The problem isn't so much with ethanol, it's monoculture. Relying on only one crop for energy. True corn produces some pretty impressive yields per acre compared to some other crops, but it in the long term it can't be the only thing we use.
The whole "uses more water" thing is only 50% true. Corn by itself has relatively low watering requirements compared to say rice or soybeans. The problem arises when we have to use pesticides(which are mostly water) to help poor quality(caused by poor soil) crops fight pests, and chemical fertilizers(again, mostly water) to counter-act poor quality (due to monoculture farming) soil.
There are other plants out there that yield almost as much, if not more, combined raw materials (oils, sugars and/or biomass) than corn, and use up different nutrients. Most of them are already widely grown.
Then there are other options that, for one reason or another, haven't been and probably never will be looked into.
Castor Bean grows wild in many parts of the state, grows rapidly, it's drought and flood tolerant and the only insect that will touch the stuff is the Castor Moth, which causes the pollination required to get the oil. One small problem with Castor. The seed pods contain trace amounts of ricin. Due to the age of paranoia we live in, it won't be long before somebody (ehem, big oil...) starts to spin castor farms as some sort of "Ticking Chemical Time Bomb" and no body will want one within a thousand miles of where they live. Never mind the fact that it's very hard to extract ricin from castor bean plants.
I've already mentioned another plant elsewhere on this site, so I will refrain from mentioning it again...
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