Was he denaturing that alcohol?
If he was, I'm not sure that the ATF would do anything. In fact, as long as the purpose is clearly not to produce a drinkable product, I'm not sure they have a leg to stand on. We certainly produced it in college chem and there are some home-brew folks that generate it for their hybrids (presumably right alongside the home-brew biodiesel folks and that's a dangerous operation if not done properly).
I think the sticking point is mention of it right next to home beer brewing.
I'm not sure of the law, but I gotta assume it's to prevent bootlegging and blinding of innocents due to your misguided attempts. A person with suitable knowledge could probably form their own S-Corp boutique distillery and get it licensed appropriately. Let us know when the first crispy bottle of Benjammin Sauce comes off the assembly.