotage services, target pilot compensation for
registered pilots is a goal. The actual demand for service dictates the
actual compensation for the registered pilots. We then divide that
amount by the historic 10-year average for pilotage demand. We
recognize that, in years where traffic is above average, pilot
associations will accrue more revenue than projected while, in years
where traffic is below average, they will take in less. We believe
that, over the long term, however, this system ensures that
infrastructure will be maintained, and that pilots will receive
adequate compensation and work a reasonable number of hours, with
adequate rest between assignments, to ensure retention of highly
trained personnel.
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\12\ 46 CFR part 404.101-404.110. <a href="https://www.ecfr.gov/current/title-46/chapter-III/part-404">https://www.ecfr.gov/current/title-46/chapter-III/part-404</a>. (Last accessed 5/17/23.)
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The purpose of this rule is to issue new pilotage rates for the
2024 shipping season. The Coast Guard believes that the new rates will
continue to promote our goal, as outlined in 46 CFR 404.1, of promoting
safe, efficient, and reliable pilotage service to facilitate commerce
and protect the marine environment in the Great Lakes by generating
sufficient revenue for each pilotage association to reimburse its
necessary and reasonable operating expenses, fairly compensate trained
and rested pilots, and provide appropriate funds to use for
improvements.

IV. Background

Pursuant to 46 U.S.C. 9303, the Coast Guard regulates shipping
practices and rates on the Great Lakes. Under Coast Guard regulations,
all vessels engaged in foreign trade (often referred to as ``salties'')
are required to engage United States or Canadian pilots during their
transit through the regulated waters.\13\ United States and Canadian
``lakers,'' which account for most commercial shipping on the Great
Lakes, are not affected.\14\ Generally, vessels are assigned a United
States or Canadian pilot, depending on the order in which they transit
a particular area of the Great Lakes, and do not choose the pilot they
receive. If a vessel is assigned a U.S. pilot, that pilot will be
assigned by the pilotage association responsible for the district in
which the vessel is operating, and the vessel operator will pay the
pilotage association for the pilotage services. The Great Lakes
Pilotage Authority (Canadian) (GLPA) establishes the rates for Canadian
registered pilots.
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\13\ See 46 CFR part 401. <a href="https://www.ecfr.gov/current/title-46/chapter-III/part-401">https://www.ecfr.gov/current/title-46/chapter-III/part-401</a> (Last accessed 5/17/23).
\14\ 46 U.S.C. 9302(f). A ``laker'' is a commercial cargo vessel
especially designed for and generally limited to use on the Great
Lakes. <a href="https://uscode.house.gov/view.xhtml?req=granuleid:U.S.C.-prelim-title46-section9302&num=0&edition=prelim">https://uscode.house.gov/view.xhtml?req=granuleid:U.S.C.-prelim-title46-section9302&num=0&edition=prelim</a> (Last accessed 5/17/
23).
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The waters of the Great Lakes and the St. Lawrence Seaway subject
to U.S. jurisdiction are divided into three pilotage districts.
Pilotage in each district is provided by an association certified by
the Director to operate a pilotage pool. The Saint Lawrence Seaway
Pilotage Association (SLSPA) provides pilotage services in District
One, which includes all waters of the St. Lawrence River and Lake
Ontario subject to U.S. jurisdiction. The Lakes Pilots Association
(LPA) provides pilotage services in District Two, which includes all
waters of Lake Erie, the Detroit River, Lake St. Clair, and the St.
Clair River subject to U.S. jurisdiction. Finally, the Western Great
Lakes Pilots Association (WGLPA) provides pilotage services in District
Three, which includes all waters of the St. Mary's River; Sault Ste.
Marie Locks; and Lakes Huron, Michigan, and Superior subject to U.S.
jurisdiction.
Each pilotage district is further divided into ``designated'' and
``undesignated'' areas, depicted in table 2. Designated areas,
classified as such by Presidential Proclamation, are waters in which
pilots must direct the navigation of vessels at all times.\15\
Undesignated areas are open bodies of water not subject to the same
pilotage requirements. While working in undesignated areas, pilots must
``be on board and available to direct the navigation of the vessel at
the discretion of and subject to the customary authority of the
master.'' \16\ For these reasons, pilotage rates in designated areas
can be significantly higher than those in undesignated areas. Table 2
shows the districts and areas of the Great Lakes and St. Lawrence
Seaway.
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\15\ Presidential Proclamation 3385, Designation of restricted
waters under the Great Lakes Pilotage Act of 1960, December 22, 1960
(<a href="https://www.archives.gov/federal-register/codification/proclamations/03385.html">https://www.archives.gov/federal-register/codification/proclamations/03385.html</a>) (Last accessed 5/31/23).
\16\ 46 U.S.C. 9302(a)(1)(B).

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

[[Page 9041]]

Three.................. Western Great Lakes Designated................. 7 St. Mary's River.
Pilots Association Undesignated............... 6 Lakes Huron and
(WGLPA). Undesignated............... 8 Michigan.
Lake Superior.
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Over the past several years, the Coast Guard has adjusted the Great
Lakes pilotage ratemaking methodology, per our authority in 46 U.S.C.
9303(f), to conduct annual reviews of base pilotage rates, and to
adjust such base rates in each intervening year in consideration of the
public interest and the costs of providing the services. The current
methodology was finalized in the 2022 final rule.\19\ We summarize the
current methodology in section VI., Summary of the Ratemaking
Methodology.
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\17\ Area 3 is the Welland Canal, which is serviced exclusively
by the Canadian GLPA and, accordingly, is not included in the United
States pilotage rate structure.
\18\ The areas are listed by name at 46 CFR 401.405. <a href="https://www.ecfr.gov/current/title-46/chapter-III/part-401/subpart-D/section-401.405">https://www.ecfr.gov/current/title-46/chapter-III/part-401/subpart-D/section-401.405</a> (Last accessed 5/17/23).
\19\ 87 FR 18488, March 30, 2022.
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V. Discussion of Comments and Changes

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

A. Requests for Additional Pilots

One of the major requests made by the commenters was the addition
of more pilots due to the increase in traffic, with several commenters
pointing to cruise ship traffic as the driving force in the surge of
vessels needing pilotage service. District One stated they estimate a
need for three new pilots by 2025, and Districts Two and Three
requested one additional pilot each to be added to this rulemaking.
The Coast Guard recognizes District One's need for more pilots
going forward, but we believe that this need is addressed by the
inclusion of an additional apprentice pilot as proposed in the NPRM.
Added to the two existing apprentice pilots that were authorized in the
2023 ratemaking, this inclusion brings the total number of apprentice
pilots in District One to three for the 2024 season. These apprentice
pilots will be able to accommodate District One's projected need for
three additional fully registered pilots for the 2025 season. The Coast
Guard will, therefore, keep the pilot numbers for District One the same
as they were in the proposed rule.
The LPA, WGLPA, ILA, and Capt. Paul C. Lamarre II all made comments
that an additional pilot is needed in both District Two and District
Three. After review of the provided documentation, the Coast Guard
agrees with these comments. The Coast Guard verified the numbers that
LPA provided, which show that another full member pilot is needed to
safely provide pilotage service. Based on these comments, our analysis
of the increase in demand for pilotage services created by cruise ship
traffic,\20\ and the unanimous recommendation made by the 2023 Great
Lake Pilot Advisory Committee (See transcript, pages 87 and 88), the
Coast Guard has added an additional pilot to this year's ratemaking for
both Districts Two and Three. For District Two, the Coast Guard reduced
the number of apprentice pilots from two to one, since the additional
pilot referenced earlier will no longer be an apprentice.
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\20\ At least 76 Great Lakes cruises are listed online as
scheduled for the 2024 season. Cruises listed at <a href="http://vikingcruises.com">vikingcruises.com</a>,
<a href="http://hl-cruises.com">hl-cruises.com</a>, <a href="http://pearlseacruises.com">pearlseacruises.com</a>, and <a href="http://us.ponant.com">us.ponant.com</a>. (Last
accessed 11/29/2023.)
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B. Bridge Hour Allocation

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

C. Methodology

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

[[Page 9042]]

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

D. Miscellaneous

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

E. Changes to the Proposed Rule

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

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

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

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

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

[[Page 9043]]

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

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

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

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

VI. Summary of the Ratemaking Methodology

As stated previously, the ratemaking methodology, outlined in 46
CFR 404.101 through 404.110, consists of 10 steps that are designed to
account for the revenues needed and total traffic

[[Page 9044]]

expected in each district. The first several steps of the methodology
establish base pilotage rates. Additional steps to incorporate the
weighting factors are necessary to establish the final pilot rates. The
result is an hourly rate, determined separately for each of the areas
administered by the Coast Guard.
In Step 1, ``Recognize previous operating expenses,'' (Sec.
404.101), the Director reviews audited operating expenses from each of
the three pilotage associations. Operating expenses include all
allowable expenses, minus wages and benefits. This number forms the
baseline amount that each association is budgeted. Because of the time
delay between when the association submits raw numbers and when the
Coast Guard receives audited numbers, this number is 3 years behind the
projected year of expenses. Therefore, in calculating the 2024 rates in
this rule, we begin with the audited expenses from the 2021 shipping
season.
While each pilotage association operates in an entire district
(including both designated and undesignated areas), the Coast Guard
determines costs by area. We allocate certain operating expenses to
designated areas and certain operating expenses to undesignated areas.
In some cases, we can allocate the costs based on where they are
accrued. For example, we can allocate the costs of insurance for
apprentice pilots who operate in undesignated areas only. In other
situations, such as general legal expenses, expenses are distributed
between designated and undesignated waters on a pro rata basis, based
upon the proportion of income forecasted from the respective portions
of the district.
In Step 2, ``Project operating expenses, adjusting for inflation or
deflation,'' (Sec. 404.102), the Director develops the 2024 projected
operating expenses. To do this, we apply inflation adjustors for 3
years to the operating expense baseline received in Step 1. The
inflation factors are from the Bureau of Labor Statistics' (BLS)
Consumer Price Index (CPI) for the Midwest Region, or, if not
available, the Federal Open Market Committee (FOMC) median economic
projections for Personal Consumption Expenditures (PCE) inflation. This
step produces the total operating expenses for each area and district.
In Step 3, ``Estimate number of registered pilots and apprentice
pilots,'' (Sec. 404.103), the Director calculates how many registered
and apprentice pilots, including apprentice pilots with limited
registrations, are needed for each district. To do this, we employ a
``staffing model,'' described in Sec. 401.220, paragraphs (a)(1)
through (3), to estimate how many pilots would be needed to handle
shipping during the beginning and close of the season. This number
provides guidance to the Director in approving an appropriate number of
pilots.
For the purpose of the ratemaking calculation, we determine the
number of pilots provided by the pilotage associations (see Sec.
404.103) and use that figure to determine how many pilots need to be
compensated via the pilotage fees collected.
In the first part of Step 4, ``Determine target pilot compensation
benchmark and apprentice pilot wage benchmark,''(Sec. 404.104(b)), the
previous year's target compensation value is first adjusted by actual
inflation using the ECI inflation value. If the ECI inflation value is
not available, Sec. 404.104(b)(1) and (2) specify the compensation
inflation process the Director will use instead.
In the second part of Step 4, (Sec. 404.104(c)), the Director
determines the total compensation figure for each district. To do this,
the Director multiplies the compensation benchmark by the number of
pilots for each area and district (from Step 3), producing a figure for
total pilot compensation.
In Step 5, ``Project working capital fund,'' (Sec. 404.105), the
Director calculates an added value to pay for needed capital
improvements and other non-recurring expenses, such as technology
investments and infrastructure maintenance. This value is calculated by
adding the total operating expenses (derived in Step 2) to the total
pilot compensation and the total target apprentice pilot wage (derived
in Step 4), then by multiplying that figure by the preceding year's
average annual rate of return for new issues of high-grade corporate
securities. This figure constitutes the ``working capital fund'' for
each area and district.
In Step 6, ``Project needed revenue,'' (Sec. 404.106), the
Director simply adds the totals produced by the preceding steps. The
projected operating expense for each area and district (from Step 2) is
added to the total pilot compensation, including apprentice pilot wage
benchmarks (from Step 4), and the working capital fund contribution
(from Step 5). The total figure, calculated separately for each area
and district, is the ``needed revenue.''
In Step 7, ``Calculate initial base rates,'' (Sec. 404.107), the
Director calculates an hourly pilotage rate to cover the needed
revenue, as calculated in Step 6. This step consists of first
calculating the 10-year average of traffic hours for each area. Next,
we divide the revenue needed in each area (calculated in Step 6) by the
10-year average of traffic hours to produce an initial base rate.
An additional element, the ``weighting factor,'' is required under
Sec. 401.400. Pursuant to that section, ships pay a multiple of the
``base rate'', as calculated in Step 7, by a number ranging from 1.0
(for the smallest ships, or ``Class I'' vessels) to 1.45 (for the
largest ships, or ``Class IV'' vessels). This significantly increases
the revenue collected, and we need to account for the added revenue
produced by the weighting factors to ensure that shippers are not
overpaying for pilotage services. We do this in the next step.
In Step 8, ``Calculate average weighting factors by Area,'' (Sec.
404.108), the Director calculates how much extra revenue, as a
percentage of total revenue, has historically been produced by the
weighting factors in each area. We do this by using a historical
average of the applied weighting factors for each year since 2014 (the
first year the current weighting factors were applied).
In Step 9, ``Calculate revised base rates,'' (Sec. 404.109), the
Director modifies the base rates by accounting for the extra revenue
generated by the weighting factors. We do this by dividing the initial
pilotage rate for each area (from Step 7) by the corresponding average
weighting factor (from Step 8), to produce a revised rate.
In Step 10, ``Review and finalize rates,'' (Sec. 404.110), often
referred to informally as ``Director's discretion'', the Director
reviews the revised base rates (from Step 9) to ensure that they meet
the goals set forth in 46 U.S.C. 9303(f) and 46 CFR 404.1(a), which
include promoting efficient, safe, and reliable pilotage service on the
Great Lakes; generating sufficient revenue for each pilotage
association to reimburse necessary and reasonable operating expenses;
compensating trained and rested pilots fairly; and providing
appropriate revenue for improvements.
After the base rates are set, Sec. 401.401 permits the Coast Guard
to apply surcharges. We are not using any surcharges in this final
rule. In previous ratemakings, where apprentice pilot wages were not
built into the rate, the Coast Guard used surcharges to cover applicant
pilot compensation in those years to help with applicant recruitment.
In this final rule, we include the applicant trainee compensation in
the district's operating expenses used in Step 1. Consistent with the
2021, 2022, and 2023 rulemakings, in this final rule we

[[Page 9045]]

continue to believe that the pilot associations are able to plan for
the costs associated with hiring applicant pilots to fill pilot
vacancies without relying on the Coast Guard to impose surcharges to
help with recruiting.

VII. Historic Methodological and Other Changes

The Coast Guard is using the existing ratemaking methodology to
establish the base rates in this ratemaking. The Coast Guard is not
issuing any methodological or other policy changes to the ratemaking
within this final rule.
According to 46 U.S.C. 9303(f), and restated in 46 CFR 404.100(a),
the Coast Guard must establish base rates by a full ratemaking at least
once every 5 years. The Coast Guard has determined that the current
base rates and methodology still adequately adhere to the Coast Guard's
goals through rate and compensation stability, while promoting
recruitment and retention of qualified U.S.-registered pilots.
The Coast Guard has made several changes to the ratemaking
methodology over the last several years in consideration of the public
interest and the costs of providing services. The recent changes and
their impacts are summarized as follows.
In the 2017 ratemaking, Great Lakes Pilotage Rates--2017 Annual
Review (82 FR 41466, published August 31, 2017),\21\ the Coast Guard
modified the methodology to account for the additional revenue produced
by the application of weighting factors. This is discussed in detail in
Steps 7 through 9 for each district, in section IX., Discussion of Rate
Adjustments, of this preamble.
---------------------------------------------------------------------------

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

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

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

In the 2020 ratemaking, Great Lakes Pilotage Rates--2020 Annual
Review and Revisions to Methodology (85 FR 20088, published April 9,
2020),\23\ the Coast Guard revised the methodology to accurately
capture all costs and revenues associated with Great Lakes pilotage
requirements, and to produce an hourly rate that adequately and
accurately compensates pilots and covers expenses.
---------------------------------------------------------------------------

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

The 2021 ratemaking, Great Lakes Pilotage Rates--2021 Annual Review
and Revisions to Methodology (86 FR 14184, published March 12,
2021),\24\ changed the inflation calculation in Step 4, Sec.
404.104(b), for interim ratemakings, so that the previous year's target
compensation value is first adjusted by actual inflation value using
the ECI. That change ensures that the target pilot compensation
reimbursed to the association remains current with inflation and
competitive with industry pay increases.
---------------------------------------------------------------------------

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

The 2022 ratemaking, Great Lakes Pilotage Rates--2022 Annual Review
and Revisions to Methodology (87 FR 18488, published March 30,
2022),\25\ implemented an apprentice pilot wage benchmark in Steps 3
and 4 to provide predictability and stability to pilot associations
training apprentice pilots. The 2022 final rule also codified rounding
up the staffing model's final number to ensure that the ratemaking does
not undercount the pilot need presented by the staffing model and
association circumstances.
---------------------------------------------------------------------------

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

VIII. Individual Target Pilot Compensation Benchmark

The Coast Guard is issuing the target pilot compensation benchmark
in this final rule at the target compensation for the ratemaking year
2023, adjusted for inflation. In an interim ratemaking year, the base
target pilot compensation is adjusted annually in accordance with Sec.
404.104(b). The Coast Guard arrived at this compensation benchmark as
explained in the following paragraphs.
Before 2016, the Coast Guard based the compensation benchmark on
data provided by the American Maritime Officers Union (AMOU) regarding
its contract for first mates on the Great Lakes. However, in 2016, the
AMOU elected to no longer provide this data to the Coast Guard. In the
2016 ratemaking, Great Lakes Pilotage Rates--2016 Annual Review and
Changes to Methodology (81 FR 11908, published March 7, 2016),\26\ the
Coast Guard used the average compensation for a Canadian pilot, plus a
10-percent adjustment. The shipping industry challenged the
compensation benchmark, and the court found that the Coast Guard did
not adequately support the 10-percent addition to the Canadian GLPA
compensation benchmark. American Great Lakes Ports Association v.
Zukunft, 296 F.Supp. 3d 27, 48 (D.D.C. 2017), aff'd sub nom. American
Great Lakes Ports Association v. Schultz, 962 F.3d 510 (D.C. Cir.
2020). The Coast Guard then based the 2018 full ratemaking compensation
benchmark on data provided by the AMOU, regarding its contract for
first mates on the Great Lakes in the 2011 to 2015 period (83 FR
26162). The 2018 final rule adjusted the AMOU 2015 data for inflation
using Federal Open Market FOMC median economic projections for PCE
inflation.
---------------------------------------------------------------------------

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

In the 2020 interim year ratemaking final rule (85 FR 20088), the
Coast Guard established its most recent pilot compensation benchmark.
Given the lack of access to AMOU data, the Coast Guard did not rely on
the AMOU aggregated wage and benefit information as the basis for the
compensation benchmark. Instead, the Coast Guard adopted the 2019
target pilot compensation (with inflation) as our compensation
benchmark going forward. The Coast Guard stated in the 2020 final rule
that no other United States or Canadian pilot compensation data was
appropriate to use as a benchmark at that time, and that the 2020
benchmark will be used for future rates (85 FR 20091). The Director
determined that the ratemaking provided adequate compensation for
pilots.
Based on our experience over the past four ratemakings (2020-2023),
the Director continues to believe that the level of target pilot
compensation for those years provided an appropriate level of
compensation for U.S.-registered pilots. According to Sec. 404.104(a),
the Director may make necessary and reasonable adjustments to the
benchmark based on current information. However, current circumstances
do not indicate that an adjustment, other than for inflation, is
necessary. The Director bases this decision on the fact that there is
no indication that registered pilots are resigning due to their
compensation, or that this compensation benchmark is causing shortfalls
in achieving reliable pilotage service. The Coast Guard also does not
believe that the pilot compensation benchmark is too high relative to
the expertise required to perform the job. The compensation will
continue to be adjusted annually, in accordance with published
inflation rates, which will ensure the

[[Page 9046]]

compensation remains competitive and current for upcoming years.
Therefore, the Coast Guard does not seek alternative benchmarks for
target compensation at this time and, instead, simply adjusts the
amount of target pilot compensation for inflation as our target
compensation benchmark for 2024, as shown in Step 4. This target
compensation benchmark approach has advanced and will continue to
advance the Coast Guard's goals through rate and compensation stability
while also promoting recruitment and retention of qualified U.S.
pilots.
The target compensation for 2024 is $440,658 per registered pilot
and $158,637 per apprentice pilot, using the 2023 compensation as a
benchmark. We follow the procedure outlined in paragraph (b) of Sec.
404.104, which adjusts the existing compensation benchmark for
inflation. We use a two-step process to adjust target pilot
compensation for inflation. First, we adjust the 2023 target
compensation benchmark of $424,398 by 1.2 percent for an adjusted value
of $429,491. This first adjustment accounts for the difference in
actual third quarter 2023 ECI inflation, which is 3.9 percent, and the
2023 PCE estimate of 2.7 percent.\27\ The second step accounts for
projected inflation from 2023 to 2024, which is 2.6 percent.\28\ Based
on the projected 2024 inflation estimate, the target compensation
benchmark for 2024 is $440,658 per pilot. The apprentice pilot wage
benchmark is 36 percent of the target pilot compensation, or $158,637
($440,658 x 0.36).\29\
---------------------------------------------------------------------------

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

IX. Discussion of Rate Adjustments

In this final rule, based on the policy changes described in the
previous section, we are issuing new pilotage rates for 2024. We
conducted the 2024 ratemaking as an interim ratemaking, as we last did
in 2022 (87 FR 18488). Thus, the Coast Guard adjusted the compensation
benchmark following the interim ratemaking year procedures under Sec.
404.100(b) rather than the procedures for a full ratemaking year in
Sec. 404.100(a).
This section discusses the rate changes using the ratemaking steps
provided in 46 CFR part 404. We will detail all 10 steps of the
ratemaking procedure for each of the 3 districts to show how we arrive
at the new rates.

District One

A. Step 1: Recognize Previous Operating Expenses
Step 1 in the ratemaking methodology requires that the Coast Guard
review and recognize the operating expenses for the last full year for
which figures are available (Sec. 404.101). To do so, we begin by
reviewing the independent accountant's financial reports for each
association's 2021 expenses and revenues.\30\ For accounting purposes,
the financial reports divide expenses into designated and undesignated
areas. For costs accrued by the pilot associations generally, such as
employee benefits, the cost is divided between the designated and
undesignated areas on a pro rata basis. The recognized operating
expenses for District One are shown in table 6.
---------------------------------------------------------------------------

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

In the 2021 expenses used as the basis for this final rule,
districts used the term ``applicant'' to describe applicant trainees
and persons who will be called apprentices (applicant pilots), under
the definition of ``apprentice pilot'', which was introduced in the
2022 final rule. Therefore, when describing past expenses, the term
``applicant'' is used to match what was reported from 2021, which
includes both applicant and apprentice pilots. The term ``apprentice''
is used to distinguish apprentice pilot wages and describe the impacts
of the ratemaking going forward.
The Coast Guard continues to include apprentice salaries as an
allowable expense in the 2024 ratemaking, as this final rule is based
on 2021 operating expenses, when salaries were still an allowable
expense. Beginning with the 2025 ratemaking, apprentice pilot salaries
will no longer be included as a 2022 operating expense, because
apprentice pilot wages will have already been factored into the
ratemaking Steps 3 and 4 in calculation of the 2022 rates. Beginning in
2025, the applicant salaries' operating expenses for 2022 will consist
of only applicant trainees (those who are not yet apprentice pilots).
The recognized operating expenses for District One are shown in table
6.

Table 6--2021 Recognized Expenses for District One
----------------------------------------------------------------------------------------------------------------
Designated Undesignated
--------------------------------
District One reported operating expenses for 2021 St. Lawrence Total
River Lake Ontario
----------------------------------------------------------------------------------------------------------------
Applicant Pilot Compensation
----------------------------------------------------------------------------------------------------------------
Salaries........................................................ $247,735 $165,157 $412,892
Employee Benefits............................................... 10,367 6,911 17,278
-----------------------------------------------
Total Applicant Pilot Compensation.......................... 258,102 172,068 430,170
----------------------------------------------------------------------------------------------------------------
Other Applicant Cost
----------------------------------------------------------------------------------------------------------------
Applicant Subsistence........................................... 1,723 1,148 2,871
Travel.......................................................... 1,832 1,221 3,053
License Insurance............................................... 752 502 1,254
Payroll taxes................................................... 1,945 1,296 3,241
Other--Pilotage Cost............................................ 833 555 1,388
-----------------------------------------------
Total Other Applicant Cost.................................. 7,085 4,722 11,807
----------------------------------------------------------------------------------------------------------------

[[Page 9047]]

Other Pilotage Cost
----------------------------------------------------------------------------------------------------------------
Subsistence..................................................... 133,993 89,329 223,322
Hotel/Lodging................................................... 32,424 21,616 54,040
Travel.......................................................... 453,718 302,478 756,196
License renewal................................................. 1,200 800 2,000
Payroll Taxes................................................... 198,901 132,601 331,502
License Insurance............................................... 53,174 35,450 88,624
-----------------------------------------------
Total Other Pilotage Costs...................................... 873,410 582,274 1,455,684
----------------------------------------------------------------------------------------------------------------
Pilot Boat and Dispatch Costs
----------------------------------------------------------------------------------------------------------------
Pilot boat expense (Operating).................................. 200,672 133,782 334,454
Dispatch expense................................................ 167,291 111,527 278,818
Employee Benefits............................................... 50,560 33,707 84,267
Salaries........................................................ 249,396 166,264 415,660
Payroll taxes................................................... 10,269 6,846 17,115
-----------------------------------------------
Total Pilot Boat and Dispatch Costs......................... 678,188 452,126 1,130,314
----------------------------------------------------------------------------------------------------------------
Administrative Expenses
----------------------------------------------------------------------------------------------------------------
Legal--general counsel.......................................... 1,078 719 1,797
Legal--shared counsel (K&L Gates)............................... 4,402 2,935 7,337
Legal--Coast Guard Litigation................................... 14,641 9,760 24,401
Insurance....................................................... 44,108 29,405 73,513
Employee benefits............................................... 4,470 2,980 7,450
Payroll Taxes................................................... 42,464 28,310 70,774
Other taxes..................................................... 79,200 52,800 132,000
Real Estate taxes............................................... 22,918 15,278 38,196
Travel.......................................................... 1,568 1,045 2,613
Depreciation.................................................... 186,517 124,345 310,862
Interest........................................................ 54,271 36,180 90,451
APA Dues........................................................ 25,250 16,834 42,084
APA Dues (D1-21-01)............................................. 2,971 1,980 4,951
Dues and subscriptions.......................................... 4,320 2,880 7,200
Utilities....................................................... 41,343 27,562 68,905
Salaries........................................................ 73,890 49,260 123,150
Accounting/Professional fees.................................... 4,320 2,880 7,200
Pilot Training.................................................. 4,680 3,120 7,800
Applicant Pilot Training........................................ 18,911 12,607 31,518
Other........................................................... 28,422 18,948 47,370
-----------------------------------------------
Total Administrative Expenses............................... 659,744 439,828 1,099,572
-----------------------------------------------
Total Operating Expenses (OpEx)............................. 2,476,529 1,651,018 4,127,547
----------------------------------------------------------------------------------------------------------------

B. Step 2: Project Operating Expenses, Adjusting for Inflation or
Deflation
In accordance with the text in Sec. 404.102, having identified the
recognized 2021 operating expenses in Step 1, the next step is to
estimate the current year's operating expenses by adjusting for
inflation over the 3-year period. We calculate inflation using the BLS
data from the CPI for the Midwest Region of the United States for the
2022 inflation rate.\31\ Because the BLS does not provide forecasted
inflation data, we use economic projections from the Federal Reserve
for the 2023 and 2024 inflation modification.\32\ Based on that
information, the calculations for Step 2 are as presented in table 7.
---------------------------------------------------------------------------

\31\ The CPI is defined as ``All Urban Consumers (CPI-U), All
Items, 1982-84=100.'' Series CUUR0200SA0 (Downloaded March 21,
2023). Available at <a href="https://www.bls.gov/cpi/data.htm">https://www.bls.gov/cpi/data.htm</a>., All Urban
Consumers (Current Series), multiscreen data, not seasonally
adjusted, 0200 Midwest, Current, All Items, Monthly, 12-month
Percent Change and Annual Data.
\32\ The 2023 and 2024 inflation rates are available at <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230920.pdf">https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230920.pdf</a>. We used the Median Core PCE June
Projection found in table 1. (Downloaded September 2023).

[[Page 9048]]

Table 7--Adjusted Operating Expenses for District One
----------------------------------------------------------------------------------------------------------------
District One
-----------------------------------------------
Designated Undesignated Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)............................... $2,476,529 $1,651,018 $4,127,547
2022 Inflation Modification (@8%)............................... 198,122 132,081 330,203
2023 Inflation Modification (@3.9%)............................. 104,311 69,541 173,852
2024 Inflation Modification (@2.6%)............................. 72,253 48,169 120,422
Adjusted 2024 Operating Expenses............................ 2,851,215 1,900,809 4,752,024
----------------------------------------------------------------------------------------------------------------
* Figures are rounded to the nearest dollar and may not sum to totals.

C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots
In accordance with the text in Sec. 404.103, the Coast Guard
estimates the number of fully registered pilots in each district. We
determine the number of fully registered pilots based on data provided
by the SLSPA. Using these numbers, we estimate that there will be 18
registered pilots in 2024 in District One. We determine the number of
apprentice pilots based on input from the district on anticipated
retirements and staffing needs. Using these numbers, we estimate that
there will be three apprentice pilots in 2024 in District One. Based on
the seasonal staffing model discussed in the 2017 ratemaking (82 FR
41466) and rounding introduced in the 2022 ratemaking (87 FR 18488), a
certain number of pilots are assigned to designated waters, and a
certain number of pilots are assigned to undesignated waters, as shown
in table 8. These numbers are used to determine the amount of revenue
needed in their respective areas.

Table 8--Authorized Pilots for District One
------------------------------------------------------------------------
Item District One
------------------------------------------------------------------------
Maximum Number of Pilots (per Sec. 401.220(a)) *...... 18
2024 Authorized Pilots (total).......................... 18
Pilots Assigned to Designated Areas..................... 10
Pilots Assigned to Undesignated Areas................... 8
2024 Apprentice Pilots.................................. 3
------------------------------------------------------------------------
* For a detailed calculation, refer to the Great Lakes Pilotage Rates--
2017 Annual Review final rule, which contains the staffing model. See
82 FR 41466, table 6 at 41480 (August 31, 2017).

D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice
Pilot Wage Benchmark
In this step, we determine the total pilot compensation for each
area. Because we are issuing an ``interim'' ratemaking this year, we
follow the procedure outlined in paragraph (b) of Sec. 404.104, which
adjusts the existing compensation benchmark by inflation. First, we
adjust the 2023 target compensation benchmark of $424,398 by 1.2
percent for a value of $429,491. This accounts for the difference in
actual third quarter 2023 ECI inflation, which is 3.9 percent, and the
2023 PCE estimate of 2.7 percent.33 34 The second step
accounts for projected inflation from 2023 to 2024, which is 2.6
percent.35 Based on the projected 2024 inflation estimate,
the target compensation benchmark for 2024 is $440,658 per pilot. The
apprentice pilot wage benchmark is 36 percent of the target pilot
compensation, or $158,637 ($440,658 x 0.36).
---------------------------------------------------------------------------

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

In accordance with Sec. 404.104(c), we use the revised target
individual compensation level to derive the total pilot compensation by
multiplying the individual target compensation by the estimated number
of registered pilots for District One, as shown in table 9. We estimate
that the number of apprentice pilots with limited registration needed
for District One in the 2024 season will be three. The total target
wages for apprentices are allocated with 60 percent for the designated
area and 40 percent for the undesignated area, in accordance with the
allocation for operating expenses.

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

[[Page 9049]]

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

E. Step 5: Project Working Capital Fund
Next, the Coast Guard calculates the working capital fund revenues
needed for each area. We first add the figures for projected operating
expenses, total target pilot compensation, and total target apprentice
pilot wage for each area, then we find the preceding year's average
annual rate of return for new issues of high-grade corporate
securities. Using Moody's data, the number is 4.0742 percent
rounded.\36\ By multiplying the two figures, we obtain the working
capital fund contribution for each area, as shown in table 10.
---------------------------------------------------------------------------

\36\ Moody's Seasoned Aaa Corporate Bond Yield, average of 2022
monthly data. The Coast Guard uses the most recent year of complete
data. Moody's is taken from Moody's Investors Service, which is a
bond credit rating business of Moody's Corporation. Bond ratings are
based on creditworthiness and risk. The rating of ``Aaa'' is the
highest bond rating assigned with the lowest credit risk. See
<a href="https://fred.stlouisfed.org/series/AAA">https://fred.stlouisfed.org/series/AAA</a>. (Last accessed 03/21/23.)

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

F. Step 6: Project Needed Revenue
In this step, we add the expenses accrued to derive the total
revenue needed for each area. These expenses include the projected
operating expenses (from Step 2), the target total pilot compensation
(from Step 4), total target apprentice pilot wage (from Step 4), and
the working capital fund contribution (from Step 5). We show these
calculations in table 11.

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

G. Step 7: Calculate Initial Base Rates
Having determined the revenue needed for each area in the previous
six steps, we divide that number by the expected number of traffic
hours to develop an hourly rate.
Step 7 is a two-part process. The first part is calculating the 10-
year traffic average in District One using the total time on task or
pilot bridge hours. To calculate the time on task for each district
from 2013-2020, the Coast Guard used billing data from SeaPro. The data
is pulled from the system filtering by district, year, job status
(including only processed jobs), and flagging code (including only U.S.
jobs).
Because we calculate separate figures for designated and
undesignated waters, there are two parts for each calculation. For
2021-2022, the Coast Guard used figures provided by the associations
through SeaPro monthly reports. Where bridge hour figures did not match
between the monthly reports and the weighted factor reports, the Coast
Guard opted to use the figures from the monthly report for Step 7. We
show these values in table 12.

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

[[Page 9050]]

2021.................................... 6,166 7,893
2020.................................... 6,265 7,560
2019.................................... 8,232 8,405
2018.................................... 6,943 8,445
2017.................................... 7,605 8,679
2016.................................... 5,434 6,217
2015.................................... 5,743 6,667
2014.................................... 6,810 6,853
2013.................................... 5,864 5,529
Average................................. 6,564 7,460
------------------------------------------------------------------------

Next, we derive the initial hourly rate by dividing the revenue
needed by the average number of hours for each area. This produces an
initial rate, which is necessary to produce the revenue needed for each
area, assuming the amount of traffic is as expected. We present the
calculations for District One in table 13.

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

H. Step 8: Calculate Average Weighting Factors by Area
In this step, the Coast Guard calculates the average weighting
factor for each designated and undesignated area by first collecting
the weighting factors, set forth in 46 CFR 401.400, for each vessel
trip. Using this data, we calculate the average weighting factor for
each area using the data from each vessel transit from 2014 to 2021, as
shown in tables 14 and 15. Data for 2022 was provided by the
associations in a weighting factor report.

Table 14--Average Weighting Factor for District One, Designated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014).................................................. 31 1 31
Class 1 (2015).................................................. 41 1 41
Class 1 (2016).................................................. 31 1 31
Class 1 (2017).................................................. 28 1 28
Class 1 (2018).................................................. 54 1 54
Class 1 (2019).................................................. 72 1 72
Class 1 (2020).................................................. 8 1 8
Class 1 (2021).................................................. 10 1 10
Class 1 (2022).................................................. 39 1 39
Class 2 (2014).................................................. 285 1.15 328
Class 2 (2015).................................................. 295 1.15 339
Class 2 (2016).................................................. 185 1.15 213
Class 2 (2017).................................................. 352 1.15 405
Class 2 (2018).................................................. 559 1.15 643
Class 2 (2019).................................................. 378 1.15 435
Class 2 (2020).................................................. 560 1.15 644
Class 2 (2021).................................................. 315 1.15 362
Class 2 (2022).................................................. 482 1.15 554
Class 3 (2014).................................................. 50 1.3 65
Class 3 (2015).................................................. 28 1.3 36
Class 3 (2016).................................................. 50 1.3 65
Class 3 (2017).................................................. 67 1.3 87
Class 3 (2018).................................................. 86 1.3 112
Class 3 (2019).................................................. 122 1.3 159
Class 3 (2020).................................................. 67 1.3 87
Class 3 (2021).................................................. 52 1.3 68
Class 3 (2022).................................................. 106 1.3 138
Class 4 (2014).................................................. 271 1.45 393
Class 4 (2015).................................................. 251 1.45 364

[[Page 9051]]

Class 4 (2016).................................................. 214 1.45 310
Class 4 (2017).................................................. 285 1.45 413
Class 4 (2018).................................................. 393 1.45 570
Class 4 (2019).................................................. 730 1.45 1059
Class 4 (2020).................................................. 427 1.45 619
Class 4 (2021).................................................. 407 1.45 590
Class 4 (2022).................................................. 478 1.45 693
-----------------------------------------------
Total....................................................... 7,809 .............. 10,064
Average weighting factor (weighted transits / number of .............. 1.29 ..............
transits)..................................................
----------------------------------------------------------------------------------------------------------------
* Figures may not sum due to rounding.

Table 15--Average Weighting Factor for District One, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014).................................................. 25 1 25
Class 1 (2015).................................................. 28 1 28
Class 1 (2016).................................................. 18 1 18
Class 1 (2017).................................................. 19 1 19
Class 1 (2018).................................................. 22 1 22
Class 1 (2019).................................................. 30 1 30
Class 1 (2020).................................................. 3 1 3
Class 1 (2021).................................................. 19 1 19
Class 1 (2022).................................................. 41 1 41
Class 2 (2014).................................................. 238 1.15 274
Class 2 (2015).................................................. 263 1.15 302
Class 2 (2016).................................................. 169 1.15 194
Class 2 (2017).................................................. 290 1.15 334
Class 2 (2018).................................................. 352 1.15 405
Class 2 (2019).................................................. 366 1.15 421
Class 2 (2020).................................................. 358 1.15 412
Class 2 (2021).................................................. 463 1.15 532
Class 2 (2022).................................................. 371 1.15 427
Class 3 (2014).................................................. 60 1.3 78
Class 3 (2015).................................................. 42 1.3 55
Class 3 (2016).................................................. 28 1.3 36
Class 3 (2017).................................................. 45 1.3 59
Class 3 (2018).................................................. 63 1.3 82
Class 3 (2019).................................................. 58 1.3 75
Class 3 (2020).................................................. 35 1.3 46
Class 3 (2021).................................................. 71 1.3 92
Class 3 (2022).................................................. 73 1.3 95
Class 4 (2014).................................................. 289 1.45 419
Class 4 (2015).................................................. 269 1.45 390
Class 4 (2016).................................................. 222 1.45 322
Class 4 (2017).................................................. 285 1.45 413
Class 4 (2018).................................................. 382 1.45 554
Class 4 (2019).................................................. 326 1.45 473
Class 4 (2020).................................................. 334 1.45 484
Class 4 (2021).................................................. 466 1.45 676
Class 4 (2022).................................................. 401 1.45 581
-----------------------------------------------
Total....................................................... 6,524 .............. 8,435
Average weighting factor (weighted transits/number of .............. 1.29 ..............
transits)..................................................
----------------------------------------------------------------------------------------------------------------
* Figures may not sum due to rounding.

I. Step 9: Calculate Revised Base Rates
In this step, we revise the base rates so that the total cost of
pilotage will be equal to the revenue needed, after considering the
impact of the weighting factors. To do this, the initial base rates
calculated in Step 7 are divided by the average weighting factors
calculated in Step 8, as shown in table 16.

[[Page 9052]]

Table 16--Revised Base Rates for District One
----------------------------------------------------------------------------------------------------------------
Revised rate
Initial rate Average weighting (Initial rate /
Area (Step 7) factor (Step 8) average weighting
factor)
----------------------------------------------------------------------------------------------------------------
District One: Designated............................... $1,196 1.29 $927
District One: Undesignated............................. 784 1.29 608
----------------------------------------------------------------------------------------------------------------

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

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

District Two

A. Step 1: Recognize Previous Operating Expenses
Step 1 in our ratemaking methodology requires that the Coast Guard
review and recognize the previous year's operating expenses (Sec.
404.101). To do so, we begin by reviewing the independent accountant's
financial reports for each association's 2021 expenses and
revenues.\37\ For accounting purposes, the financial reports divide
expenses into designated and undesignated areas. For costs generally
accrued by the pilot associations, such as employee benefits, the cost
is divided between the designated and undesignated areas on a pro rata
basis.
---------------------------------------------------------------------------

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

Table 18--2021 Recognized Expenses for District Two
----------------------------------------------------------------------------------------------------------------
Undesignated Designated
--------------------------------
Reported operating expenses for 2021 Southeast Total
Lake Erie Shoal to Port
Huron
----------------------------------------------------------------------------------------------------------------
Applicant Pilot Compensation
----------------------------------------------------------------------------------------------------------------
Salaries........................................................ $79,538 $119,306 $198,844
Employee Benefits............................................... 11,066 16,599 27,665
-----------------------------------------------
Total Applicant Pilot Compensation.......................... 90,604 135,905 226,509
----------------------------------------------------------------------------------------------------------------
Other Applicant Cost
----------------------------------------------------------------------------------------------------------------
Applicant Subsistence........................................... 5,280 7,920 13,200
Hotel/Lodging Costs............................................. 2,976 4,464 7,440
Hotel/Lodging Costs (D2-21-01).................................. (2,976) (4,464) (7,440)

[[Page 9053]]

Payroll taxes................................................... 6,901 10,352 17,253
-----------------------------------------------
Total Other Applicant Cost.................................. 12,181 18,272 30,453
----------------------------------------------------------------------------------------------------------------
Other Pilotage Cost
----------------------------------------------------------------------------------------------------------------
Subsistence..................................................... 73,921 110,880 184,800
Hotel/Lodging................................................... 62,496 93,744 156,240
Hotel/Lodging (D2-21-01)........................................ (55,307) (82,960) (138,267)
Travel.......................................................... 42,625 63,937 106,562
License renewal................................................. 1,958 2,938 4,896
Payroll Taxes................................................... 87,620 131,430 219,050
License Insurance............................................... 9,007 13,510 22,517
-----------------------------------------------
Total Other Pilotage Costs.................................. 222,320 333,479 555,798
----------------------------------------------------------------------------------------------------------------
Pilot Boat and Dispatch Costs
----------------------------------------------------------------------------------------------------------------
Pilot boat costs................................................ 60,067 90,101 150,168
Employee Benefits............................................... 80,273 120,410 200,683
Insurance....................................................... 4,317 6,475 10,792
Salaries........................................................ 148,260 222,391 370,651
Payroll taxes................................................... 13,277 19,915 33,192
-----------------------------------------------
Total Pilot and Dispatch Costs.............................. 306,194 459,292 765,486
----------------------------------------------------------------------------------------------------------------
Administrative Expenses
----------------------------------------------------------------------------------------------------------------
Legal........................................................... 2,186 3,278 5,464
Legal--shared counsel (K&L Gates)............................... 7,167 10,751 17,918
Office Rent..................................................... 27,627 41,440 69,067
Insurance....................................................... 15,084 22,627 37,711
Employee benefits............................................... 35,010 52,516 87,526
Payroll Taxes................................................... 5,161 7,741 12,902
Other taxes..................................................... 55,252 82,879 138,131
Real Estate taxes............................................... 7,879 11,819 19,698
Travel.......................................................... 8,688 13,033 21,721
Depreciation.................................................... 11,121 16,682 27,803
Interest........................................................ 2 2 4
APA Dues........................................................ 14,683 22,025 36,708
Dues and subscriptions.......................................... 505 757 1,262
Utilities....................................................... 24,356 36,535 60,891
Salaries........................................................ 48,532 72,797 121,329
Accounting/Professional fees.................................... 17,846 26,769 44,615
Pilot Training.................................................. 23,909 35,864 59,773
Applicant Pilot Training........................................ 209 313 522
Other........................................................... 21,252 31,879 53,131
-----------------------------------------------
Total Administrative Expenses............................... 326,469 489,707 816,176
-----------------------------------------------
Total Expenses (OPEX + Applicant + Pilot Boats + Admin + 957,768 1,436,655 2,394,422
Capital)...................................................
-----------------------------------------------
Total Operating Expenses (OpEx + Adjustments)............... 957,768 1,436,655 2,394,422
----------------------------------------------------------------------------------------------------------------

B. Step 2: Project Operating Expenses, Adjusting for Inflation or
Deflation
In accordance with the text in Sec. 404.102, having identified the
recognized 2021 operating expenses in Step 1, the next step is to
estimate the current year's operating expenses by adjusting for
inflation over the 3-year period. We calculate inflation using the BLS
data from the CPI for the Midwest Region of the United States for the
2022 inflation rate.\38\ Because the BLS does not provide forecasted
inflation data, we use economic projections from the Federal Reserve
for the 2023 and 2024 inflation modification.\39\ Based on that
information, the calculations for Step 2 are presented in table 19.
---------------------------------------------------------------------------

\38\ The CPI is defined as ``All Urban Consumers (CPI-U), All
Items, 1982-84=100.'' Series CUUR0200SA0 (Downloaded March 21,
2023). Available at <a href="https://www.bls.gov/cpi/data.htm">https://www.bls.gov/cpi/data.htm</a>., All Urban
Consumers (Current Series), multiscreen data, not seasonally
adjusted, 0200 Midwest, Current, All Items, Monthly, 12-month
Percent Change and Annual Data.
\39\ The 2023 and 2024 inflation rates are available at Table 1
Summary of Economic Projections, Median Core PCE Inflation June
Projection. <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230920.pdf">https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230920.pdf</a>. (Last accessed 12/4/2023).

[[Page 9054]]

Table 19--Adjusted Operating Expenses for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)............................... $957,768 $1,436,655 $2,394,422
2022 Inflation Modification (@8%)............................... $76,621 114,932 191,553
2023 Inflation Modification (@3.9%)............................. 40,341 60,512 100,853
2024 Inflation Modification (@2.6%)............................. 27,943 41,915 69,858
Adjusted 2024 Operating Expenses............................ 1,102,673 1,654,014 2,756,686
----------------------------------------------------------------------------------------------------------------
* Figures are rounded to the nearest dollar and may not sum to totals.

C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots
In accordance with the text in Sec. 404.103, the Coast Guard
estimates the number of fully registered pilots in each district. We
determine the number of fully registered pilots based on data provided
by the LPA. Using these numbers, we estimate that there will be 17
registered pilots in 2024 in District Two, including the additional
pilot being granted for 2024. We determine the number of apprentice
pilots based on input from the district on anticipated retirements and
staffing needs. Using these numbers, we estimate that there will be one
apprentice pilot in 2024 in District Two.
Based on the seasonal staffing model discussed in the 2017
ratemaking (82 FR 41466) and rounding introduced in the 2022 ratemaking
(87 FR 18488), a certain number of pilots are assigned to designated
waters, and a certain number of pilots are assigned to undesignated
waters, as shown in table 20. These numbers are used to determine the
amount of revenue needed in their respective areas.

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

D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice
Pilot Wage Benchmark
In this step, we determine the total pilot compensation for each
area. Because we are issuing an ``interim'' ratemaking this year, we
follow the procedure outlined in paragraph (b) of Sec. 404.104, which
adjusts the existing compensation benchmark by inflation.
First, we adjust the 2023 target compensation benchmark of $424,398
by 1.2 percent for a value of $429,491. This accounts for the
difference in actual third quarter 2023 ECI inflation, which is 3.9
percent, and the 2023 PCE estimate of 2.7 percent.40 41 The
second step accounts for projected inflation from 2023 to 2024, which
is 2.6 percent.\42\ Based on the projected 2024 inflation estimate, the
target compensation benchmark for 2024 is $440,658 per pilot. The
apprentice pilot wage benchmark is 36 percent of the target pilot
compensation, or $158,637 ($440,658 x 0.36).
---------------------------------------------------------------------------

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

In accordance with Sec. 404.104(c), the Coast Guard uses the
revised target individual compensation level to derive the total pilot
compensation by multiplying the individual target compensation by the
estimated number of registered pilots for District Two, as shown in
table 21. The Coast Guard estimates that the number of apprentice
pilots with limited registration needed for District Two in the 2024
season will be one. The total target wages for apprentices are
allocated at 60 percent for the designated area and 40 percent for the
undesignated area, in accordance with the allocation for operating
expenses.

Table 21--Target Compensation for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation....................................... $440,658 $440,658 $440,658
Number of Pilots................................................ 8 9 17
-----------------------------------------------
Total Target Pilot Compensation............................. 3,525,264 3,965,922 7,491,186
----------------------------------------------------------------------------------------------------------------

[[Page 9055]]

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

E. Step 5: Project Working Capital Fund
Next, the Coast Guard calculates the working capital fund revenues
needed for each area. We first add the figures for projected operating
expenses, total target pilot compensation, and total target apprentice
pilot wage for each area, and then we find the preceding year's average
annual rate of return for new issues of high-grade corporate
securities. Using Moody's data, the number is 4.0742 percent,
rounded.\43\ By multiplying the two figures, we obtain the working
capital fund contribution for each area, as shown in table 22.
---------------------------------------------------------------------------

\43\ Moody's Seasoned Aaa Corporate Bond Yield, average of 2022
monthly data. The Coast Guard uses the most recent year of complete
data. Moody's is taken from Moody's Investors Service, which is a
bond credit rating business of Moody's Corporation. Bond ratings are
based on creditworthiness and risk. The rating of ``Aaa'' is the
highest bond rating assigned with the lowest credit risk. See
<a href="https://fred.stlouisfed.org/series/AAA">https://fred.stlouisfed.org/series/AAA</a>. (Last accessed 03/21/2023).

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

F. Step 6: Project Needed Revenue
In this step, the Coast Guard adds all the expenses accrued to
derive the total revenue needed for each area. These expenses include
the projected operating expenses (from Step 2), the total target pilot
compensation (from Step 4), total target apprentice pilot wage (from
Step 4), and the working capital fund contribution (from Step 5). We
show these calculations in table 23.

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

G. Step 7: Calculate Initial Base Rates
Having determined the revenue needed for each area in the previous
six steps, the Coast Guard divides that number by the expected number
of traffic hours to develop an hourly rate.
Step 7 is a two-part process. In the first part, we calculate the
10-year traffic average in District Two, using the total time on task
or pilot bridge hours. To calculate the time on task for each district
from 2013-2020, the Coast Guard used billing data from SeaPro. The data
is pulled from the system filtering by district, year, job status
(including only processed jobs), and flagging code (including only U.S.
jobs).
Because we calculate separate figures for designated and
undesignated waters, there are two parts for each calculation. For
2021-2022, the Coast Guard used figures provided by the associations
through SeaPro monthly reports. Where bridge hour figures did not match
between the monthly reports and the weighted factor reports, the Coast
Guard opted to use the figures from the monthly report for Step 7. We
show these values in table 24.

[[Page 9056]]

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

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

H. Step 8: Calculate Average Weighting Factors by Area
In this step, we calculate the average weighting factor for each
designated and undesignated area. We collect the weighting factors, set
forth in 46 CFR 401.400, for each vessel trip. Using this data, we
calculate the average weighting factor for each area using the data
from each vessel transit from 2014-2021, as shown in tables 26 and 27.
Data for 2022 was provided by the associations in a weighting factor
report.

Table 26--Average Weighting Factor for District Two, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014).................................................. 31 1 31
Class 1 (2015).................................................. 35 1 35
Class 1 (2016).................................................. 32 1 32
Class 1 (2017).................................................. 21 1 21
Class 1 (2018).................................................. 37 1 37
Class 1 (2019).................................................. 54 1 54
Class 1 (2020).................................................. 1 1 1
Class 1 (2021).................................................. 7 1 7
Class 1 (2022).................................................. 121 1 121
Class 2 (2014).................................................. 356 1.15 409
Class 2 (2015).................................................. 354 1.15 407
Class 2 (2016).................................................. 380 1.15 437
Class 2 (2017).................................................. 222 1.15 255
Class 2 (2018).................................................. 123 1.15 141
Class 2 (2019).................................................. 127 1.15 146
Class 2 (2020).................................................. 165 1.15 190
Class 2 (2021).................................................. 206 1.15 237
Class 2 (2022).................................................. 478 1.15 550
Class 3 (2014).................................................. 20 1.3 26
Class 3 (2015).................................................. 0 1.3 0
Class 3 (2016).................................................. 9 1.3 12
Class 3 (2017).................................................. 12 1.3 16
Class 3 (2018).................................................. 3 1.3 4
Class 3 (2019).................................................. 1 1.3 1
Class 3 (2020).................................................. 1 1.3 1
Class 3 (2021).................................................. 5 1.3 7
Class 3 (2022).................................................. 8 1.3 10
Class 4 (2014).................................................. 636 1.45 922
Class 4 (2015).................................................. 560 1.45 812

[[Page 9057]]

Class 4 (2016).................................................. 468 1.45 679
Class 4 (2017).................................................. 319 1.45 463
Class 4 (2018).................................................. 196 1.45 284
Class 4 (2019).................................................. 210 1.45 305
Class 4 (2020).................................................. 201 1.45 291
Class 4 (2021).................................................. 227 1.45 329
Class 4 (2022).................................................. 642 1.45 931
-----------------------------------------------
Total....................................................... 6,268 .............. 8,204
Average weighting factor (weighted transits/number of .............. 1.31 ..............
transits)..................................................
----------------------------------------------------------------------------------------------------------------
* Figures may not sum due to rounding.

Table 27--Average Weighting Factor for District Two, Designated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014).................................................. 20 1 20
Class 1 (2015).................................................. 15 1 15
Class 1 (2016).................................................. 28 1 28
Class 1 (2017).................................................. 15 1 15
Class 1 (2018).................................................. 42 1 42
Class 1 (2019).................................................. 48 1 48
Class 1 (2020).................................................. 7 1 7
Class 1 (2021).................................................. 12 1 12
Class 1 (2022).................................................. 117 1 117
Class 2 (2014).................................................. 237 1.15 273
Class 2 (2015).................................................. 217 1.15 250
Class 2 (2016).................................................. 224 1.15 258
Class 2 (2017).................................................. 127 1.15 146
Class 2 (2018).................................................. 153 1.15 176
Class 2 (2019).................................................. 281 1.15 323
Class 2 (2020).................................................. 342 1.15 393
Class 2 (2021).................................................. 240 1.15 276
Class 2 (2022).................................................. 717 1.15 825
Class 3 (2014).................................................. 8 1.3 10
Class 3 (2015).................................................. 8 1.3 10
Class 3 (2016).................................................. 4 1.3 5
Class 3 (2017).................................................. 4 1.3 5
Class 3 (2018).................................................. 14 1.3 18
Class 3 (2019).................................................. 1 1.3 1
Class 3 (2020).................................................. 5 1.3 7
Class 3 (2021).................................................. 2 1.3 3
Class 3 (2022).................................................. 13 1.3 17
Class 4 (2014).................................................. 359 1.45 521
Class 4 (2015).................................................. 340 1.45 493
Class 4 (2016).................................................. 281 1.45 407
Class 4 (2017).................................................. 185 1.45 268
Class 4 (2018).................................................. 379 1.45 550
Class 4 (2019).................................................. 403 1.45 584
Class 4 (2020).................................................. 405 1.45 587
Class 4 (2021).................................................. 268 1.45 389
Class 4 (2022).................................................. 1,230 1.45 1,784
-----------------------------------------------
Total....................................................... 6,751 .............. 8,882
Average weighting factor (weighted transits/number of .............. 1.32 ..............
transits)..................................................
----------------------------------------------------------------------------------------------------------------
* Figures may not sum due to rounding.

I. Step 9: Calculate Revised Base Rates
In this step, the Coast Guard revises the base rates, so that the
total cost of pilotage will be equal to the revenue needed after
considering the impact of the weighting factors. To do this, we divide
the initial base rates calculated in Step 7 by the average weighting
factors calculated in Step 8, as shown in table 28.

[[Page 9058]]

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

J. Step 10: Review and Finalize Rates
In this step, the Director reviews the rates set forth by the
staffing model and ensures that they meet the goal of ensuring safe,
efficient, and reliable pilotage. To establish this, the Director
considers whether the rates incorporate appropriate compensation for
pilots to handle heavy traffic periods, and whether there are enough
pilots to handle those heavy traffic periods. The Director also
considers whether the rates cover operating expenses and infrastructure
costs, taking average traffic and weighting factors into consideration.
Based on the financial information submitted by the pilots, the
Director is not establishing any alterations to the rates in this step.
We modify Sec. 401.405(a)(3) and (4) to reflect the final rates shown
in table 29.

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

District Three

A. Step 1: Recognize Previous Operating Expenses
Step 1 in our ratemaking methodology requires that the Coast Guard
review and recognize the previous year's operating expenses (Sec.
404.101). To do so, we review the independent accountant's financial
reports for each association's 2021 expenses and revenues.\44\ For
accounting purposes, the financial reports divide expenses into
designated and undesignated areas. For costs generally accrued by the
pilot associations, such as employee benefits, the cost is divided
between the designated and undesignated areas on a pro rata basis.
---------------------------------------------------------------------------

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

In the 2021 expenses used as the basis for this final rule,
districts used the term ``applicant'' to describe applicant trainees
and persons who will be called apprentices (applicant pilots), under
the definition of ``apprentice pilot'', which was introduced in the
2022 final rule. Therefore, when describing past expenses, the term
``applicant'' is used to match what was reported in 2021, which
includes both applicant and apprentice pilots. The term ``apprentice''
is used to distinguish apprentice pilot wages and to describe the
impacts of the ratemaking going forward.
The Coast Guard continues to include apprentice salaries as an
allowable expense in the 2024 ratemaking, as this final rule is based
on 2021 operating expenses, when salaries were still an allowable
expense. Beginning with the 2025 ratemaking, apprentice pilot salaries
will no longer be included as a 2022 operating expense, because
apprentice pilot wages will have already been factored into the
ratemaking Steps 3 and 4 in calculation of the 2022 rates. Beginning in
2025, the applicant salaries' operating expenses for 2022 will consist
of only applicant trainees (those who are not yet apprentice pilots).
The recognized operating expenses for District Three are shown in table
30.

Table 30--2021 Recognized Expenses for District Three
----------------------------------------------------------------------------------------------------------------
Undesignated Designated Undesignated
------------------------------------------------
Reported operating expenses for 2021 Lakes Huron St. Mary's Total
and Michigan River Lake Superior
----------------------------------------------------------------------------------------------------------------
Applicant Cost
----------------------------------------------------------------------------------------------------------------
Applicant Salaries.............................. $336,149 $140,111 $176,330 $652,590
Applicant Benefits.............................. 58,306 24,303 30,585 113,194
---------------------------------------------------------------
Total Applicant Cost........................ 394,455 164,414 206,915 765,784
----------------------------------------------------------------------------------------------------------------
Other Pilotage Costs
----------------------------------------------------------------------------------------------------------------
Pilot subsistence/travel........................ 149,993 62,519 78,680 291,192
Hotel/Lodging Cost.............................. 136,769 57,007 71,744 265,520
Hotel/Lodging Cost (D3-21-03)................... (18,162) (7,570) (9,527) (35,260)
Travel.......................................... 55,936 23,315 29,342 108,592

[[Page 9059]]

License Insurance--Pilots....................... 881 367 462 1,710
Payroll taxes................................... .............. .............. .............. ..............
Payroll Tax (D3-21-04).......................... 155,779 64,931 81,715 302,425
License Insurance............................... 15,328 6,389 8,040 29,757
---------------------------------------------------------------
Total Other Pilotage Costs.................. 496,524 206,958 260,456 963,938
----------------------------------------------------------------------------------------------------------------
Pilot Boat and Dispatch Costs
----------------------------------------------------------------------------------------------------------------
Pilot boat costs................................ 445,549 185,710 233,716 864,975
Pilot Boat Coast (D2-21-02)..................... (10,901) (4,544) (5,718) (21,163)
Dispatch costs.................................. 38,156 15,904 20,015 74,074
Employee Benefits............................... 1,748 729 917 3,394
Insurance....................................... 20,141 8,395 10,565 39,101
Insurance (D3-21-05, D3-21-09).................. 1,735 723 910 3,369
Salaries........................................ 140,294 58,476 73,592 272,363
Payroll taxes................................... 123 51 64 238
---------------------------------------------------------------
Total Pilot boat and dispatch costs......... 636,845 265,444 334,061 1,236,350
----------------------------------------------------------------------------------------------------------------
Administrative Cost
----------------------------------------------------------------------------------------------------------------
Legal--general counsel.......................... 9,560 3,985 5,015 18,560
Legal--shared counsel (K&L Gates)............... 6,227 2,595 3,266 12,088
Legal--shared counsel (K&L Gates) (D3-21-07).... (1,307) (545) (686) (2,538)
Travel.......................................... 58,104 24,219 30,479 112,802
Travel (D3-21-03)............................... (14,093) (5,874) (7,393) (27,360)
Insurance....................................... 29,480 12,288 15,464 57,232
Insurance (D3-21-05, D3-21-09).................. (5,112) (2,131) (2,681) (9,924)
Employee benefits............................... 126,390 52,681 66,299 245,369
Payroll Tax..................................... 54,544 22,735 28,611 105,890
Other taxes..................................... 25,489 10,624 13,370 49,483
Other taxes (D3-21-02).......................... (25,006) (10,423) (13,117) (48,545)
Real Estate Taxes............................... 1,396 582 732 2,710
Depreciation/Auto leasing/Other................. 112,215 46,772 58,863 217,850
Depreciation/Auto leasing/Other (D3-21-02)...... (4,465) (1,861) (2,342) (8,668)
Interest........................................ 3,432 1,431 1,800 6,663
APA Dues........................................ 25,946 10,814 13,610 50,370
APA Dues (D3-21-08)............................. (1,297) (541) (680) (2,519)
Dues and subscriptions.......................... 4,044 1,685 2,121 7,850
Salaries........................................ 63,591 26,506 33,357 123,454
Utilities....................................... 41,681 17,373 21,864 80,919
Utilities (D3-21-03)............................ (34,248) (14,275) (17,965) (66,488)
Accounting/Professional fees.................... 22,765 9,489 11,941 44,195
Pilot Training.................................. 44,259 18,448 23,216 85,923
Other expenses.................................. 24,741 10,312 12,978 48,032
---------------------------------------------------------------
Total Administrative Expenses............... 568,336 236,889 298,122 1,103,347
---------------------------------------------------------------
Total Operating Expenses (OpEx)............. 2,096,160 873,705 1,099,554 4,069,419
----------------------------------------------------------------------------------------------------------------

B. Step 2: Project Operating Expenses, Adjusting for Inflation or
Deflation
In accordance with the text in Sec. 404.102, having identified the
2021 operating expenses in Step 1, the next step is to estimate the
current year's operating expenses by adjusting those expenses for
inflation over the 3-year period. We calculate inflation using the BLS
data from the CPI for the Midwest Region of the United States for the
2022 inflation rate.\45\ Because the BLS does not provide forecasted
inflation data, we use economic projections from the Federal Reserve
for the 2023 and 2024 inflation modification.\46\ Based on that
information, the calculations for Step 2 are as presented in table 31.
---------------------------------------------------------------------------

\45\ The CPI is defined as ``All Urban Consumers (CPI-U), All
Items, 1982-84=100.'' Series CUUR0200SA0 (Downloaded March 21,
2023). Available at <a href="https://www.bls.gov/cpi/data.htm">https://www.bls.gov/cpi/data.htm</a>., All Urban
Consumers (Current Series), multiscreen data, not seasonally
adjusted, 0200 Midwest, Current, All Items, Monthly, 12-month
Percent Change and Annual Data.
\46\ The 2022 and 2023 inflation rates are available at <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230920.pdf">https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230920.pdf</a>. We used the Median Core PCE June
Projection found in table 1. (Downloaded September 2023).

[[Page 9060]]

Table 31--Adjusted Operating Expenses for District Three
----------------------------------------------------------------------------------------------------------------
District Three
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)............................... $3,195,714 $873,705 $4,069,419
2022 Inflation Modification (@8%)............................... 255,657 69,896 325,553
2023 Inflation Modification (@3.9%)............................. 134,603 36,800 171,403
2024 Inflation Modification (@2.6%)............................. 93,235 25,490 118,725
Adjusted 2024 Operating Expenses............................ 3,679,209 1,005,891 4,685,100
----------------------------------------------------------------------------------------------------------------
* Figures are rounded to the nearest dollar and may not sum to totals.

C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots
In accordance with the text in Sec. 404.103, the Coast Guard
estimates the number of registered pilots in each district. We
determine the number of registered pilots based on data provided by the
WGLPA. Using these numbers, we estimate that there will be 23
registered pilots in 2024 in District Three, including the additional
pilot granted by the Director. We determine the number of apprentice
pilots based on input from the district on anticipated retirements and
staffing needs. Using these numbers, the Coast Guard estimates that
there will be two apprentice pilots in 2024 in District Three. Based on
the seasonal staffing model discussed in the 2017 ratemaking (82 FR
41466) and rounding introduced in the 2022 ratemaking (87 FR 18488), a
certain number of pilots are assigned to designated waters, and a
certain number of pilots are assigned to undesignated waters, as shown
in table 32. These numbers are used to determine the amount of revenue
needed in their respective areas.

Table 32--Authorized Pilots for District Three
------------------------------------------------------------------------
Item District Three
------------------------------------------------------------------------
Maximum Number of Pilots (per Sec. 401.220(a)) *...... 22
2024 Authorized Pilots (total).......................... 23
Pilots Assigned to Designated Areas..................... 5
Pilots Assigned to Undesignated Areas................... 18
2024 Apprentice Pilots.................................. 2
------------------------------------------------------------------------
* For a detailed calculation, refer to the Great Lakes Pilotage Rates--
2017 Annual Review final rule, which contains the staffing model. See
82 FR 41466, table 6 at 41480 (August 31, 2017).

D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice
Pilot Wage Benchmark
In this step, we determine the total pilot compensation for each
area. Because we are issuing an ``interim'' ratemaking this year, we
follow the procedure outlined in paragraph (b) of Sec. 404.104, which
adjusts the existing compensation benchmark by inflation. First, we
adjust the 2023 target compensation benchmark of $424,398 by 1.2
percent for a value of $429,491. This accounts for the difference in
actual third quarter 2023 ECI inflation, which is 3.9 percent, and the
2023 PCE estimate of 2.7 percent.47 48 The second step
accounts for projected inflation from 2023 to 2024, which is 2.6
percent.\49\ Based on the projected 2024 inflation estimate, the target
compensation benchmark for 2024 is $440,658 per pilot. The apprentice
pilot wage benchmark is 36 percent of the target pilot compensation, or
$158,637 ($440,658 x 0.36).
---------------------------------------------------------------------------

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

In accordance with Sec. 404.104(c), we use the revised target
individual compensation level to derive the total pilot compensation by
multiplying the individual target compensation by the estimated number
of registered pilots for District Three, as shown in table 33. We
estimate that the number of apprentice pilots with limited registration
needed for District Three in the 2024 season will be two. The total
target wages for apprentices are allocated with 21 percent for the
designated area and 79 percent (52 percent + 27 percent) for the
undesignated area, in accordance with the allocation for operating
expenses.

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

[[Page 9061]]

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

E. Step 5: Project Working Capital Fund
Next, the Coast Guard calculates the working capital fund revenues
needed for each area. We first add the figures for projected operating
expenses, total target pilot compensation, and total target apprentice
pilot wage for each area, and then, we find the preceding year's
average annual rate of return for new issues of high-grade corporate
securities. Using Moody's data, the number is 4.0742 percent,
rounded.\50\ By multiplying the two figures, we obtain the working
capital fund contribution for each area, as shown in table 34.
---------------------------------------------------------------------------

\50\ Moody's Seasoned Aaa Corporate Bond Yield, average of 2022
monthly data. The Coast Guard uses the most recent year of complete
data. Moody's is taken from Moody's Investors Service, which is a
bond credit rating business of Moody's Corporation. Bond ratings are
based on creditworthiness and risk. The rating of ``Aaa'' is the
highest bond rating assigned with the lowest credit risk. See
<a href="https://fred.stlouisfed.org/series/AAA">https://fred.stlouisfed.org/series/AAA</a>. (Last accessed 03/21/2023.)

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

F. Step 6: Project Needed Revenue
In this step, we add all the expenses accrued to derive the total
revenue needed for each area. These expenses include the projected
operating expenses (from Step 2), the total target pilot compensation
(from Step 4), and the working capital fund contribution (from Step 5).
The calculations are shown in table 35.

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

G. Step 7: Calculate Initial Base Rates
Having determined the revenue needed for each area in the previous
six steps, we divide that number by the expected number of traffic
hours to develop an hourly rate.
Step 7 is a two-part process. In the first part, the 10-year
traffic average in District Three is calculated using the total time on
task or pilot bridge hours. To calculate the time on task for each
district from 2013-2020, the Coast Guard used billing data from SeaPro.
The data is pulled from the system filtering by district, year, job
status (including only processed jobs), and flagging code (including
only U.S. jobs).
Because we calculate separate figures for designated and
undesignated waters, there are two parts for each calculation. For
2021-2022, the Coast Guard used figures provided by the associations
through SeaPro monthly reports. Where bridge hour figures did not match
between the monthly reports and the weighted factor reports, the Coast
Guard opted to use the figures from the monthly report for Step 7. We
show these values in table 36.

[[Page 9062]]

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

Next, we derive the initial hourly rate by dividing the revenue
needed by the average number of hours for each area. This produces an
initial rate, which is necessary to produce the revenue needed for each
area, assuming the amount of traffic is as expected. The calculations
for District Three are set forth in table 37.

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

H. Step 8: Calculate Average Weighting Factors by Area
In this step, we calculate the average weighting factor for each
designated and undesignated area. We collect the weighting factors, set
forth in 46 CFR 401.400, for each vessel trip. Using this data, we
calculate the average weighting factor for each area using the data
from each vessel transit from 2014 to 2021, as shown in tables 38 and
39. Data for 2022 was provided by the associations in a weighting
factor report.

Table 38--Average Weighting Factor for District Three, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits
----------------------------------------------------------------------------------------------------------------
Area 6
----------------------------------------------------------------------------------------------------------------
Class 1 (2014).................................................. 45 1 45
Class 1 (2015).................................................. 56 1 56
Class 1 (2016).................................................. 136 1 136
Class 1 (2017).................................................. 148 1 148
Class 1 (2018).................................................. 103 1 103
Class 1 (2019).................................................. 173 1 173
Class 1 (2020).................................................. 4 1 4
Class 1 (2021).................................................. 8 1 8
Class 1 (2022).................................................. 162 1 162
Class 2 (2014).................................................. 274 1.15 315
Class 2 (2015).................................................. 207 1.15 238
Class 2 (2016).................................................. 236 1.15 271
Class 2 (2017).................................................. 264 1.15 304
Class 2 (2018).................................................. 169 1.15 194
Class 2 (2019).................................................. 279 1.15 321
Class 2 (2020).................................................. 332 1.15 382
Class 2 (2021).................................................. 273 1.15 314
Class 2 (2022).................................................. 452 1.15 520
Class 3 (2014).................................................. 15 1.3 20
Class 3 (2015).................................................. 8 1.3 10
Class 3 (2016).................................................. 10 1.3 13
Class 3 (2017).................................................. 19 1.3 25
Class 3 (2018).................................................. 9 1.3 12
Class 3 (2019).................................................. 9 1.3 12
Class 3 (2020).................................................. 4 1.3 5
Class 3 (2021).................................................. 5 1.3 7
Class 3 (2022).................................................. 3 1.3 4
Class 4 (2014).................................................. 394 1.45 571

[[Page 9063]]

Class 4 (2015).................................................. 375 1.45 544
Class 4 (2016).................................................. 332 1.45 481
Class 4 (2017).................................................. 367 1.45 532
Class 4 (2018).................................................. 337 1.45 489
Class 4 (2019).................................................. 334 1.45 484
Class 4 (2020).................................................. 339 1.45 492
Class 4 (2021).................................................. 356 1.45 516
Class 4 (2022).................................................. 482 1.45 699
-----------------------------------------------
Total for Area 6............................................ 6,719 .............. 8,609
----------------------------------------------------------------------------------------------------------------
Area 8
----------------------------------------------------------------------------------------------------------------
Class 1 (2014).................................................. 3 1 3
Class 1 (2015).................................................. 0 1 0
Class 1 (2016).................................................. 4 1 4
Class 1 (2017).................................................. 4 1 4
Class 1 (2018).................................................. 0 1 0
Class 1 (2019).................................................. 0 1 0
Class 1 (2020).................................................. 1 1 1
Class 1 (2021).................................................. 5 1 5
Class 1 (2022).................................................. 12 1 12
Class 2 (2014).................................................. 177 1.15 204
Class 2 (2015).................................................. 169 1.15 194
Class 2 (2016).................................................. 174 1.15 200
Class 2 (2017).................................................. 151 1.15 174
Class 2 (2018).................................................. 102 1.15 117
Class 2 (2019).................................................. 120 1.15 138
Class 2 (2020).................................................. 180 1.15 207
Class 2 (2021).................................................. 124 1.15 143
Class 2 (2022).................................................. 95 1.15 109
Class 3 (2014).................................................. 3 1.3 4
Class 3 (2015).................................................. 0 1.3 0
Class 3 (2016).................................................. 7 1.3 9
Class 3 (2017).................................................. 18 1.3 23
Class 3 (2018).................................................. 7 1.3 9
Class 3 (2019).................................................. 6 1.3 8
Class 3 (2020).................................................. 1 1.3 1
Class 3 (2021).................................................. 1 1.3 1
Class 3 (2022).................................................. 5 1.3 7
Class 4 (2014).................................................. 243 1.45 352
Class 4 (2015).................................................. 253 1.45 367
Class 4 (2016).................................................. 204 1.45 296
Class 4 (2017).................................................. 269 1.45 390
Class 4 (2018).................................................. 188 1.45 273
Class 4 (2019).................................................. 254 1.45 368
Class 4 (2020).................................................. 265 1.45 384
Class 4 (2021).................................................. 319 1.45 463
Class 4 (2022).................................................. 306 1.45 444
-----------------------------------------------
Total for Area 8............................................ 3,670 .............. 4,914
Combined total.............................................. 10,389 .............. 13,522
Average weighting factor (weighted transits/number of .............. 1.30 ..............
transits)..................................................
----------------------------------------------------------------------------------------------------------------
* Figures may not sum due to rounding.

Table 39--Average Weighting Factor for District Three, Designated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014).................................................. 27 1 27
Class 1 (2015).................................................. 23 1 23
Class 1 (2016).................................................. 55 1 55
Class 1 (2017).................................................. 62 1 62
Class 1 (2018).................................................. 47 1 47
Class 1 (2019).................................................. 45 1 45
Class 1 (2020).................................................. 15 1 15
Class 1 (2021).................................................. 15 1 15
Class 1 (2022).................................................. 104 1 104
Class 2 (2014).................................................. 221 1.15 254
Class 2 (2015).................................................. 145 1.15 167

[[Page 9064]]

Class 2 (2016).................................................. 174 1.15 200
Class 2 (2017).................................................. 170 1.15 196
Class 2 (2018).................................................. 126 1.15 145
Class 2 (2019).................................................. 162 1.15 186
Class 2 (2020).................................................. 218 1.15 251
Class 2 (2021).................................................. 131 1.15 151
Class 2 (2022).................................................. 198 1.15 228
Class 3 (2014).................................................. 15 1.3 20
Class 3 (2015).................................................. 0 1.3 0
Class 3 (2016).................................................. 6 1.3 8
Class 3 (2017).................................................. 14 1.3 18
Class 3 (2018).................................................. 6 1.3 8
Class 3 (2019).................................................. 3 1.3 4
Class 3 (2020).................................................. 1 1.3 1
Class 3 (2021).................................................. 2 1.3 3
Class 3 (2022).................................................. 5 1.3 7
Class 4 (2014).................................................. 321 1.45 465
Class 4 (2015).................................................. 245 1.45 355
Class 4 (2016).................................................. 191 1.45 277
Class 4 (2017).................................................. 234 1.45 339
Class 4 (2018).................................................. 225 1.45 326
Class 4 (2019).................................................. 308 1.45 447
Class 4 (2020).................................................. 336 1.45 487
Class 4 (2021).................................................. 258 1.45 374
Class 4 (2022).................................................. 392 1.45 568
-----------------------------------------------
Total....................................................... 4,500 .............. 5,877
Average weighting factor (weighted transits/number of .............. 1.31 ..............
transits)..................................................
----------------------------------------------------------------------------------------------------------------
* Figures may not sum due to rounding.

I. Step 9: Calculate Revised Base Rates
In this step, we revise the base rates, so that the total cost of
pilotage will be equal to the revenue needed after considering the
impact of the weighting factors. To do this, we divide the initial base
rates calculated in Step 7 by the average weighting factors calculated
in Step 8, as shown in table 40.

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

J. Step 10: Review and Finalize Rates

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

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

X. Regulatory Analyses

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

A. Regulatory Planning and Review

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

[[Page 9065]]

Executive Order 14094 (Modernizing Regulatory Review), and 13563
(Improving Regulation and Regulatory Review) direct agencies to assess
the costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility.
The Office of Management and Budget (OMB) has not designated this
rule a significant regulatory action under section 3(f) of Executive
Order 12866, as amended by Executive Order 14094. Accordingly, OMB has
not reviewed this regulatory action.
The purpose of this final rule is to establish new pilotage rates,
as 46 U.S.C. 9303(f) requires that rates be established or reviewed and
adjusted each year. The statute also requires that base rates be
established by a full ratemaking at least once every 5 years, and, in
years when base rates are not established, they must be reviewed and,
if necessary, adjusted. The Coast Guard concluded the last full
ratemaking in February of 2023.\51\
---------------------------------------------------------------------------

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

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

Table 42--Economic Impacts Due to Rate Changes
----------------------------------------------------------------------------------------------------------------
Change Description Affected population Costs Benefits
----------------------------------------------------------------------------------------------------------------
Rate changes............. In accordance with Owners and operators Increase of New rates cover an
46 U.S.C. Chapter of 296 vessels $2,621,471 due to association's
93, the Coast Guard transiting the change in revenue necessary and
is required to Great Lakes system needed for 2024 reasonable
review and adjust annually, 58 United ($40,280,666) from operating
pilotage rates States Great Lakes revenue needed for expenses. Promotes
annually. pilots, 6 2023 ($37,659,195) safe, efficient,
apprentice pilots, as shown in table and reliable
and 3 pilotage 43. pilotage service
associations. on the Great
Lakes. Provides
fair compensation,
adequate training,
and sufficient
rest periods for
pilots. Ensures
the association
receives
sufficient
revenues to fund
future
improvements.
----------------------------------------------------------------------------------------------------------------

The Coast Guard is required to review and adjust pilotage rates on
the Great Lakes annually. See section III., Basis and Purpose, of this
preamble for detailed discussions of the legal basis and purpose for
this rulemaking. Based on our annual review for this rulemaking, we are
adjusting the pilotage rates for the 2024 shipping season to generate
sufficient revenues for each district to reimburse its necessary and
reasonable operating expenses, fairly compensate properly trained and
rested pilots, and provide an appropriate working capital fund to use
for improvements. The result is an increase in rates for both areas in
District One, the designated area for District Two, and both areas in
District Three. There is a decrease in rates for the undesignated area
in District Two. These changes also lead to a net increase in the cost
of service to shippers. The change in per-unit cost to each individual
shipper depends on their area of operation.
A detailed discussion of our economic impact analysis follows.
Affected Population
This final rule affects United States Great Lakes pilots and
apprentice pilots, the 3 pilot associations, and the owners and
operators of 296 oceangoing vessels that transit the Great Lakes
annually on average from 2020 to 2022. The Coast Guard estimates that
there will be 58 registered pilots and 6 apprentice pilots during the
2024 shipping season, an increase of 2 pilots and decrease of 1
apprentice pilot from the proposed numbers in the NPRM. The shippers
affected by these rate changes are those owners and operators of
domestic vessels operating ``on register'' (engaged in foreign trade)
and the owners and operators of non-Canadian foreign vessels on routes
within the Great Lakes system. These owners and operators must have
pilots or pilotage service as required by 46 U.S.C. 9302. There is no
minimum tonnage limit or exemption for these vessels.
The statute applies only to commercial vessels, not to recreational
vessels. United States-flagged vessels not operating on register, and
Canadian ``lakers,'' which account for most commercial shipping on the
Great Lakes, are not required by 46 U.S.C. 9302 to have pilots.
However, these United States- and Canadian-flagged lakers may
voluntarily choose to engage a Great Lakes registered pilot. Vessels
that are U.S.-flagged may opt to have a pilot for varying reasons, such
as unfamiliarity with designated waters and ports, or for insurance
purposes.
The Coast Guard used billing information from the years 2020
through 2022 from the SeaPro to estimate the average annual number of
vessels affected by the rate adjustment. SeaPro tracks data related to
managing an

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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.