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Revenue Recognition
 9 Months Ended
Sep. 30, 2020
Revenue from Contract with Customer [Abstract]  
Revenue Recognition Revenue Recognition
The revenue standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The revenue standard requires entities to recognize revenue through the application of a five-step model, which includes: identification of the contract; identification of the performance obligations; determination of the transaction price; allocation of the transaction price to the performance obligations; and recognition of revenue as the entity satisfies the performance obligations.

Disaggregation of Revenue

The following table provides information about disaggregated revenue by service type and customer type:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
Transportation services revenue – third parties$24 $31 $78 $103 
Transportation services revenue – related parties (1)
31 55 127 156 
Storage services revenue – third parties2 2 6 6 
Storage services revenue – related parties2 1 6 5 
Terminaling services revenue – related parties (2)
31 12 73 35 
Terminaling services revenue – major maintenance service – related parties (3)
— — 4 — 
Product revenue – third parties (4)
— — — 4 
Product revenue – related parties (4)
5 10 14 26 
Total Topic 606 revenue95 111 308 335 
Lease revenue – related parties15 14 43 42 
   Total revenue$110 $125 $351 $377 
(1) Transportation services revenue - related parties includes $2 million and $4 million, respectively, of the non-lease service component (defined below) in our transportation services contracts for the three and nine months ended September 30, 2020 and 2019.
(2) Terminaling services revenue - related parties is comprised of the service components in our terminaling services contracts, including the operation and maintenance service components related to the Norco Assets in connection with the April 2020 Transaction. See Note 3 – Related Party Transactions for additional details.
(3) Terminaling services revenue - major maintenance service - related parties is comprised of the service components related to providing required major maintenance to the Norco Assets in connection with the April 2020 Transaction. See Note 3 – Related Party Transactions for additional details.
(4) Product revenue is comprised of allowance oil sales.

Lease revenue

Certain of our long-term transportation and terminaling services contracts with related parties are accounted for as operating leases. These agreements have both a lease component and an implied operation and maintenance service component (“non-lease service component”). We allocate the arrangement consideration between the lease components and any non-lease service components based on the relative stand-alone selling price of each component. We estimate the stand-alone selling price of the lease and non-lease service components based on an analysis of service-related and lease-related costs for each contract, adjusted for a representative profit margin. The contracts have a minimum fixed monthly payment for both the lease and non-lease service components. We present the non-lease service components under the revenue standard within Transportation, terminaling and storage services – related parties in the unaudited consolidated statements of income.

Revenues from the lease components of these agreements are recorded within Lease revenue – related parties in the unaudited consolidated statements of income. Some of these agreements were entered into for terms of ten years, with the option for the lessee to extend for two additional five-year terms. One of these contracts was amended to include an option for the lessee to extend for a fourteen-month term prior to the original extension options. Further, we have agreements with initial terms of ten years with the option for the lessee to extend for up to ten additional one-year terms. As of September 30, 2020, future minimum payments of both the lease and non-lease service components to be received under the initial ten-year contract term of these operating leases were estimated to be:

TotalLess than 1 yearYears 2 to 3Years 4 to 5More than 5 years
Operating leases$756 $110 $219 $219 $208 
Terminaling services revenue

In April 2020, the Partnership closed the April 2020 Transaction pursuant to which the Norco Assets were transferred from SOPUS and Shell Chemical to Triton. In connection with closing the April 2020 Transaction, Triton entered into terminaling service agreements with SOPUS and Shell Chemical related to the Norco Assets. These terminaling service agreements were entered into for an initial term of fifteen years, with the option to extend for additional five-year terms. The transfer of the Norco Assets, combined with the terminaling services agreements, were accounted for as a failed sale leaseback under the lease standard. The Partnership receives an annual net payment of $140 million, which is the total annual payment pursuant to the terminaling service agreements of $151 million, less $11 million, which primarily represents the allocated utility costs from SOPUS related to the Norco Assets.

These agreements have components related to financing receivables, for which the interest income is recognized in the unaudited consolidated statements of income and principal payments are recognized as a reduction to the financing receivables in the unaudited consolidated balance sheet. Revenue related to the operation and maintenance service components and major maintenance service components are presented within Transportation, terminaling and storage services – related parties in the unaudited consolidated statements of income.

The operation and maintenance service components consist of the Partnership’s obligation to operate the Norco Assets over the life of the agreements. It is considered a distinct service that represents a performance obligation that would be satisfied over time if it were accounted for separately. The services provided over the contract period are a series of distinct services that are substantially the same, have the same pattern of transfer to the customer, and, therefore, qualify as a single performance obligation. Since the customer simultaneously receives and consumes the benefits of services, we recognize revenue over time based on the number of days elapsed.

The major maintenance service components consist of the Partnership’s obligation to provide major maintenance on the Norco Assets such that the current capacity available to the customers is maintained over the life of the agreements. It is considered a distinct service that represents a performance obligation that would be satisfied over time if it were accounted for separately. The services provided over the contract period are a series of distinct services that are substantially the same, have the same pattern of transfer to the customer, and therefore, qualify as a single performance obligation. Since the customer simultaneously receives and consumes the benefits of services, we recognize revenue over time using the input method (cost-to-cost method) based on the ratio of actual major maintenance costs incurred to date to the total forecasted major maintenance costs over the contract term.

We allocate the arrangement consideration between the components based on the relative stand-alone selling price of each component in accordance with the revenue standard. The Partnership established the stand-alone selling price for the financing components based off an expected return on the assets being financed. The Partnership established the stand-alone selling price for the service components using expected cost-plus margin approach based on the Partnership’s forecasted costs of satisfying the performance obligation plus an appropriate margin for the service. The key assumptions include forecasts of the future operation and maintenance costs and major maintenance costs and the expected return.

Contract Balances

The following table provides information about receivables and contract liabilities from contracts with customers:

January 1, 2020September 30, 2020
Receivables from contracts with customers – third parties$11 $10 
Receivables from contracts with customers – related parties24 27 
Contract assets - related parties— 237 
Deferred revenue – third parties— 5 
Deferred revenue – related parties (1)
— 14 
(1) Deferred revenue - related parties is related to deficiency credits from certain minimum volume commitment contracts and certain components of our terminaling service contracts on the Norco Assets.

In connection with the April 2020 Transaction, we also recorded contract assets in the amount of $244 million as of April 1, 2020 based on the difference between the consideration allocated to the Norco Transaction and the recognized financing receivables. The contract assets represent the excess of the fair value embedded within the terminaling services agreements transferred by the Partnership to SOPUS and Shell Chemical as part of entering into the terminaling services agreements. The
contract assets balance is amortized in a pattern consistent with the recognition of revenue on the service components of the contract. The portion of the contract assets related to operations and maintenance is amortized on a straight-line basis over a fifteen-year period, and the portion related to major maintenance is amortized based on the ratio of actual major maintenance costs incurred to the total projected major maintenance costs over the fifteen year term. We recorded amortization as a component of Transportation, terminaling and storage services – related parties of $4 million and $8 million, respectively, for the three and nine months ended September 30, 2020. We had no contract assets recognized from the costs to obtain or fulfill a contract as of December 31, 2019.

The estimated future amortization related to the contract assets for the next five years is as follows:

Reminder of 202020212022202320242025
Amortization$4 $15 $16 $16 $17 $17 


Significant changes in the deferred revenue balances with customers during the period are as follows:
December 31, 2019
Additions (1)
Reductions (2)
September 30, 2020
Deferred revenue – third parties$— $7 $(2)$5 
Deferred revenue – related parties— 16 (2)14 
(1) Deferred revenue additions resulted from $19 million deficiency payments from minimum volume commitment contracts and $4 million of deferred revenue related to the major maintenance service components of our terminaling service contracts on the Norco Assets.
(2) Deferred revenue reductions resulted from revenue earned through the actual or estimated use and expiration of deficiency credits.

Remaining Performance Obligations

The following table includes revenue expected to be recognized in the future related to performance obligations exceeding one year of their initial terms that are unsatisfied or partially unsatisfied as of September 30, 2020:
TotalRemainder of 20202021202220232024 and beyond
Revenue expected to be recognized on multi-year committed shipper transportation contracts$497 $24 $63 $63 $63 $284 
Revenue expected to be recognized on other multi-year transportation service contracts (1)
36 2 5 5 5 19 
Revenue expected to be recognized on multi-year storage service contracts18 1 4 4 4 5 
Revenue expected to be recognized on multi-year terminaling service contracts (1)
342 12 48 48 48 186 
Revenue expected to be recognized on multi-year operation and major maintenance terminaling service contracts(2)
1,533 25 106 106 106 1,190 
$2,426 $64 $226 $226 $226 $1,684 
(1) Relates to the service components of certain of our long-term transportation and terminaling service contracts, which are accounted for as operating leases.
(2) Relates to the operation and maintenance service components and the major maintenance service components of our terminaling service contracts on the Norco Assets in connection with the April 2020 Transaction.

As an exemption under the revenue standard, we do not disclose the amount of remaining performance obligations for contracts with an original expected duration of one year or less or for variable consideration that is allocated entirely to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation.