A House Resources Committee hearing on Monday got explosive when two representatives from the independent oil company Narwhal gave a presentation on oil leases they hold in West Harrison Bay. The West Harrison Bay Unit (WHBU) is currently controlled by Shell, but Narwhal holds adjacent leases.

During the presentation, Michael Parker and Stephane Labonte – managers at Narwhal – did not hold back. Parker said that Department of Natural Resources Commissioner John Boyle “is more concerned about maintaining his professional relationships with Shell and its lobbyists than promoting natural resource development in West Harrison Bay. He may pay lip service to promoting the exploration and development of state resources in West Harrison Bay, but he is unwilling to hold Shell accountable for its non-compliance with the unit agreement and its refusal to do business in Alaska.”

In 2012, Shell acquired leases in the WHBU, offshore near the National Petroleum Reserve Alaska and on state land. Narwhal acquired its WHBU leases in 2016. The WHBU is located north of Conoco’s large Willow project and northwest of Santos’ large Pikka project.

In 2015, Shell exited Alaska after spending years and $7 billion on a potential project located offshore in the Chukchi and Beaufort Seas, far away from the WHBU and located in federal waters.

Shell has held their leases in the WHBU for 12 years, but has not done any exploration or development despite saying they intended to. State oil leases require a certain level of activity to prevent speculation by lease holders. When lease holders fail to meet the terms of their leases, the Department of Natural Resources (DNR) has recourse to either mandate they meet the terms of the leases or revoke them.

The Narwhal managers told the House Resources Committee that they have had multiple meetings with DNR over the years. They said Shell is not interested in partnering with them to develop the WHBU and the DNR has refused to step in and force Shell to act on their leases or give them up. Narwhal said that if the leases were revoked they would bid on them in a new lease sale.

One potential reason they gave for Shell not wanting to give up their WHBU leases has to do with Guyana. After decades of exploring for oil in Guyana, Shell decided to give up their interests to Exxon. Not long after, Exxon hit pay dirt by discovering a massive oil filed offshore of Guyana. Presumably, Shell wants to avoid a similar blunder in Alaska.

During their presentation, Narwhal said they the WHBU could be another Kuparuk. Their slide presentation stated they estimate $20 billion of royalties and production taxes to the State of Alaska from the WHBU.

One of the Narwhal managers, Stephan Labonte, previously worked for Shell for 15 years, according to his LinkedIn. His most recent title at Shell was exploration manager, Alaska and Canada.

One fascinating aspect of the hearing has to do with who runs the House Resources Committee. Representative Tom McKay (R – Anchorage), who chairs the committee, has had a long career in the oil and gas industry and is one of the most pro-development legislators. For him to schedule this kind of hearing is telling.

McKay made it clear that he has spent months trying to get DNR and Shell to come before the committee to talk about the situation in the WHBU, but both refused. McKay was also clear that one of the roles of the committee is oversight, and that is why he decided to hold the hearing.

Shell sent a letter to McKay last week stating they have done some work in the WHBU but are still looking for a potential partner. At the end of the letter they declined to testify before the committee.

During the hearing, McKay asked why Shell gets to pick who the operator is when there is a company ready and willing to go.

Representatives Dan Saddler (R – Eagle River) and George Rauscher (R – Sutton), both majority members, made points that DNR needed to be present to address the serious accusations made by Narwhal. McKay pushed back, saying he assured them DNR was aware of the content of the presentation but still refused to participate.

DNR provided the following comment to the Landmine about the hearing:

The Department of Natural Resources declined to participate in Monday’s House Resources hearing because it is a party to active litigation filed by Narwhal LLC regarding the topic of the hearing. DNR’s commercial discussions with unit operators are closely governed by statutory confidentiality and the Department is unable to comment on the specifics of those conversations at this time. The Commissioner, and the numerous professionals within the Department as well as the Division of Oil & Gas who oversee North Slope development activities and units, all take their Constitutional obligations to maximize the development of the State’s natural resources in the interests of all Alaskans extremely seriously and work to apply them consistent with State law. The Department fully respects the oversight role of the Legislature with regard to DNR’s authorities and legislatively-established public processes, and will continue to participate in legislative oversight proceedings as appropriate.

Boyle sent this letter to committee members the day after the hearing. Boyle, who was an oil lobbyist for Santos before taking the job as DNR commissioner, was measured in his response to the accusations levied at him by Narwhal.

In the hearing, McKay said the committee was not addressing Narwhal’s litigation, only the general situation involving the WHBU. He also said he’s not endorsing what they said, but added that it’s important to hear from them and discuss the failures to develop the WHBU.

Shell has not publicly responded to Narwhal’s comments in the hearing. Despite the challenges, Narwhal says they plan on drilling some exploration wells in the WHBU next year.