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The issue with ethanol is twofold:
(1) Ethanol absorbs water. This is why it has to be shipped in container trucks rather than run through pipelines. If your fuel tank isn't completely sealed (and of course, they aren't), then the ethanol will slowly absorb water from the air. In the case of our fuel tanks, the exposure is small enough that a 10% ethanol blend will be okay for quite a while - a month or more - but that water is bad for compression in the engine, and can lead to rust in the gas tank.
(2) Ethanol (as is true with about all non-petrol fuels) has a much greater effect on rubber than petrol. Again, at a 10% blend it doesn't seem to cause any trouble, but at higher quantities it will eat any rubber gas lines very quickly. E85 (85% ethanol) eats through hoses so quickly that cars meant to run it have to use steel pipe instead. This is what strikes me as really stupid about the people you see running E85 in their normal cars.
Honestly, I think that Triumph would probably say "No ethanol" just like they say "No methanol" if they could; but in places like Minnesota, all our gas has ethanol in it, so if they hope to sell a bike in those places, they have to allow it.
As with everything, Triumph is playing the odds here. Introducing small amounts of ethanol (or even methanol for that matter) *WILL* raise warranty claims in the aggregate, but only a little - most people will have no trouble. The warranty claims will rise in small enough numbers that it's worth the trade-off for additional sales. So they draw the line at 10%, which hits a sweet spot of increasing sales without inordinately raising warranty claims. They would probably do the same with methanol if it were in wide enough use to raise their sales, but of course it's not, and so there's no incentive for them to risk raising their warranty claims rate.
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