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US Great Lakes pilots: Study on rate increases biased, flawed

Sep 25, 2017 09:49 AM

The Lakes Pilots Association faults 'hypothetical scenarios' in the Coast Guard-commissioned study

The following is the text of a news release from the Lakes Pilots Association:

(PORT HURON, Mich.) — The American pilots on the Great Lakes reject the recently released study, "Analysis of Great Lakes Pilotage Costs on Great Lakes Shipping and the Potential Impact of Increases in U.S. Pilotage Costs," as biased and flawed. The report, written by John C. Martin Associates LLC, suggests that some cargo and some jobs in the region could be lost, “should charges increase at the same level as occurred between 2015 and 2016.” The U.S. Coast Guard commissioned the study this year after raising rates 12 percent in 2016. The increase was a long-overdue adjustment as U.S. pilots were underfunded by $20 million since 2005 and unable to attract skilled and qualified pilots.

Martin Associates has been hired, retained and paid hundreds of thousands of dollars to produce several studies in the last few years by the most aggressive anti-U.S. pilot organizations. These include the American Great Lakes Ports Association (AGLPA), Fednav Ltd. and the Shipping Federation of Canada. Martin Associates fails to acknowledge this significant conflict of interest. Not only were they contracted by the AGLPA in 2011, but also in 2015, and this spring was negotiating a $500,000 contract with these same groups for a Great Lakes economic study. The executive director of the AGLPA is a registered lobbyist for Federal Marine Terminals, a subsidiary of Canadian-owned Fednav Ltd., one of the primary plaintiffs suing the U.S. Coast Guard over the 2016 rate increase.

The AGLPA in a Sept. 3 press release stated, “The total binational regional job loss associated with the Coast Guard 2016 pilotage rate increase is 4,400 jobs.” This statement is blatantly false and misleads the public to think that 4,400 jobs were actually lost in 2016 due to U.S. pilotage. The Martin report does not use any actual data from 2016, but draws conclusions using hypothetical scenarios and proprietary data that is unknown to the public. It assumes a 40 to 90 percent increase in 2017 rates while there was never any proposal to increase rates. Instead the Coast Guard kept rates the same for most of this year and recently announced a 31 percent average decrease.

The Martin study is also flawed by assuming that all other factors such as “Canadian pilotage charges, tolls, stevedoring, port charges, etc.” are held constant and factors such as demand for steel, regional construction levels, fuel costs, foreign steel price differences, currency exchange rates, railroad pricing, alternative mode capacity and weather conditions are not factored in. It is frivolous to hold $21 million annually in U.S. pilotage costs as significantly impacting cargo and jobs, when slight movements in any combination of these other major factors can affect billions of dollars in costs to shipping.

The fact is, 2016 and 2017 have been two of the best years for international traffic volumes in the last 10 years. The St. Lawrence Seaway Development Corp. just reported that general cargo is up 40 percent in the first half of 2017 over the same period last year. According to the U.S. Coast Guard, demand for pilotage service in 2016 was greater than 2015 and trending 20 percent higher than the 10-year average in 2017. There is no evidence that one ton of cargo or one job was lost due to pilotage fees in 2016 or 2017.

With the issue of pilotage, the priority should be safety in navigation and environmental protection of Great Lakes waters. Pilots have the skills and necessary autonomy to make decisions based on safety rather than protecting profits of shippers. The Martin methodology of using hypothetical scenarios with a fictional 40 to 90 percent rate increase for 2017 is flawed. Being under contract for hundreds of thousands of dollars with anti-pilot groups should immediately disqualify this report. The facts show that cargo and traffic has increased since 2016 and there is no evidence that U.S. pilotage has had any negative effect.

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