Leases (Notes)

6 Months Ended

Jun. 30, 2019

For further information regarding the adoption of ASC 842, including the method of adoption and practical expedients elected,

see Note 1.

Lessee

We lease a wide variety of facilities and equipment under operating leases, including land and building space, office and field equipment, storage facilities and transportation equipment with remaining lease terms ranging from less than 1 year to 25 years. Some of our long-term leases include renewal options. Renewal options and termination options were not included in the

measurement of right of use assets and lease liabilities since it was determined they were not reasonably certain to be exercised. The decision to renew or terminate the lease is at our sole discretion. Our lease agreements do not include any material residual value guarantees or restrictive covenants.

Maturities of lease liabilities for operating lease obligations and finance lease obligations having initial or remaining noncancellable lease terms in excess of one year as of June 30, 2019 as well as the components of lease expense under ASC 842 are as follows:

Lease Liabilities Maturities (in millions)



	Lease Obligations
	Operating			Finance
2019	$	6		$	2
2020	18			3
2021	15			2
2022	12			2
2023	12			2
2024 and thereafter	102			4
Gross lease payments	165			15
Less: imputed interest	(45		)	(2		)
Total Lease Payments	$	120		$	13

Components of Lease Expense (in millions)



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating lease cost	$	5	$	8

Finance lease cost:
Amortization of right-of-use assets	1		2
Interest on lease liabilities	1		1
Total finance lease cost	2		3

Variable lease cost	2		3
Short-term lease cost	9		15
Total Lease Cost	$	18	$	29

Supplemental Balance Sheet Data (in millions, except lease term and discount rates)



	June 30, 2019
Operating Leases
Right of use assets included in other noncurrent assets, net	$	121

Operating lease liabilities included in other current liabilities	$	12
Long-term operating lease liabilities included in other noncurrent liabilities	108
Total Operating Lease Liabilities	$	120

Weighted average remaining lease term	13 years
Weighted average discount rate	4.83		%

Finance Leases
Property, plant and equipment, gross	$	25
Accumulated depreciation	(14		)
Property, Plant and Equipment, Net	$	11

Debt due within one year	$	3
Long-term debt	10
Total Finance Lease Liabilities	$	13

Weighted average remaining lease term	5 years
Weighted average discount rate	5.88		%

Lessor

We provide storage at several of our terminals as well as certain other services to our Sponsor in which we are considered to be the lessor in accordance with U.S. GAAP. We charge fixed fees based on the total storage capacity of our tanks under those agreements. During the three and six months ended June 30, 2019, we did not receive any material contingent lease payments. The term of the majority of the storage agreements is a primary term of ten years with two renewal option periods of five years, with the primary term scheduled to expire from 2021 to 2028. Our revenue from implicit lease arrangements, excluding executory costs, totaled $132 million and $91 million for the three months ended June 30, 2019 and 2018, respectively, and $268 million and $178 million for the six months ended June 30, 2019 and 2018, respectively.

Based on the changes presented in ASC 842, we, as a lessor, may be required to reclassify contracts or existing operating leases to sales-type leases upon modification and related reassessment of the contract. If such a modification were to occur, it may result in the derecognition of existing assets, recognition of a receivable in the amount of the present value of fixed payments expected to be received by us under the contract, and recognition of a corresponding gain or loss in the period of change. We will evaluate the impact of a reassessment as modifications occur.

Minimum Future Lease Revenue on Non-Cancellable Operating Leases (in millions)



	June 30, 2019 (a)
2019	$	268
2020	535
2021	533
2022	533
2023	532
2024 and thereafter	6,292
Total Minimum Lease Revenue	$	8,693


(a)	Includes minimum future lease revenue assuming all renewal option periods for each agreement are exercised.

Investment in Assets Held for Operating Leases (in millions)



	June 30, 2019			December 31, 2018
Terminals and related assets	$	847		$	778
Pipelines	110			110
Land and leasehold improvements	29			28
Construction in progress	21			15
Property, plant and equipment, at cost	1,007			931
Accumulated depreciation	(262		)	(238		)
Property, Plant and Equipment, Net	$	745		$	693