Leases

9 Months Ended

Sep. 30, 2019

LEASES

For further information regarding the adoption of ASC 842, including the method of adoption and practical expedients elected, see Note 2.

Lessee

We lease a wide variety of facilities and equipment including land and building space, office and field equipment, storage facilities and transportation equipment. Our remaining lease terms range from less than one year to 60 years. Most long-term leases include renewal options ranging from less than one year to 50 years and, in certain leases, also include purchase options. The lease term included in the measurement of right of use assets and lease liabilities includes options to extend or terminate our leases that we are reasonably certain to exercise. Options were included in the lease term primarily for retail store sites where we constructed property, plant and equipment on leased land that is expected to exist beyond the initial lease term.

Under ASC 842, the components of lease cost were as follows:



	Three Months Ended September 30,		Nine Months Ended September 30,
(In millions)	2019		2019
Finance lease cost:
Amortization of right of use assets	$	17	$	46
Interest on lease liabilities	12		32
Operating lease cost	209		597
Variable lease cost	23		66
Short-term lease cost	197		511
Total lease cost	$	458	$	1,252

Supplemental balance sheet data related to leases were as follows:



(In millions)	September 30, 2019
Operating leases
Assets
Right of use assets	$	2,522
Liabilities
Operating lease liabilities	$	586
Long-term operating lease liabilities	1,962
Total operating lease liabilities	$	2,548

Weighted average remaining lease term (in years)	6.4
Weighted average discount rate	4.09		%

Finance leases
Assets
Property, plant and equipment, gross	$	814
Accumulated depreciation	224
Property, plant and equipment, net	$	590
Liabilities
Debt due within one year	$	55
Long-term debt	654
Total finance lease liabilities	$	709

Weighted average remaining lease term (in years)	12.1
Weighted average discount rate	6.56		%

As of September 30, 2019, maturities of lease liabilities for operating lease obligations and finance lease obligations having initial or remaining non-cancellable lease terms in excess of one year are as follows:



(In millions)	Operating		Finance
2019	$	174	$	29
2020	665		94
2021	572		86
2022	388		94
2023	277		96
2024 and thereafter	855		611
Gross lease payments	2,931		1,010
Less: imputed interest	383		301
Total lease liabilities	$	2,548	$	709

Presented in accordance with ASC 840, future minimum commitments as of December 31, 2018 for operating lease obligations and capital lease obligations having initial or remaining non-cancellable lease terms in excess of one year were as follows:



(In millions)	Operating		Capital
2019	$	709	$	70
2020	619		71
2021	553		66
2022	389		75
2023	295		82
2024 and thereafter	858		586
Total minimum lease payments	$	3,423	950
Less: imputed interest costs			301
Present value of net minimum lease payments			$	649

Leases of Lessor Disclosure

Lessor

MPLX has certain natural gas gathering, transportation and processing agreements in which it is considered to be the lessor under several implicit operating lease arrangements in accordance with GAAP. MPLX’s primary implicit lease operations relate to a natural gas gathering agreement in the Marcellus region for which it earns a fixed-fee for providing gathering services to a single producer using a dedicated gathering system. As the gathering system is expanded, the fixed-fee charged to the producer is adjusted to include the additional gathering assets in the lease. The primary term of the natural gas gathering arrangement expires in 2038 and will continue thereafter on a year-to-year basis until terminated by either party. Other implicit leases relate to a natural gas processing agreement in the Marcellus region and a natural gas processing agreement in the Southern Appalachia region for which MPLX earns minimum monthly fees for providing processing services to a single producer using a dedicated processing plant. The primary terms of these natural gas processing agreements expire during 2023 and 2033.

MPLX did not elect to use the practical expedient to combine lease and non-lease components for lessor arrangements. The tables below represent the portion of the contract allocated to the lease component based on relative standalone selling price. Lessor agreements are currently deemed operating, as we elected the practical expedient to grandfather in historical ASC 840 lease classifications. MPLX may be required to re-classify existing operating leases to sales-type leases upon modification and related reassessment of the leases.

Our revenue from implicit lease arrangements, excluding executory costs, totaled approximately $64 million and $195 million for the three and nine months ended September 30, 2019, respectively. The implicit lease arrangements related to the processing facilities contain contingent rental provisions whereby we receive additional fees if the producer customer exceeds the monthly minimum processed volumes. During the three and nine months ended September 30, 2019, MPLX did not receive any material contingent lease payments. The following is a schedule of minimum future rentals on the non‑cancellable operating leases as of September 30, 2019:



(In millions)
2019	$	47
2020	186
2021	178
2022	176
2023	170
2024 and thereafter	1,269
Total minimum future rentals	$	2,026

The following schedule summarizes our investment in assets held for operating lease by major classes as of September 30, 2019:



(In millions)	September 30, 2019
Natural gas gathering and NGL transportation pipelines and facilities	$	1,061
Natural gas processing facilities	633
Terminal and related assets	82
Land, building, office equipment and other	45
Property, plant and equipment	1,821
Less accumulated depreciation	304
Property, plant and equipment, net	$	1,517