E85 is equivalent to 100+ octane. FFV engines can advance the spark and make at least partial use of that; they make more power on E85 than on gasoline. That also reduces, slightly, the mileage hit, which is still substantial due to the lower energy content per gallon of ethanol compared to gasoline. Of course, if you have a race engine where everything else is designed for that kind of octane, you can do even better.

Do Indy cars still run on straight methanol?