Leases, Right-of-Use Assets and Related Liabilities

12 Months Ended

Dec. 31, 2024

Leases, Right-of-Use Assets and Related Liabilities

Leases, Right-of-Use Assets and Related Liabilities

7. Leases, Right-of-Use Assets and Related Liabilities

The Company is party to an operating lease for the Company’s office and research facility in Englewood, Colorado, which expires in January 2029, and an operating lease for additional office space in Albuquerque, New Mexico, which expires in 2025. The Company’s office facility lease contains an option to extend the lease, which management does not reasonably expect to exercise, so they are not included in the length of the terms. The additional office space lease does not contain an option to extend.

The Company has four finance leases for land, one for a processing facility, and one for a piece of operating equipment. The land leases are for NW Iowa RNG. The Company leases land from dairy farmers on which it has built three anaerobic digesters, and a gas upgrade facility to condition raw biogas from cow manure provided by the farmers. These leases expire at various dates between 2031 and 2050. The Company accounts for lease components separately from non-lease components for the Company’s dairy lease asset class. The total consideration in the lease agreement is allocated to the lease and non-lease components based on their relative standalone selling prices. These leases contain options to extend the leases, which management reasonably expects to exercise and are included in the length of the terms. The lease of operating equipment is to be used at NW Iowa RNG and expires in 2025. The lease does not contain an option to extend and contains a purchase option upon termination that the Company expects to exercise.

In August 2024, the Company entered into an amendment that extended the term of an existing agreement to use a third-party processing facility beyond the previous 12-month term, which resulted in the agreement being recorded as a lease. The agreement for the leased facility expires in 2025, with no option to extend the lease term. Lease amortization for the third-party processing facility was recorded as a component of Project development costs on the Condensed Consolidated Statement of Operations prior to the signing of a customer offtake agreement in August 2024, and after which it is included as a component of work-in-progress inventory, to be expended as a component of Cost of production as sales are made in future periods.

The following tables present the (i) costs by lease category, (ii) other quantitative information, and (iii) future minimum payments under non-cancelable financing and operating leases as they relate to the Company’s leases (in thousands, except for weighted averages):

	Years Ended December 31,
	2024
Operating lease cost	$	281
Finance lease expense:
Amortization of leased assets		1,069
Interest on lease liabilities		315
Total lease expense	$	1,665

	Years Ended December 31,
	2024			2023
Other Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	906		$	22
Operating cash flows from operating leases	$	405		$	330
Finance cash flows from finance leases	$	191		$	2
Right-of-use asset obtained in exchange for new finance lease liabilities	$	2,731		$	—
Right-of-use asset obtained in exchange for new operating lease liabilities	$	32		$	199
Weighted-average remaining lease term, finance lease (months)		38			307
Weighted-average remaining lease term, operating leases (months)		46			61
Weighted-average discount rate - finance leases (1)		16	%		12	%
Weighted-average discount rate - operating leases (1)		6	%		6	%

(1) When our leases do not provide an implicit interest rate, we calculate the lease liability at lease commencement as the present value of unpaid lease payments using our estimated incremental borrowing rate. The incremental borrowing rate represents the rate of interest that we would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term and is determined using a portfolio approach based on information available at the commencement date of the lease.

Year Ending December 31,	Operating Leases		Finance Leases
2025	$	398	$	2,168
2026		367		26
2027		335		27
2028		344		26
2029		—		27
2030 and thereafter		—		516
Total		1,444		2,790
Less: amounts representing present value discounts		145		602
Total lease liabilities		1,299		2,188
Less: current portion		333		2,001
Non-current portion	$	966	$	187

Leases, Right-of-Use Assets and Related Liabilities

The Company is party to an operating lease for the Company’s office and research facility in Englewood, Colorado, which expires in January 2029, and an operating lease for additional office space in Albuquerque, New Mexico, which expires in 2025. The Company’s office facility lease contains an option to extend the lease, which management does not reasonably expect to exercise, so they are not included in the length of the terms. The additional office space lease does not contain an option to extend.

The Company has four finance leases for land, one for a processing facility, and one for a piece of operating equipment. The land leases are for NW Iowa RNG. The Company leases land from dairy farmers on which it has built three anaerobic digesters, and a gas upgrade facility to condition raw biogas from cow manure provided by the farmers. These leases expire at various dates between 2031 and 2050. The Company accounts for lease components separately from non-lease components for the Company’s dairy lease asset class. The total consideration in the lease agreement is allocated to the lease and non-lease components based on their relative standalone selling prices. These leases contain options to extend the leases, which management reasonably expects to exercise and are included in the length of the terms. The lease of operating equipment is to be used at NW Iowa RNG and expires in 2025. The lease does not contain an option to extend and contains a purchase option upon termination that the Company expects to exercise.

In August 2024, the Company entered into an amendment that extended the term of an existing agreement to use a third-party processing facility beyond the previous 12-month term, which resulted in the agreement being recorded as a lease. The agreement for the leased facility expires in 2025, with no option to extend the lease term. Lease amortization for the third-party processing facility was recorded as a component of Project development costs on the Condensed Consolidated Statement of Operations prior to the signing of a customer offtake agreement in August 2024, and after which it is included as a component of work-in-progress inventory, to be expended as a component of Cost of production as sales are made in future periods.

The following tables present the (i) costs by lease category, (ii) other quantitative information, and (iii) future minimum payments under non-cancelable financing and operating leases as they relate to the Company’s leases (in thousands, except for weighted averages):

	Years Ended December 31,
	2024
Operating lease cost	$	281
Finance lease expense:
Amortization of leased assets		1,069
Interest on lease liabilities		315
Total lease expense	$	1,665

	Years Ended December 31,
	2024			2023
Other Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	906		$	22
Operating cash flows from operating leases	$	405		$	330
Finance cash flows from finance leases	$	191		$	2
Right-of-use asset obtained in exchange for new finance lease liabilities	$	2,731		$	—
Right-of-use asset obtained in exchange for new operating lease liabilities	$	32		$	199
Weighted-average remaining lease term, finance lease (months)		38			307
Weighted-average remaining lease term, operating leases (months)		46			61
Weighted-average discount rate - finance leases (1)		16	%		12	%
Weighted-average discount rate - operating leases (1)		6	%		6	%

(1) When our leases do not provide an implicit interest rate, we calculate the lease liability at lease commencement as the present value of unpaid lease payments using our estimated incremental borrowing rate. The incremental borrowing rate represents the rate of interest that we would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term and is determined using a portfolio approach based on information available at the commencement date of the lease.

Year Ending December 31,	Operating Leases		Finance Leases
2025	$	398	$	2,168
2026		367		26
2027		335		27
2028		344		26
2029		—		27
2030 and thereafter		—		516
Total		1,444		2,790
Less: amounts representing present value discounts		145		602
Total lease liabilities		1,299		2,188
Less: current portion		333		2,001
Non-current portion	$	966	$	187