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 and was exercised in the

fourth

quarter of

2019.

March 6, 2019,

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

984

acres of land situated in Brownsville, Cameron County, Texas for the purposes of constructing, operating, and maintaining the Terminal and gas treatment and gas pipeline facilities.

The initial term of the Rio Grande Site 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 FID for the

first

phase of the Terminal. Under the Rio Grande Site Lease, the Effective Date Notice was to be delivered

later than

November 6, 2019 (

the “Outside Effective Date”) unless Rio Grande was unable to deliver the Effective Date Notice prior to the Outside Effective Date due to reasons unrelated to its own acts or omissions or its inability to secure

one

or more of the required permits for the Terminal. In such a case, the Outside Effective Date would be automatically extended on a month-to-month basis (the “Effective Date Notice Extension Period”). Rio Grande has the option to renew and extend the term of the Rio Grande Site Lease beyond the Primary Term for up to

two

consecutive renewal periods of

ten

years each provided that Rio Grande has

not

caused an event of default under the Rio Grande Site Lease. Rio Grande did

not

deliver the Effective Date Notice prior to the Outside Effective Date due to

not

having obtained the required permits for the Terminal prior to the Outside Effective Date and, therefore, the Outside Effective Date has been automatically extended on a month-to-month basis.

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

December 31, 2019

are as follows (in thousands):

Office leases	$	610
Land leases		444
Total operating lease right-of-use assets, net	$	1,054

Operating lease liabilities as of

December 31, 2019

are as follows (in thousands):

Office leases	$	698
Land leases		—
Total current lease liabilities		698
Non-current office leases		3
Non-current land leases		—
Total lease liabilities	$	701

Operating lease expense for the year ended

December 31, 2019

is as follows (in thousands):

Office leases	$	719
Land leases		456
Total operating lease expense		1,175
Short-term lease expense		321
Land option expense		543
Total land option and lease expense	$	2,039

Maturity of operating lease liabilities as of

December 31, 2019

are as follows (in thousands):

2020	$	744
2021		3
2022		—
2023		—
2024		—
Thereafter		—
Total undiscounted lease payments		747
Discount to present value		(46	)
Present value of lease liabilities	$	701

Other information related to our operating leases as of

December 31, 2019

is as follows (in thousands):

Cash paid for amounts included in the measurement of operating lease liabilities:
Cash flows from operating activities	$	1,844
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		443