Two US Development Group companies, USD Partners LP and the newly formed USD Clean Fuels LLC, have entered into a five-year terminal services agreement with each other that provides for the inbound shipment of renewable diesel on rail to a terminal in West Colton, California, and the outbound shipment of the product on tank trucks to local consumers. The target start date for the agreement is Dec. 1.

According to US Development Group, the agreement is supported by a minimum throughput commitment to USD Clean Fuels from an investment-grade rated refining customer as well as a performance guarantee from US Development Group.

“This opportunity is incremental to our existing ethanol business at West Colton and is projected to generate additional adjusted EBITDA of approximately $2 million per year at the partnership over the five-year term,” said Adam Altsuler, USD Partner’s chief financial officer. “Total capital associated with the opportunity is approximately $1.8 million, which we intend to fund from cash flows from operations.”

Brad Sanders, executive vice president and chief commercial officer for US Development Group, said USD Clean Fuels was created in response to “a structural shift in demand” associated with decarbonizing the transportation fuels sector. “We believe our assets, capabilities and vision are ideally suited to serve our customers’ growth plans in clean fuels in terms of both geography and product offering,” he said, adding that those products include renewable diesel and sustainable aviation fuel. “We are thrilled to be able to bring cleaner and sustainable industry solutions to California fuel markets, and we look forward to more announcements in the future as the industry and clean fuels markets continue to evolve.”

In addition to the terminal services agreement, the two companies have also entered into a marketing agreement that grants USD Clean Fuels the right to market and develop renewable diesel growth projects at the West Colton terminal.

Furthermore, US Development Group has also entered into to an amended and restated five-year omnibus agreement with USD Partners—previously set to expire in October—to extend the term of the partnership’s right of first offer on any midstream infrastructure assets that US Development Group may develop, construct or acquire. This new omnibus agreement would now include any renewable diesel growth projects at the West Colton terminal.