The water consumption piece is definitely pertinent. While it's true that re-consumption of the ethanol will place more H20 back into the environment, it's a sideways point because we then have to collect (and I'm assuming purify) that water again to re-utilize it. It's the same problem with our water supply now. We don't drink it and have it disappear. We pee it back out into our toilets.
I do not think that the issue of water consumption is actually pertinent here due to the differences in value of water vs ethanol so I tried to find evidence to support that and found this:
"Depending on local energy prices, 1,000 gallons of desalinated seawater can cost around $3 or $4. Although that might not seem like much, it is still cheaper in many places to pump water out of the ground or import it from somewhere else."
"As of September 2016, the rack price of ethanol was $1.51 versus $1.75 for unleaded 87–octane gasoline—a difference of 24 cents per gallon."
So if a thousand gallons of ethanol sells for $1510.00 and desalinated seawater costs 3 to 4 dollars, I think any supply problems with water won't be a factor.