COMMITMENTS AND CONTINGENCIES

Leases

Land, buildings, and equipment are leased under agreements that expire in various years, including a 99-year land lease that extends through 2108. Rental costs for continuing operations were $5.9 million, $7.3 million, and $5.9 million for the years ended December 31, 2018, 2017, and 2016, respectively, a portion of which was capitalized.

The following table reflects NW Natural's future minimum lease payments due under non-cancelable operating leases for continuing operations at December 31, 2018. These commitments relate principally to the lease of the office headquarters and underground gas storage facilities.



In thousands	Minimum lease payments
2019	$	5,368
2020	4,812
2021	7,077
2022	7,223
2023	7,304
Thereafter	149,881
Total	$	181,665

In October 2017, NW Natural entered into a 20-year operating lease agreement for a new headquarters in Portland, Oregon in anticipation of the expiration of the current lease in 2020.

Payments under the new lease are expected to commence in 2020. Total estimated base rent payments over the life of the lease are approximately $160 million and have been included in the table above. There is an option to extend the term of the lease for two additional seven-year periods.

Additionally, the lease was analyzed under the lease standard in effect at the time of signing in consideration of build-to-suit lease accounting implications, and NW Natural concluded that it was the accounting owner of the asset during construction. As a result, NW Natural recognized $26.0 million and $0.5 million in property, plant and equipment and an obligation in other non-current liabilities for the same amount in its consolidated balance sheet at December 31, 2018 and 2017, respectively.

Gas Purchase and Pipeline Capacity Purchase and Release Commitments

NW Natural has signed agreements providing for the reservation of firm pipeline capacity under which it is required to make fixed monthly payments for contracted capacity. The pricing component of the monthly payment is established, subject to change, by U.S. or Canadian regulatory bodies. In addition, NW Natural has entered into long-term sale agreements to release firm pipeline capacity. NW Natural also enters into short-term and long-term gas purchase agreements.

The aggregate amounts of these agreements were as follows at December 31, 2018:



In thousands	Gas Purchase Agreements		Pipeline Capacity Purchase Agreements		Pipeline Capacity Release Agreements
2019	$	144,500	$	78,449	$	4,272
2020	2,776		76,613		3,560
2021	2,313		66,656		—
2022	—		61,075		—
2023	—		60,619		—
Thereafter	—		580,022		—
Total	149,589		923,434		7,832
Less: Amount representing interest	1,314		201,224		183
Total at present value	$	148,275	$	722,210	$	7,649

Total payments for fixed charges under capacity purchase agreements were $82.6 million for 2018, $85.3 million for 2017, and $85.0 million for 2016. Included in the amounts were reductions for capacity release sales of $4.3 million for 2018, $4.5 million for 2017, and $4.5 million for 2016. In addition, per-unit charges are required to be paid based on the actual quantities shipped under the agreements. In certain take-or-pay purchase commitments, annual deficiencies may be offset by prepayments subject to recovery over a longer term if future purchases exceed the minimum annual requirements.

Environmental Matters

Refer to Note 17 for a discussion of environmental commitments and contingencies.