Note 5 — 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.

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 the Galveston Bay Terminal (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.

On March 6, 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 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 final investment decision (“FID”) for the first phase of the Terminal. The Effective Date may be no 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 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 as of June 30, 2019 are as follows (in thousands):


Office leases	$	976
Land leases		632
Total operating lease right-of-use assets, net	$	1,608

Operating lease liabilities as of June 30, 2019 are as follows (in thousands):


Office leases	$	977
Land leases		807
Total current lease liabilities		1,784
Non-current office leases		273
Non-current land leases		-
Total lease liabilities	$	2,057

Operating lease expense is as follows (in thousands):


	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019
Office leases	$	146	$	262
Land leases		121		241
Total operating lease expense		267		503
Short-term lease expense		25		40
Land option expense		159		319
Total land option and lease expense	$	451	$	862

Maturity of operating lease liabilities as of June 30, 2019 are as follows (in thousands, except lease term and discount rate):


2019 (remaining)	$	788
2020		1,412
2021		3
2022		—
2023		—
Thereafter		—
Total undiscounted lease payments		2,203
Discount to present value		(146)
Present value of lease liabilities	$	2,057

Weighted average remaining lease term - years		1.4
Weighted average discount rate - percent		12.0

Other information related to our operating leases for the six months ended June 30, 2019 is as follows (in thousands):


Cash paid for amounts included in the measurement of operating lease liabilities:
Cash flows from operating activities	$	367
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