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Leases
 12 Months Ended
Dec. 31, 2024
Leases [Abstract]  
Leases Leases
Lessee
We have noncancelable operating leases primarily associated with rights-of-way and transportation equipment. Our remaining lease terms range from less than one year to 41 years with renewal options ranging from 3 to 40 years, and some agreements have multiple renewal options.
The components of lease cost are as follows (in thousands) (1):
Years Ended December 31,
202420232022
Operating lease cost$10,370 $11,533 $12,054 
Short-term lease cost7,359 5,031 2,541 
Variable lease cost1,261 3,826 4,803 
Total lease cost$18,990 $20,390 $19,398 
(1) Includes an immaterial amount of financing lease cost.
Supplemental balance sheet information related to leases is as follows:
Years Ended December 31,
20242023
Weighted-average remaining lease term (years) for operating leases3.43.5
Weighted-average discount rate (1) operating leases
7.4 %7.3 %
Weighted-average remaining lease term (years) for finance lease3.53.6
Weighted-average discount rate (1) finance lease
8.4 %7.2 %
(1) Our discount rate is primarily based on our incremental borrowing rate in accordance with ASC 842.
Supplemental cash flow and other information related to leases are as follows (in thousands):
Years Ended December 31,
202420232022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$(8,101)$(9,588)$(12,054)
Leased assets obtained in exchange for new operating lease liabilities$3,665 $3,804 $12,682 
Leased assets obtained in exchange for new financing lease liabilities$— $1,162 $35 
Maturities of lease liabilities as of December 31, 2024 are as follows (in thousands):
Year Ended December 31,OperatingFinance
2025$5,924 $283 
20262,871 263 
20271,906 263 
2028905 154 
2029234 — 
2030 and thereafter984 — 
Total lease payments12,824 963 
Less: present value discount1,480 127 
Lease liabilities$11,344 $836 
Lessor
We are the lessor under certain agreements for gathering, transportation, storage, terminalling, and offloading with Delek Holdings. These agreements have remaining terms ranging from 3 to 12 years with renewal options ranging from 2 to 10 years, and some agreements have multiple renewal options. Revenue from these leases are recorded in affiliate revenue in the consolidated statements of income. For details on Lease Revenue, see Note 5.
During 2024, we executed renewals to certain agreements between DKL and Delek Holdings. The renewals required the embedded leases within these agreements to be reassessed under ASC 842. As a result of these lease assessments, certain leases were reclassified from an operating lease to a sales-type lease. Accordingly, the underlying property, plant and equipment, net, and associated deferred revenue, if any, were derecognized and the present value of the future lease payments and the unguaranteed residual value of the assets were recorded as a net investment in sales-type lease during the respective periods.
The net investment in sales-type leases is recorded utilizing the estimated fair value of the underlying leased assets at contract modification date and are nonrecurring fair value measurements. The leased assets were valued using a cost method valuation approach which utilizes Level 3 inputs.
We recognized any billings in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in Net Revenues - Affiliate in the accompanying consolidated statements of income and comprehensive income.
Lease income included in the consolidated statements of income and comprehensive income was as follows:
Year Ended December 31,
(in thousands)202420232022
Operating leases:
Lease revenue$268,843 $311,096 $287,370 
Sales-type leases:
Interest income (Sales-type rental revenue-fixed minimum)47,709 — — 
Lease revenue (Revenue from variable lease payments)7,673 — — 
Sales-type lease income$55,382 $— $— 
We did not elect to use the practical expedient to combine lease and non-lease components for lessor arrangements. The tables below represent the portion of the contracts allocated to the lease component based on relative standalone selling price.
The following presents the consolidated financial statement impact of sales-type leases on commencement or modification date for the year ended December 31, 2024. There were no amounts recognized for the year ended December 31, 2023. These transactions are non-cash transactions. The amount recognized on commencement date was recorded in contributions in the consolidated statements of partners' equity (deficit), given the underlying agreements are between entities under common control.
Year Ended December 31,
(in thousands)2024
Lease receivables$217,263 
Unguaranteed residual assets10,573 
Property, plant and equipment, net(108,143)
Amount recognized on commencement date$119,693 
The following is a schedule of annual undiscounted minimum future lease cash receipts on the non-cancelable operating leases as of December 31, 2024 (in thousands):
2025$108,376 
2026105,957 
202793,867 
202863,306 
202957,194 
2030 and thereafter16,258 
Total minimum future lease revenue$444,958 
Annual future minimum undiscounted lease receipts under our sales-type leases were as follows as of December 31, 2024 (in thousands):
2025$104,323 
202683,926 
202778,858 
202878,858 
202978,858 
2030 and thereafter262,763 
Total minimum future lease revenue687,586 
Less: Imputed interest483,783 
Lease receivable (1)
$203,803 
Current lease receivables (2)
$22,783 
Long-term lease receivables (3)
$181,020 
Unguaranteed residual assets (3)
$12,106 
(1) This amount does not include the unguaranteed residual assets.
(2) Presented in Lease receivable - affiliate, in the consolidated balance sheets.
(3) Presented in Net lease investment - affiliate in the consolidated balance sheets.
The following table summarized our investment in assets held under operating lease by major classes (in thousands):
December 31,
20242023
Land$11,643 $14,946 
Building and building improvements387 853 
Pipelines, tanks and terminals419,528 664,567 
Other equipment2,229 3,856 
Property, plant and equipment433,787 684,222 
Less: accumulated depreciation143,961 253,955 
Property, plant and equipment, net$289,826 $430,267 
Capital expenditures related to assets subject to sales-type lease arrangements were $0.6 million for the year ended December 31, 2024. There were no capital expenditures related to assets subject to sales-type lease arrangements for both the years ended December 31, 2023 and 2022. These amounts are reflected as additions to property, plant and equipment in the consolidated statements of cash flows.
Leases Leases
Lessee
We have noncancelable operating leases primarily associated with rights-of-way and transportation equipment. Our remaining lease terms range from less than one year to 41 years with renewal options ranging from 3 to 40 years, and some agreements have multiple renewal options.
The components of lease cost are as follows (in thousands) (1):
Years Ended December 31,
202420232022
Operating lease cost$10,370 $11,533 $12,054 
Short-term lease cost7,359 5,031 2,541 
Variable lease cost1,261 3,826 4,803 
Total lease cost$18,990 $20,390 $19,398 
(1) Includes an immaterial amount of financing lease cost.
Supplemental balance sheet information related to leases is as follows:
Years Ended December 31,
20242023
Weighted-average remaining lease term (years) for operating leases3.43.5
Weighted-average discount rate (1) operating leases
7.4 %7.3 %
Weighted-average remaining lease term (years) for finance lease3.53.6
Weighted-average discount rate (1) finance lease
8.4 %7.2 %
(1) Our discount rate is primarily based on our incremental borrowing rate in accordance with ASC 842.
Supplemental cash flow and other information related to leases are as follows (in thousands):
Years Ended December 31,
202420232022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$(8,101)$(9,588)$(12,054)
Leased assets obtained in exchange for new operating lease liabilities$3,665 $3,804 $12,682 
Leased assets obtained in exchange for new financing lease liabilities$— $1,162 $35 
Maturities of lease liabilities as of December 31, 2024 are as follows (in thousands):
Year Ended December 31,OperatingFinance
2025$5,924 $283 
20262,871 263 
20271,906 263 
2028905 154 
2029234 — 
2030 and thereafter984 — 
Total lease payments12,824 963 
Less: present value discount1,480 127 
Lease liabilities$11,344 $836 
Lessor
We are the lessor under certain agreements for gathering, transportation, storage, terminalling, and offloading with Delek Holdings. These agreements have remaining terms ranging from 3 to 12 years with renewal options ranging from 2 to 10 years, and some agreements have multiple renewal options. Revenue from these leases are recorded in affiliate revenue in the consolidated statements of income. For details on Lease Revenue, see Note 5.
During 2024, we executed renewals to certain agreements between DKL and Delek Holdings. The renewals required the embedded leases within these agreements to be reassessed under ASC 842. As a result of these lease assessments, certain leases were reclassified from an operating lease to a sales-type lease. Accordingly, the underlying property, plant and equipment, net, and associated deferred revenue, if any, were derecognized and the present value of the future lease payments and the unguaranteed residual value of the assets were recorded as a net investment in sales-type lease during the respective periods.
The net investment in sales-type leases is recorded utilizing the estimated fair value of the underlying leased assets at contract modification date and are nonrecurring fair value measurements. The leased assets were valued using a cost method valuation approach which utilizes Level 3 inputs.
We recognized any billings in excess of minimum volume requirements as variable lease payments, and these variable lease payments were recorded in Net Revenues - Affiliate in the accompanying consolidated statements of income and comprehensive income.
Lease income included in the consolidated statements of income and comprehensive income was as follows:
Year Ended December 31,
(in thousands)202420232022
Operating leases:
Lease revenue$268,843 $311,096 $287,370 
Sales-type leases:
Interest income (Sales-type rental revenue-fixed minimum)47,709 — — 
Lease revenue (Revenue from variable lease payments)7,673 — — 
Sales-type lease income$55,382 $— $— 
We did not elect to use the practical expedient to combine lease and non-lease components for lessor arrangements. The tables below represent the portion of the contracts allocated to the lease component based on relative standalone selling price.
The following presents the consolidated financial statement impact of sales-type leases on commencement or modification date for the year ended December 31, 2024. There were no amounts recognized for the year ended December 31, 2023. These transactions are non-cash transactions. The amount recognized on commencement date was recorded in contributions in the consolidated statements of partners' equity (deficit), given the underlying agreements are between entities under common control.
Year Ended December 31,
(in thousands)2024
Lease receivables$217,263 
Unguaranteed residual assets10,573 
Property, plant and equipment, net(108,143)
Amount recognized on commencement date$119,693 
The following is a schedule of annual undiscounted minimum future lease cash receipts on the non-cancelable operating leases as of December 31, 2024 (in thousands):
2025$108,376 
2026105,957 
202793,867 
202863,306 
202957,194 
2030 and thereafter16,258 
Total minimum future lease revenue$444,958 
Annual future minimum undiscounted lease receipts under our sales-type leases were as follows as of December 31, 2024 (in thousands):
2025$104,323 
202683,926 
202778,858 
202878,858 
202978,858 
2030 and thereafter262,763 
Total minimum future lease revenue687,586 
Less: Imputed interest483,783 
Lease receivable (1)
$203,803 
Current lease receivables (2)
$22,783 
Long-term lease receivables (3)
$181,020 
Unguaranteed residual assets (3)
$12,106 
(1) This amount does not include the unguaranteed residual assets.
(2) Presented in Lease receivable - affiliate, in the consolidated balance sheets.
(3) Presented in Net lease investment - affiliate in the consolidated balance sheets.
The following table summarized our investment in assets held under operating lease by major classes (in thousands):
December 31,
20242023
Land$11,643 $14,946 
Building and building improvements387 853 
Pipelines, tanks and terminals419,528 664,567 
Other equipment2,229 3,856 
Property, plant and equipment433,787 684,222 
Less: accumulated depreciation143,961 253,955 
Property, plant and equipment, net$289,826 $430,267 
Capital expenditures related to assets subject to sales-type lease arrangements were $0.6 million for the year ended December 31, 2024. There were no capital expenditures related to assets subject to sales-type lease arrangements for both the years ended December 31, 2023 and 2022. These amounts are reflected as additions to property, plant and equipment in the consolidated statements of cash flows.