Lease Assets and Liabilities

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Lease Assets and Liabilities

Note 11—Lease Assets and Liabilities

We have agreements with Phillips 66 to lease land underlying or associated with certain of our assets. These agreements are classified as operating leases. Due to the economic infeasibility of canceling these leases, we consider them non-cancellable. Certain leases include escalation clauses for adjusting rental payments to reflect changes in price indices. Our lease agreements do not impose any significant restrictions on distribution payments, asset dispositions or borrowing ability.

Effective with our implementation of ASU No. 2016-02, we elected to discount lease obligations using our incremental borrowing rate. For all leases, we elected the practical expedient not to separate service and lease costs. 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 be exercised, we elected to not recognize the ROU asset and corresponding lease liability on our consolidated balance sheet.

Operating lease ROU assets are recorded in the “Other assets” line item and lease liabilities are recorded in the “Other current liabilities” and “Other liabilities” line items on our consolidated balance sheet. At December 31, 2019, the total operating lease ROU asset was $44 million.

Future minimum lease payments and recorded short- and long-term lease liabilities at December 31, 2019, for operating leases were:

	Millions of Dollars
2020	$	3
2021	3
2022	3
2023	3
2024	3
Remaining years	90
Future minimum lease payments	105
Amount representing interest or discounts	(61		)
Total lease liabilities	44
Short-term lease liabilities	(1		)
Long-term lease liabilities	$	43

Operating lease costs and operating cash outflows for the year ended December 31, 2019, were not material.

The weighted-average remaining lease term for our operating leases as of December 31, 2019, was 35 years. The weighted-average discount rate for our operating leases as of December 31, 2019, was 5.9%.

Lease Assets and Liabilities

Note 11—Lease Assets and Liabilities

We have agreements with Phillips 66 to lease land underlying or associated with certain of our assets. These agreements are classified as operating leases. Due to the economic infeasibility of canceling these leases, we consider them non-cancellable. Certain leases include escalation clauses for adjusting rental payments to reflect changes in price indices. Our lease agreements do not impose any significant restrictions on distribution payments, asset dispositions or borrowing ability.

Effective with our implementation of ASU No. 2016-02, we elected to discount lease obligations using our incremental borrowing rate. For all leases, we elected the practical expedient not to separate service and lease costs. 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 be exercised, we elected to not recognize the ROU asset and corresponding lease liability on our consolidated balance sheet.

Operating lease ROU assets are recorded in the “Other assets” line item and lease liabilities are recorded in the “Other current liabilities” and “Other liabilities” line items on our consolidated balance sheet. At December 31, 2019, the total operating lease ROU asset was $44 million.

Future minimum lease payments and recorded short- and long-term lease liabilities at December 31, 2019, for operating leases were:

	Millions of Dollars
2020	$	3
2021	3
2022	3
2023	3
2024	3
Remaining years	90
Future minimum lease payments	105
Amount representing interest or discounts	(61		)
Total lease liabilities	44
Short-term lease liabilities	(1		)
Long-term lease liabilities	$	43

Operating lease costs and operating cash outflows for the year ended December 31, 2019, were not material.

The weighted-average remaining lease term for our operating leases as of December 31, 2019, was 35 years. The weighted-average discount rate for our operating leases as of December 31, 2019, was 5.9%.