[Federal Register Volume 74, Number 2 (Monday, January 5, 2009)]
[Rules and Regulations]
[Pages 220-233]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-31341]


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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

46 CFR Part 401

[Docket No. USCG-2007-0039]
RIN 1625-AB23


2008 Rates for Pilotage on the Great Lakes

AGENCY: Coast Guard, DHS.

ACTION: Final Rule.

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

SUMMARY: The Coast Guard is revising and finalizing the March 2008 
interim rule, which updated rates for pilotage service on the Great 
Lakes by increasing rates an average of 8.17% over the last ratemaking 
that was completed in September 2007. In response to new contract 
provisions and to public comments on our rulemaking, this final rule 
increases rates an additional 9.95%, for a total average increase of 
18.92% since 2007.

DATES: This final rule is effective February 4, 2009.

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-2007-0039 and are available for inspection or 
copying at the Docket Management Facility (M-30), U.S. Department of 
Transportation, West Building Ground Floor, Room W12-140, 1200 New 
Jersey Avenue, SE., Washington, DC 20590, between 9 a.m. and 5 p.m., 
Monday through Friday, except Federal holidays. You may also find this 
docket on the Internet at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: For questions on this final rule, 
please call Mr. Paul Wasserman, Chief, Great Lakes Pilotage Branch, 
Commandant (CG-54122), U.S. Coast Guard, at 202-372-1535, by fax 202-
372-1929, or e-mail [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. Abbreviations
II. Background
III. Discussion of Comments
IV. Discussion of the Final Rule
V. 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
    I. Indian Tribal Governments
    J. Energy Effects
    K. Technical Standards
    L. Environment
VI. Words of Issuance and Proposed Regulatory Text

I. Abbreviations

AMOU American Maritime Officer union
GLPAC Great Lakes Pilotage Advisory Committee
MISLE Coast Guard Marine Inspection, Safety, and Law Enforcement
MOA Memorandum of Agreement
NAICS North American Industry Classification System
NPRM Notice of Proposed Rulemaking
NTTAA National Technology Transfer and Advancement Act
OMB Office of Management and Budget

II. 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 
pilots' 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

[[Page 221]]

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 Appendix A ratemaking used 2002 data and was 
published in the Federal Register on April 3, 2006 (71 FR 16501). A 
2007 Appendix C ratemaking was completed on September 18, 2007 (72 FR 
53158). An Appendix C review of rates for the 2008 season showed a need 
for further adjustment. That adjustment was the subject of a notice of 
proposed rulemaking (NPRM; 73 FR 6085, Feb. 1, 2008) proposing a rate 
increase averaging 8.17% across all three districts. The NPRM also 
proposed to clarify the duty of pilots and pilot associations to 
cooperate with lawful authority. On March 21, 2008, we published an 
interim rule (73 FR 15092) making the 8.17% increase effective 
immediately and requesting additional comments. In addition to the 
public comments received on the NPRM, we invited comments on the 
interim rule.

III. Discussion of Comments

    The Coast Guard received six comments in response to the NPRM and 
one on the interim rule. Two comments on the NPRM were received from 
legal representatives of the pilots' associations; one comment on the 
NPRM and one on the interim rule were received from the Shipping 
Federation of Canada; two comments on the NPRM were received from the 
St. Lawrence Seaway Pilots' Association; and one comment on the NPRM 
was received from the American Pilots' Association. In the interim 
rule, we summarized points made by commenters on the NPRM, but deferred 
full discussion for the final rule.
    All the NPRM and interim rule commenters made points about the 
larger context within which our annual rate rulemaking takes place. 
Collectively, these comments indicated a desire for a comprehensive 
review of Coast Guard ratemaking procedures, to take into account:
     Determination of bridge hours, particularly in light of 
Rear Admiral J. Timothy Riker's bridge hour standards report;
     The pilots' contention that we should base our 
calculations on a 284 day navigation season instead of a nine month 
season;
     Industry interest in pilot efficiency standards against 
which ratemaking adjustments can be measured; and
     Alignment of U.S. and Canadian Great Lakes pilotage rates.

We note these comments which are outside the scope of this rulemaking 
and are actively considering ways to bring about the desired 
comprehensive review. Your ideas on how best to conduct a comprehensive 
review are welcome at any time; they may be addressed to Mr. Paul 
Wasserman whose contact information appears in the FOR FURTHER 
INFORMATION CONTACT section of this preamble. The Coast Guard is 
advised on Great Lakes pilotage matters by the Great Lakes Pilotage 
Advisory Committee (GLPAC), to which suggestions also may be sent. To 
send suggestions, or for further information on GLPAC, contact Mr. John 
Bobb at (202) 372-1532 or at [email protected].
    The commenter on our interim rule asked for a full ratemaking 
pursuant to 46 CFR 404.1(b). We are honoring that request and have 
already begun the next full Appendix A ratemaking. As previously noted, 
our last Appendix A ratemaking used 2002 data and was completed in 
2006. We are now auditing 2007 pilot financial data for the next 
Appendix A ratemaking. Meanwhile, we are also preparing for the 2009 
annual Appendix C review.
    One commenter on the NPRM stated the Coast Guard proposed an 
increase without any demonstration of its need. We disagree and observe 
that the NPRM and interim rule both provided detailed information to 
show how we applied the 46 CFR Part 404, Appendix C ratemaking 
methodology.
    One commenter on the NPRM asked us to post, on the public docket, 
the pilot association financial statements and American Maritime 
Officer union (AMOU) contracts relied upon in this ratemaking. We have 
honored this request and the documents may be viewed on the docket as 
described in the Addresses section of this preamble.
    As we discussed in the interim rule, several commenters on the NPRM 
opposed our proposal to clarify the duty of pilots and pilot 
associations to cooperate with lawful authority, saying the proposal 
needed further justification. We removed the proposed language in the 
interim rule. Given the apparent public interest in this subject, we 
have decided it cannot be treated properly in the context of annual 
ratemakings that need to be completed quickly. If we return to this 
subject in the future, we will fully justify our position and provide 
ample opportunity for public comment.
    Two commenters on the NPRM pointed out that the 49.5 monthly 
multiplier we proposed and used for the interim rule failed to reflect 
the two separate sets of AMOU contracts in use, which in the NPRM were 
referred to as Agreements A and B. We agree and our final rule uses a 
54.5 multiplier for Agreement A contracts and a 49.5 multiplier for 
Agreement B contracts.
    One commenter on the NPRM pointed out that, under both sets of 
Agreements A and B, a 4.57% increase in the daily wage rate and health 
insurance contributions took effect August 1, 2008. We agree and have 
revised the final rule to reflect that change.
    Two commenters on the NPRM said that we overstated bridge hour 
projections for Areas 2, 4, and 5, thereby underestimating the rates 
needed to permit pilots to make target pilot compensation. They pointed 
out that the NPRM (and subsequently the interim rule) stated that 
bridge hours would remain the same as they had been in 2007 and that, 
therefore, we should make projections for 2008 based on the actual 2007 
bridge hours. We agree and have reduced the hour projections for Areas 
2, 4, and 5 to the actual bridge hours for 2007. The Area 2 reduction 
would ordinarily result in a reduction to four pilots, but experience 
has demonstrated the need for at least five pilots in that area.
    Data has shown that as a fifth U.S. pilot begins working in Area 2, 
vessel delays due to awaiting a pilot completing a mandatory rest 
between assignments have decreased from 78 hours during the 2007 
navigation season to five total hours during the 2008 navigation 
season. Whereas when there were only four pilots servicing vessels on 
Lake Ontario in 2005 & 2006 there were 300 hours and 340 hours of delay 
to vessels respectively. There have also been 17 pilot resignations in 
Area 2 over the past 13 years. A significant pilot attrition problem 
exists in Area 2. This is attributed to pilots continually having to 
return to work immediately after completing a mandatory minimum rest 
period. Since putting on a fifth pilot in Area 2, there has not been 
one resignation in the last 2.5 years.
    The additional pilot is necessary both to ensure adequate pilotage 
service and to ensure that the 1977 U.S.-Canadian Memorandum of 
Agreement's (MOA's) 50-50 U.S.-Canadian traffic sharing provision can 
be met. The Canadian pilots cover Area 2 with a total of six

[[Page 222]]

pilots as opposed to 5 U.S. pilots covering the same area. In 2007 50% 
of the U.S. piloted vessels transiting Area 2 go straight through the 
district, pilot boat to pilot boat. Because of distances and normal 
speeds attained by vessels the trip between Cape Vincent and Port 
Weller will typically last no more than two six hour period charges. 
Similarly, in Area 4 58% of U.S. piloted vessel transits going straight 
through District 2 are charged three or more period charges. Therefore, 
there is less revenue generated in Area 2 than in Area 4.
    It should also be noted that the rate increase in Area 2 now very 
closely matches the current Canadian rates for the first time in many 
years. Due to these factors we are refraining from reducing the number 
of pilots on which our calculations are based for Area 2. However, we 
have reduced by one the number of pilots on which our calculations are 
based for Areas 4 and 5, because the District 2 Pilots' Association has 
routinely operated with an average of one less pilot than is authorized 
under the rate and for the last season and a half with two fewer pilots 
than authorized. Accordingly, a reduction of one pilot per area 
reflects actual practice.

IV. Discussion of the Final Rule

A. Pilotage Rate Changes Summarized

    This final rule adjusts pilotage rates in accordance with Appendix 
C of 46 CFR part 404, by increasing rates an average 18.92% over the 
2007 final rule. The increase in Areas 1, 6, 7, and 8 is attributable 
to AMOU contract increases that took effect between August 1, 2006, and 
August 1, 2008, an adjustment to the AMOU contract monthly multiplier 
in the Agreement A contracts, and the use of an updated consumer price 
index. The increases in Areas 2, 4, and 5 reflect the changes referred 
to above and also the public comments discussed in Part III of this 
preamble. We are also making an across-the-board increase, equal to 
18.92% above the 2007 rate, for service interruptions, delays, and 
cancellations, and for boarding or discharging pilots at non-normal 
locations. The new rates are comparable to Canadian rates that took 
effect January 1, 2008. Table 1 summarizes the rate changes since 2007.

                                   Table 1--Summary of Rate Changes Since 2007
----------------------------------------------------------------------------------------------------------------
                                                   2008 IR/     2008 FR                   2008 FR
                                                  2008 NPRM     percent     Total 2008    percent     Total 2008
                                                   percent      increase    FR percent    increase    FR percent
                                                   increase    over 2008     increase    from 2008     increase
                                                  over 2007     IR/2008     over 2007     IR/2008     from 2007
                                                      FR          NPRM          FR          NPRM          FR
----------------------------------------------------------------------------------------------------------------
                                                  Increases effective before August 1,
                                                                  2008
                                                 Increase effective after
                                                      August 2, 2008
----------------------------------------------------------------------------------------------------------------
Area 1.........................................         7.78         2.09        10.03         6.65        14.94
Area 2 *.......................................         8.41        44.18        56.30        50.88        63.57
Area 4 *.......................................         8.50        -5.44         2.61        -1.03         7.39
Area 5.........................................         7.98         9.79        18.55        14.72        23.88
Area 6.........................................         8.37         1.92        10.45         6.65        15.58
Area 7.........................................         7.83         2.09        10.08         6.66        15.01
Area 8.........................................         8.31         1.92        10.38         6.64        15.50
Average Rate Change............................         8.17         5.15        13.72         9.95        18.92
----------------------------------------------------------------------------------------------------------------
* Note: Area 3 is omitted, being entirely in Canadian waters and not under U.S. jurisdiction.

B. Calculating the Rate Adjustment

    The Appendix C to Part 404 ratemaking calculation involves eight 
steps:
    Step 1: Calculate the total economic costs for the base period 
(i.e. pilot compensation expense plus all other recognized expenses 
plus the return element).
    Step 2: Calculate the ``expense multiplier,'' the ratio of other 
expenses and the return element to pilot compensation for the base 
period;
    Step 3: Calculate an annual ``projection of target pilot 
compensation'' using the same procedures found in Step 2 of Appendix A;
    Step 4: Increase the projected pilot compensation in Step 3 by the 
expense multiplier in Step 2;
    Step 5: Adjust the result in Step 4, as required, for inflation or 
deflation;
    Step 6: Divide the result in Step 5 by projected bridge hours to 
determine total unit costs;
    Step 7: Divide prospective unit costs in Step 6 by the base period 
unit costs in Step 1; and
    Step 8: Adjust 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 2007 final rule. The Coast Guard also used the most recent union 
contracts between the AMOU and vessel owners and operators on the Great 
Lakes to determine target pilot compensation. Bridge hour projections 
for the 2008 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. All documents and records used in 
this rate calculation have been placed in the public docket for this 
rulemaking and are available for review at the addresses listed under 
ADDRESSES.
    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: Calculate the total economic cost for the base period. In 
this step, for each Area, we add the total cost of target pilot 
compensation, all other recognized expenses, and the return element 
(net income plus interest). We subtract the return element from the 
base operating expense to show the component parts comprising total 
economic cost used in this calculation. These two expenses are 
eventually recombined as total operating expenses and subsequently 
added to base pilot compensation to yield the total economic cost. The 
subtraction and addition of the return element is for illustrative 
purposes only. It does not change total expenses and, therefore, does 
not affect the total economic cost calculation. The sum of all expenses 
and the return element are added together and divided by total bridge 
hours for each area to arrive at the base cost per bridge hour. Tables 
2 through 4 summarize the Step 1 calculations:

[[Page 223]]



                           Table 2--Total Economic Cost for Base Period, District One
----------------------------------------------------------------------------------------------------------------
                                                                    Area 1 St.      Area 2 Lake   Total District
                                                                  Lawrence River      Ontario           One
----------------------------------------------------------------------------------------------------------------
Base operating expense (less base return element)...............        $431,313        $436,283        $867,596
Base target pilot compensation..................................     +$1,368,253       +$825,760     +$2,194,013
Base return element.............................................         +$8,802        +$13,493        +$22,295
                                                                 -----------------------------------------------
    Subtotal....................................................     =$1,808,368     =$1,275,536     =$3,083,904
Base bridge hours...............................................          /5,661          /7,993         /13,654
Base cost per bridge hour.......................................        =$319.44        =$159.58        =$225.86
----------------------------------------------------------------------------------------------------------------


                           Table 3--Total Economic Cost for Base Period, District Two
----------------------------------------------------------------------------------------------------------------
                                                                                      Area 5
                                                                    Area 4 Lake      Southeast    Total District
                                                                       Erie        Shoal to Port        Two
                                                                                     Huron, MI
----------------------------------------------------------------------------------------------------------------
Base operating expense..........................................        $499,328        $737,052      $1,236,380
Base target pilot compensation..................................       +$825,760     +$1,596,295     +$2,422,055
Base return element.............................................        +$26,280        +$30,711        +$56,991
                                                                 -----------------------------------------------
    Subtotal....................................................     =$1,351,368     =$2,364,058     =$3,715,426
Base bridge hours...............................................          /8,490          /6,395         /14,885
Base cost per bridge hour.......................................        =$159.17        =$369.67        =$249.61
----------------------------------------------------------------------------------------------------------------


                          Table 4--Total Economic Cost for Base Period, District Three
----------------------------------------------------------------------------------------------------------------
                                                   Area 6 Lakes
                                                     Huron and      Area 7 St.      Area 8 Lake   Total District
                                                     Michigan      Mary's River      Superior          Three
----------------------------------------------------------------------------------------------------------------
Base operating expense..........................        $810,612        $319,193        $511,262      $1,641,067
Base target pilot compensation..................     +$1,651,520       +$912,168     +$1,156,064     +$3,719,752
Base return element.............................        +$33,776         +$9,872        +$15,812        +$59,460
                                                 ---------------------------------------------------------------
    Subtotal....................................     =$2,495,908     =$1,241,233     =$1,683,138     =$5,420,279
Base bridge hours...............................         /18,000          /3,863         /11,390         /33,253
Base cost per bridge hour.......................        =$138.66        =$321.50        =$147.77        =$163.00
----------------------------------------------------------------------------------------------------------------

    Step 2. Calculate the expense multiplier. In this step, for each 
Area, we add 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 expense multiplier expresses, 
in percentage form, the relationship pilot compensation bears to all 
other expenses. Tables 5 through 7 show the Step 2 calculations.

                                    Table 5--Expense Multiplier, District One
----------------------------------------------------------------------------------------------------------------
                                                                    Area 1 St.      Area 2 Lake   Total District
                                                                  Lawrence River      Ontario           One
----------------------------------------------------------------------------------------------------------------
Base operating expense..........................................        $431,313        $436,283        $867,596
Base return element.............................................         +$8,802        +$13,493        +$22,295
                                                                 -----------------------------------------------
    Subtotal....................................................       =$440,115       =$449,776       =$889,891
Base target pilot compensation..................................     /$1,368,253       /$825,760     /$2,194,013
Expense multiplier..............................................         =.32166         =.54468         =.40560
----------------------------------------------------------------------------------------------------------------


                                    Table 6--Expense Multiplier, District Two
----------------------------------------------------------------------------------------------------------------
                                                                                      Area 5
                                                                    Area 4 Lake      Southeast    Total District
                                                                       Erie        Shoal to Port        Two
                                                                                     Huron, MI
----------------------------------------------------------------------------------------------------------------
Base operating expense..........................................        $499,328        $737,052      $1,236,380
Base return element.............................................        +$26,280        +$30,711        +$56,991
                                                                 -----------------------------------------------
    Subtotal....................................................       =$525,608       =$767,763     =$1,293,371
Base target pilot compensation..................................       /$825,760     /$1,596,295     /$2,422,055

[[Page 224]]

 
Expense multiplier..............................................         =.63651         =.48097         =.53400
----------------------------------------------------------------------------------------------------------------


                                   Table 7--Expense Multiplier, District Three
----------------------------------------------------------------------------------------------------------------
                                                   Area 6 Lakes
                                                     Huron and      Area 7 St.      Area 8 Lake   Total District
                                                     Michigan      Mary's River      Superior          Three
----------------------------------------------------------------------------------------------------------------
Base operating expense..........................        $810,612        $319,193        $511,262      $1,641,067
Base return element.............................        +$33,776         +$9,872        +$15,812        +$59,460
                                                 ---------------------------------------------------------------
    Subtotal....................................       =$844,388       =$329,065       =$527,074     =$1,701,247
Base target pilot compensation..................     /$1,651,520       /$912,168     /$1,156,064     /$3,719,752
Expense multiplier..............................         =.51128         =.36075         =.45592         =.45716
----------------------------------------------------------------------------------------------------------------

    Step 3. Calculate annual projection of target pilot compensation. 
In this step, which duplicates Step 2 from Appendix A, we determine the 
new target rate of compensation and the new number of pilots needed in 
each pilotage Area, to determine the new target of pilot compensation 
for each Area.
    (a) Determine new target rate of compensation. Target pilot 
compensation for pilots is based on the average annual compensation of 
first mates and masters on U.S. Great Lakes vessels. Compensation 
includes wages and benefits. For pilots in undesignated waters, we 
approximate the first mates' compensation, and, in designated waters, 
we approximate the masters' compensation (first mates' wages multiplied 
by 150% plus benefits). To determine first mates' and masters' average 
annual compensation, we use data from the most recent AMOU contracts 
with the U.S. companies engaged in Great Lakes shipping. Where 
different AMOU agreements apply to different companies, we apportion 
the compensation provided by each agreement according to the percentage 
of tonnage represented by companies under each agreement.
    Our research for the 2007 ratemaking showed six companies operating 
under contract with the AMOU. Three of the six operated under one set 
of agreements and the other three operated under modified agreements. 
Since the 2007 ratemaking, one of the six companies has gone out of 
business, and a second no longer operates under an AMOU contract.
    On August 16, 2007, the Coast Guard received two new sets of 
agreements that updated wage and benefit information for the four 
companies now operating under AMOU contracts. The agreements involved a 
5% wage rate increase effective August 1, 2006, a 3% increase effective 
August 1, 2007, and a 4% increase effective August 1, 2008. Under one 
set of agreements (``Agreement A''), the daily wage rate increased from 
$226.95 to $245.46 effective until July 31, 2008, and to $255.28 
effective August 1, 2008. Similarly, under the other set of agreements 
(``Agreement B''), the daily wage rate was raised from $279.55 to 
$302.33 effective until July 31, 2008, and to $314.42 effective August 
1, 2008.
    To calculate monthly wages, we apply Agreement A and Agreement B 
monthly multipliers of 54.5 and 49.5, respectively, to the daily rate. 
The 54.5 multiplier represents 30.5 average working days, 15.5 vacation 
days, 1.5 additional days of pay per holiday per month, 4 days for four 
weekends, and 3 bonus days. The 49.5 multiplier represents 30.5 average 
working days, 16 vacation days, and 3 bonus days.
    To calculate average annual compensation, we multiply monthly 
figures by nine months, the length of the Great Lakes shipping season.
    Table 8 shows new wage calculations based on Agreements A and B.

                             Table 8--Wages
------------------------------------------------------------------------
                                                             Pilots on
                                             Pilots on      designated
            Monthly component              undesignated       waters
                                              waters       (undesignated
                                                              x 150%)
------------------------------------------------------------------------
AGREEMENT A:
    $255.28 daily rate x 54.5 days......         $13,913         $20,869
AGREEMENT A:
    Monthly total x 9 months = total             125,214         187,821
     wages..............................
AGREEMENT B:
    $314.42 daily rate x 49.5 days......          15,564          23,346
AGREEMENT B:
    Monthly total x 9 months = total             140,076         210,113
     wages..............................
------------------------------------------------------------------------

    Benefits under Agreements A and B include a health contribution 
rate of $73.36 per man-day and a pension plan contribution rate of 
$33.35 per man-day under Agreement A, and $43.55 per man-day under 
Agreement B. The AMOU 401K employer matching rate remained at 5% of the 
wage rate. A clerical contribution included in the 2003 contracts was 
eliminated under both contracts. The multiplier used to calculate 
monthly benefits under Agreements A and B is 45.5 days.

[[Page 225]]



                            Table 9--Benefits
------------------------------------------------------------------------
                                             Pilots on       Pilots on
            Monthly component              undesignated     designated
                                              waters          waters
------------------------------------------------------------------------
AGREEMENT A:
    Employer contribution, 401(K) plan           $695.63       $1,043.45
     (Monthly Wages x 5%)...............
    Pension = $33.35 x 45.5 days........       $1,517.43       $1,517.43
    Health = $73.36 x 45.5 days.........       $3,337.88       $3,337.88
AGREEMENT B:
    Employer contribution, 401(K) plan           $778.20       $1,167.30
     (Monthly Wages x 5%)...............
    Pension = $43.55 x 45.5 days........       $1,981.53       $1,981.53
    Health = $73.36 x 45.5 days.........       $3,337.88       $3,337.88
AGREEMENT A:
    Monthly total benefits..............     = $5,550.94     = $5,898.76
AGREEMENT A:
    Monthly total benefits x 9 months...       = $49,958       = $53,089
AGREEMENT B:
    Monthly total benefits..............     = $6.097.60     = $6,486.70
AGREEMENT B:
    Monthly total benefits x 9 months...       = $54,878       = $58,380
------------------------------------------------------------------------

    Table 10 totals the wages and benefits under each agreement.

         Table 10--Total Wages and Benefits Under Each Agreement
------------------------------------------------------------------------
                                             Pilots on       Pilots on
                                           undesignated     designated
                                              waters          waters
------------------------------------------------------------------------
AGREEMENT A: Wages......................        $125,214        $187,821
AGREEMENT A: Benefits...................        +$49,958         +53,089
AGREEMENT A: Total......................      = $175,173      = $240,913
AGREEMENT B: Wages......................        $140,076        $210,113
AGREEMENT B: Benefits...................        +$54,878        +$58,380
AGREEMENT B: Total......................      = $194,954      = $268,494
------------------------------------------------------------------------

    Table 11 shows that, for the four U.S. Great Lakes shipping 
companies currently operating under AMOU contracts, approximately 29% 
of their total deadweight tonnage belongs to companies operating under 
Agreement A, and approximately 71% belongs to companies operating under 
Agreement B.

                                                     Table 11--Deadweight Tonnage by AMOU Agreement
--------------------------------------------------------------------------------------------------------------------------------------------------------
                 Company                                        Agreement A                                             Agreement B
--------------------------------------------------------------------------------------------------------------------------------------------------------
American Steamship Company..............  ......................................................  664,215.
Mittal Steel USA, Inc...................  ......................................................  96,544.
HMC Ship Management.....................  12,656.                                                 ......................................................
Key Lakes, Inc..........................  303,145.
                                         ---------------------------------------------------------------------------------------------------------------
    Total tonnage, each agreement.......  315,801...............................................  760,759.
Percent tonnage, each agreement.........  315,801 / 1,076,560 = 29.3343%.                         760,759 / 1,076,560 = 70.6657%.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table 12 applies the percentage of tonnage represented by each 
agreement to the wages and benefits provided by each agreement, to 
determine the projected target rate of compensation on a tonnage-
weighted basis.

                                 Table 12--Projected Target Rate of Compensation
----------------------------------------------------------------------------------------------------------------
                                         Undesignated waters                        Designated waters
----------------------------------------------------------------------------------------------------------------
AGREEMENT A:
    Total wages and benefits  $175,173 x 29.3343% = $51,386...........  $240,910 x 29.3343% = $70,669.
     x percent tonnage.
AGREEMENT B:
    Total wages and benefits  $194,954 x 70.6657% = $137,766.           $268,494 x 70.6657% = $189,733.
     x percent tonnage.
    Total weighted average    $51,386 + $137,766 = $189,152...........  $70,669 + $189,733 = $260,402.
     wages and benefits =
     projected target rate
     of compensation.
----------------------------------------------------------------------------------------------------------------


[[Page 226]]

    (b) Determine number of pilots needed. Subject to adjustment by the 
Director of Great Lakes Pilotage to ensure uninterrupted service, we 
determine the number of pilots needed in each Area by dividing each 
Area's projected bridge hours, either by 1,000 (designated waters) or 
by 1,800 (undesignated waters).
    Based on historical data, information provided by pilots and 
industry, and the comments received in response to the NPRM and interim 
rule, the number of bridge hours in Areas 1, 6, 7, and 8 remains 
unchanged from the NPRM and interim rule, and, as previously discussed, 
we are reducing the projected bridge hours in Areas 2, 4, and 5 and 
reducing by one each the number of pilots authorized for Areas 4 and 5.
    Table 13 shows the projected bridge hours needed for each Area, and 
the total number of pilots needed after dividing those figures either 
by 1,000 or 1,800 and rounding up to the next whole pilot:

                                        Table 13--Number of Pilots Needed
----------------------------------------------------------------------------------------------------------------
                                                                                    Divided by
                                                                                       1,000
                                                                                    (designated
                          Pilotage area                           Projected 2008    waters) or     Pilots needed
                                                                   bridge hours        1,800       (total = 42)
                                                                                   (undesignated
                                                                                      waters)
----------------------------------------------------------------------------------------------------------------
Area 1..........................................................           5,661           1,000               6
Area 2..........................................................           5,650           1,800             * 5
Area 4..........................................................           7,320           1,800               4
Area 5..........................................................           5,097           1,000               6
Area 6..........................................................          18,000           1,800              10
Area 7..........................................................           3,863           1,000               4
Area 8..........................................................          11,390           1,800               7
----------------------------------------------------------------------------------------------------------------
* Calculation = 4 pilots; maintaining at 5 pilots to ensure adequate service; see discussion in Part III.

    (c) Determine the projected target pilot compensation for each 
Area. 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 projected target rate of 
compensation for pilots working in that area. Table 14 shows this 
calculation.

                                  Table 14--Projected Target Pilot Compensation
----------------------------------------------------------------------------------------------------------------
                                                                                   Multiplied by     Projected
                          Pilotage area                            Pilots needed  target rate of   target pilot
                                                                   (Total = 42)    compensation    compensation
----------------------------------------------------------------------------------------------------------------
Area 1..........................................................               6      x $260,402      $1,562,413
Area 2..........................................................               5       x 189,152         945,760
                                                                 -----------------------------------------------
    Total, District One.........................................              11  ..............       2,508,173
Area 4..........................................................               4       x 189,152         756,608
Area 5..........................................................               6       x 260,402       1,562,413
                                                                 -----------------------------------------------
    Total, District Two.........................................              10  ..............       2,319,021
Area 6..........................................................              10       x 189,152       1,891,520
Area 7..........................................................               4       x 260,402       1,041,609
Area 8..........................................................               7       x 189,152       1,324,064
                                                                 -----------------------------------------------
    Total, District Three.......................................              21  ..............       4,257,193
----------------------------------------------------------------------------------------------------------------

    Step 4: Increase the projected pilot compensation in Step 3 by the 
expense multiplier in Step 2. This step yields a projected increase in 
operating costs necessary to support the increased projected pilot 
compensation. Table 15 shows this calculation.

 Table 15--Projected Pilot Compensation, Multiplied by the Expense Multiplier Equals Projected Operating Expense
----------------------------------------------------------------------------------------------------------------
                                                                     Projected     Multiplied by     Projected
                          Pilotage area                            target pilot       expense        operating
                                                                   compensation     multiplier        expense
----------------------------------------------------------------------------------------------------------------
Area 1..........................................................      $1,562,413        x .32166      = $502,569
Area 2..........................................................         945,760        x .54468       = 515,138
                                                                 -----------------------------------------------
    Total, District One.........................................       2,508,173        x .40560     = 1,017,314
Area 4..........................................................         756,608        x .63651       = 481,592
Area 5..........................................................       1,562,413        x .48097       = 751,467
                                                                 -----------------------------------------------
    Total, District Two.........................................       2,319,021        x .53400     = 1,238,351
Area 6..........................................................       1,891,520        x .51128       = 967,095

[[Page 227]]

 
Area 7..........................................................       1,041,609        x .36075       = 375,761
Area 8..........................................................       1,324,064        x .45592       = 603,669
                                                                 -----------------------------------------------
    Total, District Three.......................................       4,257,193        x .45716     = 1,946,224
----------------------------------------------------------------------------------------------------------------

    Step 5: Adjust the result in Step 4, as required, for inflation or 
deflation, and calculate projected total economic cost. Based on data 
from the U.S. Department of Labor's Bureau of Labor Statistics, we have 
multiplied the results in Step 4 by a 1.027 inflation factor, 
reflecting an average inflation rate of 2.7% in ``Midwest Economy--
Consumer Prices'' between 2006 and 2007, the latest years for which 
data are available. Table 16 shows this calculation and the projected 
total economic cost.

 Table 16--Projected Operating Expense, Adjusted for Inflation, and Added to Projected Target Pilot Compensation
                                      Equals Projected Total Economic Cost
----------------------------------------------------------------------------------------------------------------
                                                              B. Increase,
                                            A. Projected      multiplied by     C. Projected      D. Projected
              Pilotage area                   operating     inflation factor    Target Pilot     Total Economic
                                               expense        (= A x 1.027)     Compensation      Cost (= B+C)
----------------------------------------------------------------------------------------------------------------
Area 1..................................       $502,568.82       $516,138.18     $1,562,412.77     $2,078,550.94
Area 2..................................        515,137.75        529,046.47        945,760.00      1,474,806.47
                                         -----------------------------------------------------------------------
    Total, District One.................      1,017,314.10      1,044,781.59      2,508,172.77      3,552,954.35
Area 4..................................        481,591.77        494,594.74        756,608.00      1,251,202.74
Area 5..................................        751,466.81        771,756.41      1,562,412.77      2,334,169.18
                                         -----------------------------------------------------------------------
    Total, District Two.................      1,238,350.99      1,271,786.47      2,319,020.77      3,590,807.23
Area 6..................................        967,095.03        993,206.60      1,891,520.00      2,884,726.60
Area 7..................................        375,760.72        385,906.26      1,041,608.51      1,427,514.77
Area 8..................................        603,668.75        619,967.81      1,324,064.00      1,944,031.81
                                         -----------------------------------------------------------------------
    Total, District Three...............         1,946,224      1,998,772.10      4,257,192.51      6,255,964.61
----------------------------------------------------------------------------------------------------------------

    Step 6: Divide the result in Step 5 by projected bridge hours to 
determine total unit costs. Table 17 shows this calculation.

                                    Table 17--Prospective (Total) Unit Costs
----------------------------------------------------------------------------------------------------------------
                                                                                                    Prospective
                                                                   A. Projected    B. Projected    (total) unit
                          Pilotage area                           total economic    2008 bridge      costs (A
                                                                       cost            hours       divided by B)
----------------------------------------------------------------------------------------------------------------
Area 1..........................................................   $2,078,550.94           5,661         $367.17
Area 2..........................................................    1,474,806.47           5,650          261.03
                                                                 -----------------------------------------------
    Total, District One.........................................    3,552,954.35          11,311          314.11
Area 4..........................................................    1,251,202.74           7,320          170.93
Area 5..........................................................    2,334,169.18           5,097          457.95
                                                                 -----------------------------------------------
    Total, District Two.........................................    3,590,807.23          12,417          289.18
Area 6..........................................................    2,884,726.60          18,000          160.26
Area 7..........................................................    1,427,514.77           3,863          369.54
Area 8..........................................................    1,944,031.81          11,390          170.68
                                                                 -----------------------------------------------
    Total, District Three.......................................    6,255,964.61          33,253          188.13
----------------------------------------------------------------------------------------------------------------

    Step 7: Divide prospective unit costs (total unit costs) in Step 6 
by the unit cost in Step 1. Table 18 shows this calculation, which 
expresses the percentage change between the total unit costs and the 
base unit costs. The results for each Area are identical with the 
percentage increases listed in Table 1.

[[Page 228]]



                       Table 18--Percentage Change, Prospective vs. Base Period Unit Costs
----------------------------------------------------------------------------------------------------------------
                                                                                                   C. Percentage
                                                                                                    change from
                                                                                                      base (A
                          Pilotage area                           A. Prospective  B. Base period   divided by B;
                                                                    unit costs      unit costs        result
                                                                                                   expressed as
                                                                                                    percentage)
----------------------------------------------------------------------------------------------------------------
Area 1..........................................................         $367.17         $319.44           14.94
Area 2..........................................................          261.03          159.58           63.57
                                                                 -----------------------------------------------
    Total, District One.........................................          314.11          225.86           39.08
Area 4..........................................................          170.93          159.17            7.39
Area 5..........................................................          457.95          369.67           23.88
                                                                 -----------------------------------------------
    Total, District Two.........................................          289.18          249.61           15.85
Area 6..........................................................          160.26          138.66           15.58
Area 7..........................................................          369.54          321.50           15.01
Area 8..........................................................          170.68          147.77           15.50
                                                                 -----------------------------------------------
    Total, District Three.......................................          188.13          163.00           15.42
----------------------------------------------------------------------------------------------------------------

    Step 8: Adjust the base period rates by the percentage change in 
unit costs in Step 7. The base period rates are the rates set by the 
2007 Final Rule. Table 19 shows this calculation.

                                       Table 19--Base Period Rates Adjusted by Percentage Change in Unit Costs\1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  B. Percentage change in                           D. Adjusted rate  (A
                        Pilotage area                            A. Base period   unit costs (multiplying    C. Increase in base       + C, rounded to
                                                                      rate                factor)               rate  (A x B%)          nearest cent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                            Area 1                                                         14.94 (1.1494)
--------------------------------------------------------------------------------------------------------------------------------------------------------
--Basic pilotage.............................................     $13/km, $23/mi  .......................       $1.94/km, $3.44/mi  $14.94/km, $26.44/mi
--Each lock transited........................................                288  .......................                    43.03                331.03
--Harbor movage..............................................                943  .......................                   140.89              1,083.89
--Minimum basic rate, St. Lawrence River.....................                629  .......................                    93.98                722.98
--Maximum rate, through trip.................................              2,761  .......................                   412.51              3,173.51
--------------------------------------------------------------------------------------------------------------------------------------------------------
                            Area 2                                                         63.57 (1.6357)
--------------------------------------------------------------------------------------------------------------------------------------------------------
--6-hr. period...............................................                477  .......................                   303.23                780.23
--Docking or undocking.......................................                455  .......................                   289.24                744.24
--------------------------------------------------------------------------------------------------------------------------------------------------------
                            Area 4                                                          7.39 (1.0739)
--------------------------------------------------------------------------------------------------------------------------------------------------------
--6 hr. period...............................................                641  .......................                    47.35                688.35
--Docking or undocking.......................................                494  .......................                    36.49                530.49
--Any point on Niagara River below Black Rock Lock...........              1,261  .......................                    93.15              1,354.15
--------------------------------------------------------------------------------------------------------------------------------------------------------
              Area 5 between any point on or in                                            23.88 (1.2388)
--------------------------------------------------------------------------------------------------------------------------------------------------------
--Toledo or any point on Lake Erie W. of Southeast Shoal.....              1,004  .......................                   239.75              1,243.75
--Toledo or any point on Lake Erie W. of Southeast Shoal &                 1,699  .......................                   405.72              2,104.72
 Southeast Shoal.............................................
--Toledo or any point on Lake Erie W. of Southeast Shoal &                 2,206  .......................                   526.79              2,732.79
 Detroit River...............................................
--Toledo or any point on Lake Erie W. of Southeast Shoal &                 1,699  .......................                   405.72              2,104.72
 Detroit Pilot Boat..........................................
--Port Huron Change Point & Southeast Shoal (when pilots are               2,959  .......................                   706.60              3,665.60
 not changed at the Detroit Pilot Boat)......................
--Port Huron Change Point & Toledo or any point on Lake Erie               3,428  .......................                   818.60              4,246.60
 W. of Southeast Shoal (when pilots are not changed at the
 Detroit Pilot Boat).........................................
--Port Huron Change Point & Detroit River....................              2,223  .......................                   530.85              2,753.85
--Port Huron Change Point & Detroit Pilot Boat...............              1,729  .......................                   412.88              2,141.88
--Port Huron Change Point & St. Clair River..................              1,229  .......................                   293.48              1,522.48
--St. Clair River............................................              1,004  .......................                   239.75              1,243.75

[[Page 229]]

 
--St. Clair River & Southeast Shoal (when pilots are not                   2,959  .......................                   706.60              3,665.60
 changed at the Detroit Pilot Boat)..........................
--St. Clair River & Detroit River/Detroit Pilot Boat.........              2,223  .......................                   530.85              2,753.85
--Detroit, Windsor, or Detroit River.........................              1,004  .......................                   239.75              1,243.75
--Detroit, Windsor, or Detroit River & Southeast Shoal.......              1,699  .......................                   405.72              2,104.72
--Detroit, Windsor, or Detroit River & Toledo or any point on              2,206  .......................                   526.79              2,732.79
 Lake Erie W. of Southeast Shoal.............................
--Detroit, Windsor, or Detroit River & St. Clair River.......              2,223  .......................                   530.85              2,753.85
--Detroit Pilot Boat & Southeast Shoal.......................              1,229  .......................                   293.48              1,522.48
--Detroit Pilot Boat & Toledo or any point on Lake Erie W. of              1,699  .......................                   405.72              2,104.72
 Southeast Shoal.............................................
--Detroit Pilot Boat & St. Clair River.......................              2,223  .......................                   530.85              2,753.85
--------------------------------------------------------------------------------------------------------------------------------------------------------
                            Area 6                                                         15.58 (1.1558)
--------------------------------------------------------------------------------------------------------------------------------------------------------
--6 hr. period...............................................                479  .......................                    74.62                553.62
--Docking or undocking.......................................                455  .......................                    70.88                525.88
--------------------------------------------------------------------------------------------------------------------------------------------------------
              Area 7 between any point on or in                                            15.01 (1.1501)
--------------------------------------------------------------------------------------------------------------------------------------------------------
--Gros Cap & De Tour.........................................              1,718  .......................                   257.83              1,975.83
--Algoma Steel Corp. Wharf, Sault Ste. Marie, Ont. & De Tour.              1,718  .......................                   257.83              1,975.83
--Algoma Steel Corp. Wharf, Sault Ste. Marie, Ont. & Gros Cap                647  .......................                    97.10                744.10
--Any point in Sault Ste. Marie, Ont., except the Algoma                   1,440  .......................                   216.11              1,656.11
 Steel Corp. Wharf & De Tour.................................
--Any point in Sault Ste. Marie, Ont., except the Algoma                     647  .......................                    97.10                744.10
 Steel Corp. Wharf & Gros Cap................................
--Sault Ste. Marie, MI & De Tour.............................              1,440  .......................                   216.11              1,656.11
--Sault Ste. Marie, MI & Gros Cap............................                647  .......................                    97.10                744.10
--Harbor movage..............................................                647  .......................                    97.10                744.10
--------------------------------------------------------------------------------------------------------------------------------------------------------
                            Area 8                                                         15.50 (1.1550)
--------------------------------------------------------------------------------------------------------------------------------------------------------
--6 hr. period...............................................                464  .......................                    71.92                535.92
--Docking or undocking.......................................                441  .......................                    68.36                509.36
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ 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)'' are not reflected in this table, but have
  been increased by 18.92% across all areas.

V. 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 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 Part 
I of this preamble 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 2008 
shipping season to generate sufficient revenue to cover allowable 
expenses, target pilot compensation, and returns on investment.
    The Coast Guard is revising and finalizing the March 2008 interim 
rule for pilotage service on the Great Lakes by increasing the rate by 
an average of 18.92% across all three pilotage districts over the last 
ratemaking that was completed in September 2007. A Notice of Proposed 
Rulemaking was published on February 1, 2008 proposing an average 8.17% 
increase over the 2007 Final Rule rates. An Interim Rule was published 
on March 17, 2008 putting the 8.17% increase into effect prior to the 
2008 navigation season. In response to new AMOU contract provisions and 
public comments on our rulemaking, this final rule increases rates an 
additional average 9.95%, for a total average increase of 18.92% since 
2007. Since percentages are not additive, the summation of 8.17% and 
9.95% do not yield 18.92% (see Table 1 for a specific area percentage). 
This increase is the result of changes made in response to industry and 
public comments on the ratemaking process as well as an increase in 
compensation and benefits under the AMOU contract that went into effect 
August 1, 2008.
    These adjustments to Great Lakes pilotage rates meet the 
requirements set forth in 46 CFR part 404 for similar compensation 
levels between Great

[[Page 230]]

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 rule will 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. It is the 
Coast Guard's interpretation 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 
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 updated our estimates of affected vessels for the rule by using 
recent vessel characteristics, documentation, and arrival data. We used 
2006-2007 vessel arrival data from the Coast Guard's Marine Inspection, 
Safety, and Law Enforcement (MISLE) system to estimate the average 
annual number of vessels affected by the rate adjustment to be 208 
vessels that journey 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 more than one distinct stop, docking, loading, and 
unloading at facilities in Great Lakes ports. Of the total trips for 
the 208 vessels, there were approximately 923 annual U.S. port arrivals 
before the vessels left the Great Lakes system, based on 2006-2007 
vessel data from MISLE.
    The cost of the rate adjustment to shippers is estimated from the 
district pilotage revenues. These revenues represent the direct and 
indirect costs that shippers must pay for pilotage services. The Coast 
Guard sets rates so that revenues equal the estimated cost of pilotage.
    We estimate the cost of the revised rate adjustment in this rule to 
be the difference between the total economic costs based on the 2007 
rate adjustment and the total projected economic cost in this final 
rule. Table 20 compares projected economic costs in 2007 and costs of 
the rule to industry by district.

          Table 20--Rate Adjustment Factors and Additional Cost of This Final Rule (Costs Are in $U.S.)
----------------------------------------------------------------------------------------------------------------
              District                   District One       District Two      District Three       Total \1\
----------------------------------------------------------------------------------------------------------------
Total Economic Cost in 2007 (Base             3,083,904          3,715,426          5,420,279         12,219,609
 Period)............................
Final Rate Adjustment \2\...........             1.1521             0.9665             1.1542             1.0965
                                     ---------------------------------------------------------------------------
    Total Projected Economic Cost in          3,552,949          3,590,802          6,255,945         13,399,696
     2008...........................
Additional Revenue Required or Cost             469,045           -124,624            835,666          1,180,087
 of this Rulemaking \3\.............
----------------------------------------------------------------------------------------------------------------
\1\ Some values may not total due to rounding.
\2\ See steps 5 and 7 of the ``Calculating the Rate Adjustment'' section of this final rule for the `Final Rate
  Adjustment' and the `Total Projected Economic Cost in 2008'.
\3\ Additional revenue or cost of this rule = `Total Projected Economic Cost in 2008' -`Total Projected Economic
  Cost in 2007'.

    After applying the revised rate in this final rule, the resulting 
difference between the economic cost in 2007 and the projected economic 
cost in 2008 is the annual cost to shippers from this rule. This figure 
is equivalent to the total additional payments that shippers make for 
pilotage services from the 2008 rate adjustments.
    The annual cost of the revised rate adjustment in this final rule 
to shippers is approximately $1.2 million (non-discounted). The annual 
cost of the additional 9.95% rate adjustment to shippers in this final 
rule is approximately $183,607 (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 face as a result of the rate adjustment in this rule.
    In addition to the annual reviews and possible partial rate 
adjustments, the Coast Guard is required to determine and, if 
necessary, perform a full adjustment of Great Lakes pilotage rates at a 
minimum of once every five years. Due to the frequency of the full rate 
adjustments, we estimated the total cost to shippers of the rate 
adjustments in this final rule over a five-year period instead of a 
ten-year period. The total five-year (2008-2012) present value cost 
estimate of this final rule to shippers is $5.2 million discounted at a 
seven percent discount rate and $5.6 million discounted at a three 
percent discount rate. For the calculation of the total five-year 
present value cost estimate, we chose not to discount first-year costs 
and instead began discounting in the second year, because industry will 
incur costs from this rule during the 2008 Great Lakes shipping season.

A. Small Entities

    Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have 
considered whether this rule will 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.
    Entities affected by this rule are classified under the North 
American Industry Classification System (NAICS) code subsector 483--
Water Transportation, which 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.

[[Page 231]]

    For the final rule, we reviewed recent company size and ownership 
data from 2006-2007 Coast Guard MISLE data and business revenue and 
size data provided by Reference USA and Dunn and Bradstreet. We were 
able to gather revenue and size data or link the entities to large 
shipping conglomerates for 22 of the 24 affected entities in the United 
States. We found that large, mostly foreign-owned, shipping 
conglomerates or their subsidiaries owned or operated all vessels 
engaged in foreign trade on the Great Lakes. We assume that new 
industry entrants will be comparable in ownership and size to these 
shippers.
    There are three U.S. entities affected by the final rule that will 
receive the additional revenues from the 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 described 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 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 rule will not have a significant 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 will 
affect your small business, organization, or governmental jurisdiction 
and you have questions concerning its provisions or options for 
compliance, please call or email Mr. Paul Wasserman whose contact 
information appears under FOR FURTHER INFORMATION CONTACT at the 
beginning of this preamble. 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). The Coast Guard will not 
retaliate against any small entities that question or complain about 
this rule or any policy or action of the Coast Guard.

C. Collection of Information

    This rule will call for no new collection of information under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). This rule does 
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 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 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 Department of Homeland Security 
Management Directive 0023.1 and Commandant Instruction M16475.lD, which 
guide the Coast Guard in complying with the National Environmental 
Policy Act of 1969

[[Page 232]]

(NEPA) (42 U.S.C. 4321-4370f), and have concluded under the Instruction 
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, 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. An 
environmental analysis checklist and a 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.

V. Words of Issuance and Proposed Regulatory Text

0
For the reasons discussed in the preamble, the Coast Guard amends 46 
CFR Part 401 as follows:

PART 401--GREAT LAKES PILOTAGE REGULATIONS

0
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.


0
2. In Sec.  401.405, revise paragraphs (a) and (b) to read as follows:


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

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

------------------------------------------------------------------------
                  Service                        St. Lawrence River
------------------------------------------------------------------------
Basic Pilotage............................  $14.94 per Kilometer or
                                             $26.44 per mile\1\.
Each Lock Transited.......................  $331\1\.
Harbor Movage.............................  $1084\1\.
------------------------------------------------------------------------
\1\ The minimum basic rate for assignment of a pilot in the St. Lawrence
  River is $723, and the maximum basic rate for a through trip is
  $3,174.

    (b) Area 2 (Undesignated Waters):

------------------------------------------------------------------------
                         Service                           Lake Ontario
------------------------------------------------------------------------
Six-Hour Period.........................................            $780
Docking or Undocking....................................             744
------------------------------------------------------------------------


0
3. In Sec.  401.407 revise paragraphs (a) and (b) to read as follows:


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

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

------------------------------------------------------------------------
                                             Lake Erie
                                             (East of
                 Service                     Southeast        Buffalo
                                              Shoal)
------------------------------------------------------------------------
Six-Hour Period.........................            $688            $688
Docking or Undocking....................             531             531
Any Point on the Niagara River below the             N/A           1,354
 Black Rock Lock........................
------------------------------------------------------------------------

    (b) Area 5 (Designated Waters):

----------------------------------------------------------------------------------------------------------------
                                                   Toledo or any
                                                   point on Lake
       Any point on or in            Southeast     Erie west of    Detroit River   Detroit Pilot     St. Clair
                                       Shoal         Southeast                         Boat            River
                                                       Shoal
----------------------------------------------------------------------------------------------------------------
Toledo or any port on Lake Erie           $2,105          $1,244          $2,733          $2,105             N/A
 west of Southeast Shoal........
Port Huron Change Point.........       \1\ 3,665       \1\ 4,247           2,753           2,142          $1,522
St. Clair River.................       \1\ 3,665             N/A           2,753           2,753           1,244
Detroit or Windsor Or the                  2,105           2,732           1,244             N/A           2,753
 Detroit River..................
Detroit Pilot Boat..............           1,522           2,105             N/A             N/A           2,753
----------------------------------------------------------------------------------------------------------------
\1\ When pilots are not changed at the Detroit Pilot Boat.


0
4. In Sec.  401.410, revise paragraphs (a), (b), and (c) to read as 
follows:


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

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

------------------------------------------------------------------------
                                                            Lakes Huron
                         Service                           and Michigan
------------------------------------------------------------------------
Six-Hour Period.........................................            $554
Docking or Undocking....................................             526
------------------------------------------------------------------------

    (b) Area 7 (Designated Waters):

----------------------------------------------------------------------------------------------------------------
                              Area                                    De tour        Gros cap       Any harbor
----------------------------------------------------------------------------------------------------------------
Gros Cap........................................................          $1,976             N/A             N/A
Algoma Steel Corporation Wharf at Sault Ste. Marie Ontario......           1,976            $744             N/A
Any point in Sault Ste. Marie, Ontario, except the Algoma Steel            1,656             744             N/A
 Corporation Wharf..............................................
Sault Ste. Marie, MI............................................           1,656             744             N/A
Harbor Movage...................................................             N/A             N/A            $744
----------------------------------------------------------------------------------------------------------------


[[Page 233]]

    (c) Area 8 (Undesignated Waters):

------------------------------------------------------------------------
                         Service                           Lake Superior
------------------------------------------------------------------------
Six-Hour Period.........................................            $536
Docking or Undocking....................................             509
------------------------------------------------------------------------

Sec.  401.420  [Amended]

0
5. In Sec.  401.420--
0
a. In paragraph (a), remove the number ``$93'' and add, in its place, 
the number ``$102''; and remove the number ``$1,459'' and add, in its 
place, the number ``$1,604''.
0
b. In paragraph (b), remove the number ``$93'' and add, in its place, 
the number ``$102''; and remove the number ``$1,459'' and add, in its 
place, the number ``$1,604''.
0
c. In paragraph (c)(1), remove the number ``$552'' and add, in its 
place, the number ``$606''.
0
d. In paragraph (c)(3), remove the number ``$93'' and add, in its 
place, the number ``$102''; and remove the number ``$1,459'' and add, 
in its place, the number ``$1,604''.


Sec.  401.428  [Amended]

0
6. In Sec.  401.428, remove the number ``$562'' and add, in its place, 
the number ``$618''.

    Dated: December 23, 2008.
Brian M. Salerno,
Rear Admiral, U.S. Coast Guard, Assistant Commandant for Marine Safety, 
Security and Stewardship.
[FR Doc. E8-31341 Filed 1-2-09; 8:45 am]
BILLING CODE 4910-15-P