About 20 litres of oil ended up in Whakatane's Sullivan Lake through stormwater pipes over the weekend.
Bay of Plenty Regional Council pollution prevention staff were alerted by a resident on Saturday morning and found the oil had got into the lake through the urban stormwater system, possibly originating from a light industrial area south of Whakatane.
Pollution prevention team leader Steve Pickles said staff had spent more than 20 hours containing and cleaning up the oil using absorbent booms and peat.
"Add the cost of the gear used with the staff time involved, and it has ended up being a very costly incident for our ratepayers."
Staff contracted Transpacific to use their sucker truck to remove the oil from the lake on Tuesday. However, there could still be some oil sheen around the lake visible for the next few days, as small amounts were released from vegetation surrounding the lake.
"It is vitally important that industrial sites and residents properly manage and dispose of their hydrocarbon waste to ensure it does not pollute our waterways," Mr Pickles said.
"This incident is really disappointing, considering the amount of time and resources being spent on improving the water quality of Sullivan's Lake by the local community."
He said the regional council and Whakatane District Council had been planning a joint project to inspect high-risk sites in the Whakatane area where discharges could affect water quality.