Point of fact: the Alaska Permanent Fund has never paid a dividend of $4,000. The 2004 dividend is $919.84, and the largest dividend was $1963.86, in 2000.
I dated a girl from Alaska once. She was a wild woman. Does that count? 
Another clarification. 99% of Alaska is public land of one sort or another…National Park, State Park, National Forest, State Forest, Military reservation, native land, National Monument, National Wildlife Refuge, State Wildlife Refuge, etc etc etc.
So oil exploration takes place on public land. Why does the state of Alaska or the Federal government allow oil extration on public land? Because the government certainly isn’t going to set up a government-owned commercial oil extraction entity. So, private companies are given rights to pump oil from public land, but pay the state and federal government royalties on every barrel pumped.
The Alaska permanent fund is pretty much just like any other large fund, like pension funds. All the royalty money from oil extraction goes to the permanent fund which is invested in various ways. Half the dividend money is paid back to Alaska residents, the other half is reinvested. The Alaska permanent fund checks don’t come from oil revenues, if all oil production in Alaska stopped today the permanent fund would still exist, it would still produce dividends. The biggest impact to the Alaskan economy wouldn’t be that the permanent fund checks would stop, it would be that all the oil jobs would be gone, along with all the jobs from supporting those oil jobs, and the jobs from supporting those who support the oil jobs.
Oh man, I’ve thought this exact same thing for years.
The best thing I’ve seen in my lifetime is the use of hydrogen (in a peroxide mix) that could be started up OVERNIGHT. it required some engine mods that cost about $300 in the mid 70’s. What was great about it was that it used everything in the car except for the intake. Somehow there was a catalyst involved at the intake but I don’t remember the details. It was pumped like gas so it could be distributed through standard fuel nodes.
Regardless of the method, I would LOVE a Manhattan-style project to figure it out. I don’t know how to solve it but I’m pretty sure there is a group of people who could solve it with a small mountain of money.
If every penny of profit goes into a fund, what crazy person/company would drill for the oil?
What, how dare you bring logic into this? 
!! Oh man…don’t you know? They will drill for the oil simply as a public service because it will be a benifit to all mankind!
-XT
My wag is that as oil prices go up, drilling in ANWR will become inevtiable. Not because it will make a significant dent in our oil supply, but the profits will be too irresistable. Oil become valuable enough, they’ll drill into the caribou themselves is there was oil in their skulls.