How Does USD Partners Company Work?

How does USD Partners LP keep crude flowing when pipelines are full?

USD Partners LP operates rail terminals and storage in Western Canada and the U.S., providing egress for heavy crude and biofuels when pipelines are constrained. Its terminals at Hardisty and Stroud act as a 'pipeline on rails,' linking producers to Gulf Coast markets.

USD Partners converts rail, tankage, and loading infrastructure into contracted throughput revenue, using long-term terminal and storage agreements to monetize surplus Canadian production and deliver to premium U.S. refiners; see USD Partners Porter's Five Forces Analysis.

USD Partners operates a rail-centric logistics platform that connects stranded Canadian crude to major U.S. refining hubs through the Hardisty Terminal, diluent recovery, and onward rail injection at Stroud, Oklahoma.

Terminal-Centric Network

The Hardisty Terminal serves as the operational hub with a fixed loading rack, two unit train stages and ~1.5 million barrels of storage, receiving multiple crude grades via pipeline.

Market-Driven Flexibility

Rail terminals enable customers to redirect volumes to refining centers based on real-time pricing and spreads, unlike fixed-destination pipelines.

Diluent Recovery Advantage

Partnership in the Diluent Recovery Unit (DRU) produces DRUbit, cutting diluent needs by nearly 30% and lowering cost per barrel while improving rail safety.

Integrated Delivery Path

Product ships from Hardisty to Stroud Terminal, then into the Cushing hub, supported by long-term Class I railroad agreements such as with CPKC for reliability.

The USD Partners business model centers on providing logistics solutions that convert regional supply imbalances into commercially transportable crude streams, supported by technology, rail partnerships and storage assets.

Operational and Commercial Benefits

Key operational strengths drive the USD Partners services and value proposition across the supply chain.

• Hardisty Terminal: dual unit-train capability increases throughput flexibility and reduces demurrage risk.
• DRU: produces non-flammable DRUbit, enabling safer, higher-density rail shipments and lower per-barrel logistics cost.
• Rail partnerships: long-term agreements with Class I railroads provide consistent routing into Cushing and other U.S. hubs.
• Market responsiveness: ability to reallocate cargo to highest-value refining hubs based on real-time spreads.

For context on the company origins and evolution of this logistics approach, see Brief History of USD Partners

Revenue Streams and Monetization Strategies center on long-term, take-or-pay terminalling contracts that provide predictable cash flow and insulate USD Partners from commodity price swings; in 2025 these agreements accounted for about 88 percent of revenue while terminalling, storage and throughput surcharges form the core of income.

Core Terminalling Fees

Loading, unloading, blending and heating services generate the primary recurring fees under capacity reservations and take-or-pay terms.

Storage and Throughput

Storage fees and throughput surcharges supplement base contracts, especially during peak seasonal flows and pipeline outages.

Renewable Fuels Logistics

Biofuels and renewable diesel handling make up approximately 14 percent of revenue, leveraging existing terminals for specialized feedstocks.

Tiered Pricing Models

Volume- and duration-based tiers boost per-asset yield while preserving spot flexibility to capture premium rates during demand spikes.

Asset Utilization

High utilization at Hardisty and Stroud supports an annualized revenue run rate near $125 million in 2025.

Spot and Surge Capture

When pipelines disrupt flows, rail demand spikes allow the partnership to monetize incremental throughput at elevated surcharge rates.

Revenue mix and contract design reflect the USD Partners business model emphasis on stable, fee-based income and strategic growth into renewables; see Revenue Streams & Business Model of USD Partners for further detail.

Monetization Mechanics

Key mechanisms translate capacity into cash while limiting commodity exposure and enabling strategic pricing.

• Take-or-pay contracts guarantee minimum revenue per period, reducing demand volatility impact.
• Service-level fees (loading, blending, heating) create diversified per-unit charges.
• Tiered discounts incentivize longer commitments and higher volumes, improving asset throughput.
• Renewables handling commands premium pricing for specialized storage and cleanliness protocols.

Key milestones include the 2021 launch and 2024 expansion of the Diluent Recovery Unit (DRU), multi-year contract renewals during the 2024 TMX completion, and a strategic pivot into DRUbit and biofuels that strengthened the company’s technology-driven logistics moat.

Major Milestones

The 2021 DRU launch and 2024 expansion converted the firm from a rail loader to a specialist in heavy crude logistics, capturing downstream value through proprietary recovery tech.

Strategic Contracting

Despite the Trans Mountain Expansion completing in 2024, the company secured multi-year renewals by leveraging destination-specific Stroud-to-Cushing services pipelines can’t match.

Geographic Advantage

Hardisty terminal offers direct connectivity to major Canadian export pipelines (Enbridge, Keystone), positioning the firm as a central clearinghouse for crude exports across North America.

Technology & ESG

Proprietary loading tech and safety protocols appeal to investment-grade refiners focused on ESG; DRUbit and biofuel moves address regulatory and market shifts.

The company’s business model emphasizes specialized rail-to-terminal services, technology-enabled diluent recovery, and destination-specific logistics that complement pipeline networks and underpin long-term contracts.

Competitive Edge & Strategic Moves

Competitive strength derives from location, proprietary DRU capabilities, and ecosystem effects that create switching costs for shippers and refiners.

• Hardisty access to Enbridge and Keystone enhances export routing flexibility and market reach.
• DRU project reduced diluent purchase needs and created new revenue streams via recovered product sales.
• Multi-year contract renewals in 2024 preserved throughput volumes despite TMX and maintained freight revenue stability.
• Expansion into DRUbit and biofuels diversified product mix and mitigated regulatory risk.

For a detailed strategic review and market context, see Marketing Strategy of USD Partners.

USD Partners holds a leading role in North American heavy crude rail logistics with an estimated 20 percent share of Western Canada’s rail export capacity, while facing near-term headwinds from pipeline expansions, regulatory shifts, and secular oil demand risks.

Industry Position

USD Partners business model centers on specialized heavy crude rail logistics and delivered product access to the U.S. Gulf Coast and international markets, leveraging terminal and transload assets to capture niche, higher-margin flows.

Market Share & Reach

With about 20 percent of available export rail capacity from Western Canada, USD Partners operates a network that connects producers to refiners and export points, underpinning its freight forwarding and logistics services.

Operational Risks

Key risks include pipeline competition if expansions proceed in 2025, tightening rail car safety standards, and carbon intensity reporting mandates that require recurring capital investment and operational changes.

Demand & Regulatory Pressure

Long-term decline in oil demand is a structural risk; combined with evolving compliance requirements, these factors increase cost of service and may compress margins for USD Partners services.

The company is pursuing a strategic pivot under its Green Corridor initiative to diversify throughput toward renewables and SAF, targeting 25 percent renewable throughput by 2027 and optimizing terminals like Stroud for refined and lower-carbon products.

Future Outlook & Strategic Priorities

Forward-looking priorities emphasize disciplined growth through higher-margin, non-flammable crude logistics, expansion into SAF and hydrogen transport exploration, and preserving returns on infrastructure investments through 2030.

• Expand renewable product handling to reach 25 percent of throughput by 2027
• Optimize Stroud terminal to handle a broader slate of refined products
• Pursue hydrogen logistics pilots and SAF supply chain integrations
• Maintain capital program to meet rail car and carbon reporting standards

For analysts assessing the USD Partners company structure and how USD Partners operates, review operational metrics, capital expenditures for compliance upgrades, and throughput mix; see this analysis on the company’s strategic positioning: Growth Strategy of USD Partners