Commitments and Contingencies

3 Months Ended

Mar. 31, 2022

Commitments and Contingencies [Abstract]

9. COMMITMENTS AND CONTINGENCIES

Operating Lease Expense

The partnership leases certain facilities, parcels of land, and railcars with remaining terms ranging from less than one year to approximately 9.6 years, including renewal options reasonably certain to be exercised for the land and facility leases. Railcar agreement renewals are not considered reasonably certain to be exercised as they typically renew with different underlying terms.

The partnership may sublease certain of its railcars to third parties on a short-term basis. These subleases are classified as operating leases, with the associated sublease revenue recognized on a straight-line basis over the lease term.

The components of lease expense for the three months ended March 31, 2022 and 2021, are as follows (in thousands):


	Three Months Ended ‎March 31,
	2022		2021
Lease expense
Operating lease expense	$	3,493	$	3,685
Variable lease expense (benefit) ⁽¹⁾		(25)		(276)
Total lease expense	$	3,468	$	3,409

(1) Represents railcar lease abatements provided by the lessor when railcars are out of service during periods of maintenance or upgrade, offset by amounts incurred in excess of the minimum payments required for the handling and unloading of railcars for a certain lease.

Supplemental cash flow information related to operating leases is as follows (in thousands):


	Three Months Ended ‎March 31,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3,358	$	3,598

Right-of-use assets obtained in exchange for lease obligations:
Operating leases		4,709		6,255

Right-of-use assets and lease obligations derecognized due to lease modifications:
Operating leases		-		51

Supplemental balance sheet information related to operating leases is as follows:


	March 31, 2022		December 31, 2021
Weighted average remaining lease term		4.1 years		4.1 years

Weighted average discount rate		3.58%		3.65%

Aggregate minimum lease payments under the operating lease agreements for the remainder of 2022 and in future years are as follows (in thousands):



Year Ending December 31,	Amount
2022	$	10,038
2023		11,815
2024		9,772
2025		7,201
2026		2,655
Thereafter		3,107
Total		44,588
Less: Present value discount		(3,210)
Operating lease liabilities	$	41,378

The partnership has additional railcar operating leases that commence in the second quarter of 2022, with undiscounted future lease payments of approximately $1.7 million and lease terms of four years. This amount is not included in the tables above.

Lease Revenue

The components of lease revenue for the three months ended March 31, 2022 and 2021, are as follows (in thousands):


	Three Months Ended ‎March 31,
	2022		2021
Lease revenue
Operating lease revenue	$	15,758	$	16,826
Variable lease revenue ⁽¹⁾		452		517
Total lease revenue	$	16,210	$	17,343

(1) Represents amounts charged to Green Plains Trade under the storage and throughput agreement in excess of the initial rate of $0.05 per gallon, amounts delivered by Green Plains Trade and other customers in excess of various minimum volume commitments, and the difference between the contracted railcar volumetric capacity and the actual amount provided to Green Plains Trade during the period.

In accordance with the amended storage and throughput agreement, Green Plains Trade is obligated to deliver a minimum volume of 217.7 mmg per calendar quarter to the partnership’s storage facilities and pay $0.05312 per gallon on all volume it throughputs associated with the agreement. The rate increased on July 1, 2020 from $0.05 per gallon to $0.05312 per gallon in accordance with the terms of the agreement. The minimum volume commitment decreased from 232.5 mmg per calendar quarter to 217.7 mmg per calendar quarter as of March 22, 2021, in conjunction with the Ord disposition.

The remaining lease term for the storage and throughput agreement is 7.3 years, with automatic one year renewal periods in which either party has the right to terminate the contract. Due to the unilateral right to termination during the renewal period, the lease contract would no longer contain enforceable rights or obligations. Therefore, the lease term does not include the successive one year renewal periods. Anticipated minimum operating lease revenue under this agreement assuming a consistent rate of $0.05312 per gallon for the remainder of 2022 and in future years, is as follows (in thousands):


Year Ending December 31,	Amount
2022	$	34,693
2023		46,257
2024		46,257
2025		46,257
2026		46,257
Thereafter		115,642
Total	$	335,363

In accordance with the amended rail transportation services agreement with Green Plains Trade, Green Plains Trade is required to pay the rail transportation services fee for railcar volumetric capacity provided by the partnership. The remaining lease term for this agreement is 4.7 years, with automatic one year renewal periods in which either party has the right to terminate the contract. Due to the unilateral right to termination during the renewal period, the lease contract would no longer contain enforceable rights or obligations. Therefore, the lease term does not include the successive one year renewal periods. Under the terms of the agreement, Green Plains Trade is not required to pay for volumetric capacity that is not available due to inspections, upgrades, or routine repairs and maintenance. As a result, the actual volumetric capacity billed may be reduced based on the amount of volumetric capacity available for use during any applicable period. Anticipated minimum operating lease revenue under this agreement for the remainder of 2022 and in future years is as follows (in thousands):


Year Ending December 31,	Amount
2022	$	14,428
2023		14,722
2024		11,755
2025		8,352
2026		2,268
Thereafter		1,188
Total	$	52,713

Other Commitments and Contingencies

The partnership has agreements for contracted services with certain vendors that require the partnership to pay minimum monthly amounts, which expire on various dates. These agreements do not contain an identified asset and therefore are not considered operating leases. The partnership satisfied the minimum commitments under these agreements during the three months ended March 31, 2022 and 2021. Aggregate minimum payments under these agreements for the remainder of 2022 and in future years are as follows (in thousands):



Year Ending December 31,	Amount
2022	$	495
2023		-
2024		-
2025		-
2026		-
Thereafter		-
Total	$	495

Legal

The partnership may be involved in litigation that arises during the ordinary course of business. Currently, the partnership is not a party to any material litigation.