A new scientific study of bioethanol production estimates it will use lots of water, perhaps water that won't actually be available as the climate changes in the U.S. Corn Belt. Some estimates of current water use for bioethanol production: 9 billion gallons annually. The new study says that consumption could actually balloon to over 800 billion gallons when you figure in irrigation practices.
This may actually require some thought beyond letting the blessed market forces take over. In some regions of the U.S. a gallon of ethanol can be produced with about a hundfred gallons of water. In some areas it could take over two thousand gallons of water for the same gallon of houch, 'er fuel. So, maybe we don't produce bioethanol in dry places like the California Central Valley?