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Comments from the Executive Director
October 1, 2013
An update and some comments here on Lakes pilotage rate making which has been addressed by our Association during the past few months.
I have earlier reported on an independent Bridge Hour Definition and Methodology Study (Study) which has been sponsored by the U.S. Coast Guard Great Lakes Pilotage Division with a goal to determine a more transparent methodology for the establishment of pilotage rates. A final version of that Study was delivered to the Coast Guard and the Great Lakes Pilotage Advisory Committee (GLPAC), of which I am a member, on June 25, 2013. The Study was considered at a meeting of GLPAC on July 15, 2013. GLPAC is established by the Department of Homeland Security and Coast Guard to advise the Commandant on pertinent pilotage issues. GLPAC consists of three representatives from the Pilots' Associations, three representatives from the Lakes industry and a seventh member being a maritime person of a generally more neutral position.
The Study made a variety of recommendations regarding the rate making methodology. However, following a lengthy discussion at the GLPAC Meeting in July, as well as comments filed earlier, the pilots and industry (GLPAC) concluded that the Study should not be accepted or recommended to the Coast Guard at that time. This decision occurred for many complicated reasons, but as a shorthand personal assessment here, the pilot representatives remained uncomfortable with many of the recommendations and especially the basis for projected results which the Study contained or in some cases lacked. Under the circumstances, they were more comfortable with a continuation of the current system with possibly a few definitional changes. On the other hand, the industry representatives asserted that the tone of the Study was to
completely insulate pilots' income from financial and business risk while placing the entire burden on the industry customer. USGLSA and the industry representatives provided extensive written comments, taking the position that the Study did not go far enough in removing so much of the mystery of how the rates are designed in the current methodology, but instead, still materially threatened the existence of piloted vessel traffic due to projected steadily increasing pilotage rates as a component of voyage costs. Industry endorsed a process involving far more wide-ranging and comprehensive changes to accomplish the goal.
As a result of the action taken at the July 15 Meeting, GLPAC agreed to revisit the Study to try to pin point possible common ground or suggest alternatives, and to meet again to see if they could give the Pilotage Office some alternatives to consider. That meeting was held on September 19, 2013, but regrettably, no real progress was made. Thus, as of now, U.S. pilotage rate making will continue under the existing methodology, although GLPAC is advisory only, not a decision maker, so that these results do not preclude the Pilotage Office from reaching different conclusions as they continue to assess this issue going forward.
It is unfortunate that GLPAC is unable to reach more common ground, but one need only to look at the makeup of the Committee, which unlike most other Coast Guard Advisory Committees, GLPAC members have very different interests as their priorities.
There is no argument that as long as Lakes pilotage is required in its current form, there must be reasonable compensation and operating cost recoveries which are designed to attract qualified pilots and be intensely focused on ensuring safe and efficient passage of vessels while in U.S. Great Lakes Waterways. How that is accomplished, however, must be based on a Coast Guard policy endorsed by both by pilots and industry which will help attract and grow U.S. and Canadian Lakes/Seaway commerce. Success of such a policy can be achieved through the use of an alternative, more transparent and stable rate design based on sharing of financial risk, seeking cost efficiencies with enlightened management approaches and utilization of modern technology, rather being locked into the paradigm of "you can't do it any other way."
Despite the disappointment of the current situation, our Association will continue its membership presence on GLPAC and seek to promote the industry positions described above with the Pilotage Office and our pilot colleagues.
What do you think?
Mr. Theis, who has served as Executive Director since April 2007, is an attorney and businessman with prior associations at Cleveland, Ohio based M. A. Hanna Company and Oglebay Norton Company. At Hanna, he held a variety of legal/operational positions including Corporate Vice President with responsibilities for Hanna's Great Lakes/St Lawrence Seaway and Ocean Marine vessel and dock operations in the U. S. and Canada. While at Oglebay Norton, Mr. Theis served as President of the Company's Great Lakes fleet and dock operations. Mr. Theis is a member of the American Bureau of Shipping and serves as a member on two U. S. Coast Guard Advisory Committees, the Great Lakes Pilotage Advisory Committee and the National Maritime Security Advisory Committee.