Federal Register, Volume 86 Issue 175 (Tuesday, September 14, 2021)

[Federal Register Volume 86, Number 175 (Tuesday, September 14, 2021)]
[Proposed Rules]
[Pages 51047-51081]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-19570]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

46 CFR Parts 401 and 404

[USCG-2021-0431]
RIN 1625-AC70

Great Lakes Pilotage Rates--2022 Annual Review and Revisions to
Methodology

AGENCY: Coast Guard, DHS.

ACTION: Notice of proposed rulemaking; request for comments.

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SUMMARY: In accordance with the statutory provisions enacted by the
Great Lakes Pilotage Act of 1960, the Coast Guard is proposing new base
pilotage rates for the 2022 shipping season. This proposed rule would
adjust the pilotage rates to account for changes in district operating
expenses, an increase in the number of pilots, and anticipated
inflation. In addition, this proposed rule would make a policy change
to always round up in the staffing model. The Coast Guard is also
proposing methodology changes to factor in an apprentice pilot's
compensation benchmark for the estimated number of apprentice pilots
with a limited registration. The Coast Guard estimates that this
proposed rule would result in a 12-percent increase in pilotage
operating costs compared to the 2021 season.

DATES: Comments and related material must be received by the Coast
Guard on or before October 14, 2021.

ADDRESSES: You may submit comments identified by docket number USCG-
2021-0431 using the Federal Decision Making Portal at https://www.regulations.gov. See the ``Public Participation and Request for
Comments'' portion of the SUPPLEMENTARY INFORMATION section for further
instructions on submitting comments.

FOR FURTHER INFORMATION CONTACT: For information about this document,
call or email Mr. Brian Rogers, Commandant (CG-WWM-2), Coast Guard;
telephone 202-372-1535, email [email protected], or fax 202-372-
1914.

SUPPLEMENTARY INFORMATION:

Table of Contents for Preamble

I. Public Participation and Request for Comments
II. Abbreviations
III. Executive Summary
IV. Basis and Purpose
V. Background
VI. Discussion of Proposed Methodological and Other Changes
A. Proposed Changes to the Staffing Model

[[Page 51048]]

B. Apprentice Pilots' Wage Benchmark for Conducting Pilotage
While Using a Limited Registration
C. Apprentice Pilots' Expenses and Benefits as Approved
Operating Expenses
VII. Discussion of Proposed Rate Adjustments

District One

District Two

District Three

A. Step 1: Recognize Previous Operating Expenses
B. Step 2: Project Operating Expenses, Adjusting for Inflation
or Deflation
C. Step 3: Estimate Number of Registered Pilots and Apprentice
Pilots
D. Step 4: Determine Target Pilot Compensation Benchmark and
Apprentice Pilot Wage Benchmark
E. Step 5: Project Working Capital Fund
F. Step 6: Project Needed Revenue
G. Step 7: Calculate Initial Base Rates
H. Step 8: Calculate Average Weighting Factors by Area
I. Step 9: Calculate Revised Base Rates
J. Step 10: Review and Finalize Rates
VIII. Regulatory Analyses
A. Regulatory Planning and Review
B. Small Entities
C. Assistance for Small Entities
D. Collection of Information
E. Federalism
F. Unfunded Mandates
G. Taking of Private Property
H. Civil Justice Reform
I. Protection of Children
J. Indian Tribal Governments
K. Energy Effects
L. Technical Standards
M. Environment

I. Public Participation and Request for Comments

The Coast Guard views public participation as essential to
effective rulemaking, and will consider all comments and material
received during the comment period. Your comment can help shape the
outcome of this rulemaking. If you submit a comment, please include the
docket number for this rulemaking, indicate the specific section of
this document to which each comment applies, and provide a reason for
each suggestion or recommendation.
Submitting comments. We encourage you to submit comments through
the Federal Decision Making Portal at https://www.regulations.gov. To
do so, go to https://www.regulations.gov, type USCG-2021-0431 in the
search box and click ``Search.'' Next, look for this document in the
Search Results column, and click on it. Then click on the Comment
option. If you cannot submit your material by using https://www.regulations.gov, call or email the person in the FOR FURTHER
INFORMATION CONTACT section of this proposed rule for alternate
instructions.
Viewing material in docket. To view documents mentioned in this
proposed rule as being available in the docket, find the docket as
described in the previous paragraph, and then select ``Supporting &
Related Material'' in the Document Type column. Public comments will
also be placed in our online docket and can be viewed by following
instructions on the https://www.regulations.gov Frequently Asked
Questions web page. We review all comments received, but we will only
post comments that address the topic of the proposed rule. We may
choose not to post off-topic, inappropriate, or duplicate comments that
we receive.
Personal information. We accept anonymous comments. Comments we
post to https://www.regulations.gov will include any personal
information you have provided. For more about privacy and submissions
in response to this document, see the Department of Homeland Security's
eRulemaking System of Records notice (85 Federal Register (FR) 14226,
March 11, 2020).
Public meeting. We do not plan to hold a public meeting, but we
will consider doing so if we determine from public comments that a
meeting would be helpful. We would issue a separate Federal Register
notice to announce the date, time, and location of such a meeting.

II. Abbreviations

APA American Pilots' Association
BLS Bureau of Labor Statistics
CFR Code of Federal Regulations
CPA Certified public accountant
CPI Consumer Price Index
DHS Department of Homeland Security
Director U.S. Coast Guard's Director of the Great Lakes Pilotage
ECI Employment Cost Index
FOMC Federal Open Market Committee
FR Federal Register
GLPA Great Lakes Pilotage Authority (Canadian)
GLPMS Great Lakes Pilotage Management System
LPA Lakes Pilots Association
NAICS North American Industry Classification System
NPRM Notice of proposed rulemaking
OMB Office of Management and Budget
PCE Personal Consumption Expenditures
Q4 Fourth quarter
Sec. Section
SBA Small Business Administration
SLSPA Saint Lawrence Seaway Pilotage Association
U.S.C. United States Code
WGLPA Western Great Lakes Pilots Association

III. Executive Summary

Pursuant to 46 U.S.C. Chapter 93,\1\ the Coast Guard regulates
pilotage for oceangoing vessels on the Great Lakes and St. Lawrence
Seaway--including setting the rates for pilotage services and adjusting
them on an annual basis for the upcoming shipping season. The shipping
season begins when the locks open in the St. Lawrence Seaway, which
allows traffic access to and from the Atlantic Ocean. The opening of
the locks varies annually depending on waterway conditions but is
generally in March or April. The rates, which for the 2021 season range
from $337 to $800 per pilot hour (depending on which of the specific
six areas pilotage service is provided), are paid by shippers to the
pilot associations. The three pilot associations, which are the
exclusive U.S. source of registered pilots on the Great Lakes, use this
revenue to cover operating expenses, maintain infrastructure,
compensate apprentice pilots (previously referred to as applicants) and
registered pilots, acquire and implement technological advances, train
new personnel, and allow partners to participate in professional
development.
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\1\ Title 46 of the United States Code (U.S.C.), Sections 9301-
9308.
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In accordance with statutory and regulatory requirements, we have
employed a ratemaking methodology which was introduced originally in
2016. Our ratemaking methodology calculates the revenue needed for each
pilotage association (operating expenses, compensation for the number
of pilots, and anticipated inflation), and then divides that amount by
the

[[Page 51049]]

expected demand for pilotage services over the course of the coming
year, to produce an hourly rate. We currently use a 10-step methodology
to calculate rates. We explain in detail in the Discussion of Proposed
Methodological and Other Changes in section VI of the preamble to this
notice of proposed rulemaking (NPRM).
As part of our annual review, in this NPRM we are proposing new
pilotage rates for 2022 based on the existing methodology. The Coast
Guard estimates that this proposed rule would result in a 12-percent
increase in pilotage operating costs compared to the 2021 season. The
result would be an increase in rates for all areas in District One,
District Three, and the undesignated area of District Two. The rate for
the designated area of District Two would decrease. These proposed
changes are largely due to a combination of three factors: (1) The
addition of apprentice pilots to step 3 with a target wage of 36
percent of pilot target compensation (36 percent of the increase), (2)
adjusting target pilot compensation for both the difference in past
predicted and actual inflation and predicted future inflation (23
percent of the increase), and (3) the net addition of two registered
pilots at the beginning of the 2022 shipping season (22 percent of the
increase), one for the undesignated area of District One and one for
the undesignated area of District Two. The other 19 percent of the
increase results from differences in traffic levels between the 2018,
2019, and 2020 shipping seasons. The Coast Guard uses a 10-year average
when calculating traffic to smooth out variations in traffic caused by
global economic conditions, such as those caused by the COVID-19
pandemic. The overall 12-percent increase in revenue needed is
consistent with the increases from the 2019 \2\ and 2018 \3\ rules,
which increased rates by 11 percent and 13 percent respectively, though
greater than the increases in the last 2 years.
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\2\ 84 FR 20551, 20573 (May 10, 2019), https://www.regulations.gov/document/USCG-2018-0665-0012.
\3\ 83 FR 26162, 26189 (June 5, 2018), https://www.regulations.gov/document/USCG-2017-0903-0011.
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The Coast Guard is also proposing one policy change and one change
to the ratemaking methodology. First, the Coast Guard proposes to
change the way we determine how many pilots are needed for the upcoming
season in the staffing model (Volume 82 of the Federal Register (FR) at
Page 41466, and table 6 at Page 41480, August 31, 2017), by always
rounding up the final number to the nearest whole number. Second, we
also propose to include in the methodology a calculation for a wage
benchmark for apprentice pilots conducting pilotage on a limited
registration issued by the Director. Although it is not a change to
existing ratemaking policy, we are proposing to list apprentice pilot
operating expenses within the approved operating expenses in Sec.
404.2 ``Procedure and criteria for recognizing association expenses,''
used in step 1 of the rulemaking. These operating expenses have been
included in past ratemakings and this is a codification of existing
policy in order to distinguish apprentice pilot expenses from
apprentice pilot wages.
Based on the ratemaking model discussed in this NPRM, we are
proposing the rates shown in table 1.

Table 1--Current and Proposed Pilotage Rates on the Great Lakes
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Final 2021 Proposed 2022
Area Name pilotage rate pilotage rate
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District One: Designated...................... St. Lawrence River.............. $800 $818
District One: Undesignated.................... Lake Ontario.................... 498 557
District Two: Designated...................... Navigable waters from Southeast 580 574
Shoal to Port Huron, MI.
District Two: Undesignated.................... Lake Erie....................... 566 651
District Three: Designated.................... St. Marys River................. 586 685
District Three: Undesignated.................. Lakes Huron, Michigan, and 337 375
Superior.
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This proposed rule would affect 56 U.S. Great Lakes pilots, 3 pilot
associations, and the owners and operators of an average of 293
oceangoing vessels that transit the Great Lakes annually. This proposed
rule is not economically significant under Executive Order 12866 and
would not affect the Coast Guard's budget or increase Federal spending.
The estimated overall annual regulatory economic impact of this rate
change is a net increase of $3,527,425 in estimated payments made by
shippers during the 2022 shipping season. This NPRM establishes the
2022 yearly compensation for pilots on the Great Lakes at $393,461 per
pilot (a 3.8 percent increase over their 2021 compensation). Because
the Coast Guard must review, and, if necessary, adjust rates each year,
we analyze these as single-year costs and do not annualize them over 10
years. Section VIII of this preamble provides the regulatory impact
analyses of this proposed rule.

IV. Basis and Purpose

The legal basis of this rulemaking is 46 U.S.C. Chapter 93,\4\
which requires foreign merchant vessels and U.S. vessels operating ``on
register'' (meaning U.S. vessels engaged in foreign trade) to use U.S.
or Canadian pilots while transiting the U.S. waters of the St. Lawrence
Seaway and the Great Lakes system.\5\ For U.S. Great Lakes pilots, the
statute requires the Secretary to ``prescribe by regulation rates and
charges for pilotage services, giving consideration to the public
interest and the costs of providing the services.'' \6\ The statute
requires that rates be established or reviewed and adjusted each year,
not later than March 1.\7\ The statute also requires that base rates be
established by a full ratemaking at least once every 5 years, and, in
years when base rates are not established, they must be reviewed and,
if necessary, adjusted.\8\ The Secretary's duties and authority under
46 U.S.C. Chapter 93 have been delegated to the Coast Guard.\9\
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\4\ 46 U.S.C. 9301-9308.
\5\ 46 U.S.C. 9302(a)(1).
\6\ 46 U.S.C. 9303(f).
\7\ Id.
\8\ Id.
\9\ DHS Delegation 00170.1, Revision No. 01.2, paragraph
(II)(92)(f).
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The purpose of this NPRM is to propose new pilotage rates for the
2022 shipping season. The Coast Guard believes that the proposed new
rates will continue to promote our goal as outlined in title 46 of the
Code of Federal Regulations (CFR), section 404.1

[[Page 51050]]

of promoting safe, efficient, and reliable pilotage service in the
Great Lakes by generating for each pilotage association sufficient
revenue to reimburse its necessary and reasonable operating expenses,
fairly compensate trained and rested pilots, and provide appropriate
profit to use for improvements.

V. Background

Pursuant to 46 U.S.C. 9303, the Coast Guard, in conjunction with
the Canadian Great Lakes Pilotage Authority (GLPA), regulates shipping
practices and rates on the Great Lakes. Under Coast Guard regulations,
all vessels engaged in foreign trade (often referred to as ``salties'')
are required to engage U.S. or Canadian pilots during their transit
through the regulated waters.\10\ U.S. and Canadian ``lakers,'' which
account for most commercial shipping on the Great Lakes, are not
affected.\11\ Generally, vessels are assigned a U.S. or Canadian pilot
depending on the order in which they transit a particular area of the
Great Lakes and do not choose the pilot they receive. If a vessel is
assigned a U.S. pilot, that pilot will be assigned by the pilotage
association responsible for the particular district in which the vessel
is operating, and the vessel operator will pay the pilotage association
for the pilotage services. The GLPA establishes the rates for Canadian
registered pilots.
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\10\ See 46 CFR part 401.
\11\ 46 U.S.C. 9302(f). A ``laker'' is a commercial cargo vessel
especially designed for and generally limited to use on the Great
Lakes.
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The U.S. waters of the Great Lakes and the St. Lawrence Seaway are
divided into three pilotage districts. Pilotage in each district is
provided by an association certified by the Coast Guard's Director of
the Great Lakes Pilotage (``the Director'') to operate a pilotage pool.
The Saint Lawrence Seaway Pilotage Association (SLSPA) provides
pilotage services in District One, which includes all U.S. waters of
the St. Lawrence River and Lake Ontario. The Lakes Pilots Association
(LPA) provides pilotage services in District Two, which includes all
U.S. waters of Lake Erie, the Detroit River, Lake St. Clair, and the
St. Clair River. Finally, the Western Great Lakes Pilots Association
(WGLPA) provides pilotage services in District Three, which includes
all U.S. waters of the St. Marys River; Sault Ste. Marie Locks; and
Lakes Huron, Michigan, and Superior.
Each pilotage district is further divided into ``designated'' and
``undesignated'' areas, depicted in table 2 below. Designated areas,
classified as such by Presidential Proclamation, are waters in which
pilots must be fully engaged in the navigation of vessels in their
charge at all times.\12\ Undesignated areas, on the other hand, are
open bodies of water not subject to the same pilotage requirements.
While working in undesignated areas, pilots must ``be on board and
available to direct the navigation of the vessel at the discretion of
and subject to the customary authority of the master.'' \13\ For these
reasons, pilotage rates in designated areas can be significantly higher
than those in undesignated areas.
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\12\ Presidential Proclamation 3385, Designation of restricted
waters under the Great Lakes Pilotage Act of 1960, December 22,
1960.
\13\ 46 U.S.C. 9302(a)(1)(B).

Table 2--Areas of the Great Lakes and St. Lawrence Seaway
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Area
District Pilotage association Designation No.\14\ Area name \15\
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One....................... Saint Lawrence Seaway Designated................ 1 St. Lawrence River.
Pilotage Association. Undesignated.............. 2 Lake Ontario.
Two....................... Lakes Pilots Designated................ 5 Navigable waters
Association. Undesignated.............. 4 from Southeast
Shoal to Port
Huron, MI.
Lake Erie.
Three..................... Western Great Lakes Designated................ 7 St. Marys River.
Pilots Association. Undesignated.............. 6 Lakes Huron and
Undesignated.............. 8 Michigan.
Lake Superior.
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Each pilot association is an independent business and is the sole
provider of pilotage services in the district in which it operates.
Each pilot association is responsible for funding its own operating
expenses, maintaining infrastructure, compensating pilots and
apprentice pilots, acquiring and implementing technological advances,
and training personnel and partners. The Coast Guard developed a 10-
step ratemaking methodology to derive a pilotage rate, based on the
estimated amount of traffic, which covers these expenses.\16\ The
methodology is designed to measure how much revenue each pilotage
association would need to cover expenses and provide competitive
compensation goals to registered pilots. Since the Coast Guard cannot
guarantee demand for pilotage services, target pilot compensation for
registered pilots is a goal. The actual demand for service dictates the
actual compensation for the registered pilots. We then divide that
amount by the historic 10-year average for pilotage demand. We
recognize that in years where traffic is above average, pilot
associations will accrue more revenue than projected, while in years
where traffic is below average, they will take in less. We believe that
over the long term, however, this system ensures that infrastructure
will be maintained and that pilots will receive adequate compensation
and work a reasonable number of hours, with adequate rest between
assignments, to ensure retention of highly trained personnel.
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\14\ Area 3 is the Welland Canal, which is serviced exclusively
by the Canadian GLPA and, accordingly, is not included in the U.S.
pilotage rate structure.
\15\ The areas are listed by name at 46 CFR 401.405.
\16\ 46 CFR part 404.
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Over the past 5 years, the Coast Guard has adjusted the Great Lakes
pilotage ratemaking methodology per our authority in 46 U.S.C. 9303(f)
to conduct annual reviews of base pilotage rates, and make adjustments
to such base rates, in each intervening year in consideration of the
public interest and the costs of providing the services. In 2016, we
made significant changes to the methodology, moving to an hourly
billing rate for pilotage services and changing the compensation
benchmark to a more transparent model. In 2017, we added additional
steps to the ratemaking methodology, including new steps that
accurately account for the additional revenue produced by the
application of weighting factors (discussed in detail in Steps 7
through 9 for each district, in section VII of this preamble). In 2018,
we revised the methodology by which we develop the compensation
benchmark, based upon U.S. mariners rather than Canadian working
pilots. In 2020, we revised the methodology to accurately capture all
of

[[Page 51051]]

the costs and revenues associated with Great Lakes pilotage
requirements and produce an hourly rate that adequately and accurately
compensates pilots and covers expenses. The current methodology was
finalized in the Great Lakes Pilotage Rates--2021 Annual Review and
Revisions to Methodology final rule (86 FR 14184, March 12, 2021). The
2021 ratemaking changed the inflation calculation in Step 4, Sec.
404.104(b) for interim ratemakings, so that the previous year's target
compensation value is first adjusted by actual inflation value using
the Employment Cost Index (ECI). The 2021 final rule also excluded
legal fees incurred in lawsuits against the Coast Guard related to our
ratemaking and oversight from pilots associations' approved operating
expenses. We summarize the proposed methodology in the section below.

Summary of the Ratemaking Methodology

As stated above, the ratemaking methodology, outlined in 46 CFR
404.101 through 404.110, consists of 10 steps that are designed to
account for the revenues needed and total traffic expected in each
district. The result is an hourly rate, determined separately for each
of the areas administered by the Coast Guard.
In Step 1, ``Recognize previous operating expenses,'' (Sec.
404.101) the Director reviews audited operating expenses from each of
the three pilotage associations. Operating expenses include all
allowable expenses minus wages and benefits. This number forms the
baseline amount that each association is budgeted. Because of the time
delay between when the association submits raw numbers and the Coast
Guard receives audited numbers, this number is 3 years behind the
projected year of expenses. Therefore, in calculating the 2022 rates in
this proposal, we begin with the audited expenses from the 2019
shipping season.
While each pilotage association operates in an entire district
(including both designated and undesignated areas), the Coast Guard
tries to determine costs by area. With regard to operating expenses, we
allocate certain operating expenses to designated areas, and certain
operating expenses to undesignated areas. In some cases, we can
allocate the costs based on where they are actually accrued. For
example, we can allocate the costs for insurance for apprentice pilots
who operate in undesignated areas only. In other situations, such as
general legal expenses, expenses are distributed between designated and
undesignated waters on a pro rata basis, based upon the proportion of
income forecasted from the respective portions of the district.
In Step 2, ``Project operating expenses, adjusting for inflation or
deflation,'' (Sec. 404.102) the Director develops the 2022 projected
operating expenses. To do this, we apply inflation adjustors for 3
years to the operating expense baseline received in Step 1. The
inflation factors are from the Bureau of Labor Statistics' (BLS)
Consumer Price Index (CPI) for the Midwest Region, or, if not
available, the Federal Open Market Committee (FOMC) median economic
projections for Personal Consumption Expenditures (PCE) inflation. This
step produces the total operating expenses for each area and district.
In Step 3, ``Estimate number of registered pilots and apprentice
pilots,'' (Sec. 404.103) the Director calculates how many pilots are
needed for each district. To do this, we employ a ``staffing model,''
described in Sec. 401.220, paragraphs (a)(1) through (a)(3), to
estimate how many pilots would be needed to handle shipping during the
beginning and close of the season. This number is helpful in providing
guidance to the Director in approving an appropriate number of pilots.
For the purpose of the ratemaking calculation, we determine the
number of pilots provided by the pilotage associations (see Sec.
404.103) and use that figure to determine how many pilots need to be
compensated via the pilotage fees collected.
In Step 3, in this NPRM we propose adding an estimate for the
number of apprentice pilots with limited registrations in each
district. This number of apprentice pilots with limited registrations
would be used in Step 4 to calculate an allowable wage benchmark for
the districts to claim in the ratemaking. The Director would use the
number of applications for apprentice pilots, traffic projections,
information provided by the pilotage association regarding upcoming
retirements, and any other relevant data input in determining the total
number of apprentice pilots with limited registrations. See the
Discussion of Proposed Methodological and Other Changes at section VI
of this preamble for a detailed description of the changes proposed.
In the first part of Step 4, ``Determine target pilot compensation
benchmark and apprentice pilot wage benchmark,'' (Sec. 404.104) the
Director determines the revenue needed for pilot compensation in each
area and district. In 2020, the Coast Guard updated the benchmark
compensation model in accordance with Sec. 404.104(b), switching from
using the American Maritime Officers Union's 2015 aggregated wage and
benefit information to the 2019 compensation benchmark. Based on
experience over the past two ratemakings, the Coast Guard has
determined that the level of target pilot compensation for those years
provides an appropriate level of compensation for American Great Lakes
pilots. Therefore, the Coast Guard will not seek alternative benchmarks
for target compensation for future ratemakings at this time, and will
instead simply adjust the amount of target pilot compensation for
inflation. This benchmark has advanced the Coast Guard's goals of
safety through rate and compensation stability while also promoting
recruitment and retention of qualified U.S. pilots.
In the 2021 ratemaking, the Coast Guard changed the way we
calculate inflation in Step 4 to account for actual inflation instead
of predicted inflation. In Sec. 404.104(b), the previous year's target
compensation value is first adjusted by actual inflation using the ECI
inflation value. If the ECI inflation value is not available, Sec.
404.104(b)(1) and (2) specify the compensation inflation process the
Director will use instead.
In the second part of Step 4, set forth in Sec. 404.104(c), the
Director determines the total compensation figure for each district. To
do this, the Director multiplies the compensation benchmark by the
number of pilots for each area and district (from Step 3), producing a
figure for total pilot compensation.
This proposed rule would add an apprentice pilot wage benchmark to
Step 4. The apprentice pilot wage benchmark would be set at 36 percent
of individual target pilot compensation, as calculated in this section.
The apprentice pilot wage benchmark would then be multiplied by the
number of apprentice pilots with limited registrations for each
district, producing a figure for total apprentice pilot wage. See the
Discussion of Proposed Methodological and Other Changes at section VI
of this preamble for a detailed description of the changes proposed.
In Step 5, ``Project working capital fund,'' (Sec. 404.105) the
Director calculates a value that is added to pay for needed capital
improvements and other non-recurring expenses, such as technology
investments and infrastructure maintenance. This value is calculated by
adding the total operating expenses (derived in Step 2) to the total
pilot compensation and total target apprentice pilot wage (derived in

[[Page 51052]]

Step 4), and multiplying that figure by the preceding year's average
annual rate of return for new issues of high-grade corporate
securities. This figure constitutes the ``working capital fund'' for
each area and district.
In Step 6, ``Project needed revenue,'' (Sec. 404.106) the Director
simply adds up the totals produced by the preceding steps. The
projected operating expense for each area and district (from Step 2) is
added to the total pilot compensation, including apprentice pilot wage
benchmarks, (from Step 4) and the working capital fund contribution
(from Step 5). The total figure, calculated separately for each area
and district, is the ``needed revenue.''
In Step 7, ``Calculate initial base rates,'' (Sec. 404.107) the
Director calculates an hourly pilotage rate to cover the needed revenue
as calculated in Step 6. This step consists of first calculating the
10-year hours of traffic average for each area. Next, we divide the
revenue needed in each area (calculated in Step 6) by the 10-year hours
of traffic average to produce an initial base rate.
An additional element, the ``weighting factor,'' is required under
Sec. 401.400. Pursuant to that section, ships pay a multiple of the
``base rate'' as calculated in Step 7 by a number ranging from 1.0 (for
the smallest ships, or ``Class I'' vessels) to 1.45 (for the largest
ships, or ``Class IV'' vessels). As this significantly increases the
revenue collected, we need to account for the added revenue produced by
the weighting factors to ensure that shippers are not overpaying for
pilotage services. We do this in the next step.
In Step 8, ``Calculate average weighting factors by Area,'' (Sec.
404.108) the Director calculates how much extra revenue, as a
percentage of total revenue, has historically been produced by the
weighting factors in each area. We do this by using a historical
average of the applied weighting factors for each year since 2014 (the
first year the current weighting factors were applied).
In Step 9, ``Calculate revised base rates,'' (Sec. 404.109) the
Director modifies the base rates by accounting for the extra revenue
generated by the weighting factors. We do this by dividing the initial
pilotage rate for each area (from Step 7) by the corresponding average
weighting factor (from Step 8), to produce a revised rate.
In Step 10, ``Review and finalize rates,'' (Sec. 404.110) often
referred to informally as ``Director's discretion,'' the Director
reviews the revised base rates (from Step 9) to ensure that they meet
the goals set forth in 46 U.S.C. 9303(f) and 46 CFR 404.1(a), which
include promoting efficient, safe, and reliable pilotage service on the
Great Lakes; generating sufficient revenue for each pilotage
association to reimburse necessary and reasonable operating expenses;
compensating trained and rested pilots fairly; and providing
appropriate profit for improvements.
After the base rates are set, Sec. 401.401 permits the Coast Guard
to apply surcharges. In previous ratemakings where apprentice pilot
wages were not built into the rate, the Coast Guard used surcharges to
cover applicant pilot compensation in those years to help with
recruitment. In 2019, $1,202,635 in surcharges were collected by the
three districts. Consistent with the 2020 and 2021 rulemakings, we
continue to believe that the pilot associations are now able to plan
for the costs associated with retirements without relying on the Coast
Guard to impose surcharges.

VI. Discussion of Proposed Methodological and Other Changes

For 2022, the Coast Guard is proposing one policy change to the
ratemaking model and a methodological change to incorporate apprentice
pilot wage benchmarks into the ratemaking methodology. The first
proposed policy change is to always round up the pilot totals to the
nearest whole number in the staffing model. We use the staffing model
to determine how many pilots are needed in Step 3. Second, we are
proposing to introduce a wage benchmark calculation for apprentice
pilots conducting pilotage while using a limited registration in Steps
3 and 4 of the methodology. While not a change to the ratemaking, this
proposed rule would also codify the current practice of allowing pilot
associations to include necessary and reasonable apprentice pilot
benefits and expenses as operating expenses for the year they are
incurred.

A. Proposed Changes to the Staffing Model

The Director uses the staffing model to estimate how many pilots
would be needed to handle shipping from the opening through the closing
of the season. The Coast Guard is proposing to always round up the
final number in the staffing model in Sec. 401.220(a)(2) to the
nearest whole integer, instead of the current requirement to round to
the nearest whole integer. The final number provides the maximum number
of pilots authorized to be included in the ratemaking for a district.
The Coast Guard proposed a similar change to the staffing model in
the 2021 proposed rule titled ``Great Lakes Pilotage Rates--2021 Annual
Review and Revisions to Methodology'' (85 FR 68210, October 27, 2020).
We opted to forgo the proposed change to the rounding in the staffing
model in the 2021 ratemaking final rule to more closely consider the
alternatives and staffing issues mentioned by the commenters, posted in
docket USCG-2020-0457.
After consideration of the comments and issues discussed further in
this section, the Coast Guard has determined that rounding up in the
staffing model is a necessary change, but we are proposing an
additional modification. In addition to always rounding up from the
staffing model, we also propose that when the rounding up results in an
additional pilot that would not have been authorized if we rounded to
the nearest whole integer, that additional pilot would be added to the
number of pilots in the undesignated area for that district.\17\ For
example, if the total in a district is 17.25, we would round up to 18
under the proposed changes, and the additional pilot would be allocated
to the undesignated area. If the total in a district is 17.55, we would
authorize 18 pilots and we would not change existing allocations.
---------------------------------------------------------------------------

\17\ For a detailed calculation of the staffing model, see 82 FR
41466, table 6 at 41480 (August 31, 2017).
---------------------------------------------------------------------------

The purpose for placing the additional pilot in undesignated waters
is to reduce the impact of the additional pilot on the final rates.
Allocating additional pilots to the undesignated waters in the
ratemaking methodology would result in only incremental changes, which
promotes rate stability. Rate stability is in the public interest,
because it provides greater predictability to both shipping companies
and the pilots. Undesignated waters have lower rates for pilotage
services than designated waters, because the average number of bridge
hours is greater (denominator), which allows the operating expenses for
those areas to be spread out over a greater number. Registered pilots
in a district perform pilotage in both designated and undesignated
waters. For ratemaking purposes, we assign pilots to either designated
or undesignated waters to calculate the rates in each area. For
ratemaking purposes, we assign pilots to either designated or
undesignated waters to calculate the rates in each area.
In the 2021 proposed rule, the Coast Guard acknowledged that the
staffing model used in the ratemaking could be improved to account for
registered pilots who are not performing pilotage full time. As we
noted in the 2021 proposed rule, pilot associations have made
assertions that the pilot

[[Page 51053]]

associations' presidents are spending more time at meetings,
conferences, traveling, and facilitating communication between the
pilots and Coast Guard. We continue to acknowledge that the pilot
associations' presidents are not able to serve as pilots full-time due
to their administrative duties and this continues to be the main reason
for no longer rounding down the final number for some districts. The
non-delegable administrative duties include attending meetings and
conferences, providing additional financial and traffic information to
increase transparency and accountability, overseeing and ensuring the
integrity of their training program, evaluating technology, and
coordinating with the American Pilots' Association (APA) to implement
and share best practices. Rounding down to the nearest integer in the
current staffing model could result in too few pilots allocated to a
district which, when coupled with the president's spending less time
serving as pilot, may adversely impact recuperative rest goals for
registered pilots that are essential for safe navigation.
The staffing model addresses the historic traffic at the opening
and closing of the season. During this time, the Director has
historically authorized or imposed double pilotage in the designated
waters due to ice conditions, a lack of aids to navigation, and violent
and volatile weather conditions, because the transits are likely to
exceed the Coast Guard's tolerance for safety with a single pilot.
Pilotage demand reaches peaks during the opening and close of the
seasons, which is also when pilot presidents are performing many
nondelegable duties. The pilot association president's participation is
required during various coordination meetings at the opening and
closing of the shipping season, which reduces their availability to
provide pilotage services. These meetings include coordination with the
U.S. and Canadian Seaways, the GLPA, Shipping Federation of Canada,
U.S. Great Lakes Shipping Association, and various U.S. and Canadian
Great Lakes ports. Rounding up will ensure that the pilot president is
free to participate in these meetings and the associations have
sufficient strength to handle the burden of double pilotage.
One comment representing the shipping industry on the 2021
ratemaking proposed rule requested that we authorize an administrative
position for each district to account for these increased duties. We
rejected the proposal to add an administrative position in the 2021
ratemaking, because we thought it was inconsistent with industry
standards and insufficient to address the problems identified by the
associations. Many of the presidential duties are non-delegable to
administrative staff, and the president would still be pulled away from
providing pilotage services. Authorizing an administrative person
instead of additional pilot would not address the recuperative rest
impacts and potential for lack of pilots when needed.
The APA comment \18\ and other commenters affirmed that there is
always one pilot ``off the roles'' in each association. Similarly, in
its comments, the SLSPA emphasized it is impossible to operate as a
president and pilot a vessel at the same time and with no opportunity
to rest. The APA comment urged the Coast Guard to consider authorizing
an additional pilot for each district, whose principal duties would be
to serve as an ``operations pilot.'' The comment said pilots on ships,
as well as dispatchers and transportation coordinators, need
operational support available in real time from a seasoned and
experienced piloting professional. This professional is currently the
association president or the suggested extra operations pilot. The APA
comment expressed that piloting expertise is necessary to perform these
duties, and that the associations' president pilot should be replaced
with a pilot, not administrative staff. The president is unable to
delegate certain administrative duties that keep him from piloting a
vessel. This comment was in alignment with responses we received from
other pilot industry comments.
---------------------------------------------------------------------------

\18\ https://www.regulations.gov/document?D=USCG-2020-0457-0007.
---------------------------------------------------------------------------

The Coast Guard agrees that, where the pilot associations'
presidents are spending an increased amount of their time on
administrative issues, the staffing model should account for that time
and allow for additional staff to assist by rounding up the final total
for each district. However, the Coast Guard does not agree with some
comments on the 2021 NPRM that an additional operational pilot is
necessary in addition to rounding up in the staffing model. Authorizing
an additional operational pilot, in addition to rounding up, would
authorize two additional pilots in some cases. Two additional pilots
would be more pilots than necessary to address the need presented by
the association's president not performing pilotage services full-time.
Some comments from the 2021 ratemaking proposed rule included
concerns that the staffing model could produce lower or fluctuating
numbers in upcoming years, even with always rounding up, taking away
previously authorized pilots. However, the staffing model does not
change year-to-year, unless we make changes to the staffing model in a
ratemaking. Based on the existing staffing model and the proposed
change to always round up the final number, the number of pilots
authorized would not decrease in future years, unless adjusted by
ratemaking.
The staffing model takes into consideration trends in traffic
demand, ensuring that the number of pilots is sufficient to meet
demand. The existing staffing model is designed to provide sufficient
pilots for the entire shipping season while taking into account the
amount of traffic anticipated, restorative rest periods for the pilots,
and additional capacity during surges at the opening and closing of the
shipping season. During the opening and closing of the season, the
weather tends to be more severe; ice conditions affect transit times;
and the aids to navigation are not in place. During this time, double
pilotage occurs in designated waters to mitigate external factors and
to ensure safety. This is also a time that the pilot association
presidents are performing non-delegable duties, coordinating with the
Coast Guard, the GLPA, U.S. and Canadian Seaway, and numerous other
Great Lakes shipping stakeholders to ensure safe, efficient, and
reliable pilotage service. Always rounding up allows us to account for
this time and promote safety and restorative rest, while minimizing
delays in providing pilotage services, for districts where we
previously would have rounded the final number down. We cannot continue
to round down for some districts and undersupply pilots where the
staffing model indicates more are needed. By rounding up the staffing
model final number, we ensure that we are always authorizing a
sufficient number to cover the demand calculated according to the
staffing model, which has been in place for many years. The purpose of
always rounding up where we otherwise would have rounded down is to
account for the association's president time spent away from pilotage
duties, especially during the high demand for pilotage during the
beginning and close of the shipping seasons. We believe this proposed
rounding change will promote maritime safety by ensuring enough pilots
are allocated to each district to cover the hours the association's
president spends engaged in the non-pilot tasks and the administrative
work discussed above.

[[Page 51054]]

B. Apprentice Pilots' Wage Benchmark for Conducting Pilotage While
Using a Limited Registration

In this NPRM, the Coast Guard is proposing to factor in the
apprentice pilots wage benchmark in the ratemaking methodology, Steps 3
and 4. The wage benchmark would be applicable to apprentice pilots
operating under a limited registration.
In Step 3, Sec. 404.103, the Director would project the number of
apprentice pilots with limited registrations expected to be in training
and compensated. The Director would consider the number of persons
applying under 46 CFR part 401 to become apprentice pilots, traffic
projections, information provided by the pilotage association regarding
upcoming retirements, and any other relevant data.
In Step 4, Sec. 404.104, the Director would determine the
individual apprentice pilot wage benchmark at the rate of 36 percent of
the individual target pilot compensation, as calculated according to
Step 4. The Director would determine each pilot association's total
apprentice pilot wage benchmark by multiplying the apprentice pilot
wage benchmark by the number of apprentice pilots with limited
registrations projected under Sec. 404.103. For example, if the
projected number of apprentice pilots is 4, we would first take 36
percent of individual target pilot compensation (example: $359,887 x
0.36 = $129,559) and multiply that by 4 (example: $129,559 x 4 =
$518,237) to obtain the total apprentice pilot wage benchmark for each
district. This process is based on the way we factor the fully
registered pilot compensation into the ratemaking in existing Step 3
(Sec. 404.103) and Step 4 (Sec. 404.104) described in the Summary of
the Ratemaking Methodology section above.
The Coast Guard proposes to set the apprentice pilot wage benchmark
at a percentage of the target pilot compensation, rather than a
specific dollar amount, to allow for inflation each year. We factor
inflation into the target pilot compensation calculation during Step 4.
We would take 36 percent of the inflated target pilot compensation to
obtain the apprentice pilot wage benchmark value.
In ratemaking years 2016 through 2019, the Coast Guard authorized
surcharges to cover the districts' apprentice pilot compensation. The
Coast Guard never intended to use such surcharges as a permanent
solution for compensating apprentice pilots, because the surcharge
amounts were not derived from a formula that could take into
consideration inflation and other reasonableness factors.
The purpose of the surcharges was to provide reimbursement to the
associations so that they could immediately hire additional apprentice
pilots, rather than waiting three years to be reimbursed in the rates.
The Coast Guard used surcharges as a temporary method to help the
districts with pilot hiring and retention issues. In those ratemaking
years, the Coast Guard made many Director's adjustments to the
authorized surcharges in order to ensure that the ratemaking reflected
a reasonable amount in compensation.
In the 2020 and 2021 ratemakings, the Coast Guard acknowledged that
the pilot associations were able to hire a sufficient number of
apprentice pilots and fully registered pilots. In the 2020 and 2021
ratemakings, the Coast Guard authorized apprentice pilot salaries to be
included in the association's operating expenses for 2017 and 2018,
respectively. We allowed the apprentice pilot wage expenses to be
included in the operating expenses after the districts' operating
expenses were fully audited. In the 2021 ratemaking final rule, the
Coast Guard reduced the 2018 apprentice pilot salary operating expense
(referred to as applicant pilot in the 2021 ratemaking) for District
One and District Two to $132,151 per apprentice pilot because they paid
in excess of that amount (86 FR 14184, 14197, 14202, March 12, 2021).
As District Three reported paying their apprentice pilots less than
$132,151 per apprentice pilot each, no Director's adjustment was made.
The Coast Guard is proposing to set the apprentice pilot wage
benchmark at 36 percent of individual target pilot compensation based
on reasonable amounts previously allowed in past ratemakings. In the
2019 rulemaking, we adjusted apprentice pilot salaries to approximately
36 percent of target pilot compensation. In the 2019 NPRM, the Coast
Guard proposed to make an adjustment to District Two's request for
reimbursement of $571,248 for two applicant pilots ($285,624 per
applicant). Instead of permitting $571,248 for two applicant pilots, we
proposed allowing $257,566, or $128,783 per applicant pilot, based upon
discussions with other pilot associations at the time. This standard
went into effect in the final rule for 2019. In development of the 2021
proposed rule, we reached out to several of the pilot associations
throughout the United States to see what percentage they pay their
applicant pilots. We factored in the sea time and experience required
to become an applicant pilot on the Great Lakes and discussed the
percentage with each association to determine if it was fair and
reasonable. For 2019, this was approximately 36 percent ($128,783 /
$359,887 = 35.78 percent). In the 2021 NPRM and final rule, the Coast
Guard used the 36 percent benchmark for calculating each district's
apprentice pilot compensation in its operating expenses.
The Coast Guard solicited comments in the 2021 ratemaking NPRM on
setting apprentice pilot salaries at a percentage of the fully
registered target pilot compensation and including it in the ratemaking
(85 FR 68210, October 27, 2020). We received one pilot comment and a
user coalition comment requesting that we return to the use of
surcharges. The Coast Guard used surcharges to immediately reimburse
apprentice pilot salaries to make improvements in hiring and retention
of pilots in the districts. Going forward, authorizing apprentice pilot
wages in the ratemaking continues to support hiring and retention in a
way that is better calibrated to generate the specific amount of
revenue needed, than providing a surcharge. The associations would be
funded for apprentice pilot wages in the same year they are incurred,
and the amount would be adjusted for inflation, along with the target
pilot compensation. We are also interested in building the apprentice
pilot salaries into the ratemaking for predictability and stability
purposes. We previously authorized $150,000 per apprentice pilot when
we used surcharges, but, in practice, that amount was reduced by
Director's adjustments to reasonable amounts. The proposed apprentice
pilot wage benchmark in the ratemaking would not be adjusted by
Director's adjustments.
The other comments from the pilots were generally supportive of
including the apprentice pilot salaries in the ratemaking, but urged
the Coast Guard to consider setting the salaries at a higher percentage
than 36 percent of the fully registered pilot compensation, or
implementing a gradual percentage increase for additional years served.
This 36 percent equation creates a number consistent with what some
districts paid and were reimbursed for apprentice pilots in previous
ratemaking years. It is also reasonable in amount, because it is only
wages and would not include apprentice pilot benefits and travel
reimbursements. Those additional benefits would be reimbursed in full
as allowable operating expenses for the districts. In the 2021
ratemaking, District Three reported paying apprentice pilot salaries at
an amount of $132,151 per apprentice pilot, and we considered that
amount reasonable. At

[[Page 51055]]

36 percent of registered pilot target compensation, the apprentice
pilots would be authorized wages in the amount of $129,559, which is
reasonable in consideration of the time in training, services provided,
and past ratemakings. This number would be subject to inflation
annually. Additionally, setting apprentice pilot salaries at one
amount, irrespective of years in training, is consistent with our past
practices and will help promote rate stability and predictability for
all parties. In past ratemakings, we have historically used the term
``applicant pilots'' as a collective way of referring to both applicant
trainees and apprentice pilots. In this proposed rule, we are
distinguishing how we will incorporate apprentice pilot wages into the
ratemaking methodology from how we incorporate applicant trainees
wages. To help clarify this distinction, this proposed rule would also
add definitions for the terms ``apprentice pilot'' and ``limited
registration'' in the definition section in Sec. 401.110. An
apprentice pilot would be defined as a person, approved and certified
by the Director, who is participating in an approved U.S. Great Lakes
pilot training and qualification program and meets all the minimum
requirements listed in 46 CFR 401.211. The apprentice pilot definition
would not include applicant trainees, who are pilots in training who
have not acquired the minimum service requirements in Sec.
401.210(a)(1). Under this proposed rule, salaries for applicant
trainees would continue to be included in the district's operating
expenses for the year they are incurred. The ``apprentice pilot''
definition would only be applicable in determining which pilots may be
included in the apprentice pilot estimates, compensation, and operating
expenses discussed in new Sec. Sec. 404.2(b)(7), 404.103(b), and
404.104(d) and (e) of this proposed rule.
The apprentice pilot would be required to be operating with a
limited registration to be eligible for inclusion in the wage benchmark
calculations in Steps 3 and 4. A limited registration is currently used
in the apprentice pilot training process in the districts, but it is
not defined in the Great Lakes pilotage regulations. We propose adding
a definition for ``limited registration'' that would align with the
current use of the term in the industry. A limited registration would
be defined as an authorization given by the Director, upon the request
of the respective pilot association, to an apprentice pilot to provide
pilotage service without direct supervision from a fully registered
pilot in a specific area or waterway.
Apprentice pilots with limited registrations are performing the
services of a pilot for the shipping industry, often without a fully
registered pilot onboard. These apprentice pilots are providing
pilotage services to the shipping industry for the rates set by the
Coast Guard for the waterway. Compensating the apprentice pilots for
these services has historically been considered a reasonable and
necessary cost included in the ratemakings as either surcharges or
operating expenses. However, instead of evaluating the apprentice pilot
wages annually for reasonableness in the operating expenses, the Coast
Guard is proposing to include a specific and predictable apprentice
pilot wage benchmark calculation into the ratemaking.

C. Apprentice Pilots' Expenses and Benefits as Approved Operating
Expenses

In Sec. 404.2 ``Procedure and criteria for recognizing association
expenses,'' we propose to insert the pilot association's expenses for
apprentice pilots operating with limited registrations as approved
operating expenses. These expenses have historically been allowed in
previous ratemakings' operating expenses. We are proposing to
specifically list apprentice pilot with limited registrations expenses
in the regulations to codify current practices and distinguish these
expenses from the apprentice pilot wage benchmark that we propose to
include in Step 4 of the ratemaking methodology.
The associations would continue to include health care, travel
expenses, training, and other expenses incurred on behalf of apprentice
pilots with limited registrations, when determined to be necessary and
reasonable by the Director. Associations currently fund travel and
employment benefits for apprentice pilots with limited registrations in
order to train pilots and provide pilotage services to the shipping
industry. Apprentice pilots with limited registrations are expected to
travel and be away from home while performing these duties. It is
reasonable and consistent with industry practice for the association to
cover their travel expenses. These travel costs are also allowed for
fully registered pilots operating on the Great Lakes performing
substantially similar services.
The approved operating expenses could include health care and other
necessary and reasonable employment benefits as well. Apprentice pilots
are often offered benefits to help with retention and recruitment.
Allowing associations to include necessary and reasonable expenses for
apprentice pilots with limited registrations as operating expenses in
the ratemaking would continue to promote adequate funding for
apprentice pilot training and provision of pilotage services in the
Great Lakes.

VII. Discussion of Proposed Rate Adjustments

In this NPRM, based on the proposed policy changes described in the
previous section, we are proposing new pilotage rates for 2022. We
propose to conduct the 2022 ratemaking as an ``interim year,'' as was
done in 2021, rather than a full ratemaking, as was conducted in 2018.
Thus, the Coast Guard proposes to adjust the compensation benchmark
following the procedures for an interim ratemaking year pursuant to
Sec. 404.100(b) for this purpose, rather than the full ratemaking year
procedures in Sec. 404.100(a).
This section discusses the proposed rate changes using the
ratemaking steps provided in 46 CFR part 404, incorporating the
proposed changes discussed in section VI. We will detail all 10 steps
of the ratemaking procedure for each of the 3 districts to show how we
arrive at the proposed new rates.

District One

A. Step 1: Recognize Previous Operating Expenses

Step 1 in our ratemaking methodology requires that the Coast Guard
review and recognize the previous year's operating expenses (Sec.
404.101). To do so, we begin by reviewing the independent accountant's
financial reports for each association's 2018 expenses and
revenues.\19\ For accounting purposes, the financial reports divide
expenses into designated and undesignated areas. For costs accrued by
the pilot associations generally, such as employee benefits, for
example, the cost is divided between the designated and undesignated
areas on a pro rata basis. The recognized operating expenses for
District One are shown in table 3.
---------------------------------------------------------------------------

\19\ These reports are available in the docket for this
rulemaking.
---------------------------------------------------------------------------

Adjustments have been made by the auditors and are explained in the
auditor's reports, which are available in the docket for this
rulemaking where indicated under the Public Participation and Request
for Comments portion of the preamble.
In the 2019 expenses used as the basis for this rulemaking,
districts used the term ``applicant'' to describe applicant trainees
and persons who would be

[[Page 51056]]

called apprentices (applicant pilots) under the new definition proposed
in this rulemaking. Therefore, when describing past expenses, we use
the term ``applicant'' to match what was reported from 2019, which
includes both applicant and apprentice pilots. We use ``apprentice'' to
distinguish apprentice pilot wages and describe the impacts of the
ratemaking going forward.
There was one Director's adjustment for District One, a deduction
for $282,015, the amount of surcharge collected in 2019. As this amount
exceeds the reported 2019 applicant salaries of $227,893, there is no
further Director's adjustment. We continue to include applicant
salaries as an allowable expense in the 2022 ratemaking, as it is based
on 2019 operating expenses, when salaries were still an allowable
expense. The apprentice salaries paid in the years 2019, 2020, and 2021
have not been reimbursed in the ratemaking as of publication of this
proposed rule. Applicant salaries (including applicant trainees and
apprentice pilots) will continue to be an allowable operating expense
through the 2024 ratemaking, which uses operating expenses from 2021
where the wages for apprentice pilots were still authorized as
operating expenses. Starting in the 2025 ratemaking, apprentice pilot
salaries would no longer be included as a 2022 operating expense,
because apprentice pilot wages would have already been factored into
the ratemaking Steps 3 and 4 in calculation of the 2022 rates. Starting
in 2025, the applicant salaries' operating expenses for 2022 will
consist of only applicant trainees (those who are not yet apprentice
pilots).

Table 3--2019 Recognized Expenses for District One
----------------------------------------------------------------------------------------------------------------
Designated Undesignated
--------------------------------
Reported operating expenses for 2019 St. Lawrence Total
River Lake Ontario
----------------------------------------------------------------------------------------------------------------
Applicant Pilot Salaries:
Salaries.................................................... $136,736 $91,157 $227,893
Employee Benefits........................................... 12,506 8,337 20,843
Applicant Subsistence/Travel................................ 30,685 20,567 51,252
Applicant Payroll Tax....................................... 7,943 5,295 13,238
-----------------------------------------------
Total Applicant Pilot Salaries.......................... 187,870 125,356 313,226
Other Pilot Cost:
Subsistence/Travel--Pilots.................................. 667,071 444,714 1,111,785
License Insurance--Pilots................................... 43,162 28,774 71,936
Payroll Taxes--Pilots....................................... 184,884 123,256 308,140
Other....................................................... 136,178 90,784 226,962
-----------------------------------------------
Total other pilotage costs.............................. 1,031,295 687,528 1,718,823
Pilot Boat and Dispatch Costs:
Pilot Boat Expense (Operating).............................. 360,276 240,184 600,460
Certified Public Accountant (CPA) Deduction (D1-19-01), (D1- 138,093 92,062 230,155
19-02).....................................................
Dispatch Expense............................................ 82,722 55,148 137,870
Payroll Taxes............................................... 22,412 14,941 37,353
-----------------------------------------------
Total Pilot and Dispatch Costs.......................... 603,503 402,335 1,005,838
Administrative Expenses:
Legal--General Counsel...................................... 34,558 23,038 57,596
Legal--Shared Counsel (K&L Gates)........................... 55,318 36,879 92,197
Legal--USCG Intervener Litigation........................... 28,765 19,177 47,942
Office Rent................................................. .............. .............. 0
Insurance................................................... 27,753 18,502 46,255
Employee Benefits........................................... 7,056 4,704 11,760
Payroll Taxes............................................... 5,236 3,491 8,727
Other Taxes................................................. 61,822 41,215 103,037
Real Estate Taxes........................................... 22,787 15,191 37,978
Travel...................................................... 34,617 23,078 57,695
Depreciation/Auto Leasing/Other............................. 107,584 71,723 179,307
CPA Deduction (D1-19-01).................................... (52,291) (34,861) (87,152)
Interest.................................................... 24,339 16,226 40,565
CPA Deduction (D1-19-01).................................... (24,339) (16,226) (40,565)
APA Dues.................................................... 25,838 17,225 43,063
Dues and Subscriptions...................................... 4,080 2,720 6,800
Utilities................................................... 19,221 12,814 32,035
Salaries.................................................... 164,453 109,636 274,089
Accounting/Professional Fees................................ 7,980 5,320 13,300
Other....................................................... 21,908 14,605 36,513
-----------------------------------------------
Total Administrative Expenses........................... 576,685 384,457 961,142
----------------------------------------------------------------------------------------------------------------
Total Expenses (OpEx + Applicant + Pilot Boats + Admin + 2,399,353 1,599,676 3,999,029
Capital).......................................................
Surcharge Collected......................................... (169,209) (112,806) (282,015)
-----------------------------------------------
Total Directors Adjustments............................. (169,209) (112,806) (282,015)
-----------------------------------------------
Total Operating Expenses (OpEx + Adjustments)....... 2,230,144 1,486,870 3,717,014
----------------------------------------------------------------------------------------------------------------

[[Page 51057]]

B. Step 2: Project Operating Expenses, Adjusting for Inflation or
Deflation

Having identified the recognized 2019 operating expenses in Step 1,
the next step is to estimate the current year's operating expenses by
adjusting those expenses for inflation over the 3-year period. We
calculate inflation using the BLS data from the CPI for the Midwest
Region of the United States for the 2020 inflation rate.\20\ Because
the BLS does not provide forecasted inflation data, we use economic
projections from the Federal Reserve for the 2021 and 2022 inflation
modification.\21\ Based on that information, the calculations for Step
2 are as follows:
---------------------------------------------------------------------------

\20\ The 2020 inflation rate is available at https://beta.bls.gov/dataViewer/view/timeseries/CUUR0200SA0. Specifically
the CPI is defined as ``All Urban Consumers (CPI-U), All Items,
1982-4=100''. (Downloaded April 2021)
\21\ The 2021 and 2022 inflation rates are available at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20210317.pdf. We used the PCE median inflation value
found in table 1. (Downloaded March 24, 2021)

Table 4--Adjusted Operating Expenses for District One
----------------------------------------------------------------------------------------------------------------
District One
-----------------------------------------------
Designated Undesignated Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)............................... $2,230,144 $1,486,870 $3,717,014
2020 Inflation Modification (@1%)............................... 22,301 14,869 37,170
2021 Inflation Modification (@2.4%)............................. 54,059 36,042 90,101
2022 Inflation Modification (@2%)............................... 46,130 30,756 76,886
-----------------------------------------------
Adjusted 2021 Operating Expenses............................ 2,352,634 1,568,537 3,921,171
----------------------------------------------------------------------------------------------------------------

C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots

In accordance with the text in Sec. 404.103, we estimate the
number of fully registered pilots in each district. We determine the
number of fully registered pilots based on data provided by the SLSPA.
Using these numbers, we estimate that there will be 18 registered
pilots in 2022 in District One. We determine the number of apprentice
pilots based on input from the district on anticipated retirements and
staffing needs. Using these numbers, we estimate that there will be two
apprentice pilots in 2022 in District One. Based on the seasonal
staffing model discussed in the 2017 ratemaking (see 82 FR 41466), and
our proposed changes to that staffing model, we assign a certain number
of pilots to designated waters and a certain number to undesignated
waters, as shown in table 5. Without rounding up, there would be 7
pilots assigned to the undesignated area of District One (6.8 pilots
which is rounded up to 7 pilots). These numbers are used to determine
the amount of revenue needed in their respective areas.

Table 5--Authorized Pilots
------------------------------------------------------------------------
Item District One
------------------------------------------------------------------------
Proposed Maximum Number of Pilots (per Sec. 18
401.220(a)) \22\.......................................
2022 Authorized Pilots (total).......................... 18
Pilots Assigned to Designated Areas..................... 10
Pilots Assigned to Undesignated Areas................... 8
2022 Apprentice Pilots.................................. 2
------------------------------------------------------------------------

D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice
Pilot Wage Benchmark
---------------------------------------------------------------------------

\22\ For a detailed calculation, refer to the Great Lakes
Pilotage Rates--2017 Annual Review final rule, which contains the
staffing model. See 82 FR 41466, table 6 at 41480 (August 31, 2017).
---------------------------------------------------------------------------

In this step, we determine the total target pilot compensation for
each area. As we are issuing an ``interim'' ratemaking this year, we
follow the procedure outlined in paragraph (b) of Sec. 404.104, which
adjusts the existing compensation benchmark by inflation. As stated in
section VI.A of the preamble, we are proposing to use a two-step
process to adjust target pilot compensation for inflation. First, we
adjust the 2021 percent target compensation benchmark of $378,925 by
1.8 percent for an adjusted value of $385,746. The adjustment accounts
for the difference in actual fourth quarter (Q4) 2020 ECI inflation,
which is 3.5 percent, and the 2020 PCE estimate of 1.7
percent.^{23 24} The second step accounts for projected
inflation from 2021 to 2022, 2.0 percent.\25\ Based on the projected
2022 inflation estimate, the proposed target compensation benchmark for
2022 is $393,461 per pilot. The target apprentice pilot wage is 36
percent of the target pilot compensation, $141,646 (= $393,461 x 0.36).
---------------------------------------------------------------------------

\23\ Employment Cost Index, Total Compensation for Private
Industry workers in Transportation and Material Moving, Series ID:
CIU2010000520000A.
\24\ CPI for All Urban Consumers, Series ID CUUR0200SA0.
\25\ https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20210317.pdf.

Table 6--Target Pilot Compensation
------------------------------------------------------------------------

------------------------------------------------------------------------
2021 Target Compensation from Final Rule................ $378,925
Difference between Actual 2021 ECI inflation (3.5%) and 1.80%
2020 PCE Estimate (1.7%)...............................
Adjusted 2021 Compensation.............................. $385,746
2021 to 2022 Inflation Factor........................... 2.00%
2022 Target Pilot Compensation.......................... $393,461
2022 Target Apprentice Pilot Wage....................... $141,646
------------------------------------------------------------------------

[[Page 51058]]

Next, we certify that the number of pilots estimated for 2021 is
less than or equal to the number permitted under the proposed changes
to the staffing model in Sec. 401.220(a). The proposed changes to the
staffing model suggest that the number of pilots needed is 18 pilots
for District One, which is less than or equal to 18, the number of
registered pilots provided by the pilot associations. In accordance
with the proposed changes to Sec. 404.104(c), we use the revised
target individual compensation level to derive the total pilot
compensation by multiplying the individual target compensation by the
estimated number of registered pilots for District One, as shown in
table 7. We estimate that the number of apprentice pilots with limited
registration needed will be two for District One in the 2022 season.
The total target wages for apprentices are allocated with 60 percent
for the designated area, and 40 percent for the undesignated area, in
accordance with the way operating expenses are allocated.

Table 7--Target Compensation for District One
----------------------------------------------------------------------------------------------------------------
District One
-----------------------------------------------
Designated Undesignated Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation....................................... $393,461 $393,461 $393,461
Number of Pilots................................................ 10 8 18
-----------------------------------------------
Total Target Pilot Compensation............................. $3,934,610 $3,147,688 $7,082,298
Target Apprentice Pilot Wage.................................... $141,646 $141,646 $141,646
Number of Apprentice Pilots..................................... .............. .............. 2
-----------------------------------------------
Total Target Apprentice Pilot Wages......................... $169,975 $113,317 $283,292
----------------------------------------------------------------------------------------------------------------

E. Step 5: Project Working Capital Fund

Next, we calculate the working capital fund revenues needed for
each area. First, we add the figures for projected operating expenses,
total pilot compensation, and total target apprentice pilot wage for
each area. Next, we find the preceding year's average annual rate of
return for new issues of high-grade corporate securities. Using Moody's
data, the number is 2.4767 percent.\26\ By multiplying the two figures,
we obtain the working capital fund contribution for each area, as shown
in table 8.
---------------------------------------------------------------------------

\26\ Moody's Seasoned Aaa Corporate Bond Yield, average of 2020
monthly data. The Coast Guard uses the most recent year of complete
data. Moody's is taken from Moody's Investors Service, which is a
bond credit rating business of Moody's Corporation. Bond ratings are
based on creditworthiness and risk. The rating of ``Aaa'' is the
highest bond rating assigned with the lowest credit risk. See
https://fred.stlouisfed.org/series/AAA. (Downloaded March 26, 2021)

Table 8--Working Capital Fund Calculation for District One
----------------------------------------------------------------------------------------------------------------
District One
-----------------------------------------------
Designated Undesignated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $2,352,634 $1,568,537 $3,921,171
Total Target Pilot Compensation (Step 4)........................ 3,934,610 3,147,688 7,082,298
Total Target Apprentice Pilot Wages (Step 4).................... 169,975 113,317 283,292
-----------------------------------------------
Total 2022 Expenses......................................... 6,457,219 4,829,542 11,286,761
----------------------------------------------------------------------------------------------------------------
Working Capital Fund (2.48%).................................... 159,924 119,612 279,536
----------------------------------------------------------------------------------------------------------------

F. Step 6: Project Needed Revenue

In this step, we add all the expenses accrued to derive the total
revenue needed for each area. These expenses include the projected
operating expenses (from Step 2), the total pilot compensation (from
Step 4), total target apprentice pilot wage (from Step 4), and the
working capital fund contribution (from Step 5). We show these
calculations in table 9.

Table 9--Revenue Needed for District One
----------------------------------------------------------------------------------------------------------------
District One
-----------------------------------------------
Designated Undesignated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $2,352,634 $1,568,537 $3,921,171
Total Target Pilot Compensation (Step 4)........................ 3,934,610 3,147,688 7,082,298
Total Target Apprentice Pilot Wages (Step 4).................... 169,975 113,317 283,292
Working Capital Fund (Step 5)................................... 159,924 119,612 279,536
-----------------------------------------------
Total Revenue Needed........................................ 6,617,143 4,949,154 11,566,297
----------------------------------------------------------------------------------------------------------------

[[Page 51059]]

G. Step 7: Calculate Initial Base Rates

Having determined the revenue needed for each area in the previous
six steps, to develop an hourly rate we divide that number by the
expected number of hours of traffic. Step 7 is a two-part process. In
the first part, we calculate the 10-year average of traffic in District
One, using the total time on task or pilot bridge hours.\27\ Because we
calculate separate figures for designated and undesignated waters,
there are two parts for each calculation. We show these values in table
10.
---------------------------------------------------------------------------

\27\ To calculate the time on task for each district, the Coast
Guard uses billing data from the Great Lakes Pilotage Management
System (GLPMS). We pull the data from the system filtering by
district, year, job status (we only include closed jobs), and
flagging code (we only include U.S. jobs). After downloading the
data, we remove any overland transfers from the dataset, if
necessary, and sum the total bridge hours, by area. We then subtract
any non-billable delay hours from the total.

Table 10--Time on Task for District One
[Hours]
------------------------------------------------------------------------
District One
Year -------------------------------
Designated Undesignated
------------------------------------------------------------------------
2020.................................... 6,265 7,560
2019.................................... 8,232 8,405
2018.................................... 6,943 8,445
2017.................................... 7,605 8,679
2016.................................... 5,434 6,217
2015.................................... 5,743 6,667
2014.................................... 6,810 6,853
2013.................................... 5,864 5,529
2012.................................... 4,771 5,121
2011.................................... 5,045 5,377
-------------------------------
Average............................. 6,271 6,885
------------------------------------------------------------------------

Table 11--Initial Rate Calculations for District One
------------------------------------------------------------------------
Designated Undesignated
------------------------------------------------------------------------
Revenue Needed (Step 6)................. $6,617,143 $4,949,154
Average Time on Task (Hours)............ 6,271 6,885
Initial Rate............................ $1,055 $719
------------------------------------------------------------------------

H. Step 8: Calculate Average Weighting Factors by Area

In this step, we calculate the average weighting factor for each
designated and undesignated area. We collect the weighting factors, set
forth in 46 CFR 401.400, for each vessel trip. Using this database, we
calculate the average weighting factor for each area using the data
from each vessel transit from 2014 onward, as shown in tables 12 and
13.\28\
---------------------------------------------------------------------------

\28\ To calculate the number of transits by vessel class, we use
the billing data from GLPMS and SeaPro, filtering by district, year,
job status (we only include closed jobs), and flagging code (we only
include U.S. jobs). We then count the number of jobs by vessel class
and area. (SeaPro, used by all three pilot districts, is the
approved dispatch and invoicing system that tracks pilot and vessel
transits in place of the GLPMS.)

Table 12--Average Weighting Factor for District One, Designated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014).................................................. 31 1 31
Class 1 (2015).................................................. 41 1 41
Class 1 (2016).................................................. 31 1 31
Class 1 (2017).................................................. 28 1 28
Class 1 (2018).................................................. 54 1 54
Class 1 (2019).................................................. 72 1 72
Class 1 (2020).................................................. 8 1 8
Class 2 (2014).................................................. 285 1.15 327.75
Class 2 (2015).................................................. 295 1.15 339.25
Class 2 (2016).................................................. 185 1.15 212.75
Class 2 (2017).................................................. 352 1.15 404.8
Class 2 (2018).................................................. 559 1.15 642.85
Class 2 (2019).................................................. 378 1.15 434.7
Class 2 (2020).................................................. 560 1.15 644
Class 3 (2014).................................................. 50 1.3 65
Class 3 (2015).................................................. 28 1.3 36.4
Class 3 (2016).................................................. 50 1.3 65
Class 3 (2017).................................................. 67 1.3 87.1
Class 3 (2018).................................................. 86 1.3 111.8
Class 3 (2019).................................................. 122 1.3 158.6
Class 3 (2020).................................................. 67 1.3 87.1
Class 4 (2014).................................................. 271 1.45 392.95
Class 4 (2015).................................................. 251 1.45 363.95
Class 4 (2016).................................................. 214 1.45 310.3
Class 4 (2017).................................................. 285 1.45 413.25
Class 4 (2018).................................................. 393 1.45 569.85

[[Page 51060]]

Class 4 (2019).................................................. 730 1.45 1058.5
Class 4 (2020).................................................. 427 1.45 619.15
-----------------------------------------------
Total....................................................... 5,920 .............. 7,610
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits/number of transits). .............. 1.29 ..............
----------------------------------------------------------------------------------------------------------------

Table 13--Average Weighting Factor for District One, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014).................................................. 25 1 25
Class 1 (2015).................................................. 28 1 28
Class 1 (2016).................................................. 18 1 18
Class 1 (2017).................................................. 19 1 19
Class 1 (2018).................................................. 22 1 22
Class 1 (2019).................................................. 30 1 30
Class 1 (2020).................................................. 3 1 3
Class 2 (2014).................................................. 238 1.15 273.7
Class 2 (2015).................................................. 263 1.15 302.45
Class 2 (2016).................................................. 169 1.15 194.35
Class 2 (2017).................................................. 290 1.15 333.5
Class 2 (2018).................................................. 352 1.15 404.8
Class 2 (2019).................................................. 366 1.15 420.9
Class 2 (2020).................................................. 358 1.15 411.7
Class 3 (2014).................................................. 60 1.3 78
Class 3 (2015).................................................. 42 1.3 54.6
Class 3 (2016).................................................. 28 1.3 36.4
Class 3 (2017).................................................. 45 1.3 58.5
Class 3 (2018).................................................. 63 1.3 81.9
Class 3 (2019).................................................. 58 1.3 75.4
Class 3 (2020).................................................. 35 1.3 45.5
Class 4 (2014).................................................. 289 1.45 419.05
Class 4 (2015).................................................. 269 1.45 390.05
Class 4 (2016).................................................. 222 1.45 321.9
Class 4 (2017).................................................. 285 1.45 413.25
Class 4 (2018).................................................. 382 1.45 553.9
Class 4 (2019).................................................. 326 1.45 472.7
Class 4 (2020).................................................. 334 1.45 484.3
-----------------------------------------------
Total....................................................... 4,619 .............. 5,972
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits/number of transits). .............. 1.29 ..............
----------------------------------------------------------------------------------------------------------------

I. Step 9: Calculate Revised Base Rates

In this step, we revise the base rates so that once the impact of
the weighting factors is considered; the total cost of pilotage will be
equal to the revenue needed. To do this, we divide the initial base
rates calculated in Step 7 by the average weighting factors calculated
in Step 8, as shown in table 14.

Table 14--Revised Base Rates for District One
----------------------------------------------------------------------------------------------------------------
Revised Rate
Average (initial rate
Area Initial rate weighting average
(step 7) factor (step weighting
8) factor)
----------------------------------------------------------------------------------------------------------------
District One: Designated........................................ $1,055 1.29 $818
District One: Undesignated...................................... 719 1.29 557
----------------------------------------------------------------------------------------------------------------

J. Step 10: Review and Finalize Rates

[[Page 51061]]

pilots, the Director is not proposing any alterations to the rates in
this step. We propose to modify Sec. 401.405(a)(1) and (2) to reflect
the final rates shown in table 15.

Table 15--Proposed Final Rates for District One
----------------------------------------------------------------------------------------------------------------
Final 2021 Proposed 2022
Area Name pilotage rate pilotage rate
----------------------------------------------------------------------------------------------------------------
District One: Designated...................... St. Lawrence River.............. $800 $818
District One: Undesignated.................... Lake Ontario.................... 498 557
----------------------------------------------------------------------------------------------------------------

District Two

A. Step 1: Recognize Previous Operating Expenses

Step 1 in our ratemaking methodology requires that the Coast Guard
review and recognize the previous year's operating expenses (Sec.
404.101). To do so, we begin by reviewing the independent accountant's
financial reports for each association's 2019 expenses and
revenues.\29\ For accounting purposes, the financial reports divide
expenses into designated and undesignated areas. For costs accrued by
the pilot associations generally, such as employee benefits, for
example, the cost is divided between the designated and undesignated
areas on a pro rata basis. The recognized operating expenses for
District Two are shown in table 16.
---------------------------------------------------------------------------

\29\ These reports are available in the docket for this 2022
ratemaking rulemaking (see Docket No. USCG-2021-0431).
---------------------------------------------------------------------------

Adjustments made by the auditors are explained in the auditors'
reports (available in the docket where indicated in the Public
Participation and Request for Comments portion of this document).
In the 2019 expenses used as the basis for this rulemaking,
districts used the term ``applicant'' to describe applicant trainees
and persons who would be called apprentices under the new definition
proposed in this rulemaking. Therefore, when describing past expenses,
we use the term ``applicant'' to match what was reported from 2019, but
use ``apprentice'' to distinguish the impacts of the ratemaking going
forward.
There are two Director's adjustments for District Two. The first
deduction is $173,818, the amount of surcharge collected in 2019 to
recoup expenses of one applicant pilot, which is greater than the
allowable surcharge of $150,000 per applicant pilot. The second
deduction of $287,836 reduces the allowable expenses for applicant
pilot salaries to 36 percent of target pilot compensation. District Two
reported $417,395 in expenses for the salary of a single applicant
pilot, more than the salary of a fully registered pilot. Using the 36
percent target, the allowable applicant salary would have been
$129,559, meaning the district paid an excess of $287,836 in applicant
salaries ($417,395-$129,559 = $287,836). We continue to include
applicant salaries as an allowable expense in the 2022 ratemaking as it
is based on 2019 operating expenses, when salaries were still an
allowable expense. The apprentice salaries paid in the years 2019,
2020, and 2021 have not been reimbursed in the ratemaking as of
publication of this proposed rule. Applicant salaries (including
applicant trainees and apprentice pilots) will continue to be an
allowable operating expense through the 2024 ratemaking, which uses
operating expenses from 2021, where the wages for apprentice pilots
were still authorized as operating expenses. Starting in the 2025
ratemaking, apprentice pilot salaries would no longer be included as a
2022 operating expense, because apprentice pilot wages would have
already been factored into the ratemaking Steps 3 and 4 in calculation
of the 2022 rates. Starting in 2025, the applicant salaries' operating
expenses for 2022 will consist of only applicant trainees (those who
are not yet apprentice pilots).

Table 16--2019 Recognized Expenses for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-----------------------------------------------
Undesignated Designated
Reported operating expenses for 2019 --------------------------------
SES to Port Total
Lake Erie Huron
----------------------------------------------------------------------------------------------------------------
Total Other Pilotage Costs:
Subsistence/Travel--Pilots.................................. $140,909 $211,363 $352,272
Hotel/Lodging Cost.......................................... 49,800 74,700 124,500
License Insurance........................................... 730 1,095 1,825
Payroll Taxes............................................... 90,091 135,137 225,228
Insurance................................................... 95,470 143,206 238,676
Training.................................................... 6,428 9,642 16,070
Other....................................................... 221 331 552
-----------------------------------------------
Total Other Pilotage Costs.............................. 383,649 575,474 959,123
Total Applicant Pilotage Cost:
Applicant Salaries.......................................... 166,958 250,437 417,395
Applicant Health Insurance.................................. 80 120 200
Applicant Subsistence/Travel................................ 5,729 8,593 14,322
Applicant Hotel/Lodging Cost................................ 3,984 5,976 9,960

[[Page 51062]]

Applicant Payroll Tax....................................... 5,717 8,576 14,293
-----------------------------------------------
Total Applicant Cost.................................... 182,468 273,702 456,170
Pilot Boat and Dispatch Costs:
Pilot Boat Cost............................................. 210,948 316,422 527,370
Employee Benefits........................................... 96,959 145,438 242,397
Payroll Taxes............................................... 13,178 19,767 32,945
-----------------------------------------------
Total Pilot Boat and Dispatch Costs..................... 321,085 481,627 802,712
Administrative Expense:
Legal--General Counsel...................................... 4,430 6,645 11,075
Legal--Shared Counsel (K&L Gates)........................... 22,696 34,045 56,741
Office Rent................................................. 27,627 41,440 69,067
Insurance................................................... 11,085 16,627 27,712
Employee Benefits........................................... 34,093 51,139 85,232
Payroll Taxes............................................... 5,259 7,888 13,147
Other Taxes................................................. 36,484 54,726 91,210
Real Estate Taxes........................................... 7,905 11,858 19,763
Depreciation/Auto Lease/Other............................... 12,248 18,371 30,619
Interest.................................................... 320 481 801
APA Dues.................................................... 14,698 22,048 36,746
Dues and Subscriptions...................................... 1,912 2,868 4,780
Utilities................................................... 18,910 28,366 47,276
Salaries--Admin Employees................................... 49,924 74,885 124,809
Accounting.................................................. 13,452 20,178 33,630
Other........................................................... 18,322 27,483 45,805
-----------------------------------------------
Total Administrative Expenses........................... 279,365 419,048 698,413
----------------------------------------------------------------------------------------------------------------
Total OpEx (Pilot Costs + Applicant Cost + Pilot Boats + Admin). 1,166,567 1,749,851 2,916,418
Directors Adjustments--Applicant Surcharge Collected........ (69,527) (104,291) (173,818)
Directors Adjustments--Excess Applicant Salary Paid......... (115,134) (172,701) (287,836)
-----------------------------------------------
Total Director's Adjustments............................ (184,661) (276,992) (461,654)
-----------------------------------------------
Total Operating Expenses (OpEx + Adjustments)....... 981,906 1,472,859 2,454,764
----------------------------------------------------------------------------------------------------------------
* Values may not sum due to rounding.

B. Step 2: Project Operating Expenses, Adjusting for Inflation or
Deflation

Having identified the recognized 2019 operating expenses in Step 1,
the next step is to estimate the current year's operating expenses by
adjusting those expenses for inflation over the 3-year period.
We calculate inflation using the BLS data from the CPI for the
Midwest Region of the United States for the 2020 inflation rate.\30\
Because the BLS does not provide forecasted inflation data, we use
economic projections from the Federal Reserve for the 2021 and 2022
inflation modification.\31\ Based on that information, the calculations
for Step 2 are as follows:
---------------------------------------------------------------------------

\30\ The 2020 inflation rate is available at https://beta.bls.gov/dataViewer/view/timeseries/CUUR0200SA0. Specifically
the CPI is defined as ``All Urban Consumers (CPI-U), All Items,
1982-4=100.'' (Downloaded April 2021)
\31\ The 2021 and 2022 inflation rates are available at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20210317.pdf. We used the PCE median inflation value
found in table 1. (Downloaded March 24, 2021)

Table 17--Adjusted Operating Expenses for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)............................... $981,906 $1,472,859 $2,454,764
2020 Inflation Modification (@1%)............................... 9,819 14,729 24,548
2021 Inflation Modification (@2.4%)............................. 23,801 35,702 59,503
2022 Inflation Modification (@2%)............................... 20,311 30,466 50,777
-----------------------------------------------
Adjusted 2022 Operating Expenses............................ 1,035,837 1,553,756 2,589,592
----------------------------------------------------------------------------------------------------------------

[[Page 51063]]

C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots

In accordance with the text in Sec. 404.103, we estimate the
number of registered pilots in each district. We determine the number
of registered pilots based on data provided by the LPA. Using these
numbers, we estimate that there will be 16 registered pilots in 2022 in
District Two. We determine the number of apprentice pilots based on
input from the district on anticipated retirements and staffing needs.
Using these numbers, we estimate that there will be two apprentice
pilots in 2022 in District Two. Furthermore, based on the seasonal
staffing model discussed in the 2017 ratemaking (see 82 FR 41466) and
our proposed changes to that staffing model, we assign a certain number
of pilots to designated waters and a certain number to undesignated
waters, as shown in table 18. Without rounding up, there would be 8
pilots assigned to the undesignated area of District Two (8.6 pilots
which is rounded up to 9 pilots). These numbers are used to determine
the amount of revenue needed in their respective areas.

Table 18--Authorized Pilots
------------------------------------------------------------------------
Item District Two
------------------------------------------------------------------------
Proposed Maximum Number of Pilots (per Sec. 16
401.220(a)) \32\.......................................
2022 Authorized Pilots (total).......................... 16
Pilots Assigned to Designated Areas..................... 7
Pilots Assigned to Undesignated Areas................... 9
2022 Apprentice Pilots.................................. 2
------------------------------------------------------------------------

D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice
Pilot Wage Benchmark
---------------------------------------------------------------------------

\32\ For a detailed calculation refer to the Great Lakes
Pilotage Rates--2017 Annual Review final rule, which contains the
staffing model. See 82 FR 41466, table 6 at 41480 (August 31, 2017).
---------------------------------------------------------------------------

In this step, we determine the total pilot compensation for each
area. As we are issuing an ``interim'' ratemaking this year, we follow
the procedure outlined in paragraph (b) of Sec. 404.104, which adjusts
the existing compensation benchmark by inflation. As stated in section
VI.A of the preamble, we are proposing to use a two-step process to
adjust target pilot compensation for inflation. First, we adjust the
2021 percent target compensation benchmark of $378,925 by multiplying
by 1.8 percent for an adjusted value of $385,746. The adjustment
accounts for the difference in actual Q4 2020 ECI inflation, 3.5
percent, and the 2020 PCE estimate of 1.7 percent.^{33 34} The
second step accounts for projected inflation from 2021 to 2022, which
is 2.0 percent.\35\ The proposed compensation benchmark for 2022 is
$393,461 per pilot, as calculated in table 6. The target apprentice
pilot wage is 36 percent of the target pilot compensation, $141,646 (=
$393,461 x 0.36).
---------------------------------------------------------------------------

\33\ Employment Cost Index, Total Compensation for Private
Industry workers in Transportation and Material Moving, Series ID:
CIU2010000520000A.
\34\ CPI for All Urban Consumers, Series ID CUUR0200SA0.
\35\ https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20210317.pdf.
---------------------------------------------------------------------------

Next, we certify that the number of pilots estimated for 2022 is
less than or equal to the number permitted under the proposed changes
to the staffing model in Sec. 401.220(a). The proposed changes to the
staffing model suggest that the number of pilots needed is 16 pilots
for District Two, which is less than or equal to 16, the number of
registered pilots provided by the pilot associations.\36\
---------------------------------------------------------------------------

\36\ See table 6 of the Great Lakes Pilotage Rates--2017 Annual
Review final rule, 82 FR 41466 at 41480 (August 31, 2017). The
methodology of the staffing model is discussed at length in the
final rule (see pages 41476-41480 for a detailed analysis of the
calculations).
---------------------------------------------------------------------------

Thus, in accordance with Sec. 404.104(c), we use the revised
target individual compensation level to derive the total pilot
compensation by multiplying the individual target compensation by the
estimated number of registered pilots for District Two, as shown in
table 19.

Table 19--Target Compensation for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation....................................... $393,461 $393,461 $393,461
Number of Pilots................................................ 9 7 16
-----------------------------------------------
Total Target Pilot Compensation............................. $3,541,149 $2,754,227 $6,295,376
Target Apprentice Pilot Wage.................................... $141,646 $141,646 $141,646
Number of Apprentice Pilots..................................... .............. .............. 2
-----------------------------------------------
Total Target Apprentice Pilot Wages......................... $169,975 $113,317 $283,292
----------------------------------------------------------------------------------------------------------------

E. Step 5: Project Working Capital Fund

Next, we calculate the working capital fund revenues needed for
each area. First, we add the figures for projected operating expenses,
total pilot compensation, and total target apprentice pilot wages for
each area. Next, we find the preceding year's average annual rate of
return for new issues of high-grade corporate securities. Using Moody's
data, the number is 2.4767 percent.\37\ By multiplying the two figures,
we obtain the working capital fund contribution for each area, as shown
in table 20.
---------------------------------------------------------------------------

\37\ See footnote 22 for more information.

[[Page 51064]]

Table 20--Working Capital Fund Calculation for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $1,035,837 $1,553,756 $2,589,592
Total Target Pilot Compensation (Step 4)........................ 3,541,149 2,754,227 6,295,376
Total Target Apprentice Pilot Wages (Step 4).................... 169,975 113,317 283,292
-----------------------------------------------
Total 2022 Expenses......................................... 4,746,961 4,421,300 9,168,260
----------------------------------------------------------------------------------------------------------------
Working Capital Fund (2.48%).................................... 117,566 109,501 227,067
----------------------------------------------------------------------------------------------------------------

F. Step 6: Project Needed Revenue

In this step, we add all the expenses accrued to derive the total
revenue needed for each area. These expenses include the projected
operating expenses (from Step 2), the total pilot compensation (from
Step 4), total target apprentice pilot wages, and the working capital
fund contribution (from Step 5). We show these calculations in table
21.

Table 21--Revenue Needed for District Two
----------------------------------------------------------------------------------------------------------------
District Two
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $1,035,837 $1,553,756 $2,589,592
Total Target Pilot Compensation (Step 4)........................ 3,541,149 2,754,227 6,295,376
Total Target Apprentice Pilot Wages (Step 4).................... 169,975 113,317 283,292
Working Capital Fund (Step 5)................................... 117,566 109,501 227,067
-----------------------------------------------
Total Revenue Needed........................................ 4,864,527 4,530,801 9,395,327
----------------------------------------------------------------------------------------------------------------

G. Step 7: Calculate Initial Base Rates

Having determined the revenue needed for each area in the previous
six steps, to develop an hourly rate we divide that number by the
expected number of hours of traffic. Step 7 is a two-part process. In
the first part, we calculate the 10-year average of traffic in District
Two, using the total time on task or pilot bridge hours.\38\ Because we
calculate separate figures for designated and undesignated waters,
there are two parts for each calculation. We show these values in table
22.
---------------------------------------------------------------------------

\38\ See footnote 23 for more information.

Table 22--Time on Task for District Two
[Hours]
------------------------------------------------------------------------
District Two
Year -------------------------------
Designated Undesignated
------------------------------------------------------------------------
2020.................................... 6,232 8,401
2019.................................... 6,512 7,715
2018.................................... 6,150 6,655
2017.................................... 5,139 6,074
2016.................................... 6,425 5,615
2015.................................... 6,535 5,967
2014.................................... 7,856 7,001
2013.................................... 4,603 4,750
2012.................................... 3,848 3,922
2011.................................... 3,708 3,680
-------------------------------
Average............................. 5,701 5,978
------------------------------------------------------------------------

Next, we derive the initial hourly rate by dividing the revenue
needed by the average number of hours for each area. This produces an
initial rate, which is necessary to produce the revenue needed for each
area, assuming the amount of traffic is as expected. The calculations
for each area are set forth in table 23. The initial rate for the
designated area is lower than last year's rate because of the increase
in bridge hours shown as the average time on task, making the
denominator of the revenue needed divided by bridge hours larger, and
therefore making the initial rate lower.

[[Page 51065]]

Table 23--Initial Rate Calculations for District Two
------------------------------------------------------------------------
Item Undesignated Designated
------------------------------------------------------------------------
Revenue Needed (Step 6)................. $4,864,527 $4,530,801
Average Time on Task (Hours)............ 5,701 5,978
Initial Rate............................ $853 $758
------------------------------------------------------------------------

H. Step 8: Calculate Average Weighting Factors by Area

In this step, we calculate the average weighting factor for each
designated and undesignated area. We collect the weighting factors, set
forth in 46 CFR 401.400, for each vessel trip. Using this database, we
calculate the average weighting factor for each area using the data
from each vessel transit from 2014 onward, as shown in tables 24 and
25.\39\
---------------------------------------------------------------------------

\39\ See footnote 24 for more information.

Table 24--Average Weighting Factor for District Two, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014).................................................. 31 1 31
Class 1 (2015).................................................. 35 1 35
Class 1 (2016).................................................. 32 1 32
Class 1 (2017).................................................. 21 1 21
Class 1 (2018).................................................. 37 1 37
Class 1 (2019).................................................. 54 1 54
Class 1 (2020).................................................. 1 1 1
Class 2 (2014).................................................. 356 1.15 409.4
Class 2 (2015).................................................. 354 1.15 407.1
Class 2 (2016).................................................. 380 1.15 437
Class 2 (2017).................................................. 222 1.15 255.3
Class 2 (2018).................................................. 123 1.15 141.45
Class 2 (2019).................................................. 127 1.15 146.05
Class 2 (2020).................................................. 165 1.15 189.75
Class 3 (2014).................................................. 20 1.3 26
Class 3 (2015).................................................. 0 1.3 0
Class 3 (2016).................................................. 9 1.3 11.7
Class 3 (2017).................................................. 12 1.3 15.6
Class 3 (2018).................................................. 3 1.3 3.9
Class 3 (2019).................................................. 1 1.3 1.3
Class 3 (2020).................................................. 1 1.3 1.3
Class 4 (2014).................................................. 636 1.45 922.2
Class 4 (2015).................................................. 560 1.45 812
Class 4 (2016).................................................. 468 1.45 678.6
Class 4 (2017).................................................. 319 1.45 462.55
Class 4 (2018).................................................. 196 1.45 284.20
Class 4 (2019).................................................. 210 1.45 304.50
Class 4 (2020).................................................. 201 1.45 291.45
-----------------------------------------------
Total....................................................... 4,574 .............. 6,012
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits/number of transits). .............. 1.31 ..............
----------------------------------------------------------------------------------------------------------------

Table 25--Average Weighting Factor for District Two, Designated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014).................................................. 20 1 20
Class 1 (2015).................................................. 15 1 15
Class 1 (2016).................................................. 28 1 28
Class 1 (2017).................................................. 15 1 15
Class 1 (2018).................................................. 42 1 42
Class 1 (2019).................................................. 48 1 48
Class 1 (2020).................................................. 7 1 7
Class 2 (2014).................................................. 237 1.15 272.55
Class 2 (2015).................................................. 217 1.15 249.55
Class 2 (2016).................................................. 224 1.15 257.6
Class 2 (2017).................................................. 127 1.15 146.05
Class 2 (2018).................................................. 153 1.15 175.95
Class 2 (2019).................................................. 281 1.15 323.15
Class 2 (2020).................................................. 342 1.15 393.3
Class 3 (2014).................................................. 8 1.3 10.4

[[Page 51066]]

Class 3 (2015).................................................. 8 1.3 10.4
Class 3 (2016).................................................. 4 1.3 5.2
Class 3 (2017).................................................. 4 1.3 5.2
Class 3 (2018).................................................. 14 1.3 18.2
Class 3 (2019).................................................. 1 1.3 1.3
Class 3 (2020).................................................. 5 1.3 6.5
Class 4 (2014).................................................. 359 1.45 520.55
Class 4 (2015).................................................. 340 1.45 493
Class 4 (2016).................................................. 281 1.45 407.45
Class 4 (2017).................................................. 185 1.45 268.25
Class 4 (2018).................................................. 379 1.45 549.55
Class 4 (2019).................................................. 403 1.45 584.35
Class 4 (2020).................................................. 405 1.45 587.25
-----------------------------------------------
Total....................................................... 4,152 .............. 5,461
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits/number of transits). .............. 1.32 ..............
----------------------------------------------------------------------------------------------------------------

I. Step 9: Calculate Revised Base Rates

In this step, we revise the base rates so that once the impact of
the weighting factors is considered, the total cost of pilotage will be
equal to the revenue needed. To do this, we divide the initial base
rates calculated in Step 7 by the average weighting factors calculated
in Step 8, as shown in table 26.

Table 26--Revised Base Rates for District Two
----------------------------------------------------------------------------------------------------------------
Revised rate
Average (initial rate
Area Initial rate weighting average
(step 7) factor (step weighting
8) factor)
----------------------------------------------------------------------------------------------------------------
District Two: Designated........................................ $758 1.32 $574
District Two: Undesignated...................................... 853 1.31 651
----------------------------------------------------------------------------------------------------------------

J. Step 10: Review and Finalize Rates

In this step, the Director reviews the rates set forth by the
staffing model and ensures that they meet the goal of ensuring safe,
efficient, and reliable pilotage. To establish this, the Director
considers whether the proposed rates incorporate appropriate
compensation for pilots to handle heavy traffic periods, and whether
there is a sufficient number of pilots to handle those heavy traffic
periods. The Director also considers whether the proposed rates would
cover operating expenses and infrastructure costs, and takes average
traffic and weighting factors into consideration. Based on this
information, the Director is not proposing any alterations to the rates
in this step. The proposed 2021 rate for the designated area of
District Two is lower than the 2020 final rate because of the increased
traffic shown in Step 7. We propose to modify Sec. 401.405(a)(3) and
(4) to reflect the final rates shown in table 27.

Table 27--Proposed Final Rates for District Two
----------------------------------------------------------------------------------------------------------------
Final 2020 Proposed 2021
Area Name pilotage rate pilotage rate
----------------------------------------------------------------------------------------------------------------
District Two: Designated...................... Navigable waters from Southeast $580 $574
Shoal to Port Huron, MI.
District Two: Undesignated.................... Lake Erie....................... 566 651
----------------------------------------------------------------------------------------------------------------

District Three

A. Step 1: Recognize Previous Operating Expenses

Step 1 in our ratemaking methodology requires that the Coast Guard
review and recognize the previous year's operating expenses (Sec.
404.101). To do so, we begin by reviewing the independent accountant's
financial reports for each association's 2018 expenses and
revenues.\40\ For accounting purposes, the financial reports divide
expenses into designated and undesignated areas. For costs accrued by
the pilot associations generally, such as employee benefits, for
example, the cost is divided between the designated and undesignated
areas on a pro rata basis. The recognized operating expenses for
District Three are shown in table 28.
---------------------------------------------------------------------------

\40\ These reports are available in the docket for this
rulemaking (see Docket No. USCG-2019-0736).
---------------------------------------------------------------------------

[[Page 51067]]

term ``applicant'' to describe applicant trainees and persons who would
be called apprentices under the new definition proposed in this
rulemaking. Therefore, when describing past expenses, we use the term
``applicant'' to match what was reported from 2019, but use
``apprentice'' to describe the impacts of the ratemaking going forward.
There are two Director's adjustments for District Three. The first
deduction is $746,802, the amount of surcharge collected in 2019 to
recoup expenses of four applicant pilots, which is greater than the
allowable surcharge of $150,000 per applicant pilot. The second
deduction of $1,921 reduces the allowable expenses for applicant pilots
to 36 percent of target pilot compensation. District Three reported
$520,158 in expenses for the salary of four applicant pilots. Using the
36 percent target, the allowable applicant salary would have been
$129,559 per applicant for a total of $518,237 for four applicant
pilots, meaning the district paid an excess of $1,921 in applicant
salaries ($520,158-$518,237 = $1,921). Applicant salaries (including
applicant trainees and apprentice pilots) will continue to be an
allowable operating expense through the 2024 ratemaking, which uses
operating expenses from 2021 where the wages for apprentice pilots were
still authorized as operating expenses. Starting in the 2025
ratemaking, apprentice pilot salaries would no longer be included as a
2022 operating expense, because apprentice pilot wages would have
already been factored into the ratemaking Steps 3 and 4 in calculation
of the 2022 rates. Starting in 2025, the applicant salaries operating
expenses for 2022 will consist of only applicant trainees (those who
are not apprentice pilots).

Table 28--2019 Recognized Expenses for District Three
----------------------------------------------------------------------------------------------------------------
District Three
------------------------------------------------
Undesignated Designated Undesignated
Reported operating expenses for 2019 ------------------------------------------------ Total
Lakes Huron St. Mary's
and Michigan River Lake Superior
----------------------------------------------------------------------------------------------------------------
Other Pilotage Costs:
Pilot Subsistence/Travel.................... $274,911 $114,586 $144,207 $533,704
Hotel/Lodging Cost.......................... 118,533 49,406 62,178 230,117
License Insurance--Pilots................... 16,171 6,740 8,483 31,394
Payroll Taxes............................... .............. .............. .............. 0
Payroll Tax (D3-19-01)...................... 146,545 61,082 76,871 284,498
Pilot Training.............................. 40,017 16,680 20,991 77,688
Other....................................... 12,551 5,232 6,584 24,367
---------------------------------------------------------------
Total Other Pilotage Costs.............. 608,728 253,726 319,314 1,181,768
Applicant Cost:
Applicant Salaries.......................... 267,933 111,678 140,547 520,158
Applicant Benefits.......................... 77,627 32,356 40,720 150,703
Applicant Payroll Tax....................... 21,713 9,050 11,390 42,153
---------------------------------------------------------------
Total Applicant Cost.................... 367,273 153,084 192,657 713,014
Pilot Boat and Dispatch Costs:
Pilot Boat Costs............................ 415,908 173,356 218,168 807,432
Dispatch Costs.............................. 126,807 52,855 66,518 246,180
Employee Benefits........................... 7,550 3,147 3,960 14,657
Payroll Taxes............................... 10,534 4,391 5,526 20,451
---------------------------------------------------------------
Total Pilot Boat and Dispatch Costs..... 560,799 233,749 294,172 1,088,720
Administrative Cost:
Legal--General Counsel...................... 9,453 3,940 4,958 18,351
Legal--Shared Counsel (K&L Gates)........... 26,858 11,195 14,089 52,142
Legal--USCG Intervener Litigation........... 19,050 7,940 9,993 36,983
Office Rent................................. 3,369 1,404 1,767 6,540
Insurance................................... 27,622 11,513 14,489 53,624
Employee Benefits........................... 77,435 32,276 40,619 150,330
Payroll Tax................................. 18,984 7,913 9,958 36,855
Other Taxes................................. 480 200 252 932
Depreciation/Auto Leasing/Other............. 51,287 21,377 26,903 99,567
Interest.................................... 5,754 2,398 3,018 11,170
APA Dues.................................... 24,311 10,133 12,752 47,196
Dues and Subscriptions...................... 4,198 1,750 2,202 8,150
Utilities................................... 38,585 16,083 20,240 74,908
Salaries.................................... 75,200 31,344 39,447 145,991
Accounting/Professional Fees................ 19,865 8,280 10,420 38,565
Other Expenses.............................. 23,945 9,981 12,561 46,487
CPA Deduction (D3-18-01).................... (4,117) (1,716) (2,160) (7,993)
---------------------------------------------------------------
Total Administrative Expenses........... 422,279 176,011 221,508 819,798
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Other Costs+ Applicant 1,959,079 816,570 1,027,651 3,803,300
Cost + Pilot Boats + Admin)....................
Directors Adjustments--Applicant Surcharge (384,678) (160,339) (201,786) (746,802)
Collected..................................
Directors Adjustments--Excess Applicant (989.36) (412.38) (518.98) (1,921)
Salary Paid................................
---------------------------------------------------------------

[[Page 51068]]

Total Directors Adjustments............. (385,667) (160,751) (202,305) (748,723)
---------------------------------------------------------------
Total Operating Expenses (OpEx + 1,573,412 655,819 825,346 3,054,577
Adjustments).......................
----------------------------------------------------------------------------------------------------------------

B. Step 2: Project Operating Expenses, Adjusting for Inflation or
Deflation

Having identified the recognized 2019 operating expenses in Step 1,
the next step is to estimate the current year's operating expenses by
adjusting those expenses for inflation over the 3-year period.
We calculate inflation using the BLS data from the CPI for the
Midwest Region of the United States for the 2020 inflation rate.\41\
Because the BLS does not provide forecasted inflation data, we use
economic projections from the Federal Reserve for the 2021 and 2022
inflation modification.\42\ Based on that information, the calculations
for Step 2 are as follows:
---------------------------------------------------------------------------

\41\ The 2020 inflation rate is available at https://beta.bls.gov/dataViewer/view/timeseries/CUUR0200SA0. Specifically
the CPI is defined as ``All Urban Consumers (CPI-U), All Items,
1982-4 = 100''. (Downloaded April 2021)
\42\ The 2021 and 2022 inflation rates are available at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20210317.pdf. We used the PCE median inflation value
found in table 1. (Downloaded March 24, 2021)

Table 29--Adjusted Operating Expenses for District Three
----------------------------------------------------------------------------------------------------------------
District Three
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)............................... $2,398,758 $655,819 $3,054,577
2020 Inflation Modification (@1%)............................... 23,988 6,558 30,546
2021 Inflation Modification (@2.4%)............................. 58,146 15,897 74,043
2022 Inflation Modification (@2%)............................... 49,618 13,565 63,183
-----------------------------------------------
Adjusted 2022 Operating Expenses............................ 2,530,510 691,839 3,222,349
----------------------------------------------------------------------------------------------------------------

C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots

In accordance with the text in Sec. 404.104(c), we estimate the
number of registered pilots in each district. We determine the number
of registered pilots based on data provided by the WGLPA. Using these
numbers, we estimate that there will be 22 registered pilots in 2022 in
District Three. We determine the number of apprentice pilots based on
input from the district on anticipated retirements and staffing needs.
Using these numbers, we estimate that there will be five apprentice
pilots in 2022 in District Three. Furthermore, based on the seasonal
staffing model discussed in the 2017 ratemaking (see 82 FR 41466), and
our proposed changes to that staffing model, we assign a certain number
of pilots to designated waters and a certain number to undesignated
waters, as shown in table 30. These numbers are used to determine the
amount of revenue needed in their respective areas.

Table 30--Authorized Pilots
------------------------------------------------------------------------
Item District Three
------------------------------------------------------------------------
Proposed Maximum Number of Pilots (per Sec. 22
401.220(a)) \43\.......................................
2022 Authorized Pilots (total).......................... 22
Pilots Assigned to Designated Areas..................... 4
Pilots Assigned to Undesignated Areas................... 18
2022 Apprentice Pilots.................................. 5
------------------------------------------------------------------------

D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice
Pilot Wage Benchmark
---------------------------------------------------------------------------

\43\ For a detailed calculation, refer to the Great Lakes
Pilotage Rates--2017 Annual Review final rule, which contains the
staffing model. See 82 FR 41466, table 6 at 41480 (August 31, 2017).
---------------------------------------------------------------------------

[[Page 51069]]

2021 to 2022, 2.0 percent.\46\ Based on the projected 2022 inflation
estimate, the proposed compensation benchmark for 2022 is $393,461 per
pilot as shown in table 6. The target apprentice pilot wage is 36
percent of the target pilot compensation, $141,646 (= $393,461 x 0.36).
---------------------------------------------------------------------------

\44\ Employment Cost Index, Total Compensation for Private
Industry workers in Transportation and Material Moving, Series ID:
CIU2010000520000A.
\45\ CPI for All Urban Consumers, Series ID CUUR0200SA0.
\46\ https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20210317.pdf.
---------------------------------------------------------------------------

Next, we certify that the number of pilots estimated for 2022 is
less than or equal to the number permitted under the proposed changes
to the staffing model in Sec. 401.220(a). The proposed changes to the
staffing model suggest that the number of pilots needed is 22 pilots
for District Three, which is less than or equal to 22, the number of
registered pilots provided by the pilot associations.\47\
---------------------------------------------------------------------------

\47\ See Table 6 of the Great Lakes Pilotage Rates--2017 Annual
Review final rule, 82 FR 41466 at 41480 (August 31, 2017). The
methodology of the staffing model is discussed at length in the
final rule (see pages 41476-41480 for a detailed analysis of the
calculations).
---------------------------------------------------------------------------

Table 31--Target Compensation for District Three
----------------------------------------------------------------------------------------------------------------
District Three
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation....................................... $393,461 $393,461 $393,461
Number of Pilots................................................ 18 4 22
-----------------------------------------------
Total Target Pilot Compensation............................. $7,082,298 $1,573,844 $8,656,142
Target Apprentice Pilot Wage.................................... $141,646 $141,646 $141,646
Number of Apprentice Pilots..................................... .............. .............. 5
-----------------------------------------------
Total Target Apprentice Pilot Wages......................... $424,938 $283,292 $708,229.80
----------------------------------------------------------------------------------------------------------------

E. Step 5: Project Working Capital Fund

Next, we calculate the working capital fund revenues needed for
each area. First, we add the figures for projected operating expenses,
total pilot compensation, and total target apprentice pilot wages for
each area. Next, we find the preceding year's average annual rate of
return for new issues of high-grade corporate securities. Using Moody's
data, the number is 2.4767 percent.\48\ By multiplying the two figures,
we obtain the working capital fund contribution for each area, as shown
in table 32.
---------------------------------------------------------------------------

\48\ Moody's Seasoned Aaa Corporate Bond Yield, average of 2020
monthly data. The Coast Guard uses the most recent year of complete
data. Moody's is taken from Moody's Investors Service, which is a
bond credit rating business of Moody's Corporation. Bond ratings are
based on creditworthiness and risk. The rating of ``Aaa'' is the
highest bond rating assigned with the lowest credit risk. See
https://fred.stlouisfed.org/series/AAA. (March 26, 2021)

Table 32--Working Capital Fund Calculation for District Three
----------------------------------------------------------------------------------------------------------------
District Three
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $2,530,510 $691,839 $3,222,349
Total Target Pilot Compensation (Step 4)........................ 7,082,298 1,573,844 8,656,142
Total Target Apprentice Pilot Wages (Step 4).................... 424,938 283,292 708,230
-----------------------------------------------
Total 2022 Expenses......................................... 10,037,746 2,548,975 12,586,721
----------------------------------------------------------------------------------------------------------------
Working Capital Fund (2.48%).................................... 248,602 63,130 311,732
----------------------------------------------------------------------------------------------------------------

F. Step 6: Project Needed Revenue

In this step, we add all the expenses accrued to derive the total
revenue needed for each area. These expenses include the projected
operating expenses (from Step 2), the total pilot compensation (from
Step 4), and the working capital fund contribution (from Step 5). The
calculations are shown in table 33.

Table 33--Revenue Needed for District Three
----------------------------------------------------------------------------------------------------------------
District Three
-----------------------------------------------
Undesignated Designated Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................ $2,530,510 $691,839 $3,222,349
Total Target Pilot Compensation (Step 4)........................ 7,082,298 1,573,844 8,656,142
Total Target Apprentice Pilot Wages (Step 4).................... 424,938 283,292 708,230
Working Capital Fund (Step 5)................................... 248,602 63,130 311,732
-----------------------------------------------
Total Revenue Needed........................................ 10,286,348 2,612,105 12,898,453
----------------------------------------------------------------------------------------------------------------

[[Page 51070]]

G. Step 7: Calculate Initial Base Rates

Having determined the revenue needed for each area in the previous
six steps, to develop an hourly rate we divide that number by the
expected number of hours of traffic. Step 7 is a two-part process. In
the first part, we calculate the 10-year average of traffic in District
Three, using the total time on task or pilot bridge hours.\49\ Because
we calculate separate figures for designated and undesignated waters,
there are two parts for each calculation. We show these values in table
34.
---------------------------------------------------------------------------

\49\ See footnote 22 for more information.

Table 34--Time on Task for District Three
[Hours]
------------------------------------------------------------------------
District Three
Year -------------------------------
Undesignated Designated
------------------------------------------------------------------------
2020.................................... 24,178 3,682
2019.................................... 24,851 3,395
2018.................................... 19,967 3,455
2017.................................... 20,955 2,997
2016.................................... 23,421 2,769
2015.................................... 22,824 2,696
2014.................................... 25,833 3,835
2013.................................... 17,115 2,631
2012.................................... 15,906 2,163
2011.................................... 16,012 1,678
-------------------------------
Average............................. 21,106 2,930
------------------------------------------------------------------------

Table 35--Initial Rate Calculations for District Three
------------------------------------------------------------------------
Undesignated Designated
------------------------------------------------------------------------
Revenue Needed (Step 6)................. $10,287,977 $2,612,550
Average Time on Task (Hours)............ 21,106 2,930
Initial Rate............................ 487 891
------------------------------------------------------------------------

H. Step 8: Calculate Average Weighting Factors by Area

In this step, we calculate the average weighting factor for each
designated and undesignated area. We collect the weighting factors, set
forth in 46 CFR 401.400, for each vessel trip. Using this database, we
calculate the average weighting factor for each area using the data
from each vessel transit from 2014 onward, as shown in tables 36 and
37.\50\
---------------------------------------------------------------------------

\50\ See footnote 23 for more information.

Table 36--Average Weighting Factor for District Three, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014).................................................. 45 1 45
Class 1 (2015).................................................. 56 1 56
Class 1 (2016).................................................. 136 1 136
Class 1 (2017).................................................. 148 1 148
Class 1 (2018).................................................. 103 1 103
Class 1 (2019).................................................. 173 1 173
Class 1 (2020).................................................. 4 1 4
Class 2 (2014).................................................. 274 1.15 315.1
Class 2 (2015).................................................. 207 1.15 238.05
Class 2 (2016).................................................. 236 1.15 271.4
Class 2 (2017).................................................. 264 1.15 303.6
Class 2 (2018).................................................. 169 1.15 194.35
Class 2 (2019).................................................. 279 1.15 320.85
Class 2 (2020).................................................. 395 1.15 454.25
Class 3 (2014).................................................. 15 1.3 19.5
Class 3 (2015).................................................. 8 1.3 10.4
Class 3 (2016).................................................. 10 1.3 13
Class 3 (2017).................................................. 19 1.3 24.7
Class 3 (2018).................................................. 9 1.3 11.7
Class 3 (2019).................................................. 9 1.3 11.7
Class 3 (2020).................................................. 4 1.3 5.2

[[Page 51071]]

Class 4 (2014).................................................. 394 1.45 571.3
Class 4 (2015).................................................. 375 1.45 543.75
Class 4 (2016).................................................. 332 1.45 481.4
Class 4 (2017).................................................. 367 1.45 532.15
Class 4 (2018).................................................. 337 1.45 488.65
Class 4 (2019).................................................. 334 1.45 484.3
Class 4 (2020).................................................. 413 1.45 598.85
-----------------------------------------------
Total for Area 6............................................ 5,115 .............. 6,559
Area 8:
Class 1 (2014).............................................. 3 1 3
Class 1 (2015).............................................. 0 1 0
Class 1 (2016).............................................. 4 1 4
Class 1 (2017).............................................. 4 1 4
Class 1 (2018).............................................. 0 1 0
Class 1 (2019).............................................. 0 1 0
Class 1 (2020).............................................. 1 1 1
Class 2 (2014).............................................. 177 1.15 203.55
Class 2 (2015).............................................. 169 1.15 194.35
Class 2 (2016).............................................. 174 1.15 200.1
Class 2 (2017).............................................. 151 1.15 173.65
Class 2 (2018).............................................. 102 1.15 117.3
Class 2 (2019).............................................. 120 1.15 138
Class 2 (2020).............................................. 239 1.15 274.85
Class 3 (2014).............................................. 3 1.3 3.9
Class 3 (2015).............................................. 0 1.3 0
Class 3 (2016).............................................. 7 1.3 9.1
Class 3 (2017).............................................. 18 1.3 23.4
Class 3 (2018).............................................. 7 1.3 9.1
Class 3 (2019).............................................. 6 1.3 7.8
Class 3 (2020).............................................. 2 1.3 2.6
Class 4 (2014).............................................. 243 1.45 352.35
Class 4 (2015).............................................. 253 1.45 366.85
Class 4 (2016).............................................. 204 1.45 295.8
Class 4 (2017).............................................. 269 1.45 390.05
Class 4 (2018).............................................. 188 1.45 272.6
Class 4 (2019).............................................. 254 1.45 368.3
Class 4 (2020).............................................. 456 1.45 661.2
-----------------------------------------------
Total for Area 8............................................ 3,054 .............. 4,077
-----------------------------------------------
Combined total.......................................... 8,169 .............. 10,636.05
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits/number of transits). .............. 1.30 ..............
----------------------------------------------------------------------------------------------------------------

Table 37--Average Weighting Factor for District Three, Designated Areas
----------------------------------------------------------------------------------------------------------------
Number of Weighting Weighted
Vessel class/year transits factor transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014).................................................. 27 1 27
Class 1 (2015).................................................. 23 1 23
Class 1 (2016).................................................. 55 1 55
Class 1 (2017).................................................. 62 1 62
Class 1 (2018).................................................. 47 1 47
Class 1 (2019).................................................. 45 1 45
Class 1 (2020).................................................. 16 1 16
Class 2 (2014).................................................. 221 1.15 254.15
Class 2 (2015).................................................. 145 1.15 166.75
Class 2 (2016).................................................. 174 1.15 200.1
Class 2 (2017).................................................. 170 1.15 195.5
Class 2 (2018).................................................. 126 1.15 144.9
Class 2 (2019).................................................. 162 1.15 186.3
Class 2 (2020).................................................. 250 1.15 287.5
Class 3 (2014).................................................. 4 1.3 5.2
Class 3 (2015).................................................. 0 1.3 0
Class 3 (2016).................................................. 6 1.3 7.8
Class 3 (2017).................................................. 14 1.3 18.2
Class 3 (2018).................................................. 6 1.3 7.8
Class 3 (2019).................................................. 3 1.3 3.9
Class 3 (2020).................................................. 4 1.3 5.2

[[Page 51072]]

Class 4 (2014).................................................. 321 1.45 465.45
Class 4 (2015).................................................. 245 1.45 355.25
Class 4 (2016).................................................. 191 1.45 276.95
Class 4 (2017).................................................. 234 1.45 339.3
Class 4 (2018).................................................. 225 1.45 326.25
Class 4 (2019).................................................. 308 1.45 446.6
Class 4 (2020).................................................. 385 1.45 558.25
-----------------------------------------------
Total....................................................... 3,469 .............. 4,526
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits/number of transits). .............. 1.30 ..............
----------------------------------------------------------------------------------------------------------------

I. Step 9: Calculate Revised Base Rates

Table 38--Revised Base Rates for District Three
----------------------------------------------------------------------------------------------------------------
Revised rate
Average (initial rate
Area Initial rate weighting average
(step 7) factor (step weighting
8) factor)
----------------------------------------------------------------------------------------------------------------
District Three: Designated...................................... $891 1.30 $685
District Three: Undesignated.................................... 487 1.30 375
----------------------------------------------------------------------------------------------------------------

J. Step 10: Review and Finalize Rates

In this step, the Director reviews the rates set forth by the
staffing model and ensures that they meet the goal of ensuring safe,
efficient, and reliable pilotage. To establish this, the Director
considers whether the proposed rates incorporate appropriate
compensation for pilots to handle heavy traffic periods and whether
there is a sufficient number of pilots to handle those heavy traffic
periods. The Director also considers whether the proposed rates would
cover operating expenses and infrastructure costs, and takes average
traffic and weighting factors into consideration. Based on this
information, the Director is not proposing any alterations to the rates
in this step. We propose to modify Sec. 401.405(a)(5) and (6) to
reflect the final rates shown in table 39.

Table 39--Proposed Final Rates for District Three
----------------------------------------------------------------------------------------------------------------
Final 2020 Proposed 2021
Area Name pilotage rate pilotage rate
----------------------------------------------------------------------------------------------------------------
District Three: Designated.................... St. Marys River................. $586 $685
District Three: Undesignated.................. Lakes Huron, Michigan, and 337 375
Superior.
----------------------------------------------------------------------------------------------------------------

VIII. Regulatory Analyses

We developed this proposed rule after considering numerous statutes
and Executive orders related to rulemaking. A summary of our analyses
based on these statutes or Executive orders follows.

A. Regulatory Planning and Review

Executive Orders 12866 (Regulatory Planning and Review) and 13563
(Improving Regulation and Regulatory Review) direct agencies to assess
the costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying costs and
benefits, reducing costs, harmonizing rules, and promoting flexibility.
The Office of Management and Budget (OMB) has not designated this
proposed rule a significant regulatory action under section 3(f) of
Executive Order 12866. Accordingly, OMB has not reviewed it. A
regulatory analysis (RA) follows. The purpose of this proposed rule is
to establish new base pilotage rates, as 46 U.S.C. 9303(f) requires
that rates be established or reviewed and adjusted each year. The
statute also requires that base rates be established by a full
ratemaking at least once every 5 years, and in years when base rates
are not established, they must be reviewed and, if necessary, adjusted.
The last full ratemaking was concluded in June of 2018.\51\ For this
ratemaking, the Coast Guard estimates an increase in cost of
approximately $3.53 million to industry, an approximate 12-percent
increase, because of the change in revenue needed in 2022 compared to
the revenue needed in 2021.
---------------------------------------------------------------------------

\51\ Great Lakes Pilotage Rates--2018 Annual Review and
Revisions to Methodology (83 FR 26162), published June 5, 2018.
---------------------------------------------------------------------------

Table 40 summarizes proposed changes with no cost impacts or where
the cost impacts are captured in the

[[Page 51073]]

proposed rate change. Table 41 summarizes the affected population,
costs, and benefits of the proposed rate change.

Table 40--Proposed Changes With No Costs or Cost Captured in the Proposed Rate Change
----------------------------------------------------------------------------------------------------------------
Basis for no cost
Change Description Affected or cost captured Benefits
population in the rate
----------------------------------------------------------------------------------------------------------------
Add a definition of apprentice Distinguishes Owners and No cost, strictly Provides clarity
pilot. between operators of 293 a definitional by distinguishing
applicants who vessels change. apprentice pilots
have not yet transiting the from applicant
entered training Great Lakes trainees when
and apprentices, system annually, calculating the
persons approved 56 U.S. Great apprentice pilot
and certified by Lakes pilots, 9 operating
the Director who apprentice expenses,
are participating pilots, and 3 estimates and
in an approved pilotage wage benchmark.
U.S. Great Lakes associations.
pilot training
and qualification
program and meet
all the minimum
requirements
listed in 46 CFR
401.211.
Changes to staffing model....... The Coast Guard is Owners and The total number Rounding up in the
proposing to operators of 293 of pilots is staffing model
modify the vessels accounted for in accounts for
staffing model at transiting the the base pilotage extra staff or
46 CFR Great Lakes rates. For the extra time spent
401.220(a)(3) to system annually, 2022 ratemaking, by the pilot
round up to the 56 U.S. Great this proposed associations
nearest integer, Lakes pilots, 9 change would presidents not
as opposed to the apprentice allow for two performing
existing method, pilots, and 3 additional pilots pilotage service.
which rounds to pilotage that would not Rounding up
the nearest associations. have otherwise allows us to
integer. In been allowed. account for this
total, this would This increases time and promote
increase the the total revenue safety and
maximum number of needed by restorative rest,
allowable pilots $773,281. while minimizing
by 2, adding one delays in
pilot to each of providing
the undesignated pilotage
areas of District services.
One and District
Two.
Adding number of apprentice The Coast Guard is Owners and Total cost of Setting a target
pilots to Step 3 and setting proposing to operators of 293 $1,274,814 for wage of 36% of
target apprentice pilot wage in modify the vessels the wages of 9 registered pilot
Step 4. staffing model at transiting the apprentice pilots compensation
46 CFR 404.103 to Great Lakes for the 2022 better matches
predict the system annually, season. This changes in
number of 56 U.S. Great amount is registered pilot
apprentice pilots Lakes pilots, 9 incorporated into compensation and
each district apprentice the rate increase. inflation and
would need for pilots, and 3 more evenly
the next season. pilotage distributes the
46 CFR 404.103 associations. additional cost
would establish of apprentice
the target pilots compared
apprentice pilot to the surcharge
wage at 36% of method.
registered pilot
compensation for
that year.
----------------------------------------------------------------------------------------------------------------

Table 41--Economic Impacts Due to Proposed Changes
----------------------------------------------------------------------------------------------------------------
Affected
Change Description population Costs Benefits
----------------------------------------------------------------------------------------------------------------
Rate and surcharge changes...... In accordance with Owners and Increase of New rates cover an
46 U.S.C. Chapter operators of 293 $3,527,425 due to association's
93, the Coast vessels change in revenue necessary and
Guard is required transiting the needed for 2022 reasonable
to review and Great Lakes ($33,860,077) operating
adjust base system annually, from revenue expenses.
pilotage rates 56 U.S. Great needed for 2021 Promotes safe,
annually. Lakes pilots, 9 ($30,332,652), as efficient, and
apprentice shown in table 42. reliable pilotage
pilots, and 3 service on the
pilotage Great Lakes.
associations. Provides fair
compensation,
adequate
training, and
sufficient rest
periods for
pilots. Ensures
the association
receives
sufficient
revenues to fund
future
improvements.
----------------------------------------------------------------------------------------------------------------

The Coast Guard is required to review and adjust pilotage rates on
the Great Lakes annually. See sections IV and V of this preamble for
detailed discussions of the legal basis and purpose for this rulemaking
and for background

[[Page 51074]]

information on Great Lakes pilotage ratemaking. Based on our annual
review for this rulemaking, we are proposing to adjust the pilotage
rates for the 2022 shipping season to generate sufficient revenues for
each district to reimburse its necessary and reasonable operating
expenses, fairly compensate trained and rested pilots, and provide an
appropriate working capital fund to use for improvements. The result
would be an increase in rates for all areas in Districts One and Three
and the undesignated area of District Two. The rate for the designated
area of District Two would decrease. These changes would lead to a net
increase in the cost of service to shippers. However, because the
proposed rates would increase for some areas and decrease for others,
the change in per unit cost to each individual shipper would be
dependent on their area of operation, and if they previously paid a
surcharge.
A detailed discussion of our economic impact analysis follows.
Affected Population
This rule would affect U.S. Great Lakes pilots, the 3 pilot
associations, and the owners and operators of 293 oceangoing vessels
that transit the Great Lakes annually. We estimate that there would be
56 registered pilots and 9 apprentice pilots during the 2022 shipping
season. The shippers affected by these rate changes are those owners
and operators of domestic vessels operating ``on register'' (engaged in
foreign trade) and owners and operators of non-Canadian foreign vessels
on routes within the Great Lakes system. These owners and operators
must have pilots or pilotage service as required by 46 U.S.C. 9302.
There is no minimum tonnage limit or exemption for these vessels. The
statute applies only to commercial vessels and not to recreational
vessels. U.S.-flagged vessels not operating on register and Canadian
``lakers,'' which account for most commercial shipping on the Great
Lakes, are not required by 46 U.S.C. 9302 to have pilots. However,
these U.S. and Canadian-flagged lakers may voluntarily choose to engage
a Great Lakes registered pilot. Vessels that are U.S.-flagged may opt
to have a pilot for varying reasons, such as unfamiliarity with
designated waters and ports, or for insurance purposes.
The Coast Guard used billing information from the years 2018
through 2020 from the Great Lakes Pilotage Management System (GLPMS) to
estimate the average annual number of vessels affected by the rate
adjustment. The GLPMS tracks data related to managing and coordinating
the dispatch of pilots on the Great Lakes, and billing in accordance
with the services. As described in Step 7 of the methodology, we use a
10-year average to estimate the traffic. We used 3 years of the most
recent billing data to estimate the affected population. When we
reviewed 10 years of the most recent billing data, we found the data
included vessels that have not used pilotage services in recent years.
We believe using 3 years of billing data is a better representation of
the vessel population that is currently using pilotage services and
would be impacted by this rulemaking. We found that 514 unique vessels
used pilotage services during the years 2017 through 2019. That is,
these vessels had a pilot dispatched to the vessel, and billing
information was recorded in the GLPMS or SeaPro. Of these vessels, 465
were foreign-flagged vessels and 49 were U.S.-flagged vessels. As
stated previously, U.S.-flagged vessels not operating on register are
not required to have a registered pilot per 46 U.S.C. 9302, but they
can voluntarily choose to have one.
Numerous factors affect vessel traffic, which varies from year to
year. Therefore, rather than using the total number of vessels over the
time period, we took an average of the unique vessels using pilotage
services from the years 2018 through 2020 as the best representation of
vessels estimated to be affected by the rates in this rulemaking. From
2018 through 2020, an average of 293 vessels used pilotage services
annually.\52\ On average, 275 of these vessels were foreign-flagged
vessels and 19 were U.S.-flagged vessels that voluntarily opted into
the pilotage service.
---------------------------------------------------------------------------

\52\ Some vessels entered the Great Lakes multiple times in a
single year, affecting the average number of unique vessels
utilizing pilotage services in any given year.
---------------------------------------------------------------------------

Total Cost to Shippers
The proposed rate changes resulting from this adjustment to the
rates would result in a net increase in the cost of service to
shippers. However, the proposed change in per unit cost to each
individual shipper would be dependent on their area of operation.
The Coast Guard estimates the effect of the rate changes on
shippers by comparing the total projected revenues needed to cover
costs in 2021 with the total projected revenues to cover costs in 2022,
including any temporary surcharges we have authorized.\53\ We set
pilotage rates so pilot associations receive enough revenue to cover
their necessary and reasonable expenses. Shippers pay these rates when
they have a pilot as required by 46 U.S.C. 9302. Therefore, the
aggregate payments of shippers to pilot associations are equal to the
projected necessary revenues for pilot associations. The revenues each
year represent the total costs that shippers must pay for pilotage
services. The change in revenue from the previous year is the
additional cost to shippers discussed in this rule.
---------------------------------------------------------------------------

\53\ While the Coast Guard implemented a surcharge in 2019, we
are not proposing any surcharges for 2022.
---------------------------------------------------------------------------

The impacts of the rate changes on shippers are estimated from the
district pilotage projected revenues (shown in tables 9, 21, and 33 of
this preamble). The Coast Guard estimates that for the 2022 shipping
season, the projected revenue needed for all three districts is
$33,860,077.
To estimate the change in cost to shippers from this rule, the
Coast Guard compared the 2022 total projected revenues to the 2021
projected revenues. Because we review and prescribe rates for the Great
Lakes Pilotage annually, the effects are estimated as a single-year
cost rather than annualized over a 10-year period. In the 2021
rulemaking, we estimated the total projected revenue needed for 2021 as
$30,332,652.\54\ This is the best approximation of 2021 revenues, as at
the time of this publication the Coast Guard does not have enough
audited data available for the 2021 shipping season to revise these
projections.\55\ Table 42 shows the revenue projections for 2021 and
2022 and details the additional cost increases to shippers by area and
district as a result of the rate changes on traffic in Districts One,
Two, and Three.
---------------------------------------------------------------------------

\54\ 85 FR 20088, see table 41.
\55\ The proposed rates for 2021 do not account for the impacts
COVID-19 may have had on shipping traffic and subsequently pilotage
revenue, as we do not have complete data for 2020. The rates for
2022 will take into account for all and any pertinent impacts of
COVID-19 on shipping traffic, because that future ratemaking will
include 2020 traffic data. However, the Coast Guard uses 10-year
average when calculating traffic in order to smooth out variations
in traffic caused by global economic conditions, such as those
caused by the COVID-19 pandemic.

[[Page 51075]]

Table 42--Effect of the Rule by Area and District
[$U.S.; non-discounted]
----------------------------------------------------------------------------------------------------------------
Change in
Area Revenue needed Revenue needed costs of this
in 2021 in 2022 proposed rule
----------------------------------------------------------------------------------------------------------------
Total, District One............................................. $10,620,941 $11,566,297 $945,356
Total, District Two............................................. 8,506,705 9,395,327 888,622
Total, District Three........................................... 11,205,006 12,898,453 1,693,447
-----------------------------------------------
System Total................................................ 30,332,652 33,860,077 3,527,425
----------------------------------------------------------------------------------------------------------------

The resulting difference between the projected revenue in 2021 and
the projected revenue in 2022 is the annual change in payments from
shippers to pilots as a result of the rate change imposed by this
proposed rule. The effect of the rate change to shippers varies by area
and district. After taking into account the change in pilotage rates,
the rate changes would lead to affected shippers operating in District
One experiencing an increase in payments of $945,356 over the previous
year. District Two and District Three would experience an increase in
payments of $888,622 and $1,693,447, respectively, when compared with
2021. The overall adjustment in payments would be an increase in
payments by shippers of $3,527,425 across all three districts (a 12-
percent increase when compared with 2021). Again, because the Coast
Guard reviews and sets rates for Great Lakes pilotage annually, we
estimate the impacts as single-year costs rather than annualizing them
over a 10-year period.
Table 43 shows the difference in revenue by revenue-component from
2021 to 2022 and presents each revenue-component as a percentage of the
total revenue needed. In both 2021 and 2022, the largest revenue-
component was pilotage compensation (71 percent of total revenue needed
in 2021 and 65 percent of total revenue needed in 2022), followed by
operating expenses (26 percent of total revenue needed in 2021 and 29
percent of total revenue needed in 2022).

Table 43--Difference in Revenue by Component
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percentage of Percentage of Difference (2022 Percentage
Revenue-component Revenue needed total revenue Revenue needed total revenue revenue- 2021 change from
in 2021 needed in 2021 in 2022 needed in 2022 revenue) previous year
--------------------------------------------------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses........................... $8,876,850 29 $9,733,112 29 $856,262 10
Total Target Pilot Compensation....................... 20,461,950 67 22,033,816 65 1,571,866 8
Total Target Apprentice Pilot Wages................... .............. .............. 1,274,814 4 1,274,814 ..............
Working Capital Fund.................................. 993,852 3 818,335 2 (175,517) (18)
-------------------------------------------------------------------------------------------------
Total Revenue Needed.............................. 30,332,652 100 33,860,077 100 3,527,425 12
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Totals may not sum due to rounding.

As stated above, we estimate that there will be a total increase in
revenue needed by the pilot associations of $3,527,425. This represents
an increase in revenue needed for target pilot compensation of
$1,571,866, the now-codified revenue needed for total apprentice pilot
wages of $1,274,814, and an increase in the revenue needed for adjusted
operating expenses of $856,262 and a decrease in the revenue needed for
the working capital fund of ($175,517).
The majority of the increase in revenue needed, $1,571,866, is the
result of changes to target pilot compensation. These changes are due
to three factors: (1) The proposed changes to adjust 2021 pilotage
compensation to account for the difference between actual ECI inflation
(3.5 percent) \56\ and predicted PCE inflation (1.7 percent) \57\ for
2021; (2) the net addition of two additional pilots; and (3) inflation
of pilotage compensation in step 2 of the methodology using CPI from
2019 and predicted inflation through 2022.
---------------------------------------------------------------------------

\56\ https://www.bls.gov/news.release/archives/eci_01292021.htm.
\57\ https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20201216.htm.
---------------------------------------------------------------------------

The proposed target compensation is $393,461 per pilot in 2022,
compared to $378,925 in 2021. The proposed changes to modify the 2020
pilot compensation to account for the difference between predicted and
actual inflation would increase the 2021 target compensation value by
1.8 percent. As shown in table 44, this inflation adjustment would
increase total compensation by $6,821 per pilot, and the total revenue
needed by $381,956 when accounting for all 56 pilots.

[[Page 51076]]

Table 44--Change in Revenue Resulting From the Proposed Change to
Inflation of Pilot Compensation Calculation in Step 4
------------------------------------------------------------------------

------------------------------------------------------------------------
2021 target compensation................................ $378,925
Adjusted 2021 Compensation ($378,925 x 1.018)........... 385,746
Difference between Target 2021 Compensation and Adjusted 6,821
Target 2021 Compensation ($385,746-$378,925)...........
Increase in Total Revenue for 56 Pilots ($6,821 x 56)... 381,956
------------------------------------------------------------------------

Adjusting rounding in the staffing model to always round up, rather
than round to the nearest integer, would add an additional pilot to the
undesignated areas of District One and District Two. The proposed
addition of two fully registered pilots accounts for $773,281 of the
increase in needed revenue. As shown in table 44, to avoid double
counting, this value excludes the change in revenue resulting from the
proposed change to adjust 2021 pilotage compensation to account for the
difference between actual and predicted inflation.

Table 45--Change in Revenue Resulting From Adding Two Additional Pilots
------------------------------------------------------------------------

------------------------------------------------------------------------
2022 Target Compensation................................ $393,461
Total Number of New Pilots.............................. 2
Total Cost of New Pilots ($393,461 x 2)................. $786,922
Difference between Adjusted Target 2021 Compensation and $6,821
Target 2021 Compensation ($378,925-$385,746)...........
Increase in Total Revenue for 2 Pilots ($6,821 x 2)..... $13,641
Net Increase in Total Revenue for 2 Pilots ($786,922- $773,281
$13,641)...............................................
------------------------------------------------------------------------

Another proposed increase, $432,060, is the result of increasing
compensation for the 56 pilots to account for future inflation of 2.0
percent in 2022. This would increase total compensation by $7,715 per
pilot, as shown in table 46.

Table 46--Change in Revenue Resulting From Inflating 2021 Compensation
to 2022
------------------------------------------------------------------------

------------------------------------------------------------------------
Adjusted 2021 Compensation.............................. $385,746
2022 Target Compensation ($385,746 x 1.02).............. 393,461
Difference between Adjusted 2021 Compensation and Target 7,715
2022 Compensation ($393,461-$385,746)..................
Increase in Total Revenue for 56 Pilots ($7,715 x 56)... 432,060
------------------------------------------------------------------------

Finally, the second-largest part of the increase in revenue needed
would be to account for the target apprentice pilot wage, now
incorporated into the rate. First, in Step 3, we estimate the need for
9 apprentice pilots for the 2022 shipping season. Based on the 2022
target pilot compensation of $393,461, the target apprentice pilot wage
would be $141,646 ($393,461 x 0.36 = $141,646). Setting the target in
this manner, rather than through a surcharge, better allows apprentice
pilot wages to match fluctuations in the pilot wage, which follows
changes in traffic and better accounts for changes in inflation than
the surcharge. Additionally, unlike a surcharge, this method will not
need to be ``turned off,'' which makes rates throughout the season more
predictable for shippers. The total cost of wages for the 9 apprentice
pilots would be $1,274,814, as shown in table 47.
---------------------------------------------------------------------------

\58\ The 2020 projected revenues are from the Great Lakes
Pilotage Rate--2020 Annual Review and Revisions to Methodology final
rule (85 FR 20088), tables 8, 20, and 32. The 2021 projected
revenues are from tables 9, 21, and 33 of this NPRM.

Table 47--Change in Revenue Resulting From Target Apprentice Pilot Wages
------------------------------------------------------------------------

------------------------------------------------------------------------
2022 Target Apprentice Pilot Wage....................... $141,646
Total Number of Apprentice Pilots....................... 9
Total Cost of Apprentice Pilots ($141,646 x 9).......... $1,274,814
------------------------------------------------------------------------

Table 48 presents the percentage change in revenue by area and
revenue-component, excluding surcharges, as they are applied at the
district level.\58\

[[Page 51077]]

Table 48--Difference in Revenue by Component and Area
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Adjusted operating expenses Total target pilot compensation Total Working capital fund Total revenue needed
------------------------------------------------------------------------------ target -----------------------------------------------------------------------------
apprentice
Percentage Percentage pilot wage Percentage Percentage
2021 2022 change 2021 2022 change ------------- 2021 2022 change 2021 2022 change
2022
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
District One: Designated....................................... $2,328,981 $2,352,634 1 $3,789,250 $4,104,585 8 $169,975 $207,255 $159,924 (30) $6,325,486 $6,617,143 4
District One: Undesignated..................................... 1,502,239 1,568,537 4 2,652,475 3,261,005 19 113,317 140,741 119,612 (18) 4,295,455 4,949,154 13
District Two: Undesignated..................................... 1,003,961 1,035,837 3 3,031,400 3,711,124 18 169,975 136,698 117,566 (16) 4,172,059 4,864,527 14
District Two: Designated....................................... 1,540,146 1,553,756 1 2,652,475 2,867,544 8 113,317 142,025 109,501 (30) 4,334,646 4,530,801 4
District Three: Undesignated................................... 1,947,484 2,530,510 23 6,820,650 7,507,236 9 424,938 297,021 248,602 (19) 9,065,155 10,286,348 12
District Three: Designated..................................... 554,039 691,839 20 1,515,700 1,857,136 18 283,292 70,112 63,130 (11) 2,139,851 2,612,105 18
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 51078]]

Benefits
This proposed rule would allow the Coast Guard to meet requirements
in 46 U.S.C. 9303 to review the rates for pilotage services on the
Great Lakes. The rate changes would promote safe, efficient, and
reliable pilotage service on the Great Lakes by (1) ensuring that rates
cover an association's operating expenses; (2) providing fair pilot
compensation, adequate training, and sufficient rest periods for
pilots; and (3) ensuring pilot associations produce enough revenue to
fund future improvements. The rate changes would also help recruit and
retain pilots, which would ensure a sufficient number of pilots to meet
peak shipping demand, helping to reduce delays caused by pilot
shortages.

B. Small Entities

Under the Regulatory Flexibility Act, 5 U.S.C. 601-612, we have
considered whether this proposed rule would have a significant economic
impact on a substantial number of small entities. The term ``small
entities'' comprises small businesses, not-for-profit organizations
that are independently owned and operated and are not dominant in their
fields, and governmental jurisdictions with populations of less than
50,000.
For the proposed rule, the Coast Guard reviewed recent company size
and ownership data for the vessels identified in the GLPMS, and we
reviewed business revenue and size data provided by publicly available
sources such as Manta \59\ and ReferenceUSA.\60\ As described in
section VIII.A of this preamble, Regulatory Planning and Review, we
found that 513 unique vessels used pilotage services during the years
2018 through 2020. These vessels are owned by 58 entities, of which 44
are foreign entities that operate primarily outside the United States
and the remaining 14 entities are U.S. entities. We compared the
revenue and employee data found in the company search to the Small
Business Administration's (SBA) small business threshold as defined in
the SBA's ``Table of Size Standards'' for small businesses to determine
how many of these companies are considered small entities.\61\ Table 49
shows the North American Industry Classification System (NAICS) codes
of the U.S. entities and the small entity standard size established by
the SBA.
---------------------------------------------------------------------------

\59\ See https://www.manta.com/.
\60\ See https://resource.referenceusa.com/.
\61\ See https://www.sba.gov/document/support--table-size-standards. SBA has established a ``Table of Size Standards'' for
small businesses that sets small business size standards by NAICS
code. A size standard, which is usually stated in number of
employees or average annual receipts (``revenues''), represents the
largest size that a business (including its subsidiaries and
affiliates) may be in order to remain classified as a small business
for SBA and Federal contracting programs.

Table 49--NAICS Codes and Small Entities Size Standards
----------------------------------------------------------------------------------------------------------------
NAICS Description Small entity size standard
----------------------------------------------------------------------------------------------------------------
211120......................... Crude Petroleum Extraction..... 1,250 employees.
237990......................... Other Heavy and Civil $39.5 million.
Engineering Construction.
238910......................... Site Preparation Contractors... $16.5 million.
483212......................... Inland Water Passenger 500 employees.
Transportation.
487210......................... Scenic and Sightseeing $8.0 million.
Transportation, Water.
488330......................... Navigational Services to $41.5 million.
Shipping.
523910......................... Miscellaneous Intermediation... $41.5 million.
561599......................... All Other Travel Arrangement $22.0 million.
and Reservation Services.
982100......................... National Security.............. Population of 50,000 People.
----------------------------------------------------------------------------------------------------------------

Of the 14 U.S. entities, 7 exceed the SBA's small business
standards for small entities. To estimate the potential impact on the
seven small entities, the Coast Guard used their 2020 invoice data to
estimate their pilotage costs in 2022. Of the seven entities from 2018
to 2020, only three used pilotage services in 2020. We increased their
2020 costs to account for the changes in pilotage rates resulting from
this proposed rule and the Great Lakes Pilotage Rates--2021 Annual
Review and Revisions to Methodology final rule (86 FR 14184). We
estimated the change in cost to these entities resulting from this
proposed rule by subtracting their estimated 2021 costs from their
estimated 2022 costs and found the average costs to small firms would
be approximately $16,072, with a range of $607 to $70,853.\62\ We then
compared the estimated change in pilotage costs between 2021 and 2022
with each firm's annual revenue. In all cases, their estimated pilotage
expenses were below 1 percent of their annual revenue.
---------------------------------------------------------------------------

\62\ One company had a particularly disproportionate impact
because its vessel operated in all three districts. The impact for
that company was more than 15 times greater than the next smallest
company.
---------------------------------------------------------------------------

In addition to the owners and operators discussed above, three U.S.
entities that receive revenue from pilotage services would be affected
by this proposed rule. These are the three pilot associations that
provide and manage pilotage services within the Great Lakes districts.
Two of the associations operate as partnerships, and one operates as a
corporation. These associations are designated with the same NAICS code
and small-entity size standards described above, but have fewer than
500 employees. Combined, they have approximately 65 employees in total
and, therefore, are designated as small entities. The Coast Guard
expects no adverse effect on these entities from this rule, because the
three pilot associations would receive enough revenue to balance the
projected expenses associated with the projected number of bridge hours
(time on task) and pilots.
Finally, the Coast Guard did not find any small not-for-profit
organizations that are independently owned and operated and are not
dominant in their fields that would be impacted by this proposed rule.
We also did not find any small governmental jurisdictions with
populations of fewer than 50,000 people that would be impacted by this
proposed rule. Based on this analysis, we conclude this rulemaking
would not affect a substantial number of small entities, nor have a
significant economic impact on any of the affected entities.
Based on our analysis, this proposed rule would have a less than 1
percent annual impact on three small entities; therefore, the Coast
Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not
have a significant economic impact on a substantial number of small
entities. If you think that your business, organization, or
governmental jurisdiction qualifies as a small entity and that this
proposed rule would have a significant economic impact on it, please
submit a comment to the docket at the address listed in the ADDRESSES
section of this preamble. In your comment, explain why you think

[[Page 51079]]

it qualifies and how and to what degree this proposed rule would
economically affect it.

C. Assistance for Small Entities

Under section 213(a) of the Small Business Regulatory Enforcement
Fairness Act of 1996, Public Law 104-121, we want to assist small
entities in understanding this proposed rule so that they can better
evaluate its effects on them and participate in the rulemaking. If the
proposed rule would affect your small business, organization, or
governmental jurisdiction and you have questions concerning its
provisions or options for compliance, please call or email the person
in the FOR FURTHER INFORMATION section of this proposed rule. The Coast
Guard will not retaliate against small entities that question or
complain about this proposed rule or any policy or action of the Coast
Guard.
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).

D. Collection of Information

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

E. Federalism

A rule has implications for federalism under Executive Order 13132
(Federalism) if it has a substantial direct effect on the States, on
the relationship between the national government and the States, or on
the distribution of power and responsibilities among the various levels
of government. We have analyzed this proposed rule under Executive
Order 13132 and have determined that it is consistent with the
fundamental federalism principles and preemption requirements as
described in Executive Order 13132. Our analysis follows.
Congress directed the Coast Guard to establish ``rates and charges
for pilotage services''. See 46 U.S.C. 9303(f). This regulation is
issued pursuant to that statute and is preemptive of State law as
specified in 46 U.S.C. 9306. Under 46 U.S.C. 9306, a ``State or
political subdivision of a State may not regulate or impose any
requirement on pilotage on the Great Lakes.'' As a result, States or
local governments are expressly prohibited from regulating within this
category. Therefore, this proposed rule is consistent with the
fundamental federalism principles and preemption requirements described
in Executive Order 13132.
While it is well settled that States may not regulate in categories
in which Congress intended the Coast Guard to be the sole source of a
vessel's obligations, the Coast Guard recognizes the key role that
State and local governments may have in making regulatory
determinations. Additionally, for rules with implications and
preemptive effect, Executive Order 13132 specifically directs agencies
to consult with State and local governments during the rulemaking
process. If you believe this rule has implications for federalism under
Executive Order 13132, please contact the person listed in the FOR
FURTHER INFORMATION section of this preamble.

F. Unfunded Mandates

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, 46 U.S.C. Chapter 93 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 million
(adjusted for inflation) or more in any one year. Although this
proposed rule would not result in such an expenditure, we do discuss
the effects of this proposed rule elsewhere in this preamble.

G. Taking of Private Property

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

H. Civil Justice Reform

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

I. Protection of Children

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

J. Indian Tribal Governments

This proposed rule does not have tribal implications under
Executive Order 13175 (Consultation and Coordination with Indian Tribal
Governments), because it would not have a substantial direct effect on
one or more Indian tribes, on the relationship between the Federal
Government and Indian tribes, or on the distribution of power and
responsibilities between the Federal Government and Indian tribes.

K. Energy Effects

We have analyzed this proposed rule under Executive Order 13211
(Actions Concerning Regulations That Significantly Affect Energy
Supply, Distribution, or Use). We have determined that it is not a
``significant energy action'' under that order because it is not a
``significant regulatory action'' under Executive Order 12866 and is
not likely to have a significant adverse effect on the supply,
distribution, or use of energy.

L. Technical Standards

The National Technology Transfer and Advancement Act, codified as a
note to 15 U.S.C. 272, directs agencies to use voluntary consensus
standards in their regulatory activities unless the agency provides
Congress, through OMB, with an explanation of why using these standards
would be inconsistent with applicable law or otherwise impractical.
Voluntary consensus standards are technical standards (e.g.,
specifications of materials, performance, design, or operation; test
methods; sampling procedures; and related management systems practices)
that are developed or adopted by voluntary consensus standards bodies.
This proposed rule does not use technical standards. Therefore, we
did not consider the use of voluntary consensus standards. If you
disagree with our analysis or are aware of voluntary consensus
standards that might apply, please send a comment explaining your
disagreement or identifying appropriate standards to the docket using
one of the methods listed in the ADDRESSES section of this preamble.

M. Environment

We have analyzed this proposed rule under DHS Management Directive
023-01, Rev. 1, associated implementing instructions, and Environmental
Planning COMDTINST 5090.1 (series), which guide the Coast Guard in
complying with the National

[[Page 51080]]

Environmental Policy Act of 1969 1969 (42 U.S.C. 4321-4370f), and have
made a preliminary determination that this action is one of a category
of actions that do not individually or cumulatively have a significant
effect on the human environment. A preliminary Record of Environmental
Consideration supporting this determination is available in the docket.
For instructions on locating the docket, see the ADDRESSES section of
this preamble.
This proposed rule meets the criteria for categorical exclusion
(CATEX) under paragraphs A3 and L54 of Appendix A, Table 1 of DHS
Instruction Manual 023-001-01, Rev. 1.\63\ Paragraph A3 pertains to the
promulgation of rules, issuance of rulings or interpretations, and the
development and publication of policies, orders, directives, notices,
procedures, manuals, advisory circulars, and other guidance documents
of the following nature: (a) Those of a strictly administrative or
procedural nature; (b) those that implement, without substantive
change, statutory or regulatory requirements; or (c) those that
implement, without substantive change, procedures, manuals, and other
guidance documents; and (d) those that interpret or amend an existing
regulation without changing its environmental effect. Paragraph L54
pertains to regulations, which are editorial or procedural.
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\63\ https://www.dhs.gov/sites/default/files/publications/DHS_Instruction%20Manual%20023-01-001-01%20Rev%2001_508%20Admin%20Rev.pdf.
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This proposed rule involves adjusting the pilotage rates to account
for changes in district operating expenses, an increase in the number
of pilots, and anticipated inflation. In addition, the Coast Guard is
proposing how apprentice pilots will be compensated in future
rulemakings. All of these proposed changes are consistent with the
Coast Guard's maritime safety missions. We seek any comments or
information that may lead to the discovery of a significant
environmental impact from this proposed rule.

List of Subjects

46 CFR Part 401

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

46 CFR Part 404

Great Lakes, Navigation (water), Seamen.

For the reasons discussed in the preamble, the Coast Guard proposes
to amend 46 CFR parts 401 and 404 as follows:

PART 401--GREAT LAKES PILOTAGE REGULATIONS

0
1. The authority citation for part 401 is revised to read as follows:

Authority: 46 U.S.C. 2103, 2104(a), 6101, 7701, 8105, 9303,
9304; DHS Delegation 00170.1, Revision No. 01.2, paragraphs
(II)(92)(a), (d), (e), (f).

0
2. Amend Sec. 401.110 by adding paragraphs (a)(18) and (19) to read as
follows:

Sec. 401.110 Definitions.

(a) * * *
(18) Apprentice Pilot means a person approved and certified by the
Director who is participating in an approved U.S. Great Lakes pilot
training and qualification program. This individual meets all the
minimum requirements listed in 46 CFR 401.211. This definition is only
applicable to determining which pilots may be included in the operating
expenses, estimates, and wage benchmark in Sec. Sec. 404.2(b)(7),
404.103(b), and 404.104(d) and (e).
(19) Limited Registration is a certificate issued by the Director,
upon the request of the respective pilots association, to an Apprentice
Pilot to provide pilotage service without direct supervision from a
fully registered pilot in a specific area or waterway.
0
3. Amend Sec. 401.220 by revising the first sentence of paragraph
(a)(3) to read as follows:

Sec. 401.220 Registration of pilots.

(a) * * *
(3) The number of pilots needed in each district is calculated by
totaling the area results by district and rounding them up to a whole
integer. * * *
* * * * *
0
4. Amend Sec. 401.405 by revising paragraphs (a)(1) through (6) to
read as follows:

Sec. 401.405 Pilotage rates and charges.

(a) * * *
(1) The St. Lawrence River is $818;
(2) Lake Ontario is $557;
(3) Lake Erie is $651;
(4) The navigable waters from Southeast Shoal to Port Huron, MI is
$574;
(5) Lakes Huron, Michigan, and Superior is $375; and
(6) The St. Marys River is $685.
* * * * *

PART 404--GREAT LAKES PILOTAGE RATEMAKING

0
5. The authority citation for part 404 is revised to read as follows:

Authority: 46 U.S.C. 2103, 2104(a), 9303, 9304; DHS Delegation
00170.1, Revision No. 01.2, paragraphs (II)(92)(a), (f).

0
6. Amend Sec. 404.2 by adding paragraph (b)(7) to read as follows:

Sec. 404.2 Procedure and criteria for recognizing association
expenses.

* * * * *
(b) * * *
(7) Apprentice Pilot Expenses. The association's expenses for
Apprentice Pilots with limited registrations, such as health care,
travel expenses, training, and other expenses are recognizable when
determined to be necessary and reasonable.
* * * * *
0
7. Amend Sec. 404.103 as follows:
0
a. Revise the section heading;
0
b. Redesignate the introductory text as paragraph (a); and
0
c. Add new paragraph (b).
The revisions and additions read as follows:

Sec. 404.103 Ratemaking step 3: Estimate number of registered pilots
and apprentice pilots.

* * * * *
(b) The Director projects, based on the number of persons applying
under 46 CFR part 401 to become apprentice pilots, traffic projections,
information provided by the pilotage association regarding upcoming
retirements, and any other relevant data, the number of apprentice
pilots with limited registrations expected to be in training and
compensated.
0
8. Amend Sec. 404.104 as follows:
0
a. Revise the section heading; and
0
b. Add new paragraphs (d) and (e).
The revisions and additions read as follows:

Sec. 404.104 Ratemaking step 4: Determine target pilot compensation
benchmark and apprentice pilot wage benchmark.

* * * * *
(d) The Director determines the individual apprentice pilot wage
benchmark at the rate of 36 percent of the individual target pilot
compensation, as calculated according to paragraphs (a) or (b) of this
section.
(e) The Director determines each pilot association's total
apprentice pilot wage benchmark by multiplying the apprentice pilot
compensation computed in paragraph (d) of this section by the number of
apprentice pilots with limited registrations projected under Sec.
404.103(b).
* * * * *

[[Page 51081]]

Dated: September 3, 2021.
J.W. Mauger,
Rear Admiral, U.S. Coast Guard, Assistant Commandant for Prevention
Policy.
[FR Doc. 2021-19570 Filed 9-13-21; 8:45 am]
BILLING CODE 9110-04-P