The fuel isn't the problem. Basing ethanol production on topsoil is the problem.
Sandia NREL proved in the 1980s you can grow algae economically in open raceway ponds, and you don't even need to add algae. The air will do it for you, and the most efficient algae to produce at your latitude and in your local conditions will outcompete other strains so you will automatically get the most beneficial species for production in your location.
The focus at the time was for lipids for biodiesel production. But you could as easily produce ethanol. Or more intelligently, you would make butanol using the ABE process, which also produces some acetone and some ethanol. Octane can be adjusted by mixing the butanol and the acetone. The ethanol can be used as an industrial solvent, far away from fuel systems, where it draws in water.