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Note 7 - Leases

12 Months Ended

Dec. 31, 2020

We currently lease approximately 25,600 square feet of office space for general and administrative purposes in Houston, Texas under a lease agreement that expires on September 30, 2021.

On 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 30 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 no 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.

On April 30, 2020, Rio Grande and the BND amended the Rio Grande Site Lease (the “Rio Grande Site Lease Amendment”) to extend the effective date for commencing the Rio Grande Site Lease to May 6, 2021 (the “Effective Date”). The Rio Grande Site Lease Amendment further provides that Rio Grande has the right, exercisable in its sole discretion, to extend the Effective Date to May 6, 2022 by providing the BND with written notice of its election no later than the close of business on the Effective Date.

In 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 a potential second U.S. LNG project (collectively, the “Galveston Bay Leases”). The term of the Galveston Bay Leases is 36 months with an option to extend for an additional 12 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. The Galveston Bay Leases were not renewed upon expiration on December 31, 2020.

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 12 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 are as follows (in thousands):

		*December 31,*		*December 31,*
		*2020*		*2019*
Office leases	$	429	$	610
Land leases		—		444
Total operating lease right-of-use assets, net	$	429	$	1,054

Operating lease liabilities are as follows (in thousands):

		*December 31,*		*December 31,*
		*2020*		*2019*
Office leases	$	432	$	698
Land leases		—		—
Total current lease liabilities		432		698
Non-current office leases		—		3
Non-current land leases		—		—
Total lease liabilities	$	432	$	701

Operating lease expense is as follows (in thousands):

		*December 31,*		*December 31,*
		*2020*		*2019*
Office leases	$	829	$	719
Land leases		446		456
Total operating lease expense		1,275		1,175
Short-term lease expense		319		321
Land option expense		9		543
Total land option and lease expense	$	1,603	$	2,039

Maturity of operating lease liabilities as of December 31, 2020 are as follows (in thousands):

2021	$	452
2022		—
2023		—
2024		—
2025		—
Thereafter		—
Total undiscounted lease payments		452
Discount to present value		(20	)
Present value of lease liabilities	$	432

Other information related to our operating leases as of December 31, 2020 is as follows (in thousands):

		*December 31,*		*December 31,*
		*2020*		*2019*
Cash paid for amounts included in the measurement of operating lease liabilities:
Cash flows from operating activities	$	1,004	$	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		605		443