[Federal Register Volume 71, Number 134 (Thursday, July 13, 2006)]
[Proposed Rules]
[Pages 39629-39642]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-11062]


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

Coast Guard

46 CFR Part 401

[USCG-2006-24414]
RIN 1625-AB05


Rates for Pilotage on the Great Lakes

AGENCY: Coast Guard, DHS.

ACTION: Notice of proposed rulemaking.

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

SUMMARY: The Coast Guard is proposing to update the rates for pilotage 
on the Great Lakes. Based on our review we propose to adjust the 
pilotage rates an average of 6% for the 2006 shipping season to 
generate sufficient revenue to cover allowable expenses, target pilot 
compensation, and returns on investment.

DATES: Comments and related material must reach the Docket Management 
Facility on or before August 14, 2006.

ADDRESSES: To make sure your comments and related material are not 
entered more than once in the docket, please submit them by only one of 
the following means:
    (1) By mail to the Docket Management Facility (USCG-2006-24414), 
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 (Volume 65, Number 70; Pages 
19477-78), or you may visit http://dms.dot.gov.

FOR FURTHER INFORMATION CONTACT: For questions on this proposed rule, 
call Mr. Michael Sakaio, Program Analyst, Office of Great Lakes 
Pilotage, Commandant (G-PWM), U.S. Coast Guard, at 202-372-1538, by fax 
202-372-1929, or by e-mail at [email protected]. For questions on 
viewing or submitting material to the docket, call Renee V. Wright, 
Chief, Dockets, Department of Transportation, telephone 202-493-0402.

Table of Contents

I. Public Participation and Request for Comments
    A. Submitting Comments
    B. Viewing Comments and Documents
    C. Public Meeting
    D. Privacy Act
II. Program History
III. Purpose of the Proposed Rule
    A. Proposed Pilotage Rate Changes--Summarized
    B. Calculating the Rate Adjustment
    Step 1: Calculating the Base Period Total Economic Cost (Cost 
per Bridge Hour by Area for the Base Period)
    Step 2. Calculating the Expense Multiplier
    Step 3. Calculating the new annual ``projection of target pilot 
compensation'' using the same procedures found in Step 2 of Appendix 
A to 46 CFR part 404.
    Step 4: Increase the new total target pilot compensation in Step 
3 by the expense multiplier in Step 2.
    Step 5(a): Adjust the result in Step 4, as required, for 
inflation or deflation.
    Step 5(b): Calculate Projected Total Economic Costs.
    Step 6: Divide the Result in Step 5(b) by Projected Bridge Hours 
to Determine Total Unit Costs (Adjusted Cost per Bridge Hour by 
Area).
    Step 7: Divide prospective unit costs in Step 6 by the base 
period unit costs in Step 1.
    Step 8: Adjust the base period rates by the percentage change in 
unit costs in Step 7.
IV. Regulatory Evaluation
    A. Small Entities
    B. Assistance for Small Entities
    C. Collection of Information
    D. Federalism
    E. Unfunded Mandates Reform Act
    F. Taking of Private Property
    G. Civil Justice Reform
    H. Protection of Children

[[Page 39630]]

    I. Indian Tribal Governments
    J. Energy Effects
    K. Technical Standards
    L. Environment
V. Regulatory Text

SUPPLEMENTARY INFORMATION:

I. Public Participation and Request for Comments

    We encourage you to participate in this rulemaking by submitting 
comments and related materials. All comments received will be posted, 
without change, to http://dms.dot.gov and will include any personal 
information you have provided. We have an agreement with the Department 
of Transportation (DOT) to use the Docket Management Facility. Please 
see DOT's ``Privacy Act'' paragraph below.
    A. Submitting Comments: If you submit a comment, please include 
your name and address, identify the docket number for this rulemaking 
(USCG-2006-24414), 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 electronic means, mail, fax, 
or delivery 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 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 that 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 rule in 
view of them.
    B. Viewing comments and documents: To view comments, as well as 
documents mentioned in this preamble as being available in the docket, 
go to http://dms.dot.gov at any time and conduct a simple search using 
the docket number. You may also visit the Docket Management Facility in 
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.
    C. Public Meeting: We do not plan to hold a public meeting. But you 
may submit a request for one to the Docket Management Facility at the 
address under ADDRESSES explaining why one would be beneficial. If we 
determine that one would aid this rulemaking, we will hold one at a 
time and place announced by a later notice in the Federal Register.
    D. Privacy Act: Anyone can search the electronic form of all 
comments received into any of our dockets by the name of the individual 
submitting the comment (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc.). You may review the 
Department of Transportation's Privacy Act Statement in the Federal 
Register published on April 11, 2000 (65 FR 19477), or you may visit 
http://dms.dot.gov.

II. Program History

    The Great Lakes Pilotage Act of 1960 requires foreign-flag vessels 
and U.S.-flag vessels in foreign trade to use federal Great Lakes 
registered pilots while transiting the St. Lawrence Seaway and the 
Great Lakes system. 46 U.S.C. Chapter 93, Sec. Sec.  9302 and 9308. The 
Coast Guard is responsible for administering this pilotage program, 
which includes setting rates for pilotage service.
    The U.S. waters of the Great Lakes and the St. Lawrence Seaway are 
divided into three pilotage Districts. Pilotage in each District is 
provided by an association certified by the Director of Great Lakes 
Pilotage to operate a pilotage pool. It is important to note that, 
while the Coast Guard sets rates, it does not control the actual 
compensation that pilots receive. This is determined by each of the 
three District associations, which use different compensation 
practices.
    District One, consisting of Areas 1 and 2, includes all U.S. waters 
of the St. Lawrence River and Lake Ontario. District Two, consisting of 
Areas 4 and 5, includes all U.S. waters of Lake Erie, the Detroit 
River, Lake St. Clair, and the St. Clair River. District Three, 
consisting of Areas 6, 7, and 8, includes all U.S. waters of the St. 
Mary's River, Sault Ste. Marie Locks, and Lakes Michigan, Huron, and 
Superior. Area 3 is the Welland Canal, which is serviced exclusively by 
the Canadian Great Lakes Pilotage Authority and, accordingly, is not 
included in the U.S. rate structure. Areas 1, 5, and 7 have been 
designated by Presidential Proclamation, pursuant to the Great Lakes 
Pilotage Act of 1960, to be waters in which pilots must at all times be 
fully engaged in the navigation of vessels in their charge. These 
waters were ``designated'' because they are difficult waters to 
navigate. Areas 2, 4, 6 and 8 have not been so designated because they 
are open bodies of water. Under the Great Lakes Pilotage Act of 1960, 
pilots assigned to vessels in these areas are only required ``to be on 
board and available to direct the navigation of a vessel at the 
discretion of and subject to the customary authority of the master.'' 
46 U.S.C. 9302(a)(1)(A) and (B).
    The Coast Guard pilotage regulations require annual reviews of 
pilotage rates and the creation of a new rate at least once every five 
years, or sooner, if annual reviews show a need. 46 CFR part 404. To 
assist in calculating pilotage rates, the pilotage associations are 
required to submit to the Coast Guard annual financial statements 
prepared by certified public accounting firms. In addition, every fifth 
year, in connection with the mandatory rate adjustment, the Coast Guard 
contracts with an independent accounting firm to conduct a full 
ratemaking by auditing the accounts and records of the pilotage 
associations and by preparing and submitting financial reports relevant 
to the ratemaking process. In those years when a full ratemaking is 
conducted, the Coast Guard generates the pilotage rates using Appendix 
A to 46 CFR part 404. Between the five-year full ratemaking intervals, 
the Coast Guard annually reviews the pilotage rates using Appendix C to 
46 CFR part 404, and adjusts rates when deemed appropriate.
    The last full ratemaking was published in the Federal Register on 
April 3, 2006 (71 FR 16501). In that ratemaking, the Coast Guard 
applied the Appendix A methodology for calculating rates. For this 
annual rate review and adjustment, we are using the methodology 
contained in Appendix C.

III. Purpose of the Proposed Rule

    The authority to establish pilotage rates on the Great Lakes 
derives from 46 U.S.C. 9303(f), which states that: ``[t]he Secretary 
shall prescribe by regulation rates and charges for pilotage services, 
giving consideration to the public interest and the costs of providing 
the services.''
    The pilotage regulations require that pilotage rates be reviewed 
annually. If the annual review shows that pilotage rates are within a 
reasonable range of the base target pilot compensation set in the full 
ratemaking, no adjustment to the rates will be initiated. (Target pilot 
compensation is defined in 46 CFR part 404, Appendix B, and is the 
compensation that pilots are intended to receive for full time 
employment.) However, if the annual review indicates that an adjustment 
is necessary, then the Coast Guard will establish new pilotage rates 
using Sec.  404.10 and either Appendix A or Appendix C of part 404.
    The Appendix C ratemaking methodology is intended for use during 
the years between Appendix A full ratemaking reviews and adjustments. 
This section is a description of the

[[Page 39631]]

analyses performed, and the eight-step methodology followed, in the 
development of the Appendix C adjustment. The first part summarizes the 
rate adjustments proposed in this rule. The second part describes the 
ratemaking process and explains the formulas used in the methodology to 
show how the rate adjustment was actually calculated.

A. Proposed Pilotage Rate Changes--Summarized

    This proposed rule would adjust the rates for Federal pilots on the 
Great Lakes, contained in 46 CFR 401.405, 401.407, and 401.410, in 
accordance with Appendix C of 46 CFR part 404. Using this methodology, 
the rate adjustment would result in an average increase of 6 percent 
across all Districts over the last pilotage rate adjustment.

                         2006 Area Rate Changes
------------------------------------------------------------------------
                                                             Then the
                                                            percentage
           If pilotage service is required in:            increases over
                                                            the current
                                                             rate is:
------------------------------------------------------------------------
Area 1 (Designated waters)..............................            5.44
Area 2 (Undesignated waters)............................            6.30
Area 4 (Undesignated waters)............................            6.39
Area 5 (Designated waters)..............................            5.65
Area 6 (Undesignated waters)............................            6.26
Area 7 (Designated waters)..............................            5.50
Area 8 (Undesignated waters)............................            6.20
------------------------------------------------------------------------

    Rates for ``Cancellation, delay or interruption in rendering 
services (Sec.  401.420)'' and ``Basic rates and charges for carrying a 
U.S. pilot beyond [the] normal change point, or for boarding at other 
than the normal boarding point (Sec.  401.428)'' have been increased by 
6 percent. These changes are the same in every Area.

B. Calculating the Rate Adjustment

    The ratemaking analyses and methodology contained in Appendix C to 
46 CFR part 404 is comprised of eight steps. These steps are:
    1. Calculating the Base Period Total Economic Cost (Cost Per Bridge 
Hour by Area for the Base Period);
    2. Calculating the Expense Multiplier;
    3. Calculating the Annual Projection of Target Pilot Compensation;
    4. Increasing the Projected Pilot Compensation in Step 3 by the 
Expense Multiplier;
    5. Adjusting the Result for Inflation or Deflation;
    6. Dividing the Result in Step 5 by Projected Bridge Hours to 
Determine Total Unit Costs (Adjusted Cost per Bridge Hour by Area);
    7. Dividing Prospective Unit Costs (Total Unit Cost) in Step 6 by 
the Base Period Unit Costs in Step 1; and
    8. Adjusting the Base Period rates by the Percentage Changes in 
Unit Cost in Step 7.
    The base data used to calculate each of the eight steps comes from 
the final rule published in the Federal Register on April 3, 2006 (71 
FR 16501), adjusting pilotage rates on the Great Lakes. 71 FR 16501. 
The Coast Guard also used the most recent union contracts between the 
American Maritime Officers' union (AMO) and vessel owners and operators 
on the Great Lakes to determine target pilot compensation. Bridge hour 
projections for the 2006 season have been obtained from historical 
data, pilots, and industry. Bridge hours are the number of hours a 
pilot is aboard a vessel providing pilotage service.
    Some values may not total exactly due to format rounding for 
presentation in charts and explanations in this section. The rounding 
does not affect the integrity or truncate the real value of all 
calculations in the ratemaking methodology described below.
    Step 1: Calculating the Base Period Total Economic Cost (Cost per 
Bridge Hour by Area for the Base Period).
    The base period numbers used in all calculations are those that 
were set by the final rule published in the Federal Register on April 
3, 2006 (71 FR 16513). The data used for this first step is obtained 
from the tables containing the base operating expense, base target 
pilot compensation, and base return element computations. This first 
step requires that we calculate the total economic cost for the base 
period by taking from these tables, and adding together, the recognized 
expenses, the total cost of target pilot compensation, and the return 
element in each Area. We then take this sum and divide it by the total 
bridge hours used in each Area in setting the base period rates. This 
calculation gives us the cost of providing pilotage service per bridge 
hour by Area for the base period.
    The following tables summarize the Step 1 computations:

                 Table 1.--Base Period Total Economic Cost (Cost Per Bridge Hour)--District One
----------------------------------------------------------------------------------------------------------------
                                                               Area 1  St.      Area 2  Lake     Total--District
                                                             Lawrence River        Ontario             One
----------------------------------------------------------------------------------------------------------------
Base Operating Expenses...................................          $368,186          $372,911          $741,097
Base Target Pilot compensation............................       +$1,207,209         +$725,848        +1,933,057
Base Return Element \1\...................................           +$8,087          +$10,185          +$18,272
                                                           =====================================================
    Subtotal..............................................       =$1,583,482       =$1,108,944       =$2,692,426
                                                           -----------------------------------------------------
Base Bridge Hours.........................................            /6,000            /9,000           /15,000

[[Page 39632]]

 
Base Cost per Bridge Hour.................................          =$263.91          =$123.22          =$179.50
----------------------------------------------------------------------------------------------------------------
\1\ The return element is defined at Appendix B to 46 CFR part 404 as the sum of net income and interest
  expense. The return element can be considered the sum of the return to equity capital (net increase), and the
  return to debt (the interest expense).


                 Table 2.--Base Period Total Economic Cost (Cost Per Bridge Hour)--District Two
----------------------------------------------------------------------------------------------------------------
                                                                                  Area 5--
                                                              Area 4--Lake     Southeast Shoal   Total--District
                                                                  Erie         to Port Huron,          Two
                                                                                     MI
----------------------------------------------------------------------------------------------------------------
Base Operating Expenses...................................          $427,333          $632,117        $1,059,450
Base Target Pilot compensation............................         +$725,848       +$1,408,410       +$2,134,258
Base Return Element.......................................          +$20,354          +$24,275          +$44,629
                                                           -----------------------------------------------------
    Subtotal..............................................       =$1,173,535       =$2,064,802       =$3,238,337
                                                           =====================================================
Base Bridge Hours.........................................            /9,000            /7,000           /16,000
Base Cost per Bridge Hour.................................          =$130.39          =$294.97          =$202.40
----------------------------------------------------------------------------------------------------------------


                Table 3.--Base Period Total Economic Cost (Cost Per Bridge Hour)--District Three
----------------------------------------------------------------------------------------------------------------
                                            Area 6--Lakes
                                              Huron and        Area 7--St.      Area 8--Lake     Total--District
                                              Michigan        Mary's River        Superior            Three
----------------------------------------------------------------------------------------------------------------
Base Operating Expenses.................          $693,924          $271,563          $433,484        $1,398,971
Base Target Pilot compensation..........       +$1,451,696         +$804,806       +$1,016,187       +$3,272,689
Base Return Element.....................          +$25,283           +$9,768          +$15,451          +$50,502
                                         -----------------------------------------------------------------------
    Subtotal............................       =$2,170,903       =$1,086,137       =$1,465,122       =$4,722,162
                                         =======================================================================
Base Bridge Hours.......................           /18,000            /4,000           /12,600           /34,600
Base Cost per Bridge Hour...............          =$120.61          =$271.53          =$116.28          =$136.48
----------------------------------------------------------------------------------------------------------------

    Step 2. Calculating the Expense Multiplier.
    The expense multiplier is the ratio of both the base operating 
expenses and the base return element to the base target pilot 
compensation by Area. This step requires that we add together the base 
operating expense and the base return element. Then we divide the sum 
by the base target pilot compensation to get the expense multiplier for 
each Area. The following tables show the calculations:

                                     1. Expense Multiplier for District One
----------------------------------------------------------------------------------------------------------------
                                                               Area 1--St.      Area 2--Lake     Total--District
                                                             Lawrence River        Ontario             One
----------------------------------------------------------------------------------------------------------------
Base Operating Expense....................................          $368,186          $372,911          $741,097
Base Return Element.......................................           +$8,087          +$10,185          +$18,272
                                                           -----------------------------------------------------
    Subtotal..............................................         =$376,273         =$383,096         =$759,369
                                                           =====================================================
Base Target Pilot Compensation............................       /$1,207,209         /$725,848       /$1,933,057
Expense Multiplier........................................           =.31169           =.52779           =.39283
----------------------------------------------------------------------------------------------------------------


                                     2. Expense Multiplier for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                  Area 5--
                                                              Area 4--Lake     Southeast Shoal   Total--District
                                                                  Erie         to Port Huron,          Two
                                                                                     MI
----------------------------------------------------------------------------------------------------------------
Base Operating Expense....................................          $427,333          $632,117        $1,059,450
Base Return Element.......................................          +$20,354          +$24,275          +$44,629
                                                           -----------------------------------------------------
    Subtotal..............................................         =$447,687         =$656,392       =$1,104,079
                                                           =====================================================
Base Target Pilot Compensation............................         /$725,848       /$1,408,410       /$2,134,258

[[Page 39633]]

 
Expense Multiplier........................................           =.61678           =.46605           =.51731
----------------------------------------------------------------------------------------------------------------


                                     3. Expense Multiplier for District Three
----------------------------------------------------------------------------------------------------------------
                                            Area 6--Lakes
                                              Huron and        Area 7--St.      Area 8--Lake     Total--District
                                              Michigan        Mary's River        Superior            Three
----------------------------------------------------------------------------------------------------------------
Base Operating Expense..................          $693,924          $271,563          $433,484        $1,398,971
Base Return Element.....................          +$25,283           +$9,768          +$15,451          +$50,502
                                         -----------------------------------------------------------------------
    Subtotal............................         =$719,207         =$281,331         =$448,935       =$1,449,473
                                         =======================================================================
Base Target Pilot Compensation..........       /$1,451,696         /$804,806       /$1,016,187       /$3,272,689
Expense Multiplier......................           =.49543           =.34956           =.44178           =.44290
----------------------------------------------------------------------------------------------------------------

    Step 3. Calculating the new annual ``projection of target pilot 
compensation'' using the same procedures found in Step 2 of Appendix A 
to 46 CFR part 404.
    Step 2 of Appendix A requires the Director of Great Lakes Pilotage 
to:
    1. Determine the new target rate of compensation;
    2. Determine the new number of pilots needed in each pilotage Area; 
and
    3. Multiply new target compensation by the new number of pilots 
needed to project total new target pilot compensation needed in each 
Area.
    Each step is detailed as follows:
1. Determination of New Target Pilot Compensation
    Target pilot compensation for pilots providing services in 
undesignated waters approximates the average annual compensation for 
first mates on U.S. Great Lakes vessels. For this notice of proposed 
rulemaking (NPRM), the average annual compensation for first mates is 
determined based on the AMO union contract effective August 1, 2005, 
for wages and benefits received by first mates.
    Target pilot compensation for pilots providing services in 
designated waters approximates the average annual compensation for 
masters on U.S. Great Lakes vessels. It is calculated as 150 percent of 
the compensation earned by first mates on U.S. Great Lakes vessels. The 
Office of Great Lakes Pilotage has consistently calculated this by 
first multiplying the first mates' salary by 150 percent and then 
adding benefits, since this is the best approximation of the average 
annual compensation for masters.
    The following tables (7, 8, and 9) summarize how target pilot 
compensation is determined for undesignated and designated waters:

                                                 Table 7.--Wages
----------------------------------------------------------------------------------------------------------------
                                                                                (First mate)
                                                                                  pilots on     (Master)  pilots
                              Monthly component                                 undesignated     on  designated
                                                                                   waters            waters
----------------------------------------------------------------------------------------------------------------
$226.96 (Daily Rate) x 54 (Days)............................................           $12,256               N/A
                                                                             -----------------------------------
    Monthly Total x 9 Months = Total Wages..................................          $110,303               N/A
                                                                             ===================================
Wages: $226.96 (Daily Rate) x 54 x 1.5......................................               N/A           $18,384
                                                                             -----------------------------------
    Monthly Total x 9 Months = Total Wages..................................               N/A          $165,454
----------------------------------------------------------------------------------------------------------------


                                               Table 8.--Benefits
----------------------------------------------------------------------------------------------------------------
                                                                               (First mate)
                                                                                pilots on       (Master)  pilots
                             Monthly component                                 undesignated      on  designated
                                                                                  waters             waters
----------------------------------------------------------------------------------------------------------------
Employer Contribution--401(K) Plan........................................            $612.79            $919.19
Clerical..................................................................           +$340.44           +$340.44
Health....................................................................         +$2,512.51         +$2,512.51
Pension...................................................................         +$1,283.10         +$1,283.10
                                                                           -------------------------------------
    Monthly Total Benefits................................................         =$4,748.84         =$5,055.24
                                                                           =====================================
    Monthly Total Benefits x 9 months.....................................           =$42,740           =$45,497
----------------------------------------------------------------------------------------------------------------


[[Page 39634]]


                                          Table 9.--Wages and Benefits
----------------------------------------------------------------------------------------------------------------
                                                                               (First mate)
                                                                                pilots on       (Master)  pilots
                                                                               undesignated      on designated
                                                                                  waters             waters
----------------------------------------------------------------------------------------------------------------
Wages.....................................................................           $110,303           $165,454
Benefits..................................................................           +$42,740           +$45,497
                                                                           -------------------------------------
    Total Wages Plus Benefits.............................................          =$153,042          =$210,951
----------------------------------------------------------------------------------------------------------------

    The monthly component for wages is derived by multiplying the daily 
rate of pay by 54 days, instead of 30 days, based upon the following 
formulation obtained from the AMO union contract:
    a. Average Working Days per month--30.5
    b. Vacation Days per month--15.0
    c. Weekend days per month--4.0
    d. Holidays per month--1.5
    e. Bonus per month--3.0
    Monthly Multiplier--54.0
    Additionally, we use a nine-month multiplier in computing annual 
wages and benefits because the season is nine months in duration vice 
12 months.
    Effective August 1, 2002, the matching benefit increased to 50 
percent for each participating 401(k) employee up to a maximum of 5 
percent of a participating employee's compensation. For purposes of 
this benefit, the AMO union contracts interpret ``employee 
compensation'' to mean base wages. 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 401(k) matching benefit provision under the AMO union contracts, 
pilot compensation for Districts Two and Three are increased. The 
increase in undesignated waters is $5,515.20 and for designated waters 
is $8,272.80 per pilot. These increases are 5 percent of compensation, 
respectively.
    District One does not administer any form of 401(k) or retirement 
plan. At the recommendation of the independent accountant, the Coast 
Guard has determined that the District One Association pilots should 
receive the same employer matching benefits as Districts Two and Three.
    Accordingly, the compensation base of District One is adjusted to 
include an amount equivalent to an employer's contribution under the 
AMO 401(k) matching plan, which increases pilot compensation in 
undesignated waters by $5,515.20 and for designated waters by $8,272.80 
per pilot.
2. Determination of New Number of Pilots Needed
    The number of pilots needed in each Area of designated waters is 
established by dividing the projected bridge hours for that Area by 
1,000. Bridge hours are the number of hours a pilot is aboard a vessel 
providing pilotage service. The number of pilots needed in each Area of 
undesignated waters is established by dividing the projected bridge 
hours for that Area by 1,800. These hours are the target number of 
bridge hours a pilot needs to earn target pilot compensation.
    Projected bridge hours are based on the vessel traffic that pilots 
are expected to serve. The Coast Guard projects that traffic for the 
2006 navigation season will remain the same as it did in 2005. As 
indicated, these projections were made based upon historical data, and 
all other relevant information provided by pilots and industry. 
Dividing the projected annual number of bridge hours per Area by the 
target number of bridge hours per pilot results in the number of pilots 
that will be needed in each Area to service vessel traffic.
    The following table, ``Number of Pilots Needed,'' shows the 
calculation of the number of pilots needed in each Area for the 2006 
navigation season rounded to the next whole pilot:

                                             Number of Pilots Needed
----------------------------------------------------------------------------------------------------------------
                                                                                 Divided by
                       Pilotage area                         Projected 2006      bridge-hour      Pilots needed
                                                              bridge hours         target
----------------------------------------------------------------------------------------------------------------
AREA 1....................................................             6,000             1,000                 6
AREA 2....................................................             9,000             1,800                 5
AREA 4....................................................             9,000             1,800                 5
AREA 5....................................................             7,000             1,000                 7
AREA 6....................................................            18,000             1,800                10
AREA 7....................................................             4,000             1,000                 4
AREA 8....................................................            12,600             1,800                 7
                                                           -----------------------------------------------------
    Total Pilots Needed...................................  ................  ................                44
----------------------------------------------------------------------------------------------------------------

3. Projection of New Total Target Pilot Compensation
    The projection of new total target pilot compensation is determined 
separately for each pilotage Area by multiplying the number of pilots 
needed in each Area by the target pilot compensation for pilots working 
in that Area.
    The results for each pilotage Area are set out as follows:

[[Page 39635]]



                                                  District One
----------------------------------------------------------------------------------------------------------------
                                                            Area 1--St.        Area 2--Lake     Total--District
                                                           Lawrence River        Ontario              One
----------------------------------------------------------------------------------------------------------------
Projection of target pilot compensation................        $1,265,708           $765,212         $2,030,920
----------------------------------------------------------------------------------------------------------------


                                                  District Two
----------------------------------------------------------------------------------------------------------------
                                                                            Area 5--Southeast
                                                         Area 4--Lake Erie    Shoal to Port     Total--District
                                                                                Huron, MI             Two
----------------------------------------------------------------------------------------------------------------
Projection of target pilot compensation................          $765,212         $1,476,660         $2,241,872
----------------------------------------------------------------------------------------------------------------


                                                 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                  $1,530,424           $843,805         $1,071,297         $3,445,526
 compensation.......................
----------------------------------------------------------------------------------------------------------------

    Step 4: Increase the new total target pilot compensation in Step 3 
by the expense multiplier in Step 2.
    The increase in Step 4 refers to the proportional increase of 
operating expense when new total target pilot compensation is 
multiplied by the expense multiplier. The calculations for Step 4 
appear as follows:

                                                  District One
----------------------------------------------------------------------------------------------------------------
                                                               Area 1--St.      Area 2--Lake     Total--District
                                                             Lawrence River        Ontario             One
----------------------------------------------------------------------------------------------------------------
Pilot Compensation........................................        $1,265,708          $765,212        $2,030,920
Expense Multiplier........................................           x.31169           x.52779           x.39283
Projected Increase in Operating Expense...................         =$394,506         =$403,872         =$797,813
----------------------------------------------------------------------------------------------------------------


                                                  District Two
----------------------------------------------------------------------------------------------------------------
                                                                                  Area 5--
                                                              Area 4--Lake     Southeast Shoal   Total--District
                                                                  Erie         to Port Huron,          Two
                                                                                     MI
----------------------------------------------------------------------------------------------------------------
Pilot Compensation........................................          $765,212        $1,476,660        $2,241,872
Expense Multiplier........................................           x.61678           x.46605           x.51731
Projected increase in Operating Expense...................         =$471,966         =$688,200       =$1,159,749
----------------------------------------------------------------------------------------------------------------


                                                 District Three
----------------------------------------------------------------------------------------------------------------
                                            Area 6--Lakes
                                              Huron and        Area 7--St.      Area 8--Lake     Total--District
                                              Michigan        Mary's River        Superior            Three
----------------------------------------------------------------------------------------------------------------
Pilot Compensation......................        $1,530,424          $843,805        $1,071,297        $3,445,526
Expense Multiplier......................           x.49543           x.34956           x.44178           x.44290
Projected Increase in Operating Expense.         =$758,211         =$294,964         =$473,282       =$1,526,023
----------------------------------------------------------------------------------------------------------------

    Step 5(a): Adjust the result in Step 4, as required, for inflation 
or deflation.
    The calculations for Step 5(a) appear below. Inflation rates were 
obtained from the U.S. Department of Labor, Bureau of Labor Statistics, 
``Midwest Economy--Consumer Prices,'' using the years 2003 to 2004 
annual average in the amount of 2.4 percent per year.

                                                  District One
----------------------------------------------------------------------------------------------------------------
                                                               Area 1--St.      Area 2--Lake     Total--District
                                                             Lawrence River        Ontario             One
----------------------------------------------------------------------------------------------------------------
Projected Increase in Operating Expense...................          $394,506          $403,872          $797,813
Inflation Rate............................................            x1.024            x1.024            x1.024

[[Page 39636]]

 
Adjusted Projected Increase in Operating Expense..........         =$403,974         =$413,565         =$816,961
----------------------------------------------------------------------------------------------------------------


                                                  District Two
----------------------------------------------------------------------------------------------------------------
                                                                                  Area 5--
                                                              Area 4--Lake     Southeast Shoal   Total--District
                                                                  Erie         to Port Huron,          Two
                                                                                     MI
----------------------------------------------------------------------------------------------------------------
Projected Increase in Operating Expense...................          $471,966          $688,200        $1,159,749
Inflation Rate............................................            x1.024            x1.024            x1.024
Adjusted Projected Increase in Operating Expense..........         =$483,293         =$704,717       =$1,187,583
----------------------------------------------------------------------------------------------------------------


                                                 District Three
----------------------------------------------------------------------------------------------------------------
                                            Area 6--Lakes
                                              Huron and        Area 7--St.      Area 8--Lake     Total--District
                                              Michigan        Mary's River        Superior            Three
----------------------------------------------------------------------------------------------------------------
Projected Increase in Operating Expense.          $758,211          $294,964          $473,282        $1,526,023
Inflation Rate..........................            x1.024            x1.024            x1.024           X 1.024
Adjusted Projected Increase in Operating         =$776,408         =$302,043         =$484,641       =$1,562,648
 Expense................................
----------------------------------------------------------------------------------------------------------------

    Step 5(b): Calculate Projected Total Economic Costs.
    After the inflation adjustments are made to the Operating Expenses 
in Step 5(a), the adjusted amount (Adjusted Projected Increase in 
Operating Expense) is added to the New Total Target Pilot Compensation, 
as determined in Step 3, to arrive at a Projected Total Economic Cost. 
The Total Economic Cost is necessary in order to determine the Total 
Unit Cost in Step 6. The calculations for Step 5(b) appear as follows:

                                                  District One
----------------------------------------------------------------------------------------------------------------
                                                               Area 1--St.      Area 2--Lake     Total--District
                                                             Lawrence River        Ontario             One
----------------------------------------------------------------------------------------------------------------
Adjusted Projected Increase in Operating Expense..........          $403,974          $413,565          $816,961
Projected Target Pilot Compensation.......................       +$1,265,708         +$765,212       +$2,030,920
Projected Total Economic Cost.............................       =$1,669,683       =$1,178,777       =$2,847,881
----------------------------------------------------------------------------------------------------------------


                                                  District Two
----------------------------------------------------------------------------------------------------------------
                                                                                  Area 5--
                                                              Area 4--Lake     Southeast Shoal   Total--District
                                                                  Erie         to Port Huron,          Two
                                                                                     MI
----------------------------------------------------------------------------------------------------------------
Adjusted Projected Increase in Operating Expense..........          $483,293          $704,717        $1,187,583
Projected Target Pilot Compensation.......................         +$765,212       +$1,476,660       +$2,241,872
Projected Total Economic Cost.............................       =$1,248,505       =$2,181,376       =$3,429,454
----------------------------------------------------------------------------------------------------------------


                                                 District Three
----------------------------------------------------------------------------------------------------------------
                                            Area 6--Lakes
                                              Huron and        Area 7--St.      Area 8--Lake     Total--District
                                              Michigan        Mary's River        Superior            Three
----------------------------------------------------------------------------------------------------------------
Adjusted Projected Increase in Operating          $766,408          $302,043          $484,641        $1,562,648
 Expense................................
Projected Target Pilot Compensation.....       +$1,530,424         +$843,805       +$1,071,297       +$3,445,526
Projected Total Economic Cost...........       =$2,306,832       =$1,145,848       =$1,555,937       =$5,008,174
----------------------------------------------------------------------------------------------------------------

    Step 6: Divide the Result in Step 5(b) by Projected Bridge Hours to 
Determine Total Unit Costs (Adjusted Cost per Bridge Hour by Area).

[[Page 39637]]



                                                  District One
----------------------------------------------------------------------------------------------------------------
                                                               Area 1--St.      Area 2--Lake     Total--District
                                                             Lawrence River        Ontario             One
----------------------------------------------------------------------------------------------------------------
Projected Total Economic Costs............................        $1,669,683        $1,178,777        $2,847,881
Projected Bridge Hours....................................            /6,000            /9,000           /15,000
Total Unit Costs..........................................          =$278.28          =$130.98          =$189.86
----------------------------------------------------------------------------------------------------------------


                                                  District Two
----------------------------------------------------------------------------------------------------------------
                                                                                  Area 5--
                                                              Area 4--Lake     Southeast Shoal   Total--District
                                                                  Erie         to Port Huron,          Two
                                                                                     MI
----------------------------------------------------------------------------------------------------------------
Projected Total Economic Costs............................        $1,248,505        $2,181,376        $3,429,454
Projected Bridge Hours....................................            /9,000            /7,000           /16,000
Total Unit Costs..........................................          =$138.72          =$311.63          =$214.34
----------------------------------------------------------------------------------------------------------------


                                                 District Three
----------------------------------------------------------------------------------------------------------------
                                            Area 6--Lakes
                                              Huron and        Area 7--St.      Area 8--Lake     Total--District
                                              Michigan        Mary's River        Superior            Three
----------------------------------------------------------------------------------------------------------------
Projected Total Economic Costs..........        $2,306,832        $1,145,848        $1,555,937        $5,008,174
Projected Bridge Hours..................           /18,000            /4,000           /12,600           /34,600
Total Unit Costs........................          =$128.16          =$286.46          =$123.49          =$144.74
----------------------------------------------------------------------------------------------------------------

    Step 7: Divide prospective unit costs in Step 6 by the base period 
unit costs in Step 1.
    (This step calculates the percent change in unit cost from the base 
period to the prospective unit cost.)

                                                  District One
----------------------------------------------------------------------------------------------------------------
                                                               Area 1--St.      Area 2--Lake     Total--District
                                                             Lawrence River        Ontario             One
----------------------------------------------------------------------------------------------------------------
Prospective Unit Cost (Total Unit Cost)...................           $278.28           $130.98           $189.86
Base Period Unit Cost.....................................          /$263.91          /$123.22          /$179.50
Percentage Change in Unit Cost (Rate Adjustment)..........           =1.0544           =1.0630           =1.0577
----------------------------------------------------------------------------------------------------------------


                                                  District Two
----------------------------------------------------------------------------------------------------------------
                                                                                  Area 5--
                                                              Area 4--Lake     Southeast Shoal   Total--District
                                                                  Erie         to Port Huron,          Two
                                                                                     MI
----------------------------------------------------------------------------------------------------------------
Prospective Unit Cost (Total Unit Cost)...................           $138.72           $311.63           $214.34
Base Period Unit Cost.....................................          /$130.39          /$294.97          /$202.40
Percentage Change in Unit Cost (Rate Adjustment)..........           =1.0639           =1.0565           =1.0590
----------------------------------------------------------------------------------------------------------------


                                                 District Three
----------------------------------------------------------------------------------------------------------------
                                            Area 6--Lakes
                                              Huron and        Area 7--St.      Area 8--Lake     Total--District
                                              Michigan        Mary's River        Superior            Three
----------------------------------------------------------------------------------------------------------------
Prospective Unit Cost (Total Unit Cost).           $128.16           $286.46           $123.49           $144.74
Base Period Unit Cost...................          /$120.61          /$271.53          /$116.28          /$136.48
Percentage Change in Unit Cost (Rate               =1.0626           =1.0550           =1.0620           =1.0606
 Adjustment)............................
----------------------------------------------------------------------------------------------------------------

    Step 8: Adjust the base period rates by the percentage change in 
unit costs in Step 7.
    The ``Percentage Change in Unit Cost'' in Step 7 represents the 
percentage change or rate adjustment that will be applied to existing 
base period rates and charges in subpart D of 46 CFR part 401. For 
instance, in Area 1, the Percentage Change in Unit Cost of 1.0544 
represents a 5.44 percent rate adjustment over the existing Area 1 
rate. The rate adjustments are summarized by Areas in the following 
table. The actual adjustments are shown in the proposed amendments to 
regulatory text that follow this preamble. Each of the area rates 
listed in part 401 has been

[[Page 39638]]

adjusted according to this table. Results are rounded to nearest whole 
dollar.

                         2006 Area Rate Changes
------------------------------------------------------------------------
                                                             Then the
                                                            percentage
           If pilotage service is required in:            increases over
                                                            the current
                                                             rate is:
------------------------------------------------------------------------
Area 1 (Designated waters)..............................            5.44
Area 2 (Undesignated waters)............................            6.30
Area 4 (Undesignated waters)............................            6.39
Area 5 (Designated waters)..............................            5.65
Area 6 (Undesignated waters)............................            6.26
Area 7 (Designated waters)..............................            5.50
Area 8 (Undesignated waters)............................            6.20
------------------------------------------------------------------------

IV. Regulatory Evaluation

    Executive Order 12866, ``Regulatory Planning and Review,'' 58 FR 
51735, October 4, 1993, requires a determination whether a regulatory 
action is ``significant'' and therefore subject to review by the Office 
of Management and Budget (OMB) and subject to the requirements of the 
Executive Order. This rulemaking is not significant under Executive 
Order 12866 and has not been reviewed by OMB.
    The Coast Guard is required to conduct an annual review of pilotage 
rates on the Great Lakes and, if necessary, adjust these rates to align 
compensation levels between Great Lakes pilots and industry. (See the 
``Purpose of the Proposed Rule'' section for a detailed explanation of 
the legal authority and requirements for the Coast Guard to conduct an 
annual review and provide possible adjustments of pilotage rates on the 
Great Lakes.) Based on our review, we are adjusting the pilotage rates 
for the 2006 shipping season to generate sufficient revenue to cover 
allowable expenses, target pilot compensation, and returns on 
investment.
    This proposed rule would provide an additional six percent average 
rate adjustment for the Great Lakes system over the rate adjustment 
found in the 2005 final rule. This proposed increase is the result of 
adjustments for inflation, target pilot compensation, and operating 
expenses of the pilot associations.
    These adjustments to Great Lakes pilotage rates meet the 
requirements set forth in 46 CFR part 404 for similar compensation 
levels between Great Lakes pilots and industry. They also include 
adjustments for inflation and changes in association expenses to 
maintain these compensation levels.
    The increase in pilotage rates will be an additional cost for 
shippers to transit the Great Lakes system. This proposed rule would 
result in a distributional effect that transfers payments (income) from 
vessel owners and operators to the Great Lakes' pilot associations 
through Coast Guard regulated pilotage rates.
    The shippers affected by these rate adjustments are those owners 
and operators of domestic vessels operating on register (employed in 
the foreign trade) and owners and operators of foreign vessels on a 
route within the Great Lakes system. These owners and operators must 
have pilots or pilotage service as required by 46 U.S.C. 9302. There is 
no minimum tonnage limit or exemption for these vessels. However, the 
Coast Guard issued a policy position several years ago stating that the 
statute applies only to commercial vessels and not to recreational 
vessels.
    Owners and operators of other vessels that are not affected by this 
proposed rule, such as recreational boats and vessels only operating 
within the Great Lakes system, may elect to purchase pilotage services. 
However, this election is voluntary and does not affect the Coast 
Guard's calculation of the rate increase and is not a part of our 
estimated national cost to shippers.
    We reviewed a sample of pilot source forms, which are the forms 
used to record pilotage transactions on vessels, and discovered very 
few cases of U.S. Great Lakes vessels (i.e., domestic vessels without 
registry operating only in the Great Lakes) that purchased pilotage 
services. There was one case where the vessel operator purchased 
pilotage service in District One to presumably leave the Great Lakes 
system. We assume some vessel owners and operators may also choose to 
purchase pilotage services if their vessels are carrying hazardous 
substances or were navigating the Great Lakes system with inexperienced 
personnel. Based on information from the Coast Guard Office of Great 
Lakes Pilotage, we have determined that these vessels voluntarily chose 
to use pilots and, therefore, are exempt from pilotage requirements.
    We used 2003 arrival data from the Coast Guard's National Vessel 
Movement Center (NVMC) to estimate the annual number of vessels 
affected by the rate adjustment to be 214 vessels that, for some, make 
several journeys or trips into the Great Lakes system. These vessels 
entered the Great Lakes by transiting through or in part of at least 
one of the three pilotage Districts before leaving the Great Lakes 
system. These vessels often make several distinct stops docking, 
offloading, and onloading at facilities in Great Lakes ports. Of the 
total trips for the 214 vessels, there were approximately 1,090 U.S. 
port arrivals before the vessels left the Great Lakes system, based on 
2003 vessel arrival data from the NVMC.
    We used district pilotage revenues from the independent 
accountant's reports of the Districts' financial statements to estimate 
the additional cost to shippers of the rate adjustments in this 
proposed rule. These revenues represent the direct and indirect 
pilotage costs that shippers must pay for pilotage services in order to 
transit their vessels in the Great Lakes. Table 1 shows historical 
pilotage revenues by District.

                                       Table 1.--District Revenues ($U.S.)
----------------------------------------------------------------------------------------------------------------
                  Year                      District One      District Two     District Three         Total
----------------------------------------------------------------------------------------------------------------
1998....................................         2,127,577         3,202,374         4,026,802         9,356,753

[[Page 39639]]

 
1999....................................         2,009,180         2,727,688         3,599,993         8,336,861
2000....................................         1,890,779         2,947,798         4,036,354         8,874,931
2001....................................         1,676,578         2,375,779         3,657,756         7,710,113
2002....................................         1,686,655         2,089,348         3,460,560        7,236,563
----------------------------------------------------------------------------------------------------------------
Source: Annual independent accountant's reports of the Districts to the Coast Guard's Office of Great Lake
  Pilotage.

    While the revenues have decreased over time, the Coast Guard 
adjusts pilotage rates to achieve a target pilot compensation similar 
to masters and first mates working on U.S. vessels engaged in the Great 
Lakes trade.
    We estimate the additional cost of the rate adjustment in this 
proposed rule to be the difference between the total adjusted revenue 
based on the 2005 rate adjustment and the proposed rate adjustment 
(change) revenue in this proposed rule. These revenue values and 
adjustments are described and calculated in the ``Calculating the Rate 
Adjustment'' section of this rulemaking. The projected revenue uses the 
2002 revenues in Table 1 adjusted for the 2005 final rule and the 
proposed adjustments for inflation, wages, and 401(k) contributions 
from this proposed rule. Table 2 compares projected and adjusted 
revenues and costs of the proposed rule to industry by district.

          Table 2.--Revenues, Rate Adjustment Factors and Additional Cost of the Rulemaking ($U.S.) \1\
----------------------------------------------------------------------------------------------------------------
                District                    District One      District Two     District Three       Total \2\
----------------------------------------------------------------------------------------------------------------
Base Revenue \1\........................         1,686,655         2,089,348         3,460,560         7,236,563
                                         -----------------------------------------------------------------------
    Total Adjusted Revenue \3\..........         2,643,732         3,125,036         4,722,162        10,490,930
                                         =======================================================================
Proposed Rate Change \4\................            1.0577             1.059            1.0606            1.0594
Revenue Needed \5\......................         2,796,275         3,309,413         5,008,325        11,114,013
Additional Revenue or Cost of this                 152,543           184,377           286,163          623,083
 Rulemaking \6\.........................
----------------------------------------------------------------------------------------------------------------
\1\ Base revenue is from the 2002 base accounting year data.
\2\ Some values may not total due to rounding.
\3\ Total adjusted revenue = `2002 base revenue' + `2005 final rule rate adjustment revenue'.
\4\ See step 7 of the ``Calculating the Rate Adjustment'' section of this proposed rule. We used the districts'
  percent change in unit costs for the rate change.
\5\ Revenue needed = `total adjusted revenue' x `proposed rate change'.
\6\ Additional revenue or cost of this proposed rule = `revenue needed'--`total adjusted revenue'.

    After applying the rate change in this proposed rule, the resulting 
difference between the revenue projected and the revenue needed is the 
annual cost for the affected population of this proposed rule. This 
figure will be equivalent to the total additional payments that 
shippers will make for pilotage services from this proposed rule.
    The annual cost of the rate adjustment in this proposed rule to 
shippers is approximately $623,083 (non-discounted). To calculate an 
exact cost per vessel is difficult because of the variation in vessel 
types, routes, port arrivals, commodity carriage, time of season, 
conditions during navigation, and preferences for the extent of 
pilotage services on designated and undesignated portions of the Great 
Lakes system. Some owners and operators will pay more and some will pay 
less depending on the distance and port arrivals of their vessels' 
trips. However, the annual cost reported above does capture all of the 
additional cost the shippers would face as a result of the rate 
adjustment in this proposed rule.
    We estimated the total cost to shippers of the rate adjustments in 
this proposed rule over a five-year period, because the Coast Guard is 
required to determine and, if necessary, adjust Great Lakes pilotage 
rates at a minimum of at least once every five years from the 2005 rate 
adjustment. However, the Coast Guard does evaluate and analyze the 
Great Lakes pilotage rates every year, regardless of whether an 
adjustment is needed or not. The total five-year (2006-2010) present 
value cost estimate of this rulemaking to shippers is $2.7 million 
discounted at a seven percent discount rate and $2.9 million discounted 
at a three percent discount rate.
    The cost to shippers of this proposed rule is minimal compared with 
the travel cost shippers save when they use the Great Lakes system. The 
alternative to Great Lakes waterborne transportation is to choose 
coastal delivery, such as East Coast and Gulf Coast ports that are more 
expensive, and extra-modal transportation overland, which is far less 
practical and has additional transportation costs for all commodity 
groups. See Coast Guard docket number USCG-2006-24414 for an assessment 
of alternatives to Great Lakes waterborne transportation and the 
associated costs entitled ``Analysis of Great Lakes Pilotage Costs on 
Great Lakes Shipping and the Potential Impact of Pilotage Rate 
Increases'' (October 1, 2004).

A. Small Entities

    Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have 
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.
    In 2003, most vessels engaged in foreign trade on the Great Lakes 
were large foreign-owned shipping conglomerates. There were two U.S. 
companies that were operating vessels engaged in foreign trade in the 
Great Lakes system that would be affected by the rate adjustments in 
this proposed rule and pay additional costs for pilotage services. 
However, these two companies are subsidiaries of large foreign parent 
entities. The North American Industry Classification

[[Page 39640]]

System (NAICS) code subsector for these shippers is 483--Water 
Transportation, and includes one or all of the following 6-digit NAICS 
codes for freight transportation: 483111--Deep Sea Freight 
Transportation, 483113--Coastal and Great Lakes Freight Transportation, 
and 483211--Inland Water Freight Transportation. According to the Small 
Business Administration's definition, a U.S. company with these NAICS 
codes and employing less than 500 employees is considered a small 
entity. These large foreign-owned shippers do not qualify as small 
entities because their number of employees exceeds 500. We assume that 
new industry entrants will be comparable in size to these shippers with 
a large enough employee base and the financial resources to support 
long international trade routes and, thus, will not be small 
businesses.
    There are three U.S. entities that are affected by the proposed 
rule that will receive the additional revenues from the proposed rate 
adjustment. These are the three pilot associations that are the only 
entities providing pilotage services within the Great Lakes districts. 
Two of the associations operate as partnerships and one operates as a 
corporation. These associations are classified with the same NAICS 
industry classification and small entity size standards as the U.S. 
shippers above, but they have far fewer than 500 employees: 
approximately 65 total employees combined. However, they are not 
adversely impacted with the additional costs of the proposed rate 
adjustments, but instead receive the additional revenue benefits for 
operating expenses and pilot compensation.
    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 U.S. 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.

B. Assistance for Small Entities

    Under section 213(a) of the Small Business Regulatory Enforcement 
Fairness Act of 1996 (Pub. L. 104-121), we offered to assist small 
entities in understanding the proposed rule so that they could 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 call Paul Wasserman, Director, Office of 
Great Lakes Pilotage, (G-PWM-2), U.S. Coast Guard, telephone 202-372-
1535 or send him e-mail 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).

C. Collection of Information

    Under the Paperwork Reduction Act (44 U.S.C. 3501-3520), the Office 
of Management and Budget (OMB) reviews each proposed rule that contains 
a collection of information requirement to determine whether the 
practical value of the information is worth the burden imposed by its 
collection. Collection of information requirements include reporting, 
record keeping, notification, and other similar requirements.
    This proposed rule would call for no new collection of information 
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). This 
proposed rule would not change the burden in the collection currently 
approved by the Office of Management and Budget (OMB) under OMB Control 
Number 1625-0086, Great Lakes Pilotage Methodology.

D. Federalism

    A rule has implications for federalism under Executive Order 13132, 
Federalism, if it has a substantial direct effect on State or local 
governments and would either preempt State law or impose a substantial 
direct cost of compliance on them. We have analyzed this proposed rule 
under that Order and have determined that it does not have implications 
for federalism because there are no similar State regulations, and the 
States do not have the authority to regulate and adjust rates for 
pilotage services in the Great Lakes system.

E. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) 
requires Federal agencies to assess the effects of their discretionary 
regulatory actions. In particular, the Act addresses actions that may 
result in the expenditure by a State, local, or tribal government, in 
the aggregate, or by the private sector of $100,000,000 or more in any 
one year. Though this proposed rule would not result in such 
expenditure, we do discuss the effects of this rule elsewhere in this 
preamble.

F. 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.

G. 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.

H. 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 
create an environmental risk to health or risk to safety that may 
disproportionately affect children.

I. Indian Tribal Governments

    This proposed rule does not have tribal implications under 
Executive Order 13175, Consultation and Coordination with Indian Tribal 
Governments, because it does 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.

J. 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. The Administrator of the Office of Information and 
Regulatory Affairs has not designated it as a significant energy 
action. Therefore, it does not require a Statement of Energy Effects 
under Executive Order 13211.

[[Page 39641]]

K. Technical Standards

    The National Technology Transfer and Advancement Act (NTTAA) (15 
U.S.C. 272 note) directs agencies to use voluntary consensus standards 
in their regulatory activities unless the agency provides Congress, 
through the Office of Management and Budget, with an explanation of why 
using these standards would be inconsistent with applicable law or 
otherwise impractical. Voluntary consensus standards are technical 
standards (e.g., specifications of materials, performance, design, or 
operation; test methods; sampling procedures; and related management 
systems practices) that are developed or adopted by voluntary consensus 
standards bodies. This proposed rule does not use technical standards. 
Therefore, we did not consider the use of voluntary consensus 
standards.

L. Environment

    We have analyzed this proposed rule under Commandant Instruction 
M16475.lD and Department of Homeland Security Management Directive 
5100.1, which guide the Coast Guard in complying with the National 
Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and 
have made a preliminary determination that there are no factors in this 
case that would limit the use of a categorical exclusion under section 
2.B.2 of the Instruction. Therefore, we believe that this rule should 
be categorically excluded, under figure 2-1, paragraph (34)(a), of the 
Instruction, from further environmental documentation. Paragraph 34(a) 
pertains to minor regulatory changes that are editorial or procedural 
in nature. This NPRM proposes rate adjustments in accordance with 
applicable statutory and regulatory mandates. A preliminary 
``Environmental Analysis Check List'' is available in the docket where 
indicated under the ``Public Participation and Request for Comments'' 
section of this preamble. Comments on this section will be considered 
before we make the final decision on whether this rule should be 
categorically excluded from further environmental review.

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; 
Department of Homeland Security Delegation No. 0170.1 46 CFR 401.105 
also issued under 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.

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

------------------------------------------------------------------------
              Service                         St. Lawrence River
------------------------------------------------------------------------
Basic Pilotage.....................  \1\ $12 per Kilometer or $20 per
                                      mile.
Each Lock Transited................  \1\ 251.
Harbor Movage......................  \1\ 821.
------------------------------------------------------------------------
\1\ The minimum basic rate for assignment of a pilot in the St. Lawrence
  River is $548, and the maximum basic rate for a through trip is
  $2,405.

    (b) Area 2 (Undesignated Waters):

------------------------------------------------------------------------
                       Service                           Lake Ontario
------------------------------------------------------------------------
Six-Hour Period.....................................                $391
Docking or Undocking................................                 373
------------------------------------------------------------------------

    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 Shoal)         Buffalo
------------------------------------------------------------------------
Six-Hour Period.................                $559                $559
Docking or Undocking............                 431                 431
Any Point on the Niagara River                   N/A               1,099
 below the Black Rock Lock......
------------------------------------------------------------------------

    (b) Area 5 (Designated Waters):

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Toledo or any
                                                                                    Point on Lake                       Detroit Pilot
                      Any point on or in                         Southeast Shoal    Erie west of      Detroit River         Boat         St. Clair River
                                                                                   Southeast Shoal
--------------------------------------------------------------------------------------------------------------------------------------------------------
Toledo or any port on Lake Erie west of Southeast Shoal.......            $1,433              $846            $1,859            $1,433               N/A
Port Huron Change Point.......................................         \1\ 2,494         \1\ 2,890             1,874             1,458             1,036
 St. Clair River..............................................         \1\ 2,494               N/A             1,874             1,874               846
Detroit or Windsor Or the Detroit River.......................             1,433             1,859               846               N/A             1,874

[[Page 39642]]

 
Detroit Pilot Boat............................................             1,036             1,433               N/A               N/A            1,874
--------------------------------------------------------------------------------------------------------------------------------------------------------
\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 and
                       Service                             Michigan
------------------------------------------------------------------------
Six-Hour Period.....................................                $443
Docking or Undocking................................                 421
------------------------------------------------------------------------

    (b) Area 7 (Designated Waters):

------------------------------------------------------------------------
                                                                  Any
                Area                    De Tour    Gros Cap     Harbor
------------------------------------------------------------------------
Gros Cap............................      $1,532         N/A         N/A
Algoma Steel Corporation Wharf at          1,532         577         N/A
 Sault Ste. Marie Ontario...........
Any point in Sault Ste. Marie,             1,284         577         N/A
 Ontario, except the Algoma Steel
 Corporation Wharf..................
Sault Ste. Marie, MI................       1,284         577         N/A
Harbor Movage.......................         N/A         N/A         577
------------------------------------------------------------------------

    (c) Area 8 (Undesignated Waters):

------------------------------------------------------------------------
                       Service                           Lake Superior
------------------------------------------------------------------------
Six-Hour Period.....................................                $388
Docking or Undocking................................                 369
------------------------------------------------------------------------

Sec.  401.420  [Amended]

    5. In Sec.  401.420--
    a. In paragraph (a), remove the number ``$70'' and add, in its 
place, the number ``$74''; and remove the number ``$1,100'' and add, in 
its place, the number ``$1,166''.
    b. In paragraph (b), remove the number ``$70'' and add, in its 
place, the number ``$74''; and remove the number ``$1,100'' and add, in 
its place, the number ``$1,166''.
    c. In paragraph (c)(1), remove the number ``$416'' and add, in its 
place, the number ``$441''; in paragraph (c)(3), remove the number 
``$70'' and add, in its place, the number ``$74''; and, also in 
paragraph (c)(3), remove the number ``$1,100'' and add, in its place, 
the number ``$1,166''.


Sec.  401.428  [Amended]

    6. In Sec.  401.428, remove the number ``$424'' and add, in its 
place, the number ``$449''.

    Dated: May 30, 2006.
C.E. Bone,
Rear Admiral, U.S. Coast Guard, Assistant Commandant for Prevention.
[FR Doc. E6-11062 Filed 7-12-06; 8:45 am]
BILLING CODE 4910-15-P