Leases

3 Months Ended

Mar. 31, 2020

Lease Costs and Other Supplemental Information

Our total lease cost comprises costs that are included in our income statement, as well as costs capitalized as part of an item of property, plant, and equipment or inventory. Total lease cost by class of underlying asset was as follows (in millions):



	Pipelines, Terminals, and Tanks		Transportation					Feedstock Processing Equipment		Energy and Gases		Real Estate		Other		Total
	Pipelines, Terminals, and Tanks		Marine			Rail		Feedstock Processing Equipment		Energy and Gases		Real Estate		Other		Total
Three months ended March 31, 2020
Finance lease cost:
Amortization of right-of-use (ROU) assets	$	22	$	—		$	—	$	3	$	1	$	—	$	—	$	26
Interest on lease liabilities	21		—			—		—		1		—		—		22
Operating lease cost	42		39			15		4		2		6		1		109
Variable lease cost	16		18			1		1		—		—		—		36
Short-term lease cost	4		22			—		14		—		—		—		40
Sublease income	—		(6		)	—		—		—		—		—		(6		)
Total lease cost	$	105	$	73		$	16	$	22	$	4	$	6	$	1	$	227



Three months ended March 31, 2019
Finance lease cost:
Amortization of ROU assets	$	8	$	—		$	—	$	1	$	1	$	—		$	—	$	10
Interest on lease liabilities	10		—			—		—		1		—			—		11
Operating lease cost	47		34			11		7		2		4			—		105
Variable lease cost	18		10			—		—		—		—			—		28
Short-term lease cost	3		14			—		6		—		—			—		23
Sublease income	—		(1		)	—		—		—		(1		)	—		(2		)
Total lease cost	$	86	$	57		$	11	$	14	$	4	$	3		$	—	$	175

The following table presents additional information related to our operating and finance leases (in millions, except for lease terms and discount rates):



	March 31, 2020						December 31, 2019
	Operating Leases			Finance Leases			Operating Leases			Finance Leases
Supplemental balance sheet information
ROU assets, net reflected in the following balance sheet line items:
Property, plant, and equipment, net	$	—		$	2,203		$	—		$	790
Deferred charges and other assets, net	1,297			—			1,329			—
Total ROU assets, net	$	1,297		$	2,203		$	1,329		$	790

Current lease liabilities reflected in the following balance sheet line items:
Current portion of debt and finance lease obligations	$	—		$	63		$	—		$	41
Accrued expenses	342			—			331			—
Noncurrent lease liabilities reflected in the following balance sheet line items:
Debt and finance lease obligations, less current portion	—			2,149			—			750
Other long-term liabilities	928			—			959			—
Total lease liabilities	$	1,270		$	2,212		$	1,290		$	791

Other supplemental information
Weighted-average remaining lease term	7.5 years			22.9 years			7.7 years			19.7 years
Weighted-average discount rate	4.8		%	4.4		%	4.9		%	5.2		%

Supplemental cash flow information related to our operating and finance leases is presented in Note 13.

Significant Lease Commencement

We have a 50 percent membership interest in MVP Terminalling, LLC (MVP), an unconsolidated joint venture formed in September 2017 with a subsidiary of Magellan Midstream Partners LP, to construct, own, and operate the Magellan Valero Pasadena marine terminal (MVP Terminal) located adjacent to the Houston Ship Channel in Pasadena, Texas. Concurrent with the formation of MVP, we entered into a terminaling agreement with MVP to utilize the MVP Terminal upon completion of the initial two phases of construction, which occurred in the first quarter of 2020. During the three months ended March 31, 2020, we recognized a finance lease ROU asset and related liability of approximately $1.4 billion in connection with this agreement. The terminaling agreement has an initial term of 12 years with two five-year automatic renewals, and year-to-year renewals thereafter.

Maturity Analysis

The remaining minimum lease payments due under our long-term leases were as follows (in millions):



	March 31, 2020				December 31, 2019
	Operating Leases		Finance Leases		Operating Leases		Finance Leases
2020 (a)	$	302	$	123	$	376	$	88
2021	273		164		250		86
2022	205		165		194		87
2023	170		171		160		91
2024	133		162		125		82
Thereafter	489		2,895		498		1,011
Total undiscounted lease payments	1,572		3,680		1,603		1,445
Less: Amount associated with discounting	302		1,468		313		654
Total lease liabilities	$	1,270	$	2,212	$	1,290	$	791

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(a)

The amounts as of March 31, 2020 are for the remaining nine months of 2020.

LEASES