Sidebar: DNR's view

Reproduced below in full and verbatim is Alaska Department of Natural Resources Commissioner John Boyle's letter of May 14 to members of the House and Senate Resources committees.

"On May 6th, Shell provided formal notice of its intent to voluntarily terminate the West Harrison Bay Unit (WHBU) and relinquish the underlying oil and gas leases. The Department of Natural Resources (DNR or the Department) Division of Oil and Gas is reviewing and processing the unit termination and lease relinquishment per statute and regulation. This result is the culmination of extensive DNR negotiations and oversight on the WHBU over the last year, building on the continued efforts to actively manage the WHBU going back to its formation in 2020.

"DNR achieved these results a year and a half earlier than otherwise would have occurred under the contractual unit agreement, without litigation or dispute, and with the State set to receive the full $3.25 million performance bond from Shell.

"While the Department's preferred position was to see Shell proceed with exploration and development of the WHBU, DNR views this relinquishment as the next best possible outcome. Litigation or dispute with Shell would likely have delayed the release of these leases beyond 2025 and potentially threatened the State's recovery of the bond. These results also exemplify the diligent oversight DNR applies to all units on the North Slope and the efforts exerted to encourage investment and be a reliable partner in the development of State resources.

"The Department's efforts to bring about this positive resolution have been repeatedly complicated by disputes and administrative challenges by Narwhal LLC -- a commercial entity that holds leases adjacent to the WHBU. Since it entered Alaska, Narwhal has pursued numerous costly administrative and judicial actions to further its own commercial self-interests.

"This included filing an unprecedented administrative request for its leases to be forcibly joined to the WHBU, which if granted, would have threatened Alaska's orderly leasing and unit management process, and destabilized our business environment.

"Despite those demands, the Department took great pains to provide flexibility and optionality for Narwhal as it contemplated an exploration plan for its own leases. Instead of pursuing these options, Narwhal filed an additional appeal and then a lawsuit against the Department earlier this year. Narwhal's litigation with DNR over WHBU management, and the confidentiality of the ongoing negotiations with Shell, precluded any meaningful public discussion of this context by DNR during the recent April 15th House Resources Committee hearing.

"Narwhal's ballyhoo notwithstanding, the Department kept the negotiation with Shell on track, which protected the State's interests and may enable the WHBU leases to be available in the next North Slope lease sale.

"It is the Department's hope to see these leases in the hands of any company with the technical and financial wherewithal to delineate the resource potential of West Harrison Bay and to carry a project forward to development.

"DNR is happy to provide further briefings on this information as necessary and is committed to working with you to keep Alaska open for business."

-Kay Cashman, publisher