Lease Accounting

12 Months Ended

Dec. 31, 2020

Lessee Arrangements

We lease a variety of transportation equipment (primarily railcars), terminals, land and facilities, and office space and equipment. Lease terms vary and can range from short term (not greater than 12 months) to long term (greater than 12 months). A majority of our leases contain options to extend the life of the lease at our sole discretion. We considered these options when determining the lease terms used to derive our right of use asset and associated lease liability. Leases with a term of 12 months or less are not recorded on our Consolidated Balance Sheets and we recognize lease expense for these leases on a straight-line basis over the lease term.

Certain lease agreements include lease and non-lease components. We have elected to combine lease and non-lease components for all of our underlying assets for the purpose of deriving our right of use asset and lease liability. Additionally, certain lease payments are driven by variable factors, such as plant production or indexing rates. Variable costs are expensed as incurred and are not included in our determination for our lease liability and right of use asset.

As a lessee, we do not have any finance leases and none of our leases contain material residual value guarantees or material restrictive covenants. In addition, most of our leases do not provide an implicit rate, and as such, we determined our incremental borrowing rate based on the information available at the inception of the lease in determining the present value of lease payments.

Our lease portfolio consists of operating leases within three major categories: Transportation Equipment, Office Space and Equipment, and Facilities and Equipment. These values are recorded within “Right of Use Assets, net” on the Consolidated Balance Sheets. Current and non-current lease liabilities are recorded within “Accrued liabilities” and “Other long-term liabilities”, respectively, on the Consolidated Balance Sheets. Refer to the table below for our lease balances as of December 31, 2022 and December 31, 2021.


Leases	Classification	Financial Statement Caption	December 31, 2022		December 31, 2021
Assets
	Transportation Equipment	Right of Use Assets, net	$	65,375	$	79,784
	Office Space & Equipment	Right of Use Assets, net	7,238		5,981
	Facilities and Equipment	Right of Use Assets, net	52,664		55,031
Total Right of Use Assets, net			$	125,277	$	140,796

Liabilities
Current		Accrued liabilities	17,978		19,966
Non-Current		Other long-term liabilities	113,844		121,854
Total Lease Liability			$	131,822	$	141,820

Our “Right of Use Assets, net” balance includes our unamortized initial direct costs associated with certain of our transportation equipment, office space and equipment, and facilities and equipment leases. Additionally, it includes our unamortized prepaid rents, our deferred rents, and our previously classified intangible asset associated with a favorable lease.

We recorded total operating lease expense of $13.6 million, $18.4 million, and $30.2 million for the years ended December 31, 2022, 2021, and 2020, respectively. The total operating lease expense is net of the variable railcar mileage credits we receive in our Alkali Business of $22.4 million, $20.8 million and $18.4 million for the years ended December 31, 2022, 2021, and 2020, respectively. The total operating cost includes the amounts associated with our existing lease liabilities, along with both short term and variable lease costs incurred during the period which are not significant to the operating lease cost individually, or in the aggregate.

The following table presents the maturities of our operating lease liabilities as of December 31, 2022 on an undiscounted cash flow basis reconciled to the present value recorded on our Consolidated Balance Sheets:


Maturity of Lease Liabilities	Transportation Equipment		Office Space and Equipment		Facilities and Equipment		Operating Leases
2023	$	18,928	$	1,386	$	5,529	$	25,843
2024	17,889		1,359		5,005		24,253
2025	14,372		2,168		5,041		21,581
2026	9,965		1,997		5,092		17,054
2027	7,110		1,721		5,136		13,967
Thereafter	7,092		9,445		115,349		131,886
Total Lease Payments	75,356		18,076		141,152		234,584
Less: Interest	(10,644)		(5,601)		(86,517)		(102,762)
Present value of operating lease liabilities	$	64,712	$	12,475	$	54,635	$	131,822

The following table presents the weighted average remaining terms and discount rates related to our right of use assets:

Lease Term and Discount Rate

December 31, 2022

December 31, 2021

Weighted-average remaining lease term

13.70 years

13.48 years

Weighted-average discount rate

7.75%

7.69%

The following table provides information regarding the cash paid and right of use assets obtained related to our operating leases:


	Year Ended December 31,
Cash Flows Information	2022		2021
Cash paid for amounts included in the measurement of lease liabilities	$	28,576	$	33,145
Leased assets obtained in exchange for new operating lease liabilities	9,443		8,296

Lessor Arrangements

We have certain contracts discussed below in which we act as a lessor. We also, from time to time, sublease certain of our transportation and facilities equipment to third parties.

Operating Leases

During the years ended December 31, 2022, 2021, and 2020, we acted as a lessor in our revenue contracts associated with the M/T American Phoenix, included in our marine transportation segment. During the year ended December 31, 2020, we acted as a lessor in our Free State pipeline system, included in our onshore facilities and transportation segment. Revenues associated with these contracts were recorded within their respective segment’s revenue in the Consolidated Statements of Operations. Our lease revenues for these arrangements (inclusive of fixed and variable consideration) are reflected in the table below for the years ended December 31, 2022, 2021, and 2020, respectively:


	Year Ended December 31,
	2022		2021		2020
M/T American Phoenix	$	16,432	$	15,031	$	24,116
Free State Pipeline(1)	—		—		5,234

(1)We sold the Free State pipeline to a subsidiary of Denbury Inc. on October 30, 2020. The 2020 revenues presented above reflect operations through October 29, 2020 as that was the last date the asset operated under our ownership.

Direct Finance Lease

We formerly held a direct finance lease of the Northeast Jackson Dome (“NEJD”) Pipeline. Under the terms of the agreement, we were paid a quarterly payment, which commenced on August 3, 2008. These payments were fixed at approximately $5.2 million per quarter during the lease term at an interest rate of 10.25%. At the end of the lease term in 2028, we would convey all of our interest in the NEJD Pipeline to the lessee for a nominal payment. During the third quarter of 2020, our customer, a subsidiary of Denbury, Inc., defaulted under the agreement and we exercised a letter of credit we had issued to us as beneficiary and we collected approximately $41 million in accelerated principal payments during 2020. On October 30, 2020 we executed an agreement with our customer to accelerate the remaining principal payments on the NEJD direct financing lease. As of December 31, 2020, we had an outstanding receivable (included within “Accounts receivable- trade, net” on the Consolidated Balance Sheets) of $70.0 million from Denbury for the remaining payments per the agreement, which was fully collected during 2021. Additionally as part of this agreement, we transferred the ownership of all of our CO2 assets, including the Free State pipeline system, to Denbury.