Leases

12 Months Ended

Dec. 31, 2019

Leases

We lease marine vessels, tugboats, barges, pipelines, storage tanks, railcars, service station sites, office buildings, corporate aircraft, land and other facilities and equipment. In determining whether an agreement contains a lease, we consider our ability to control the asset and whether third-party participation or vendor substitution rights limit our control. Certain leases include escalation clauses for adjusting rental payments to reflect changes in price indices, as well as renewal options and/or options to purchase the leased property. Renewal options have been included only when reasonably certain of exercise. There are no significant restrictions imposed on us in our lease agreements with regards to dividend payments, asset dispositions or borrowing ability. Certain leases have residual value guarantees, which may require additional payments at the end of the lease term if future fair values decline below contractual lease balances.

In our implementation of ASU No. 2016-02, we elected to discount lease obligations using our incremental borrowing rate. Furthermore, we elected to separate costs for lease and service components for contracts involving the following asset types: marine vessels, tugboats, barges and consignment service stations. For these contracts, we allocate the consideration payable between the lease and service components using the relative standalone prices of each component. For contracts involving all other asset types, we elected the practical expedient to account for the lease and service components on a combined basis. Our right of way agreements in effect prior to January 1, 2019, were not accounted for as leases as they were not initially determined to be leases at their commencement dates. However, modifications to these agreements or new agreements will be assessed and accounted for accordingly under ASU No. 2016-02. For short-term leases, which are leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that is reasonably certain to exercise, we elected to not recognize the ROU asset and corresponding lease liability on our consolidated balance sheet.

The following table indicates the consolidated balance sheet line items that include the ROU assets and lease liabilities for our finance and operating leases:



	Millions of Dollars
	December 31, 2019
	Finance Leases		Operating Leases
Right-of-Use Assets
Net properties, plants and equipment	$	284	—
Other assets	—		1,312
Total right-of-use assets	$	284	1,312

Lease Liabilities
Short-term debt	$	18	—
Other accruals	—		455
Long-term debt	259		—
Other liabilities and deferred credits	—		806
Total lease liabilities	$	277	1,261

Future minimum lease payments at December 31, 2019, for finance and operating lease liabilities were:



	Millions of Dollars
	Finance Leases			Operating Leases

2020	$	26		488
2021	25			260
2022	23			167
2023	23			111
2024	23			84
Remaining years	243			299
Future minimum lease payments	363			1,409
Amount representing interest or discounts	(86		)	(148	)
Total lease liabilities	$	277		1,261

Our finance lease liabilities relate primarily to consignment agreements with United and an oil terminal in the United Kingdom. The lease liability for the oil terminal finance lease is subject to foreign currency translation adjustments each reporting period.

Components of net lease cost for the year ended December 31, 2019, were:



	Millions of Dollars

Finance lease cost
Amortization of right-of-use assets	$	20
Interest on lease liabilities	6
Total finance lease cost	26
Operating lease cost	531
Short-term lease cost	118
Variable lease cost	12
Sublease income	(16		)
Total net lease cost	$	671

Cash paid for amounts included in the measurement of our lease liabilities for the year ended December 31, 2019, was:



	Millions of Dollars

Operating cash outflows—finance leases	$	6
Operating cash outflows—operating leases	553
Financing cash outflows—finance leases	21

During the year ended December 31, 2019, we recorded additional noncash ROU assets and corresponding operating lease liabilities totaling $342 million related to new and modified lease agreements.

At December 31, 2019, the weighted-average remaining lease terms and discount rates for our lease liabilities were:



Weighted-average remaining lease term—finance leases (years)	11.1
Weighted-average remaining lease term—operating leases (years)	5.6

Weighted-average discount rate—finance leases	3.1	%
Weighted-average discount rate—operating leases	3.8	%

Lessee