If that's true, then clearly it would be a bad program. But I don't think that's true. Because the subsidy is only $0.51 per gallon of ethanol ($0.05 per gallon of E10).ethanol subsidy Nobody could afford to claim the subsidy if it really took that much gas to produce.
That would seem to bear out in looking at the total figures as well. $6 billion in ethanol subsidies vs 6 billion gallons of ethanol produced. That seems to indicate total ethanol subsidies are more like $1.00, but that $6 billion cost might include federal administrative costs. Still at $1.00/gallon of ethanol subsidy and a cost of 3 gallons of gas, nobody would produce E10.
Sorry, I got my numbers wrong - it takes at least 1.3 gallons of oil to make one gallon of corn ethanol.