ITEM TITLE:
#25-14 - Authorizing a Lease with Crowley Fuels, LLC for a 6,230 Square Foot Portion of USS 495 Tidelands (North Fuel Dock)
SUBMITTED BY: Nicole Chase, Planner
FISCAL NOTES:
Expenditure Required: N/A
Unencumbered Balance: N/A
Funding Source: N/A
RECOMMENDATION:
Approve resolution 25-14 authorizing a lease with Crowley Fuels, LLC for a 6,230 square foot portion of USS 495 Tidelands (North Fuel Dock)
SUMMARY STATEMENT:
The City of Valdez entered into a lease for a 6,230 square foot portion of USS 495 Tidelands, with Westmark Hotels, Inc. in 2001 for twenty-one years, expiring July 31, 2022 with six additional, five-year options to renew. This lease was partially assigned to separate the fuel dock portion and assign it to Valdez Fuels, LLC in 2002. Valdez Fuels was acquired by Crowley Fuels, LLC, and the lease was assigned to Crowley in 2012.
The lease was amended via resolution #22-76 to extend the term of the lease, expiring July 31, 2024. The lease has been in holdover with all terms and conditions continuing on a monthly basis since the expiration while the recommended new lease terms were negotiated between staff and Crowley.
Crowley Fuels, LLC has applied to continue to lease this property for use of fuel dock. The new lease is proposed for an initial term of 10 years, with four five-year options to renew the lease. The rent for this lease is subject to fair rental value pursuant to Valdez Municipal Code 14.04.020 which is determined to be 10% of appraised value annually which amounts to $1,500.00 annually for use of this property according to the most recent appraisal for the location. In addition to the baseline annual rent, staff proposes that lessee pay a fuel surcharge of $00.04 cents per gallon of fuel sold. The lessee should provide lessor access to meters and other records necessary to determine the annual volume of fuel sold at this location. Staff proposes this negotiated rate since the fair rental value of $1,500.00 does not adequately capture the true value of this property. The fuel surcharge would be based on annual throughput of fuel in 2024 for the first five years of the lease and adjusted based on the most recent fuel flow every five years following.
Another notable proposed change for this lease is that it sets forth proposed minimum operating hours in response to community feedback regarding call-out fees, and hours of operations. The draft lease establishes the following minimum operating hours:
“LESSEE shall use the Property for fueling related purposes and for no other purposes. LESSEE shall not conduct any illegal activities on the Property or maintain any nuisances on the Property. LESSEE shall provide fueling services at the South Fuel Dock Premises or at the North Fuel Dock as depicted on Exhibit B so long as LESSOR is leasing the North Fuel Dock from LESSOR as follows:
(a) November 1 - April 13 (by Appointment Only)
(b) April 15 - Thursday before Memorial Day, 7 days a week from 9am-5pm
(c) Friday of Memorial Day weekend - Labor Day
South Fuel Dock - 7 days a week from 6am-10pm
North Fuel Dock - 7 days a week from 10am-6pm
(d) Day after Labor Day - October 15, Monday-Friday 9am-5pm”
The proposed lease sets forth that at least one of the two Crowley fuel locations in the Small Boat Harbor needs to maintain these hours at a given time.
On February 11, 2025, the Ports and Harbors Commission voted on a recommendation to approve this lease. On February 12, 2025 the Planning and Zoning Commission voted on a recommendation to approve this lease. The Planning and Zoning Commission had questions regarding spill safety and response for this lease, which Crowley responded to with the following statement:
“We have a facility Response Plan (FRP), that is reviewed and approved by regulatory authorities, that was updated in December 2024 that outlines the Spill Response, Reporting and Notification, Safety, Communications, Deployment Strategies. The prevention portion covers Pollution Prevention and Maintenance, planning for unintentional discharge, discharge detection, and the environmental impacts and risk. The supplemental sections cover training, cleanup and response equipment, command system, etc.
Tanks, piping, hoses, manifolds, and valves are visually inspected for leaks or structural damage and maintained to reduce potential leaks. All transfers are monitored visually.
The diesel and gasoline control stations include vaporless 3" FE Petro Automatic Line Leak detectors, and an EECO Electronic tank, sump, and piping monitoring systems (manufactured by Tuthill Corp. Cary, North Carolina).
We also have a tank level monitoring system - Veeter-Root - that tracks any inventory loss, and we perform a weekly .2 gallon / hour leak test per State of AK for UST compliance. In addition, we have sumps in place equipped with liquid alarms and if liquid is detected a report is immediately generated.”
All other terms and conditions of the proposed lease agreement follow the standard lease language applied to all tideland lessees. Pending Council approval, staff will work with the City Attorney and Crowley Fuels to execute a new agreement.