Quarterly report pursuant to Section 13 or 15(d)

Goodwill and Intangible Assets

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Goodwill and Intangible Assets
 9 Months Ended
Sep. 30, 2021
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]  
Goodwill and Intangible Assets
NOTE 8 – Goodwill and Intangible Assets
Goodwill
At September 30, 2021, the Company had $27.0 million of goodwill, all of which is allocated to the RNG segment. The goodwill is primarily associated with the acquisition of Aria in the Business Combinations.
Intangible Assets
Intangible assets consist of biogas rights agreements, off-take agreements, operations and maintenance contracts, an RNG purchase contract, customer relationships and trade names that were recognized as a result of the allocation of the purchase price under business acquisitions based on their future value to the Company, and such intangible assets will be amortized over their estimated useful lives. The biogas rights agreements have various renewal terms in their underlying contracts that are factored into the useful lives when amortizing the intangible asset.
Intangible assets consist of the following as of September 30, 2021 and December 31, 2020:
(in thousands)
 September 30, 2021
Gross Carrying
Amount
Accumulated
Amortization
Net
Biogas rights agreements
 $ 554,745  $ 1,560  $ 553,185 
Electricity off-take agreements 23,400  113  23,287 
Operations and maintenance contracts
 8,620  11  8,609 
RNG purchase contract 6,920  199  6,721 
Customer relationships
 350  125  225 
Trade names
 150  54  96 
Total
 $ 594,185  $ 2,062  $ 592,123 
(in thousands)
 December 31, 2020
Gross Carrying
Amount
Accumulated
Amortization
Net
Biogas rights agreements
 $ 8,293  $ —  $ 8,293 
Customer relationships
 350  70  280 
Trade names
 150  30  120 
Total
 $ 8,793  $ 100  $ 8,693 
The biogas rights agreements, some of which are evergreen, are being amortized over their expected useful lives ranging from 4 years to 30 years, and the amortization period for each agreement begins once the associated facility commences operations. Total amortization expense was approximately $1.6 million for both the three and nine months ended September 30, 2021. The annual amortization expense is expected to be approximately $35 million for each of the next 5 years.
Below-Market Contracts
As a result of the Aria Merger, the Company assumed certain fixed-price sales contracts that are below current and future market prices. The contracts were recorded at fair value and are classified as other long-term liabilities on the Company’s consolidated condensed balance sheet.
(in thousands)
 September 30, 2021
Gross Liability
Accumulated
Amortization
Net
Gas off-take agreements
 $ 108,880  $ 488  $ 108,392 
The below-market contract amortization was $0.5 million for both the three months and nine months ended September 30, 2021, and was recognized as an increase to revenues since it relates to the sale of RNG and related Environmental Attributes.
Aria Energy LLC  
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]  
Intangible Assets Intangible Assets - Predecessor
Intangible assets consist of gas rights agreements, operations and maintenance contracts, power purchase, gas sales and gas purchase agreements that were created as a result of the allocation of the purchase price under business acquisitions based on the future value to Aria and amortized over their estimated useful lives. The gas rights agreements have various renewal terms in their underlying contracts that are factored into the useful lives when amortizing the intangible asset.
Amortizable Intangible Assets
December 31, 2020
(in thousands) Gross Carrying Amount Accumulated Amortization Net
Gas rights agreements $ 217,285  $ 102,944  $ 114,341 
Operations and maintenance contracts 3,500  2,475  1,025 
Gas sales agreements 32,059  20,503  11,556 
Total $ 252,844  $ 125,922  $ 126,922 
Details of the intangible assets are summarized below:
Expense
Type of Contract Amortization Line Item Remaining Lives July 1 to September 14, 2021 July 1 to September 30, 2020 January 1 to September 14, 2021 January 1 to September 30, 2020
Gas rights Depreciation, amortization and accretion
4 to 16 years
 $ 1,892  $ 3,777  $ 6,494  $ 11,331 
Operation and maintenance Amortization of intangibles and below-market contracts
5 years
 $ 52  $ 145  $ 178  $ 434 
Gas sales Amortization of intangibles and below-market contracts
1 to 8 years
 $ 733  $ 891  $ 2,515  $ 2,674 
Below-Market Contracts
Due to business acquisitions and asset acquisitions, Aria previously acquired certain below-market contracts, which are classified as noncurrent liabilities on Aria’s consolidated balance sheet as of December 30, 2020. These include:
December 31, 2020
Gross Accumulated
(in thousands) Liability Amortization Net
Gas purchase agreements $ 19,828  $ 14,059  $ 5,769 
For intangibles and below-market contracts, depreciation, amortization and accretion was $7.4 million and $12.2 million for the periods ended September 14, 2021 and September 30, 2020, respectively. Below-market contracts related to the purchase of gas are amortized to cost of energy, and amortization was $1.8 million for both the periods ended September 14, 2021 and September 30, 2020, which was recorded as a decrease to cost of energy.