U.S. ethanol credits spike on refiner demand

*RIN prices have risen from 4-8 cts to 10-11 cents

*2008 deadline for turning in RINS coming up February 28

*Cellulosic RINs worth more than traditional ethanol

By Timothy Gardner

NEW YORK, Jan 14 (Reuters) - Stung by the high price of ethanol, some U.S. oil refiners are buying credits to meet their biofuel requirements instead of actually blending the fuel into gasoline, the head of a year-old exchange offering the credits said.

Under the 2007 Renewable Fuels Standard law that seeks to begin to wean the country off foreign oil, the petroleum industry as a whole must blend 11.1 billion gallons of biofuels like ethanol and biodiesel into gasoline in 2009. That number rises to 36 billion gallons by 2022.

Each refiner has to blend a required amount of biofuel into their gasoline. To track how the oil companies are doing, the government assigns each gallon of biofuel a code known as a Renewable Identification Number, or RIN. Each year refiners prove they have met their obligation by turning in the RINs to the Environmental Protection Agency.

But instead of blending all the biofuels themselves, refiners also have the option to simply buy excess RINS from other refiners who have done extra blending. And that route has become more popular as prices for ethanol have spiked.

"Nobody wants to blend ethanol into gasoline right now because it's just too expensive. They'd rather buy the RINS, which makes a lot more sense," said John Gelbard, who heads the New York-based Rinxchange, the only exchange on which RINs are currently traded.