Leases

12 Months Ended

Dec. 31, 2022

We are committed under long-term lease agreements for equipment, lines of road, and other property. We combine lease and non-lease components for new and reassessed leases. Some of these agreements are variable lease agreements that include usage-based payments. These agreements contain payment provisions that depend on an index or rate, initially measured using the index or rate at the lease commencement date, and are therefore not included in our future minimum lease payments. Our long-term lease agreements do not contain any material restrictive covenants.

Our equipment leases have remaining terms of less than 1 year to 7 years and our lines of road and land leases have remaining terms of less than 1 year to 135 years. Some of these leases include options to extend the leases for up to 99 years and some include options to terminate the leases within 30 days. Because we are not reasonably certain to exercise these renewal options, the options are not considered in determining the lease term, and associated payments are excluded from future minimum lease payments.

Leases with an initial term of twelve months or less are not recorded on the balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term.

Operating lease amounts included on the Consolidated Balance Sheets are as follows:


		December 31,
		2022		2021
		($ in millions)
	Classification
Assets
Right-of-use (ROU) assets	Other assets	$	407	$	411

Liabilities
Current lease liabilities	Other current liabilities	$	94	$	82
Non-current lease liabilities	Other liabilities	316		331

Total lease liabilities		$	410	$	413

The components of total lease expense, primarily included in “Purchased services and rents,” are as follows:


	2022		2021		2020
	($ in millions)

Operating lease expense	$	101	$	106	$	109
Variable lease expense	55		44		42
Short-term lease expense	18		9		9

Total lease expense	$	174	$	159	$	160

In March 2019, we entered into a non-cancellable lease for an office building. In 2021, the construction of the office building was completed and the lease commenced. The initial lease term is five years with options to renew, purchase, or sell the office building at the end of the lease term. The lease contains a residual value guarantee of up to eighty-three percent of the total construction cost of $499 million.

Other information related to operating leases is as follows:


	December 31,
	2022		2021

Weighted-average remaining lease term (years) on operating leases	6.67		7.49

Weighted-average discount rates on operating leases	3.16	%	3.04	%

As the rates implicit in most of our leases are not readily determinable, we use a collateralized incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments. We use the portfolio approach and group leases into short-, medium-, and long-term categories, applying the corresponding incremental borrowing rates to these categories.

During 2022 and 2021, respectively, ROU assets obtained in exchange for new operating lease liabilities were $57 million at both periods. Cash paid for amounts included in the measurement of lease liabilities was $100 million and $103 million in 2022 and 2021, respectively, and is included in operating cash flows.

Future minimum lease payments under non-cancellable operating leases are as follows:


	December 31, 2022
	($ in millions)

2023	$	103
2024	95
2025	87
2026	69
2027	27
2028 and subsequent years	81
Total lease payments	462
Less: Interest	52

Present value of lease liabilities	$	410


	December 31, 2021
	($ in millions)

2022	$	92
2023	83
2024	73
2025	69
2026	55
2027 and subsequent years	98
Total lease payments	470
Less: Interest	57

Present value of lease liabilities	$	413