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Leases

12 Months Ended

Dec. 31, 2020

Leases [Abstract]

LEASES

6.    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, ethanol, 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, renewable diesel, and ethanol 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, plants, and pipelines and other logistics assets, 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 FASB Accounting Standards Codification (ASC) Topic 842, “Leases,” (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
Year ended December 31, 2020
Finance lease cost:
Amortization of ROU assets			$	109					$	—					$	2					$	13					$	4					$	—					$	—					$	128
Interest on lease liabilities			92						—						—						3						3						—						—						98
Operating lease cost			165						156						61						15						7						26						4						434
Variable lease cost			53						40						1						3						—						2						—						99
Short-term lease cost			9						45						—						37						—						—						—						91
Sublease income			—						(10)						—						—						—						(2)						—						(12)
Total lease cost			$	428					$	231					$	64					$	71					$	14					$	26					$	4					$	838
Year ended December 31, 2019
Finance lease cost:
Amortization of ROU assets			$	44					$	—					$	—					$	7					$	3					$	—					$	—					$	54
Interest on lease liabilities			47						—						—						1						2						—						—						50
Operating lease cost			182						145						52						20						9						27						4						439
Variable lease cost			66						35						—						1						—						1						—						103
Short-term lease cost			9						53						—						29						—						—						—						91
Sublease income			—						(27)						—						—						—						(3)						—						(30)
Total lease cost			$	348					$	206					$	52					$	58					$	14					$	25					$	4					$	707

In accordance with FASB ASC Topic 840, “Leases,” which was superseded by Topic 842, “rental expense, net of sublease rental income” for the year ended December 31, 2018 was as follows (in millions):

Minimum rental expense			$	515
Contingent rental expense			19
Total rental expense			534
Less: Sublease rental income			31
Rental expense, net of sublease rental income			$	503

The following table presents additional information related to our operating and finance leases (in millions, except for lease terms and discount rates):

			December 31, 2020												December 31, 2019
			Operating Leases						Finance Leases						Operating Leases						Finance Leases
Supplemental balance sheet information
ROU assets, net reflected in the following balance sheet line items:
Property, plant, and equipment, net			$	—					$	1,622					$	—					$	790
Deferred charges and other assets, net			1,204						—						1,329						—
Total ROU assets, net			$	1,204					$	1,622					$	1,329					$	790
Current lease liabilities reflected in the following balance sheet line items:
Current portion of debt and finance lease obligations			$	—					$	120					$	—					$	41
Accrued expenses			285						—						331						—
Noncurrent lease liabilities reflected in the following balance sheet line items:
Debt and finance lease obligations, less current portion			—						1,544						—						750
Other long-term liabilities			885						—						959						—
Total lease liabilities			$	1,170					$	1,664					$	1,290					$	791
Other supplemental information
Weighted-average remaining lease term			7.6 years						14.5 years						7.7 years						19.7 years
Weighted-average discount rate			4.7		%				4.1		%				4.9		%				5.2		%

Supplemental cash flow information related to our operating and finance leases is presented in Note 19.

MVP Terminal Finance Lease

We have a 50 percent membership interest in MVP Terminalling, LLC (MVP), an unconsolidated joint venture formed in September 2017 with a subsidiary of Magellan Midstream Partners LP (Magellan). MVP owns and operates a marine terminal (the MVP Terminal) located adjacent to the Houston Ship Channel in Pasadena, Texas. Concurrent with the formation of MVP, we entered into a terminaling agreement with MVP to utilize the MVP Terminal upon completion of construction of the terminal, which occurred in the first quarter of 2020. During the three months ended March 31, 2020, we recognized a finance lease ROU asset and related liability of approximately $1.4 billion in connection with this agreement. The lease term included the initial term of 12 years and renewal option periods. In the fourth quarter of 2020, we evaluated our strategy with regard to certain of our logistics investments, including MVP. As a result of this review, we formally notified MVP that we do not intend to renew the terminaling agreement after its initial noncancelable term. Consequently, we reassessed the lease term and remeasured the finance lease liability based on the shortened lease term. We derecognized approximately $600 million of the finance lease liability and related ROU asset, which are noncash financing and investing activities, respectively. As of December 31, 2020, the total lease liability was approximately $800 million.

Maturity Analysis

The remaining minimum lease payments due under our long-term leases were as follows (in millions):

			December 31, 2020												December 31, 2019
			Operating Leases						Finance Leases						Operating Leases						Finance Leases
2020			n/a						n/a						$	376					$	88
2021			$	324					$	187					250						86
2022			231						182						194						87
2023			194						187						160						91
2024			155						178						125						82
2025			107						178						n/a						n/a
Thereafter			435						1,498						498						1,011
Total undiscounted lease payments			1,446						2,410						1,603						1,445
Less: Amount associated with discounting			276						746						313						654
Total lease liabilities			$	1,170					$	1,664					$	1,290					$	791

LEASES

6.    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, ethanol, 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, renewable diesel, and ethanol 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, plants, and pipelines and other logistics assets, 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 FASB Accounting Standards Codification (ASC) Topic 842, “Leases,” (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
Year ended December 31, 2020
Finance lease cost:
Amortization of ROU assets			$	109					$	—					$	2					$	13					$	4					$	—					$	—					$	128
Interest on lease liabilities			92						—						—						3						3						—						—						98
Operating lease cost			165						156						61						15						7						26						4						434
Variable lease cost			53						40						1						3						—						2						—						99
Short-term lease cost			9						45						—						37						—						—						—						91
Sublease income			—						(10)						—						—						—						(2)						—						(12)
Total lease cost			$	428					$	231					$	64					$	71					$	14					$	26					$	4					$	838
Year ended December 31, 2019
Finance lease cost:
Amortization of ROU assets			$	44					$	—					$	—					$	7					$	3					$	—					$	—					$	54
Interest on lease liabilities			47						—						—						1						2						—						—						50
Operating lease cost			182						145						52						20						9						27						4						439
Variable lease cost			66						35						—						1						—						1						—						103
Short-term lease cost			9						53						—						29						—						—						—						91
Sublease income			—						(27)						—						—						—						(3)						—						(30)
Total lease cost			$	348					$	206					$	52					$	58					$	14					$	25					$	4					$	707

In accordance with FASB ASC Topic 840, “Leases,” which was superseded by Topic 842, “rental expense, net of sublease rental income” for the year ended December 31, 2018 was as follows (in millions):

Minimum rental expense			$	515
Contingent rental expense			19
Total rental expense			534
Less: Sublease rental income			31
Rental expense, net of sublease rental income			$	503

The following table presents additional information related to our operating and finance leases (in millions, except for lease terms and discount rates):

			December 31, 2020												December 31, 2019
			Operating Leases						Finance Leases						Operating Leases						Finance Leases
Supplemental balance sheet information
ROU assets, net reflected in the following balance sheet line items:
Property, plant, and equipment, net			$	—					$	1,622					$	—					$	790
Deferred charges and other assets, net			1,204						—						1,329						—
Total ROU assets, net			$	1,204					$	1,622					$	1,329					$	790
Current lease liabilities reflected in the following balance sheet line items:
Current portion of debt and finance lease obligations			$	—					$	120					$	—					$	41
Accrued expenses			285						—						331						—
Noncurrent lease liabilities reflected in the following balance sheet line items:
Debt and finance lease obligations, less current portion			—						1,544						—						750
Other long-term liabilities			885						—						959						—
Total lease liabilities			$	1,170					$	1,664					$	1,290					$	791
Other supplemental information
Weighted-average remaining lease term			7.6 years						14.5 years						7.7 years						19.7 years
Weighted-average discount rate			4.7		%				4.1		%				4.9		%				5.2		%

Supplemental cash flow information related to our operating and finance leases is presented in Note 19.

MVP Terminal Finance Lease

We have a 50 percent membership interest in MVP Terminalling, LLC (MVP), an unconsolidated joint venture formed in September 2017 with a subsidiary of Magellan Midstream Partners LP (Magellan). MVP owns and operates a marine terminal (the MVP Terminal) located adjacent to the Houston Ship Channel in Pasadena, Texas. Concurrent with the formation of MVP, we entered into a terminaling agreement with MVP to utilize the MVP Terminal upon completion of construction of the terminal, which occurred in the first quarter of 2020. During the three months ended March 31, 2020, we recognized a finance lease ROU asset and related liability of approximately $1.4 billion in connection with this agreement. The lease term included the initial term of 12 years and renewal option periods. In the fourth quarter of 2020, we evaluated our strategy with regard to certain of our logistics investments, including MVP. As a result of this review, we formally notified MVP that we do not intend to renew the terminaling agreement after its initial noncancelable term. Consequently, we reassessed the lease term and remeasured the finance lease liability based on the shortened lease term. We derecognized approximately $600 million of the finance lease liability and related ROU asset, which are noncash financing and investing activities, respectively. As of December 31, 2020, the total lease liability was approximately $800 million.

Maturity Analysis

The remaining minimum lease payments due under our long-term leases were as follows (in millions):

			December 31, 2020												December 31, 2019
			Operating Leases						Finance Leases						Operating Leases						Finance Leases
2020			n/a						n/a						$	376					$	88
2021			$	324					$	187					250						86
2022			231						182						194						87
2023			194						187						160						91
2024			155						178						125						82
2025			107						178						n/a						n/a
Thereafter			435						1,498						498						1,011
Total undiscounted lease payments			1,446						2,410						1,603						1,445
Less: Amount associated with discounting			276						746						313						654
Total lease liabilities			$	1,170					$	1,664					$	1,290					$	791

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The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability.

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-Name Accounting Standards Codification
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The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability.

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Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 842
-SubTopic 20
-URI http://asc.fasb.org/subtopic&trid=77888251

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