U.S. pilot rates on the Great Lakes rose 11 percent for the 2019 season under a new final rule from the U.S. Coast Guard.
For the fifth consecutive year, the Coast Guard implemented a double-digit rate increase for pilotage costs that took effect June 10. The rate increase was 11 percent over the estimated costs for 2018, reaching $27.9 million for 51 pilots operating in three districts. In 2014, the estimated costs were $12.8 million for 36 pilots.
“The Coast Guard believes that the new rates will promote pilot retention, ensure safe, efficient and reliable pilotage services on the Great Lakes, and provide adequate funds to upgrade and maintain infrastructure,” the agency said in the rule.
Ocean vessels operating in the Great Lakes must use a pilot from one of three U.S. pilot associations or a pilot from the two Canadian government pilot agencies. The Canadian pilots are government employees and are paid a government salary.
The Coast Guard sets rates to allow the U.S. associations to generate revenue to fund their operations, including salaries, infrastructure needs and training. For 2019, a pilot’s target compensation for the nine-month shipping season is $359,887. The rate is calculated in a formula that incorporates the pay for masters of U.S.-flag lake vessels in 2015.
For 2019, per-pilot hourly pay will range from $306 to $733, depending on the district, up from $271 to $653 last year. The rate increase will impact operators of about 255 vessels, whose payments will increase $2.8 million over the $25.1 million paid in 2018.
The final rule provides for 51 pilots: 17 in District 1 (St. Lawrence River and Lake Ontario); 14 in District 2 (Lake Erie and Detroit/St. Clair rivers); and 20 in District 3 (Lake Huron, Lake Michigan, Lake Superior and St. Marys River). The rule also provides funds for training of new applicant pilots, including two in District 1, one in District 2 and four in District 3.
The American Great Lakes Ports Association has filed suit against the Coast Guard to overturn the latest ruling, said Steve Fisher, the group’s executive director. Previously, the AGLPA and other parties sued the Coast Guard to challenge the 2016 and 2018 rate settings. All three of the suits are awaiting action by the courts.
“We believe the Coast Guard has developed rates that generate more revenue for the pilot associations than even the Coast Guard intended to,” Fisher said.
Under the current system, there is no method of “truing up” or reconciling the revenue collected and the pilots’ actual expenses compared to the Coast Guard’s estimates. In previous years, the pilots reported they were underpaid, and recently vessel operators have overpaid, Fisher said. The associations’ financial reports are available three years later, so the 2016 information became available this year.
“The vessel operators paid about $5 million more than even the Coast Guard intended because the agency had gotten the calculation that far off,” Fisher said.
Canadian pilotage rates can be half the amount charged by the U.S. pilot associations. A ship may have Canadian and U.S. pilots on board while navigating the Great Lakes and pay widely varying fees for the same services.
Fisher said it’s been challenging to get the Coast Guard or Congress to focus on the issue because the owners of foreign vessels pay the higher U.S. pilot fees. However, those higher fees will be passed on to cargo owners, including American agricultural exporters and importers of various commodities.
“Ultimately, it’s American farmers and manufacturers who are going to pay for this through higher shipping rates,” Fisher said.