(12) Lease Obligations

We determine if an arrangement is a lease at inception. Leases with an initial term of 12 months or less are not recorded in our condensed consolidated balance sheet unless it is reasonably certain we will renew the lease. All leases with an initial term greater than 12 months, whether classified as operating or finance, are recorded to our condensed consolidated balance sheet based on present value of lease payments over the lease term, determined at lease commencement. Determination of the present value of lease payments requires discount rate. We use the implicit rate in the lease agreement when available. Most of our leases do not provide an implicit interest rate: therefore, we use a weighted average borrowing rate based on the information available at the commencement date.

Our lease portfolio primarily consists of operating leases for certain, facilities, office spaces and equipment. Our leases have remaining terms of 1 year to 5 years and may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. The operating lease asset also includes any upfront lease payments made and excludes lease incentives and initial direct cost incurred. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

The following table summarized the supplemental balance sheet information related to lease assets and lease liability obligations as of June 30, 2019 (in thousands, unaudited):


	Classification
Assets
Operating lease assets	Operating lease right-of-use assets	$	497
Finance lease assets	Property and equipment, net of accum depreciation		9,550

Total lease assets			10,047

Liabilities
Current
Operating	Current portion of operating lease obligations		276
Finance	Current portion of finance lease obligation		5,089
Noncurrent
Operating	Operating lease liabilities		226
Finance	Finance lease obligations,—related parties, net of current portion		485

Total lease liabilities		$	6,076

The following table summarizes the components of lease expenses for the three and six months ended June 30, 2019 (in thousands, unaudited):


	Classification	Three Months Ended June 30,				Six Months Ended June 30,
Lease Cost	Classification	2019		2018		2019		2018
Operating lease cost	Cost of sales and Selling, general and administrative expenses	$	95		—	$	95		—
Finance lease cost
Amortization of leased assets	Cost of operations		292		249		584		498
Interest on lease liabilities	Interest expense		166		179		340		366

Net lease cost		$	553		428	$	1,019		864

In 2014, the Company entered into a five year non-cancelable operating lease for an office in Denver, Colorado. In January 2019, the Company amended its operating lease for the Denver, Colorado office relocating to smaller office suite and reducing the lease expense for the remainder of the term. The total rent expense incurred under the lease for the six months ended June 30, 2019 and 2018 totaled $60 thousand and $120 thousand, respectively. In February of 2018, the Company began to sublease a portion of the office space to a subsidiary of TMG for $5 thousand a month through December 2018 and $2 thousand a month beginning January 2019 (see Note 8) Related Party Transactions for further discussion).

In December 2018, the Company entered into a one year lease for equipment used at our liquefaction plant in George West, Texas. The lease called for monthly payments of $13 thousand through December 31, 2019.

In January 2019, the Company extended its lease for one year for yard space from an unrelated party in Fort Lupton, Colorado. The lease called for monthly payments of $2,000 through December 31, 2019. The Company subleased the yard space to a subsidiary of TMG during 2018 (see Note 8) Related Party Transactions for further discussion).

The Company leases certain buildings and facilities, including office space in Bellevue, Washington; Houston, Texas; and certain equipment under non-cancellable operating leases expiring at various dates through 2022.

The following schedule presents the future minimum lease payments for our operating and finance obligations at June 30, 2019 (in thousands):


	Operating leases		Finance leases			Total
Remainder 2019	$	158	$	2,282		$	2,440
2020		189		3,950			4,139
2021		138		—			138
2022		17		—			17

Total lease payments		502		6,232			6,734
Less: Interest		—		(658	)		(658	)

Present value of lease liabilities	$	502	$	5,574		$	6,076

Lease term and discount rates for our operating and finance lease obligations are as follows:


Lease Term and Discount Rate	June 30, 2019
Weighted-average remaining lease term (years)
Operating leases		1.5
Finance leases		1
Weighted-average discount rate
Operating leases		7.3	%
Finance leases		9.9	%

The following table summarizes the supplemental cash flow information related to leases as of June 30, 2019:


Other information	June 30, 2019
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	95
Financing cash flows from finance leases		1,672
Interest paid		340
Noncash activities from right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	497