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Revenue Recognition
 3 Months Ended
Mar. 31, 2022
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 March 31,
20222021
Transportation services revenue – third parties$30 $39 
Transportation services revenue – related parties (1)
44 44 
Storage services revenue – third parties2 2 
Storage services revenue – related parties2 2 
Terminaling services revenue – related parties (2)
31 30 
Terminaling services revenue – major maintenance service – related parties (3)
2 2 
Product revenue – related parties (4)
11 6 
Total Topic 606 revenue122 125 
Lease revenue – related parties13 14 
   Total revenue$135 $139 
(1) Transportation services revenue – related parties includes $1 million of non-lease service component in our transportation services contracts for both the three months ended March 31, 2022 and March 31, 2021.
(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. See Note 2 – Related Party Transactions for additional details.
(3) Terminaling services revenue – major maintenance service – related parties is comprised of the major maintenance service components related the Norco Assets. See Note 2 – Related Party Transactions for additional details.
(4) Product revenue – related parties 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 lease and non-lease service components. 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. However, it is reasonably certain that the original extension options of the two additional five-year terms will not be exercised for this contract. 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 March 31, 2022, future minimum payments of both the lease and non-lease service components to be received under the 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$590 $109 $218 $218 $45 

Terminaling services revenue - Norco Assets
Certain of our terminaling service agreements entered into with SOPUS and Shell Chemical relate to the Norco Assets. These terminaling service agreements were entered into for an initial term of fifteen years, with the option to extend for an additional five-year term. 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. The terminaling service agreements contain an inflation escalation clause, pursuant to which the annual payments increase on July 1 of each year commencing on July 1, 2021. The inflation adjustment is based on the rate of change in the annual Consumer Price Index (“CPI”) published by U.S. Department of Labor’s Bureau of Labor Statistics. On July 1, 2021, the annual payments were escalated by applying a CPI adjustment of 4.86%. After such escalation, the Partnership now receives an annual net payment of $147 million, which is the total annual payment of $158 million, less $11 million related to the allocated utility costs from SOPUS.

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 service components are presented within Transportation, terminaling and storage services – related parties in the unaudited consolidated statements of income.

For additional information on the service types of revenue, refer to Note 12 – Revenue Recognition in the Notes to Consolidated Financial Statements in our 2021 Annual Report.

Contract Balances
The following table provides information about receivables and contract liabilities from contracts with customers:
January 1, 2022March 31, 2022
Receivables from contracts with customers – third parties$13 $10 
Receivables from contracts with customers – related parties35 37 
Contract assets – related parties218 214 
Deferred revenue – third parties2 4 
Deferred revenue – related parties (1)
31 36 
(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.

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 related to the Norco Assets. 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 for both the three months ended March 31, 2022 and March 31, 2021. We had $214 million and $218 million contract assets recognized from the costs to obtain or fulfill a contract as of March 31, 2022 and December 31, 2021, respectively.

The estimated future amortization related to the contract assets for the next five years is as follows:
Remainder of 202220232024202520262027
Amortization$13 $17 $18 $19 $16 $16 
Significant changes in the deferred revenue balances with customers during the period are as follows:
December 31, 2021
Additions (1)
Reductions (2)
March 31, 2022
Deferred revenue – third parties$2 $2 $— $4 
Deferred revenue – related parties31 7 (2)36 
(1) Deferred revenue additions resulted from $6 million deficiency payments from minimum volume commitment contracts and $3 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 March 31, 2022:
TotalRemainder of 20222023202420252026 and beyond
Revenue expected to be recognized on multi-year committed shipper transportation contracts$394 $48 $63 $57 $50 $176 
Revenue expected to be recognized on other multi-year transportation service contracts (1)
28 4 6 6 5 7 
Revenue expected to be recognized on multi-year storage service contracts15 7 4 4 — — 
Revenue expected to be recognized on multi-year terminaling service contracts (1)
269 36 47 47 48 91 
Revenue expected to be recognized on multi-year operation and major maintenance terminaling service contracts(2)
1,456 87 119 123 127 1,000 
$2,162 $182 $239 $237 $230 $1,274 
(1) Relates to the non-lease 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.

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.