Well, the BTU energy content is less than gas, but that does not equate to less mpg or performance when the engine is designed specifically to take advantage of all the features of the fuel. Case in point, the GM 3.2L EBDI engine in testing right now. Primarily designed for E85, but is also flex fuel capable. On E85, it has the same HP and Torque as the 6.6L Duramax diesel, while getting the same fuel economy as the diesel. Now there is a strong difference between the BTU content of ethanol compared to diesel, much more than the difference between gas and ethanol. Yet, an engine half the size of the 6.6L can generate the same HP and Torque using a fuel with lower BTU content and considerably cheaper in price at the pump. This engine has been under testing in 3500HD pickups. No idea when or if it will ever be made available to us out here in the cheap seats. BTU content of the fuel is only one aspect to consider. There are other aspects of the fuel that can be taken advantage of. In ethanol's case, significantly higher compression ratios than can be run with even premium gas. Ethanol, when injected, has a cooling effect on the intake air temperature and combustion chamber. You can not only have higher compression ratios with ethanol, but you also get a higher air density from the air being cooled. Something neither gas or diesel offers. And these are just some of the characteristics of ethanol that can be taken advantage of.
The problem with the lower mpg in current flex fuel vehicles using E85, is that they are designed primarily for gas, and cannot fully take advantage of things like diesel engine level compression ratios and other factors, to glean all the capabilities out of using higher ethanol concentrations. Same can be said of all other gas engines using E10. The engines were not primarily developed to take advantage of the fuel. Just basic modifications to allow the use of it. Hopefully soon, engines designed around ethanol specifically will be made available, and we can then use all the E85 we want and allow those with older engines to use all the gas they want. We all will win!
Those that have such an aversion to using ethanol should be championing the OEM's to bring out these newer E85 specific engines so that they will have more traditional gas to use for themselves. It is called... "lighting a candle instead of cursing the darkness". And who cares what the ethanol is made from... corn, sugar beets, or granny's fruit cake. If it is not cost effective to make one way, then folks will find a way to use another source. The market price will determine what is cost effective to use as a feed stock for the product.