Alcohol and water DO mix... hence the problem.

From the Outdoor Wire via Sebastian:

A pro-ethanol group known as Growth Energy is leading a petition to the EPA to allow in increase in the maximum amount of ethanol in gasoline from 10% (E-10) to 15% (E-15).


While this may (or may not) be OK for street and highway vehicles, it could be problematic for marine engines. Ethanol tends to attract water, which as you might imagine is readily available in a marine environment. Contaminant water makes the fuel more corrosive. This is an even bigger problem in marine engines since they tend to sit idle and unused for extended periods of time and the fuel "turnover rate" is less. Granted, fuel stabilizers and such might counter this problem.

My own boat needs a new fuel pump. It'll cost me about $700. Anyone who owns a boat knows that anything boat-related is more expensive than its automotive counterpart. I'd prefer to not run it on some fuel blend it was not designed, tested, and originally warrantied for.

Matt Crenson notes in an AP article titled "Biofuels Boom Raises Tough Questions" that

For all the environmental and economic troubles it causes, gasoline turns out to be a remarkably efficient automobile fuel. The energy required to pump crude out of the ground, refine it and transport it from oil well to gas tank is about 6 percent of the energy in the gasoline itself.

Ethanol is much less efficient, especially when it is made from corn. Just growing corn requires expending energy _ plowing, planting, fertilizing and harvesting all require machinery that burns fossil fuel. Modern agriculture relies on large amounts of fertilizer and pesticides, both of which are produced by methods that consume fossil fuels. Then there's the cost of transporting the corn to an ethanol plant, where the fermentation and distillation processes consume yet more energy. Finally, there's the cost of transporting the fuel to filling stations. And because ethanol is more corrosive than gasoline, it can't be pumped through relatively efficient pipelines, but must be transported by rail or tanker truck.

In the end, even the most generous analysts estimate that it takes the energy equivalent of three gallons of ethanol^* to make four gallons of the stuff. Some even argue that it takes more energy to produce ethanol from corn than you get out of it, but most agricultural economists think that's a stretch.

^*A citation in "Liberty and Tyranny" by Mark Levin cites it as "... three gallons of gasoline to make four gallons of the stuff [ethanol]."