The Coast Guard is proposing a change in the way it calculates Great Lakes pilot rates by adding a metric favored by shippers and ports.
The agency for the first time will account for the weighting factor, so that larger ships yield higher pilotage fee revenues than smaller ones.
“The result of the adjustment would be a reduction in the hourly pilotage rates in the Great Lakes region from amounts proposed” last October for the 2017 shipping season, the Coast Guard said in its Supplemental Notice of Proposed Rulemaking (SNPRM) published April 5. “This action does not change the total amount of projected revenue we deem necessary for the pilot associations to provide safe, efficient, and reliable service, but would have the practical effect of reducing the actual amount of money paid as pilotage fees by shippers by approximately 28 to 32 percent.”
The agency originally sought a 14 percent rate increase primarily to cover eight new pilots needed because of workload and fatigue factors as well as the number of older pilots approaching retirement. Meanwhile, the 2016 rates remain in effect.
Under the new calculations, the current hourly rate on the St. Lawrence River, for example, would go from $580 to $592, instead of $757 in the October proposal. Rates on lakes Huron, Michigan and Superior would go from $264 to $215, instead of $280.
The Coast Guard establishes rates for Great Lakes pilots while rates elsewhere in the country are set at the local level. The rates must be reviewed annually.
Both sides have spoken up on the weight issue.
“It is abundantly clear that the use of the weighting factor when invoicing for services needs to be included in revenue projection calculations,” Michael Broad, wrote on behalf of the U.S. Great Lakes Pilotage Users Coalition. “Not doing so is an unacceptable error in principal. This can no longer be ignored and must be corrected immediately.”
Pilots want the Coast Guard to keep the status quo on weighting factors, “at least until actual data suggests that changes are necessary and appropriate,” pilot group presidents Capt. John Boyce, St. Lawrence Seaway Lakes Pilots Association, Capt. Dan Gallagher, Lakes Pilots Association, and Capt. John Swartout, Western Great Lakes Pilots Association, said about the October proposal. “Over the last decade, the pilots have consistently failed to reach target compensation even with the weighting factors included. Changing this practice would exacerbate an already-unfortunate situation and risk further contributing to the pilot attraction and retention difficulties.”
Meanwhile, ports and shippers last year sued the Coast Guard seeking a 2016 rate reduction of at least 20.6%, arguing the agency’s calculations were flawed and the increases arbitrary and capricious. The Coast Guard set the average annual pilot compensation at $326,000, up from $235,000 and recommended more pilots and up to 10 days off a month.
Pilots associations have joined the suit on the Coast Guard side.
Comments on the SNPRM must be submitted by May 5.