[Federal Register Volume 68, Number 15 (Thursday, January 23, 2003)]
[Proposed Rules]
[Pages 3202-3214]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-1461]


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DEPARTMENT OF TRANSPORTATION

Coast Guard

46 CFR Part 401

[USCG-2002-11288]
RIN 2115-AG30


Rates for Pilotage on the Great Lakes

AGENCY: Coast Guard, DOT.

ACTION: Notice of proposed rulemaking and public meeting.

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

SUMMARY: The Coast Guard proposes to update the rates for pilotage on 
the Great Lakes. We must by law review these rates annually, and we 
have reviewed them. We propose to change the pilotage rates for the 
shipping season of 2003 on the Great Lakes, both to generate sufficient 
funds for allowable expenses and to ensure that the pilots receive 
target compensation.

DATES: Comments and related material must reach the Docket Management 
Facility on or before March 10, 2003. A public meeting will be held 
January 31, 2003.

ADDRESSES: To make sure your comments and related material are not 
entered more than once in the docket,

[[Page 3203]]

please submit them by only one of the following means:
    (1) By mail to the Docket Management Facility (USCG-2002-11288), 
U.S. Department of Transportation, room PL-401, 400 Seventh Street, 
SW., Washington, DC 20590-0001.
    (2) By delivery to room PL-401 on the Plaza level of the Nassif 
Building, 400 Seventh Street, SW., Washington, DC, between 9 a.m. and 5 
p.m., Monday through Friday, except Federal holidays. The telephone 
number is 202-366-9329.
    (3) By fax to the Docket Management Facility at 202-493-2251.
    (4) Electronically through the Web Site for the Docket Management 
System at http://dms.dot.gov.
    The Docket Management Facility maintains the public docket for this 
rulemaking. Comments and material received from the public, as well as 
documents mentioned in this preamble as being available in the docket, 
will become part of this docket and will be available for inspection or 
copying at room PL-401 on the Plaza level of the Nassif Building, 400 
Seventh Street, SW., Washington, DC, between 9 a.m. and 5 p.m., Monday 
through Friday, except Federal holidays. You may also find this docket 
on the Internet at http://dms.dot.gov. Anyone is able to search the 
electronic form of all comments received into any of our dockets by the 
name of the individual submitting the comment (or signing the comment, 
if submitted on behalf of an association, business, labor union, etc.). 
You may review DOT's complete Privacy Act Statement in the Federal 
Register published on April 11, 2000 (65 FR 19477), or you may visit 
http://dms.dot.gov.

FOR FURTHER INFORMATION CONTACT: For questions on this proposed rule, 
call Tom Lawler, Chief Economist, Office of Great Lakes Pilotage, 
Commandant (G-MW-1), U.S. Coast Guard, at 202-267-1241, by fax 202-267-
4700, or by email at [email protected]. For questions on viewing 
or submitting material to the docket, call Dorothy Beard, Chief, 
Dockets, Department of Transportation, telephone 202-366-5149.

SUPPLEMENTARY INFORMATION: 

Request for Comments

    We encourage you to participate in this rulemaking by submitting 
comments and related material. If you do so, please include your name 
and address, identify the docket number for this rulemaking (USCG-2002-
11288), indicate the specific section of this document to which each 
comment applies, and give the reason for each comment. You may submit 
your comments and material by mail, hand delivery, fax, or electronic 
means to the Docket Management Facility at the address under ADDRESSES; 
but please submit your comments and material by only one means. If you 
submit them by mail or hand delivery, submit them in an unbound format, 
no larger than 8\1/2\ by 11 inches, suitable for copying and electronic 
filing. If you submit them by mail and would like to know they reached 
the Facility, please enclose a stamped, self-addressed postcard or 
envelope. We will consider all comments and material received during 
the comment period. We may change this proposed rule in view of them.

Public Meeting

    A public meeting will be held from 2 p.m. to 4 p.m. on January 31, 
2003, in Room B-1, Anthony J. Celebrezze Federal Building, 1240 East 
Ninth Street, Cleveland, OH 44199-2060. This meeting may close early if 
all business is finished.
    Written material and requests to make oral presentations can be 
sent to: Margie Hegy, Commandant (G-MW), U.S. Coast Guard Headquarters, 
2100 Second Street, SW., Washington, DC 20593-0001.
    Persons who are unable to attend the public meeting are encouraged 
to send written comments to the Docket Management Facility as directed 
under ADDRESSES during the comment period.

Background and Purpose

Regulatory History

    On May 9, 1996, the Department of Transportation published a final 
rule in the Federal Register (61 FR 21081) establishing a new 
methodology for setting rates for pilotage on the Great Lakes.
    On February 10, 1997, the Coast Guard published a final rule in the 
Federal Register (62 FR 5917) utilizing for the first time the newly 
established methodology that amended the rates for pilotage on the 
Great Lakes.
    On December 14, 1998, the Coast Guard published a notice of 
findings on annual review in the Federal Register (63 FR 68697) 
announcing the results of the 1998 rate review and requesting comments. 
The rates were not amended as a result of this rate review.
    On July 12, 2001, the Coast Guard published a final rule in the 
Federal Register (66 FR 36484) amending the rates for pilotage on the 
Great Lakes.
    On July 19, 2002, as the result of a lawsuit filed by District Two, 
the Coast Guard published a temporary final rule in the Federal 
Register (67 FR 47464) entitled ``Basic Rates and Charges on Lake Erie 
and the Navigable Waters From Southeast Shoal to Port Huron, MI''. The 
rule returned the rate in District Two, Area 5, to the one that was in 
place prior to August 13, 2001.
    On August 26, 2002, the Coast Guard published a notice of meetings 
in the Federal Register (67 FR 54836) for four public meetings to be 
held in regard to issues relevant to Great Lakes Pilotage Bridge Hour 
Standards. The Coast Guard also announced it is conducting a review to 
determine the appropriate bridge hour standards.

Purpose of This Notice of Proposed Rulemaking (NPRM)

    The Coast Guard must, under 46 CFR 404.1(b), conduct an annual 
review of the rates for pilotage on the Great Lakes using the 
procedures found at Appendix C to 46 CFR part 404. In addition, every 
five years the Coast Guard must perform a review using the methodology 
contained in 46 CFR part 404, Appendix A. At Step 2.A of Appendix A, we 
explain the target pilot compensation for pilots providing service on 
designated waters of the Great Lakes is approximately the average 
annual compensation for masters on U.S. Great Lakes vessels. The target 
pilot compensation for pilots providing service on undesignated waters 
of the Great Lakes is approximately the average annual compensation for 
first mates of such vessels. We have reviewed the current pilotage 
rates and determined that they should be adjusted to meet target pilot 
compensation and allowable expenses. Therefore, in accordance with 46 
U.S.C. 9303(f), and on the basis of the rate review for 2002, we 
propose to amend the rates for pilotage on the Great Lakes to meet 
these needs. We would like your comments on the updated rates.

Relationship of This Rulemaking to the Coast Guard's Ongoing Bridge 
Hour Study

    On July 1, 2002, the Assistant Commandant for Marine Safety, 
Security and Environmental Protection, commissioned a study to review 
the methodology for developing bridge hour standards for Great Lakes 
pilotage (67 FR 54836 (August 26, 2002)). This Bridge Hour Study is 
scheduled to be completed by January 31, 2003. The Study will explore 
the historical development of the bridge hour standard currently used 
in the ratemaking methodology for U.S. Great Lakes pilots. The goal of 
this study is to determine what the appropriate bridge

[[Page 3204]]

hour standard for designated and undesignated waters should be in each 
of the three Districts. It will explore issues such as whether the 
bridge hour standard should include hours associated with delay, 
detention, cancellation, and travel time.
    The findings of the Bridge Hour Study could cause the Coast Guard 
to modify the current bridge hour standard. Any significant 
modification in the bridge hour standard would, in turn, have a 
significant effect on the rate for 2003 under the existing methodology. 
The Coast Guard considered holding up the ratemaking process until the 
results of the Bridge Hour Study were available and the Coast Guard 
made any subsequent modifications to the bridge hour standard. 
Militating against this approach however, were the results of the Coast 
Guard's annual and five-year audits, that indicated that the 2003 
season would see a substantial adjustment in the rates. Ultimately, the 
Coast Guard concluded that because it projected a substantial rate 
adjustment for 2003, it should not delay the process, but should have 
the new rate published before the beginning of the new season. 
Accordingly, the Coast Guard intends to issue an interim rule on or 
before February 14, 2003, to be effective March 15, 2003, in time for 
the new season.
    Once it completes its evaluation of the Bridge Hour Study, the 
Coast Guard intends to issue a final rule that incorporates any 
appropriate modifications to the bridge hour standard along with any 
corresponding modification in pilotage rates. The Coast Guard will 
provide notice of any proposed changes and solicit and consider public 
comments, as well as input from the Great Lakes Pilotage Advisory 
Committee, before issuing its final rule.

What Is the Coast Guard Proposing in This Rulemaking?

    We propose to change the pilotage rates for waters treated in 46 
CFR 401.405, 401.407, and 401.410 as follows:

------------------------------------------------------------------------
       If you require pilotage in:                The rate would:
------------------------------------------------------------------------
Area 1 (Designated).....................  Increase 23%.
Area 2..................................  Increase 62%.
Area 4..................................  Increase 31%.
Area 5 (Designated).....................  Increase 17%.
Area 6..................................  Increase 20%.
Area 7 (Designated).....................  Increase 3%.
Area 8..................................  Increase 28%.
------------------------------------------------------------------------

    We also propose to increase the pilotage rates for the 
``Cancellation, delay or interruption in rendering services'' and 
``Basic rates and charges for carrying a U.S. pilot beyond normal 
change point or for boarding at other than the normal boarding point'' 
in 46 CFR 401.420 and 401.428, respectively, by 25 percent--the average 
rate change for all districts.

Discussion of Methodology

    This proposed rulemaking follows the methodology detailed in 46 CFR 
part 404, Appendix A, including the step-by-step five-year ratemaking 
calculations contained in Appendix A. We summarize these calculations 
in the following tables (and explain them in more detail afterwards):

                                             Table A.--District One
----------------------------------------------------------------------------------------------------------------
                                       Area 1  St. Lawrence
                                               River             Area 2  Lake Ontario      Total  District One
----------------------------------------------------------------------------------------------------------------
Step 1, Projection of operating      $315,253                  $284,253                  $559,506
 expenses.
Step 2, Projection of target pilot   $1,040,742                $734,562                  $1,775,304
 compensation.
Step 3, Projection of revenue......  $1,105,233                $629,149                  $1,734,382
Step 4, Calculation of investment    $50,000                   $50,000                   $100,000
 base.
Step 5, Determination of target      7.04%                     7.04%                     7.04%
 return on investment.
Step 6, Adjustment determination...  $1,356,243                $1,019,063                $2,375,306
Step 7, Adjustment of pilotage       1.23 (+23%)               1.62 (+62%)               1.37 (+37%)
 rates.
----------------------------------------------------------------------------------------------------------------


                                             Table B.--District Two
----------------------------------------------------------------------------------------------------------------
                                                                Area 5 Southeast Shoal
                                         Area 4 Lake Erie          to Port Huron, MI        Total District Two
----------------------------------------------------------------------------------------------------------------
Step 1, Projection of operating      $312,726                  $497,445                  $810,171
 expenses.
Step 2, Projection of target pilot   $612,135                  $1,214,199                $1,826,334
 compensation.
Step 3, Projection of revenue......  $705,015                  $1,461,069                $2,166,084
Step 4, Calculation of investment    $89,734                   $140,353                  $230,087
 base.
Step 5, Determination of target      7.04%                     7.04%                     7.04%
 return on investment.
Step 6, Adjustment determination...  $925,306                  $1,712,340                $2,637,646
Step 7, Adjustment of pilotage       1.31 (+31%)               1.17 (+17%)               1.22 (+22%)
 rates.
----------------------------------------------------------------------------------------------------------------


                                            Table C.--District Three
----------------------------------------------------------------------------------------------------------------
                                Area 6  Lakes Huron   Area 7  St. Mary's     Area 8  Lake       Total District
                                    and Michigan            River              Superior              Three
----------------------------------------------------------------------------------------------------------------
Step 1, Projection of           $616,292             $462,219             $462.219            $1,540,730
 operating expenses.
Step 2, Projection of target    $1,224,270           $693,828             $856,989            $2,775,087
 pilot compensation.
Step 3, Projection of revenue.  $1,540,306           $1,119,819           $1,030,693          $3,690,818
Step 4, Calculation of          $111,668             $83,752              $83,752             $279,172
 investment base.
Step 5, Determination of        7.04%                7.04%                7.04%               7.04%
 target return on investment.
Step 6, Adjustment              $1,841,115           $1,156,463           $1,319,623          $4,317,201
 determination.

[[Page 3205]]

 
Step 7, Adjustment of pilotage  $1.20 (+20%)         1.03 (+3%)           1.28 (+28%)         1.17 (+17%)
 rate.
----------------------------------------------------------------------------------------------------------------

    Here is a detailed explanation of our step-by-step calculations:

Step 1.A: Submission of Financial Information

    The first step is gathering financial data from each of the three 
Great Lakes pilots' districts. Each district must obtain an audit by an 
independent Certified Public Accountant (CPA) and submit it to the 
Acting Director (the Director) of Great Lakes Pilotage, in accordance 
with 46 CFR 403.300.

Step 1.B: Determination of Recognizable Expenses

    The Director determines which association expenses will be 
recognized for ratemaking purposes each year. The Director hires an 
independent CPA to review the expenses reported by the associations 
using the guidelines contained in 46 CFR 404.05. To determine which 
expenses were reasonable and necessary to include in our 2002 rate 
review, we used the Director's independent audit of the associations 
for 2001. In the following paragraphs, we discuss some of the audit's 
details. We have also provided a table containing the expenses 
recognized and approved by the Director.
    We calculate target pilot compensation for both designated and 
undesignated waters each year based on the current union contract for 
first mates on U.S. Great Lakes vessels. We add that amount to the 
total expenses to determine the revenue needed for ratemaking purposes.
    In 2001, to support safety and ongoing professional development, 
each association was asked to develop a continuing education program 
for registered pilots and to submit to the Director a proposed annual 
budget. The purpose of the program is to keep registered pilots aware 
of safety issues and to refresh their skills. The Director approved 
each district's program together with their estimate of yearly costs 
(District One, $30,000; District Two, $40,000; and District Three, 
$50,000) and included these amounts in their respective expense bases 
in the final rule published on July 12, 2001, in the Federal Register 
(63 FR 68697) with the new rates becoming effective August 13, 2001. 
The Director's 2001 audit disclosed that the pilots' associations 
during the remainder of the 2001 navigation season were only able to 
expend approximately 50 percent of the Director's training allocation 
that was included in the final rule (63 FR 68697). Therefore, the 
Director is adjusting the expense base of each pilots' association to 
reflect the full amount the Director previously approved (District One, 
$30,000; District Two, $40,000; and District Three, $50,000). This will 
ensure adequate funding for this program on a continuing yearly basis. 
The Director will continually monitor the plans to ensure they are 
effectively implemented, that the money is accounted for and applied 
properly to each district's continuing education account. The Director 
reserves the right to modify each plan as necessary.
    Accordingly, the Director has added the following amounts to each 
district's expense base to support this program on a yearly basis:

------------------------------------------------------------------------
                                     District     District     District
                                       One          Two         Three
------------------------------------------------------------------------
2001 Expenditure.................       $8,128      $19,500      $25,000
Director's Adjustment............       21,872       20,500       25,000
                                  --------------
    Total Yearly Training........       30,000       40,000       50,000
------------------------------------------------------------------------

    Additionally, effective August 1, 2002, the current union contract 
for first mates on the Great Lakes stipulates: ``that employers will 
make matching contributions for each participating 401(k) plan employee 
in an amount equal to 50 percent of the employee's contribution, to a 
maximum of 5 percent of a participating employee's compensation.'' 
District Two has a pension plan, while District Three has a 401(k) 
plan. District One does not provide either a 401(k) or pension plan for 
its members. Therefore, to conform to the current union contract for 
first mates in accounting for an employer's contribution of 50 percent, 
expense bases of Districts Two and Three are increased by $41,817 and 
$66,159 based on their total employee 401(k)/pension contributions in 
2001 of $83,634 and $132,318, respectively.
    The following table displays audit results, along with the CPA's 
and Director's adjustments:

                                              Recognizable Expenses
----------------------------------------------------------------------------------------------------------------
                                     District One                District Two               District Three
----------------------------------------------------------------------------------------------------------------
Reported expenses for 2001..  $687,591                    $1,386,376                  $1,336,710
Proposed adjustments          Equalization Between        Equalization Between        Equalization Between
 (independent CPA).            Districts:                  Districts:                  Districts:
                              $10,120                     None                        $143,035
                              $62,096                                                 $152,535

[[Page 3206]]

 
                              Reimbursed Expenses:        Reimbursed Expenses:        Reimbursed Expenses:
                              ($13,000)                   ($83,376)                   ($163,207)
                                                          ($174,414)
                                                          ($211,849)
                              Not Recognized or Allowed:  Not Recognized or Allowed:  Not Recognized or Allowed:
                              ($782)                      ($74)                       ($995)
                              ($43,100)                   ($720)                      ($19,780)
                                                          ($28,124)
                              Misclassified Expenses:     Misclassified Expenses:     Misclassified Expenses:
                              ($4,500)                    ($8,600)                    ($4,050)
                              ($11,740)                   ($20,470)                   ($23,100)
                              ($120,377)
                              Undocumented Expenses:      Undocumented Expenses:      Undocumented Expenses:
                              None                        ($125,559)                  None
Total expenses 2001 +.......  $566,308                    $733,190                    $1,421,148
Inflation adjustment (2%)...  $11,326                     $14,664                     $28,423
Director's adjustments......  $21,872                     $20,500                     $25,000
                                                          $41,817                     $66,159
                             -----------------------------
    Total projected expenses  $599,506                    $810,171                    $1,540,730
     for 2003 pilotage
     season.
----------------------------------------------------------------------------------------------------------------

    The following is a summary of the independent CPA's major findings 
and proposed adjustments, along with the Director's corresponding 
adjustments:

Summary of Major Findings and Proposed Adjustments

    We divided the adjustments we made to the reported expenses into 
five categories: (1) equalization among districts, (2) reimbursed 
expenses, (3) expenses not reasonable or necessary for pilotage 
services (46 CFR 404.5(a)), (4) misclassified expenses, and (5) 
undocumented expenses.

(1) Equalization Among Districts

    The Coast Guard must ensure that each association's expenses are 
analyzed fairly and consistently with the other associations because of 
how they are organized. The associations of Districts One and Three are 
organized as partnerships, while the association of District Two is 
organized as a corporation. Because of this difference, the District 
Two association pays the employer's share of Social Security and 
Medicare taxes, insurance, and travel expenses out of corporate funds. 
In the associations of Districts One and Two, the individual pilots pay 
these expenses because each pilot is self-employed. Because these 
taxes, insurance, and travel expenses are legitimate business expenses 
that should be recognized for ratemaking purposes, funds for these 
expenses have been added to District One and Three's expense bases on 
the independent CPA's recommendation. In District One, $62,096 in 
Social Security and Medicare taxes, and $10,120 in travel expenses have 
been added to the expense base. In District Three, $143,035 in Social 
Security and Medicare taxes, along with $152,535 in travel expenses 
have been added to the expense base.

(2) Reimbursed Expenses

    The independent CPA found that a number of expenses are reimbursed 
to the pilots' associations and recommended that these expenses should 
not be included in each district's expense base. Examples are 
reimbursement from one pilots' association to another for shared pilot 
boats and dispatch, reimbursement for dividends received on Workmen's 
Compensation premiums, and reimbursement from Canadian pilots for 
shared administrative expenses, dispatch, and pilot boat services.
    The Director agrees with the independent CPA's recommendation to 
deduct these reimbursed expenses from the expense bases of the 
districts. Although these are legitimate business expenses, they are 
paid for by other districts or parties, not by the associations 
claiming them, and, as such, should not be included in the expense base 
of the district being reimbursed. In District Two, we deducted $174,414 
and $83,376 in reimbursed expenses for pilotage and dispatch services 
and for the refund of Workmen's Compensation premiums of $211,849, from 
the expense base. Likewise, in District Three, we deducted $163,207 in 
reimbursed expenses for pilotage and in dispatch services from the 
expense base.
    Settlement of a lawsuit in 2002 reimbursed the District One Pilots' 
Association $13,000 in legal fees. Accordingly, we have deducted this 
reimbursed amount from the expense base.

(3) Expenses Not Recognized or Not Allowed as Reasonable or Necessary 
for the Provision of Pilotage Services (46 CFR 404.5(a)

    Excessive capital lease costs associated with the rental of two 
pilot boats, lobbying expenses, and certain miscellaneous expenses 
(advertising, business promotion, and donations) were identified as 
unnecessary for the provision of pilotage services.
    During 2001, District Two paid Erie Leasing $62,950 in lease cost 
for the rental of two pilot boats. The Director considers this cost 
unreasonable. In 46 CFR 404.5(a)(3), it states:

    Lease costs for both operating and capital leases are recognized 
for ratemaking purposes to the extent that they conform to market 
rates. In the absence of a comparable market, lease costs are 
recognized for ratemaking purposes to the extent that they conform 
to depreciation plus an allowance for return on investment (computed 
as if the asset had been purchased with equity capital). The portion 
of lease costs that exceed these standards is not recognized for 
ratemaking purposes.

    Using this methodology, with the cost of the pilot boats being 
$315,000, a market return of 7.04 percent, and a depreciation amount of 
$9,450, the

[[Page 3207]]

result is an allowable lease expense of $31,626 ($315,000 x 7.04% = 
$22,176 + $9,450 = $31,626). To bring pilot-boat expenses of District 
Two into line with those of Districts One and Three, the Director is 
reducing District Two's expense base by $28,124 ($59,750 rental fee - 
$31,626 allowable fee = $28,124 excessive lease fee).
    The Director, in consultation with the District One Pilots' 
Association, identified $43,100 in lobbying expenses and has deducted 
this amount from its expense base because they are not recognized for 
ratemaking purposes.
    In addition, the independent CPA has recommended a deduction from 
District One's expenses of $782 for advertising, two deductions from 
District Two's expenses in amounts of $74 for business promotion and 
$720 for donations, and $995 from District Three's expense base for 
donations. None of these expenses is necessary for the provision of 
pilotage services. The independent CPA further recommended a deduction 
of $19,780 from District Three's expenses for an uncollectable account 
or bad debt. While this treatment of bad debt is an acceptable practice 
for financial reporting, it is unnecessary for ratemaking in that it is 
a one-time, non-recurring expense. The Director agrees with the 
independent CPA and has deducted all these expenses from the expense 
bases.

(4) Misclassified Expenses

    The independent CPA recommended deductions of $4,500, $11,740, and 
$120,377 from District One, $8,600 and $20,470 from District Two, and 
$4,050 and $23,100 from District Three because these payments were made 
directly to pilots as compensation. District One paid $4,500 to 
registered pilots to train temporarily registered pilots on Lake 
Ontario and $120,377 to an independent registered pilot for the 
provision of pilotage services. District Two made payments to pilots in 
the amount of $8,600 to attend yearly meetings. This was paid in 
addition to payments to pilots for travel and per diem expenses. 
Additionally, District One made payments of $11,740 in union dues, 
District Two made payments of $20,470 in association dues, and District 
Three made payments of $4,050 and $23,100 for subscriptions and union 
dues. The Director agrees with the independent CPA because the payments 
benefit pilots and will be treated as pilot compensation in accordance 
with 46 CFR 404.5(a)(6), and he deducted these payments from the 
districts' expense bases.

(5) Undocumented Expenses

    A detailed inspection of District Two's expense accounts and annual 
audited financial statements disclosed payments of $38 daily per diem 
to each pilot based on days available. These payments in November 2001 
and late December 2001 totaled $125,559 and were not documented. The 
Internal Revenue Service procedures (Rev. Proc. 2001-47) require 
substantiation as to time, place, and purpose of expenses paid. These 
payments were in addition to properly documented travel and per diem 
payments made throughout the year. The total combined per diem (food 
and incidental) expense claimed actually exceeded the maximum amount 
possible if every pilot would have been on travel for every day during 
the season. The travel regulations do not contemplate a payment based 
on ``days available'' for travel. The independent CPA recommended that 
$125,559 be deducted from District Two's expense base. The Director 
agrees and has deducted the amount from the expense base and treated it 
as pilot compensation in accordance with 46 CFR 404.5(a)(6). Properly 
substantiated and documented travel and per diem costs incurred while a 
pilot is engaged in legitimate travel in connection with the provision 
of pilotage service will be recognized for ratemaking purposes.

Step 1.C: Adjustment for Inflation or Deflation

    To adjust expenses for inflation (there being no deflation, yet), 
we increased the total recognized expenses for each association by two 
percent. This figure is based on the approximate average change in the 
Consumer Price Index (CPI) from July 2001 to November 2002.

Step 1.D: Projection of Operating Expenses

    Once all adjustments are made to the recognized operating expenses, 
the Director projects these expenses for each pilotage area. The 
Director considers foreseeable circumstances that could affect the 
accuracy of the expenses as projected and, as well as possible, 
determines the ``projection of operating expenses.''
    District-wide general and administrative expenses are apportioned 
to each area according to the number of pilots in that area. Expenses 
that are attributable to a pilotage area are applied directly to it. 
For instance, in District One, approximately $31,000 in taxi expense is 
directly attributable to Area 1; but the remaining general and 
administrative expense in District One is then apportioned according to 
the number of pilots assigned to Areas 1 and 2. The results of Step 1.D 
for each district are displayed as follows:

                                                  District One
----------------------------------------------------------------------------------------------------------------
                                                               Area 1  St.      Area 2  Lake     Total  District
                                                             Lawrence River        Ontario             One
----------------------------------------------------------------------------------------------------------------
Projection of operating expenses..........................         $315,253          $284,253          $599,506
----------------------------------------------------------------------------------------------------------------


                                                  District Two
----------------------------------------------------------------------------------------------------------------
                                                                                   Area 5
                                                              Area 4  Lake     Southeast Shoal   Total  District
                                                                  Erie         to Port Huron,          Two
                                                                                     MI
----------------------------------------------------------------------------------------------------------------
Projection of operating expenses..........................         $312,726          $497,445          $810,171
----------------------------------------------------------------------------------------------------------------


[[Page 3208]]


                                                 District Three
----------------------------------------------------------------------------------------------------------------
                                            Area 6  Lakes
                                              Huron and        Area 7  St.      Area 8  Lake     Total  District
                                              Michigan        Mary's River        Superior            Three
----------------------------------------------------------------------------------------------------------------
Projection of operating expenses........         $616,292          $462,219          $462,219        $1,540,730
----------------------------------------------------------------------------------------------------------------

Step 2.A: Determination of Target Rate of Compensation

    For pilots providing service in undesignated waters, the target 
rate of compensation is approximately the average yearly compensation 
earned by first mates on U.S. Great Lakes vessels. Effective August 1, 
2002, according to the American Maritime Officers Union (AMOU), the 
average yearly compensation is $122,427. This rate covers wages and 
benefits, which comprises work days, vacation pay, weekend pay, holiday 
pay, bonuses, clerical pay, medical and pension benefits.
    For pilots providing services in designated waters, the target rate 
of compensation is calculated as 1.5 times the yearly salary of a first 
mate plus benefits, (1.5 x 100,944 = $151,416 (Yearly Salary) + $22,041 
(Benefits) = $173,457 (Pilot Target Compensation effective August 1, 
2002).
    The Coast Guard adopted this method of calculating the rate because 
it most accurately achieves the stated goal of approximating the salary 
of a Great Lakes Master. This method is the same method we used in the 
final rule establishing rates in 1997 (62 FR 5917 (February 10, 1997)) 
and again in 2001 (66 FR 36484 (July 12, 2001)).
    Effective August 1, 2002, the daily contractual rate of wages for 
first mates is $207.70. We multiply the daily rate by 54 days (30.5 
work days, 15 vacation days, 4 weekend days, 1.5 holidays, and 3 bonus 
days) to determine the monthly rate for undesignated waters. This 
monthly rate is then multiplied by 1.5 to determine the monthly rate 
for designated waters (monthly rate for undesignated waters x 1.5 = 
monthly rate for designated waters). Only then is the cost of benefits 
(pensions, health care, and clerical support) added to the monthly 
rates for both undesignated and designated waters. These figures are 
then multiplied by 9 to yield total yearly target pilot compensation. 
The calculation goes as follows: the daily rate of wages specified in 
the first mates' union contract, effective August 1, 2002, is $207.70. 
The daily rate is then multiplied by 54 to determine the monthly rate, 
$11,216. Added to this figure are the monthly costs of first mates' 
clerical support, $126; health benefits, $1,748; and their pension, 
$513. The monthly total of wages and benefits comes to $13,603. This 
figure is then multiplied by 9 to yield a total target pilot 
compensation for undesignated waters of $122,427.
    For designated waters, the monthly rate of wages, calculated above, 
is multiplied by 1.5, totaling $16,824. To this figure, we add the 
monthly cost of a masters' clerical support, $188; the monthly health 
benefits, $1,748; and the monthly cost of their pension benefits, $513. 
The monthly total of wages and benefits now comes to $19,273. This 
figure is then multiplied by 9, to yield a total target pilot 
compensation for designated waters of $173,457.
    The table below summarizes how the total target pilot compensation 
is determined for undesignated and designated waters:

 
------------------------------------------------------------------------
                                      Monthly  (First      Monthly
                                       Mate)  pilots   (Master) pilots
        Monthly component \1\         on undesignated   on designated
                                           waters           waters
-----------------------------------------------------------------------
$207.70 (Daily Rate) x 54 (Days)....          $11,216  ...............
$207.70 (Daily Rate) x 54 x 1.5.....  ...............          $16,824
Clerical............................              126              188
Health \2\..........................            1,748            1,748
Pension \3\.........................              513              513
                                     ------------------
Monthly Total.......................           13,603           19,273
Monthly Total x 9 Months............          122,427         173,457
------------------------------------------------------------------------
\1\ For the purposes of the 2002 rate review, pilots are assumed to work
  180 man days a year for a total of 270 days for both health and
  pension benefits (180 working days a year/60 = 3, 3 x 30 = 90 extra
  days of payments; 180 working days + 90 days of extra payments = 270
  days of payments.
\2\ Health benefits are $15,372 a year, or $1,748 a month for nine
  months (270 paid days a year x $58.26 a day worked =$15,372 of
  compensation/9 months = $1,748 a month.)
\3\ Pension benefits are paid at the same proportion as the health
  benefits, though at a daily rate of $17.09. Using the same methodology
  as for the health benefits, yearly pension benefits are $4,608 a year,
  or $513 a month for nine months (270 paid days a year x $17.09 a day
  worked = $4,608 a year; $4,614 a year/9 months = $513 a month.)

Step 2.B: Determination of Number of Pilots Needed

    The number of pilots needed in each area is determined by dividing 
the projected bridge hours, excluding delay and detention hours for 
each area, by the targets for each area i.e., 1,000 hours in designated 
waters and 1,800 hours in undesignated waters. Projected bridge hours 
are based on the vessel traffic that pilots are expected to serve. The 
Director projects that bridge hours for the 2003 season will be the 
same as or comparable to the totals of 2001.
    Dividing the projected annual number of bridge hours per area by 
the target number of bridge hours per pilot determines the number of 
pilots required in each area to service vessel traffic.

[[Page 3209]]



----------------------------------------------------------------------------------------------------------------
                                                                                    Divided by
                          Pilotage area                           Projected 2003    bridge-hour       Pilots
                                                                    bridge hours      target         required
----------------------------------------------------------------------------------------------------------------
Area 1..........................................................           5,407           1,000             5.4
Area 2..........................................................           6,130           1,800             3.4
Area 4..........................................................           8,298           1,800             4.6
Area 5..........................................................           6,395           1,000             6.4
Area 6..........................................................          19,016           1,800            10.5
Area 7..........................................................           4,320           1,000             4.3
Area 8..........................................................          12,354           1,800             6.9
----------------------------------------------------------------------------------------------------------------

    The following bullets list the number of pilots, by area, the 
Director has authorized for the 2003 navigation season:

[sbull] Area 1: Six pilots.
[sbull] Area 2: Six pilots.
[sbull] Area 4: Five pilots.
[sbull] Area 5: Seven pilots.
[sbull] Area 6: 10 pilots.
[sbull] Area 7: Four pilots.
[sbull] Area 8: Seven pilots.

    In authorizing the number of pilots for each pilotage area, the 
Director has rounded up the number of pilots required in Areas 1, 2, 4, 
and 5, from the above table, for Districts One and Two to insure 
adequate pilot availability. Furthermore, the Director has approved two 
additional pilots for Area 2 for a total of six pilots to equal the 
number of Canadian pilots assigned to Lake Ontario. This is necessary 
to ensure pilotage assignments are divided equally between the United 
States and Canada, as specified in the Memorandum of Arrangements 
between the Secretary of Transportation of the United States and the 
Minister of Transport of Canada.
    In District Three, however, the Director has rounded down the 
number of pilots in Area 7 (designated waters) to four and rounded down 
the total number of pilots required in the undesignated waters of Areas 
6 and 8 (10.5 + 6.9 = 17.4) to 17 because District Three employs 
additional contract pilots to cover surges in vessel traffic during the 
navigational season.

Step 2.C: Projection of Target Pilot Compensation

    Target pilot compensation for each pilotage area is determined by 
multiplying the target compensation for each area by the number of 
pilots in each area (i.e., six pilots are required in Area 1, target 
compensation for the designated waters of Area 1 is $173,457, 6 x 
$173,457 = $1,040,742). The results for each pilotage area are 
summarized below:

                                                  District One
----------------------------------------------------------------------------------------------------------------
                                                               Area 1  St.      Area 2  Lake     Total District
                                                             Lawrence River        Ontario             One
----------------------------------------------------------------------------------------------------------------
Projection of target pilot compensation...................       $1,040,742          $734,562        $1,775,304
----------------------------------------------------------------------------------------------------------------


                                                  District Two
----------------------------------------------------------------------------------------------------------------
                                                                              Area 5 Southeast
                                                            Area 4 Lake Erie    Shoal to Port    Total District
                                                                                  Huron, MI            Two
----------------------------------------------------------------------------------------------------------------
Projection of target pilot compensation...................         $612,135        $1,214,199        $1,826,334
----------------------------------------------------------------------------------------------------------------


                                                 District Three
----------------------------------------------------------------------------------------------------------------
                                            Area 6  Lakes
                                              Huron and        Area 7  St.      Area 8  Lake     Total  District
                                              Michigan        Mary's River        Superior            Three
----------------------------------------------------------------------------------------------------------------
Projection of target pilot compensation.       $1,224,270          $693,828          $856,989        $2,775,087
----------------------------------------------------------------------------------------------------------------

Step 3.A: Projection of Revenue

    The economic slowdown that began in 1999 has steadily precipitated 
a significant decline in Seaway traffic during the 2001 navigation 
season. The most notable sign was a downturn in consumer demand for 
durable goods, which caused a reduction in the flow of imported steel. 
This combined with a poor grain harvest in the Midwest and Canada 
resulted in the lowest cargo volumes on the Great Lakes since 1993. 
Short-term prospects for trade are not very encouraging considering the 
imposition of steel tariffs of up to 30 percent in March of this year, 
and preliminary shipping data for the 2002 navigation season already 
suggests that traffic could decline further. Therefore, for the 
purposes of this NPRM, the Director is projecting that pilotage revenue 
and bridge hours for the 2003 navigation season will be comparable to 
those of 2001. This is being done with the understanding that this 
projection will be adjusted as necessary in a final rule to account for 
2002 data (revenue and bridge hour study) when they become available in 
late January 2003.
    The Coast Guard published a final rule on July 12, 2001, that 
amended rates for pilotage services on the Great Lakes. That rule 
increased the rate in District One, Area 1 by 4 percent; increased the 
rate in Area 2 by 17 percent; increased the rate in District

[[Page 3210]]

Two, Area 4 by 3 percent; increased the rate in District Three, Area 6 
by 4 percent; and increased the rate in Area 7 by 9 percent. There was 
a 5 percent decrease in the rate for Area 5, while the rate in Area 8 
went unchanged.
    As a result of a lawsuit filed by District Two, the Coast Guard 
published a temporary final rule on July 19, 2002. The rule returned 
the rate in District Two, Area 5, to the one that was in place prior to 
August 13, 2001. The result of this rule was a rate increase of 5 
percent, which became effective August 20, 2002.
    To accurately project 2003 revenues, we must adjust or ``align'' 
2001 revenues to reflect the changes in the rates referenced above. 
Accordingly, the aforementioned percentage changes in pilotage rates 
for each pilotage area were applied (multiplied by a factor to reflect 
an increase or decrease) to the total pilotage revenues in each area, 
collected prior to August 13, 2001 (the effective date of the rate 
adjustment), except for District Two, Area 5. The adjusted revenues for 
each area were then added to the revenues collected after August 13, 
2001, in each area to obtain total adjusted revenue for each area. To 
account for the initial rate decrease and subsequent increase in 
District Two, Area 5, pilotage revenues collected after August 19, 
2001, were adjusted to reflect the 5 percent increase effective August 
19, 2002, (i.e., $782,914 x 1.05 = $822,060) and then added actual area 
revenues collected prior to August 19, 2001, to obtain the total 
adjusted revenue for Area 5.
    In previous rulemakings, actual revenue for each pilotage area was 
not available. Only total revenue for the districts was being provided 
in financial statements. As a result, total revenue for each district 
was apportioned among pilotage areas based on the number of pilots 
authorized. Often this apportionment did not accurately approximate or 
reflect the actual revenue collected in a given pilotage area, most 
notably in Area 7 of District Three, where in 2001 actual revenue 
exceeded the apportioned amount by approximately $450,000. In the past, 
this apportionment caused an inflated pilotage rate in one area and 
also caused deflated rates in other areas. This year, with the 
cooperation of the districts, we were able to account for revenue in 
each of their respective pilotage areas. Using actual revenues greatly 
enhances the equity of the rate structure. The results of Step 3.A for 
each district are summarized below:

                                                  District One
----------------------------------------------------------------------------------------------------------------
                                                               Area 1  St.      Area 2  Lake     Total District
                                                             Lawrence River        Ontario             One
----------------------------------------------------------------------------------------------------------------
Projection of revenue.....................................       $1,105,233          $629,149        $1,734,382
----------------------------------------------------------------------------------------------------------------


                                                  District Two
----------------------------------------------------------------------------------------------------------------
                                                                                   Area 5
                                                              Area 4  Lake     Southeast Shoal   Total District
                                                                  Erie        to Port Huron MI         Two
----------------------------------------------------------------------------------------------------------------
Projection of revenue.....................................         $705,015        $1,461,069        $2,166,084
----------------------------------------------------------------------------------------------------------------


                                                 District Three
----------------------------------------------------------------------------------------------------------------
                                            Area 6  Lakes
                                              Huron and        Area 7  St.      Area 8  Lake     Total  District
                                              Michigan        Mary's River        Superior            Three
----------------------------------------------------------------------------------------------------------------
Projection of revenue...................       $1,540,306        $1,119,819        $1,030,693        $3,690,818
----------------------------------------------------------------------------------------------------------------

Step 4: Calculation of Investment Base

    In 46 CFR part 404, Appendix A, Step 5(3), it states that ``Assets 
subject to return on investment * * * must be reasonable in purpose and 
amount. If an asset or other investment is not necessary for the 
provision of pilotage services, that portion of the return element is 
not allowed for ratemaking purposes.'' In calculating rate of return 
the Director considers property, equipment and cash necessary to cover 
pilots' associations expenses during the three-month period the St. 
Lawrence Seaway is closed. Some pilots' associations throughout the 
course of the navigation season choose to accumulate large cash 
balances from revenue received for pilotage service rather than 
distribute the money as pilot compensation. These large cash balances 
are reflected on their balance sheet as cash assets at the close of the 
calendar year (December 31). A significant portion of these cash assets 
are then immediately distributed the next calendar year as pilot 
compensation. The net effect inflates their investment base at the end 
of the calendar year. The Director's inclusion of cash assets in excess 
of what is required to operate during this period would encourage these 
associations to unnecessarily inflate their investment bases and 
provide a source of return available to few, if any, other private 
businesses. An analysis of pilots' associations' investment bases 
indicates that, ever since the concept of return on investment was 
introduced into the ratemaking methodology, Districts Two and Three 
have greatly increased their bases. In District Two, the base went from 
$265,488 in 1995 to $413,998 in 1996, of which only $116,041 
represented property and equipment. In District Three, it went from 
$119,823 in 1995 to $994,896 in 1996, of which only $25,583 represented 
property and equipment.
    In addition to property and equipment, the Director is recognizing 
$100,000, $150,000, and $200,000 for inclusion in the investment base 
for Districts One, Two, and Three, respectively, as cash necessary to 
cover operating expenses during the months the St. Lawrence Seaway is 
closed.

[[Page 3211]]

    The investment base (Step 4) as calculated for each district is 
displayed below:

                                                  District One
----------------------------------------------------------------------------------------------------------------
                                                               Area 1  St.      Area 2  Lake     Total  District
                                                             Lawrence River        Ontario             One
----------------------------------------------------------------------------------------------------------------
Calculation of investment base............................          $50,000           $50,000          $100,000
----------------------------------------------------------------------------------------------------------------


                                                  District Two
----------------------------------------------------------------------------------------------------------------
                                                                                   Area 5
                                                              Area 4  Lake     Southeast Shoal   Total  District
                                                                  Erie         to Port Huron,          Two
                                                                                     MI
----------------------------------------------------------------------------------------------------------------
Calculation of investment base............................          $89,734          $140,353          $230,087
----------------------------------------------------------------------------------------------------------------


                                                 District Three
----------------------------------------------------------------------------------------------------------------
                                            Area 6 Lakes
                                              Huron and        Area 7  St.      Area 8  Lake     Total  District
                                              Michigan        Mary's River        Superior            Three
----------------------------------------------------------------------------------------------------------------
Calculation of investment base..........         $111,668           $83,752           $83,752          $279,172
----------------------------------------------------------------------------------------------------------------

Step 5: Determination of Target Rate of Return

    The target rate of return on investment (ROI) for 2002 was set at 
7.04 percent. This is based on the preceding year's (2001's) average 
annual rate of return of new issues of high-grade corporate securities 
(Moody's AAA rating, average return).

Step 6: Adjustment Determination (Revenue Needed)

    We made the adjustment determination (revenue needed to cover 
operating expenses and pilot compensation) using the numbers listed 
above and following the formula found in Step 6 of 46 CFR part 404, 
Appendix A. The results for each district are displayed below:

                                                  District One
----------------------------------------------------------------------------------------------------------------
                                                               Area 1  St.      Area 2  Lake     Total  District
                                                             Lawrence River        Ontario             One
----------------------------------------------------------------------------------------------------------------
Adjustment determination..................................       $1,356,243        $1,019,063        $2,375,306
----------------------------------------------------------------------------------------------------------------


                                                  District Two
----------------------------------------------------------------------------------------------------------------
                                                                                   Area 5
                                                              Area 4  Lake     Southeast Shoal   Total  District
                                                                  Erie         to Port Huron,          Two
                                                                                     MI
----------------------------------------------------------------------------------------------------------------
Adjustment determination..................................         $925,306        $1,712,340        $2,637,646
----------------------------------------------------------------------------------------------------------------


                                                 District Three
----------------------------------------------------------------------------------------------------------------
                                            Area 6  Lakes
                                              Huron and        Area 7  St.      Area 8  Lake     Total  District
                                              Michigan        Mary's River        Superior            Three
----------------------------------------------------------------------------------------------------------------
Adjustment determination................       $1,841,115        $1,156,463        $1,319,623        $4,317,201
----------------------------------------------------------------------------------------------------------------

Step 7: Adjustment of Pilotage Rate

    To determine the adjustments to pilotage rates in each area, we 
multiplied the current pilotage rate in the area by the rate 
multiplier. The rate multiplier is calculated by dividing the revenue 
needed (from Step 6) by the revenue projection (from Step 3) for each 
area. The Director proposes to amend the pilotage rates for the waters 
treated in 46 CFR 401.405 through 46 CFR 401.410 with the rates 
obtained by multiplying the current pilotage rates times the rate 
multiplier for each pilotage area. The Adjustments of Pilotage Rates 
(Step 7) for each district are displayed below:

[[Page 3212]]



                                                  District One
----------------------------------------------------------------------------------------------------------------
                                        Area 1 St. Lawrence
                                               River              Area 2 Lake Ontario       Total District One
----------------------------------------------------------------------------------------------------------------
Adjustment of pilotage rates.......  1.23 (23%)                1.62 (+62%)               1.37 (+37%)
----------------------------------------------------------------------------------------------------------------


                                                  District Two
----------------------------------------------------------------------------------------------------------------
                                                                Area 5 Southeast Shoal
                                         Area 4 Lake Erie          to Port Huron, MI        Total District Two
----------------------------------------------------------------------------------------------------------------
Adjustment of pilotage rates.......  1.31 (+31%)               1.17 (+17%)               1.22 (+22%)
----------------------------------------------------------------------------------------------------------------


                                                 District Three
----------------------------------------------------------------------------------------------------------------
                                 Area 6 Lakes Huron   Area 7 St. Mary's       Area 8 Lake       Total District
                                    and Michigan            River              Superior              Three
----------------------------------------------------------------------------------------------------------------
Adjustment of pilotage rate...  1.20 (+20%)          1.03 (+4)            1.28 (+28%)         1.17 (+17%)
----------------------------------------------------------------------------------------------------------------

Regulatory Evaluation

    This proposed rule is not a ``significant regulatory action'' under 
section 3(f) of Executive Order 12866 and does not require an 
assessment of potential costs and benefits under section 6(a)(3) of 
that Order. The Office of Management and Budget has not reviewed it 
under that Order. It is not ``significant'' under the regulatory 
policies and procedures of the Department of Transportation (DOT) (44 
FR 11040 (February 26, 1979)).
    We expect the economic impact of this proposed rule to be so 
minimal that a full Regulatory Evaluation under paragraph 10e of the 
regulatory policies and procedures of DOT is unnecessary. This proposed 
rule would make adjustments to the pilotage rates paid by foreign 
flagged ships for the 2003 Great Lakes navigational season. While these 
adjustments to pilotage rates may seem relatively large they actually 
represent a small change to the overall cost of moving these vessels 
through the St. Lawrence Seaway system. The Coast Guard used the 
ratemaking methodology found in 46 CFR part 404, Appendix A, to 
identify adjustments necessary to achieve target pilot compensation and 
association expenses by establishing these new pilotage rates. This 
ratemaking methodology is designed to annually review pilotage rates in 
order to avoid fluctuations in pilot compensation thus avoiding large 
changes in pilotage rates. This notice of proposed rulemaking (NPRM) 
provides a step-by-step economic guide to show how the pilotage rates 
would be changed. The results of this proposed rulemaking are in 
keeping with the Coast Guard's desire for a fair and efficient pilotage 
system.

Small Entities

    Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we 
considered whether this proposed rule would have a significant economic 
impact on a substantial number of small entities. The term ``small 
entities'' comprises small businesses, not-for-profit organizations 
that are independently owned and operated and are not dominant in their 
fields, and governmental jurisdictions with populations of less than 
50,000.
    For the Great Lakes region, small entities potentially affected by 
this proposed rulemaking include shippers, ports, carriers, and 
shipping agents. The proposed increases in pilotage rates should not 
significantly affect small businesses.
    Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that 
this proposed rule would not have a significant economic impact on a 
substantial number of small entities. If you think that your business, 
organization, or governmental jurisdiction qualifies as a small entity 
and that this rule would have a significant economic impact on it, 
please submit a comment to the Docket Management Facility at the 
address under ADDRESSES. In your comment, explain why you think it 
qualifies and how and to what degree this rule would economically 
affect it.

Assistance for Small Entities

    Under section 213(a) of the Small Business Regulatory Enforcement 
Fairness Act of 1996 (Pub. L. 104-121), we want to assist small 
entities in understanding this proposed rule so that they can better 
evaluate its effects on them and participate in the rulemaking. If the 
rule would affect your small business, organization, or governmental 
jurisdiction and you have questions concerning its provisions or 
options for compliance, please consult Tom Lawler, Chief Economist, 
Great Lakes Pilotage (G-MW-1), U.S. Coast Guard, at 202-267-1241, by 
facsimile 202-267-4700, or by email at [email protected]
    Small businesses may send comments on the actions of Federal 
employees who enforce, or otherwise determine compliance with, Federal 
regulations to the Small Business and Agriculture Regulatory 
Enforcement Ombudsman and the Regional Small Business Regulatory 
Fairness Boards. The Ombudsman evaluates these actions annually and 
rates each agency's responsiveness to small business. If you wish to 
comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR 
(1-888-734-3247).

Collection of Information

    This proposed rule would call for no new collection of information 
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

Federalism

    The Coast Guard has analyzed this proposed rule under the 
principles and criteria in Executive Order 12612 and has determined 
that this proposed rule does not have implications for federalism.

Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) 
requires

[[Page 3213]]

Federal agencies to assess the effects of their regulatory actions not 
specifically required by law. In particular, the Act addresses actions 
that may result in the expenditure by a State, local, or tribal 
government, in the aggregate, or by the private sector of $100,000,000 
or more in any one year. Though this proposed rule would not result in 
such an expenditure, we do discuss the effects of this rule elsewhere 
in this preamble.

Taking of Private Property

    This proposed rule would not effect a taking of private property or 
otherwise have taking implications under Executive Order 12630, 
Governmental Actions and Interference with Constitutionally Protected 
Property Rights.

Civil Justice Reform

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

Protection of Children

    We have analyzed this proposed rule under Executive Order 13045, 
Protection of Children from Environmental Health Risks and Safety 
Risks. This rule is not an economically significant rule and does not 
concern an environmental risk to health or risk to safety that may 
disproportionately affect children.

Indian Tribal Governments

    This proposed rule does not have tribal implications under 
Executive Order 13175, Consultation and Coordination with Indian Tribal 
Governments, because it would not have a substantial direct effect on 
one or more Indian tribes, on the relationship between the Federal 
government and Indian tribes, or on the distribution of power and 
responsibilities between the Federal government and Indian tribes.
    To help the Coast Guard establish regular and meaningful 
consultation and collaboration with Indian and Alaskan Native tribes, 
we published a notice in the Federal Register (66 FR 36361 (July 11, 
2001)) requesting comments on how to best carry out the Order. We 
invite your comments on the impact this rule might have on tribal 
governments, even if that impact may not constitute a ``tribal 
implication'' under the Order.

Energy Effects

    We have analyzed this proposed rule under Executive Order 13211, 
Actions Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use. We have determined that it is not a ``significant 
energy action'' under that order because it is not a ``significant 
regulatory action'' under Executive Order 12866 and is not likely to 
have a significant adverse effect on the supply, distribution, or use 
of energy. It has not been designated by the Administrator of the 
Office of Information and Regulatory Affairs as a significant energy 
action. Therefore, it does not require a Statement of Energy Effects 
under Executive Order 13211.

Environment

    We have considered the environmental impact of this proposed rule 
and concluded that under figure 2-1, paragraph 34 (a), of the 
Commandant Instruction M16475.1D, this rule is categorically excluded 
from further environmental documentation. This rule is procedural in 
nature because it deals exclusively with adjusting pilotage rates for 
the Great Lakes. A
    ``Categorical Exclusion Determination'' is available in the docket 
where indicated under ADDRESSES.

List of Subjects in 46 CFR Part 401

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

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

PART 401--GREAT LAKES PILOTAGE REGULATIONS

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

    Authority: 46 U.S.C. 2104(a), 6101, 7701, 8105, 9303, 9304; 49 
CFR 1.45, 1.46 (mmm), 46 CFR 401.105 also issued the authority of 44 
U.S.C. 3507.

    2. In Sec.  401.405, revise paragraphs (a) and (b), including the 
footnote to Table (a), to read as follows:


Sec.  401.405  Basic rates and charges on the St. Lawrence River and 
Lake Ontario.

* * * * *
    (a) Area 1 (Designated Waters):

------------------------------------------------------------------------
               Service                         St. Lawrence River
------------------------------------------------------------------------
Basic Pilotage.......................  $10 per Kilometer or $17 per
                                        mile.\1\
Each Lock Transited..................  $219.\1\
Harbor Movage........................  $718.\1\
------------------------------------------------------------------------
\1\ The minimum basic rate for assignment of a pilot in the St. Lawrence
  River is $478, and the maximum basic rate for a through trip is
  $2,102.

    (b) Area 2 (Undesignated Waters):

------------------------------------------------------------------------
                                                                  Lake
                           Service                              Ontario
------------------------------------------------------------------------
Six-Hour Period..............................................       $557
Docking or Undocking.........................................        531
------------------------------------------------------------------------

    3. In Sec.  401.407, revise paragraphs (a) and (b), including the 
footnote to Table (b), to read as follows:


Sec.  401.407  Basic rates and charges on Lake Erie and the navigable 
waters from Southeast Shoal to Port Huron, MI.

* * * * *
    (a) Area 4 (Undesignated Waters):

------------------------------------------------------------------------
                                                 Lake Erie
                                                  (East of
                    Service                      Southeast     Buffalo
                                                   Shoal)
------------------------------------------------------------------------
Six-Hour Period...............................         $439         $439
Docking or Undocking..........................          338          338
Any Point on the Niagara River below the Black          N/A          862
 Rock Lock....................................
------------------------------------------------------------------------

    (b) Area 5 (Designated Waters):

[[Page 3214]]



----------------------------------------------------------------------------------------------------------------
                                                               Toledo or
                                                               any Point
                                                                on Lake
               Any point on or in                 Southeast    Erie west     Detroit      Detroit     St. Clair
                                                    Shoal          of         River      Pilot Boat     River
                                                               Southeast
                                                                 Shoal
----------------------------------------------------------------------------------------------------------------
Toledo or any port on Lake Erie west of               $1,156         $682       $1,500       $1,156          N/A
 Southeast Shoal...............................
Port Huron Change Point........................    \1\ 2,012    \1\ 2,332        1,513        1,176          837
St. Clair River................................    \1\ 2,012          N/A        1,513        1,513          682
Detroit or Windsor or the Detroit River........        1,156        1,500          682          N/A        1,513
Detroit Pilot Boat.............................          837        1,156          N/A          N/A       1,513
----------------------------------------------------------------------------------------------------------------
\1\ When pilots are not changed at the Detroit Pilot Boat.

* * * * *
    4. In Sec.  401.410, revise paragraphs (a), (b), and (c) to read as 
follows:


Sec.  401.410  Basic rates and charges on Lakes Huron, Michigan, and 
Superior, and the St. Mary's River.

* * * * *
    (a) Area 6 (Undesignated Waters):

------------------------------------------------------------------------
                                                             Lakes Huron
                          Service                                and
                                                               Michigan
------------------------------------------------------------------------
Six-Hour Period............................................         $336
Docking or Undocking.......................................          319
------------------------------------------------------------------------

    (b) Area 7 (Designated Waters):

------------------------------------------------------------------------
               Area                   Detour      Gros cap    Any harbor
------------------------------------------------------------------------
Gros Cap.........................       $1,479          N/A          N/A
Algoma Steel Corporation Wharf at        1,479         $557          N/A
 Sault Ste. Marie, Ontario.......
Any point in Sault Ste. Marie,           1,240          557          N/A
 Ontario, except the Algoma Steel
 Corporation.....................
Wharf Sault Ste. Marie, MI.......        1,240          557          N/A
Harbor Movage....................          N/A          N/A         $557
------------------------------------------------------------------------

    (c) Area 8 (Undesignated Waters):

------------------------------------------------------------------------
                                                                 Lake
                          Service                              Superior
------------------------------------------------------------------------
Six-Hour Period............................................         $334
Docking or Undocking.......................................          319
------------------------------------------------------------------------

Sec.  401.420  [Amended]

    5. In Sec.  401.420--
    a. In paragraph (a), remove the number ``$53'' and add, in its 
place, the number ``$66''; and remove the number ``$831'' and add, in 
its place, the number ``$1,039''.
    b. In paragraph (b), remove the number ``$53'' and add, in its 
place, the number ``$66''; and remove the number ``$831'' and add, in 
its place, the number ``$1,039''.
    c. In paragraph (c)(1), remove the number ``$314'' and add, in its 
place, the number ``$392''; in paragraph (c)(3), remove the number 
``$53'' and add, in its place, the number ``$66''; and, also in 
paragraph (c)(3), remove the number ``$831'' and add, in its place, the 
number ``$1,039''.


Sec.  401.428  [Amended]

    6. In Sec.  401.428, remove the number ``$321'' and add, in its 
place, the number ``$401''.

    Dated: December 20, 2002.
Paul J. Pluta,
Rear Admiral, Coast Guard, Assistant Commandant for Marine Safety, 
Security and Environmental Protection.
[FR Doc. 03-1461 Filed 1-17-03; 2:01 pm]
BILLING CODE 4910-15-P