Leases

12 Months Ended

Dec. 31, 2023

(6) Leases

Lease Overview

We lease certain pipelines, storage tanks, railcars, office space, land, and equipment across our refining, fertilizer, and corporate operations. Most of our leases include one or more renewal options to extend the lease term, which can be exercised at our sole discretion. Certain leases also include options to purchase the leased asset. Certain of our lease agreements include rental payments, which are adjusted periodically for factors such as inflation. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Additionally, we do not have any material lessor or sub-leasing arrangements.

Balance Sheet Summary as of December 31, 2023 and 2022

The following tables summarize the right-of-use (“ROU”) asset and lease liability balances for the Company’s operating and finance leases at December 31, 2023 and 2022:


	December 31, 2023				December 31, 2022
(in millions)	Operating Leases		Finance Leases		Operating Leases		Finance Leases
ROU assets, net
Pipeline and storage	$	12	$	17	$	16	$	20
Railcars	12		—		11		—
Real estate and other	29		14		13		15
Lease liability
Pipelines and storage	$	12	$	28	$	16	$	32
Railcars	12		—		11		—
Real estate and other	25		16		13		16

Lease Expense Summary for the Year Ended December 31, 2023, 2022 and 2021

We recognize operating lease expense on a straight-line basis over the lease term within Direct operating expenses (exclusive of depreciation and amortization) and Cost of materials and other and finance lease expense on a straight-line basis over the lease term within Depreciation and amortization. For the years ended December 31, 2023, 2022, and 2021, we recognized lease expense comprised of the following components:


	Year Ended December 31,
(in millions)	2023		2022		2021
Operating lease expense	$	18	$	16	$	15
Finance lease expense:
Amortization of ROU asset	$	6	$	6	$	6
Interest expense on lease liability	4		5		5
Short-term lease expense	$	11	$	11	$	8

Lease Terms and Discount Rates

The following outlines the remaining lease terms and discount rates used in the measurement of the Company’s ROU assets and lease liabilities at December 31, 2023 and 2022:


	December 31, 2023				December 31, 2022
	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Weighted-average remaining lease term	5.4 years		5.3 years		4.1 years		6.3 years
Weighted-average discount rate	6.7	%	9.0	%	5.2	%	9.0	%

Maturities of Lease Liabilities

The following summarizes the remaining minimum lease payments through maturity of the Company’s lease liabilities at December 31, 2023:


(in millions)	Operating Leases		Finance Leases
Year Ended December 31,
2024	$	17	$	11
2025	12		11
2026	10		11
2027	6		10
2028	3		7
Thereafter	12		5
Total lease payments	60		55
Less: imputed interest	(11)		(11)
Total lease liability	$	49	$	44

The Company has entered into the following material lease commitments that have not yet commenced:

•On February 21, 2022, Coffeyville Resources Nitrogen Fertilizer, LLC (“CRNF”) entered into the First Amendment to the On-Site Product Supply Agreement with Messer LLC (“Messer”), which amended the July 31, 2020 On-Site Product Supply Agreement (as amended, the “Messer Agreement”). Under the Messer Agreement, among other obligations, Messer is obligated to supply oxygen and make certain capital improvements during the term of the Messer Agreement, and CRNF is obligated to take as available and pay for oxygen from Messer’s facility. This arrangement for CRNF’s purchase of oxygen from Messer does not meet the definition of a lease under FASB ASC Topic 842, Leases (“Topic 842”), as CRNF does not expect to receive substantially all of the output, which includes oxygen, nitrogen, and compressed air, of Messer’s on-site production from its air separation unit over the life of the Messer Agreement. The Messer Agreement also obligates Messer to install a new oxygen storage vessel, related equipment and infrastructure (“Oxygen Storage Vessel” or “Vessel”) to be used solely by the Coffeyville Fertilizer Facility. The arrangement for the use of the Oxygen Storage Vessel meets the definition of a lease under Topic 842, as CRNF will receive all output associated with the Vessel. Based on terms outlined in the Messer Agreement, the Company expects the lease of the Oxygen Storage Vessel to be classified as a finance lease with an estimated amount within the range of $20 million to $25 million being capitalized upon lease commencement when the Vessel is placed in service, which is currently expected to occur in the second half of 2024.

Leases