Pilots prevail in Louisiana

Industry’s push to rein in pilot costs in Louisiana has gone down to defeat.

Heavy traffic, fast currents and restricted waters are nothing new for Louisiana pilots. A recent effort by a pilot users group failed to reform pilot regulations.

A coalition of shipping interests backed legislation to reform the system for regulating the pilots, but the bill never made it out of committee. “We left that House committee with our heads neatly tucked under our arms,” said Channing Hayden, president of the Steamship Association of Louisiana.

The defeat came as a deep disappointment to those who regard pilot costs as serious competitive disadvantages facing Louisiana ports. “We’re losing business because of a handful of people,” said Dale Revelle of Revelle Shipping Agency Inc., based in Slidell, La.

The pilots, however, insist that the fees they charge are in line with industry norms and that the ports they serve are prospering. Michael R. Lorino Jr., president of the Associated Branch Pilots for the Port of New Orleans, noted that four of the five Louisiana ports on the Mississippi River rank among the top 10 in the country in total cargo. “The system is not broken,” he said. “We have four of the top 10 ports. How could they be noncompetitive?”

Critics of the pilots remain determined to reform what they claim is an obsolete system that threatens their ability to compete with other Gulf ports. “It’s the common understanding of just about everyone except the pilots that the system is badly broken,” said Michael K. Dees, general counsel for the Port of Lake Charles.

Dees and his allies will probably have to wait two years before they get another chance to take their case to the Legislature. When it reconvenes in 2002, lawmakers will only consider fiscal matters. There won’t be another opportunity next year, said Dees, “unless the governor calls a special session,” something Dees does not expect to happen.

Three different pilot groups operate on the Mississippi River in Louisiana: the Associated Branch Pilots for the Port of New Orleans, the Crescent River Port Pilots Association and the New Orleans-Baton Rouge Pilots Association (NOBRA). That means that a ship traveling the 250 miles from the Gulf to Baton Rouge requires three different pilots. The Lake Charles Pilots are responsible for the Calcasieu Ship Canal connecting Lake Charles with the Gulf.

The rates for each of the four pilot groups are set separately, but in practice they track each other very closely. Under the current fee system, the pilots are expected to have annual incomes of about $320,000. To achieve their target incomes, the pilots must guide the number of ships anticipated when the fee structure was established. “We wouldn’t be doing things to chase ships away,” Lorino said.

Pilot fees are set by boards comprising four pilots and four representatives of industry. When those boards deadlock, as they frequently do, the issue goes to the Louisiana Public Service Commission. Rulings by the commission can be appealed to the state courts.

Dees dismisses the current approach as antiquated and irrational. The four members of industry that sit on the boards do not have the staff or other resources to assess the validity of the expense data submitted by the pilots, he said. Because of the 50-50 split on the boards, neither side can prevail. As a result, “It always becomes a negotiated deal,” said Dees. “That’s a crazy system in my view.”

Shipping and port interests say they are losing business because of the pilotage costs, the main cost difference between New Orleans and competing ports, according to Revelle. For a handy size bulk carrier delivering a 10,000 metric ton cargo, the pilotage fee for New Orleans would be about $8,500, he said. In Houston, the same ship and cargo would pay about $2,900, he said.

That’s a disadvantage of more than 50 cents a ton for New Orleans, an amount that can be decisive in a highly competitive market. “When you compare all the fees, basically it’s the same with Houston, except the pilotage,” Revelle said.

Lorino maintains it is misleading to make such cost comparisons between Houston and the Mississippi River ports. To take a ship to Houston, the pilot must guide the ship less than 60 miles. To reach New Orleans a ship must travel about 125 miles. To Baton Rouge, the distance is 250 miles. “You can’t compare it. It’s not fair,” Lorino said.

When you consider the distances involved on the Mississippi, the pilot fees compare favorably with those of other ports, Lorino said. “On a cost per mile, the Mississippi pilots were cheaper than other Gulf ports,” he said. “Other people don’t want to hear that. It doesn’t suit their purposes.”

From a ship owner’s perspective, however, what matters is the total cost, not the distance, according to Revelle. “An owner does not look at how long a river is. The owner asks, ÔWhat’s it going to cost to get it in and out?’ That’s what they’re missing.”

The bill that failed in the Legislature would have created a five-member commission to regulate the pilots. The pilots would have nominated one member, while other interest groups would have nominated the other four. The result would have been a dramatic reduction in the pilots’ influence.

The bill was promoted by an organization called the Pilot Users Group (PUG) created early this year in response to the pilots’ recent rate hikes. Its members include the Port of Lake Charles, major oil companies and other shipping interests.

Daryl Didier of Lake Charles Stevedores Inc., said some action had to be taken to get pilot fees under control. “These guys are holding the whole economy in this region hostage,” he said. While rejecting the idea that the system is broken, Lorino acknowledged the need to improve it. “It can be tweaked; it can be refined, any system can,” he said.

However, he staunchly defended the income levels of the pilots. He cited the responsibilities of guiding a 2,000 passenger cruise ship in dense fog through winding channels past ships laden with oil or chemicals. The expertise required to handle that responsibility justifies the pay, he argued. “I’m not ashamed of what I make,” he said.

PUG members say that the legislative battle was not a total defeat. They believe that they succeeded in shedding light on an issue that most people did not know much about. “A lot of people’s eyebrows were raised. A lot of people scratched their heads and asked why would a reform bill fail so miserably?” said Frank Simoneaux, a lawyer who represents Citgo and assisted PUG. His side expects to be back before the Legislature for the next general session in 2003. “We are not giving up,” he said.

By Professional Mariner Staff