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Leases | 12 Months Ended
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Dec. 31, 2022
Leases [Abstract] |
Leases | Leases Lessee We have operating and finance leases for land, buildings, pipelines, storage tanks, transportation and other equipment for our operations. Our leases have remaining terms of one to 57 years, some of which include options to extend the leases for up to 10 years. Certain of our leases for pipeline assets include provisions for variable payments which are based on a measure of throughput and also contain a provision for the lessor to adjust the rate per barrel periodically over the life of the lease. These variable costs are not included in the initial measurement of ROU assets and lease liabilities. The following table presents the amounts and balance sheet locations of our operating and financing leases recorded on our consolidated balance sheets.
|  | December 31,
|  | 2022 |  | 2021
|  | (In thousands)
Operating leases: |  |  |  |
Operating lease right-of-use assets |  | $ | 351,068 |  |  | $ | 396,191 |
Operating lease liabilities |  | 109,926 |  |  | 110,606 |
Noncurrent operating lease liabilities |  | 254,215 |  |  | 308,747 |
Total operating lease liabilities |  | $ | 364,141 |  |  | $ | 419,353 |
Finance leases: |  |  |  |
Properties, plants and equipment, at cost |  | $ | 81,454 |  |  | $ | 75,885 |
Accumulated amortization |  | (21,434) |  |  | (8,945) |
Properties, plants and equipment, net |  | $ | 60,020 |  |  | $ | 66,940 |
Accrued liabilities |  | $ | 10,722 |  |  | $ | 10,510 |
Other long-term liabilities |  | 50,361 |  |  | 56,556 |
Total finance lease liabilities |  | $ | 61,083 |  |  | $ | 67,066 |
Supplemental balance sheet information related to our leases was as follows:
|  | December 31,
|  | 2022 |  | 2021
Weighted average remaining lease term (in years) |  |  |  |
Operating leases |  | 7.2 |  | 7.4
Finance leases |  | 7.8 |  | 8.6
Weighted average discount rate |  |  |  |
Operating leases |  | 4.2 | % |  | 3.8 | %
Finance leases |  | 4.2 | % |  | 3.9 | %
The components of lease expense were as follows:
|  | Years Ended December 31,
|  | 2022 |  | 2021 |  | 2020
|  | (In thousands)
Operating lease expense |  | $ | 116,769 |  |  | $ | 117,292 |  |  | $ | 121,608 |
Finance lease expense: |  |  |  |  |  |
Amortization of right-of-use assets |  | 13,003 |  |  | 4,295 |  |  | 4,400 |
Interest on lease liabilities |  | 2,593 |  |  | 733 |  |  | 415 |
Variable lease cost |  | 4,448 |  |  | 3,645 |  |  | 3,580 |
Total lease expense |  | $ | 136,813 |  |  | $ | 125,965 |  |  | $ | 130,003 |
Supplemental cash flow information related to leases was as follows:
|  | Years Ended December 31,
|  | 2022 |  | 2021 |  | 2020
|  | (In thousands)
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |
Operating cash flows from operating leases |  | $ | 126,048 |  |  | $ | 129,577 |  |  | $ | 126,313 |
Operating cash flows from finance leases |  | $ | 2,593 |  |  | $ | 733 |  |  | $ | 415 |
Financing cash flows from finance leases |  | $ | 11,713 |  |  | $ | 3,990 |  |  | $ | 2,995 |
Right-of-use assets obtained in exchange for lease obligations: |  |  |  |  |  |
Operating leases |  | $ | 61,403 |  |  | $ | 147,718 |  |  | $ | 18,823 |
Finance leases |  | $ | 6,149 |  |  | $ | 64,334 |  |  | $ | 4,085 |
As of December 31, 2022, minimum future lease payments of our operating and finance lease obligations were as follows:
|  | Operating |  | Finance
|  | (In thousands)
2023 |  | $ | 120,995 |  |  | $ | 13,234 |
2024 |  | 94,207 |  |  | 9,647 |
2025 |  | 44,132 |  |  | 8,564 |
2026 |  | 29,122 |  |  | 7,682 |
2027 |  | 17,931 |  |  | 6,419 |
Thereafter |  | 127,714 |  |  | 26,845 |
Future minimum lease payments |  | 434,101 |  |  | 72,391 |
Less: imputed interest |  | 69,960 |  |  | 11,308 |
Total lease obligations |  | 364,141 |  |  | 61,083 |
Less: current obligations |  | 109,926 |  |  | 10,722 |
Long-term lease obligations |  | $ | 254,215 |  |  | $ | 50,361 |
Lessor Our consolidated statements of operations reflect lease revenue recognized by HEP for contracts with third parties in which HEP is the lessor. Substantially all of the assets supporting contracts meeting the definition of a lease have long useful lives, and HEP believes these assets will continue to have value when the current agreements expire due to HEP's risk management strategy for protecting the residual fair value of the underlying assets by performing ongoing maintenance during the lease term. One of HEP’s throughput agreements with Delek US Holdings, Inc. (“Delek”) was partially renewed during the year ended December 31, 2020. Certain components of this agreement met the criteria of sales-type leases since the underlying assets are not expected to have an alternative use at the end of the lease term to anyone other than Delek. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Therefore, HEP recognized a gain on sales-type leases totaling $33.8 million during the year ended December 31, 2020. This sales-type lease transaction, including the related gain, was a non-cash transaction. Lease income recognized was as follows:
|  | Years Ended December 31,
|  | 2022 |  | 2021 |  | 2020
|  | (In thousands) |  |
Operating lease revenues |  | $ | 14,346 |  |  | $ | 15,281 |  |  | $ | 22,636 |
Gain on sales-type leases |  | $ | — |  |  | $ | — |  |  | $ | 33,834 |
Sales-type lease interest income |  | $ | 2,515 |  |  | $ | 2,545 |  |  | $ | 1,928 |
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable |  | $ | 1,782 |  |  | $ | 2,162 |  |  | $ | 1,690 |
For HEP’s sales-type leases, HEP included customer obligations related to minimum volume requirements in guaranteed minimum lease payments. Portions of HEP’s minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. HEP recognized any billings for throughput volumes in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues. Annual minimum undiscounted lease payments in which HEP is a lessor to third-party contracts as of December 31, 2022 were as follows:
|  | Operating |  | Sales-type
|  | (In thousands)
2023 |  | $ | 11,017 |  |  | $ | 2,955 |
2024 |  | 11,017 |  |  | 2,955 |
2025 |  | 3,017 |  |  | 2,955 |
2026 |  | — |  |  | 2,955 |
2027 |  | — |  |  | 2,955 |
Thereafter |  | — |  |  | 21,425 |
Total lease payment receipts |  | $ | 25,051 |  |  | 36,200 |
Less: imputed interest |  |  |  | (27,202) |
|  |  |  | 8,998 |
Unguaranteed residual assets at end of leases |  |  |  | 25,182 |
Net investment in leases |  |  |  | $ | 34,180 |
Net investment in sales-type leases recorded on our consolidated balance sheet was composed of the following:
|  | December 31, 2022 |  | December 31, 2021
|  | (In thousands)
Lease receivables |  | $ | 23,797 |  |  | $ | 24,962 |
Unguaranteed residual assets |  | 10,383 |  |  | 9,659 |
Net investment in leases |  | $ | 34,180 |  |  | $ | 34,621 |
Leases | Leases Lessee We have operating and finance leases for land, buildings, pipelines, storage tanks, transportation and other equipment for our operations. Our leases have remaining terms of one to 57 years, some of which include options to extend the leases for up to 10 years. Certain of our leases for pipeline assets include provisions for variable payments which are based on a measure of throughput and also contain a provision for the lessor to adjust the rate per barrel periodically over the life of the lease. These variable costs are not included in the initial measurement of ROU assets and lease liabilities. The following table presents the amounts and balance sheet locations of our operating and financing leases recorded on our consolidated balance sheets.
|  | December 31,
|  | 2022 |  | 2021
|  | (In thousands)
Operating leases: |  |  |  |
Operating lease right-of-use assets |  | $ | 351,068 |  |  | $ | 396,191 |
Operating lease liabilities |  | 109,926 |  |  | 110,606 |
Noncurrent operating lease liabilities |  | 254,215 |  |  | 308,747 |
Total operating lease liabilities |  | $ | 364,141 |  |  | $ | 419,353 |
Finance leases: |  |  |  |
Properties, plants and equipment, at cost |  | $ | 81,454 |  |  | $ | 75,885 |
Accumulated amortization |  | (21,434) |  |  | (8,945) |
Properties, plants and equipment, net |  | $ | 60,020 |  |  | $ | 66,940 |
Accrued liabilities |  | $ | 10,722 |  |  | $ | 10,510 |
Other long-term liabilities |  | 50,361 |  |  | 56,556 |
Total finance lease liabilities |  | $ | 61,083 |  |  | $ | 67,066 |
Supplemental balance sheet information related to our leases was as follows:
|  | December 31,
|  | 2022 |  | 2021
Weighted average remaining lease term (in years) |  |  |  |
Operating leases |  | 7.2 |  | 7.4
Finance leases |  | 7.8 |  | 8.6
Weighted average discount rate |  |  |  |
Operating leases |  | 4.2 | % |  | 3.8 | %
Finance leases |  | 4.2 | % |  | 3.9 | %
The components of lease expense were as follows:
|  | Years Ended December 31,
|  | 2022 |  | 2021 |  | 2020
|  | (In thousands)
Operating lease expense |  | $ | 116,769 |  |  | $ | 117,292 |  |  | $ | 121,608 |
Finance lease expense: |  |  |  |  |  |
Amortization of right-of-use assets |  | 13,003 |  |  | 4,295 |  |  | 4,400 |
Interest on lease liabilities |  | 2,593 |  |  | 733 |  |  | 415 |
Variable lease cost |  | 4,448 |  |  | 3,645 |  |  | 3,580 |
Total lease expense |  | $ | 136,813 |  |  | $ | 125,965 |  |  | $ | 130,003 |
Supplemental cash flow information related to leases was as follows:
|  | Years Ended December 31,
|  | 2022 |  | 2021 |  | 2020
|  | (In thousands)
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |
Operating cash flows from operating leases |  | $ | 126,048 |  |  | $ | 129,577 |  |  | $ | 126,313 |
Operating cash flows from finance leases |  | $ | 2,593 |  |  | $ | 733 |  |  | $ | 415 |
Financing cash flows from finance leases |  | $ | 11,713 |  |  | $ | 3,990 |  |  | $ | 2,995 |
Right-of-use assets obtained in exchange for lease obligations: |  |  |  |  |  |
Operating leases |  | $ | 61,403 |  |  | $ | 147,718 |  |  | $ | 18,823 |
Finance leases |  | $ | 6,149 |  |  | $ | 64,334 |  |  | $ | 4,085 |
As of December 31, 2022, minimum future lease payments of our operating and finance lease obligations were as follows:
|  | Operating |  | Finance
|  | (In thousands)
2023 |  | $ | 120,995 |  |  | $ | 13,234 |
2024 |  | 94,207 |  |  | 9,647 |
2025 |  | 44,132 |  |  | 8,564 |
2026 |  | 29,122 |  |  | 7,682 |
2027 |  | 17,931 |  |  | 6,419 |
Thereafter |  | 127,714 |  |  | 26,845 |
Future minimum lease payments |  | 434,101 |  |  | 72,391 |
Less: imputed interest |  | 69,960 |  |  | 11,308 |
Total lease obligations |  | 364,141 |  |  | 61,083 |
Less: current obligations |  | 109,926 |  |  | 10,722 |
Long-term lease obligations |  | $ | 254,215 |  |  | $ | 50,361 |
Lessor Our consolidated statements of operations reflect lease revenue recognized by HEP for contracts with third parties in which HEP is the lessor. Substantially all of the assets supporting contracts meeting the definition of a lease have long useful lives, and HEP believes these assets will continue to have value when the current agreements expire due to HEP's risk management strategy for protecting the residual fair value of the underlying assets by performing ongoing maintenance during the lease term. One of HEP’s throughput agreements with Delek US Holdings, Inc. (“Delek”) was partially renewed during the year ended December 31, 2020. Certain components of this agreement met the criteria of sales-type leases since the underlying assets are not expected to have an alternative use at the end of the lease term to anyone other than Delek. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Therefore, HEP recognized a gain on sales-type leases totaling $33.8 million during the year ended December 31, 2020. This sales-type lease transaction, including the related gain, was a non-cash transaction. Lease income recognized was as follows:
|  | Years Ended December 31,
|  | 2022 |  | 2021 |  | 2020
|  | (In thousands) |  |
Operating lease revenues |  | $ | 14,346 |  |  | $ | 15,281 |  |  | $ | 22,636 |
Gain on sales-type leases |  | $ | — |  |  | $ | — |  |  | $ | 33,834 |
Sales-type lease interest income |  | $ | 2,515 |  |  | $ | 2,545 |  |  | $ | 1,928 |
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable |  | $ | 1,782 |  |  | $ | 2,162 |  |  | $ | 1,690 |
For HEP’s sales-type leases, HEP included customer obligations related to minimum volume requirements in guaranteed minimum lease payments. Portions of HEP’s minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. HEP recognized any billings for throughput volumes in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues. Annual minimum undiscounted lease payments in which HEP is a lessor to third-party contracts as of December 31, 2022 were as follows:
|  | Operating |  | Sales-type
|  | (In thousands)
2023 |  | $ | 11,017 |  |  | $ | 2,955 |
2024 |  | 11,017 |  |  | 2,955 |
2025 |  | 3,017 |  |  | 2,955 |
2026 |  | — |  |  | 2,955 |
2027 |  | — |  |  | 2,955 |
Thereafter |  | — |  |  | 21,425 |
Total lease payment receipts |  | $ | 25,051 |  |  | 36,200 |
Less: imputed interest |  |  |  | (27,202) |
|  |  |  | 8,998 |
Unguaranteed residual assets at end of leases |  |  |  | 25,182 |
Net investment in leases |  |  |  | $ | 34,180 |
Net investment in sales-type leases recorded on our consolidated balance sheet was composed of the following:
|  | December 31, 2022 |  | December 31, 2021
|  | (In thousands)
Lease receivables |  | $ | 23,797 |  |  | $ | 24,962 |
Unguaranteed residual assets |  | 10,383 |  |  | 9,659 |
Net investment in leases |  | $ | 34,180 |  |  | $ | 34,621 |
Leases | Leases Lessee We have operating and finance leases for land, buildings, pipelines, storage tanks, transportation and other equipment for our operations. Our leases have remaining terms of one to 57 years, some of which include options to extend the leases for up to 10 years. Certain of our leases for pipeline assets include provisions for variable payments which are based on a measure of throughput and also contain a provision for the lessor to adjust the rate per barrel periodically over the life of the lease. These variable costs are not included in the initial measurement of ROU assets and lease liabilities. The following table presents the amounts and balance sheet locations of our operating and financing leases recorded on our consolidated balance sheets.
|  | December 31,
|  | 2022 |  | 2021
|  | (In thousands)
Operating leases: |  |  |  |
Operating lease right-of-use assets |  | $ | 351,068 |  |  | $ | 396,191 |
Operating lease liabilities |  | 109,926 |  |  | 110,606 |
Noncurrent operating lease liabilities |  | 254,215 |  |  | 308,747 |
Total operating lease liabilities |  | $ | 364,141 |  |  | $ | 419,353 |
Finance leases: |  |  |  |
Properties, plants and equipment, at cost |  | $ | 81,454 |  |  | $ | 75,885 |
Accumulated amortization |  | (21,434) |  |  | (8,945) |
Properties, plants and equipment, net |  | $ | 60,020 |  |  | $ | 66,940 |
Accrued liabilities |  | $ | 10,722 |  |  | $ | 10,510 |
Other long-term liabilities |  | 50,361 |  |  | 56,556 |
Total finance lease liabilities |  | $ | 61,083 |  |  | $ | 67,066 |
Supplemental balance sheet information related to our leases was as follows:
|  | December 31,
|  | 2022 |  | 2021
Weighted average remaining lease term (in years) |  |  |  |
Operating leases |  | 7.2 |  | 7.4
Finance leases |  | 7.8 |  | 8.6
Weighted average discount rate |  |  |  |
Operating leases |  | 4.2 | % |  | 3.8 | %
Finance leases |  | 4.2 | % |  | 3.9 | %
The components of lease expense were as follows:
|  | Years Ended December 31,
|  | 2022 |  | 2021 |  | 2020
|  | (In thousands)
Operating lease expense |  | $ | 116,769 |  |  | $ | 117,292 |  |  | $ | 121,608 |
Finance lease expense: |  |  |  |  |  |
Amortization of right-of-use assets |  | 13,003 |  |  | 4,295 |  |  | 4,400 |
Interest on lease liabilities |  | 2,593 |  |  | 733 |  |  | 415 |
Variable lease cost |  | 4,448 |  |  | 3,645 |  |  | 3,580 |
Total lease expense |  | $ | 136,813 |  |  | $ | 125,965 |  |  | $ | 130,003 |
Supplemental cash flow information related to leases was as follows:
|  | Years Ended December 31,
|  | 2022 |  | 2021 |  | 2020
|  | (In thousands)
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |
Operating cash flows from operating leases |  | $ | 126,048 |  |  | $ | 129,577 |  |  | $ | 126,313 |
Operating cash flows from finance leases |  | $ | 2,593 |  |  | $ | 733 |  |  | $ | 415 |
Financing cash flows from finance leases |  | $ | 11,713 |  |  | $ | 3,990 |  |  | $ | 2,995 |
Right-of-use assets obtained in exchange for lease obligations: |  |  |  |  |  |
Operating leases |  | $ | 61,403 |  |  | $ | 147,718 |  |  | $ | 18,823 |
Finance leases |  | $ | 6,149 |  |  | $ | 64,334 |  |  | $ | 4,085 |
As of December 31, 2022, minimum future lease payments of our operating and finance lease obligations were as follows:
|  | Operating |  | Finance
|  | (In thousands)
2023 |  | $ | 120,995 |  |  | $ | 13,234 |
2024 |  | 94,207 |  |  | 9,647 |
2025 |  | 44,132 |  |  | 8,564 |
2026 |  | 29,122 |  |  | 7,682 |
2027 |  | 17,931 |  |  | 6,419 |
Thereafter |  | 127,714 |  |  | 26,845 |
Future minimum lease payments |  | 434,101 |  |  | 72,391 |
Less: imputed interest |  | 69,960 |  |  | 11,308 |
Total lease obligations |  | 364,141 |  |  | 61,083 |
Less: current obligations |  | 109,926 |  |  | 10,722 |
Long-term lease obligations |  | $ | 254,215 |  |  | $ | 50,361 |
Lessor Our consolidated statements of operations reflect lease revenue recognized by HEP for contracts with third parties in which HEP is the lessor. Substantially all of the assets supporting contracts meeting the definition of a lease have long useful lives, and HEP believes these assets will continue to have value when the current agreements expire due to HEP's risk management strategy for protecting the residual fair value of the underlying assets by performing ongoing maintenance during the lease term. One of HEP’s throughput agreements with Delek US Holdings, Inc. (“Delek”) was partially renewed during the year ended December 31, 2020. Certain components of this agreement met the criteria of sales-type leases since the underlying assets are not expected to have an alternative use at the end of the lease term to anyone other than Delek. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Therefore, HEP recognized a gain on sales-type leases totaling $33.8 million during the year ended December 31, 2020. This sales-type lease transaction, including the related gain, was a non-cash transaction. Lease income recognized was as follows:
|  | Years Ended December 31,
|  | 2022 |  | 2021 |  | 2020
|  | (In thousands) |  |
Operating lease revenues |  | $ | 14,346 |  |  | $ | 15,281 |  |  | $ | 22,636 |
Gain on sales-type leases |  | $ | — |  |  | $ | — |  |  | $ | 33,834 |
Sales-type lease interest income |  | $ | 2,515 |  |  | $ | 2,545 |  |  | $ | 1,928 |
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable |  | $ | 1,782 |  |  | $ | 2,162 |  |  | $ | 1,690 |
For HEP’s sales-type leases, HEP included customer obligations related to minimum volume requirements in guaranteed minimum lease payments. Portions of HEP’s minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. HEP recognized any billings for throughput volumes in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues. Annual minimum undiscounted lease payments in which HEP is a lessor to third-party contracts as of December 31, 2022 were as follows:
|  | Operating |  | Sales-type
|  | (In thousands)
2023 |  | $ | 11,017 |  |  | $ | 2,955 |
2024 |  | 11,017 |  |  | 2,955 |
2025 |  | 3,017 |  |  | 2,955 |
2026 |  | — |  |  | 2,955 |
2027 |  | — |  |  | 2,955 |
Thereafter |  | — |  |  | 21,425 |
Total lease payment receipts |  | $ | 25,051 |  |  | 36,200 |
Less: imputed interest |  |  |  | (27,202) |
|  |  |  | 8,998 |
Unguaranteed residual assets at end of leases |  |  |  | 25,182 |
Net investment in leases |  |  |  | $ | 34,180 |
Net investment in sales-type leases recorded on our consolidated balance sheet was composed of the following:
|  | December 31, 2022 |  | December 31, 2021
|  | (In thousands)
Lease receivables |  | $ | 23,797 |  |  | $ | 24,962 |
Unguaranteed residual assets |  | 10,383 |  |  | 9,659 |
Net investment in leases |  | $ | 34,180 |  |  | $ | 34,621 |
Leases | Leases Lessee We have operating and finance leases for land, buildings, pipelines, storage tanks, transportation and other equipment for our operations. Our leases have remaining terms of one to 57 years, some of which include options to extend the leases for up to 10 years. Certain of our leases for pipeline assets include provisions for variable payments which are based on a measure of throughput and also contain a provision for the lessor to adjust the rate per barrel periodically over the life of the lease. These variable costs are not included in the initial measurement of ROU assets and lease liabilities. The following table presents the amounts and balance sheet locations of our operating and financing leases recorded on our consolidated balance sheets.
|  | December 31,
|  | 2022 |  | 2021
|  | (In thousands)
Operating leases: |  |  |  |
Operating lease right-of-use assets |  | $ | 351,068 |  |  | $ | 396,191 |
Operating lease liabilities |  | 109,926 |  |  | 110,606 |
Noncurrent operating lease liabilities |  | 254,215 |  |  | 308,747 |
Total operating lease liabilities |  | $ | 364,141 |  |  | $ | 419,353 |
Finance leases: |  |  |  |
Properties, plants and equipment, at cost |  | $ | 81,454 |  |  | $ | 75,885 |
Accumulated amortization |  | (21,434) |  |  | (8,945) |
Properties, plants and equipment, net |  | $ | 60,020 |  |  | $ | 66,940 |
Accrued liabilities |  | $ | 10,722 |  |  | $ | 10,510 |
Other long-term liabilities |  | 50,361 |  |  | 56,556 |
Total finance lease liabilities |  | $ | 61,083 |  |  | $ | 67,066 |
Supplemental balance sheet information related to our leases was as follows:
|  | December 31,
|  | 2022 |  | 2021
Weighted average remaining lease term (in years) |  |  |  |
Operating leases |  | 7.2 |  | 7.4
Finance leases |  | 7.8 |  | 8.6
Weighted average discount rate |  |  |  |
Operating leases |  | 4.2 | % |  | 3.8 | %
Finance leases |  | 4.2 | % |  | 3.9 | %
The components of lease expense were as follows:
|  | Years Ended December 31,
|  | 2022 |  | 2021 |  | 2020
|  | (In thousands)
Operating lease expense |  | $ | 116,769 |  |  | $ | 117,292 |  |  | $ | 121,608 |
Finance lease expense: |  |  |  |  |  |
Amortization of right-of-use assets |  | 13,003 |  |  | 4,295 |  |  | 4,400 |
Interest on lease liabilities |  | 2,593 |  |  | 733 |  |  | 415 |
Variable lease cost |  | 4,448 |  |  | 3,645 |  |  | 3,580 |
Total lease expense |  | $ | 136,813 |  |  | $ | 125,965 |  |  | $ | 130,003 |
Supplemental cash flow information related to leases was as follows:
|  | Years Ended December 31,
|  | 2022 |  | 2021 |  | 2020
|  | (In thousands)
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |
Operating cash flows from operating leases |  | $ | 126,048 |  |  | $ | 129,577 |  |  | $ | 126,313 |
Operating cash flows from finance leases |  | $ | 2,593 |  |  | $ | 733 |  |  | $ | 415 |
Financing cash flows from finance leases |  | $ | 11,713 |  |  | $ | 3,990 |  |  | $ | 2,995 |
Right-of-use assets obtained in exchange for lease obligations: |  |  |  |  |  |
Operating leases |  | $ | 61,403 |  |  | $ | 147,718 |  |  | $ | 18,823 |
Finance leases |  | $ | 6,149 |  |  | $ | 64,334 |  |  | $ | 4,085 |
As of December 31, 2022, minimum future lease payments of our operating and finance lease obligations were as follows:
|  | Operating |  | Finance
|  | (In thousands)
2023 |  | $ | 120,995 |  |  | $ | 13,234 |
2024 |  | 94,207 |  |  | 9,647 |
2025 |  | 44,132 |  |  | 8,564 |
2026 |  | 29,122 |  |  | 7,682 |
2027 |  | 17,931 |  |  | 6,419 |
Thereafter |  | 127,714 |  |  | 26,845 |
Future minimum lease payments |  | 434,101 |  |  | 72,391 |
Less: imputed interest |  | 69,960 |  |  | 11,308 |
Total lease obligations |  | 364,141 |  |  | 61,083 |
Less: current obligations |  | 109,926 |  |  | 10,722 |
Long-term lease obligations |  | $ | 254,215 |  |  | $ | 50,361 |
Lessor Our consolidated statements of operations reflect lease revenue recognized by HEP for contracts with third parties in which HEP is the lessor. Substantially all of the assets supporting contracts meeting the definition of a lease have long useful lives, and HEP believes these assets will continue to have value when the current agreements expire due to HEP's risk management strategy for protecting the residual fair value of the underlying assets by performing ongoing maintenance during the lease term. One of HEP’s throughput agreements with Delek US Holdings, Inc. (“Delek”) was partially renewed during the year ended December 31, 2020. Certain components of this agreement met the criteria of sales-type leases since the underlying assets are not expected to have an alternative use at the end of the lease term to anyone other than Delek. Under sales-type lease accounting, at the commencement date, the lessor recognizes a net investment in the lease, based on the estimated fair value of the underlying leased assets at contract inception, and derecognizes the underlying assets with the difference recorded as selling profit or loss arising from the lease. Therefore, HEP recognized a gain on sales-type leases totaling $33.8 million during the year ended December 31, 2020. This sales-type lease transaction, including the related gain, was a non-cash transaction. Lease income recognized was as follows:
|  | Years Ended December 31,
|  | 2022 |  | 2021 |  | 2020
|  | (In thousands) |  |
Operating lease revenues |  | $ | 14,346 |  |  | $ | 15,281 |  |  | $ | 22,636 |
Gain on sales-type leases |  | $ | — |  |  | $ | — |  |  | $ | 33,834 |
Sales-type lease interest income |  | $ | 2,515 |  |  | $ | 2,545 |  |  | $ | 1,928 |
Lease revenues relating to variable lease payments not included in measurement of the sales-type lease receivable |  | $ | 1,782 |  |  | $ | 2,162 |  |  | $ | 1,690 |
For HEP’s sales-type leases, HEP included customer obligations related to minimum volume requirements in guaranteed minimum lease payments. Portions of HEP’s minimum guaranteed pipeline tariffs for assets subject to sales-type lease accounting are recorded as interest income with the remaining amounts recorded as a reduction in net investment in leases. HEP recognized any billings for throughput volumes in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in lease revenues. Annual minimum undiscounted lease payments in which HEP is a lessor to third-party contracts as of December 31, 2022 were as follows:
|  | Operating |  | Sales-type
|  | (In thousands)
2023 |  | $ | 11,017 |  |  | $ | 2,955 |
2024 |  | 11,017 |  |  | 2,955 |
2025 |  | 3,017 |  |  | 2,955 |
2026 |  | — |  |  | 2,955 |
2027 |  | — |  |  | 2,955 |
Thereafter |  | — |  |  | 21,425 |
Total lease payment receipts |  | $ | 25,051 |  |  | 36,200 |
Less: imputed interest |  |  |  | (27,202) |
|  |  |  | 8,998 |
Unguaranteed residual assets at end of leases |  |  |  | 25,182 |
Net investment in leases |  |  |  | $ | 34,180 |
Net investment in sales-type leases recorded on our consolidated balance sheet was composed of the following:
|  | December 31, 2022 |  | December 31, 2021
|  | (In thousands)
Lease receivables |  | $ | 23,797 |  |  | $ | 24,962 |
Unguaranteed residual assets |  | 10,383 |  |  | 9,659 |
Net investment in leases |  | $ | 34,180 |  |  | $ | 34,621 |

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