There is one problem with your reasoning when it comes to California. Despite the population of 35 million, there really is a lot of empty land in this state, much of it in private hands. The limiting factor here is not space, but water. There could well be thriving cities in the Coast Range mountains, for example, if a practical way could be found to bring water there. There would be a lot more land under cultivation, too, if there were more water.
And now, after the housing bubble burst, the average home price is once again comparable. High housing costs here were fueled mainly by speculation.
Who should have been the owner of public lands, then? Homesteaders? The highest bidder? Who?
If drilling in ANWR is cost effective, then yes, of course it would have been done by now.
Because the federal government, in other words, you and I, are the owners of that land. Are you suggesting it be given away?