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 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
Class 4 (2019)..................................................             730            1.45          1058.5
                                                                 -----------------------------------------------
    Total.......................................................           4,858  ..............           6,252
                                                                 -----------------------------------------------

        Average weighting factor (weighted transits/number of     ..............            1.29  ..............
         transits)..............................................
----------------------------------------------------------------------------------------------------------------

                     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 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 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 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
                                                                 -----------------------------------------------
    Total.......................................................           3,889  ..............           5,027
                                                                 -----------------------------------------------
        Average weighting factor (weighted transits/number of     ..............            1.29  ..............
         transits)..............................................
----------------------------------------------------------------------------------------------------------------

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........................................          $1,032            1.29            $800
District One: Undesignated......................................             642            1.29             498
----------------------------------------------------------------------------------------------------------------

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, including average
traffic and weighting factions. Based on the financial information
submitted by the pilots, the Director is not making any alterations to
the rates in this step. We will modify the text in Sec.  401.405(a) to
reflect the final rates shown in Table 15.

                                     Table 15--Final Rates for District One
----------------------------------------------------------------------------------------------------------------
                                                                    Final 2020     Proposed 2021    Final 2021
                 Area                             Name             pilotage rate   pilotage rate   pilotage rate
----------------------------------------------------------------------------------------------------------------
District One: Designated..............  St. Lawrence River......            $758            $757            $800
District One: Undesignated............  Lake Ontario............             463             428             498
----------------------------------------------------------------------------------------------------------------

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 2018 expenses and
revenues.\39\ 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.
---------------------------------------------------------------------------

    \39\ These reports are available in the docket for this
rulemaking (see Docket No. USCG-2019-0736).
---------------------------------------------------------------------------

    For District Two, we finalized three Director's adjustments: (1)
For the amount collected from the 2018 surcharge; (2) for the amount in
Coast Guard litigation legal fees (allowing intervener fees); and (3)
for the amount paid to the District's applicant pilot. District Two had
one applicant pilot during the 2018 season and paid $334,659 in salary.
The Coast Guard believes this amount is above what is necessary and
reasonable for retention and recruitment. 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. This
proposal went into the final rule for 2019 and was not opposed. Going
forward, the Coast Guard will continue to use the same ratio of
applicant to target compensation. For 2019, this was approximately 36
percent of $359,887, which was the target pilot compensation value for
2019 ($128,783 / $359,887 = 35.78 percent). The Coast Guard is using
the rounded-up value of 36.0 percent of target compensation as the
benchmark for applicant pilot compensation, for a 2021 target pilot
compensation of $132,151 ($367,085 x .36). This allows adjustments to
applicant pilot compensation to fluctuate in line with target
compensation. Other adjustments made by the auditors are explained in
the auditors' reports (available in the docket where indicated under
the ADDRESSES portion of this document).

                               Table 16--2018 Recognized Expenses for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                District Two
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated
              Reported operating expenses for 2018               --------------------------------
                                                                                Southeast         Total
                                                                     Lake Erie     Shoal to Port
                                                                                Huron
----------------------------------------------------------------------------------------------------------------
Other Pilotage Costs:
    Subsistence/Travel--Pilots..................................        $115,073        $172,608        $287,681
    CPA DEDUCTION...............................................         (3,457)         (5,185)         (8,642)
    Hotel/Lodging Cost..........................................          50,464          75,696         126,160
    License Insurance...........................................             138             207             345
    Payroll taxes...............................................          82,960         124,441         207,401
    Other.......................................................             860           1,291           2,151
                                                                 -----------------------------------------------
        Total Other Pilotage Costs..............................         246,038         369,058         615,096
Applicant Pilot Costs:
    Applicant Salaries..........................................         133,864         200,795         334,659
    Applicant Health Insurance..................................          18,691          28,036          46,727
    Applicant Payroll Tax.......................................           4,496           6,745          11,241
    Applicant Subsistence.......................................           9,872          14,807          24,679
                                                                 -----------------------------------------------
        Total Applicant Pilot Cost..............................         166,923         250,383         417,306
Pilot Boat and Dispatch Costs:
    Pilot Boat Cost.............................................         206,998         310,496         517,494
    Employee Benefits...........................................          80,906         121,358         202,264
    Payroll Taxes...............................................          12,523          18,785          31,308
                                                                 -----------------------------------------------
        Total Pilot and Dispatch Costs..........................         300,427         450,639         751,066
Administrative Expenses:
    Legal--general counsel......................................          35,711          53,567          89,278
    Legal--shared counsel (K&L Gates)...........................          17,037          25,555          42,592
    Legal--USCG litigation......................................           2,185           3,277           5,462
    Office rent.................................................          33,326          49,988          83,314
    Insurance...................................................          20,357          30,536          50,893

    Employee Benefits...........................................          89,999         134,999         224,998
    Other taxes.................................................          25,620          38,430          64,050
    Real Estate taxes...........................................           6,066           9,099          15,165
    Depreciation/Auto lease/Other...............................          29,392          44,087          73,479
    Interest....................................................             586             880           1,466
    APA dues....................................................          13,703          20,554          34,257
    Dues and Subscriptions......................................             676           1,015           1,691
    Utilities...................................................          19,413          29,119          48,532
    Salaries--Admin employees...................................          53,170          79,755         132,925
    Payroll taxes...............................................           5,558           8,338          13,896
    Accounting..................................................          14,276          21,414          35,690
    Pilot Training..............................................          14,434          21,414          35,848
    Other.......................................................          15,310          22,966          38,276
                                                                 -----------------------------------------------
        Total Administrative Expenses...........................         396,819         594,993         991,812
                                                                 -----------------------------------------------
            Total Operating Expenses (Other Costs + Pilot Boats        1,110,207       1,665,073       2,775,280
             + Admin)...........................................
Adjustments (Director):
    Director's Adjustment Surcharge Collected in 2018...........        (65,962)        (65,962)       (131,924)
    Director's Adjustment Applicant Pilot Salary................        (81,003)       (121,505)       (202,508)
    Legal Fee Removal--USCG Litigation..........................         (2,185)         (3,277)         (5,462)
                                                                 -----------------------------------------------
        Total Director's Adjustments............................       (149,150)       (190,744)       (339,894)
                                                                 -----------------------------------------------
            Total Operating Expenses (OpEx + Adjustments).......         961,057       1,474,329       2,435,386
----------------------------------------------------------------------------------------------------------------

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 2019 inflation rate.\40\ Because
the BLS does not provide forecasted inflation data, we use economic
projections from the Federal Reserve for the 2020 and 2021 inflation
modification.\41\ Based on that information, the calculations for Step
1 are as follows:
---------------------------------------------------------------------------

    \40\ See footnote 30.
    \41\ See footnote 31.

                             Table 17--Adjusted Operating Expenses for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                District Two
                              Item                               -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)...............................        $961,057      $1,474,329      $2,435,386
2019 Inflation Modification (@1.5%).............................          14,416          22,115          36,531
2020 Inflation Modification (@1.2%).............................          11,706          17,957          29,663
2021 Inflation Modification (@1.7%).............................          16,782          25,745          42,527
                                                                 -----------------------------------------------
    Adjusted 2021 Operating Expenses............................       1,003,961       1,540,146       2,544,107
----------------------------------------------------------------------------------------------------------------

C. Step 3: Estimate Number of Working Pilots

    In accordance with the text in Sec.  404.103, we estimate the
number of working pilots in each district. We determine the number of
registered pilots based on data provided by the Lakes Pilots
Association. Using these numbers, we estimate that there will be 15
registered pilots in 2021 in District Two. Furthermore, based on the
seasonal staffing model discussed in the 2017 ratemaking (see 82 FR
41466), we assign a certain number of pilots to designated waters and a
certain number to undesignated waters, as shown in Table 18. These
numbers are used to determine the amount of revenue needed in their
respective areas.

                       Table 18--Authorized Pilots
------------------------------------------------------------------------
                          Item                             District Two
------------------------------------------------------------------------
Maximum number of pilots (per Sec.   401.220(a)) \42\...              15
2021 Authorized pilots (total)..........................              15
Pilots assigned to designated areas.....................               7
Pilots assigned to undesignated areas...................               8
------------------------------------------------------------------------

D. Step 4: Determine Target Pilot Compensation Benchmark
---------------------------------------------------------------------------

    \42\ 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 conducting an ``interim'' ratemaking this year, we will
follow the procedure outlined in paragraph (b) of Sec.  404.104, which
adjusts the existing compensation benchmark by inflation. As stated in
Section V.A of the preamble, we are using a two-step process to adjust
target pilot compensation for inflation. The first step adjusts the
2019 target compensation benchmark of $367,085 by 1.5 percent, for a
total adjusted value of $372,591. This adjustment accounts for the
difference between the predicted 2020 Median PCE inflation value of 2
percent and the actual 2020 ECI inflation value of 3.5
percent.43 44 Because we do not have a value for the
employment cost index for 2021, we multiply the adjusted 2020
compensation benchmark of $372,591 by the Median PCE inflation value of
1.70 percent.\45\ Based on the projected 2021 inflation estimate, the
compensation benchmark for 2021 is $378,925 per pilot (see Table 6 for
calculations).
---------------------------------------------------------------------------

    \43\ See footnote 33.
    \44\ See footnote 34.
    \45\ See footnote 35.
---------------------------------------------------------------------------

    Next, we certify that the number of pilots estimated for 2021 is
less than or equal to the number permitted under the changes to the
staffing model in Sec.  401.220(a). The number of pilots needed is 15
pilots for District Two, which is more than or equal to 15, the number
of registered pilots provided by the pilot associations.\46\
---------------------------------------------------------------------------

    \46\ 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
----------------------------------------------------------------------------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation.......................................        $378,925        $378,925        $378,925
Number of Pilots................................................               8               7              15
                                                                 -----------------------------------------------
    Total Target Pilot Compensation.............................      $3,031,400      $2,652,475      $5,683,875
----------------------------------------------------------------------------------------------------------------

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
and total pilot compensation 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 3.3875
percent.\47\ By multiplying the two figures, we obtain the working
capital fund contribution for each area, as shown in Table 20.
---------------------------------------------------------------------------

    \47\ See footnote 36.

                           Table 20--Working Capital Fund Calculation for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                District Two
                              Item                               -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................      $1,003,961      $1,540,146      $2,544,107
Total Target Pilot Compensation (Step 4)........................       3,031,400       2,652,475       5,683,875
Total Expenses..................................................       4,035,361       4,192,621       8,227,982
Working Capital Fund (3.3875%)..................................         136,698         142,025         278,723
----------------------------------------------------------------------------------------------------------------

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). We
show these calculations in Table 21.

                                    Table 21--Revenue Needed for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                District Two
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2, see Table 17)..............      $1,003,961      $1,540,146      $2,544,107
Total Target Pilot Compensation (Step 4, see Table 19)..........       3,031,400       2,652,475       5,683,875
Working Capital Fund (Step 5, see Table 20).....................         136,698         142,025         278,723
                                                                 -----------------------------------------------
    Total Revenue Needed........................................       4,172,059       4,334,646       8,506,705
----------------------------------------------------------------------------------------------------------------

G. Step 7: Calculate Initial Base Rates

    Having determined the needed revenue 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.\48\ Because we
calculate separate figures for designated and undesignated waters,
there are two parts for each calculation. We show these values in Table
22.
---------------------------------------------------------------------------

    \48\ See footnote 37.

                 Table 22--Time on Task for District Two
                                 [Hours]
------------------------------------------------------------------------
                  Year                     Undesignated     Designated
------------------------------------------------------------------------
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
2010....................................           5,565           5,235
                                         -------------------------------
    Average.............................           5,634           5,661
------------------------------------------------------------------------

    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.

          Table 23--Initial Rate Calculations for District Two
------------------------------------------------------------------------
                  Item                     Undesignated     Designated
------------------------------------------------------------------------
Needed revenue (Step 6).................      $4,172,059      $4,334,646
Average time on task (hours)............           5,634           5,661
Initial rate............................            $741            $766
------------------------------------------------------------------------

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.\49\
---------------------------------------------------------------------------

    \49\ See footnote 38.

                     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 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 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 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           304.5
                                                                 -----------------------------------------------
    Total.......................................................           4,206  ..............           5,529
                                                                 -----------------------------------------------
        Average weighting factor (weighted transits/number of     ..............            1.31  ..............
         transits)..............................................
----------------------------------------------------------------------------------------------------------------

                      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 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 3 (2014)..................................................               8             1.3            10.4
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 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
                                                                 -----------------------------------------------
    Total.......................................................           3,393  ..............           4,467
                                                                 -----------------------------------------------
        Average weighting factor (weighted transits/number of     ..............            1.32  ..............
         transits)..............................................
----------------------------------------------------------------------------------------------------------------

I. Step 9: Calculate Revised Base Rates

    In this step, we revise the base rates so that, once the impact of
the weighting factors are 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........................................            $766            1.32            $580

District Two: Undesignated......................................             741            1.31             566
----------------------------------------------------------------------------------------------------------------

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 making any alterations to the rates in
this step. We will modify the text in Sec.  401.405(a) to reflect the
final rates shown in Table 27.

                                     Table 27--Final Rates for District Two
----------------------------------------------------------------------------------------------------------------
                                                                    Final 2020     Proposed 2021    Final 2021
                 Area                             Name             pilotage rate   pilotage rate   pilotage rate
----------------------------------------------------------------------------------------------------------------
District Two: Designated..............  Navigable waters from               $618            $577            $580
                                         Southeast Shoal to Port
                                         Huron, MI.
District Two: Undesignated............  Lake Erie...............             586             566             566
----------------------------------------------------------------------------------------------------------------

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.\50\ 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.
---------------------------------------------------------------------------

    \50\ These reports are available in the docket for this
rulemaking (see Docket No. USCG-2019-0736).
---------------------------------------------------------------------------

    For District Three, we finalized two Director's adjustments. One is
for the amount collected from the 2018 surcharge, and the other for
$9,277, which was the amount the district spent on litigation legal
fees against the Coast Guard. The other $9,094 spent by District Three
on Coast Guard litigation was for intervener fees, which are allowable
expenses. Other adjustments made by the auditors are explained in the
auditors' reports (available in the docket where indicated in the
ADDRESSES portion of this document).
    We make no adjustments to the District Three compensation for
applicant pilots. In the 2019 NPRM, the Coast Guard proposed to make an
adjustment to District Three'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. This proposal went into the
final rule for 2019 and was not opposed. Going forward, the Coast Guard
will continue to use the same ratio of applicant to target compensation
for all districts. For 2019, this was approximately 36 percent of
$359,887, which was the target pilot compensation value for 2019
($128,783 / $359,887 = 35.78 percent). The Coast Guard is using 36.0
percent of target compensation as the benchmark for applicant pilot
compensation, for a 2021 target pilot compensation of $132,151
($367,085 x .36). This allows adjustments to applicant pilot
compensation to fluctuate in line with target compensation.

                              Table 28--2018 Recognized Expenses for District Three
----------------------------------------------------------------------------------------------------------------
                                                                         District Three
                                               -----------------------------------------------------------------
                                                  Undesignated      Designated     Undesignated
          Reported expenses for 2018              \51\ (Area 6)      (Area 7)        (Area 8)
                                               --------------------------------------------------      Total
                                                 Lakes Huron and     St. Marys
                                                    Michigan           River       Lake Superior
----------------------------------------------------------------------------------------------------------------
Operating Expenses:
    Other Pilotage Costs......................
    Pilot subsistence/travel..................          $208,110        $110,697        $123,980        $442,787
    Hotel/Lodging Cost........................            88,982          47,331          53,011         189,324
    License Insurance--Pilots.................            13,516           7,189           8,052          28,757

    Payroll taxes.............................           122,954          65,401          73,249         261,604
    Other.....................................            19,521          10,383          11,629          41,533
                                               -----------------------------------------------------------------
        Total Other Pilotage Costs............           453,083         241,001         269,921         964,005
Applicant Pilot Costs:
    Applicant Salaries........................           183,485          97,598         109,310         390,393
    Applicant pilot subsistence/travel........            16,411           8,729           9,777          34,917
    Applicant Insurance.......................            38,312          20,379          22,823          81,514
    Applicant Payroll Tax.....................            16,411           8,729           9,777          34,917
                                               -----------------------------------------------------------------
        Applicant Total Cost..................           254,619         135,435         151,687         541,741
Pilot Boat and Dispatch Costs:
    Pilot boat costs..........................           346,160         184,127         206,223         736,510
Dispatch costs................................            99,982          53,182          59,563         212,727
    Payroll taxes.............................            13,609           7,239           8,108          28,956
                                               -----------------------------------------------------------------
        Total Pilot and Dispatch Costs........           459,751         244,548         273,894         978,193
Administrative Expenses:
    Legal--general counsel....................            22,766          12,109          13,563          48,438
    Legal--shared counsel (K&L Gates).........            19,426          10,333          11,573          41,332
    Legal--USCG litigation....................             8,611           4,580           5,130          18,321
                                               -----------------------------------------------------------------
    Office rent...............................             4,020           2,138           2,395           8,553
    Insurance.................................            11,354           6,040           6,764          24,158
    Employee benefits.........................            68,303          36,331          40,691         145,325
    Other taxes...............................               131              70              78             279
    Depreciation/Auto leasing/Other...........            57,315          30,487          34,145         121,947
    Interest..................................                 7               4               4              15
    APA Dues..................................            20,628          10,973          12,289          43,890
    Dues and subscriptions....................             3,290           1,750           1,960           7,000
    Utilities.................................            31,860          16,947          18,980          67,787
    Salaries..................................            60,876          32,381          36,267         129,524
    Payroll taxes.............................             5,406           2,875           3,220          11,501
    Accounting/Professional fees..............             8,069           4,292           4,807          17,168
    Pilot training............................            18,586           9,886          11,073          39,545
    Other expenses (D3-18-01).................             8,907           4,738           5,306          18,951
    (D3-18-01) CPA Deduction..................           (2,030)         (1,080)         (1,210)         (4,320)
                                               -----------------------------------------------------------------
        Total Administrative Expenses.........           347,525         184,854         207,035         739,414
                                               -----------------------------------------------------------------
            Total Operating Expenses (Other            1,514,978         805,838         902,537       3,223,353
             Costs + Pilot Boats + Admin).....
Adjustments (Director):
    Director's Adjustment Surcharge Collected          (273,168)       (273,168)       (273,168)       (819,504)
     in 2018..................................
    Legal Fee Removal--USCG Litigation........           (4,337)         (2,307)         (2,584)         (9,227)
                                               -----------------------------------------------------------------
        Total Director's Adjustments..........         (277,505)       (275,475)       (275,752)       (828,731)
                                               -----------------------------------------------------------------
            Total Operating Expenses (OpEx +           1,237,473         530,363         626,785       2,394,622
             Adjustments).....................
----------------------------------------------------------------------------------------------------------------

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

    \51\ The undesignated areas in District Three (areas 6 and 8)
are treated separately in table 28. In table 29 and subsequent
tables, both undesignated areas are combined and analyzed as a
single undesignated area.
---------------------------------------------------------------------------

    Having identified the recognized 2018 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 2019 inflation rate.\52\ Because
the BLS does not provide forecasted inflation data, we use economic
projections from the Federal Reserve for the 2020 and 2021 inflation
modification.\53\ Based on that information, the calculations for Step
1 are as follows:
---------------------------------------------------------------------------

    \52\ See footnote 30.
    \53\ See footnote 31.

                            Table 29--Adjusted Operating Expenses for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                District Three
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)...............................      $1,864,259        $530,363      $2,394,622
2019 Inflation Modification (@1.5%).............................          27,964           7,955          35,919
2020 Inflation Modification (@1.2%).............................          22,707           6,460          29,167
2021 Inflation Modification (@1.7%).............................          32,554           9,261          41,815
                                                                 -----------------------------------------------
    Adjusted 2021 Operating Expenses............................       1,947,484         554,039       2,501,523
----------------------------------------------------------------------------------------------------------------

C. Step 3: Estimate Number of Working Pilots

    In accordance with the text in Sec.  404.104(c), we estimate the
number of working pilots in each district. We determine the number of
registered pilots based on data provided by the Western Great Lakes
Pilots Association. Using these numbers, we estimate that there will be
22 registered pilots in 2021 in District Three. Furthermore, based on
the seasonal staffing model discussed in the 2017 ratemaking (see 82 FR
41466), 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.
---------------------------------------------------------------------------

    \54\ 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).

                       Table 30--Authorized Pilots
------------------------------------------------------------------------
                                                          District Three
------------------------------------------------------------------------
Maximum number of pilots (per Sec.   401.220(a)) \54\...              22
2021 Authorized pilots (total)..........................              22
Pilots assigned to designated areas.....................               4
Pilots assigned to undesignated areas...................              18
------------------------------------------------------------------------

D. Step 4: Determine Target Pilot Compensation Benchmark

    In this step, we determine the total pilot compensation for each
area. As we are conducting an ``interim'' ratemaking this year, we will
follow the procedure outlined in paragraph (b) of Sec.  404.104, which
adjusts the existing compensation benchmark by inflation. As stated in
Section V.A of the preamble, we are using a two-step process to adjust
target pilot compensation for inflation. The first step adjusts the
2019 target compensation benchmark of $367,085 by 15 percent, for a
total adjusted value of $372,591. This adjustment accounts for the
difference between the predicted 2020 Median PCE inflation value of 2
percent and the actual 2020 ECI inflation value of 3.3
percent.55 56 Because we do not have a value for the ECI for
2021, we multiply the adjusted 2020 compensation benchmark of $372,591
by the Median PCE inflation value of 1.70 percent.\57\ Based on the
projected 2020 inflation estimate, the compensation benchmark for 2021
is $378,925 per pilot (see Table 6 for calculations).
---------------------------------------------------------------------------

    \55\ See footnote 33.
    \56\ See footnote 34.
    \57\ See footnote 35.
---------------------------------------------------------------------------

    Next, we certify that the number of pilots estimated for 2021 is
less than or equal to the number permitted under the changes to the
staffing model in Sec.  401.220(a). The number of pilots needed is 22
pilots for District Three,\58\ which is more than or equal to 22, the
number of registered pilots provided by the pilot associations.
---------------------------------------------------------------------------

    \58\ 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 Three, as shown in
Table 31.

                                Table 31--Target Compensation for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                District Three
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation.......................................        $378,925        $378,925        $378,925
Number of Pilots................................................              18               4              22
                                                                 -----------------------------------------------
    Total Target Pilot Compensation.............................       6,820,650       1,515,700       8,336,350
----------------------------------------------------------------------------------------------------------------

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
and total pilot compensation 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 3.3875
percent.\59\ By multiplying the two figures, we obtain the working
capital fund contribution for each area, as shown in Table 32.
---------------------------------------------------------------------------

    \59\ See footnote 36.

                          Table 32--Working Capital Fund Calculation for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                District Three
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................      $1,947,484        $554,039      $2,501,523
Total Target Pilot Compensation (Step 4)........................       6,820,650       1,515,700       8,336,350
Total Expenses..................................................       8,768,134       2,069,739      10,837,873
Working Capital Fund (3.3875)...................................         297,021          70,112         367,133
----------------------------------------------------------------------------------------------------------------

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, see Table 29)..............      $1,947,484        $554,039      $2,501,523
Total Target Pilot Compensation (Step 4, see Table 31)..........       6,820,650       1,515,700       8,336,350
Working Capital Fund (Step 5, see Table 32).....................         297,021          70,112         367,133
                                                                 -----------------------------------------------
    Total Revenue Needed........................................       9,065,155       2,139,851      11,205,006
----------------------------------------------------------------------------------------------------------------

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.\60\ Because
we calculate separate figures for designated and undesignated waters,
there are two parts for each calculation. We show these values in Table
34.
---------------------------------------------------------------------------

    \60\ See footnote 37.

                Table 34--Time on Task for District Three
                                 [Hours]
------------------------------------------------------------------------
                                                  District Three
                  Year                   -------------------------------
                                           Undesignated     Designated
------------------------------------------------------------------------
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
2010....................................          20,211           2,461
                                         -------------------------------
    Average.............................          20,710           2,808
------------------------------------------------------------------------

    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 35.

         Table 35--Initial Rate Calculations for District Three
------------------------------------------------------------------------
                                           Undesignated     Designated
------------------------------------------------------------------------
Revenue needed (Step 6).................      $9,065,155      $2,139,851
Average time on task (hours)............          20,710           2,808
Initial rate............................            $438            $762
------------------------------------------------------------------------

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.\61\
---------------------------------------------------------------------------

    \61\ See footnote 38.

                    Table 36--Average Weighting Factor for District Three, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
                                                                     Number of       Weighting       Weighted
                        Vessel class/year                            transits         factor         transits
----------------------------------------------------------------------------------------------------------------
                                                     Area 6
----------------------------------------------------------------------------------------------------------------
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 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 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 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
                                                                 -----------------------------------------------
    Total for Area 6............................................           4,299  ..............           5,497
----------------------------------------------------------------------------------------------------------------
                                                     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 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 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 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
                                                                 -----------------------------------------------
        Total for Area 8........................................           2,356  ..............           3,137
        Combined total..........................................           6,655  ..............        8,634.10
                                                                 -----------------------------------------------
            Average weighting factor (weighted transits/number    ..............            1.30  ..............
             of transits).......................................
----------------------------------------------------------------------------------------------------------------

                     Table 37--Average Weighting Factor for District Three, Designated Areas
----------------------------------------------------------------------------------------------------------------
                                                                     Number of       Weighting       Weighted
                      Vessel class per 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 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 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 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
                                                                 -----------------------------------------------
    Total.......................................................           2,814  ..............           3,659
                                                                 -----------------------------------------------
        Average weighting factor (weighted transits per number    ..............            1.30  ..............
         of transits)...........................................
----------------------------------------------------------------------------------------------------------------

I. Step 9: Calculate Revised Base Rates

    In this step, we revise the base rates so that, once the impact of
the weighting factors are 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 38.

                                 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......................................            $762            1.30            $586
District Three: Undesignated....................................             438            1.30             337
----------------------------------------------------------------------------------------------------------------

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 making any alterations to the rates in
this step. We will modify the text in Sec.  401.405(a) to reflect the
final rates shown in Table 39.

                                    Table 39--Final Rates for District Three
----------------------------------------------------------------------------------------------------------------
                                                                    Final 2020     Proposed 2021    Final 2021
                 Area                             Name             pilotage rate   pilotage rate   pilotage rate
----------------------------------------------------------------------------------------------------------------
District Three: Designated............  St. Marys River.........            $632            $584            $586
District Three: Undesignated..........  Lakes Huron, Michigan,               337             335             337
                                         and Superior.
----------------------------------------------------------------------------------------------------------------

VIII. Regulatory Analyses

    We developed this rule after considering numerous statutes and
Executive orders related to rulemaking. Below, we summarize our
analyses based on these statutes or Executive orders.

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
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 rule is to establish new base pilotage rates.
The Great Lakes Pilotage Act of 1960 requires that rates be established
or reviewed and adjusted each year. The Act requires that base rates be
established by a full ratemaking at least once every five 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.\62\ For this ratemaking, the Coast Guard estimates an increase
in cost of approximately $2.06 million to industry as a result of the
change in revenue needed in 2021 compared to the revenue needed in
2020.
---------------------------------------------------------------------------

    \62\ Great Lakes Pilotage Rates-2018 Annual Review and Revisions
to Methodology (83 FR 26162), published June 5, 2018.
---------------------------------------------------------------------------

    Table 40 summarizes changes with no cost impacts or where the cost
impacts are captured in the rate change. Table 41 summarizes the
affected population, costs, and benefits of the rate change.

                    Table 40--Changes With No Costs or Cost Captured in the Final Rate Change
----------------------------------------------------------------------------------------------------------------
                                                                           Basis for no cost
             Change                   Description          Affected        or cost captured        Benefits
                                                          population       in the final rate
----------------------------------------------------------------------------------------------------------------
Legal expenses for lawsuits       The Coast Guard is  Owners and          Changes in          The change will
 against the Coast Guard in        excluding legal     operators of 279    operating           remove the undue
 relation to the ratemaking are    fees for            vessels             expenses are        cost to shippers
 not allowable operating           litigation          journeying the      accounted for in    of effectively
 expenses.                         against the Coast   Great Lakes         the base pilotage   paying for the
                                   Guard from          system annually,    rates. For the      pilots'
                                   operating           54 United States    2021 ratemaking,    litigation
                                   expenses for        registered          these legal fees    expenses to sue
                                   calculation of      pilots, and 3       total $27,594 for   the Coast Guard.
                                   pilotage rates.     pilotage            all three
                                   This exclusion      associations.       districts. After
                                   only applies to                         adjusting for
                                   legal fees when                         inflation and the
                                   pilots                                  working capital
                                   associations sue                        fund, these
                                   the Coast Guard                         expenses are
                                   in relation to                          $29,802, or 0.10%
                                   the ratemaking                          of the total
                                   and oversight                           revenue needed
                                   requirement in 46                       for 2021. The
                                   U.S.C. 9303, 9304                       pilot
                                   and 9305. As part                       associations may
                                   of this change,                         still be
                                   the Coast Guard                         reimbursed for
                                   is also creating                        these expenses by
                                   a new paragraph                         the Coast Guard
                                   46 CFR                                  under the EAJA.
                                   404.2(b)(6),
                                   which defines
                                   legal expenses.
Inflation of target pilot         The Coast Guard is  Owners and          Pilot compensation  This change
 compensation.                     modifying 46 CFR    operators of 279    costs are           ensures the Coast
                                   404.104(b) to       vessels             accounted for in    Guard will be
                                   change how          journeying the      the base pilotage   able to correct
                                   inflation of        Great Lakes         rates.              any under- or
                                   pilot               system annually,                        over-estimates in
                                   compensation is     54 United States                        inflation, rather
                                   calculated by       registered Great                        than keeping
                                   accounting for      Lakes pilots, and                       these errors
                                   the difference      3 pilotage                              continuously in
                                   between the         associations.                           the rate.
                                   predicted PCE
                                   inflation rated
                                   and the actual
                                   ECI inflation
                                   rate.
----------------------------------------------------------------------------------------------------------------

                                    Table 41--Economic Impacts Due to Changes
----------------------------------------------------------------------------------------------------------------
                                                           Affected
             Change                   Description         population             Costs             Benefits
----------------------------------------------------------------------------------------------------------------
Rate and surcharge changes......  Under the Great     Owners and          Increase of         New rates cover an
                                   Lakes Pilotage      operators of 279    $2,064,622 due to   association's
                                   Act of 1960, the    vessels             change in revenue   necessary and
                                   Coast Guard is      transiting the      needed for 2021     reasonable
                                   required to         Great Lakes         ($30,332,652)       operating
                                   review and adjust   system annually,    from revenue        expenses.
                                   base pilotage       54 United States    needed for 2020     Promotes safe,
                                   rates annually.     registered Great    ($28,268,030), as   efficient, and
                                                       Lakes pilots, and   shown in Table 43   reliable pilotage
                                                       3 pilotage          below.              service on the
                                                       associations.                           Great Lakes.
                                                                                Provides fair
                                                                                compensation,
                                                                                adequate
                                                                                training, and
                                                                                sufficient rest
                                                                                periods for
                                                                                pilots. Ensures
                                                                                the association
                                                                                receives
                                                                                sufficient
                                                                                revenues to fund
                                                                                future
                                                                                improvements.
----------------------------------------------------------------------------------------------------------------

    The Coast Guard did not receive any comments on the regulatory
analysis itself, but we did receive comments on the operating expenses
that affected the calculation of projected revenues. In this final
rule, the Coast Guard made six adjustments to the operating expenses
(Step 1):
    (1) We included intervener legal fees paid by District Three in
their operating expenses. These fees were incorrectly deducted via
Directors adjustment in the NPRM.
    (2) We removed the Director's adjustment deducting District One's
applicant pilot salaries.
    (3) We removed a CPA deduction of $6,600 for District One's dues
and subscriptions, as this deduction was not included in the auditor's
report.
    (4) We added capital expenses to District One for dock repairs,
loan repayment, and the down payment of a new pilot boat.
    (5) We adjusted District One's applicant expenses based on new
information provided by the CohnReznick.
    (6) We redistributed the applicant pilot salary deduction for
District Two between the designated and undesignated areas.

    In addition to the adjustments made to the operating expenses, we
made two other changes that impacted the calculation of projected
revenues:
    (1) We updated the PCE and ECI inflation data to use the most
recently available information.
    (2) Based on public comment, we decided not to incorporate the
proposed rounding changes to the staffing model in this final rule. As
a result of this change, District One will have one less working pilot
than was proposed.
    Table 42 summarizes the changes in the regulatory analysis from the
NPRM to this final rule. The Coast Guard made these changes as a result
of public comments received after publication of the NPRM and a review
of each district's operating expenses by the Coast Guard and
CohnReznick. In addition, the Coast Guard updated the ECI and PCE
inflation data to use more recent published datasets, and removed one
working pilot from District One. An in-depth discussion of the public
comments is located in Section VI of the preamble, Discussion of
Comments.

                              Table 42--Summary of Changes From NPRM to Final Rule
----------------------------------------------------------------------------------------------------------------
                                                                                Resulting change
     Element of the analysis             NPRM             Final rule            Impact               in RA
----------------------------------------------------------------------------------------------------------------
Operating Expenses (Step 1).....  The Coast Guard     Based on public     Increased District  Data affects the
                                   deducted $36,688    comment, the        Three's total       calculation of
                                   from total          Coast Guard         operating           projected
                                   operating           realized that       expenses by         revenues.
                                   expenses for        $9,094 worth of     $9,094 before
                                   legal fees for      intervener legal    inflation and
                                   litigation          fees paid by        accounting for
                                   against the Coast   District Three      the working
                                   Guard.              were erroneously    capital fund
                                                       deducted as         adjustments.
                                                       litigation
                                                       expenses. We
                                                       added that amount
                                                       back into the
                                                       operating
                                                       expenses and are
                                                       deducting $27,594
                                                       in this final
                                                       rule for
                                                       litigation fees
                                                       against the Coast
                                                       Guard.
Operating Expenses (Step 1).....  The Coast Guard     Based on public     Increased District  Data affects the
                                   deducted $594,521   comment, the        One's total         calculation of
                                   from District       Coast Guard         operating           projected
                                   One's total         removed the         expenses by         revenues.
                                   operating           Director's          $594,331 before
                                   expenses for        adjustment that     inflation and
                                   applicant pilot     removed applicant   accounting for
                                   salaries.           salaries from       the working
                                                       District One's      capital fund
                                                       operating           adjustments.
                                                       expenses. In
                                                       addition, based
                                                       on information
                                                       provided by
                                                       CohnReznick, the
                                                       Coast Guard
                                                       modified the
                                                       applicant salary
                                                       amount from
                                                       $594,521 to
                                                       $594,331.
Operating Expenses (Step 1).....  The Coast Guard     Based on public     Increased District  Data affects the
                                   deducted $6,600     comment, the        One's total         calculation of
                                   from District       Coast Guard         operating           projected
                                   One's total         removed an          expenses by         revenues.
                                   operating           erroneous CPA       $6,600 before
                                   expenses for dues   adjustment of       inflation and
                                   and subscriptions.  $6,600 from         accounting for
                                                       District One's      the working
                                                       operating           capital fund
                                                       expenses.           adjustments.
Operating Expenses (Step 1).....  The NPRM did not    Based on public     Increased District  Data affects the
                                   include expenses    comment, the        One's total         calculation of
                                   incurred by         Coast Guard added   operating           projected
                                   District One for    $606,836 for        expenses by         revenues.
                                   infrastructure      infrastructure      $606,836 before
                                   expenditures made   costs to District   inflation and
                                   in 2018.            One's total         accounting for
                                                       operating           the working
                                                       expenses.           capital fund
                                                                           adjustments.
Operating Expenses (Step 1).....  The Coast Guard     The Coast Guard     No impact. Because  None. There is no
                                   calculated that     calculated that     these expenses      impact on
                                   District One        District One        are not included    projected
                                   spent a total of    spent a total of    in the final        revenues or the
                                   $228,526 on         $238,520 on         operating costs     RA.
                                   applicant pilot     applicant pilot     for District One,
                                   expenses,           expenses,           modifying these
                                   excluding           excluding           amounts does not
                                   salaries. To        salaries, based     impact District
                                   increase            on new              One's total
                                   transparency, we    information from    operating costs.
                                   presented these     CohnReznick. To
                                   expenses as         increase
                                   Director's          transparency, we
                                   adjustments in      presented these
                                   Table 3 of the      expenses as
                                   NPRM and then       director's
                                   deducted them to    adjustments in
                                   avoid double        Table 3 of this
                                   counting.           final rule and
                                                       then deducted
                                                       them to avoid
                                                       double counting.
Operating Expenses (Step 1).....  In the NPRM, the    The Coast Guard     This change         None. There is no
                                   Coast Guard         modified the way    reduced the         impact on
                                   attributed 40% of   the Director's      operating           projected
                                   District Two's      adjustment for      expenses for the    revenues or the
                                   applicant salary    applicant           undesignated area   RA.
                                   costs to the        salaries was        by $14,175 and
                                   undesignated area   allocated to a 40/  increased them
                                   and 60% to the      60 split, with      for the
                                   designated area.    40% of the          designated area
                                   However, the        Director's          by $14,175.
                                   Director's          adjustment          Therefore, this
                                   adjustment for      attributed to the   change had no net
                                   applicant           undesignated area   impact on
                                   salaries used a     and 60%             District Two's
                                   33/67% spilt        attributed to the   total operating
                                   between the         designated area.    expenses.
                                   undesignated and
                                   designated areas.
Inflation of Operating Expenses   The Coast Guard     The Coast Guard     Increased total     Data affects the
 (Step 2).                         used a PCE          updated PCE         inflated            calculation of
                                   inflation value     inflation value     operating           projected
                                   of 0.8% for 2020    to 1.2% for 2020    expenses for all    revenues.
                                   and 1.6% for        and 1.7% for        three districts
                                   2021, based on      2021, based on      by $43,779.
                                   the most recent     the most recently
                                   PCE data            published PCE
                                   available at the    data (September
                                   time the NPRM was   2020).
                                   completed. (June
                                   2020 data).
Estimate of Total Number of       Estimated that      There will be a     Decreased the       Data affects the
 Working Pilots (Step 3).          there would be a    net addition of     amount of revenue   calculation of
                                   net addition of     two additional      needed for pilot    projected
                                   three additional    working pilots.     compensation by     revenues.
                                   working pilots.                         $378,925.

Target Pilot Compensation (Step   To calculate        To calculate        Target pilot        Data affects the
 4).                               target pilot        target pilot        compensation        calculation of
                                   compensation, the   compensation, the   decreased by $745   projected
                                   Coast Guard used    Coast Guard used    per pilot, from     revenues.
                                   a Q1 ECI            a Q3 ECI            $378,180 to
                                   inflation value     inflation value     $378,925.
                                   of 3.4% and a       of 3.5% and a
                                   2021 PCE value of   2021 PCE value of
                                   1.6% for 2021,      1.7% for 2021,
                                   based on the most   based on the most
                                   recently            recently
                                   available data at   available data.
                                   the time the NPRM
                                   was completed.
----------------------------------------------------------------------------------------------------------------

    The Coast Guard is required to review and adjust pilotage rates on
the Great Lakes annually. See Sections III and IV of this preamble for
detailed discussions of the legal basis and purpose for this rulemaking
and for background information on Great Lakes pilotage ratemaking.
Based on our annual review for this rulemaking, we are adjusting the
pilotage rates for the 2021 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 rate changes in this final rule will increase the rates for
District One and decrease them for District Two and the designated area
of District Three. The rate for District Three's undesignated area will
not change from 2020. In addition, the rule will not implement a
surcharge for the training of apprentice pilots as was last implemented
in the 2019 ratemaking.\63\ These changes lead to a net increase in the
cost of service to shippers. However, because the rates will 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.
---------------------------------------------------------------------------

    \63\ See, 84 FR 20551 (May 10, 2019).
---------------------------------------------------------------------------

    A detailed discussion of our economic impact analysis follows.
Affected Population
    This rule will impact United States registered Great Lakes pilots,
the 3 pilot associations, and the owners and operators of 279
oceangoing vessels that transit the Great Lakes annually. We estimate
that there will be 54 pilots registered during the 2021 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. United States-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 2017
through 2019 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
will be impacted by this rulemaking. We found that 474 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. Of these vessels, 434 were
foreign-flagged vessels and 40 were U.S.-flagged vessels. As previously
stated, 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 2017 through 2019 as the best representation of
vessels estimated to be affected by the rates in this rulemaking. From
2017 through 2019, an average of 279 vessels used pilotage services
annually.\64\ On average, 261 of these vessels were foreign-flagged
vessels and 18 were U.S.-flagged vessels that voluntarily opted into
the pilotage service.
---------------------------------------------------------------------------

    \64\ 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 rate changes resulting from this adjustment to the rates will
result in a net increase in the cost of service to shippers. However,
the 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 2020 with the total projected revenues to cover costs in 2021,
including any temporary surcharges we have authorized.\65\ 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.
---------------------------------------------------------------------------

    \65\ While the Coast Guard implemented a surcharge in 2019, we
are not implementing any surcharges for 2021.
---------------------------------------------------------------------------

    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 2021 shipping
season, the projected

revenue needed for all three districts is $30,332,652.
    To estimate the change in cost to shippers from this rule, the
Coast Guard compared the 2021 total projected revenues to the 2020
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 2020
rulemaking, we estimated the total projected revenue needed for 2020 as
$28,268,030.\66\ This is the best approximation of 2020 revenues, as,
at the time of this publication, the Coast Guard does not have enough
audited data available for the 2020 shipping season to revise these
projections.\67\ Table 43 shows the revenue projections for 2020 and
2021 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.
---------------------------------------------------------------------------

    \66\ 85 FR 20088, see table 41.
    \67\ The rates for 2021 do not account for the impacts COVID-19
may have on shipping traffic and subsequently pilotage revenue, as
we do not have complete data for 2020. The rates for 2022 will take
into account the impact 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.

                                Table 43--Effect of the Rule by Area and District
                                             [$U.S.; non-discounted]
----------------------------------------------------------------------------------------------------------------
                                                                                Change in
                              Area                                Revenue needed  Revenue needed   costs of this
                                                                      in 2020         in 2021          rule
----------------------------------------------------------------------------------------------------------------
Total, District One.............................................      $9,210,888     $10,620,941      $1,410,053
Total, District Two.............................................       8,345,871       8,506,705         160,834
Total, District Three...........................................      10,711,271      11,205,006         493,735
                                                                 -----------------------------------------------
    System Total................................................      28,268,030      30,332,652       2,064,622
----------------------------------------------------------------------------------------------------------------

    The resulting difference between the projected revenue in 2020 and
the projected revenue in 2021 is the annual change in payments from
shippers to pilots as a result of the rate change imposed by this 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 will lead to affected shippers operating in District One
experiencing an increase in payments of $1,410,053 over the previous
year. District Two and District Three will experience an increase in
payments of $160,834 and $493,735, respectively, when compared with
2020. The overall adjustment in payments will be an increase in
payments by shippers of $2,064,622 across all three districts (a 7-
percent increase when compared with 2020). 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 44 shows the difference in revenue-by-revenue-component from
2020 to 2021 and presents each revenue-component as a percentage of the
total revenue needed. In both 2020 and 2021, the largest revenue-
component was pilot compensation (68 percent of total revenue needed in
2020 and 67 percent of total revenue needed in 2021), followed by
operating expenses (29 percent of total revenue needed in both 2020 and
2021).

                                                      Table 44--Difference in Revenue by Component
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           Percentage of                   Percentage of                    Percentage
                                                          Revenue needed   total revenue  Revenue needed   total revenue    Difference      change from
                    Revenue-component                         in 2020     needed in 2020      in 2021     needed in 2021  (2021 revenue -  previous year
                                                                             (percent)                       (percent)    2020  revenue)     (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses.............................      $8,110,685              29      $8,876,850              29        $766,165               9
Total Target Pilot Compensation.........................      19,088,420              68      20,461,950              67       1,373,530               7
Working Capital Fund....................................       1,068,925               4         993,852               3        (75,073)             (7)
Total Revenue Needed....................................      28,268,030             100      30,332,652             100       2,064,622               7
--------------------------------------------------------------------------------------------------------------------------------------------------------
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 $2,064,622. This represents
an increase in revenue needed for target pilot compensation and
adjusted operating expenses of $1,373,530 and $766,165, respectively,
and a decrease in the revenue needed for the working capital fund of
$75,073. The removal of legal fees associated with litigation against
the Coast Guard will reduce the revenue needed in 2021 by $29,802. This
number includes adjustments made to the base legal fee amount of
$27,594 for inflation and the working capital fund. While the shippers
will no longer reimburse the legal fees associated with litigation via
the rate under the rule, the pilot associations may still be reimbursed
for these expenses by the Coast Guard under the EAJA.
    The majority of the increase in revenue needed, $1,373,530, is the
result of changes to target pilot compensation. These changes are due
to three factors: (1) The changes to adjust 2020 pilotage compensation
to account for the difference between actual and predicted inflation;
(2) the net addition of two additional pilots; and (3) inflation of
pilotage compensation to adjust target compensation values from 2020
dollars to 2021 dollars.
    The target compensation is $378,925 per pilot in 2021, compared to
$367,085 in 2020. The changes to modify the 2020 pilot compensation to
account for the difference between predicted and actual inflation will
increase the 2020 target compensation value by 1.5 percent. As shown in
Table 45, this inflation

adjustment will increase total compensation by $5,506 per pilot, and
the total revenue needed by $297,339, when accounting for all 54
pilots.

  Table 45--Change in Revenue Resulting From the Change to Inflation of
                Pilot Compensation Calculation in Step 4
------------------------------------------------------------------------

------------------------------------------------------------------------
2020 Target Compensation................................        $367,085
Adjusted 2020 Compensation ($367,085 x 1.015)...........         372,591
Difference between Adjusted Target 2020 Compensation and           5,506
 Target 2020 Compensation ($372,591-$367,085)...........
Increase in total Revenue for 54 Pilots ($5,506 x 54)...         297,339
------------------------------------------------------------------------

    The addition of two pilots to full registered status accounts for
$746,837 of the increase in needed revenue. As shown in Table 46, to
avoid double counting, this value excludes the change in revenue
resulting from the change to adjust 2020 pilotage compensation to
account for the difference between actual and predicted inflation.

 Table 46--Change in Revenue Resulting From Adding Two Additional Pilots
------------------------------------------------------------------------

------------------------------------------------------------------------
2021 Target Compensation................................        $378,925
Total Number of New Pilots..............................               2
Total Cost of new Pilots ($378,925 x 2).................        $757,850
Difference between Adjusted Target 2020 Compensation and          $5,506
 Target 2020 Compensation ($372,591-$367,085)...........
Increase in total Revenue for 2 Pilots ($5,506 x 2).....         $11,013
Net Increase in total Revenue 2 Pilots ($757,850-               $746,837
 $11,013)...............................................
------------------------------------------------------------------------

    Finally, the remainder of the increase, $329,354, is the result of
increasing compensation for the other 52 pilots to account for future
inflation of 1.7 percent in 2021. This will increase total compensation
by $6,334 per pilot.

 Table 47-- Change in Revenue Resulting From Inflating 2020 Compensation
                                 to 2021
------------------------------------------------------------------------

------------------------------------------------------------------------
Adjusted 2020 Compensation..............................        $372,591
2021 Target Compensation ($372,591 x 1.017).............         378,925
Difference between Target 2020 Compensation and Target             6,334
 2020 Compensation ($378,925-$372,591)..................
Increase in total Revenue for 52 Pilots ($6,334 x 52)...         329,354
------------------------------------------------------------------------

    Table 48 presents the percentage change in revenue by area and
revenue-component, excluding surcharges, as they are applied at the
district level.\68\
---------------------------------------------------------------------------

    \68\ The 2020 projected revenues are from the Great Lakes
Pilotage Rates--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 rule.

                                                                      Table 48--Difference in Revenue by Component and Area
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Adjusted operating expenses        Total target pilot compensation            Working capital fund                 Total revenue needed
                                             ---------------------------------------------------------------------------------------------------------------------------------------------------
                    Area                                               Percentage                           Percentage                           Percentage                           Percentage
                                                 2020        2021        change       2020        2021        change       2020        2021        change       2020        2021        change
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
District One: Designated....................  $1,573,286  $2,328,981          32%  $3,670,850  $3,789,250           3%    $206,095    $207,255           1%  $5,450,231  $6,325,486          14%
District One: Undesignated..................   1,048,857   1,502,239          30%   2,569,595   2,652,475           3%     142,205     140,741         (1%)   3,760,657   4,295,455          12%
District Two: Undesignated..................   1,019,371   1,003,961          -2%   2,936,680   3,031,400           3%     155,473     136,698        (14%)   4,111,524   4,172,059           1%
District Two: Designated....................   1,504,635   1,540,146           2%   2,569,595   2,652,475           3%     160,117     142,025        (13%)   4,234,347   4,334,646           2%
District Three: Undesignated................   2,336,354   1,947,484         -20%   5,873,360   6,820,650          14%     322,642     297,021         (9%)   8,532,356   9,065,155           6%
District Three: Designated..................     628,182     554,039         -13%   1,468,340   1,515,700           3%      82,393      70,112        (18%)   2,178,915   2,139,851         (2%)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Benefits
    This rule will 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 will 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 will also help recruit and
retain pilots, which will ensure a sufficient number of pilots to meet