Proposed Rule2025-17095
Great Lakes Pilotage Rates-2026 Annual Review and Revisions to Methodology
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Published
September 5, 2025
Issuing agencies
Homeland Security DepartmentCoast Guard
Abstract
The Coast Guard is proposing new base Great Lakes pilotage rates for the 2026 shipping season while facilitating commerce and supply chains. The Coast Guard estimates that this proposed rule would result in an approximately 7-percent decrease in operating costs compared to the 2025 season. The Coast Guard is also proposing one change to the ratemaking methodology: the removal of Step 5 regarding the working capital fund. In accordance with the requirement to conduct a full ratemaking at least every 5 years, we are conducting a full ratemaking for 2026 and accepting comments on the Great Lakes pilotage ratemaking methodology.
Full Text
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<title>Federal Register, Volume 90 Issue 170 (Friday, September 5, 2025)</title>
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[Federal Register Volume 90, Number 170 (Friday, September 5, 2025)]
[Proposed Rules]
[Pages 42899-42930]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-17095]
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DEPARTMENT OF HOMELAND SECURITY
Coast Guard
46 CFR Parts 401 and 404
[Docket No. USCG-2025-0252]
RIN 1625-AD03
Great Lakes Pilotage Rates--2026 Annual Review and Revisions to
Methodology
AGENCY: Coast Guard, DHS.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Coast Guard is proposing new base Great Lakes pilotage
rates for the 2026 shipping season while facilitating commerce and
supply chains. The Coast Guard estimates that this proposed rule would
result in an approximately 7-percent decrease in operating costs
compared to the 2025 season. The Coast Guard is also proposing one
change to the ratemaking methodology: the removal of Step 5 regarding
the working capital fund. In accordance with the requirement to conduct
a full ratemaking at least every 5 years, we are conducting a full
ratemaking for 2026 and accepting comments on the Great Lakes pilotage
ratemaking methodology.
DATES: Comments and related material must be received by the Coast
Guard on or before October 8, 2025.
ADDRESSES: You may submit comments identified by docket number USCG-
2025-0252 using the Federal Decision-Making Portal at
<a href="http://www.regulations.gov">www.regulations.gov</a>. See the ``Public Participation and Request for
Comments'' portion of the SUPPLEMENTARY INFORMATION section for further
instructions on submitting comments. This notice of proposed
rulemaking, with its plain-language, 100-word-or-less proposed rule
summary, will be available in this same docket.
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 571-608-8418 or email <a href="/cdn-cgi/l/email-protection#c183b3a8a0afef93aea6a4b3b281b4b2a2a6efaca8ad"><span class="__cf_email__" data-cfemail="c183b3a8a0afef93aea6a4b3b281b4b2a2a6efaca8ad">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
Table of Contents for Preamble
I. Abbreviations
II. Basis and Purpose
III. Discussion of Proposed Methodological Changes and Consideration
of Past Comments
IV. Summary of the Ratemaking Methodology
V. Discussion of Proposed Rate Adjustments
District One
A. Step 1: Recognize Previous Operating Expenses
B. Step 2: Project Operating Expenses, Adjusting for Inflation
or Deflation
C. Step 3: Estimate Number of Registered Pilots and Apprentice
Pilots
D. Step 4: Determine Target Pilot Compensation Benchmark and
Apprentice Pilot Wage Benchmark
E. Redesignated Step 5: Project Needed Revenue (Previously Step
6)
F. Redesignated Step 6: Calculate Initial Base Rates (Previously
Step 7)
G. Redesignated Step 7: Calculate Average Weighting Factors by
Area (Previously Step 8)
H. Redesignated Step 8: Calculate Revised Base Rates (Previously
Step 9)
I. Redesignated Step 9: Review and Finalize Rates (Previously
Step 10)
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. Redesignated Step 5: Project Needed Revenue (Previously Step
6)
F. Redesignated Step 6: Calculate Initial Base Rates (Previously
Step 7)
G. Redesignated Step 7: Calculate Average Weighting Factors by
Area (Previously Step 8)
H. Redesignated Step 8: Calculate Revised Base Rates (Previously
Step 9)
I. Redesignated Step 9 Review and Finalize Rates (Previously
Step 10)
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. Redesignated Step 5: Project Needed Revenue (Previously Step
6)
F. Redesignated Step 6: Calculate Initial Base Rates (Previously
Step 7)
G. Redesignated Step 7: Calculate Average Weighting Factors by
Area (Previously Step 8)
H. Redesignated Step 8: Calculate Revised Base Rates (Previously
Step 9)
I. Redesignated Step 9: Review and Finalize Rates (Previously
Step 10)
VI. 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
VII. Public Participation and Request for Comments
I. Abbreviations
2021 final rule Great Lakes Pilotage Rates--2021 Annual Review and
Revisions to Methodology final rule
2023 final rule Great Lakes Pilotage Rates--2023 Annual Ratemaking
and Review of Methodology
2025 final rule Great Lakes Pilotage Rates--2025 Annual Review
APA American Pilots' Association
BLS Bureau of Labor Statistics
CFR Code of Federal Regulations
CPI Consumer Price Index
DHS Department of Homeland Security
Director U.S. Coast Guard's Director of the Great Lakes Pilotage
ECI Employment Cost Index
FOMC Federal Open Market Committee
FR Federal Register
GLPAC Great Lakes Pilotage Advisory Committee
LPA Lakes Pilots Association
NAICS North American Industry Classification System
NPRM Notice of proposed rulemaking
OMB Office of Management and Budget
PCE Personal Consumption Expenditures
Sec. Section
SBA Small Business Administration
SLSPA Saint Lawrence Seaway Pilots Association
[[Page 42900]]
U.S.C. United States Code
WGLPA Western Great Lakes Pilots Association
II. Basis and Purpose
The legal basis of this rulemaking is 46 U.S.C. Chapter 93,\1\
which requires foreign merchant vessels and United States vessels
operating ``on register'' (meaning United States vessels engaged in
foreign trade) to use United States or Canadian Registered Pilots while
transiting the United States waters of the St. Lawrence Seaway and the
Great Lakes system.\2\ For United States Registered Pilots, the statute
requires the Secretary to ``prescribe by regulation rates and charges
for pilotage services, giving consideration to the public interest and
the costs of providing the services.'' \3\ The statute requires that
rates be established or reviewed and adjusted each year, not later than
March 1.\4\ 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.\5\ The Secretary's duties and authority under 46 U.S.C.
Chapter 93 have generally been delegated to the Coast Guard.\6\
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\1\ 46 U.S.C. 9301-9308.
\2\ 46 U.S.C. 9302(a)(1).
\3\ 46 U.S.C. 9303(f).
\4\ Id.
\5\ Id.
\6\ Department of Homeland Security (DHS) Delegation 00170.1,
Revision No. 01.4, paragraph (II)(92)(f).
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The purpose of this rulemaking is to conduct a full ratemaking and
issue new pilotage rates for the 2026 shipping season. The full
ratemaking includes solicitating feedback regarding the entire
methodology and the staffing model. The Coast Guard believes that the
new rates and proposed changes to the methodology will continue to
promote our goal, as outlined in46 CFR 404.1, to promote safe,
efficient, and reliable pilotage service on the Great Lakes by
generating for each pilotage association sufficient revenue to
reimburse its necessary and reasonable operating expenses and fairly
compensate trained and rested Pilots. The Coast Guard believes this
ratemaking will continue to meet the other Sec. 404.1 goal of
providing an appropriate profit to use for improvements, as explained
later in this preamble.
Rates are the foundation for safe, efficient, and reliable pilotage
service to facilitate maritime commerce, protect the marine
environment, and comply with National Transportation Safety Board
recommendations regarding staffing and pilot fatigue. The pilotage
rates for the 2026 season range from a proposed $377 to $966 per pilot
hour, depending on which of the specific 6 areas pilotage service is
provided. The rates are paid by shippers to the pilot associations.
Table 1--Current and Proposed Pilotage Rates on the Great Lakes
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Final 2025 Proposed 2026
Area Name pilotage rate pilotage rate
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District One: Designated...................... St. Lawrence River.............. $986 $966
District One: Undesignated.................... Lake Ontario.................... 643 617
District Two: Designated...................... Navigable waters from Southeast 753 681
Shoal to Port Huron, MI..
District Two: Undesignated.................... Lake Erie....................... 576 555
District Three: Designated.................... St. Marys River................. 825 860
District Three: Undesignated.................. Lakes Huron, Michigan, and 440 377
Superior.
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There are three American pilotage districts on the Great Lakes,
each represented by a pilot association.\7\ Each pilotage district is
further divided into ``designated'' and ``undesignated'' areas.
Designated areas, classified as such by Presidential Proclamation, are
waters in which Pilots must direct the navigation of vessels at all
times.\8\ Undesignated areas are open bodies of water where Pilots must
only ``be on board and available to direct the navigation of the
vessel'' at the discretion of the vessel Master.\9\ The three pilot
associations, which are the exclusive source of United States
Registered Pilots on the Great Lakes, use the revenue from the shippers
to cover operating expenses, maintain infrastructure, compensate United
States Apprentice and Registered Pilots, acquire and implement
technological advances, train new personnel, and provide for continuing
professional development. Each pilot association is an independent
business and is the sole provider of pilotage services in its district
of operation. Each pilot association is responsible for funding its own
operating expenses, infrastructure maintenance, and compensation for
Pilots and Apprentice Pilots.\10\
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\7\ The Saint Lawrence Seaway Pilots Association (SLSPA)
provides pilotage services in District One, which includes all U.S.
waters of the St. Lawrence River and Lake Ontario. The Lakes Pilots
Association (LPA) provides pilotage services in District Two, which
includes all U.S. waters of Lake Erie, the Detroit River, Lake St.
Clair, and the St. Clair River. Finally, the Western Great Lakes
Pilots Association (WGLPA) provides pilotage services in District
Three, which includes all U.S. waters of the St. Mary's River; Sault
Ste. Marie Locks; and Lakes Huron, Michigan, and Superior.
\8\ 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>; accessed 08/08/25.
\9\ 46 U.S.C. 9302(a)(1)(B).
\10\ 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 actual demand for service dictates the compensation amount for
United States Registered Pilots. We divide that amount by the historic
10-year average for pilotage demand. We recognize that, in years where
demand for pilotage services exceeds the 10-year average, pilot
associations will accrue more revenue than projected, while, in years
where demand is below average, they will take in less. We believe that,
over the long term, however, this scheme ensures that infrastructure
will be maintained, and that Pilots will receive adequate compensation
and work a reasonable number of hours, with adequate rest between
assignments, to ensure retention of highly trained personnel. Using a
10-year average also results in less rate volatility.
In this notice of proposed rulemaking (NPRM), we are conducting a
full ratemaking under 46 CFR 404.100(a) to establish base pilotage
rates for 2026. We are electing to conduct a full ratemaking because
the Coast Guard is proposing changes to the methodology. Specifically,
2e are proposing to remove Step 5, which calculates a working capital
fund for each pilot association.
[[Page 42901]]
We typically propose methodology changes only during full
ratemakings, not during an adjustment ratemaking that follows the
existing methodology to reach the annual rates. The statute requires us
to conduct a full ratemaking at least once every 5 years but allows us
the discretion to conduct them more frequently. 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, February 27, 2023).
This proposed rule is a full ratemaking under 46 CFR 404.100(a). The
Coast Guard has made several changes to the ratemaking over the last
several final rules in consideration of the public interest and costs
of providing services. The recent changes and their impacts are
summarized in the 2023 final rule (88 FR 12226).
III. Discussion of Proposed Methodological Changes and Consideration of
Past Comments
The Coast Guard is proposing one change to the ratemaking
methodology: to remove Step 5 for calculating a working capital fund.
We are accepting comments on the entire ratemaking methodology and
staffing model as part of our full ratemaking year. In this section, we
also address the public comments on recent interim year ratemakings
that we committed to address in the next full ratemaking.
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. We have determined that the current base rate and
existing methodology in Steps 1 through 4 and 6 through 10 still adhere
to the Coast Guard's goals of safety through rate and compensation
stability, while promoting recruitment and retention of qualified
United States Registered Pilots. Therefore, we are not recommending any
methodological changes to Steps 1 through 4. For Steps 6 through 10,
the only change we are recommending is that they be redesignated as
Steps 5 through 9, and any references to previous steps be renumbered
as required.
A. Removal of Sec. 404.105--Ratemaking Step 5: Project Working Capital
Fund
We are proposing to remove Step 5 and retain the other 9 steps of
the ratemaking methodology. We are proposing this change in response to
public comments and upon review of the three pilotage associations'
assets and expenses. We also discussed removing the working capital
fund at the 2024 Great Lakes Pilotage Advisory Committee (GLPAC)
meeting. The discussion of the working capital fund removal begins on
page 212 of the 2024 GLPAC meeting transcript. The transcripts are
available in the docket for this rulemaking (USCG-2025-0252) and also
for the ``Great Lakes Pilotage Rates--2025 Annual Review'' final rule
(hereafter the 2025 final rule) (USCG-2024-0406), where indicated under
the Public Participation and Request for Comments portion of the
preamble. If adopted, existing Steps 6 through 10 would be redesignated
as Steps 5 through 9 in the ratemaking methodology.
During the NPRM comment period for the 2025 final rule, we received
a comment from industry stakeholders requesting that we remove the
working capital fund.\11\ In the 2025 final rule, we responded that we
would consider it in the next full ratemaking.\12\ The commenter
stated, in part:
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\11\ See docket USCG-2024-0406 on <a href="http://regulations.gov">regulations.gov</a>, specifically
Comment ID USCG-2024-0406-0007. <a href="https://www.regulations.gov/comment/USCG-2024-0406-0007">https://www.regulations.gov/comment/USCG-2024-0406-0007</a>.
\12\ 89 FR 100810, 100812, December 13, 2024.
We support the Coast Guard on this matter and urge that Step 5
of the rate-setting process be eliminated in the future. This
position is consistent with our past comments. In our submissions
for the 2017, 2018, and 2019 rate-settings, we urged the Coast Guard
to eliminate Step 5 for several reasons. First, we believe that
pilot associations--like any well-run business--should plan for and
reserve a portion of their revenue for routine capital needs. In the
past we have supported special surcharges for extraordinary capital
expenses, such as new pilot boats. We think a surcharge system is
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more transparent and easier to track.
The American Great Lakes Ports Association made this same point at
the 2024 GLPAC meeting.\13\
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\13\ Ibid.
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We are proposing to remove Step 5 for the following reasons. The
working capital fund was primarily put in place so that the three
districts could have sufficient proof of funds to receive loans and
lines of credit from financial institutions for large projects. The
U.S. Coast Guard's Director of the Great Lakes Pilotage (Director) has
reviewed and monitored the working capital fund accounts each year and
has determined that the pilot associations now have the funds needed
and ability to plan ahead for infrastructure maintenance, non-recurring
expenses, and credit worthiness. We anticipate, therefore, that the
pilot associations will have sufficient revenues to cover most
maintenance projects by early planning and setting funds aside.
If a necessary and reasonable expense presents itself as outside
the financial means of the organization, the Director may approve the
use of a surcharge, as we have done in the past. A surcharge would
provide transparency in both the amount and the association's purpose
for collecting the funds. If a surcharge is authorized in the future,
the amount collected would be included in the revenue reports for the
Coast Guard's review. Any surplus in revenue from the surcharge would
be deducted from Step 1 expenses, as necessary.
In Section VI., Regulatory Analyses, in this preamble, table 47
shows the difference in rates for the 2026 season between retaining and
removing Step 5: Project the working capital fund.
B. Suggestions Related to the Federal Open Market Committee Inflation
Adjustment in Step 2
In the same industry comment on the NPRM for the 2025 final rule,
we received a request to use the Federal Open Market Committee (FOMC)
inflation adjustment in Step 2.\14\ During the 2025 final rule
discussion of the comments, we indicated that we would address this
request in the next full ratemaking.\15\ Step 2 of our methodology
explains that inflation factors are taken from one of two sources--the
Bureau of Labor Statistics (BLS) Consumer Price Index (CPI) for the
Midwest Region or the FOMC median economic projections for Personal
Consumption Expenditures (PCE) inflation. The commenter was concerned
that we used the last 3 years of the BLS source. The commenter reasoned
that recent high inflation numbers appear in the average in each of 3
consecutive years leading to a projection that is ``unrealistically and
permanently high.'' The commenter asserted that continuing to rely on
the BLS gives little prospect of the numbers being corrected by a
downswing in inflation as the FOMC projections ``drop highs and lows
over the previous years to arrive at its estimates for mean inflation
percentages.''
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\14\ Ibid.
\15\ 89 FR 100810, 100812. December 13, 2024.
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The Coast Guard appreciates the concern that very high inflation
measures could lead to a high rate. However, Step 2 does not employ an
average at any point when applying the inflation measures for the 3
different years. The goal of the methodology in Step 2 is to adjust the
expenses from Step 1 by point estimates of inflation in each of the 3
years so that they are a more accurate representation of what future
expenses (and therefore revenue
[[Page 42902]]
needed) will look like in the year that rates are being set for. That
is, the three inflation rates are not averaged; they are compounded.
This process can be found in 46 CFR 404.102.
For the 2025 final rule, the base year of expenses was 2022,
requiring an adjustment for realized inflation in 2023 and projected
inflation that would occur in 2024 and 2025. The three measures used in
Step 2 of the 2025 final rule were, as noted in table 4 of this
preamble, for inflation from 2022 to 2023 (3.8-percent), inflation from
2023 to 2024 (2.8 percent), and inflation from 2024 to 2025 (2.3
percent). The 3.8 figure is the 2023 12-month percent change in CPI for
the categories of All Urban Consumers, All items in Midwest urban, all
urban consumers, not seasonally adjusted, while the 2.8 and 2.3 are
FOMC projections for 2024 and 2025. As the commenter notes, the FOMC
figures are projections for future years for which there is not current
data available, which is why the Coast Guard used these figures for
2024 and 2025. At the time of the 2025 final rule, the realized value
for inflation in 2023 was available to adjust the 2022 expenses. It is
most accurate to adjust the 2022 expenses by the actual value for 2023
rather than an average utilizing other years' data.
As this rulemaking is a full ratemaking, the Coast Guard welcomes
any proposals for improvements or changes to Step 2 of the methodology
that would better 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.
C. Other Comments To Address in Full Ratemaking
The same industry comment from the NPRM to the 2025 final rule also
suggested that the Coast Guard should conduct a line-by-line inspection
of pilot association expenses to determine if they meet the ``necessary
and reasonable'' standard. We stated in the 2025 final rule that we
would address this comment in the next full ratemaking.\16\
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\16\ 89 FR 100810, 100812. December 13, 2024.
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The Coast Guard does not conduct a line-by-line inspection because
it was unanimously voted at a previous GLPAC meeting that it would be
best to have a third party conduct a line-by-line inspection of pilot
association expenses.\17\ Third parties, particularly professionals
like auditors or financial advisors, bring unbiased expertise and
credibility to the review process. A neutral third-party auditor
provides a higher level of transparency in the way the review is
conducted. Having a third party review the pilotage expenses can
provide confidence to stakeholders that the process is thorough and
trustworthy, without potential for bias or manipulation. The third
party in this case is CohnReznick, a certified public accounting firm,
whose team was mentioned by all three district presidents in the 2023
GLPAC meeting as doing a great job and being the best company to
complete this important work. See pages 17-22 of the 2023 GLPAC
transcript.
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\17\ See discussion on pp. 17-30 from the 2023 GLPAC transcript
at <a href="https://www.regulations.gov/document/USCG-2023-0438-0009">https://www.regulations.gov/document/USCG-2023-0438-0009</a>.
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After these line-by-line items are reviewed by a third party, the
Coast Guard reviews out-of-the-ordinary findings and determines if the
expense is necessary and reasonable. The Coast Guard is open to
considering alternative methods or expense reviews, which could be
discussed in detail at the next GLPAC meeting or in the docket for this
proposed rule.
Lastly, in their comment on the NPRM for the 2025 final rule, the
Western Great Lakes Pilotage Association (WGLPA) requested an upward
adjustment of $45,296 based on a 2023 arbitration ruling that found
that wages were owed for overtime work performed by their dispatch
team.\18\ Because they were 2023 expenses, they were not included in
the 2025 final rule ratemaking methodology. The 2025 final rule used 3-
year-old expenses, from 2022, per Step 1 of the ratemaking methodology,
because 2022 was the earliest full year of audited data we could obtain
in time for the 2025 rulemaking. We explained in the 2025 final rule
(89 FR at 100812) that, if WGLPA provided documentation of the
expenses, those expenses would be evaluated in this year's ratemaking.
The WGPLA did not provide documentation for this year's ratemaking.
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\18\ See docket USCG-2024-0406 on <a href="http://regulations.gov">regulations.gov</a>, specifically
Comment ID USCG-2024-0406-0007. <a href="https://www.regulations.gov/comment/USCG-2024-0406-0007">https://www.regulations.gov/comment/USCG-2024-0406-0007</a>.
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The 2023 District 3 audited report included a total amount of
$45,296 as an adjusted expense for dispatch related work. However, the
audited report does not provide a breakdown of the dispatch related
expenses. According to WGLPA, this expense is associated with an
arbitration ruling. We are required to determine that an expense is
both necessary and reasonable in order to include the amount in the
expense base, but the burden is on the pilotage association to provide
sufficient documentation to support a determination that an expense is
both necessary and reasonable. We find we have insufficient information
to make this determination. We are unable to include this expense
without more detail from the association.
We also need additional information regarding the ``overtime
payments.'' We believe WGLPA dispatchers are salaried employees, and we
need a better understanding of these payments and how they compare to
the collective agreement between the dispatchers and WGLPA. A more
detailed line item expense breakdown would allow us to determine if the
court-ordered amount was necessary and reasonable for the services
provided. For example, in 2023, the WGLPA attempted to eliminate
dispatchers and, instead, required the United States Registered Pilots
in their association to monitor and track vessel movements. The
Director found this proposal to be unsafe and ordered WGLPA to
reinstate the dispatchers. We are unable to determine if the amount
paid included overtime pay, such as time-and-a-half or double time, or
any other punitive costs that may not have been necessary and
reasonable had the association had a sufficient number of dispatchers
in the first place.
In order to properly evaluate this expense, we require the
following information: (1) the complete invoice for legal fees, with
the same level of detail that a Federal court would require to award
legal fees to a prevailing party, (2) the arbitrator's full decision
with discussion and analysis for the award, and (3) proof of payment of
the award. If WGLPA provides this information, it will be included with
the final rule with any and all other information WGLPA provides.
The WGLPA was not able to provide us this detailed information by
our requested deadline to develop the rates for this proposed rule when
we asked on May 7, 2025. The association is welcome to provide this
information during the comment period, and the Director will evaluate
the claim further. At this time, we do not have sufficient information
to determine if the dispatch adjustment expenses are necessary and
reasonable expenses to include in Step 1 of this ratemaking.
[[Page 42903]]
D. Proposed Rates and Pilot Staffing
Based on the 9-step ratemaking model proposed in this NPRM, we are
proposing the rates shown in table 2.
Table 2--Current and Proposed Pilotage Rates on the Great Lakes
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Final 2025 Proposed 2026
Area Name pilotage rate pilotage rate
----------------------------------------------------------------------------------------------------------------
District One: Designated...................... St. Lawrence River.............. $986 $966
District One: Undesignated.................... Lake Ontario.................... 643 617
District Two: Designated...................... Navigable waters from Southeast 753 681
Shoal to Port Huron, MI.
District Two: Undesignated.................... Lake Erie....................... 576 555
District Three: Designated.................... St. Marys River................. 825 860
District Three: Undesignated.................. Lakes Huron, Michigan, and 440 377
Superior.
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This proposed rule would affect 57 United States Registered Pilots,
5 Apprentice Pilots, 3 pilot associations, and the owners and operators
of an average of 258 oceangoing vessels that transit the Great Lakes
annually. This proposed rule is not economically significant under
Executive Order 12866 and would not affect the Coast Guard's budget or
increase Federal spending because foreign shippers, foreign cruise
ships, and vessels requesting voluntary pilotage pay these rates
directly to the respective pilot association.
The estimated overall annual regulatory economic impact of this
rate change would be a net decrease of $3,034,653 in estimated payments
made by the foreign shippers, foreign cruise ships, and vessels
requesting voluntary pilotage service, an approximately 7-percent
decrease from operating costs in the 2025 shipping season. This
represents a decrease in revenue needed for total target Pilot
compensation, an increase in revenue needed for the total target
Apprentice Pilot wage benchmark, a decrease in the revenue needed for
adjusted operating expenses, and a decrease in the revenue needed for
the working capital fund because of the proposed removal of Step 5 from
the ratemaking.
E. Individual Target Pilot Compensation Benchmark
This NPRM would establish the proposed 2026 yearly base
compensation for Pilots on the Great Lakes at $483,548 per Pilot (a
$19,231 increase, or 4.14 percent, over their 2025 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 VI., Regulatory Analyses, of this preamble
provides the regulatory impact analyses of this proposed rule.
The Coast Guard is proposing to set the target Pilot compensation
benchmark at the target compensation for the ratemaking year 2025,
adjusted for inflation. This is the same method we used for setting the
target compensation benchmark in the previous full ratemaking in 2023.
This method resembles the interim ratemaking year requirements in Sec.
404.104(b), where the base target Pilot compensation is adjusted
annually for inflation. For a detailed history of how we arrived at the
target benchmark in previous years, please see the 2023 final rule. For
the reasons discussed in the 2023 final rule, we believe the base
compensation as adjusted annually has remained fair.
Based on the information we have exchanged with the Pilots and
industry over the past two ratemakings (2024-2025), the Director
continues to believe that the level of target Pilot compensation for
those years provided an appropriate level of compensation for United
States 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 United States Registered Pilots are resigning due to their
compensation, or that this compensation benchmark is causing shortfalls
in achieving reliable pilotage service. The Coast Guard finds that the
Pilot compensation benchmark is appropriate relative to the expertise
required to perform the necessary job functions. The compensation will
continue to be adjusted annually, in accordance with published
inflation rates, which will ensure the compensation remains competitive
and current for upcoming years.
Therefore, the Coast Guard does not propose alternative benchmarks
for target compensation at this time and, instead, proposes simply
adjusting the amount of target Pilot compensation for inflation as our
target compensation benchmark for 2025, as shown in Step 4. This target
compensation benchmark approach has advanced and would continue to
advance the Coast Guard's goals through rate and compensation stability
while also promoting recruitment and retention of qualified United
States Registered Pilots.
IV. Summary of the Ratemaking Methodology
The ratemaking methodology, outlined in current 46 CFR 404.101
through 404.110, consists of 10 steps that are designed to account for
the revenues needed and total traffic expected in each district. The
first several steps of the methodology establish base pilotage rates.
Additional steps to incorporate the weighting factors are necessary to
establish the final pilotage rates. The result is an hourly rate,
determined separately for each of the six areas administered by the
Coast Guard.
In Step 1, ``Recognize previous operating expenses,'' (Sec.
404.101) the Director uses an independent third party to review each
pilot association's audited operating expenses from each of the three
pilot associations. Operating expenses include all allowable expenses,
minus Pilot and Apprentice Pilot wages and benefits. This number forms
the baseline amount that each association is budgeted. Because of the
time delay between when the association submits raw numbers and the
Coast Guard receives audited numbers, this number is 3 years behind the
projected year of expenses. Therefore, in calculating the 2026 rates in
this proposal, we begin with the
[[Page 42904]]
audited expenses from the 2023 shipping season.
Of note, CohnReznick labeled District One and District Three
salaries incorrectly, using the term ``Applicant'' and not
``Apprentice'' in their independent third-party review of 2023 district
expenses. The term Apprentice was introduced in the 2022 final rule,
Great Lakes Pilotage Rates--2022 Annual Review and Revisions to
Methodology (87 FR 18488, March 20, 2022) under the definition of
``apprentice pilot.'' The incorrectly labeled Applicant salaries are
actually Apprentice Pilot salaries that are excluded in District One
and District Three. Apprentice salaries are included in Step 4 of the
ratemaking methodology of this NPRM and are not to be included in the
operating expenses.
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
actually accrued. For example, we can allocate the costs for 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 2026 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 BLS CPI for the Midwest Region, or, if
not available, the FOMC median economic projections for 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 United
States Registered Pilots and Apprentice Pilots are needed for each
district. To do this, the Director projects, based on the number of
persons applying under 46 CFR part 401 to become United States Great
Lakes Registered Pilots and on information provided by the district's
pilotage association, the number of Pilots expected to be fully working
and compensated. The director then employs the staffing model,
described in Sec. 401.220, paragraphs (a)(1) through (a)(3), to
estimate how many Pilots would be needed to handle shipping during the
opening and closing of the season. This number provides guidance to the
Director in approving an appropriate number of Pilots. As noted in the
2025 final rule, the maximum number of Pilots is now the maximum amount
allowed by the staffing model plus three, following the recommendation
from GLPAC in 2023.\19\ The minimum is set at the current staffing
model, with rounding as amended in the ``Great Lakes Pilotage Rates--
2021 Annual Review and Revisions to Methodology final rule'' final rule
(hereafter ``the 2021 final rule'') (86 FR 14184, March 12, 2021).
---------------------------------------------------------------------------
\19\ See Page 89 of the 2023 GLPAC Transcript at <a href="https://www.regulations.gov/document/USCG-2023-0438-0009">https://www.regulations.gov/document/USCG-2023-0438-0009</a>.
---------------------------------------------------------------------------
In Step 4 of the ratemaking calculation, we determine the number of
Pilots provided by the pilot associations (see Sec. 404.103) and use
that figure to determine how many Pilots need to be compensated via the
pilotage fees collected. In Step 4, ``Determine target Pilot
compensation benchmark and apprentice pilot wage benchmark,'' (Sec.
404.104(a)(1)), the Director determines base individual target Pilot
compensation using a compensation benchmark, set after considering the
most relevant currently available non-proprietary information. For
supportable circumstances, the Director may make necessary and
reasonable adjustments to the benchmark. For this proposed rule, the
Director plans to adjust the previous year's individual target Pilot
compensation using the same process as in an interim year (Sec.
404.104(b)).
In Step 5, ``Project working capital fund,'' (Sec. 404.105) the
Director calculates an added value to pay for needed capital
improvements and other non-recurring expenses, such as technology
investments and infrastructure maintenance. This value is calculated by
adding the total operating expenses (derived in Step 2) to the total
target Pilot compensation and total target Apprentice Pilot wage
(derived in Step 4) and 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. For the reasons given in the Section III.,
Discussion of Proposed Methodological Changes and Consideration of Past
Comments, in this preamble, we are proposing to remove Step 5 for
projecting the working capital fund. We would redesignate Steps 6
through 10 as Steps 5 through 9. In Section VI., Regulatory Analyses,
of this preamble, table 47 shows the difference in the rates for 2026
season between retaining and removing the working capital fund.
In proposed redesignated Step 5, previously 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).
The total figure, calculated separately for each area and district, is
the ``needed revenue.''
In proposed redesignated Step 6, previously Step 7, ``Calculate
initial base rates,'' (Sec. 404.107) the Director calculates an hourly
pilotage rate to cover the needed revenue, as calculated in
redesignated Step 5. This step consists of first calculating the 10-
year average hours of traffic for each area. Next, we divide the
revenue needed in each area (calculated in redesignated 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 redesignated Step 6, 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 proposed redesignated Step 7, previously 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 10-year average of the applied weighting factors.
In proposed redesignated Step 8, previously 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 redesignated Step 6) by the corresponding average weighting
factor (from redesignated Step 7), to produce a revised rate.
In proposed redesignated Step 9, previously 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 redesignated
[[Page 42905]]
Step 8) 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.
V. Discussion of Proposed Rate Adjustments
In this NPRM, based on the proposed methodology changes described
in the previous section, we are proposing new pilotage rates for 2026.
We propose to conduct the 2026 ratemaking as a full ratemaking, as we
last did in 2023 (88 FR 12226). Thus, the Coast Guard is proposing to
set the target Pilot compensation benchmark at the target compensation
for the ratemaking year 2025, adjusted for inflation. This method
resembles the interim ratemaking year requirements in Sec. 404.104(b),
where the base target Pilot compensation is adjusted annually for
inflation.
This section discusses the proposed rate changes using the
ratemaking steps provided in 46 CFR part 404, including our proposal to
remove the working capital fund calculation in Step 5. The following
work demonstrates how we arrived at the proposed rate for each pilotage
district.
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 2023 expenses and revenues.\20\ 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, for example, the cost is divided between the
designated and undesignated areas on a pro rata basis. Adjustments have
been made by the auditors and are explained in the auditor's reports,
which are available in the docket for this rulemaking, where indicated
under the Public Participation and Request for Comments portion of the
preamble. As noted in the Summary of the Ratemaking Methodology, the
2023 expense report for District One included an expense for $466,144
in ``applicant salaries,'' but the Coast Guard believes that these are
Apprentice Pilot salaries that are incorrectly labeled. Apprentice
Pilot salaries are accounted for in Step 4 of the methodology;
therefore, we excluded this expense from Step 1.
---------------------------------------------------------------------------
\20\ These reports are available in the docket for this
rulemaking.
---------------------------------------------------------------------------
The recognized operating expenses for District One are shown in
table 3.
Table 3--2023 Recognized Expenses for District One
----------------------------------------------------------------------------------------------------------------
District One
-----------------------------------------------
Designated Undesignated
Reported operating expenses for 2023 --------------------------------
St. Lawrence Total
River Lake Ontario
----------------------------------------------------------------------------------------------------------------
Applicant Pilot Compensation:
Travel...................................................... $11,548 $7,699 $19,247
License Insurance........................................... 2,872 1,915 4,787
Other Expenses.............................................. 1,246 830 2,076
Employee Benefits........................................... 16,409 10,940 27,349
-----------------------------------------------
Total Applicant Pilot Compensation...................... 32,075 21,384 53,459
Operating Expenses:
Hotel/Lodging............................................... 54,912 36,608 91,520
Payroll Taxes............................................... 208,891 139,261 348,152
Pilot Subsistence........................................... 146,011 97,340 243,351
Travel...................................................... 654,922 436,614 1,091,536
License Insurance........................................... 51,302 34,202 85,504
-----------------------------------------------
Total Other Pilotage Costs.............................. 1,116,038 744,025 1,860,063
Pilot Boat and Dispatch Costs:
Dispatch Cost............................................... 207,397 138,265 345,662
Employee Benefits........................................... 57,739 38,492 96,231
Pilot Boat Cost............................................. 19,798 13,198 32,996
Travel...................................................... 2,732 1,821 4,553
Salaries.................................................... 243,523 162,348 405,871
-----------------------------------------------
Total Pilot and Dispatch Costs.......................... 531,189 354,124 885,313
Administrative Expenses:
Accounting/Professional fees................................ 12,300 8,200 20,500
American Pilots' Association (APA) Dues..................... 29,374 19,583 48,957
Depreciation/Auto Leasing/Other............................. 173,910 115,940 289,850
Depreciation/Auto Leasing/Other--D1-23-03................... -68,486 -45,657 -114,143
Dues and subscriptions...................................... 5,055 3,370 8,425
Employee benefits........................................... 3,685 2,456 6,141
Insurance................................................... 48,133 32,089 80,222
Interest.................................................... 32,274 21,516 53,790
Interest--D1-23-04.......................................... -17,344 -11,562 -28,906
Legal--Shared Counsel (K&L Gates)........................... 52,858 35,239 88,097
Legal--Shared Counsel (K&L Gates)--D1-23-05................. -3,494 -2,329 -5,824
[[Page 42906]]
Legal....................................................... 6,871 4,581 11,452
Other Expenses.............................................. 174,482 116,321 290,803
Other Expenses--D1-23-02.................................... 8,642 5,761 14,403
Other Taxes................................................. 91,261 60,841 152,102
Payroll Taxes............................................... 56,253 37,502 93,755
Pilot Training.............................................. 50,734 33,823 84,557
Real Estate taxes........................................... 23,053 15,369 38,422
Salaries.................................................... 92,117 61,411 153,528
Travel...................................................... 7,875 5,250 13,125
Travel--D1-23-01............................................ -3,168 -2,112 -5,280
Utilities................................................... 29,952 19,968 49,920
-----------------------------------------------
Total Administrative Expenses........................... 806,337 537,560 1,343,896
----------------------------------------------------------------------------------------------------------------
Total Expenses (OpEx + Applicant + Pilot Boats + Admin + 2,485,639 1,657,093 * 4,142,731
Capital).......................................................
----------------------------------------------------------------------------------------------------------------
* Where the total column for a line from the expense report did not match manual addition, the Coast Guard
manually matched to the line total for that expense and continued to sum down the column. As a result, the
ending total for each column (designated, undesignated, and total) may not sum across.
B. Step 2: Project Operating Expenses, Adjusting for Inflation or
Deflation
In accordance with the text in Sec. 404.102, having identified the
recognized 2023 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 2024 inflation rate.\21\ Because the BLS does not
provide forecasted inflation data, we use economic projections from the
Federal Reserve for the 2025 and 2026 inflation modification.\22\ Based
on that information, the calculations for Step 2 are as follows:
---------------------------------------------------------------------------
\21\ The CPI is defined as ``All Urban Consumers (CPI-U), All
Items, 1982-4=100.'' Series CUUR0200SA0. 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;
accessed 01/28/2025.
\22\ The 2025 and 2026 inflation rates are available at <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250319.pdf">https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250319.pdf</a>. We used the Core PCE December Projection
value found in table 1; accessed 03/19/2025.
Table 4--Adjusted Operating Expenses for District One
----------------------------------------------------------------------------------------------------------------
District One
-----------------------------------------------
Designated Undesignated Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)............................... $2,485,639 $1,657,093 $4,142,731
2024 Inflation Modification (@2.7%)............................. 67,112 44,742 111,854
2025 Inflation Modification (@2.5%)............................. 63,819 42,546 106,365
2026 Inflation Modification (@2.2%)............................. 57,565 38,376 95,941
-----------------------------------------------
Adjusted 2026 Operating Expenses............................ 2,674,135 1,782,757 4,456,891
----------------------------------------------------------------------------------------------------------------
C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots
In accordance with the text in Sec. 404.103, we estimate the
number of fully registered Pilots in each district. As established by
the 2021 final rule (86 FR 14184), the minimum number of United States
Registered Pilots for District One is 18. Then, the 2025 final rule
established the maximum number as 21. We determine the number of fully
registered Pilots based on data provided by the SLSPA. We determine the
number of Apprentice Pilots based on input from the district on
anticipated retirements and staffing needs. These numbers can be found
in table 5.
Table 5--Authorized Pilots for District One
------------------------------------------------------------------------
Item District One
------------------------------------------------------------------------
2026 Authorized United States Registered Pilots (total). 20
Pilots Assigned to Designated Areas..................... 11
Pilots Assigned to Undesignated Areas................... 9
2026 Apprentice Pilots.................................. 1
------------------------------------------------------------------------
D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice
Pilot Wage Benchmark
In this step, we determine the total United States Registered Pilot
compensation for each area. Because we are proposing a full ratemaking
this year, we propose to follow the procedure outlined in paragraph (a)
of Sec. 404.104, which requires us to develop a benchmark after
considering the most relevant currently available non-proprietary
information. In accordance with the discussion in Section III.E.,
Individual Target Pilot Compensation Benchmark, of this preamble, the
[[Page 42907]]
proposed compensation benchmark for 2026 uses the 2025 compensation of
$464,317 per United States Registered Pilot as a base, then adjusts for
inflation following the procedure outlined in paragraph (b) of Sec.
404.104. First, we adjust the 2025 target compensation benchmark of
$464,317 by 1.9 percent, for a value of $473,139. This accounts for the
difference in actual fourth quarter 2024 Employment Cost Index (ECI)
inflation, which is 4.2 percent, and the 2025 PCE estimate of 2.3
percent. <SUP>23 24 </SUP>
---------------------------------------------------------------------------
\23\ Employment Cost Index, Total Compensation for Private
Industry workers in Transportation and Material Moving, Annual
Average (December 2024), Series ID: CIU2010000520000A. <a href="https://www.bls.gov/news.release/eci.t05.htm">https://www.bls.gov/news.release/eci.t05.htm</a>; accessed 01/31/2025.
\24\ 2.3 percent was the latest figure available for the 2025
final rule. Table 1, Summary of Economic Projections, Median Core
PCE Inflation June Projection. <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20240918.pdf">https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20240918.pdf</a>; accessed 10/02/2024.
---------------------------------------------------------------------------
The second step accounts for projected inflation from 2025 to 2026,
which is 2.2 percent.\25\ Based on the projected 2026 inflation
estimate, the target compensation benchmark for 2026 is $483,548 per
United States Registered Pilot. In accordance with Sec. 404.104(d),
the Apprentice Pilot wage benchmark is 36 percent of the target United
States Registered Pilot compensation, or $174,077 ($483,548 x 0.36).
---------------------------------------------------------------------------
\25\ Table 1, Summary of Economic Projections, Median Core PCE
Inflation December Projection. <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250319.pdf">https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250319.pdf</a>; accessed 03/19/2025.
---------------------------------------------------------------------------
In accordance with Sec. 404.104(c), we use the revised target
individual compensation level to derive the total United States
Registered Pilot compensation by multiplying the individual target
compensation by the estimated number of United States Registered Pilots
for District One, as shown in table 6. We estimate that the number of
Apprentice Pilots needed will be one for District One in the 2026
season. The total target wages for Apprentice Pilots are allocated with
60 percent for the designated area, and 40 percent for the undesignated
area, in accordance with the allocation for operating expenses.
Table 6--Target Compensation for District One
----------------------------------------------------------------------------------------------------------------
District One
-----------------------------------------------
Designated Undesignated Total
----------------------------------------------------------------------------------------------------------------
Target United States Registered Pilot Compensation.............. $483,548 $483,548 $483,548
Number of United States Registered Pilots....................... 11 9 20
-----------------------------------------------
Total Target United States Registered Pilot Compensation.... $5,319,028 $4,351,932 $9,670,960
Target Apprentice Pilot Compensation............................ $174,077 $174,077 $174,077
Number of Apprentice Pilots..................................... .............. .............. 1
-----------------------------------------------
Total Target Apprentice Pilot Compensation.................. $104,446 $69,631 $174,077
----------------------------------------------------------------------------------------------------------------
E. Redesignated Step 5: Project Needed Revenue (Previously Step 6)
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 United States
Registered Pilot compensation (from Step 4), and total target
Apprentice Pilot wage (also from Step 4). We show these calculations in
table 7.
Table 7--Revenue Needed for District One
----------------------------------------------------------------------------------------------------------------
District One
-----------------------------------------------
Designated Undesignated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $2,674,135 $1,782,757 $4,456,891
Total Target United States Registered Pilot Compensation (Step 5,319,028 4,351,932 9,670,960
4).............................................................
Total Target Apprentice Pilot Compensation (Step 4)............. 104,446 69,631 174,077
-----------------------------------------------
Total Revenue Needed........................................ 8,097,609 6,204,320 14,301,928
----------------------------------------------------------------------------------------------------------------
F. Redesignated Step 6: Calculate Initial Base Rates (Previously Step
7)
Having determined the revenue needed for each area in the previous
five steps, we develop an hourly rate by dividing that number by the
expected number of hours of traffic. Step 6 is a two-part process. In
the first part, we calculate the 10-year average of traffic in District
One, using the total time on task or Pilot bridge hours. To calculate
the time on task for each district, the Coast Guard uses billing data
from SeaPro.\26\ Because we calculate separate figures for designated
and undesignated waters, there are two parts for each calculation. We
show these values in table 8.
---------------------------------------------------------------------------
\26\ SeaPro, used by all three pilot districts, is the approved
dispatch and invoicing system that tracks pilot and vessel transits.
[[Page 42908]]
Table 8--Time on Task for District One
[Hours]
------------------------------------------------------------------------
District One
Year -------------------------------
Designated Undesignated
------------------------------------------------------------------------
2024.................................... 6,232 8,075
2023.................................... 5,810 7,650
2022.................................... 6,577 8,356
2021.................................... 6,166 7,893
2020.................................... 6,265 7,560
2019.................................... 8,232 8,405
2018.................................... 6,943 8,445
2017.................................... 7,605 8,679
2016.................................... 5,434 6,217
2015.................................... 5,743 6,667
Average................................. 6,501 7,795
------------------------------------------------------------------------
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 9.
Table 9--Initial Rate Calculations for District One
------------------------------------------------------------------------
Designated Undesignated
------------------------------------------------------------------------
Revenue needed (Step 5)................. $8,097,609 $6,204,320
Average time on task (hours)............ 6,501 7,795
Initial rate............................ $1,246 $796
------------------------------------------------------------------------
G. Redesignated Step 7: Calculate Average Weighting Factors by Area
(Previously Step 8)
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 the weighting
factor report from SeaPro, we calculate the average weighting factor
for each area using the data from each vessel transit from 2015 to
2024, as shown in tables 10 and 11.
Table 10--Average Weighting Factor for District One, Designated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits *
----------------------------------------------------------------------------------------------------------------
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 1 (2023).................................................. 19 1 19
Class 1 (2024).................................................. 26 1 26
Class 2 (2015).................................................. 295 1.15 339
Class 2 (2016).................................................. 185 1.15 213
Class 2 (2017).................................................. 352 1.15 405
Class 2 (2018).................................................. 559 1.15 643
Class 2 (2019).................................................. 378 1.15 435
Class 2 (2020).................................................. 560 1.15 644
Class 2 (2021).................................................. 315 1.15 362
Class 2 (2022).................................................. 462 1.15 531
Class 2 (2023).................................................. 481 1.15 553
Class 2 (2024).................................................. 467 1.15 537
Class 3 (2015).................................................. 28 1.3 36
Class 3 (2016).................................................. 50 1.3 65
Class 3 (2017).................................................. 67 1.3 87
Class 3 (2018).................................................. 86 1.3 112
Class 3 (2019).................................................. 122 1.3 159
Class 3 (2020).................................................. 67 1.3 87
Class 3 (2021).................................................. 52 1.3 68
Class 3 (2022).................................................. 103 1.3 134
Class 3 (2023).................................................. 34 1.3 44
[[Page 42909]]
Class 3 (2024).................................................. 69 1.3 90
Class 4 (2015).................................................. 251 1.45 364
Class 4 (2016).................................................. 214 1.45 310
Class 4 (2017).................................................. 285 1.45 413
Class 4 (2018).................................................. 393 1.45 570
Class 4 (2019).................................................. 730 1.45 1059
Class 4 (2020).................................................. 427 1.45 619
Class 4 (2021).................................................. 407 1.45 590
Class 4 (2022).................................................. 446 1.45 647
Class 4 (2023).................................................. 420 1.45 609
Class 4 (2024).................................................. 471 1.45 683
-----------------------------------------------
Total....................................................... 9,104 .............. 11,735
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits / number of .............. 1.29 ..............
transits)......................................................
----------------------------------------------------------------------------------------------------------------
* Weighted transits are rounded to the nearest whole number for presentation, but the Total calculation uses
unrounded figures.
Table 11--Average Weighting Factor for District One, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits *
----------------------------------------------------------------------------------------------------------------
Class 1 (2015).................................................. 28 1 28
Class 1 (2016).................................................. 18 1 18
Class 1 (2017).................................................. 19 1 19
Class 1 (2018).................................................. 22 1 22
Class 1 (2019).................................................. 30 1 30
Class 1 (2020).................................................. 3 1 3
Class 1 (2021).................................................. 19 1 19
Class 1 (2022).................................................. 27 1 27
Class 1 (2023).................................................. 31 1 31
Class 1 (2024).................................................. 10 1 10
Class 2 (2015).................................................. 263 1.15 302
Class 2 (2016).................................................. 169 1.15 194
Class 2 (2017).................................................. 290 1.15 334
Class 2 (2018).................................................. 352 1.15 405
Class 2 (2019).................................................. 366 1.15 421
Class 2 (2020).................................................. 358 1.15 412
Class 2 (2021).................................................. 463 1.15 532
Class 2 (2022).................................................. 349 1.15 401
Class 2 (2023).................................................. 346 1.15 398
Class 2 (2024).................................................. 334 1.15 384
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).................................................. 65 1.3 85
Class 3 (2023).................................................. 44 1.3 57
Class 3 (2024).................................................. 44 1.3 57
Class 4 (2015).................................................. 269 1.45 390
Class 4 (2016).................................................. 222 1.45 322
Class 4 (2017).................................................. 285 1.45 413
Class 4 (2018).................................................. 382 1.45 554
Class 4 (2019).................................................. 326 1.45 473
Class 4 (2020).................................................. 334 1.45 484
Class 4 (2021).................................................. 466 1.45 676
Class 4 (2022).................................................. 386 1.45 560
Class 4 (2023).................................................. 328 1.45 476
Class 4 (2024).................................................. 421 1.45 610
-----------------------------------------------
Total....................................................... 7,411 .............. 9,592
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits / number of .............. 1.29 ..............
transits)......................................................
----------------------------------------------------------------------------------------------------------------
** Weighted transits are rounded to the nearest whole number for presentation, but the Total calculation uses
unrounded figures.
[[Page 42910]]
H. Redesignated Step 8: Calculate Revised Base Rates (previously Step
9)
After considering the impact of the weighting factors, we revise
the base rates in this step so that the total costs of pilotage will be
equal to the revenue needed. To do this, we divide the initial base
rates calculated in redesignated Step 6 by the average weighting
factors calculated in redesignated Step 7, as shown in table 12.
Table 12--Revised Base Rates for District One
----------------------------------------------------------------------------------------------------------------
Revised rate
Average (Initial rate
Area Initial rate weighting average
(Step 6) factor (Step weighting
7) factor)
----------------------------------------------------------------------------------------------------------------
District One: Designated........................................ $1,246 1.29 $966
District One: Undesignated...................................... 796 1.29 617
----------------------------------------------------------------------------------------------------------------
I. Redesignated Step 9: Review and Finalize Rates (Previously Step 10)
In this step, the Director reviews the rates set forth by the
staffing model and ensures that they meet the goal of ensuring safe,
efficient, and reliable pilotage. To establish this, the Director
considers whether the proposed rates incorporate appropriate
compensation for United States Registered Pilots to handle heavy
traffic periods and whether there is a sufficient number of United
States Registered Pilots to handle those heavy traffic periods. The
Director also considers whether the proposed rates would cover
operating expenses and infrastructure costs, including average traffic
and weighting factors. Based on these considerations, the Director is
not proposing any alterations to the rates in this step. We propose to
modify Sec. 401.405(a)(1) and (2) to reflect the final rates shown in
table 13.
Table 13--Proposed Final Rates for District One
----------------------------------------------------------------------------------------------------------------
Final 2025 Proposed 2026
Area Name pilotage rate pilotage rate
----------------------------------------------------------------------------------------------------------------
District One: Designated...................... St. Lawrence River.............. $986 $966
District One: Undesignated.................... Lake Ontario.................... 643 617
----------------------------------------------------------------------------------------------------------------
District Two
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 2023 expenses and revenues.\27\ 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, for example, the cost is divided between the
designated and undesignated areas on a pro rata basis. The recognized
operating expenses for District Two are shown in table 14.
---------------------------------------------------------------------------
\27\ These reports are available in the docket for this
rulemaking.
---------------------------------------------------------------------------
Adjustments have been made by the auditors and are explained in the
auditor's reports, which are available in the docket for this
rulemaking, where indicated under the Public Participation and Request
for Comments portion of the preamble.
Table 14--2023 Recognized Expenses for District Two
----------------------------------------------------------------------------------------------------------------
District Two
--------------------------------------------------------
Undesignated Designated
Reported operating expenses for 2023 --------------------------------------
Southeast Shoal Total
Lake Erie to Port Huron
----------------------------------------------------------------------------------------------------------------
Applicant Pilot Employee Benefits...................... $80 $120 $200
--------------------------------------------------------
Total Other Applicant Cost......................... 80 120 200
Other Pilotage Cost:
Pilot Subsistence.................................. 93,840 140,760 234,600
Travel............................................. 37,469 56,204 93,673
License renewal.................................... 931 1,396 2,327
License Insurance.................................. 7,656 11,485 19,141
--------------------------------------------------------
Total Other Pilotage Costs..................... 139,896 209,845 349,741
Pilot Boat and Dispatch Costs:
Pilot boat costs................................... 76,785 115,177 191,962
Employee Benefits.................................. 88,722 133,084 221,806
[[Page 42911]]
Insurance.......................................... 11,550 17,324 28,874
Salaries........................................... 192,299 288,448 480,747
--------------------------------------------------------
Total Pilot and Dispatch Costs................. 369,356 554,033 923,389
Administrative Expenses
Legal--general counsel............................. 3,947 5,921 9,868
Legal--shared counsel (K&L Gates).................. 4,955 7,432 12,386
Legal--shared counsel (K&L Gates)--D2-23-02........ -2,071 -3,106 -5,177
Office Rent........................................ 29,508 44,262 73,770
Insurance.......................................... 14,083 21,124 35,207
Employee benefits.................................. 28,614 42,922 71,536
Payroll Taxes...................................... 149,889 224,833 374,722
Other taxes........................................ 103,752 155,628 259,380
Other taxes--D2-23-01.............................. -45,722 -68,583 -114,305
Real Estate taxes.................................. 8,193 12,289 20,482
Travel............................................. 20,430 30,646 51,076
Depreciation....................................... 23,140 34,710 57,850
APA Dues........................................... 16,428 24,641 41,069
Dues and subscriptions............................. 2,634 3,950 6,584
Utilities.......................................... 4,956 7,434 12,390
Salaries........................................... 65,850 98,776 164,626
Accounting/Professional fees....................... 15,997 23,996 39,993
Pilot Training..................................... 17,644 26,465 44,109
Other.............................................. 124,233 186,349 310,582
Other--D2-23-01.................................... -70,962 -106,442 -177,404
--------------------------------------------------------
Total Administrative Expenses.................. 515,498 773,247 1,288,744
----------------------------------------------------------------------------------------------------------------
Total Expenses (OPEX + Applicant + Pilot Boats + Admin 1,024,830 1,537,245 * 2,562,074
+ Capital)............................................
----------------------------------------------------------------------------------------------------------------
* Where the total column for a line from the expense report did not match manual addition, Coast Guard manually
matched to the line total for that expense and continued to sum down the column. As a result, the ending total
for each column (designated, undesignated, and total) may not sum across.
B. Step 2: Project Operating Expenses, Adjusting for Inflation or
Deflation
In accordance with the text in Sec. 404.102, having identified the
recognized 2023 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 2024 inflation rate.\28\ Because the BLS does not
provide forecasted inflation data, we use economic projections from the
Federal Reserve for the 2025 and 2026 inflation modification.\29\ Based
on that information, the calculations for Step 2 are as follows:
---------------------------------------------------------------------------
\28\ The CPI is defined as ``All Urban Consumers (CPI-U), All
Items, 1982-4=100.'' Series CUUR0200SA0. 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 (last
accessed 01/28/2025).
\29\ The 2025 and 2026 inflation rates are available at <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250319.pdf">https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250319.pdf</a>. We used the Core PCE December Projection
value found in table 1; accessed 03/19/2025.
Table 15--Adjusted Operating Expenses for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)............................... $1,024,830 $1,537,245 $2,562,074
2024 Inflation Modification (@2.7%)............................. 27,670 41,506 69,176
2025 Inflation Modification (@2.5%)............................. 26,313 39,469 65,782
2026 Inflation Modification (@2.2%)............................. 23,734 35,601 59,335
-----------------------------------------------
Adjusted 2026 Operating Expenses............................ 1,102,547 1,653,821 2,756,367
----------------------------------------------------------------------------------------------------------------
[[Page 42912]]
C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots
In accordance with the text in Sec. 404.103, we estimate the
number of fully registered Pilots in each district. As established by
the 2021 final rule, the minimum number of United States Registered
Pilots for District Two is 16. Then, the 2025 final rule established
the maximum number as 19. We determine the number of fully registered
Pilots based on data provided by the Lakes Pilots Association (LPA). We
determine the number of Apprentice Pilots based on input from the
district on anticipated retirements and staffing needs. These numbers
can be found in table 16.
Table 16--Authorized Pilots for District Two
------------------------------------------------------------------------
Item District Two
------------------------------------------------------------------------
2026 Authorized United States Registered Pilots (total). 17
Pilots Assigned to Designated Areas..................... 10
Pilots Assigned to Undesignated Areas................... 7
2026 Apprentice Pilots.................................. 0
------------------------------------------------------------------------
D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice
Pilot Wage Benchmark
In this step, we determine the total United States Registered Pilot
compensation for each area. Because we are proposing a full ratemaking
this year, we propose to follow the procedure outlined in paragraph (a)
of Sec. 404.104, which requires us to develop a benchmark after
considering the most relevant currently available non-proprietary
information. In accordance with the discussion in Section III.E.,
Individual Target Pilot Compensation Benchmark, of this preamble, the
proposed compensation benchmark for 2026 uses the 2025 compensation of
$464,317 per United States Registered Pilot as a base, then adjusts for
inflation following the procedure outlined in paragraph (b) of Sec.
404.104. First, we adjust the 2025 target compensation benchmark of
$464,317 by 1.9 percent, for a value of $473,139. This accounts for the
difference in actual fourth quarter 2024 ECI inflation, which is 4.2
percent, and the 2025 PCE estimate of 2.3 percent. <SUP>30 31</SUP>
---------------------------------------------------------------------------
\30\ Employment Cost Index, Total Compensation for Private
Industry workers in Transportation and Material Moving, Annual
Average (December 2024), Series ID: CIU2010000520000A. <a href="https://www.bls.gov/news.release/eci.t05.htm">https://www.bls.gov/news.release/eci.t05.htm</a>; accessed 01/31/2025.
\31\ 2.3 percent was the latest figure available for the 2025
final rule. Table 1, Summary of Economic Projections, Median Core
PCE Inflation June Projection. <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20240918.pdf">https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20240918.pdf</a>; accessed 10/02/2024.
---------------------------------------------------------------------------
The second step accounts for projected inflation from 2025 to 2026,
which is 2.2 percent.\32\ Based on the projected 2026 inflation
estimate, the target compensation benchmark for 2026 is $483,548 per
United States Registered Pilot. In accordance with Sec. 404.104(d),
the Apprentice Pilot wage benchmark is 36 percent of the target Pilot
compensation, or $174,077 ($483,548 x 0.36).
---------------------------------------------------------------------------
\32\ Table 1, Summary of Economic Projections, Median Core PCE
Inflation December Projection. <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250319.pdf">https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250319.pdf</a>; accessed 03/19/2025.
---------------------------------------------------------------------------
In accordance with Sec. 404.104(c), we use the revised target
individual compensation level to derive the total United States
Registered Pilot compensation by multiplying the individual target
compensation by the estimated number of United States Registered Pilots
for District Two, as shown in table 17. We estimate that the number of
Apprentice Pilots needed will be zero for District Two in the 2026
season. The total target wages for Apprentice Pilots are allocated with
60 percent for the designated area and 40 percent for the undesignated
area, in accordance with the allocation for operating expenses.
Table 17--Target Compensation for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation....................................... $483,548 $483,548 $483,548
Number of United States Registered Pilots....................... 7 10 17
-----------------------------------------------
Total Target United States Registered Pilots Compensation... $3,384,836 $4,835,480 $8,220,316
Target Apprentice Pilot Compensation............................ $174,077 $174,077 $174,077
Number of Apprentice Pilots..................................... .............. .............. 0
-----------------------------------------------
Total Target Apprentice Pilot Compensation.................. $0 $0 $0
----------------------------------------------------------------------------------------------------------------
E. Redesignated Step 5: Project Needed Revenue (Previously Step 6)
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 United States
Registered Pilot compensation (from Step 4), and total target
Apprentice Pilot wage (also from Step 4). We show these calculations in
table 18.
Table 18--Revenue Needed for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $1,102,547 $1,653,821 $2,756,367
Total Target United States Registered Pilot Compensation (Step 3,384,836 4,835,480 8,220,316
4).............................................................
Total Target Apprentice Pilot Compensation (Step 4)............. 0 0 0
-----------------------------------------------
Total Revenue Needed........................................ 4,487,383 6,489,301 10,976,683
----------------------------------------------------------------------------------------------------------------
[[Page 42913]]
F. Redesignated Step 6: Calculate Initial Base Rates (Previously Step
7)
Having determined the revenue needed for each area in the previous
five steps, we develop an hourly rate by dividing that number by the
expected number of hours of traffic. Step 6 is a two-part process. In
the first part, we calculate the 10-year average of traffic in District
Two, using the total time on task or Pilot bridge hours. To calculate
the time on task for each district, the Coast Guard uses billing data
from SeaPro. Because we calculate separate figures for designated and
undesignated waters, there are two parts for each calculation. We show
these values in table 19.
Table 19--Time on Task for District Two
[Hours]
------------------------------------------------------------------------
District Two
Year -------------------------------
Undesignated Designated
------------------------------------------------------------------------
2024.................................... 5,809 8,308
2023.................................... 6,424 8,181
2022.................................... 7,695 9,044
2021.................................... 5,290 6,762
2020.................................... 6,232 8,401
2019.................................... 6,512 7,715
2018.................................... 6,150 6,655
2017.................................... 5,139 6,074
2016.................................... 6,425 5,615
2015.................................... 6,535 5,967
Average............................. 6,221 7,272
------------------------------------------------------------------------
Next, we derive the initial hourly rate by dividing the revenue
needed by the average number of hours for each area. This produces an
initial rate, which is necessary to produce the revenue needed for each
area, assuming the amount of traffic is as expected. We present the
calculations for District Two in table 20.
Table 20--Initial Rate Calculations for District Two
------------------------------------------------------------------------
Undesignated Designated
------------------------------------------------------------------------
Revenue needed (Step 5)................. $4,487,383 $6,489,301
Average time on task (hours)............ 6,221 7,272
Initial rate............................ $721 $892
------------------------------------------------------------------------
G. Redesignated Step 7: Calculate Average Weighting Factors by Area
(Previously Step 8)
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 the weighting
factor report from SeaPro, we calculate the average weighting factor
for each area using the data from each vessel transit from 2015 to
2024, as shown in tables 21 and 22.
Of note, in the 2025 final rule, the Coast Guard published a figure
of 8,092 hours as the total 2023 designated hours for District Two.\33\
Since that publication, the Coast Guard received a revised figure of
8,181 hours through the 2023 Revenue Report for District Two, which
noted that some winter work had been excluded. We also received a
revised 2023 weight factor report from District Two on March 6th, 2025,
to reflect the transits by vessel class corresponding to the updated
figure of 8,181 designated bridge hours for 2023. This updated report
changes the number of Class 2 designated transits for 2023 from 312 to
318, as shown in table 22.
---------------------------------------------------------------------------
\33\ See p. 100822, 89 FR 100810.
Table 21--Average Weighting Factor for District Two, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits *
----------------------------------------------------------------------------------------------------------------
Class 1 (2015).................................................. 35 1 35
Class 1 (2016).................................................. 32 1 32
Class 1 (2017).................................................. 21 1 21
Class 1 (2018).................................................. 37 1 37
Class 1 (2019).................................................. 54 1 54
Class 1 (2020).................................................. 1 1 1
Class 1 (2021).................................................. 7 1 7
Class 1 (2022).................................................. 57 1 57
Class 1 (2023).................................................. 54 1 54
Class 1 (2024).................................................. 19 1 19
Class 2 (2015).................................................. 354 1.15 407
Class 2 (2016).................................................. 380 1.15 437
Class 2 (2017).................................................. 222 1.15 255
[[Page 42914]]
Class 2 (2018).................................................. 123 1.15 141
Class 2 (2019).................................................. 127 1.15 146
Class 2 (2020).................................................. 165 1.15 190
Class 2 (2021).................................................. 206 1.15 237
Class 2 (2022).................................................. 202 1.15 232
Class 2 (2023).................................................. 152 1.15 175
Class 2 (2024).................................................. 125 1.15 144
Class 3 (2015).................................................. 0 1.3 0
Class 3 (2016).................................................. 9 1.3 12
Class 3 (2017).................................................. 12 1.3 16
Class 3 (2018).................................................. 3 1.3 4
Class 3 (2019).................................................. 1 1.3 1
Class 3 (2020).................................................. 1 1.3 1
Class 3 (2021).................................................. 5 1.3 7
Class 3 (2022).................................................. 2 1.3 3
Class 3 (2023).................................................. 2 1.3 3
Class 3 (2024).................................................. 5 1.3 7
Class 4 (2015).................................................. 560 1.45 812
Class 4 (2016).................................................. 468 1.45 679
Class 4 (2017).................................................. 319 1.45 463
Class 4 (2018).................................................. 196 1.45 284
Class 4 (2019).................................................. 210 1.45 305
Class 4 (2020).................................................. 201 1.45 291
Class 4 (2021).................................................. 227 1.45 329
Class 4 (2022).................................................. 208 1.45 302
Class 4 (2023).................................................. 169 1.45 245
Class 4 (2024).................................................. 205 1.45 297
-----------------------------------------------
Total....................................................... 5,176 .............. 6,740
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits / number of .............. 1.30 ..............
transits)......................................................
----------------------------------------------------------------------------------------------------------------
* Weighted transits are rounded to the nearest whole number for presentation, but the Total calculation uses
unrounded figures.
Table 22--Average Weighting Factor for District Two, Designated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits *
----------------------------------------------------------------------------------------------------------------
Class 1 (2015).................................................. 15 1 15
Class 1 (2016).................................................. 28 1 28
Class 1 (2017).................................................. 15 1 15
Class 1 (2018).................................................. 42 1 42
Class 1 (2019).................................................. 48 1 48
Class 1 (2020).................................................. 7 1 7
Class 1 (2021).................................................. 12 1 12
Class 1 (2022).................................................. 53 1 53
Class 1 (2023).................................................. 56 1 56
Class 1 (2024).................................................. 24 1 24
Class 2 (2015).................................................. 217 1.15 250
Class 2 (2016).................................................. 224 1.15 258
Class 2 (2017).................................................. 127 1.15 146
Class 2 (2018).................................................. 153 1.15 176
Class 2 (2019).................................................. 281 1.15 323
Class 2 (2020).................................................. 342 1.15 393
Class 2 (2021).................................................. 240 1.15 276
Class 2 (2022).................................................. 327 1.15 376
Class 2 (2023).................................................. 318 1.15 366
Class 2 (2024).................................................. 318 1.15 366
Class 3 (2015).................................................. 8 1.3 10
Class 3 (2016).................................................. 4 1.3 5
Class 3 (2017).................................................. 4 1.3 5
Class 3 (2018).................................................. 14 1.3 18
Class 3 (2019).................................................. 1 1.3 1
Class 3 (2020).................................................. 5 1.3 7
Class 3 (2021).................................................. 2 1.3 3
Class 3 (2022).................................................. 4 1.3 5
Class 3 (2023).................................................. 5 1.3 7
Class 3 (2024).................................................. 11 1.3 14
Class 4 (2015).................................................. 340 1.45 493
Class 4 (2016).................................................. 281 1.45 407
[[Page 42915]]
Class 4 (2017).................................................. 185 1.45 268
Class 4 (2018).................................................. 379 1.45 550
Class 4 (2019).................................................. 403 1.45 584
Class 4 (2020).................................................. 405 1.45 587
Class 4 (2021).................................................. 268 1.45 389
Class 4 (2022).................................................. 391 1.45 567
Class 4 (2023).................................................. 349 1.45 506
Class 4 (2024).................................................. 474 1.45 687
-----------------------------------------------
Total....................................................... 6,380 .............. 8,343
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits / number of .............. 1.31 ..............
transits)......................................................
----------------------------------------------------------------------------------------------------------------
* Weighted transits are rounded to the nearest whole number for presentation, but the Total calculation uses
unrounded figures.
H. Redesignated Step 8: Calculate Revised Base Rates (Previously Step
9)
After considering the impact of the weighting factors, we revise
the base rates in this step so that the total costs of pilotage will be
equal to the revenue needed. To do this, we divide the initial base
rates calculated in redesignated Step 6 by the average weighting
factors calculated in redesignated Step 7, as shown in table 23.
Table 23--Revised Base Rates for District Two
----------------------------------------------------------------------------------------------------------------
Revised rate
Average (initial rate
Area Initial rate weighting average
(Step 6) factor (Step weighting
7) factor)
----------------------------------------------------------------------------------------------------------------
District Two: Designated........................................ $892 1.31 $681
District Two: Undesignated...................................... 721 1.30 555
----------------------------------------------------------------------------------------------------------------
I. Redesignated Step 9: Review and Finalize Rates (Previously Step 10)
In this step, the Director reviews the rates set forth by the
staffing model and ensures that they meet the goal of ensuring safe,
efficient, and reliable pilotage. To establish this, the Director
considers whether the proposed rates incorporate appropriate
compensation for United States Registered Pilots to handle heavy
traffic periods, and whether there is a sufficient number of United
States Registered Pilots to handle those heavy traffic periods. The
Director also considers whether the proposed rates would cover
operating expenses and infrastructure costs, including average traffic
and weighting factors. Based on these considerations, the Director is
not proposing any alterations to the rates in this step. We propose to
modify Sec. 401.405(a)(3) and (4) to reflect the final rates shown in
table 24.
Table 24 -- Proposed Final Rates for District Two
----------------------------------------------------------------------------------------------------------------
Final 2025 Proposed 2026
Area Name pilotage rate pilotage rate
----------------------------------------------------------------------------------------------------------------
District Two: Designated...................... Navigable waters from Southeast $753 $681
Shoal to Port Huron, MI.
District Two: Undesignated.................... Lake Erie....................... 576 555
----------------------------------------------------------------------------------------------------------------
District Three
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 2023 expenses and revenues.\34\ 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, for example, the cost is divided between the
designated and undesignated areas on a pro rata basis. The recognized
operating expenses for District Three are shown in table 25.
---------------------------------------------------------------------------
\34\ These reports are available in the docket for this
rulemaking.
---------------------------------------------------------------------------
Adjustments made by the auditors are explained in the auditor's
reports, which are available in the docket for this rulemaking, where
indicated under the Public Participation and Request for Comments
portion of the preamble. As noted in the Summary of the Ratemaking
Methodology, the 2023 expense report for District Three included an
expense of $969,812 in ``applicant salaries,'' but Coast Guard believes
that these are apprentice salaries that are incorrectly labeled.
Apprentice salaries are accounted for in
[[Page 42916]]
Step 4 of the methodology; therefore, Coast Guard excluded this expense
from Step 1. We discuss the other Director's adjustment for the $45,296
amount in Section C. Other Comments To Address in Full Ratemaking of
this preamble.
Table 25--2023 Recognized Expenses for District Three
----------------------------------------------------------------------------------------------------------------
District Three
---------------------------------------------------------------
Undesignated Designated Undesignated
Reported operating expenses for 2023 ------------------------------------------------
Lakes Huron St. Marys Total
and Michigan River Lake Superior
----------------------------------------------------------------------------------------------------------------
Other Pilotage Costs:
Applicant Benefits.......................... $56,123 $23,720 $26,741 $106,584
Pilot subsistence........................... 163,861 69,254 78,076 311,190
Hotel/Lodging Cost.......................... 142,665 60,295 67,977 270,937
Hotel/Lodging Cost--D3-23-05................ -3,454 -1,460 -1,646 -6,560
Travel...................................... 235,214 99,410 112,074 446,698
License Renewal............................. 536 227 255 1,018
Payroll taxes............................... 211,362 89,329 100,709 401,400
Payroll taxes--D3-23-04..................... -5,075 -2,145 -2,418 -9,637
License Insurance........................... 16,953 7,165 8,078 32,196
Total Other Pilotage Costs.............. 818,185 345,795 389,846 1,553,826
Pilot Boat and Dispatch costs:
Pilot boat costs............................ 613,308 259,207 292,227 1,164,742
Dispatch costs.............................. 149,831 63,324 71,391 284,546
Dispatch costs--D3-23-07.................... 23,851 10,080 11,365 45,296
Insurance................................... 33,584 14,194 16,002 63,779
Total Pilot boat and dispatch costs..... 820,574 346,805 390,985 1,558,363
Administrative Cost:
Legal--general counsel...................... 26,809 11,331 12,774 50,914
Legal--general counsel--D3-23-01............ -2,098 -887 -999 -3,984
Legal--shared counsel (K&L Gates)........... 9,608 4,061 4,578 18,247
Legal--shared counsel (K&L Gates)--D3-23-01. -1,007 -426 -480 -1,913
Office Rent................................. 6,719 2,840 3,201 12,760
Insurance................................... 30,104 12,723 14,344 57,171
Employee benefits........................... 116,979 49,440 55,738 222,156
Payroll Tax................................. 57,428 24,271 27,363 109,062
Other taxes................................. 2,708 1,145 1,290 5,143
Real Estate Taxes........................... 1,609 680 766 3,055
Depreciation/Auto leasing/Other............. 88,577 37,436 42,205 168,218
Interest.................................... 13,424 5,673 6,396 25,493
APA Dues.................................... 30,519 12,899 14,542 57,960
APA Dues (D3-23-02)......................... -2,373 -1,003 -1,131 -4,507
Dues and subscriptions...................... 5,792 2,448 2,760 10,999
Utilities................................... 9,568 4,044 4,559 18,171
Salaries.................................... 60,558 25,594 28,855 115,007
Accounting/Professional fees................ 37,984 16,053 18,099 72,136
Pilot Training.............................. 13,645 5,767 6,501 25,913
Other expenses.............................. 84,033 35,516 40,040 159,589
Other expenses (D3-23-06)................... -13,191 -5,575 -6,285 -25,051
---------------------------------------------------------------
Total Administrative Expenses........... 577,395 244,030 275,116 1,096,539
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Other Costs+ Applicant 2,216,154 936,630 1,055,947 * 4,208,728
Cost + Pilot Boats + Admin)....................
Directors Adjustments--Applicant Surcharge -23,851 -10,080 -11,365 -45,296
Collected..................................
Total Directors Adjustment.............. -23,851 -10,080 -11,365 -45,296
Total Operating Expenses (OpEx + 2,192,303 926,550 1,044,582 4,163,432
Adjustments).......................
----------------------------------------------------------------------------------------------------------------
* Where the total column for a line from the expense report did not match manual addition, Coast Guard manually
matched to the line total for that expense and continued to sum down the column. As a result, the ending total
for each column (designated, undesignated, and total) may not sum across.
B. Step 2: Project Operating Expenses, Adjusting for Inflation or
Deflation
In accordance with the text in Sec. 404.102, having identified the
recognized 2023 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 2024 inflation rate.\35\ Because the BLS does not
provide forecasted inflation data, we use economic projections from the
Federal
---------------------------------------------------------------------------
\35\ The CPI is defined as ``All Urban Consumers (CPI-U), All
Items, 1982-4 = 100.'' Series CUUR0200SA0. 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 (last
accessed 01/28/2025).
---------------------------------------------------------------------------
[[Page 42917]]
Reserve for the 2025 and 2026 inflation modification.\36\ Based on that
information, the calculations for Step 2 are as follows:
---------------------------------------------------------------------------
\36\ The 2025 and 2026 inflation rates are available at <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250319.pdf">https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250319.pdf</a>. We used the Core PCE December Projection
value found in table 1; accessed 03/19/2025.
Table 26--Adjusted Operating Expenses for District Three
----------------------------------------------------------------------------------------------------------------
District three
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)............................... $3,236,885 $926,550 $4,163,432
2024 Inflation Modification (@2.7%)............................. 87,396 25,017 112,413
2025 Inflation Modification (@2.5% )............................ 83,107 23,789 106,896
2026 Inflation Modification (@2.2%)............................. 74,963 21,458 96,421
-----------------------------------------------
Adjusted 2026 Operating Expenses............................ 3,482,351 996,814 4,479,162
----------------------------------------------------------------------------------------------------------------
C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots
In accordance with the text in Sec. 404.103, we estimate the
number of United States Registered Pilots in each district. As
established by the 2021 final rule, the minimum number of United States
Registered Pilots for District Three is 22. Then, the 2025 final rule
established the maximum number as 25. We determine the number of fully
registered Pilots based on data provided by the WGLPA. We determine the
number of Apprentice Pilots based on input from the district on
anticipated retirements and staffing needs. These numbers can be found
in table 27.
Table 27--Authorized Pilots for District Three
------------------------------------------------------------------------
Item District three
------------------------------------------------------------------------
2026 Authorized United States Registered Pilots (total). 20
Pilots Assigned to Designated Areas..................... 5
Pilots Assigned to Undesignated Areas................... 15
2026 Apprentice Pilots.................................. 4
------------------------------------------------------------------------
D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice
Pilot Wage Benchmark
In this step, we determine the total United States Registered Pilot
compensation for each area. Because we are proposing a full ratemaking
this year, we propose to follow the procedure outlined in paragraph (a)
of Sec. 404.104, which requires us to develop a benchmark after
considering the most relevant currently available non-proprietary
information. In accordance with the discussion in Section III.E.,
Individual Target Pilot Compensation Benchmark, of this preamble, the
proposed compensation benchmark for 2026 uses the 2025 compensation of
$464,317 per United States Registered Pilot as a base, then adjusts for
inflation following the procedure outlined in paragraph (b) of Sec.
404.104. First, we adjust the 2025 target compensation benchmark of
$464,317 by 1.9 percent for a value of $473,139. This accounts for the
difference in actual fourth quarter 2024 ECI inflation, which is 4.2
percent, and the 2025 PCE estimate of 2.3 percent.<SUP>37 38</SUP>
---------------------------------------------------------------------------
\37\ Employment Cost Index, Total Compensation for Private
Industry workers in Transportation and Material Moving, Annual
Average (December 2024), Series ID: CIU2010000520000A. <a href="https://www.bls.gov/news.release/eci.t05.htm">https://www.bls.gov/news.release/eci.t05.htm</a>; accessed 01/31/2025.
\38\ 2.3 percent was the latest figure available for the 2025
final rule. Table 1, Summary of Economic Projections, Median Core
PCE Inflation June Projection. <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20240918.pdf">https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20240918.pdf</a>; accessed 10/02/2024.
---------------------------------------------------------------------------
The second step accounts for projected inflation from 2025 to 2026,
which is 2.2 percent.\39\ Based on the projected 2026 inflation
estimate, the target compensation benchmark for 2026 is $483,548 per
United States Registered Pilot. In accordance with Sec. 404.104(d),
the Apprentice Pilot wage benchmark is 36 percent of the target United
States Registered Pilot compensation, or $174,077 ($483,548 x 0.36).
---------------------------------------------------------------------------
\39\ Table 1, Summary of Economic Projections, Median Core PCE
Inflation December Projection. <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250319.pdf">https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250319.pdf</a>; accessed 03/19/2025.
---------------------------------------------------------------------------
In accordance with Sec. 404.104(c), we use the revised target
individual compensation level to derive the total United States
Registered Pilot compensation by multiplying the individual target
compensation by the estimated number of United States Registered Pilots
for District Three, as shown in table 28. We estimate that the number
of Apprentice Pilots needed will be four for District Three in the 2026
season. The total target wages for Apprentice Pilots are allocated with
22 percent for the designated area and 78 percent (53 percent + 25
percent) for the undesignated areas, in accordance with the allocation
for operating expenses.
Table 28--Target Compensation for District Three
----------------------------------------------------------------------------------------------------------------
District Three
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Target United States Registered Pilots Compensation............. $483,548 $483,548 $483,548
Number of United States Registered Pilots....................... 15 5 20
-----------------------------------------------
Total Target United States Registered Pilot Compensation.... $7,253,220 $2,417,740 $9,670,960
Target Apprentice Pilot Compensation............................ $174,077 $174,077 $174,077
Number of Apprentice Pilots..................................... .............. .............. 4
-----------------------------------------------
Total Target Apprentice Pilot Compensation.................. $543,120 $153,188 $696,308
----------------------------------------------------------------------------------------------------------------
[[Page 42918]]
E. Redesignated Step 5: Project Needed Revenue (Previously Step 6)
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), and the total target United States
Registered Pilot compensation (from Step 4). The calculations are shown
in table 29.
Table 29--Revenue Needed for District Three
----------------------------------------------------------------------------------------------------------------
District Three
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $3,482,351 $996,814 $4,479,162
Total Target United States Registered Pilot Compensation (Step 7,253,220 2,417,740 9,670,960
4).............................................................
Total Target Apprentice Pilot Compensation (Step 4)............. 543,120 153,188 696,308
-----------------------------------------------
Total Revenue Needed........................................ 11,278,691 3,567,742 14,846,430
----------------------------------------------------------------------------------------------------------------
F. Redesignated Step 6: Calculate Initial Base Rates (Previously Step
7)
Having determined the revenue needed for each area in the previous
five steps, we develop an hourly rate by dividing that number by the
expected number of hours of traffic. Step 6 is a two-part process. The
first part is calculating the 10-year average of traffic in District
Three using the total time on task or Pilot bridge hours. Because we
calculate separate figures for designated and undesignated waters,
there are two parts for each calculation. We show these values in table
30.
Table 30--Time on Task for District Three
[Hours]
------------------------------------------------------------------------
District Three
------------------------------------------------------------------------
Year Undesignated Designated
------------------------------------------------------------------------
2024.................................... 26,359 3,437
2023.................................... 25,690 3,501
2022.................................... 24,148 3,426
2021.................................... 18,149 2,484
2020.................................... 23,678 3,520
2019.................................... 24,851 3,395
2018.................................... 19,967 3,455
2017.................................... 20,955 2,997
2016.................................... 23,421 2,769
2015.................................... 22,824 2,696
Average............................. 23,004 3,168
------------------------------------------------------------------------
Next, we derive the initial hourly rate by dividing the revenue
needed by the average number of hours for each area. This produces an
initial rate, which is necessary to produce the revenue needed for each
area, assuming the amount of traffic is as expected. We present the
calculations for District Three in table 31.
Table 31--Initial Rate Calculations for District Three
------------------------------------------------------------------------
Undesignated Designated
------------------------------------------------------------------------
Revenue needed (Step 5)................. $11,278,691 $3,567,742
Average time on task (hours)............ 23,004 3,168
Initial rate............................ $490 $1,126
------------------------------------------------------------------------
G. Redesignated Step 7: Calculate Average Weighting Factors by Area
(Previously Step 8)
In this step, The Coast Guard calculates the average weighting
factor for each designated and undesignated area by first collecting
the weighting factors, set forth in 46 CFR 401.400, for each vessel
trip. Using the weight factor reports from SeaPro, we calculate the
average weighting factor for each area using the data from each vessel
transit from 2015 to 2024, as shown in tables 32 and 33.
Table 32--Average Weighting Factor for District Three, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits *
----------------------------------------------------------------------------------------------------------------
Class 1 (2015).................................................. 56 1 56
Class 1 (2016).................................................. 136 1 136
Class 1 (2017).................................................. 148 1 148
[[Page 42919]]
Class 1 (2018).................................................. 103 1 103
Class 1 (2019).................................................. 173 1 173
Class 1 (2020).................................................. 4 1 4
Class 1 (2021).................................................. 8 1 8
Class 1 (2022).................................................. 116 1 116
Class 1 (2023).................................................. 155 1 155
Class 1 (2024).................................................. 52 1 52
Class 2 (2015).................................................. 207 1.15 238
Class 2 (2016).................................................. 236 1.15 271
Class 2 (2017).................................................. 264 1.15 304
Class 2 (2018).................................................. 169 1.15 194
Class 2 (2019).................................................. 279 1.15 321
Class 2 (2020).................................................. 332 1.15 382
Class 2 (2021).................................................. 273 1.15 314
Class 2 (2022).................................................. 276 1.15 317
Class 2 (2023).................................................. 295 1.15 339
Class 2 (2024).................................................. 287 1.15 330
Class 3 (2015).................................................. 8 1.3 10
Class 3 (2016).................................................. 10 1.3 13
Class 3 (2017).................................................. 19 1.3 25
Class 3 (2018).................................................. 9 1.3 12
Class 3 (2019).................................................. 9 1.3 12
Class 3 (2020).................................................. 4 1.3 5
Class 3 (2021).................................................. 5 1.3 7
Class 3 (2022).................................................. 3 1.3 4
Class 3 (2023).................................................. 5 1.3 7
Class 3 (2024).................................................. 9 1.3 12
Class 4 (2015).................................................. 375 1.45 544
Class 4 (2016).................................................. 332 1.45 481
Class 4 (2017).................................................. 367 1.45 532
Class 4 (2018).................................................. 337 1.45 489
Class 4 (2019).................................................. 334 1.45 484
Class 4 (2020).................................................. 339 1.45 492
Class 4 (2021).................................................. 356 1.45 516
Class 4 (2022).................................................. 363 1.45 526
Class 4 (2023).................................................. 356 1.45 516
Class 4 (2024).................................................. 433 1.45 628
-----------------------------------------------
Total for Area 6............................................ 7,242 .............. 9,275
----------------------------------------------------------------------------------------------------------------
Area 8
----------------------------------------------------------------------------------------------------------------
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).................................................. 10 1 10
Class 1 (2023).................................................. 5 1 5
Class 1 (2024).................................................. 6 1 6
Class 2 (2015).................................................. 169 1.15 194
Class 2 (2016).................................................. 174 1.15 200
Class 2 (2017).................................................. 151 1.15 174
Class 2 (2018).................................................. 102 1.15 117
Class 2 (2019).................................................. 120 1.15 138
Class 2 (2020).................................................. 180 1.15 207
Class 2 (2021).................................................. 124 1.15 143
Class 2 (2022).................................................. 89 1.15 102
Class 2 (2023).................................................. 118 1.15 136
Class 2 (2024).................................................. 122 1.15 140
Class 3 (2015).................................................. 0 1.3 0
Class 3 (2016).................................................. 7 1.3 9
Class 3 (2017).................................................. 18 1.3 23
Class 3 (2018).................................................. 7 1.3 9
Class 3 (2019).................................................. 6 1.3 8
Class 3 (2020).................................................. 1 1.3 1
Class 3 (2021).................................................. 1 1.3 1
Class 3 (2022).................................................. 6 1.3 8
Class 3 (2023).................................................. 0 1.3 0
[[Page 42920]]
Class 3 (2024).................................................. 4 1.3 5
Class 4 (2015).................................................. 253 1.45 367
Class 4 (2016).................................................. 204 1.45 296
Class 4 (2017).................................................. 269 1.45 390
Class 4 (2018).................................................. 188 1.45 273
Class 4 (2019).................................................. 254 1.45 368
Class 4 (2020).................................................. 265 1.45 384
Class 4 (2021).................................................. 319 1.45 463
Class 4 (2022).................................................. 243 1.45 352
Class 4 (2023).................................................. 268 1.45 389
Class 4 (2024).................................................. 345 1.45 500
-----------------------------------------------
Total for Area 8............................................ 4,042 .............. 5,433
-----------------------------------------------
Combined total.......................................... 11,284 .............. 14,708
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits / number of .............. 1.30 ..............
transits)......................................................
----------------------------------------------------------------------------------------------------------------
* Weighted transits are rounded to the nearest whole number for presentation, but the Total calculation uses
unrounded figures.
Table 33--Average Weighting Factor for District Three, Designated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits *
----------------------------------------------------------------------------------------------------------------
Class 1 (2015).................................................. 23 1 23
Class 1 (2016).................................................. 55 1 55
Class 1 (2017).................................................. 62 1 62
Class 1 (2018).................................................. 47 1 47
Class 1 (2019).................................................. 45 1 45
Class 1 (2020).................................................. 15 1 15
Class 1 (2021).................................................. 15 1 15
Class 1 (2022).................................................. 74 1 74
Class 1 (2023).................................................. 68 1 68
Class 1 (2024).................................................. 24 1 24
Class 2 (2015).................................................. 145 1.15 167
Class 2 (2016).................................................. 174 1.15 200
Class 2 (2017).................................................. 170 1.15 196
Class 2 (2018).................................................. 126 1.15 145
Class 2 (2019).................................................. 162 1.15 186
Class 2 (2020).................................................. 218 1.15 251
Class 2 (2021).................................................. 131 1.15 151
Class 2 (2022).................................................. 162 1.15 186
Class 2 (2023).................................................. 142 1.15 163
Class 2 (2024).................................................. 132 1.15 152
Class 3 (2015).................................................. 0 1.3 0
Class 3 (2016).................................................. 6 1.3 8
Class 3 (2017).................................................. 14 1.3 18
Class 3 (2018).................................................. 6 1.3 8
Class 3 (2019).................................................. 3 1.3 4
Class 3 (2020).................................................. 1 1.3 1
Class 3 (2021).................................................. 2 1.3 3
Class 3 (2022).................................................. 5 1.3 7
Class 3 (2023).................................................. 0 1.3 0
Class 3 (2024).................................................. 4 1.3 5
Class 4 (2015).................................................. 245 1.45 355
Class 4 (2016).................................................. 191 1.45 277
Class 4 (2017).................................................. 234 1.45 339
Class 4 (2018).................................................. 225 1.45 326
Class 4 (2019).................................................. 308 1.45 447
Class 4 (2020).................................................. 336 1.45 487
Class 4 (2021).................................................. 258 1.45 374
Class 4 (2022).................................................. 249 1.45 361
Class 4 (2023).................................................. 300 1.45 435
Class 4 (2024).................................................. 345 1.45 500
-----------------------------------------------
Total....................................................... 4,722 .............. 6,180
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits / number of .............. 1.31 ..............
transits)......................................................
----------------------------------------------------------------------------------------------------------------
* Weighted transits are rounded to the nearest whole number for presentation, but the Total calculation uses
unrounded figures.
[[Page 42921]]
H. Redesignated Step 8: Calculate Revised Base Rates (Previously Step
9)
After considering the impact of the weighting factors, we revise
the base rates in this step so that the total costs of pilotage will be
equal to the revenue needed. To do this, we divide the initial base
rates calculated in redesignated Step 6 by the average weighting
factors calculated in redesignated Step 7, as shown in table 34.
Table 34--Revised Base Rates for District Three
----------------------------------------------------------------------------------------------------------------
Revised rate
Average (Initial rate
Area Initial rate weighting average
(step 6) factor (step weighting
7) factor)
----------------------------------------------------------------------------------------------------------------
District Three: Undesignated.................................... $490 1.30 $377
District Three: Designated...................................... 1,126 1.31 860
----------------------------------------------------------------------------------------------------------------
I. Redesignated Step 9: Review and Finalize Rates (Previously Step 10)
In this step, the Director reviews the rates set forth by the
staffing model and ensures that they meet the goal of ensuring safe,
efficient, and reliable pilotage. To establish this, the Director
considers whether the proposed rates incorporate appropriate
compensation for United States Registered Pilots to handle heavy
traffic periods and whether there is a sufficient number of United
States Registered Pilots to handle those heavy traffic periods. The
Director also considers whether the proposed rates would cover
operating expenses and infrastructure costs including average traffic
and weighting factors. Based on this information, the Director is not
proposing any alterations to the rates in this step. We propose to
modify Sec. 401.405(a)(5) and (6) to reflect the final rates shown in
table 35.
Table 35--Proposed Final Rates for District Three
----------------------------------------------------------------------------------------------------------------
Final 2025 Proposed 2026
Area Name pilotage rate pilotage rate
----------------------------------------------------------------------------------------------------------------
District Three: Designated.................... St. Marys River................. $825 $860
District Three: Undesignated.................. Lakes Huron, Michigan, and 440 377
Superior.
----------------------------------------------------------------------------------------------------------------
VI. Regulatory Analyses
We developed this proposed rule after considering numerous statutes
and Executive orders related to rulemaking. A summary of our analyses
based on these statutes or Executive orders follows.
A. Regulatory Planning and Review
Executive Orders 12866 (Regulatory Planning and Review) 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. Executive Order 13563 emphasizes the importance of
quantifying both costs and benefits, of reducing costs, of harmonizing
rules, and of promoting flexibility. Executive Order 14192 (Unleashing
Prosperity Through Deregulation) directs agencies to significantly
reduce the private expenditures required to comply with Federal
regulations and provides that ``any new incremental costs associated
with new regulations shall, to the extent permitted by law, be offset
by the elimination of existing costs associated with at least 10 prior
regulations.''
The Office of Management and Budget (OMB) has not designated this
proposed rule a ``significant regulatory action,'' under section 3(f)
of Executive Order 12866. Accordingly, OMB has not reviewed it.
This proposed rule is not an Executive Order 14192 regulatory
action because this proposed rule is not significant under Executive
Order 12866. See OMB Memorandum M-25-20, ``Guidance Implementing
Section 3 of Executive Order 14192, titled `Unleashing Prosperity
Through Deregulation' '' (Mar. 26, 2025).
The purpose of this proposed rule is to establish new base 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. For this ratemaking, the Coast
Guard estimates a decrease in cost of approximately $3.03 million to
industry. This is approximately a 7-percent decrease because of the
change in revenue needed in 2026 compared to the revenue needed in
2025, as shown in table 36.
Table 36--Economic Impacts Due to Proposed Changes
----------------------------------------------------------------------------------------------------------------
Affected
Change Description population Costs Benefits
----------------------------------------------------------------------------------------------------------------
Rate changes.................... In accordance with Owners and Decrease of New rates cover an
46 U.S.C. Chapter operators of 258 $3,034,653 due to association's
93, the Coast vessels change in revenue necessary and
Guard is required transiting the needed for 2026 reasonable
to review and Great Lakes ($40,125,041) operating
adjust base system annually, from revenue expenses.
pilotage rates 57 United States needed for 2025 Promotes safe,
annually. Registered ($43,159,694) as efficient, and
Pilots, 5 shown in table 37. reliable pilotage
apprentice service on the
Pilots, and 3 Great Lakes.
pilotage Provides fair
associations. compensation,
adequate
training, and
sufficient rest
periods for
Pilots.
[[Page 42922]]
Removal of Working Capital Fund. Following GLPAC The 3 pilotage A decrease of Rates are on
recommendation, associations. $1,980,709 in average 5% lower,
the Coast Guard revenue needed and the
proposes to for the Working associations
remove Step 5 of Capital Fund for would need
the ratemaking. 2026 compared to $2,023,988 less
2025. This is in revenue for
equal to the 2026 than if the
revenue needed Working Capital
for the working Fund had been
capital fund included.
approved in the
2025 ratemaking.
----------------------------------------------------------------------------------------------------------------
The Coast Guard is required to review and adjust pilotage rates on
the Great Lakes annually. See Section II., 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
propose adjusting the pilotage rates for the 2026 shipping season to
generate sufficient revenues for each district to reimburse its
necessary and reasonable operating expenses and fairly compensate
trained and rested Pilots. The result would be a decrease in rates for
all areas in District One and District Two. In District Three, the rate
would increase for the designated area and would decrease for the
undesignated area. These changes would also lead to a net decrease in
the cost of service to shippers. The change in per unit cost to each
individual shipper would be dependent on their area of operation.
A detailed discussion of our economic impact analysis follows.
Affected Population
This proposed rule affects United States Registered Pilots and
Apprentice Pilots, the 3 pilot associations, and the owners and
operators of 258 oceangoing vessels that transit the Great Lakes
annually, on average, from 2022 to 2024. We estimate that there will be
57 United States Registered Pilots and 5 Apprentice Pilots during the
2026 shipping season. The shippers that would be affected by these rate
changes are those owners and operators of domestic vessels operating
``on register'' (engaged in foreign trade) and owners and operators of
non-Canadian foreign vessels on routes within the Great Lakes system.
These owners and operators must have United States Registered 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 and not to recreational vessels. U.S.-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 United States Registered Pilots.
However, these United States and Canadian-flagged lakers may
voluntarily choose to engage a United States Registered Pilot. Vessels
that are U.S.-flagged may opt to have a United States Registered 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 2022
through 2024 from SeaPro to estimate the average annual number of
vessels affected by the proposed rate adjustment. SeaPro tracks data
related to managing and coordinating the dispatch of Pilots on the
Great Lakes and billing in accordance with the services. As described
in the ratemaking methodology, we use a 10-year average to estimate the
traffic. We used 3 years of the most recent billing data to estimate
the affected population. When we reviewed 10 years of the most recent
billing data, we found the data included vessels that have not used
pilotage services in recent years. We believe that using 3 years of
billing data is a better representation of the vessel population
currently using pilotage services and that would be impacted by this
proposed rule. We found that 425 unique vessels used pilotage services
during the years 2022 through 2024. That is, these vessels had a United
States Registered Pilot dispatched to the vessel and billing
information was recorded in SeaPro. Of these vessels, 403 were foreign-
flagged vessels and 22 were U.S.-flagged vessels. Again, U.S.-flagged
vessels not operating on register are not required to have a United
States Registered Pilot per 46 U.S.C. 9302, but they can voluntarily
choose to have one. Any such vessels that voluntarily choose to have a
Pilot are accounted for in the methodology.
Numerous factors affect vessel traffic, which varies from year to
year. Therefore, rather than using the total number of vessels over the
time period, the Coast Guard took an average of the unique vessels
using pilotage services from the years 2022 through 2024 as the best
representation of vessels estimated to be affected by the rates in this
proposed rule. From 2022 through 2024, an average of 258 unique vessels
used pilotage services annually. On average, 249 of these vessels were
foreign-flagged and 9 were U.S.-flagged vessels that voluntarily opted
into the pilotage service (these figures are rounded averages).
Total Cost to Shippers
The rate changes resulting from this adjustment to the rates would
result in a net decrease in the cost of service to shippers. However,
the change in per unit cost to each individual shipper would be
dependent on their area of operation.
The Coast Guard estimates the effect of the rate changes on
shippers by comparing the total projected revenues needed to cover
costs in 2025 with the total projected revenues to cover costs in 2026.
We set pilotage rates, so pilot associations receive enough revenue to
cover their necessary and reasonable expenses. Shippers pay these rates
when they engage a United States Registered Pilot, as required by 46
U.S.C. 9302. Therefore, the aggregate payments of shippers to pilot
associations are equal to the projected necessary revenues for pilot
associations. The revenues each year represent the total costs that
shippers must pay for pilotage services. The change in revenue from the
previous year is the additional cost to shippers discussed in this
proposed rule.
The impacts of the rate changes on shippers are estimated from the
district pilotage projected revenues (shown in tables 7, 18, and 29 of
this preamble). The Coast Guard estimates that, for the 2026 shipping
season, the projected revenue needed for all three districts is
$40,125,041.
To estimate the change in cost to shippers from this proposed rule,
the Coast Guard compared the 2026 total projected revenues to the 2025
projected revenues. Because we review and prescribe rates for Great
Lakes pilotage annually, the effects are estimated as a single-year
cost rather than annualized over a 10-year period. In the 2025 final
rule, we estimated the total projected
[[Page 42923]]
revenue needed for 2025 as $43,159,694.\40\ This is the best
approximation of 2025 revenues because, at the time of publication of
this proposed rule, the Coast Guard does not have enough audited data
available for the 2025 shipping season to revise these projections.
Table 37 shows the revenue projections for 2025 and 2026. The
additional cost increases to shippers are detailed by area and district
as a result of the proposed rate changes on traffic in Districts One,
Two, and Three.
---------------------------------------------------------------------------
\40\ 89 FR 100810, see table 40. <a href="https://www.govinfo.gov/content/pkg/FR-2024-12-13/pdf/2024-29128.pdf">https://www.govinfo.gov/content/pkg/FR-2024-12-13/pdf/2024-29128.pdf</a>; accessed 03/25/2025.
Table 37--Effect of the Proposed Rule by Area and District
[$U.S.; Non-discounted]
----------------------------------------------------------------------------------------------------------------
Additional
Area Revenue needed Revenue needed costs of this
in 2025 in 2026 rule
----------------------------------------------------------------------------------------------------------------
Total, District One............................................. $14,713,084 $14,301,928 -$411,156
Total, District Two............................................. 11,883,331 10,976,683 -906,648
Total, District Three........................................... 16,563,279 14,846,430 -1,716,849
-----------------------------------------------
System Total................................................ 43,159,694 40,125,041 -3,034,653
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.
The resulting difference between the projected revenue in 2025 and
the projected revenue in 2026 is the annual change in payments from
shippers to United States Registered Pilots as a result of the rate
changes proposed by this rule. The effect of the rate changes to
shippers would vary by area and district. The proposed rate changes
would lead to affected shippers operating in District One experiencing
a decrease in payments of $411,156 over 2025. District Two and District
Three would experience a decrease in payments of $906,648 and
$1,716,849, respectively, when compared with 2025. The overall
adjustment in payments would be a decrease in payments by shippers of
$3,034,653 across all three districts (a 7-percent decrease when
compared with 2025). Again, because the Coast Guard reviews and sets
rates for Great Lakes pilotage annually, we estimate the impacts as
single-year costs rather than annualizing them over a 10-year period.
Table 38 shows the difference in revenue by revenue-component from
2025 to 2026 and presents each revenue-component as a percentage of the
total revenue needed. In both 2025 and 2026, the largest revenue-
component was pilotage compensation (66 percent of total revenue needed
in 2025, and 69 percent of total revenue needed in 2026), followed by
operating expenses (29 percent of total revenue needed in 2025, and 29
percent of total revenue needed in 2026).
Table 38--Difference in Revenue by Revenue-Component
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percentage of Percentage of
Revenue total revenue Revenue total revenue Difference Percentage
Revenue component needed in needed in needed in needed in (2025 revenue- change from
2025 2025 2026 2026 2026 revenue) previous year
--------------------------------------------------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses........................... $12,354,186 29 $11,692,420 29 -$661,766 -5
Total Target United States Registered Pilot 28,323,337 66 27,562,236 69 -761,101 -3
Compensation.........................................
Total Target Apprentice Pilot Compensation............ 501,462 1 870,385 2 368,923 74
Working Capital Fund.................................. 1,980,709 5 0 0 -1,980,709 -100
-------------------------------------------------------------------------------------------------
Total Revenue Needed.............................. 43,159,694 100 40,125,041 100 -3,034,653 -7.03
--------------------------------------------------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.
As stated above, we estimate that there would be a total decrease
in revenue needed by the pilot associations of $3,043,653. This
represents a decrease in revenue needed for total target United States
Registered Pilot compensation of $761,101, an increase in revenue
needed for total target Apprentice Pilot wage benchmark of $368,923, a
decrease in the revenue needed for adjusted operating expenses of
$661,766, and a decrease in the revenue needed for the working capital
fund of $1,980,709.
The change in revenue needed for United States Registered Pilot
compensation, $761,101, is due to three factors: (1) The changes to
adjust 2025 pilotage compensation to account for the difference between
actual ECI inflation \41\ (4.2 percent) and predicted PCE inflation
\42\ (2.3 percent) for 2025; (2) projected inflation of pilotage
compensation in Step 2 of the methodology, using predicted inflation
\43\ (2.2 percent) through 2026; and (3) a decrease of four Pilots in
District Three compared to 2025.
---------------------------------------------------------------------------
\41\ Employment Cost Index, Total Compensation for Private
Industry workers in Transportation and Material Moving, Annual
Average (December 2024), Series ID: CIU2010000520000A; accessed 01/
31/2025. <a href="https://www.bls.gov/news.release/eci.t05.htm">https://www.bls.gov/news.release/eci.t05.htm</a>; accessed 03/
25/2025.
\42\ 2.3 percent was the latest figure available for the 2025
final rule. Table 1, Summary of Economic Projections, Median Core
PCE Inflation June Projection. <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20240918.pdf">https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20240918.pdf</a>; accessed 10/02/2024.
\43\ Table 1, Summary of Economic Projections, Median Core PCE
Inflation December Projection. <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250319.pdf">https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250319.pdf</a>; accessed 03/19/2025.
---------------------------------------------------------------------------
The target compensation is $483,548 per Pilot in 2026, compared to
$464,317 in 2025. The proposed changes to modify the 2025 Pilot
compensation to account for the difference between predicted and actual
inflation would increase the 2026 target compensation value by 1.9
percent. As shown in table 39, this inflation adjustment increases
total compensation by $8,822 per Pilot,
[[Page 42924]]
and the total revenue needed by $502,855 when accounting for all 57
Pilots.
Table 39--Change in Revenue Resulting From the Change to Inflation of
Pilot Compensation Calculation in Step 4
------------------------------------------------------------------------
------------------------------------------------------------------------
2025 Target United States Registered Pilot Compensation. $464,317
Adjusted 2025 Compensation ($464,317 x 1.019)........... 473,139
Difference between Adjusted Target 2025 Compensation and 8,822
Target 2025 Compensation ($473,139-$464,317)...........
Increase in total Revenue for 57 Pilots ($8,822 x 57)... 502,855
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.
Similarly, table 40 shows the impact of the difference between
predicted and actual inflation on the target Apprentice Pilot
compensation benchmark. The inflation adjustment increases the
compensation benchmark by $3,176 per Apprentice Pilot, and the total
revenue needed by $15,880 when accounting for all five Apprentice
Pilots.
Table 40--Change in Revenue Resulting From the Change to Inflation of
Apprentice Pilot Compensation Calculation in Step 4
------------------------------------------------------------------------
------------------------------------------------------------------------
2025 Target Apprentice Pilot Compensation............... $167,154
Adjusted 2025 Compensation ($167,154 x 1.019)........... 170,330
Difference between Adjusted Target 2025 Compensation and 3,176
Target Compensation ($170,330-$167,154)................
Increase in total Revenue for Apprentices ($3,176 x 5).. 15,880
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.
Another increase, $634,948, would be the result of increasing
compensation for the 61 United States Registered Pilots predicted for
the 2025 season to account for future inflation of 2.2 percent in 2026.
This would increase total compensation by $10,409 per Pilot when
accounting for all 61 Pilots in the 2025 final rule, as shown in table
41.
Table 41--Change in Revenue Resulting From Inflating 2025 Compensation
to 2026
------------------------------------------------------------------------
------------------------------------------------------------------------
Adjusted 2025 Compensation.............................. $473,139
2026 Target Compensation ($473,139 x 1.022)............. 483,548
Difference between Adjusted 2025 Compensation and Target 10,409
2026 Compensation ($483,548 - $473,139)................
Increase in total Revenue for 61 United States 634,948
Registered Pilots ($10,409 x 61).......................
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.
Similarly, an increase of $11,241 would be the result of increasing
compensation for the three Apprentice Pilots predicted for the 2025
season to account for future inflation of 2.2 percent in 2026. This
would increase total compensation by $3,747 per Apprentice Pilot when
accounting for the three Apprentice Pilots in the 2025 final rule, as
shown in table 42.
Table 42--Change in Revenue Resulting From Inflating 2025 Apprentice
Pilot Compensation to 2026
------------------------------------------------------------------------
------------------------------------------------------------------------
Adjusted 2025 Compensation.............................. $170,330
2026 Target Compensation ($483,548 x 36%)............... 174,077
Difference between Adjusted Compensation and Target 3,747
Compensation ($174,077 - $170,330).....................
Increase in total Revenue for 3 Apprentices ($3,747 x 3) 11,241
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.
As noted earlier, the Coast Guard predicts that 57 United States
Registered Pilots would be needed for the 2026 season. This reflects a
decrease of four United States Registered Pilots compared to the 2025
season, in District Three.
Table 43 shows the decrease of $1,898,904 in revenue needed solely
for United States Registered Pilot compensation. As noted previously,
to avoid double counting, this value excludes the change in revenue
resulting from the change to adjust 2025 pilotage compensation to
account for the difference between actual and predicted inflation.
Table 43--Change in Revenue Resulting From Decrease of Four Pilots
------------------------------------------------------------------------
------------------------------------------------------------------------
2026 Target Compensation................................ $483,548
Total Number of New United States Registered Pilots..... -4
Total Cost of New United States Registered Pilots -1,934,192
($483,548 x -4)........................................
Difference between Adjusted Target 2025 Compensation and 8,822
Target 2025 Compensation ($473,139-$464,317)...........
Increase in total Revenue for -4 United States -35,288
Registered Pilots ($8,822 x -4)........................
[[Page 42925]]
Net Increase in total Revenue for -4 United States -1,898,904
Registered Pilots (-$1,934,192- -$35,288)..............
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.
Similarly, the Coast Guard predicts that five Apprentice Pilots
would be needed for the 2026 season. This would be a total increase of
two Apprentice Pilots from the 2025 season. The difference reflects a
decrease of one Apprentice Pilot for District Two and an increase of
three Apprentice Pilots for District Three.
Table 44 shows the increase of $341,802 in revenue needed solely
for Apprentice Pilot compensation. As noted previously, to avoid double
counting this value excludes the change in revenue resulting from the
change to adjust 2025 apprentice pilotage compensation to account for
the difference between actual and predicted inflation.
Table 44--Change in Revenue Resulting From Increase of Two Apprentices
------------------------------------------------------------------------
------------------------------------------------------------------------
2026 Apprentice Target Compensation..................... $174,077
Total Number of New Apprentices......................... 2
Total Cost of new Apprentices ($174,077 x 2)............ 348,154
Difference between Adjusted Target 2025 Compensation and 3,176
Target 2025 Compensation ($170,330-$167,154)...........
Increase in total Revenue for 2 Apprentices ($3,176 x 2) $6,352
Net Increase in total Revenue for 2 Apprentices 341,802
($348,154-$6,352)......................................
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.
Removing the working capital fund (previously Step 5) would result
in a decrease of revenue needed of $1,980,709 for 2026 compared to
2025. Since this is a proposed change in the methodology, we also show
the change in what both revenue would be needed and rates would have
been for 2026 if the working capital fund remained in the methodology.
To calculate the working capital fund for 2026, we would add the
figures for projected operating expenses, total target United States
Registered Pilot compensation, and total target Apprentice Pilot wage
for each area. Then we would 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 5.0442 percent.\44\ By multiplying the two
figures, we obtain what the 2026 working capital fund contribution
would have been for each area, as shown in table 45.
---------------------------------------------------------------------------
\44\ Moody's Seasoned Aaa Corporate Bond Yield, average of 2024
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>; accessed 01/14/2025.
Table 45--Working Capital Fund Calculation for Comparing 2025 and 2026
----------------------------------------------------------------------------------------------------------------
Designated Undesignated Total
----------------------------------------------------------------------------------------------------------------
District One:
Adjusted Operating Expenses (Step 2)........................ $2,674,135 $1,782,757 $4,456,891
Total Target United States Registered Pilot Compensation 5,319,028 4,351,932 9,670,960
(Step 4)...................................................
Total Target Apprentice Pilot Compensation (Step 4)......... 104,446 69,631 174,077
Total 2026 Expenses......................................... 8,097,609 6,204,320 14,301,928
Working Capital Fund (5.0442% * Total 2026 Expenses)........ 408,460 312,958 721,418
District Two:
Adjusted Operating Expenses (Step 2)........................ 1,102,547 1,653,821 2,756,367
Total Target United States Registered Pilot Compensation 3,384,836 4,835,480 8,220,316
(Step 4)...................................................
Total Target Apprentice Pilot Compensation (Step 4)......... 0 0 0
Total 2026 Expenses......................................... 4,487,383 6,489,301 10,976,683
Working Capital Fund (5.0442% * Total 2026 Expenses)........ 226,353 327,333 553,686
District Three:
Adjusted Operating Expenses (Step 2)........................ 3,482,351 996,814 4,479,162
Total Target United States Registered Pilot Compensation 7,253,220 2,417,740 9,670,960
(Step 4)...................................................
Total Target Apprentice Pilot Compensation (Step 4)......... 543,120 153,188 696,308
Total 2026 Expenses......................................... 11,278,691 3,567,742 14,846,430
Working Capital Fund (5.0442% * Total 2026 Expenses)........ 568,920 179,964 748,884
----------------------------------------------------------------------------------------------------------------
Across the entire system, the three districts would have needed
$2,023,988 in revenue for the working capital fund in 2026. The
resulting total revenue needed for 2026 would have been $42,149,029, a
decrease of $1,010,665 or 2.34 percent from 2025, as shown in table 46.
[[Page 42926]]
Table 46--Difference in Revenue by Revenue-Component With Working Capital Fund
--------------------------------------------------------------------------------------------------------------------------------------------------------
Difference
Revenue needed Percentage of Revenue needed Percentage of (2026 revenue-- Percentage
Revenue component in 2025 total revenue in 2026 total revenue 2025 revenue) change from
needed in 2025 needed in 2026 previous year
--------------------------------------------------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses............................ $12,354,186 29 $11,692,420 28 -$661,766 -5
Total Target United States Registered Pilot 28,323,337 66 27,562,236 65 -761,101 -3
Compensation..........................................
Total Target Apprentice Pilot Compensation............. 501,462 1 870,385 2 368,923 74
Working Capital Fund................................... 1,980,709 5 2,023,988 5 43,279 2
Total Revenue Needed................................... 43,159,694 100 42,149,029 100 -1,010,665 -2.34
---------------
[…truncated; see source link]Indexed from Federal Register on September 5, 2025.
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