At least four U.S. gasoline marketers are preparing legal and regulatory challenges to Colonial Pipeline over proposed changes in fuel shipping terms, which the companies say will hurt their margins and drive up fuel prices at the pump, according to sources familiar with the discussions.

The Colonial Pipeline is a critical artery for shipping fuel from the U.S. Gulf Coast to the East Coast, where refining capacity has shrunk and pipeline shipments are the most cost-effective way to meet regional demand. As such, changes to the pipeline's operations can have major impacts on markets in the world's largest motor fuel consuming nation.

Colonial last week sought approval from the Federal Energy Regulatory Commission (FERC) to stop shipping different gasoline grades at the same time and to eliminate shipments of so-called Grade 5 gasoline. However, a Colonial spokesperson said the changes would streamline operations and minimise slowdowns.

Two U.S. gasoline traders said their firms were exploring options for court challenges if Colonial implements the changes, with two others saying they planned to file protest notices asking FERC to block Colonial's proposed changes due to potential harm to shippers and consumers.

Colonial said the changes proposed last month should add 15,000 to 20,000 barrels per day of capacity to Colonial's main gasoline line. Colonial believes this will help shippers and consumers by moving more fuel on a pipeline that ran at full capacity throughout last year, a spokesperson said.

However, Colonial shippers who spoke with Reuters said the changes will hurt their margins and restrict the overall U.S. gasoline supply pool. They said Gulf Coast refiners would have to reduce blending of additives during times when regulators allow sale of gasoline with a higher Reid Vapor Pressure, or RVP.