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Leases | 9 Months Ended
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Sep. 30, 2019
Leases [Abstract] |
LEASES | 4. LEASES General We have entered into long-term leasing arrangements for the right to use various classes of underlying assets as follows:
• | Pipelines, Terminals, and Tanks includes facilities and equipment used in the storage, transportation, production, and sale of refinery feedstock, refined petroleum product, and corn inventories;
• | Marine Transportation includes time charters for ocean-going tankers and coastal vessels;
• | Rail Transportation includes railcars and related storage facilities;
• | Feedstock Processing Equipment includes machinery, equipment, and various facilities used in our refining, ethanol, and renewable diesel operations;
• | Energy and Gases includes facilities and equipment related to industrial gases and power used in our operations;
• | Real Estate includes land and rights-of-way associated with our refineries and pipelines, as well as office facilities; and
• | Other includes equipment primarily used at our corporate offices, such as printers and copiers.
In addition to fixed lease payments, some arrangements contain provisions for variable lease payments. Certain leases for pipelines, terminals, and tanks provide for variable lease payments based on, among other things, throughput volumes in excess of a base amount. Certain marine transportation leases contain provisions for payments that are contingent on usage. Additionally, if the rental increases are not scheduled in the lease, such as an increase based on subsequent changes in the index or rate, those rents are considered variable lease payments. In all instances, variable lease payments are recognized in the period in which the obligation for those payments is incurred. Lease Costs and Other Supplemental Information In accordance with Topic 842, our total lease cost comprises costs that are included in our income statement, as well as costs capitalized as part of an item of property, plant, and equipment or inventory. Total lease cost by class of underlying asset was as follows (in millions):
| Pipelines, Terminals, and Tanks |  | Transportation |  | Feedstock Processing Equipment |  | Energy and Gases |  | Real Estate |  | Other |  | Total
|  | Marine |  | Rail |  |  |  |  |
Three months ended September 30, 2019: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Finance lease cost: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amortization of ROU assets | $ | 12 |  |  | $ | — |  |  | $ | — |  |  | $ | 2 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 14 |
Interest on lease liabilities | 13 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 13 |
Operating lease cost | 46 |  |  | 39 |  |  | 14 |  |  | 4 |  |  | 3 |  |  | 7 |  |  | 1 |  |  | 114 |
Variable lease cost | 20 |  |  | 4 |  |  | — |  |  | 1 |  |  | — |  |  | 1 |  |  | — |  |  | 26 |
Short-term lease cost | 1 |  |  | 13 |  |  | — |  |  | 8 |  |  | — |  |  | — |  |  | — |  |  | 22 |
Sublease income | — |  |  | (8 | ) |  | — |  |  | — |  |  | — |  |  | (1 | ) |  | — |  |  | (9 | )
Total lease cost | $ | 92 |  |  | $ | 48 |  |  | $ | 14 |  |  | $ | 15 |  |  | $ | 3 |  |  | $ | 7 |  |  | $ | 1 |  |  | $ | 180 |
Nine months ended September 30, 2019: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Finance lease cost: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amortization of ROU assets | $ | 32 |  |  | $ | — |  |  | $ | — |  |  | $ | 4 |  |  | $ | 2 |  |  | $ | — |  |  | $ | — |  |  | $ | 38 |
Interest on lease liabilities | 35 |  |  | — |  |  | — |  |  | 1 |  |  | 2 |  |  | — |  |  | — |  |  | 38 |
Operating lease cost | 140 |  |  | 107 |  |  | 38 |  |  | 16 |  |  | 7 |  |  | 21 |  |  | 3 |  |  | 332 |
Variable lease cost | 53 |  |  | 21 |  |  | — |  |  | 1 |  |  | — |  |  | 1 |  |  | — |  |  | 76 |
Short-term lease cost | 8 |  |  | 39 |  |  | — |  |  | 22 |  |  | — |  |  | — |  |  | — |  |  | 69 |
Sublease income | — |  |  | (24 | ) |  | — |  |  | — |  |  | — |  |  | (3 | ) |  | — |  |  | (27 | )
Total lease cost | $ | 268 |  |  | $ | 143 |  |  | $ | 38 |  |  | $ | 44 |  |  | $ | 11 |  |  | $ | 19 |  |  | $ | 3 |  |  | $ | 526 |
In accordance with Topic 840, “rental expense, net of sublease rental income” was as follows (in millions):
| Three Months Ended September 30, 2018 |  | Nine Months Ended September 30, 2018
Minimum rental expense | $ | 126 |  |  | $ | 377 |
Contingent rental expense | 5 |  |  | 14 |
Total rental expense | 131 |  |  | 391 |
Less sublease rental income | 8 |  |  | 24 |
Rental expense, net of sublease rental income | $ | 123 |  |  | $ | 367 |
The following table presents additional information related to our operating and finance leases (in millions, except for lease terms and discount rates):
|  | September 30, 2019
|  | Operating Leases |  | Finance Leases
Supplemental balance sheet information: |  |  |  |
ROU assets, net reflected in the following balance sheet line items: |  |  |  |
Property, plant, and equipment, net |  | $ | — |  |  | $ | 787 |
Deferred charges and other assets, net |  | 1,338 |  |  | — |
Total ROU assets, net |  | $ | 1,338 |  |  | $ | 787 |
Current lease liabilities reflected in the following balance sheet line items: |  |  |  |
Current portion of debt and finance lease obligations |  | $ | — |  |  | $ | 41 |
Accrued expenses |  | 333 |  |  | — |
Noncurrent lease liabilities reflected in the following balance sheet line items: |  |  |  |
Debt and finance lease obligations, less current portion |  | — |  |  | 744 |
Other long-term liabilities |  | 970 |  |  | — |
Total lease liabilities |  | $ | 1,303 |  |  | $ | 785 |
Other supplemental information: |  |  |  |
Weighted-average remaining lease term |  | 7.7 years |  |  | 20.0 years |
Weighted-average discount rate |  | 5.0 | % |  | 5.2 | %
Supplemental cash flow information related to our operating and finance leases is presented in Note 12. Maturity Analysis The remaining minimum lease payments due under our long-term leases were as follows (in millions):
| September 30, 2019 |  | December 31, 2018
| Operating Leases |  | Finance Leases |  | Operating Leases |  | Capital Leases
2019 (a) | $ | 108 |  |  | $ | 22 |  |  | $ | 359 |  |  | $ | 69 |
2020 | 349 |  |  | 87 |  |  | 245 |  |  | 65 |
2021 | 236 |  |  | 85 |  |  | 178 |  |  | 62 |
2022 | 183 |  |  | 85 |  |  | 146 |  |  | 64 |
2023 | 150 |  |  | 89 |  |  | 123 |  |  | 65 |
Thereafter | 598 |  |  | 1,078 |  |  | 514 |  |  | 957 |
Total undiscounted lease payments | 1,624 |  |  | 1,446 |  |  | $ | 1,565 |  |  | 1,282 |
Less amount associated with discounting | 321 |  |  | 661 |  |  |  |  | 676 |
Total lease liabilities | $ | 1,303 |  |  | $ | 785 |  |  |  |  | $ | 606 |
____________________
(a) | The amounts as of September 30, 2019 are for the remaining three months of 2019.
Future Lease Commencement As described and defined in Note 6, we have a terminaling agreement with MVP to utilize the MVP Terminal upon completion of phase two, which is expected to occur in late 2019. We expect to recognize an ROU asset and lease liability of approximately $1.1 billion in 2020 in connection with this agreement.
LEASES | 4. LEASES General We have entered into long-term leasing arrangements for the right to use various classes of underlying assets as follows:
• | Pipelines, Terminals, and Tanks includes facilities and equipment used in the storage, transportation, production, and sale of refinery feedstock, refined petroleum product, and corn inventories;
• | Marine Transportation includes time charters for ocean-going tankers and coastal vessels;
• | Rail Transportation includes railcars and related storage facilities;
• | Feedstock Processing Equipment includes machinery, equipment, and various facilities used in our refining, ethanol, and renewable diesel operations;
• | Energy and Gases includes facilities and equipment related to industrial gases and power used in our operations;
• | Real Estate includes land and rights-of-way associated with our refineries and pipelines, as well as office facilities; and
• | Other includes equipment primarily used at our corporate offices, such as printers and copiers.
In addition to fixed lease payments, some arrangements contain provisions for variable lease payments. Certain leases for pipelines, terminals, and tanks provide for variable lease payments based on, among other things, throughput volumes in excess of a base amount. Certain marine transportation leases contain provisions for payments that are contingent on usage. Additionally, if the rental increases are not scheduled in the lease, such as an increase based on subsequent changes in the index or rate, those rents are considered variable lease payments. In all instances, variable lease payments are recognized in the period in which the obligation for those payments is incurred. Lease Costs and Other Supplemental Information In accordance with Topic 842, our total lease cost comprises costs that are included in our income statement, as well as costs capitalized as part of an item of property, plant, and equipment or inventory. Total lease cost by class of underlying asset was as follows (in millions):
| Pipelines, Terminals, and Tanks |  | Transportation |  | Feedstock Processing Equipment |  | Energy and Gases |  | Real Estate |  | Other |  | Total
|  | Marine |  | Rail |  |  |  |  |
Three months ended September 30, 2019: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Finance lease cost: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amortization of ROU assets | $ | 12 |  |  | $ | — |  |  | $ | — |  |  | $ | 2 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 14 |
Interest on lease liabilities | 13 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 13 |
Operating lease cost | 46 |  |  | 39 |  |  | 14 |  |  | 4 |  |  | 3 |  |  | 7 |  |  | 1 |  |  | 114 |
Variable lease cost | 20 |  |  | 4 |  |  | — |  |  | 1 |  |  | — |  |  | 1 |  |  | — |  |  | 26 |
Short-term lease cost | 1 |  |  | 13 |  |  | — |  |  | 8 |  |  | — |  |  | — |  |  | — |  |  | 22 |
Sublease income | — |  |  | (8 | ) |  | — |  |  | — |  |  | — |  |  | (1 | ) |  | — |  |  | (9 | )
Total lease cost | $ | 92 |  |  | $ | 48 |  |  | $ | 14 |  |  | $ | 15 |  |  | $ | 3 |  |  | $ | 7 |  |  | $ | 1 |  |  | $ | 180 |
Nine months ended September 30, 2019: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Finance lease cost: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amortization of ROU assets | $ | 32 |  |  | $ | — |  |  | $ | — |  |  | $ | 4 |  |  | $ | 2 |  |  | $ | — |  |  | $ | — |  |  | $ | 38 |
Interest on lease liabilities | 35 |  |  | — |  |  | — |  |  | 1 |  |  | 2 |  |  | — |  |  | — |  |  | 38 |
Operating lease cost | 140 |  |  | 107 |  |  | 38 |  |  | 16 |  |  | 7 |  |  | 21 |  |  | 3 |  |  | 332 |
Variable lease cost | 53 |  |  | 21 |  |  | — |  |  | 1 |  |  | — |  |  | 1 |  |  | — |  |  | 76 |
Short-term lease cost | 8 |  |  | 39 |  |  | — |  |  | 22 |  |  | — |  |  | — |  |  | — |  |  | 69 |
Sublease income | — |  |  | (24 | ) |  | — |  |  | — |  |  | — |  |  | (3 | ) |  | — |  |  | (27 | )
Total lease cost | $ | 268 |  |  | $ | 143 |  |  | $ | 38 |  |  | $ | 44 |  |  | $ | 11 |  |  | $ | 19 |  |  | $ | 3 |  |  | $ | 526 |
In accordance with Topic 840, “rental expense, net of sublease rental income” was as follows (in millions):
| Three Months Ended September 30, 2018 |  | Nine Months Ended September 30, 2018
Minimum rental expense | $ | 126 |  |  | $ | 377 |
Contingent rental expense | 5 |  |  | 14 |
Total rental expense | 131 |  |  | 391 |
Less sublease rental income | 8 |  |  | 24 |
Rental expense, net of sublease rental income | $ | 123 |  |  | $ | 367 |
The following table presents additional information related to our operating and finance leases (in millions, except for lease terms and discount rates):
|  | September 30, 2019
|  | Operating Leases |  | Finance Leases
Supplemental balance sheet information: |  |  |  |
ROU assets, net reflected in the following balance sheet line items: |  |  |  |
Property, plant, and equipment, net |  | $ | — |  |  | $ | 787 |
Deferred charges and other assets, net |  | 1,338 |  |  | — |
Total ROU assets, net |  | $ | 1,338 |  |  | $ | 787 |
Current lease liabilities reflected in the following balance sheet line items: |  |  |  |
Current portion of debt and finance lease obligations |  | $ | — |  |  | $ | 41 |
Accrued expenses |  | 333 |  |  | — |
Noncurrent lease liabilities reflected in the following balance sheet line items: |  |  |  |
Debt and finance lease obligations, less current portion |  | — |  |  | 744 |
Other long-term liabilities |  | 970 |  |  | — |
Total lease liabilities |  | $ | 1,303 |  |  | $ | 785 |
Other supplemental information: |  |  |  |
Weighted-average remaining lease term |  | 7.7 years |  |  | 20.0 years |
Weighted-average discount rate |  | 5.0 | % |  | 5.2 | %
Supplemental cash flow information related to our operating and finance leases is presented in Note 12. Maturity Analysis The remaining minimum lease payments due under our long-term leases were as follows (in millions):
| September 30, 2019 |  | December 31, 2018
| Operating Leases |  | Finance Leases |  | Operating Leases |  | Capital Leases
2019 (a) | $ | 108 |  |  | $ | 22 |  |  | $ | 359 |  |  | $ | 69 |
2020 | 349 |  |  | 87 |  |  | 245 |  |  | 65 |
2021 | 236 |  |  | 85 |  |  | 178 |  |  | 62 |
2022 | 183 |  |  | 85 |  |  | 146 |  |  | 64 |
2023 | 150 |  |  | 89 |  |  | 123 |  |  | 65 |
Thereafter | 598 |  |  | 1,078 |  |  | 514 |  |  | 957 |
Total undiscounted lease payments | 1,624 |  |  | 1,446 |  |  | $ | 1,565 |  |  | 1,282 |
Less amount associated with discounting | 321 |  |  | 661 |  |  |  |  | 676 |
Total lease liabilities | $ | 1,303 |  |  | $ | 785 |  |  |  |  | $ | 606 |
____________________
(a) | The amounts as of September 30, 2019 are for the remaining three months of 2019.
Future Lease Commencement As described and defined in Note 6, we have a terminaling agreement with MVP to utilize the MVP Terminal upon completion of phase two, which is expected to occur in late 2019. We expect to recognize an ROU asset and lease liability of approximately $1.1 billion in 2020 in connection with this agreement.

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