[Federal Register Volume 72, Number 180 (Tuesday, September 18, 2007)]
[Rules and Regulations]
[Pages 53158-53161]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-18306]


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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: Final rule.

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SUMMARY: The Coast Guard is finalizing the February 2007 interim rule, 
which updated rates for pilotage service on the Great Lakes by 
increasing rates an average of 22.62% across all three pilotage 
districts over the last ratemaking that was completed in April 2006. 
Annual reviews of pilotage rates are required by law to ensure that 
sufficient revenues are generated to cover the annual projected 
allowable expenses, target pilot compensation, and returns on 
investment of the pilot associations.

DATES: This final rule is effective October 18, 2007.

ADDRESSES: Comments and material received from the public, as well as 
documents mentioned in this preamble as being available in the docket, 
are part of docket USCG-2006-24414 and are available for inspection or 
copying at the Docket Management Facility, U.S. Department of 
Transportation, West Building Ground Floor, Room W12-140, 1200 New 
Jersey Avenue SE., 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.

FOR FURTHER INFORMATION CONTACT: For questions on this final rule, 
please call Mr. Michael Sakaio, Program Analyst, Office of Great Lakes 
Pilotage, Commandant (CG-3PWM), U.S. Coast Guard, at 202-372-1538, by 
fax 202-372-1929, or by email 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.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
II. Discussion of Comments and Changes
III. Discussion of the Final Rule
IV. Regulatory Evaluation

I. Background

    The Great Lakes Pilotage Act of 1960, codified in Title 46, Chapter 
93, of the United States Code (U.S.C.), 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. 9302, 9308. The Coast Guard is 
responsible for administering this pilotage program, which includes 
setting rates for pilotage service. 46 U.S.C. 9303.
    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. 46 
U.S.C. 9303(f) requires these reviews and, where deemed appropriate, 
that adjustments be established by March 1 of every shipping season.
    To assist in calculating pilotage rates, the three Great Lakes 
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 full ratemaking, the 
Coast Guard contracts with an independent accounting firm to conduct 
audits of the accounts and records of the pilotage associations and to 
submit financial reports relevant to the ratemaking process. In those 
years when a full ratemaking is conducted, the Coast Guard generates 
the pilotage rates using Appendix A to 46 CFR Part 404. Between the 
five-year full ratemaking intervals, the Coast Guard annually reviews 
the pilotage rates using Appendix C to 46 CFR Part 404, and adjusts 
rates as appropriate.
    The last full ratemaking was published in the Federal Register on 
April 3, 2006 (71 FR 16501). The first annual review following the 2006 
ratemaking showed a need to adjust rates for the 2007 Great Lakes 
shipping season. That adjustment was the subject of a Notice of 
Proposed Rulemaking (``NPRM,'' 71 FR 39629, Jul. 13, 2006), followed by 
an Interim Rule (72 FR 8115, Feb. 23, 2007; corrected at 72 FR 13352, 
Mar. 21, 2007) which took effect March 26, 2007. In addition to the 
public comments, we received on the NPRM, we invited comments on the 
interim rule.

II. Discussion of Comments

    The Coast Guard received three comments in response to the interim 
rule. One comment was received from the legal representative of the 
pilot associations; one comment was received from the legal 
representative for the Shipping Federation of Canada; and one comment 
was received from the Saint Lawrence Seaway Pilots Association.

[[Page 53159]]

    A. Comments Not Requiring Full Discussion. Several comments raised 
issues that have either been fully addressed by the Coast Guard in the 
interim rule or in preceding rulemakings, or which are not relevant to 
the current rulemaking. These issues include the Coast Guard's pending 
action on Rear Admiral J. Timothy Riker's bridge hour standards report; 
whether delay and detention should be included in calculating bridge 
hours; the use of actual versus rounded bridge hours in projecting 
compensation; and whether the Coast Guard is correct in calculating 
pilot compensation by multiplying mates' wages by 150% and then adding 
benefits, as opposed to multiplying mates' wages and benefits by 150%. 
On this last point, one commenter took issue with our statement, in the 
interim rule, that in 2003 the District Court for the District of 
Columbia upheld our method of applying the 150% multiplier. This 
commenter remarked that a court ruling on this issue today might reach 
a different result in light of the ``quantitative proof'' that the 
Coast Guard's method is less successful than the commenter's preferred 
method in producing the outcome intended by Congress. We disagree. No 
such ``quantitative proof '' data has been submitted to the docket for 
this rulemaking. Moreover, despite this commenter's statements to the 
contrary, we have fully and consistently explained the rationale for 
our method, most recently in the interim rule at 72 FR 8117.
    Finally, comments concerning surcharges are not relevant to this 
rulemaking inasmuch as no surcharges have been taken into consideration 
in establishing the current rate. In the 2006 ratemaking, we 
incorporated all surcharges that were determined reasonable and 
necessary for the provision of pilotage service into each pilot 
association's expense base, and terminated any further surcharges. No 
surcharges are currently authorized by the Coast Guard to be charged by 
the pilot associations and no future surcharges are contemplated. 
Persons interested in the Coast Guard's treatment of surcharges are 
referred to the 2006 ratemaking's final rule (71 FR 16501, Apr. 3, 
2006).
    B. Union Contracts. One of the comments stated that the Coast Guard 
should consider using other union contracts, besides the American 
Maritime Officers' (AMO) union contracts, in determining target pilot 
compensation. It mentioned two other maritime labor unions, the Marine 
Engineers' Beneficial Association (MEBA) and the National Organization 
of Masters, Mates, and Pilots of North America (MMP). The comment 
further stated that ``the Coast Guard has historically limited its 
review to AMO union contracts. However, the regulations require a 
review of all union contracts.''
    We agree that the Coast Guard, since the implementation of the 
Great Lakes Ratemaking Methodology in 1996, has consistently used the 
AMO union contracts in its computation of target pilot compensation. We 
disagree that the regulations require a review of all union contracts. 
46 CFR part 404, Appendix A, states only that ``the average annual 
compensation for first mates is determined based on the most current 
union contracts.'' The Coast Guard has interpreted this language to 
mean contracts most representative of first mates sailing on laker 
vessels in the Great Lakes. We disagree with the commenter that MEBA 
and MMP contracts should be included in our computation of rates. 
Research leading to the publication of the interim rule shows that AMO 
union contracts represent 62% of all laker tonnage compared to non-AMO 
union contracts, which represent approximately 38% of the tonnage. We 
do not know the exact percentage of laker tonnage represented by MEBA 
or MMP. But even with their presence, or any other union's presence, 
the majority of the tonnage (62%) is represented by the AMO union 
contracts.
    Another commenter stated that the Coast Guard should use ``only the 
most lucrative union contract in calculating target pilot 
compensation.'' We disagree. As previously discussed, 46 CFR part 404, 
Appendix A, requires that the Coast Guard review ``the most current 
contracts'' in computing target pilot compensation and that is what we 
have done. Placing undue emphasis on a single ``most lucrative'' 
contract would inappropriately inflate compensation projections.
    C. Magnitude of Rate Increase. One comment stated the Coast Guard, 
by raising ``pilotage rates 22.62% ... over the last rulemaking 
completed approximately one year ago, and just under 50% since 2005'' 
had, by that fact alone, ``breached its obligation to maintain a fair 
and efficient pilotage system and adhere to the statutory requirement 
to ensure that rates accurately reflect the costs of providing pilotage 
services under the Great Lakes Pilotage Act.'' The Coast Guard 
disagrees. 46 U.S.C. 9303(f) states that the ``Secretary shall 
prescribe by regulation rates and charges for pilotage services, giving 
consideration to the public interest and the costs of providing the 
services.'' 46 CFR Part 404, Appendices A and C, set out two 
methodologies, which were themselves the product of public rulemaking, 
creating fair and impartial formulas for establishing those rates and 
charges for pilot services. The Coast Guard has meticulously adhered to 
these methodologies in the creation of the rates referred to by the 
commenter.
    This same commenter states that by switching to unrounded bridge 
hour projections in the interim rule, vice the rounded bridge hour 
projections used in the NPRM, rates actually increased by 7.2%, 
overall, instead of the 3% claimed by the Coast Guard. We disagree. As 
we stated in the preamble to the interim rule, this correction 
increased the rate by 3%. The remaining percentage increases are 
attributable to a 14.7% increase in wages and benefits under the most 
recent AMO union contracts, a 5% increase in projected traffic, and .5% 
to non-wage inflation.
    D. Petition for Full Review. One commenter petitioned the Coast 
Guard to perform a full review of pilotage rates, to include an 
independent audit of each pilot association's expense records and 
accounts pursuant to 46 CFR 404.1(b). That section requires that the 
Coast Guard perform such a review and audit at least once every five 
years. The last time the Coast Guard conducted such an audit was 
following the 2002 navigation season. Accordingly, the Coast Guard 
will, in the ordinary course, and consistent with the commenter's 
request, conduct a five year review and audit at the completion of the 
2007 navigation season.

III. Discussion of the Final Rule

    This final rule finalizes the interim rule's rates that Federal 
Great Lakes Registered Pilots may charge for the provision of pilotage 
services. Because this final rule changes none of the calculations or 
rates contained in the interim rule, we will not repeat the rate 
calculations or the regulatory evaluation contained in that document 
(72 IR 8115, Feb. 23, 2007).

IV. Regulatory Evaluation

    This rule is not a ``significant regulatory action'' under section 
3(f) of Executive Order 12866, Regulatory Planning and Review, 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.
    The interim rule published in February 2007 is unchanged for this 
final rule. The cost and population data

[[Page 53160]]

contained in the interim analysis is also unchanged for this final 
rule. In addition, there were no comments on the evaluation of the 
interim rule published in February 2007. Consequently, we adopt the 
analysis from the interim rule, available in the preamble of the 
interim rule, for this final rule. This rule makes final the 22.62 
percent average rate adjustment for the Great Lakes system over the 
rate adjustment found in the 2006 final rule. The annual cost of the 
rate adjustment in this rule to shippers is approximately $2.3 million 
(non-discounted). The total five-year present value cost estimate 
(2007-2011) of this rule to shippers is $10.2 million discounted at a 
seven percent discount rate and $11.0 million discounted at a three 
percent discount rate. We use a five-year cost estimate because the 
Coast Guard is required to determine and, if necessary, perform a full 
adjustment of Great Lakes pilotage rates every five years.

A. Small Entities

    Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have 
considered whether this rule has 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.
    The analysis of the impact to small entities in the interim rule 
resulted in no small entities affected by this rule. Since we received 
no comments pertaining to small entities and the analysis has not 
changed, we adopt the interim analysis for this final rule. Therefore, 
the Coast Guard certifies under 5 U.S.C. 605(b) that this rule does not 
have a significant economic impact on a substantial number of U.S. 
small entities.

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 rule so that they could better evaluate 
its effects on them and participate in the rulemaking. If the rule 
affects your small business, organization, or governmental jurisdiction 
and you have questions concerning its provisions or options for 
compliance, please call Mike Sakaio, Office of Great Lakes Pilotage, 
(CG-3PWM-2), U.S. Coast Guard, telephone 202-372-1538, 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 of 1995, (44 U.S.C. 3501-3520), 
the Office of Management and Budget (OMB) reviews each 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 rule calls for no new collection of information under the 
Paperwork Reduction Act. This rule does not change the burden in the 
collection currently approved by the Office of Management and Budget 
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 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 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 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 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 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 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 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.

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

[[Page 53161]]

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 rule does not use technical 
standards. Therefore, we did not consider the use of voluntary 
consensus standards.

L. Environment

    We have analyzed this 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). 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, this rule is 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 
rule adjusts rates in accordance with applicable statutory and 
regulatory mandates. A final ``Environmental Analysis Check List'' and 
a final ``Categorical Exclusion Determination'' are 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.

0
For the reasons set forth in the preamble, the Coast Guard adopts as 
final without change the interim rule published at 72 FR 8115, February 
23, 2007.

    Dated: September 10, 2007.
J.G. Lantz,
Acting Assistant Commandant for Prevention, U.S. Coast Guard.
[FR Doc. E7-18306 Filed 9-17-07; 8:45 am]
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