This is where the story gets a bit murky - petrol is allowed, by law, to be up to 5% water. (is it ??) This is before ethanol appeared on the scene.
This fact emerged when some petrol stations started pumping neat water into folks fuel tanks - with predictable results.
It seems the underground tanks contain some water, which is hard to exclude, and the petrol simply floats on top, and is pumped off the top and sold to customers. As long as the underground tanks don't fill with water, all is well....
Petrols used to contain something that grabbed any stray water in your fuel tank, and bound it up chemically within the fuel - hence the 5% bit.
So does ethanol not blend with petrol, or separate out in some fashion that is the problem ?