Gasoline (varies with formulation) has appx 114k btu/gal
E-85 has appx 81k btu/gal (appx 70% of gasoline)
Ethanol has appx 76k btu/gal
The ratio of BTU/gal is the main issue with the changing miles per gallon in a Flex Fuel (computer controlled injection based on getting the desired power)
If you drive the same and the system works, then it is correct to expect 70% of the miles per gallon on E-85 as on no-alcohol gasoline.
But you'll likely be comparing 10% ethanol gas to the E-85 so you should do a bit better on the E-85.
Actually, Henry Ford expected automobiles to be operated on alcohol.
Gasoline was a waste product of processing oil for other purposes. Oil companies just burned it to get rid of it.
(and as long as we use oil for ANYTHING, we'll end up making gasoline as part of processing crude oil.)
gasoline was cheap and reasonably available. Cheaper than the alcohol, and it worked well. So it became the predominant fuel for automobiles and people rapidly forgot that the car was supposed to be alcohol fueled.
As long as gasoline is cheaper for use as fuel in cars, that is what will dominate.
When alcohol is cheaper then that will naturally become the dominant fuel.
Artificially manipulating the market really doesn't do any good because it lets the producers of the product being artificially promoted make a profit without researching better ways to process the product. It also lends to the argument that the product couldn't survive on the market without government subsidies.
If the product can't survive on the market on its own... then the product isn't ready for the market. Eventually, alcohol will be the dominant fuel... but there's no reason for the government to manipulate the market.