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Leases
 12 Months Ended
Dec. 31, 2023
Leases [Abstract]  
Leases LEASES
Lessee
Our leases are primarily comprised of equipment and buildings with terms ranging from approximately 3 to 11 years.
A lease exists when we have the right to control the use of identified property, plant or equipment, as conveyed through a contract, for a certain time period and consideration paid. The right to control is deemed to occur when we have the right to obtain substantially all of the economic benefits of the identified assets and the right to direct the use of such assets.
Lease liabilities are calculated utilizing a discount rate to determine the present values of lease payments. GAAP requires the use of the rate implicit in the lease if it is readily determinable. When the rate implicit in the lease is not readily determinable, the incremental borrowing rate is used. The incremental borrowing rate is based upon the rate of interest that would have been paid on a collateralized basis over similar contract terms to that of the leases. The incremental borrowing rates have been determined utilizing an implied secured borrowing rate based upon an unsecured rate for a similar time period of remaining lease terms, which is then adjusted for the estimated impact of collateral. We have leases with non-index-based escalation clauses for fixed dollar or percentage increases over the contract term.
We have certain leases which contain purchase options. Based upon the nature of the leased property and terms of the purchase options, we have determined it is not reasonably certain that such purchase options will be exercised. Thus, the impact of the purchase options has not been included in the determination of right-of-use assets and lease liabilities for the subject leases.
We have certain leases which contain renewal options. Where the renewal options were deemed reasonably certain to occur, the impacts of such options were included in the determination of the right-of-use assets and lease liabilities for the subject leases.
We have agreements with lease and non-lease components, which are generally accounted for separately. Consideration in a lease is allocated between lease and non-lease components based upon the estimated relative standalone prices.
The components of lease cost for the following years includes:
Year Ended December 31,
202320222021
(millions)
Operating lease cost$20 $20 $19 
Short-term lease cost3 3 1 
$23 $23 $20 
Operating lease cost includes amortization of operating lease right-of-use assets and other related costs. We have elected not to apply the lease balance sheet recognition requirements to short-term leases with a term of 12 months or less. Operating and short-term lease costs are recorded to operation and maintenance in our Consolidated Statements of Operations.
Other relevant information related to leases for the following years includes:
Year Ended December 31,
202320222021
Supplemental Cash Flows Information(millions, except years and percentages)
Cash paid for amounts included in the measurement of these liabilities:
Operating cash flows for operating leases$21$18$19
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$25$14$9
Weighted Average Remaining Lease Term
Operating leases4.4 years4.0 years4.4 years
Weighted Average Discount Rate
Operating leases4.8 %3.5 %2.6 %
Future minimum lease payments under leases for remaining periods as of December 31, 2023 are as follows:
Operating Leases
(millions)
2024$15 
20259 
20267 
20277 
20282 
2029 and thereafter4 
Total future minimum lease payments44 
Imputed interest(4)
Lease liabilities$40 
Lessor
We lease assets under an operating lease for a pipeline which commenced in December 2018. The lease is comprised of fixed payments with a remaining term of 15 years. The operating lease does not have renewal provisions or options to purchase the assets at the end of the lease and does not have termination for convenience provisions. The lease term extends to the end of the estimated economic life of the leased assets, thereby resulting in no residual value.
A lease exists when we have provided other parties with the right to control the use of identified property, plant or equipment, as conveyed through a contract, for a certain time period and consideration received. The right to control is deemed to occur when we have provided other parties with the right to obtain substantially all of the economic benefits of the identified assets and the right to direct the use of such assets.
Fixed lease income associated with the operating lease was $7 million, $10 million, and $9 million for the years ended December 31, 2023, 2022 and 2021, respectively. Fixed lease income is reported in Operating revenues in our Consolidated Statements of Operations. Depreciation expense associated with the property under the operating lease was $3 million for each of the years ended December 31, 2023, 2022 and 2021.
Future minimum rental revenues for remaining periods as of December 31, 2023 are as follows:
Operating Lease
(millions)
2024$9 
20259 
20269 
20279 
20289 
2029 and thereafter88 
Total future minimum rental revenues$133 
Property under the operating lease is as follows:
December 31,
20232022
(millions)
Gross property under operating leases$58 $58 
Accumulated amortization of property under operating leases$15 $12 
Leases LEASES
Lessee
Our leases are primarily comprised of equipment and buildings with terms ranging from approximately 3 to 11 years.
A lease exists when we have the right to control the use of identified property, plant or equipment, as conveyed through a contract, for a certain time period and consideration paid. The right to control is deemed to occur when we have the right to obtain substantially all of the economic benefits of the identified assets and the right to direct the use of such assets.
Lease liabilities are calculated utilizing a discount rate to determine the present values of lease payments. GAAP requires the use of the rate implicit in the lease if it is readily determinable. When the rate implicit in the lease is not readily determinable, the incremental borrowing rate is used. The incremental borrowing rate is based upon the rate of interest that would have been paid on a collateralized basis over similar contract terms to that of the leases. The incremental borrowing rates have been determined utilizing an implied secured borrowing rate based upon an unsecured rate for a similar time period of remaining lease terms, which is then adjusted for the estimated impact of collateral. We have leases with non-index-based escalation clauses for fixed dollar or percentage increases over the contract term.
We have certain leases which contain purchase options. Based upon the nature of the leased property and terms of the purchase options, we have determined it is not reasonably certain that such purchase options will be exercised. Thus, the impact of the purchase options has not been included in the determination of right-of-use assets and lease liabilities for the subject leases.
We have certain leases which contain renewal options. Where the renewal options were deemed reasonably certain to occur, the impacts of such options were included in the determination of the right-of-use assets and lease liabilities for the subject leases.
We have agreements with lease and non-lease components, which are generally accounted for separately. Consideration in a lease is allocated between lease and non-lease components based upon the estimated relative standalone prices.
The components of lease cost for the following years includes:
Year Ended December 31,
202320222021
(millions)
Operating lease cost$20 $20 $19 
Short-term lease cost3 3 1 
$23 $23 $20 
Operating lease cost includes amortization of operating lease right-of-use assets and other related costs. We have elected not to apply the lease balance sheet recognition requirements to short-term leases with a term of 12 months or less. Operating and short-term lease costs are recorded to operation and maintenance in our Consolidated Statements of Operations.
Other relevant information related to leases for the following years includes:
Year Ended December 31,
202320222021
Supplemental Cash Flows Information(millions, except years and percentages)
Cash paid for amounts included in the measurement of these liabilities:
Operating cash flows for operating leases$21$18$19
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$25$14$9
Weighted Average Remaining Lease Term
Operating leases4.4 years4.0 years4.4 years
Weighted Average Discount Rate
Operating leases4.8 %3.5 %2.6 %
Future minimum lease payments under leases for remaining periods as of December 31, 2023 are as follows:
Operating Leases
(millions)
2024$15 
20259 
20267 
20277 
20282 
2029 and thereafter4 
Total future minimum lease payments44 
Imputed interest(4)
Lease liabilities$40 
Lessor
We lease assets under an operating lease for a pipeline which commenced in December 2018. The lease is comprised of fixed payments with a remaining term of 15 years. The operating lease does not have renewal provisions or options to purchase the assets at the end of the lease and does not have termination for convenience provisions. The lease term extends to the end of the estimated economic life of the leased assets, thereby resulting in no residual value.
A lease exists when we have provided other parties with the right to control the use of identified property, plant or equipment, as conveyed through a contract, for a certain time period and consideration received. The right to control is deemed to occur when we have provided other parties with the right to obtain substantially all of the economic benefits of the identified assets and the right to direct the use of such assets.
Fixed lease income associated with the operating lease was $7 million, $10 million, and $9 million for the years ended December 31, 2023, 2022 and 2021, respectively. Fixed lease income is reported in Operating revenues in our Consolidated Statements of Operations. Depreciation expense associated with the property under the operating lease was $3 million for each of the years ended December 31, 2023, 2022 and 2021.
Future minimum rental revenues for remaining periods as of December 31, 2023 are as follows:
Operating Lease
(millions)
2024$9 
20259 
20269 
20279 
20289 
2029 and thereafter88 
Total future minimum rental revenues$133 
Property under the operating lease is as follows:
December 31,
20232022
(millions)
Gross property under operating leases$58 $58 
Accumulated amortization of property under operating leases$15 $12