Note

— Leases

We currently lease approximately

38,300

square feet of office space for general and administrative purposes in Houston, Texas under a lease agreement that expires on

September 30, 2020.

January 2017,

NextDecade LLC executed surface lease agreements with the City of Texas City and the State of Texas for a

994

-acre site for the Galveston Bay Terminal (collectively, the “Galveston Bay Leases”). The term of the Galveston Bay Leases is

months with an option to extend for an additional

months. Such option was included in the measurement of Operating lease right-of-use assets and Operating lease liabilities.

March

2019,

Rio Grande entered into a lease agreement with the Brownsville Navigation District of Cameron County, Texas (“BND”), pursuant to which Rio Grande has agreed to lease approximately

984

acres of land situated in Cameron County, Texas for the purposes of constructing, operating and maintaining the Terminal.

The initial term of the lease is for

years (the “Primary Term”), which will commence on the date specified in a written notice by Rio Grande to BND (the “Effective Date Notice”), if given, confirming that Rio Grande or a Rio Grande affiliate has made a positive final investment decision (“FID”) for the

first

phase of the Terminal. The Effective Date

may

later than

November 6, 2019 (

the “Outside Effective Date”), provided, however, that in the event Rio Grande does

not

deliver the Effective Date Notice prior to the Outside Effective Date due to reasons unrelated to an act or omission of its own or its inability to secure

one

or more of the required permits for the Terminal, then the Outside Effective Date will be automatically extended on a month-to-month basis for a maximum of

six

months. Rio Grande has the option to renew and extend the term of the lease beyond the Primary Term for up to

two

consecutive renewal periods of

ten

years each provided that it has

not

caused an event of default under the lease

In adopting Topic

842,

the Company has elected the “package of practical expedients,” which permits it

not

to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the use-of-hindsight and the practical expedient pertaining to land easements. The Company elected

not

to apply Topic

842

to arrangements with original lease terms of

months or less. At lease commencement date, the Company estimated the lease liability and the right-of-use assets at present value, at inception, of

$2.3

million. On

January 1, 2019,

upon adoption of Topic

842,

the Company recorded right-of-use assets of

$1.6

million, lease liabilities of

$1.9

million, eliminated deferred rent of

$0.1

million and recorded a cumulative-effect adjustment of

$0.2

million.

The Company determines if a contractual arrangement represents or contains a lease at inception. Operating leases with lease terms greater than

twelve

months are included in Operating lease right-of-use assets and Operating lease liabilities in the Consolidated Balance Sheets.

Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the future lease payments over the lease term. The Company utilizes its incremental borrowing rate in determining the present value of the future lease payments. The incremental borrowing rate is derived from information available at the lease commencement date and represents the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment. The right-of-use assets and lease liabilities

may

include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has lease arrangements that include both lease and non-lease components. The Company accounts for non-lease components separately from the lease component.

Operating lease right-of-use assets as of

September 30, 2019

are as follows (in thousands):

Office leases	$	797
Land leases		539
Total operating lease right-of-use assets, net	$	1,336

Operating lease liabilities as of

September 30, 2019

are as follows (in thousands):

Office leases	$	935
Land leases		577
Total current lease liabilities		1,512
Non-current office leases		10
Non-current land leases		—
Total lease liabilities	$	1,522

Operating lease expense is as follows (in thousands):

	Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019
Office leases	$	232	$	381
Land leases		328		815
Total operating lease expense		560		1,196
Short-term lease expense		38		78
Land option expense		156		476
Total land option and lease expense	$	754	$	1,750

Maturity of operating lease liabilities as of

September 30, 2019

are as follows (in thousands, except lease term and discount rate):

2019 (remaining)	$	188
2020		1,412
2021		3
2022		—
2023		—
Thereafter		—
Total undiscounted lease payments		1,603
Discount to present value		(81	)
Present value of lease liabilities	$	1,522

Weighted average remaining lease term - years		1.1
Weighted average discount rate - percent		12.0

Other information related to our operating leases for the

nine

months ended

September 30, 2019

is as follows (in thousands):

Cash paid for amounts included in the measurement of operating lease liabilities:
Cash flows from operating activities	$	969
Noncash right-of-use assets recorded for operating lease liabilities:
Adoption of Topic 842		1,562
In exchange for new operating lease liabilities during the period		446