By Arathy Somasekhar and Nia Williams

HOUSTON, June 12 (Reuters) - U.S. oil refiners and West

Coast traders are flagging concerns about the quality of crude

shipped on the newly completed Trans Mountain pipeline expansion

(TMX), warning that high vapor pressure and acidity limits could

deter purchases of Canadian heavy barrels.

The $24.84 billion (C$34 bln) expansion started operations

last month and has nearly tripled shipping capacity to Canada's

Pacific Coast to 890,000 barrels per day (bpd).

The roughly 2.5 million bpd U.S. West Coast refining market

is expected to be a major outlet for Canadian heavy oil shipped

via Trans Mountain but questions over crude quality could dampen

demand for the barrels. That could weigh on prices or push more

oil onto rival Canadian export pipelines with lower vapor

pressure and acidity limits.

Several West Coast refiners have raised concerns in recent

weeks about the initial volumes' high sulfur content, acidity

and vapor pressure, conditions that could damage refining

equipment or increase air pollution, according to regulatory

complaints and three people familiar with the matter, though

thus far it has not affected demand.

The Trans Mountain pipeline historically has had higher

vapor pressure limits than other export pipelines because it

shipped refined products as well as crude oil. Although the

expanded line mainly ships heavy crude, it carried over the same

limits.

Ten companies and industry associations including Canadian

Natural Resources Ltd ( CNQ ), U.S. oil major Chevron ( CVX )

and refiner Valero Energy ( VLO ) have written to the Canada

Energy Regulator (CER) to complain about high vapor pressure

limits and have asked for the pipeline's technical

specifications to be narrowed.

Trans Mountain said its current vapor pressure and acidity

specifications were developed though a shipper consultation

process and have been in place since March 2023.

"Prior to the filing of the current complaint, Trans

Mountain was aware of newly raised shipper concerns and had

engaged in an updated consultation process with shippers which

is ongoing," the company told Reuters in an email.

Vapor pressure limits, which measure the volatility of

crude, are "wholly inappropriate" for West Coast refining

markets, Valero wrote to the CER last month. It and other West

Coast refiners are expected to be top buyers of TMX barrels.

Chevron ( CVX ) separately told the CER the vapor pressure limit

exceeds the regulatory limit set for storage tanks at both its

California refineries. High pressures cause more vapors to leak

from tanks into the atmosphere.

The higher vapor limit also means more lower-value light oil

could be blended into Trans Mountain crude, reducing its value,

wrote oil producer Canadian Natural, a major shipper on the

pipeline.

The TMX crudes are more acidic, Chevron ( CVX ) wrote, a trait that

can corrode processing equipment and cause damage.

"Refiners are still trying to figure out the new paradigm.

Lot of uncertainty and folks are running (operational) models,"

a West Coast crude trader said.

LIMITED INVESTMENT APPETITE

Refiners are unlikely to spend the money to modify their

equipment to accommodate the unusual characteristics of the TMX

crude.

There is limited appetite for investment required to add new

units or make upgrades at (West Coast) refineries, said RBN

Energy analyst Robert Auers, citing regulatory hurdles.

Trans Mountain said in May a review of the pipeline's

technical specifications is underway, prompting Canadian Natural

to ask the CER to pause considering the complaint for 45 days.

Last week the CER agreed, meaning there will be no regulatory

decision on the issue before July 8.

Canadian heavy crudes are also sour, containing high amounts

of sulfur, which will strain the existing sulfur removal

capacity and limit how many barrels can be imported by West

Coast refiners, said Jeffrey McGee, managing director of marine

advisory firm Makai Marine Advisors.

Los Angeles area refineries are the only significant

destination for TMX's heavy sour crude grades along the West

Coast as Washington state, Hawaiian and Alaskan refineries

prefer lighter and sweeter crudes, McGee noted.

COSTS TRUMP CONCERNS

The low cost and proximity of Canadian barrels have so far

however trumped the quality concerns. The vessel Aqualeader

discharged about 290,000 barrels of crude last month at Marathon

Petroleum's ( MPC ) Anacortes, Washington, becoming the first

TMX cargo to arrive on the West Coast, refinery ship tracking

data showed.

Chevron's ( CVX ) El Segundo, California, and Phillips 66's

Ferndale, Washington, refineries also took shipments in

recent days.

The purchases will displace some South American crudes, such

as Ecuador's Napo and Oriente and Colombia's Vasconia. Iraqi

Basrah could also be replaced due to their higher shipping

costs, traders and analysts noted.

Crude oil from California and Alaska North Slope crude,

however, is expected to continue to be a part of West Coast

refinery slates, thanks to their superior quality.

($1 = 1.3687 Canadian dollars)