Consider Lease Agreement with East Side Oil Companies

In June, 2012, the City Council discussed a potential opportunity to initiate a used oil collection (recycling) program at the Public Works campus.  East Side Oil Companies would provide, at no cost to the City, a 2,000 gallon tank for used oil collection. In addition, East Side would also provide containers for oil filters and antifreeze.  Staff would need to provide monitoring of two external gages on the tank daily and monthly.  The monitoring is for both quantity of oil in tank (done regularly) and to review the interstitial space to verify there is no leak in the tank (done monthly).  Once the tank is more than half full, the City would contact East Side Oil Companies to empty the tank.  The original 2012 case is attached for background information. 

There was general support from the City Council in 2012 to pursue this opportunity.  East Side Oil Companies requires the execution of an Equipment Lease Agreement to clarify that they remain the owner of the collection tank.  However, the City Council directed Staff to explore a land lease option with East Side Oil Companies, which may better protect the City against liability from an environmental concern such as an oil spill.

In conjunction with the City Attorney, a Lease Agreement was drafted that includes standard indemnity language provided by the League of Minnesota Cities.  Additionally, the Lease Agreement includes language requiring the tenant (East Side Oil Companies) to obtain environmental insurance to insure the City against potential liabilities relating to hazardous substances, hazardous waste, petroleum or other pollutants contaminating the environment as a result of a spill, leak or other malfunction of equipment.  East Side Oil Companies has reviewed the Lease Agreement and has agreed to the terms of the Lease Agreement.

Alternative #1: Approve the Lease Agreement for leasing space to East Side Oil Companies for placement of a 2,000 gallon tank at the Public Works campus to collect used oil, oil filters and antifreeze.  Staff has spoken with the cities of Elk River and East Bethel, both of which have tanks from East Side Oil Companies. Each has stated that the program is appreciated by their residents.  In fact, they each stated that it is not uncommon to find cash donations in the donation box (provided with the tank). Furthermore, East Side Oil Companies participated in the Ramsey's Fall Recycling Event last year and it was very well received by residents.  Over 400 gallons of used oil (along with about fifty [50] gallons of antifreeze and one full barrel of oil filters) were received during the four (4) hour event.  Staff believes that with the land Lease Agreement, which includes the added indemnity language and environmental insurance requirement, that the City would be protected against environmental concerns resulting from having the tank on City owned property.

Alternative #2: Deny the Lease Agreement and limit the used oil recycling opportunity to only the recycling events.  While residents would still potentially have a local opportunity to recycling used oil, it would be limited to only a couple weekends per year.  Having the tank available year-round provides a more convenient options for residents to properly dispose of this material.

Staff would recommend approving the land Lease Agreement with East Side Oil Companies to placement a 2,000 gallon tank on the City's Public Works campus for collection of used oil, oil filters and antifreeze, subject to final review and approval as  to legal form by the City Attorney.

There are no direct hard costs to the City related to this program opportunity.  Staff time associated with monitoring of the external gages, which should be fairly minimal, could be charged to the recycling account, which is funded via SCORE (Select Committee on Recycling and the Environment) monies.

Motion to authorize Staff to execute a land Lease Agreement with East Side Oil Companies to place a 2,000 gallon tank on the City's Public Works campus for the collection of used oil, oil filters and antifreeze from residents, subject to final review and approval as to legal form by the City Attorney.