Leases

12 Months Ended

Dec. 31, 2021

24. Leases

Operating lease assets consist primarily of office space, heavy mobile equipment used in our mining operations and facilities and equipment under operating service agreements for electricity generation and scrap processing. We also have operating lease assets for light mobile equipment and information technology assets. The Company also has short term leases related to transportation services for which we apply the short-term lease exception. Significant finance leases primarily consist of heavy mobile equipment used in our mining operations (see Note 17 for further details). Variable lease payments are primarily related to operating service agreements where payment is solely dependent on consumption of certain services, such as raw material and by-product processing. Most long-term leases include renewal options and, in certain leases, purchase options. Generally, we are not reasonably certain that these options will be exercised. We have residual value guarantees under certain light mobile equipment leases. There is no impact to our leased assets for residual value guarantees as the potential loss is not probable (see “Other Contingencies” in Note 26 for further details). We do not have material restrictive covenants associated with our leases or material amounts of sublease income. From time to time, U. S. Steel may enter into arrangements for the construction or purchase of an asset and then enter into a financing arrangement to lease the asset. U. S. Steel recognizes leased assets and liabilities under these arrangements when it obtains control of the asset.

The following table summarizes the lease amounts included in our Consolidated Balance Sheet as of December 31, 2021.


(In millions)	Balance Sheet Location	December 31, 2021		December 31, 2020
Assets
Operating	Operating lease assets (a)	$	185	$	214
Finance	Property, plant and equipment (b)	101		73
Total Lease Assets		$	286	$	287

Liabilities
Current
Operating	Current operating lease liabilities	$	58	$	59
Finance	Current portion of long-term debt	16		16
Non-Current
Operating	Noncurrent operating lease liabilities	136		163
Finance	Long-term debt less unamortized discount and issue costs	76		65
Total Lease Liabilities		$	286	$	303

(a) Operating lease assets are recorded net of accumulated amortization of $128 million and $96 million as of December 31, 2021, and December 31, 2020, respectively.

(b) Finance lease assets are recorded net of accumulated depreciation of $59 million and $40 million as of December 31, 2021, and December 31, 2020, respectively.

The following table summarizes lease costs included in our Consolidated Statement of Operations for the years ended December 31, 2021, December 31, 2020 and December 31, 2019.


(In millions)	Classification	Year Ended December 31, 2021		Year Ended December 31, 2020		Year Ended December 31, 2019
Operating Lease Cost (a)	Cost of sales	$	69	$	67	$	81
Operating Lease Cost	Selling, general and administrative expenses	14		14		11
Finance Lease Cost
Amortization	Depreciation, depletion and amortization	21		14		7
Interest	Interest expense	9		4		3
Total Lease Cost		$	113	$	99	$	102

(a) Operating lease cost recorded in cost of sales includes $11 million, $7 million and $15 million of variable lease cost for the years ended December 31, 2021, December 31, 2020 and December 31, 2019, respectively. An immaterial amount of variable lease cost was included in cost of sales and selling, general and administrative expenses for the years ended December 31, 2021, December 31, 2020 and December 31, 2019, respectively. $1 million of short-term lease cost is included in cost of sales and selling, general and administrative expenses for both of the years ended December 31, 2021, and December 31, 2020. An immaterial amount of short-term lease cost is included in cost of sales and selling, general and administrative expenses for the year ended December 31, 2019.

Lease liability maturities as of December 31, 2021, are shown below.


(In millions)	Operating		Finance		Total
2022	$	68	$	20	$	88
2023	48		20		68
2024	38		18		56
2025	28		15		43
2026	19		12		31
After 2026	22		18		40
Total Lease Payments	$	223	$	103	$	326
Less: Interest	29		11		40
Present value of lease liabilities	$	194	$	92	$	286

Lease terms and discount rates are shown below.


	December 31, 2021
Weighted average lease term
Finance	5 years
Operating	4 years

Weighted average discount rate
Finance	4.16	%
Operating	6.56	%

Supplemental cash flow information related to leases is as follows:


(In millions)	Year Ended December 31, 2021		Year Ended December 31, 2020		Year Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	70	$	71	$	72
Operating cash flows from finance leases	9		4		3
Financing cash flows from finance leases	30		13		7
Right-of-use assets exchanged for lease liabilities:
Operating leases	40		41		53
Finance leases	18		31		46