Do yuh wanna know why? It's because of the word "distilled."
One thing they're worried about in this country is home/farm distillery. That's because the same alcohol you run in your car is moonshine. When alcohol fuel use is widespread, more and more people will apply for the required licenses to make alcohol and some of that production will undoubtedly be diverted to... um... other uses than motor fuel. The government fears the growth of a distillery-based culture similar to home brewing and wine making.
Right now I'll bet they're only issuing licenses to large enterprises where production can be closely monitored. But at some point smaller producers will apply and I'm sure there will be a spate of lawsuits by people who want to make alcohol in lesser amounts but who can't because they won't be issued a permit by the feds. The feds undoubtedly fear that alcohol production will get out of control, meaning more production of tax-free moonshine.
This is the hidden reason why the government wants to skip a generation of fuel production (alcohol) and jump directly to higher tech fuels (like hydrogen).