Leases

12 Months Ended

Dec. 31, 2019

LEASES:

On January 1, 2019, the Company adopted ASU 2016-02, and all related amendments, using the transition method, which allows for a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. CNX elected the transition relief package of practical expedients by applying previous accounting conclusions under ASC 840 to all leases that existed prior to the transition date. As a result, CNX did not reassess 1) whether existing or expired contracts contain leases, 2) lease classification for any existing or expired leases or 3) whether lease origination costs qualified as initial direct costs. Additionally, the Company elected the short-term practical expedient for all asset classes by establishing an accounting policy to exclude leases with a term of 12 months or less. CNX will not separate lease components from non-lease components for any asset class. Lastly, CNX adopted the easement practical expedient, which allows the Company to apply ASC 842 prospectively to land easements after the adoption date. Easements that existed or expired prior to the adoption date that were not previously assessed under ASC 840 will not be reassessed.

CNX's leasing activities primarily consist of operating and finance leases for electric fracturing equipment, natural gas drilling rigs, CNX's corporate headquarters as well as field offices, a natural gas gathering pipeline and commercial vehicles. Some leases include options to renew ranging from a period of 1 to 10 years, which are not recognized as part of the lease right-of-use (ROU) assets or liabilities as they are not reasonably certain to be exercised.

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of the lease payments over the lease term. As most of CNX's leases do not provide an implicit rate, an incremental borrowing rate is used to determine the present value of lease payments.

The components of lease cost were as follows:



	For the Year Ended
	December 31, 2019
Operating Lease Cost	$	73,809
Finance Lease Cost:
Amortization of Right-of-Use Assets	5,242
Interest on Lease Liabilities	1,241
Short-term Lease Cost	5,547
Variable Lease Cost*	17,337
Total Lease Cost	$	103,176

*Amount recognized in the Consolidated Balance Sheet for natural gas drilling rigs are measured using the rates that would be paid if the rigs were idle, as this represents the minimum payment that could be made under the contract. Variable lease cost represents amounts paid for natural gas drilling rigs above this minimum when the rigs are in use. Amount recognized in the Consolidated Balance Sheet for electric fracturing equipment are measured using minimum pumping hours under the contract; however, pumping hours may exceed the minimum and vary period to period. Any such amounts paid related to pumping hours in excess of the minimum represent variable lease cost.

Rental expense under operating leases prior to the adoption of ASC 842 was $21,441 and $16,797 for the years ended December 31, 2018 and 2017, respectively.

Amounts recognized in the Consolidated Balance Sheet are as follows:



	December 31, 2019
Operating Leases:
Operating Lease Right-of-Use Asset	$	187,097

Current Portion of Operating Lease Obligations	$	61,670
Operating Lease Obligations	110,466
Total Operating Lease Liabilities	$	172,136

Finance Leases:
Property, Plant and Equipment	$	72,916
Less—Accumulated Depreciation, Depletion and Amortization	63,008
Property, Plant and Equipment—Net	$	9,908

Current Portion of Finance Lease Obligations	$	7,164
Finance Lease Obligations	7,706
Total Finance Lease Liabilities	$	14,870

Supplemental cash flow information related to leases was as follows:



	For the Year Ended
	December 31, 2019
Cash Paid for Amounts Included in the Measurement of Lease Liabilities:
Operating Cash Flows from Operating Leases	$	66,827
Operating Cash Flows from Finance Leases	$	1,241
Financing Cash Flows from Finance Leases	$	7,149
Right-of-Use Assets Obtained in Exchange for Lease Obligations:
Operating Leases	$	15,347
Finance Leases	$	1,846

Maturities of lease liabilities are as follows:



	Operating		Finance
	Leases		Leases
Year Ended December 31,
2020	$	68,663	$	7,968
2021	59,410		7,142
2022	23,789		436
2023	5,453		433
2024	5,433		127
Thereafter	30,822		—
Total Lease Payments	193,570		16,106
Less: Interest	21,434		1,236
Present Value of Lease Liabilities	$	172,136	$	14,870

Lease terms and discount rates are as follows:



	December 31, 2019
Weighted Average Remaining Lease Term (years):
Operating Leases	4.39
Finance Leases	2.16

Weighted Average Discount Rate:
Operating Leases	4.96	%
Finance Leases	6.92	%

Leases