Final 2021     2022 Pilotage
                     Area                                     Name                 pilotage rate       rate
----------------------------------------------------------------------------------------------------------------
District One: Designated......................  St. Lawrence River..............            $800            $834
District One: Undesignated....................  Lake Ontario....................            $498            $568
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar.

District Two

A. Step 1: Recognize Previous Operating Expenses

    Step 1 in our ratemaking methodology requires that the Coast Guard
review and recognize the previous year's operating expenses (Sec.
404.101). To do so, we begin by reviewing the independent accountant's
financial reports for each association's 2019 expenses and revenues,
which are available in the docket for this rulemaking. For accounting
purposes, the financial reports divide expenses into designated (60
percent) and undesignated areas (40 percent). 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.
    Adjustments made by the auditors are explained in the auditors'
reports, which are available in the docket for this rulemaking.
    In the 2019 expenses used as the basis for this rulemaking,
districts used the term ``applicant'' to describe applicant trainees
and persons who are called apprentices (applicant pilots) under the new
definition in this rulemaking. Therefore, when describing past
expenses, we use the term ``applicant'' to match what was reported from
2019, which includes both applicant trainees and apprentice pilots. We
use ``apprentice'' to distinguish the apprentice pilot wage benchmark
and describe the impacts of the ratemaking going forward.
    There are two Director's adjustments for District Two. The first
deduction is $173,818, the amount of surcharge collected in 2019 to
recoup expenses of one applicant pilot, which is greater than the
allowable surcharge of $150,000 per applicant pilot. The second
deduction of $287,836 reduces the allowable expenses for applicant
pilot salaries to 36 percent of target pilot compensation. District Two
reported $417,395 in expenses for the salary of a single applicant
pilot, more than the salary of a fully registered pilot. Using the 36-
percent target, the allowable applicant salary would have been
$129,559, meaning the district paid an excess of $287,836 in applicant
salaries ($417,395-$129,559 = $287,836). We continue to include
applicant salaries as an allowable expense in the 2022 ratemaking, as
it is based on 2019 operating expenses, when salaries for both
apprentices and applicant trainees were still an allowable expense. The
apprentice salaries paid in the years 2019, 2020, and 2021 have not
been reimbursed in the ratemaking as of publication of this rule.
Applicant salaries (including applicant trainees and apprentice pilots)
will continue to be an allowable operating expense through the 2024
ratemaking, which will use operating expenses from 2021, when the
salaries for apprentice pilots were still authorized as operating
expenses. Starting in the 2025 ratemaking, apprentice pilot salaries
will no longer be included as a 2022 operating expense, because
apprentice pilot wages will have already been factored into the
ratemaking Steps 3 and 4 in calculation of the 2022 rates. Starting in
2025, the applicant salaries' operating expenses for 2022 will consist
of only applicant trainees (those who are not yet apprentice pilots).
    As discussed above, in a public comment on the NPRM for this
rulemaking, the LPA commented that the expenses listed in the NPRM for
license insurance and applicant health insurance were incorrect. An
independent accounting firm reviewed the expenses LPA claimed as the
correct figures and determined that the license insurance expense
figure of $1,825 originally proposed in the NPRM was correct, and that
the amount the LPA claimed was missing was accounted for in another
line item. The independent accountant further determined that the
applicant health insurance expense of $200 originally proposed was
incorrect. In this final rule, Coast Guard corrects the applicant
health insurance to a total of $31,764, with $12,706 allocated to the
undesignated area and $19,058 allocated to the designated area.

                               Table 16--2019 Recognized Expenses for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                District Two
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated
              Reported operating expenses for 2019               --------------------------------
                                                                                Southeast         Total
                                                                     Lake Erie     Shoal to Port
                                                                                Huron
----------------------------------------------------------------------------------------------------------------
Total Other Pilotage Costs:
    Subsistence/Travel--Pilots..................................        $140,909        $211,363        $352,272
    Hotel/Lodging Cost..........................................          49,800          74,700         124,500
    License Insurance...........................................             730           1,095           1,825
    Payroll Taxes...............................................          90,091         135,137         225,228
    Insurance...................................................          95,470         143,206         238,676
    Training....................................................           6,428           9,642          16,070
    Other.......................................................             221             331             552
                                                                 -----------------------------------------------

        Total Other Pilotage Costs..............................         383,649         575,474         959,123
Total Applicant Pilotage Costs:
    Applicant Salaries..........................................         166,958         250,437         417,395
    Applicant Health Insurance..................................          12,706          19,058          31,764
    Applicant Subsistence/Travel................................           5,729           8,593          14,322
    Applicant Hotel/Lodging Cost................................           3,984           5,976           9,960
    Applicant Payroll Tax.......................................           5,717           8,576          14,293
                                                                 -----------------------------------------------
        Total Applicant Costs...................................         195,094         292,640         487,734
Pilot Boat and Dispatch Costs:
    Pilot Boat Cost.............................................         210,948         316,422         527,370
    Employee Benefits...........................................          96,959         145,438         242,397
    Payroll Taxes...............................................          13,178          19,767          32,945
                                                                 -----------------------------------------------
        Total Pilot Boat and Dispatch Costs.....................         321,085         481,627         802,712
Administrative Expense:
    Legal--General Counsel......................................           4,430           6,645          11,075
    Legal--Shared Counsel (K&L Gates)...........................          22,696          34,045          56,741
    Office Rent.................................................          27,627          41,440          69,067
    Insurance...................................................          11,085          16,627          27,712
    Employee Benefits...........................................          34,093          51,139          85,232
    Payroll Taxes...............................................           5,259           7,888          13,147
    Other Taxes.................................................          36,484          54,726          91,210
    Real Estate Taxes...........................................           7,905          11,858          19,763
    Depreciation/Auto Lease/Other...............................          12,248          18,371          30,619
    Interest....................................................             320             481             801
    APA Dues....................................................          14,698          22,048          36,746
    Dues and Subscriptions......................................           1,912           2,868           4,780
    Utilities...................................................          18,910          28,366          47,276
    Salaries--Admin Employees...................................          49,924          74,885         124,809
    Accounting..................................................          13,452          20,178          33,630
    Other.......................................................          18,322          27,483          45,805
                                                                 -----------------------------------------------
        Total Administrative Expenses...........................         279,365         419,048         698,413
----------------------------------------------------------------------------------------------------------------
Total OpEx (Pilot Costs + Applicant Cost + Pilot Boats + Admin).       1,179,193       1,768,789       2,947,982
Directors Adjustments-Applicant Surcharge Collected.............        (69,527)       (104,291)       (173,818)
Directors Adjustments-Excess Applicant Salary Paid..............       (115,134)       (172,701)       (287,836)
                                                                 -----------------------------------------------
        Total Director's Adjustments............................       (184,661)       (276,992)       (461,654)
                                                                 -----------------------------------------------
            Total Operating Expenses (OpEx + Adjustments).......         994,531       1,491,797       2,486,328
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

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

    Having identified the recognized 2019 operating expenses in Step 1,
the next step is to estimate the current year's operating expenses by
adjusting those expenses for inflation over the 3-year period.
    We calculate inflation using the BLS data from the CPI for the
Midwest Region of the United States for the 2020 and 2021 inflation
rates.\24\ Because the BLS does not provide forecasted inflation data,
we use economic projections from the Federal Reserve for the 2022
inflation modification.\25\ Based on that information, the calculations
for Step 2 are as shown in table 17.
---------------------------------------------------------------------------

    \24\ The 2020 and 2021 inflation rates are available at https://beta.bls.gov/dataViewer/view/timeseries/CUUR0200SA0. Specifically,
the CPI is defined as ``All items in Midwest urban, all urban
consumers, not seasonally adjusted (Series ID CUUR0200SA0)(CPI-U),
All Items, 1982-4=100'' (downloaded March 2022). In the NPRM we used
the PCE estimate of 4.3 percent for 2021, but now use the available
interim CPI figure of 5.1 percent.
    \25\ For the 2022 inflation rates, we used the PCE median
inflation value found in table 1 at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20211215.pdf (Federal Reserve
Board, Summary of Economic Projections, dated December 15, 2021,
downloaded March 2022). This figure is updated to 2.2 percent from 2
percent in the NPRM.

                             Table 17--Adjusted Operating Expenses for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                District Two
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)...............................        $994,531      $1,491,797      $2,486,328
2020 Inflation Modification (@1%)...............................           9,945          14,918          24,863
2021 Inflation Modification (@5.1%).............................          51,228          76,842         128,070
2022 Inflation Modification (@2.2%).............................          23,225          34,838          58,063
                                                                 -----------------------------------------------
    Adjusted 2022 Operating Expenses............................      $1,078,929      $1,618,395      $2,697,324
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

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

    In accordance with the text in Sec.  404.103, we estimate the
number of registered pilots in each district. We determine the number
of registered pilots based on data provided by the LPA. With rounding,
the maximum number of pilots for District Two increases to 16 pilots
(15.41 rounding up to 16), with the additional pilot allocated to the
maximum for the undesignated area of District Two, resulting in a
maximum of 7 pilots for the designated area and a maximum of 9 pilots
for the undesignated area. In the NPRM, the Coast Guard estimated that
District Two would fill the new maximum of 16 registered pilots, but
has since been made aware that a temporary pilot performed
substantially fewer trips than the average number of assignments per
pilot projected in the staffing model, and that an apprentice pilot
previously projected to join as a registered pilot will not do so, as
noted in section IV. F. of the discussion of public comments and
changes. Therefore, in this final rule, we estimate that there will be
14 registered pilots in 2022 in District Two. We determine the number
of apprentice pilots based on input from the district on anticipated
retirements and staffing needs. Using these numbers, we estimate that
there will be two apprentice pilots in 2022 in District Two.
Furthermore, based on the seasonal staffing model discussed in the 2017
ratemaking (see 82 FR 41466), and our changes to that staffing model,
we assign a certain number of pilots to designated waters and a certain
number to undesignated waters, as shown in table 18. 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)) *......              16
2022 Authorized Pilots (total)..........................              14
Pilots Assigned to Designated Areas.....................               6
Pilots Assigned to Undesignated Areas...................               8
2022 Apprentice Pilots..................................               2
------------------------------------------------------------------------
* 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).

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

    In this step, we determine the total pilot compensation for each
area. As we are issuing an ``interim'' ratemaking this year, we follow
the procedure outlined in paragraph (b) of Sec.  404.104, which adjusts
the existing compensation benchmark by inflation. As stated in section
V.A of the preamble, we using a two-step process to adjust target pilot
compensation for inflation. First, we adjust the 2021 target
compensation benchmark of $378,925 by multiplying by 3.1 percent for an
adjusted value of $390,672. The adjustment accounts for the difference
in actual Q4 2021 ECI inflation, 4.8 percent, and the 2020 PCE estimate
of 1.7 percent.\26\ \27\ The second step accounts for projected
inflation from 2021 to 2022, which is 2.2 percent.\28\ The compensation
benchmark for 2022 is $399,266 per pilot, as calculated in table 6. The
apprentice pilot wage benchmark is 36 percent of the target pilot
compensation, or $143,736 ($399,266 x 0.36).
---------------------------------------------------------------------------

    \26\ Employment Cost Index, Total Compensation for Private
Industry workers in Transportation and Material Moving, Series ID:
CIU2010000520000A.
    \27\ CPI for All Urban Consumers, Series ID CUUR0200SA0.
    \28\ For the 2022 inflation rates, we used the PCE median
inflation value found in table 1 at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20211215.pdf (Federal Reserve Bank,
Summary of Economic Projections, dated December 15, 2021, downloaded
March 2022). This figure is updated to 2.2 percent from 2 percent in
the NPRM.
---------------------------------------------------------------------------

    Next, we certify that the number of pilots estimated for 2022 is
less than or equal to the number permitted under the changes to the
staffing model in Sec.  401.220(a). The changes to the staffing model
suggest that the number of pilots needed is 14 pilots for District Two,
which is less than or equal to 16, the maximum number of registered
pilots provided by staffing model.\29\ We estimate that two apprentice
pilots will be needed for District Two in the 2022 season. The
apprentice pilots will work under a fully registered pilot and receive
training in both the designated and undesignated waters, but their
target compensation will not differ depending on which area they are
training in. The $287,472 in total wages for two apprentice pilots is
allocated 60 percent for the designated area ($172,483) and 40 percent
for the undesignated area ($114,989), in accordance with the way
operating expenses are allocated in Step 1 and later in Step 6.
---------------------------------------------------------------------------

    \29\ See table 6 of the Great Lakes Pilotage Rates--2017 Annual
Review final rule, 82 FR 41466 at 41480 (August 31, 2017). The
methodology of the staffing model is discussed at length in the
final rule (see pages 41476-41480 for a detailed analysis of the
calculations).
---------------------------------------------------------------------------

    Thus, in accordance with Sec.  404.104(c), we use the revised
target

individual compensation level to derive the total pilot compensation,
by multiplying the individual target compensation by the estimated
number of registered pilots for District Two, as shown in table 19.

                                 Table 19--Target Compensation for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                District Two
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation.......................................        $399,266        $399,266        $399,266
Number of Pilots................................................               8               6              14
                                                                 -----------------------------------------------
    Total Target Pilot Compensation.............................      $3,194,128      $2,395,596      $5,589,724
Apprentice Pilot Wage Benchmark.................................        $143,736        $143,736        $143,736
Number of Apprentice Pilots.....................................  ..............  ..............               2
                                                                 -----------------------------------------------
    Total Apprentice Pilot Wage Benchmark.......................        $172,483        $114,989        $287,472
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

E. Step 5: Project Working Capital Fund

    Next, we calculate the working capital fund revenues needed for
each area. First, we add the figures for projected operating expenses,
total pilot compensation, and total apprentice pilot wage benchmarks
for each area. Next, we find the preceding year's average annual rate
of return for new issues of high-grade corporate securities. Using
Moody's data, the number is 2.4767 percent.\30\ By multiplying the two
figures, we obtain the working capital fund contribution for each area,
as shown in table 20.
---------------------------------------------------------------------------

    \30\ Moody's Seasoned Aaa Corporate Bond Yield, average of 2020
monthly data. The Coast Guard uses the most recent year of complete
data. Moody's is taken from Moody's Investors Service, which is a
bond credit rating business of Moody's Corporation. Bond ratings are
based on creditworthiness and risk. The rating of ``Aaa'' is the
highest bond rating assigned with the lowest credit risk. See
https://fred.stlouisfed.org/series/AAA. (March 26, 2021)

                           Table 20--Working Capital Fund Calculation for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                District Two
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................      $1,078,929      $1,618,395      $2,697,324
Total Target Pilot Compensation (Step 4)........................       3,194,128       2,395,596       5,589,724
Total Apprentice Pilot Wage Benchmark (Step 4)..................         172,483         114,989         287,472
                                                                 -----------------------------------------------
    Total 2022 Expenses.........................................       4,445,540       4,128,980       8,574,520
----------------------------------------------------------------------------------------------------------------
Working Capital Fund (2.48%)....................................         110,101         102,261         212,362
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

F. Step 6: Project Needed Revenue

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

                                    Table 21--Revenue Needed for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                District Two
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................      $1,078,929      $1,618,395      $2,697,324
Total Target Pilot Compensation (Step 4)........................       3,194,128       2,395,596       5,589,724
Total Apprentice Pilot Wage Benchmark (Step 4)..................         172,483         114,989         287,472
Working Capital Fund (Step 5)...................................         110,101         102,261         212,362
                                                                 -----------------------------------------------
    Total Revenue Needed........................................       4,555,641       4,231,241       8,786,882
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

G. Step 7: Calculate Initial Base Rates

    Having determined the revenue needed for each area in the previous
six steps, to develop an hourly rate we divide that number by the
expected number of hours of traffic. Step 7 is a two-part process. In
the first part, we calculate the 10-year average of traffic in District
Two, using the total time on task or pilot bridge hours. To calculate
the time on task for each district, the Coast Guard uses billing data
from the GLPMS and SeaPro. We pull the data from the system, filtering
by district, year, job status (we only include closed jobs), and
flagging code (we only include U.S. jobs). After downloading the data,
we remove any overland

transfers from the dataset, if necessary, and sum the total bridge
hours, by area. We then subtract any non-billable delay hours from the
total. Because we calculate separate figures for designated and
undesignated waters, there are two parts for each calculation. We show
these values in table 22.

                 Table 22--Time on Task for District Two
                                 [Hours]
------------------------------------------------------------------------
                                                   District Two
                  Year                   -------------------------------
                                           Undesignated     Designated
------------------------------------------------------------------------
2020....................................            6232            8401
2019....................................            6512            7715
2018....................................            6150            6655
2017....................................            5139            6074
2016....................................            6425            5615
2015....................................            6535            5967
2014....................................            7856            7001
2013....................................            4603            4750
2012....................................            3848            3922
2011....................................            3708            3680
                                         -------------------------------
    Average.............................            5701            5978
------------------------------------------------------------------------

    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
------------------------------------------------------------------------
Revenue Needed (Step 6).................      $4,555,641      $4,231,241
Average Time on Task (Hours)............           5,701           5,978
Initial Rate............................            $799            $708
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

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.

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

Class 4 (2017)..................................................             319            1.45          462.55
Class 4 (2018)..................................................             196            1.45          284.20
Class 4 (2019)..................................................             210            1.45          304.50
Class 4 (2020)..................................................             201            1.45          291.45
                                                                 -----------------------------------------------
    Total.......................................................           4,574  ..............           6,012
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits/number of transits).  ..............            1.31  ..............
----------------------------------------------------------------------------------------------------------------

                      Table 25--Average Weighting Factor for District Two, Designated Areas
----------------------------------------------------------------------------------------------------------------
                                                                     Number of       Weighting       Weighted
                        Vessel class/year                            transits         factor         transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014)..................................................              20               1              20
Class 1 (2015)..................................................              15               1              15
Class 1 (2016)..................................................              28               1              28
Class 1 (2017)..................................................              15               1              15
Class 1 (2018)..................................................              42               1              42
Class 1 (2019)..................................................              48               1              48
Class 1 (2020)..................................................               7               1               7
Class 2 (2014)..................................................             237            1.15          272.55
Class 2 (2015)..................................................             217            1.15          249.55
Class 2 (2016)..................................................             224            1.15           257.6
Class 2 (2017)..................................................             127            1.15          146.05
Class 2 (2018)..................................................             153            1.15          175.95
Class 2 (2019)..................................................             281            1.15          323.15
Class 2 (2020)..................................................             342            1.15           393.3
Class 3 (2014)..................................................               8             1.3            10.4
Class 3 (2015)..................................................               8             1.3            10.4
Class 3 (2016)..................................................               4             1.3             5.2
Class 3 (2017)..................................................               4             1.3             5.2
Class 3 (2018)..................................................              14             1.3            18.2
Class 3 (2019)..................................................               1             1.3             1.3
Class 3 (2020)..................................................               5             1.3             6.5
Class 4 (2014)..................................................             359            1.45          520.55
Class 4 (2015)..................................................             340            1.45             493
Class 4 (2016)..................................................             281            1.45          407.45
Class 4 (2017)..................................................             185            1.45          268.25
Class 4 (2018)..................................................             379            1.45          549.55
Class 4 (2019)..................................................             403            1.45          584.35
Class 4 (2020)..................................................             405            1.45          587.25
                                                                 -----------------------------------------------
    Total.......................................................           4,152  ..............           5,461
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits/number of transits).  ..............            1.32  ..............
----------------------------------------------------------------------------------------------------------------

I. Step 9: Calculate Revised Base Rates

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

                                  Table 26--Revised Base Rates for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                Revised rate
                                                                                Average     (initial rate
                              Area                                 Initial rate      weighting        average
                                                                     (Step 7)      factor (Step      weighting
                                                                                8)            factor)
----------------------------------------------------------------------------------------------------------------
District Two: Designated........................................            $708            1.32            $536
District Two: Undesignated......................................             799            1.31             610
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar.

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 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 rates will 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. The 2022 rate for
the designated area of District Two is higher than the 2021 final rate,
despite the increased traffic shown in Step 7, because of increased
inflation. We modify Sec.  401.405(a)(3) and (4) to reflect the final
rates shown in table 27.

                                     Table 27--Final Rates for District Two
----------------------------------------------------------------------------------------------------------------
                                                                                Final 2021     2022 Pilotage
                     Area                                     Name                 pilotage rate       rate
----------------------------------------------------------------------------------------------------------------
District Two: Designated......................  Navigable waters from Southeast             $580            $536
                                                 Shoal to Port Huron, MI.
District Two: Undesignated....................  Lake Erie.......................             566             610
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar.

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 2019 expenses and revenues,
which are available in the docket for this rulemaking. For accounting
purposes, the financial reports divide expenses into a designated area
(21 percent) and two undesignated areas (52 and 27 percent). 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.
    Adjustments made by the auditors are explained in the auditors'
reports, which are available in the docket for this rulemaking.
    In the 2019 expenses used as the basis for this rulemaking,
districts used the term ``applicant'' to describe applicant trainees
and persons who are called apprentices (applicant pilots) under the new
definition in this rulemaking. Therefore, when describing past
expenses, we use the term ``applicant'' to match what was reported from
2019, which includes both applicant trainees and apprentice pilots. We
use ``apprentice'' to distinguish the apprentice pilot wage benchmark
and describe the impacts of the ratemaking going forward.
    There are two Director's adjustments for District Three. The first
deduction is $746,802, the amount of surcharge collected in 2019 to
recoup expenses of five applicant pilots. In the NPRM, the Coast Guard
proposed a second deduction of $1,921 to reduce the allowable expenses
for applicant pilots to 36 percent of target pilot compensation. In
this final rule, Coast Guard removes this deduction because we
confirmed that the fifth apprentice reported was approved by the
Director, meaning that the average per-apprentice compensation was
below the 36-percent benchmark. District Three reported $520,158 in
expenses for the salary of five applicant pilots. Using the 36-percent
target, the allowable applicant salary would have been $129,559 per
applicant, for a total of $647,797 for five applicant pilots, meaning
the district paid an average of $104,032 per applicant, which is below
the $129,559 target. Applicant salaries (including applicant trainees
and apprentice pilots) will continue to be an allowable operating
expense through the 2024 ratemaking, which will use operating expenses
from 2021, when the wages for apprentice pilots were still authorized
as operating expenses. Starting in the 2025 ratemaking, apprentice
pilot salaries will no longer be included as a 2022 operating expense,
because apprentice pilot wage benchmark will have already been factored
into the ratemaking Steps 3 and 4 in calculation of the 2022 rates.
Starting in 2025, the applicant salaries operating expenses for 2022
will consist of only applicant trainees (those who are not apprentice
pilots).

                              Table 28--2019 Recognized Expenses for District Three
----------------------------------------------------------------------------------------------------------------
                                                                          District Three
                                                 ---------------------------------------------------------------
                                                   Undesignated     Designated     Undesignated
      Reported Operating Expenses for 2019       ------------------------------------------------
                                                    Lakes Huron      St. Marys                         Total
                                                   and Michigan        River       Lake Superior
----------------------------------------------------------------------------------------------------------------
Other Pilotage Costs:
    Pilot Subsistence/Travel....................        $274,911        $114,586        $144,207        $533,704
    Hotel/Lodging Cost..........................         118,533          49,406          62,178         230,117
    License Insurance--Pilots...................          16,171           6,740           8,483          31,394
    Payroll Tax (D3-19-01)......................         146,545          61,082          76,871         284,498
    Pilot Training..............................          40,017          16,680          20,991          77,688
    Other.......................................          12,551           5,232           6,584          24,367
                                                 ---------------------------------------------------------------
        Total Other Pilotage Costs..............         608,728         253,726         319,314       1,181,768
Applicant Costs:
    Applicant Salaries..........................         267,933         111,678         140,547         520,158
    Applicant Benefits..........................          77,627          32,356          40,720         150,703

    Applicant Payroll Tax.......................          21,713           9,050          11,390          42,153
                                                 ---------------------------------------------------------------
        Total Applicant Costs...................         367,273         153,084         192,657         713,014
Pilot Boat and Dispatch Costs:
    Pilot Boat Costs............................         415,908         173,356         218,168         807,432
    Dispatch Costs..............................         126,807          52,855          66,518         246,180
    Employee Benefits...........................           7,550           3,147           3,960          14,657
    Payroll Taxes...............................          10,534           4,391           5,526          20,451
                                                 ---------------------------------------------------------------
        Total Pilot Boat and Dispatch Costs.....         560,799         233,749         294,172       1,088,720
Administrative Costs:
    Legal--General Counsel......................           9,453           3,940           4,958          18,351
    Legal--Shared Counsel (K&L Gates)...........          26,858          11,195          14,089          52,142
    Legal--USCG Intervener Litigation...........          19,050           7,940           9,993          36,983
    Office Rent.................................           3,369           1,404           1,767           6,540
    Insurance...................................          27,622          11,513          14,489          53,624
    Employee Benefits...........................          77,435          32,276          40,619         150,330
    Payroll Tax.................................          18,984           7,913           9,958          36,855
    Other Taxes.................................             480             200             252             932
    Depreciation/Auto Leasing/Other.............          51,287          21,377          26,903          99,567
    Interest....................................           5,754           2,398           3,018          11,170
    APA Dues....................................          24,311          10,133          12,752          47,196
    Dues and Subscriptions......................           4,198           1,750           2,202           8,150
    Utilities...................................          38,585          16,083          20,240          74,908
    Salaries....................................          75,200          31,344          39,447         145,991
    Accounting/Professional Fees................          19,865           8,280          10,420          38,565
    Other Expenses..............................          23,945           9,981          12,561          46,487
    CPA Deduction (D3-18-01)....................         (4,117)         (1,716)         (2,160)         (7,993)
                                                 ---------------------------------------------------------------
        Total Administrative Expenses...........         422,279         176,011         221,508         819,798
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Other Costs +                1,959,079         816,570       1,027,651       3,803,300
 Applicant Cost + Pilot Boats + Admin)..........
    Directors Adjustments-Applicant Surcharge          (384,678)       (160,339)       (201,786)       (746,802)
     Collected..................................
        Total Directors Adjustments.............       (384,678)       (160,339)       (201,786)       (746,802)
                                                 ---------------------------------------------------------------
            Total Operating Expenses (OpEx +           1,574,401         656,231         825,865       3,056,498
             Adjustments).......................
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

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

    Having identified the recognized 2019 operating expenses in Step 1,
the next step is to estimate the current year's operating expenses by
adjusting those expenses for inflation over the 3-year period.
    We calculate inflation using the BLS data from the CPI for the
Midwest Region of the United States for the 2020 and 2021 inflation
rates.\31\ Because the BLS does not provide forecasted inflation data,
we use economic projections from the Federal Reserve for the 2022
inflation modification.\32\ Based on that information, the calculations
for Step 2 are as shown in table 29.
---------------------------------------------------------------------------

    \31\ The 2020 and 2021 inflation rates are available at https://beta.bls.gov/dataViewer/view/timeseries/CUUR0200SA0. Specifically,
the CPI is defined as ``All items in Midwest urban, all urban
consumers, not seasonally adjusted (Series ID CUUR0200SA0)(CPI-U),
All Items, 1982-4=100'' (downloaded March 2022). In the NPRM we used
the PCE estimate of 4.3 percent for 2021, but now use the available
interim CPI figure of 5.1 percent.
    \32\ For the 2022 inflation rates, we used the PCE median
inflation value found in table 1 at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20211215.pdf (Federal Reserve Bank,
Summary of Economic Projections, dated December 16, 2021, downloaded
March 2022). This figure is updated to 2.2 percent from 2 percent in
the NPRM.

                            Table 29--Adjusted Operating Expenses for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                District Three
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Total Operating Expenses (Step 1)...............................      $2,400,266        $656,231      $3,056,498
2020 Inflation Modification (@1%)...............................          24,003           6,562          30,565
2021 Inflation Modification (@5.1%).............................         123,638          33,802         157,440
2022 Inflation Modification (@2.2%).............................          56,054          15,325          71,379
    Adjusted 2022 Operating Expenses............................       2,603,961         711,920       3,315,882
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

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

    In accordance with the text in Sec.  404.104(c), we estimate the
number of registered pilots in each district. Rounding in the staffing
model does not increase the maximum number of pilots for District Three
because the total pilots needed, 21.55, already rounds up to 22. We
determine the number of registered pilots based on data provided by the
WGLPA. In the NPRM, we estimated that there would be 22 registered
pilots in 2022 in District Three. However, during the GLPAC meeting on
September 1, 2021, WGLPA reported that they would have three
retirements before the 2022 season. Therefore, we now estimate that
there will be 19 registered pilots in 2022 in District Three, with 4
pilots assigned to designated areas and 15 pilots assigned to
undesignated areas. We determine the number of apprentice pilots based
on input from the district on anticipated retirements and staffing
needs. Using these numbers, we estimate that there will be five
apprentice pilots in 2022 in District Three. Furthermore, based on the
seasonal staffing model discussed in the 2017 ratemaking (see 82 FR
41466), and our changes to that staffing model, we assign a certain
number of pilots to designated waters and a certain number to
undesignated waters, as shown in table 30. These numbers are used to
determine the amount of revenue needed in their respective areas.

                       Table 30--Authorized Pilots
------------------------------------------------------------------------
                          Item                            District three
------------------------------------------------------------------------
Maximum Number of Pilots (per Sec.   401.220(a)) *......              22
2022 Authorized Pilots (total)..........................              19
Pilots Assigned to Designated Areas.....................               4
Pilots Assigned to Undesignated Areas...................              15
2022 Apprentice Pilots..................................               5
------------------------------------------------------------------------
* 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).

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

    In this step, we determine the total pilot compensation for each
area. As we are issuing an ``interim'' ratemaking this year, we follow
the procedure outlined in paragraph (b) of Sec.  404.104, which adjusts
the existing compensation benchmark by inflation. First, we adjust the
2021 target compensation benchmark of $378,925 by 3.1 percent for an
adjusted value of $390,672. The adjustment accounts for the difference
in actual Q4 2021 ECI inflation, 4.8 percent, and the 2020 PCE estimate
of 1.7 percent.\33\ \34\ The second step accounts for projected
inflation from 2021 to 2022, 2.2 percent.\35\ Based on the projected
2022 inflation estimate, the compensation benchmark for 2022 is
$399,266 per pilot as shown in table 6. The apprentice pilot wage
benchmark is 36 percent of the target pilot compensation, or $143,736
($399,266 x 0.36).
---------------------------------------------------------------------------

    \33\ Employment Cost Index, Total Compensation for Private
Industry workers in Transportation and Material Moving, Series ID:
CIU2010000520000A
    \34\ CPI for All Urban Consumers, Series ID CUUR0200SA0.
    \35\ For the 2022 inflation rates, we used the PCE median
inflation value found in table 1 at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20211215.pdf (Federal Reserve Bank,
Summary of Economic Projections, dated December 16, 2021, downloaded
March 2022). This figure is updated to 2.2 percent from 2 percent in
the NPRM.
---------------------------------------------------------------------------

    Next, we certify that the number of pilots estimated for 2022 is
less than or equal to the number permitted under the changes to the
staffing model in Sec.  401.220(a). The changes to the staffing model
suggest that the number of pilots needed is 19 pilots for District
Three, which is less than or equal to 22, the number of registered
pilots provided by the pilot associations.\36\ We estimate that five
apprentice pilots will be needed for District Three in the 2022 season.
The apprentice pilots will work under a fully registered pilot and
receive training in both the designated and undesignated waters, but
their target compensation will not differ depending on which area they
are training in. The total wages of $718,680 for five apprentice pilots
are allocated at 21 percent for the designated area ($150,923) and 79
percent (52 percent + 27 percent) for the undesignated area ($567,756),
in accordance with the way operating expenses are allocated in Step 1
and later in Step 6.
---------------------------------------------------------------------------

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

    Thus, in accordance with Sec.  404.104(c), we use the revised
target individual compensation level to derive the total pilot
compensation by multiplying the individual target compensation by the
estimated number of registered pilots for District Three, as shown in
table 31.

                                Table 31--Target Compensation for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                District Three
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Target Pilot Compensation.......................................        $399,266        $399,266        $399,266
Number of Pilots................................................              15               4              19
Total Target Pilot Compensation.................................      $5,988,990      $1,597,064      $7,586,054
Apprentice Pilot Wage Benchmark.................................        $143,736        $143,736        $143,736
Number of Apprentice Pilots.....................................  ..............  ..............               5
    Total Apprentice Pilot Wage Benchmark.......................        $567,756        $150,923     $718,678.80
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

E. Step 5: Project Working Capital Fund

    Next, we calculate the working capital fund revenues needed for
each area. First, we add the figures for projected operating expenses,
total pilot compensation, and total apprentice pilot wage benchmarks
for each area. Next, we find the preceding year's average annual rate
of return for new issues of high-grade corporate securities. Using
Moody's data, the number is 2.4767 percent.\37\ By multiplying the two
figures, we obtain the working capital fund contribution for each area,
as shown in table 32.
---------------------------------------------------------------------------

    \37\ Moody's Seasoned Aaa Corporate Bond Yield, average of 2020
monthly data. The Coast Guard uses the most recent year of complete
data. Moody's is taken from Moody's Investors Service, which is a
bond credit rating business of Moody's Corporation. Bond ratings are
based on creditworthiness and risk. The rating of ``Aaa'' is the
highest bond rating assigned with the lowest credit risk. See
https://fred.stlouisfed.org/series/AAA (March 26, 2021).

                          Table 32--Working Capital Fund Calculation for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                District Three
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................      $2,603,961        $711,920      $3,315,882
Total Target Pilot Compensation (Step 4)........................       5,988,990       1,597,064       7,586,054
Total Apprentice Pilot Wage Benchmark (Step 4)..................         567,756         150,923         718,679
                                                                 -----------------------------------------------
    Total 2022 Expenses.........................................       9,160,708       2,459,907      11,620,614
----------------------------------------------------------------------------------------------------------------
Working Capital Fund (2.48%)....................................         226,880          60,924         287,804
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

F. Step 6: Project Needed Revenue

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

                                   Table 33--Revenue Needed for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                District Three
                                                                 -----------------------------------------------
                                                                   Undesignated     Designated         Total
----------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses (Step 2)............................      $2,603,961        $711,920      $3,315,882
Total Target Pilot Compensation (Step 4)........................       5,988,990       1,597,064       7,586,054
Total Apprentice Pilot Wage Benchmark (Step 4)..................         567,756         150,923         718,679
Working Capital Fund (Step 5)...................................         226,880          60,924         287,804
                                                                 -----------------------------------------------
    Total Revenue Needed........................................       9,387,588       2,520,831      11,908,418
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

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. To calculate
the time on task for each district, the Coast Guard uses billing data
from the GLPMS and SeaPro. We pull the data from the system, filtering
by district, year, job status (we only include closed jobs), and
flagging code (we only include U.S. jobs). After downloading the data,
we remove any overland transfers from the dataset, if necessary, and
sum the total bridge hours, by area. We then subtract any non-billable
delay hours from the total. Because we calculate separate figures for
designated and undesignated waters, there are two parts for each
calculation. We show these values in table 34.

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

Average.................................          21,106           2,930
------------------------------------------------------------------------

    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).................      $9,387,588      $2,520,831
Average Time on Task (Hours)............          21,106           2,930
Initial Rate............................            $445            $860
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

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.

                    Table 36--Average Weighting Factor for District Three, Undesignated Areas
----------------------------------------------------------------------------------------------------------------
                                                                     Number of       Weighting       Weighted
                        Vessel class/year                            transits         factor         transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014)..................................................              45               1              45
Class 1 (2015)..................................................              56               1              56
Class 1 (2016)..................................................             136               1             136
Class 1 (2017)..................................................             148               1             148
Class 1 (2018)..................................................             103               1             103
Class 1 (2019)..................................................             173               1             173
Class 1 (2020)..................................................               4               1               4
Class 2 (2014)..................................................             274            1.15           315.1
Class 2 (2015)..................................................             207            1.15          238.05
Class 2 (2016)..................................................             236            1.15           271.4
Class 2 (2017)..................................................             264            1.15           303.6
Class 2 (2018)..................................................             169            1.15          194.35
Class 2 (2019)..................................................             279            1.15          320.85
Class 2 (2020)..................................................             395            1.15          454.25
Class 3 (2014)..................................................              15             1.3            19.5
Class 3 (2015)..................................................               8             1.3            10.4
Class 3 (2016)..................................................              10             1.3              13
Class 3 (2017)..................................................              19             1.3            24.7
Class 3 (2018)..................................................               9             1.3            11.7
Class 3 (2019)..................................................               9             1.3            11.7
Class 3 (2020)..................................................               4             1.3             5.2
Class 4 (2014)..................................................             394            1.45           571.3
Class 4 (2015)..................................................             375            1.45          543.75
Class 4 (2016)..................................................             332            1.45           481.4
Class 4 (2017)..................................................             367            1.45          532.15
Class 4 (2018)..................................................             337            1.45          488.65
Class 4 (2019)..................................................             334            1.45           484.3
Class 4 (2020)..................................................             413            1.45          598.85
                                                                 -----------------------------------------------
    Total for Area 6............................................           5,115  ..............           6,559
                                                                 ===============================================
Area 8:
    Class 1 (2014)..............................................               3               1               3
    Class 1 (2015)..............................................               0               1               0
    Class 1 (2016)..............................................               4               1               4
    Class 1 (2017)..............................................               4               1               4
    Class 1 (2018)..............................................               0               1               0
    Class 1 (2019)..............................................               0               1               0
    Class 1 (2020)..............................................               1               1               1
    Class 2 (2014)..............................................             177            1.15          203.55

    Class 2 (2015)..............................................             169            1.15          194.35
    Class 2 (2016)..............................................             174            1.15           200.1
    Class 2 (2017)..............................................             151            1.15          173.65
    Class 2 (2018)..............................................             102            1.15           117.3
    Class 2 (2019)..............................................             120            1.15             138
    Class 2 (2020)..............................................             239            1.15          274.85
    Class 3 (2014)..............................................               3             1.3             3.9
    Class 3 (2015)..............................................               0             1.3               0
    Class 3 (2016)..............................................               7             1.3             9.1
    Class 3 (2017)..............................................              18             1.3            23.4
    Class 3 (2018)..............................................               7             1.3             9.1
    Class 3 (2019)..............................................               6             1.3             7.8
    Class 3 (2020)..............................................               2             1.3             2.6
    Class 4 (2014)..............................................             243            1.45          352.35
    Class 4 (2015)..............................................             253            1.45          366.85
    Class 4 (2016)..............................................             204            1.45           295.8
    Class 4 (2017)..............................................             269            1.45          390.05
    Class 4 (2018)..............................................             188            1.45           272.6
    Class 4 (2019)..............................................             254            1.45           368.3
    Class 4 (2020)..............................................             456            1.45           661.2
                                                                 -----------------------------------------------
    Total for Area 8............................................           3,054  ..............           4,077
                                                                 -----------------------------------------------
        Combined total..........................................           8,169  ..............       10,636.05
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits/number of transits).  ..............            1.30  ..............
----------------------------------------------------------------------------------------------------------------

                     Table 37--Average Weighting Factor for District Three, Designated Areas
----------------------------------------------------------------------------------------------------------------
                                                                     Number of       Weighting       Weighted
                        Vessel class/year                            transits         factor         transits
----------------------------------------------------------------------------------------------------------------
Class 1 (2014)..................................................              27               1              27
Class 1 (2015)..................................................              23               1              23
Class 1 (2016)..................................................              55               1              55
Class 1 (2017)..................................................              62               1              62
Class 1 (2018)..................................................              47               1              47
Class 1 (2019)..................................................              45               1              45
Class 1 (2020)..................................................              16               1              16
Class 2 (2014)..................................................             221            1.15          254.15
Class 2 (2015)..................................................             145            1.15          166.75
Class 2 (2016)..................................................             174            1.15           200.1
Class 2 (2017)..................................................             170            1.15           195.5
Class 2 (2018)..................................................             126            1.15           144.9
Class 2 (2019)..................................................             162            1.15           186.3
Class 2 (2020)..................................................             250            1.15           287.5
Class 3 (2014)..................................................               4             1.3             5.2
Class 3 (2015)..................................................               0             1.3               0
Class 3 (2016)..................................................               6             1.3             7.8
Class 3 (2017)..................................................              14             1.3            18.2
Class 3 (2018)..................................................               6             1.3             7.8
Class 3 (2019)..................................................               3             1.3             3.9
Class 3 (2020)..................................................               4             1.3             5.2
Class 4 (2014)..................................................             321            1.45          465.45
Class 4 (2015)..................................................             245            1.45          355.25
Class 4 (2016)..................................................             191            1.45          276.95
Class 4 (2017)..................................................             234            1.45           339.3
Class 4 (2018)..................................................             225            1.45          326.25
Class 4 (2019)..................................................             308            1.45           446.6
Class 4 (2020)..................................................             385            1.45          558.25
                                                                 -----------------------------------------------
    Total.......................................................           3,469  ..............           4,526
----------------------------------------------------------------------------------------------------------------
Average weighting factor (weighted transits/number of transits).  ..............            1.30  ..............
----------------------------------------------------------------------------------------------------------------

I. Step 9: Calculate Revised Base Rates

    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 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......................................            $860            1.30            $662
District Three: Undesignated....................................             445            1.30             342
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar.

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 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 rates will 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
Sec.  401.405(a)(5) and (6) to reflect the final rates shown in table
39.

                                    Table 39--Final Rates for District Three
----------------------------------------------------------------------------------------------------------------
                                                                                Final 2021    2022  pilotage
                     Area                                     Name                 pilotage rate       rate
----------------------------------------------------------------------------------------------------------------
District Three: Designated....................  St. Marys River.................            $586            $662
District Three: Undesignated..................  Lakes Huron, Michigan, and                   337             342
                                                 Superior.
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar.

VII. Regulatory Analyses

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

A. Regulatory Planning and Review

    Executive Orders 12866 (Regulatory Planning and Review) and 13563
(Improving Regulation and Regulatory Review) direct agencies to assess
the costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying costs and
benefits, reducing costs, harmonizing rules, and promoting flexibility.
    The Office of Management and Budget (OMB) has not designated this
rule a significant regulatory action under section 3(f) of Executive
Order 12866. Accordingly, OMB has not reviewed it. A regulatory
analysis follows.
    The purpose of this rule is to establish new base pilotage rates,
as 46 U.S.C. 9303(f) requires that rates be established or reviewed and
adjusted each year. The statute also requires that base rates be
established by a full ratemaking at least once every 5 years, and, in
years when base rates are not established, they must be reviewed and,
if necessary, adjusted. The last full ratemaking was concluded in June
of 2018.\38\ For this ratemaking, the Coast Guard estimates an increase
in cost of approximately $2.15 million to industry. This is
approximately a 7-percent increase because of the change in revenue
needed in 2022 compared to the revenue needed in 2021.
---------------------------------------------------------------------------

    \38\ 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 Costs Captured in the Rate Change
----------------------------------------------------------------------------------------------------------------
                                                                           Basis for no cost
             Change                   Description          Affected        or cost captured        Benefits
                                                          population          in the rate
----------------------------------------------------------------------------------------------------------------
Add a definition of apprentice    Distinguishes       Owners and          No cost, strictly   Provides clarity
 pilot.                            between             operators of 293    a definitional      by distinguishing
                                   applicants who      vessels             change.             apprentice pilots
                                   have not yet        transiting the                          from applicant
                                   entered training    Great Lakes                             trainees when
                                   and apprentices,    system annually,                        calculating the
                                   persons approved    51 United States                        apprentice pilot
                                   and certified by    Great Lakes                             operating
                                   the Director, who   pilots, 9                               expenses,
                                   are participating   apprentice                              estimates and
                                   in an approved      pilots, and 3                           wage benchmark.
                                   United States       pilotage
                                   Great Lakes pilot   associations.
                                   training and
                                   qualification
                                   program and meet
                                   all the minimum
                                   requirements
                                   listed in 46 CFR
                                   401.211.
Add a definition of limited       An authorization    Owners and          No cost, strictly   Provides clarity
 registration.                     given by the        operators of 293    a definitional      by distinguishing
                                   Director, upon      vessels             change.             when apprentice
                                   the request of      transiting the                          pilots can
                                   the respective      Great Lakes                             operate as the
                                   pilots              system annually,                        pilot of record
                                   association, to     51 United States                        without being a
                                   an apprentice       Great Lakes                             fully registered
                                   pilot to provide    pilots, 9                               pilot.
                                   pilotage service    apprentice
                                   without direct      pilots, and 3
                                   supervision from    pilotage
                                   a fully             associations.
                                   registered pilot
                                   in a specific
                                   area or waterway.
Adding number of apprentice       The Coast Guard     Owners and          Total cost of       Setting a target
 pilots to Step 3 and setting      will modify the     operators of 293    $1,293,622 for      wage of 36% of
 apprentice pilot wage benchmark   staffing model at   vessels             the wages of 9      registered pilot
 in Step 4.                        46 CFR 404.103 to   transiting the      apprentice pilots   compensation
                                   predict the         Great Lakes         for the 2022        better matches
                                   number of           system annually,    season. This        changes in
                                   apprentice pilots   51 United States    amount is           registered pilot
                                   each district       Great Lakes         incorporated into   compensation and
                                   will need for the   pilots, 9           the rate increase.  inflation and
                                   next season. 46     apprentice                              more evenly
                                   CFR 404.103 will    pilots, and 3                           distributes the
                                   establish the       pilotage                                additional cost
                                   apprentice pilot    associations.                           of apprentice
                                   wage benchmark at                                           pilots compared
                                   36% of registered                                           to the surcharge
                                   pilot                                                       method.
                                   compensation for
                                   that year.
----------------------------------------------------------------------------------------------------------------

                                    Table 41--Economic Impacts Due to Changes
----------------------------------------------------------------------------------------------------------------
                                                           Affected
             Change                   Description         population             Costs             Benefits
----------------------------------------------------------------------------------------------------------------
Rate changes....................  In accordance with  Owners and          Increase of         New rates cover an
                                   46 U.S.C. Chapter   operators of 293    $2,154,343 due to   association's
                                   93, the Coast       vessels             change in revenue   necessary and
                                   Guard is required   transiting the      needed for 2022     reasonable
                                   to review and       Great Lakes         ($32,486,995)       operating
                                   adjust base         system annually,    from revenue        expenses.
                                   pilotage rates      51 United States    needed for 2021     Promotes safe,
                                   annually.           Great Lakes         ($30,332,652), as   efficient, and
                                                       pilots, 9           shown in table 42.  reliable pilotage
                                                       apprentice                              service on the
                                                       pilots, and 3                           Great Lakes.
                                                       pilotage                                Provides fair
                                                       associations.                           compensation,
                                                                                adequate
                                                                                training, and
                                                                                sufficient rest
                                                                                periods for
                                                                                pilots. Ensures
                                                                                the association
                                                                                receives
                                                                                sufficient
                                                                                revenues to fund
                                                                                future
                                                                                improvements.
Changes to staffing model.......  The Coast Guard     Owners and          The total           Rounding up in the
                                   will modify the     operators of 293    potential impact    staffing model
                                   staffing model at   vessels             of two additional   accounts for
                                   46 CFR              transiting the      positions is        extra staff or
                                   401.220(a)(3) to    Great Lakes         $775,039. Only      extra time spent
                                   round up to the     system annually,    one district has    by the pilot
                                   nearest integer,    51 United States    hired up to the     associations'
                                   as opposed to the   Great Lakes         new maximum so      presidents not
                                   existing method,    pilots, 9           the realized        performing
                                   which rounds to     apprentice          impact is only      pilotage service.
                                   the nearest         pilots, and 3       $387,519.           Rounding up
                                   integer. In         pilotage                                allows us to
                                   total, this will    associations.                           account for this
                                   increase the                                                time and promote
                                   maximum number of                                           safety and
                                   allowable pilots                                            restorative rest,
                                   by two, adding                                              while minimizing
                                   one pilot to each                                           delays in
                                   of the                                                      providing
                                   undesignated                                                pilotage
                                   areas of District                                           services.
                                   One and District
                                   Two.
----------------------------------------------------------------------------------------------------------------

    The Coast Guard is required to review and adjust pilotage rates on
the Great Lakes annually. See section III of this preamble for detailed
discussions of the legal basis and purpose for this rulemaking. Based
on our annual review for this rulemaking, we are adjusting the pilotage
rates for the 2022 shipping season to generate sufficient revenues for
each district to reimburse its necessary and reasonable operating
expenses, fairly compensate trained and rested pilots, and provide an
appropriate working capital fund to use for improvements. The result
will be an increase in rates for all areas in District One and District
Two, and in the designated area of District Three. The rate for the
undesignated area of District Three will decrease. These changes will
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 will be
dependent on their area of operation, and if they previously paid a
surcharge.
    A detailed discussion of our economic impact analysis follows.
Affected Population
    This rule affects United States Great Lakes pilots, the 3 pilot
associations, and the owners and operators of 293 oceangoing vessels
that transit the Great Lakes annually. We estimate that there

will be 51 registered pilots and 9 apprentice pilots during the 2022
shipping season. The shippers affected by these rate changes are those
owners and operators of domestic vessels operating ``on register''
(engaged in foreign trade) and owners and operators of non-Canadian
foreign vessels on routes within the Great Lakes system. These owners
and operators must have pilots or pilotage service as required by 46
U.S.C. 9302. There is no minimum tonnage limit or exemption for these
vessels. The statute applies only to commercial vessels and not to
recreational vessels. 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 United States- and Canadian-flagged lakers may
voluntarily choose to engage a Great Lakes registered pilot. Vessels
that are U.S.-flagged may opt to have a pilot for varying reasons, such
as unfamiliarity with designated waters and ports, or for insurance
purposes.
    The Coast Guard used billing information from the years 2018
through 2020 from the 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 ratemaking 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 514 unique vessels used pilotage services
during the years 2018 through 2020. That is, these vessels had a pilot
dispatched to the vessel, and billing information was recorded in the
GLPMS or SeaPro.\39\ Of these vessels, 465 were foreign-flagged vessels
and 49 were U.S.-flagged vessels. As stated previously, U.S.-flagged
vessels not operating on register are not required to have a registered
pilot per 46 U.S.C. 9302, but they can voluntarily choose to have one.
---------------------------------------------------------------------------

    \39\ SeaPro is a data management system developed by District
One as an alternative to GLPMS. It tracks the same traffic and
invoice data as the GLPMS. Going into the 2022 season, all districts
will employ SeaPro.
---------------------------------------------------------------------------

    Numerous factors affect vessel traffic, which varies from year to
year. Therefore, rather than using the total number of vessels over the
time period, we took an average of the unique vessels using pilotage
services from the years 2018 through 2020 as the best representation of
vessels estimated to be affected by the rates in this rulemaking. From
2018 through 2020, an average of 293 vessels used pilotage services
annually.\40\ On average, 275 of these vessels were foreign-flagged
vessels and 19 were U.S.-flagged vessels that voluntarily opted into
the pilotage service (these figures are rounded averages).
---------------------------------------------------------------------------

    \40\ 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 will be
dependent on their area of operation.
    The Coast Guard estimates the effect of the rate changes on
shippers by comparing the total projected revenues needed to cover
costs in 2021 with the total projected revenues to cover costs in 2022,
including any temporary surcharges we have authorized.\41\ 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.
---------------------------------------------------------------------------

    \41\ While the Coast Guard implemented a surcharge in 2019, we
are not implementing any surcharges for 2022.
---------------------------------------------------------------------------

    The impacts of the rate changes on shippers are estimated from the
district pilotage projected revenues (shown in tables 9, 21, and 33 of
this preamble). The Coast Guard estimates that for the 2022 shipping
season, the projected revenue needed for all three districts is
$32,486,994.
    To estimate the change in cost to shippers from this rule, the
Coast Guard compared the 2022 total projected revenues to the 2021
projected revenues. Because we review and prescribe rates for the Great
Lakes Pilotage annually, the effects are estimated as a single-year
cost rather than annualized over a 10-year period. In the 2021
rulemaking, we estimated the total projected revenue needed for 2021 as
$30,332,652.\42\ This is the best approximation of 2021 revenues, as,
at the time of this publication of this final rule, the Coast Guard
does not have enough audited data available for the 2021 shipping
season to revise these projections.\43\ Table 42 shows the revenue
projections for 2021 and 2022 and details the additional cost increases
to shippers by area and district as a result of the rate changes on
traffic in Districts One, Two, and Three.
---------------------------------------------------------------------------

    \42\ 85 FR 20088, see table 41. https://www.regulations.gov/document/USCG-2020-0457-0013.
    \43\ The rates for 2021 do not account for the impacts COVID-19
may have had on shipping traffic and, subsequently, pilotage
revenue, as we do not have complete data for 2020. The rates for
2022 will take into account for all and any pertinent impacts of
COVID-19 on shipping traffic, because that future ratemaking will
include 2020 traffic data. However, the Coast Guard uses a 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 42--Effect of the Rule by Area and District
                                             [$U.S.; Non-discounted]
----------------------------------------------------------------------------------------------------------------
                                                                                Change in
                              Area                                    Revenue         Revenue      costs of this
                                                                  needed in 2021  needed in 2022       rule
----------------------------------------------------------------------------------------------------------------
Total, District One.............................................     $10,620,941     $11,791,695      $1,170,754
Total, District Two.............................................       8,506,705       8,786,882         280,177
Total, District Three...........................................      11,205,006      11,908,418         703,412
                                                                 -----------------------------------------------
    System Total................................................      30,332,652      32,486,995       2,154,343
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    The resulting difference between the projected revenue in 2021 and
the projected revenue in 2022 is the annual change in payments from
shippers to pilots as a result of the rate change imposed by this 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 $1,170,754 over the previous
year. District Two and District Three will experience an increase in
payments of $280,177 and $703,412, respectively, when compared with
2021. The overall adjustment in payments will be an increase in
payments by shippers of $2,154,343 across all three districts (a 7-
percent increase when compared with 2021). Again, because the Coast
Guard reviews and sets rates for Great Lakes pilotage annually, we
estimate the impacts as single-year costs rather than annualizing them
over a 10-year period.
    Table 43 shows the difference in revenue by revenue-component from
2021 to 2022, and presents each revenue-component as a percentage of
the total revenue needed. In both 2021 and 2022, the largest revenue-
component was pilotage compensation (67 percent of total revenue needed
in 2021, and 63 percent of total revenue needed in 2022), followed by
operating expenses (29 percent of total revenue needed in 2021, and 31
percent of total revenue needed in 2022).

                                                      Table 43--Difference in Revenue by Component
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Percentage of                   Percentage of  Difference (2022    Percentage
                   Revenue-component                    Revenue needed   total revenue  Revenue needed   total revenue    revenue- 2021     change from
                                                            in 2021     needed in 2021      in 2022     needed in 2022      revenue)       previous year
--------------------------------------------------------------------------------------------------------------------------------------------------------
Adjusted Operating Expenses...........................      $8,876,850              29     $10,045,658              31        $1,168,808              13
Total Target Pilot Compensation.......................      20,461,950              67      20,362,566              63          (99,384)           (0.5)
Total Apprentice Pilot Wage Benchmark.................  ..............  ..............       1,293,622               4         1,293,622  ..............
Working Capital Fund..................................         993,852               3         785,149               2         (208,703)            (21)
                                                       -------------------------------------------------------------------------------------------------
    Total Revenue Needed..............................      30,332,652             100      32,486,995             100         2,154,343               7
--------------------------------------------------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    As stated above, we estimate that there will be a total increase in
revenue needed by the pilot associations of $2,154,343. This represents
a decrease in revenue needed for target pilot compensation of
($99,384), the now-codified revenue needed for total apprentice pilot
wage benchmark of $1,293,622, an increase in the revenue needed for
adjusted operating expenses of $1,168,808, and a decrease in the
revenue needed for the working capital fund of ($208,703).
    The change in revenue needed for pilot compensation, ($99,384), is
due to four factors: (1) The changes to adjust 2021 pilotage
compensation to account for the difference between actual ECI inflation
(5.1 percent) \44\ and predicted PCE inflation (1.7 percent) \45\ for
2021; (2) the increase in the maximum number of pilots by two pilots
because of rounding; (3) an increase of one pilot in District One
compared to 2021, a decrease of one pilot in District Two compared to
2021, and a decrease of three pilots in District Three compared to
2021; and (4) projected inflation of pilotage compensation in Step 2 of
the methodology, using predicted inflation through 2023.
---------------------------------------------------------------------------

    \44\ In the NPRM we used a figure of 3.5 percent, the most
recently available at the time. Employment Cost Index, Total
Compensation for Private Industry workers in Transportation and
Material Moving, Series ID: CIU2010000520000A.
    \45\ https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20201216.htm.
---------------------------------------------------------------------------

    The target compensation is $399,266 per pilot in 2022, compared to
$378,925 in 2021. The changes to modify the 2021 pilot compensation to
account for the difference between predicted and actual inflation will
increase the 2021 target compensation value by 3.1 percent. As shown in
table 44, this inflation adjustment increases total compensation by
$11,747 per pilot, and the total revenue needed by $599,080 when
accounting for all 51 pilots.

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

------------------------------------------------------------------------
2021 Target Compensation................................        $378,925
Adjusted 2021 Compensation ($378,925 x 1.031%)..........         390,672
Difference between Adjusted Target 2021 Compensation and          11,747
 Target 2021 Compensation ( $390,672-$378,925)..........
Increase in total Revenue for 51 Pilots ($11,747 x 51)..         599,080
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    Adjusting rounding in the staffing model to always round up, rather
than round to the nearest integer, increases the maximum number of
pilots in District One and District Two. The potential impact of this
change is equivalent to an increase in revenue needed for two fully
registered pilots because the districts would have the ability to hire
two more pilots than they would have without rounding. The cost of
$775,039 is based on target compensation for 2022. However, only
District One will utilize the increased maximum number of pilots in the
2022 season, while District Two will have fewer than the maximum number
of pilots in the 2022 season. For this reason, the potential impact of
rounding in the staffing model is not fully realized in the 2022
season. Further, the increase in revenue needed from rounding is offset
by the net decrease in pilots needed, such that the cost is not
represented in the rate for this year. For that reason, the Coast Guard
breaks out the potential and realized costs separately and does not
show the percentage in relation to the increase in total revenue
needed, as shown in table 45. To avoid double counting, the Coast Guard
excludes the change in revenue resulting from adjustments for inflation
to account for the difference between actual and predicted inflation.

                   Table 45--Potential and Realized Impacts of Rounding in the Staffing Model
----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
                       Potential impact                          Realized impact
----------------------------------------------------------------------------------------------------------------
2022 Target Compensation......................        $399,266  2022 Target Compensation........        $399,266
Total Number of New Pilots....................               2  Total Number of New Pilot.......               1
Total Cost of New Pilots ($399,266 x 2).......        $798,532  Total Cost of New Pilot                 $399,266
                                                                 ($399,266 x 1).
Difference between Adjusted Target 2021                $11,747  Difference between Adjusted              $11,747
 Compensation and Target 2021 Compensation                       Target 2021 Compensation and
 ($390,672-$378,925).                                            Target 2021 Compensation
                                                                 ($390,672-$378,925).
Increase in total Revenue for 2 Pilots                 $23,493  Increase in total Revenue for 1          $11,747
 ($11,747 x 2).                                                  Pilot ($11,747 x 1).
Net Increase in total Revenue for 2 Pilots            $775,039  Net Increase in total Revenue           $387,519
 ($798,532-$23,493).                                             for 1 Pilot ($399,266-$11,747).
----------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    As noted earlier, the Coast Guard revised the total number of
pilots needed from 56 pilots in the NPRM to 51 pilots in this final
rule because of the attrition of one apprentice pilot, the removal of
one temporary pilot in District Two, and three retirements in District
Three going into the 2022 season. This change is discussed in detail in
section IV. F. of the discussion of comments and changes. The result is
a net decrease of three pilots needed compared to the 2021 season,
which projected 54 pilots needed. The difference reflects an increase
of one pilot in District One, a decrease of one pilot in District Two,
and a decrease of three pilots in District Three (1-1-3 =-3). Table 46
shows the decrease of $1,162,558 in revenue needed solely for pilot
compensation. As above, to avoid double counting, this value excludes
the change in revenue resulting from the change to adjust 2021 pilotage
compensation to account for the difference between actual and predicted
inflation.

 Table 46--Change in Revenue Resulting From Net Decrease of Three Pilots
------------------------------------------------------------------------

------------------------------------------------------------------------
2022 Target Compensation................................        $399,266
Net Number of New Pilots................................             (3)
Total Cost of new Pilots ($399,266 x-3).................    ($1,197,798)
Difference between Adjusted Target 2021 Compensation and         $11,747
 Target 2021 Compensation ($390,672-$378,925)...........
Increase in total Revenue for -3 Pilots ($11,747 x-3)...       ($35,240)
Net Increase in total Revenue for -3 Pilots (-$1,197,798-   ($1,162,558)
 -$35,240)..............................................
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    Another increase, $438,311, is the result of increasing
compensation for the 51 pilots to account for future inflation of 2.2
percent in 2022. This will increase total compensation by $8,594 per
pilot, as shown in table 47.

 Table 47--Change in Revenue Resulting From Inflating 2021 Compensation
                                 to 2022
------------------------------------------------------------------------

------------------------------------------------------------------------
Adjusted 2021 Compensation..............................        $390,672
2022 Target Compensation ($390,672 x 1.022%)............         399,266
Difference between Adjusted 2021 Compensation and Target           8,594
 2022 Compensation ($399,266-$390,672)..................
Increase in total Revenue for 51 Pilots ($8,594 x 51)...         438,311
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    Finally, the largest part of the increase in revenue needed is to
account for the apprentice pilot wage benchmark, now incorporated into
the rate. First, in Step 3, we estimate the need for nine apprentice
pilots for the 2022 shipping season. Based on the 2022 target pilot
compensation of $399,266, the apprentice pilot wage benchmark will be
$143,736 ($399,266 x 0.36 = $143,736). Setting the wage benchmark in
this manner, rather than through a surcharge, better allows apprentice
pilot wage benchmark to match fluctuations in the pilot compensation,
which follows changes in traffic and better accounts for changes in
inflation than the surcharge. Additionally, unlike a surcharge, this
method will not need to be ``turned off'' once the target amount of
surcharge is collected, which makes rates throughout the season more
predictable for shippers. The total cost of the wage benchmark for the
9 apprentice pilots will be $1,293,622, as shown in table 48.

    Table 48--Change in Revenue Resulting From Apprentice Pilot Wages
------------------------------------------------------------------------

------------------------------------------------------------------------
2022 Apprentice Pilot Wage Benchmark....................        $143,736
Total Number of Apprentice Pilots.......................               9
Total Cost of Apprentice Pilots ($143,736 x 9)..........      $1,293,622
------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

    Table 49 presents the percentage change in revenue by area and
revenue-component, excluding surcharges, as they are applied at the
district level.\46\
---------------------------------------------------------------------------

    \46\ The 2021 projected revenues are from the Great Lakes
Pilotage Rate-2021 Annual Review and Revisions to Methodology final
rule (86 FR 14184), tables 9, 21, and 33. The 2022 projected
revenues are from tables 9, 21, and 33 of this final rule.

                                                                      Table 49--Difference in Revenue by Component and Area
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    Adjusted operating expenses    Total target pilot compensation     Total          Working capital fund             Total revenue needed
                                                 ------------------------------------------------------------------ apprentice -----------------------------------------------------------------
                                                                             %                                %     pilot wage                             %                                %
                                                     2021        2022      change     2021        2022      change   benchmark     2021        2022      change     2021        2022      change
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
District One: Designated........................  $2,328,981  $2,419,401        4  $3,789,250  $4,165,143       10    $172,483    $207,255    $163,077     (21)  $6,325,486  $6,747,621      6.7
District One: Undesignated......................   1,502,239   1,613,051        7   2,652,475   3,309,117       25     114,989     140,741     121,906     (13)   4,295,455   5,044,074     17.4
District Two: Undesignated......................   1,003,961   1,078,929        7   3,031,400   3,366,611       11     172,483     136,698     110,101     (19)   4,172,059   4,555,641      9.2
District Two: Designated........................   1,540,146   1,618,395        5   2,652,475   2,510,585      (5)     114,989     142,025     102,261     (28)   4,334,646   4,231,241    (2.4)
District Three: Undesignated....................   1,947,484   2,603,961       34   6,820,650   6,556,746      (4)     567,756     297,021     226,880     (24)   9,065,155   9,387,588      3.6
District Three: Designated......................     554,039     711,920       28   1,515,700   1,747,987       15     150,923      70,112      60,924     (13)   2,139,851   2,520,831     17.8
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* All figures are rounded to the nearest dollar and may not sum.

Benefits
    This rule allows the Coast Guard to meet the requirements in 46
U.S.C. 9303 to review the rates for pilotage services on the Great
Lakes. The rate changes 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 also help recruit and retain
pilots, which ensure a sufficient number of pilots to meet peak
shipping demand, helping to reduce delays caused by pilot shortages.

B. Small Entities

    Under the Regulatory Flexibility Act, 5 U.S.C. 601-612, we have
considered whether this rule would have a significant economic impact
on a substantial number of small entities. The term ``small entities''
comprises small businesses, not-for-profit organizations that are
independently owned and operated and are not dominant in their fields,
and governmental jurisdictions with populations of less than 50,000.
    For the rule, the Coast Guard reviewed recent company size and
ownership data for the vessels identified in the GLPMS, and we reviewed
business revenue and size data provided by publicly available sources