The Shangpa Kagyu lineage (shangs pa bka' brgyud) developed independently and is not counted among the Four Greater and Eight Lesser Dagpo Kagyu schools which originated with Tilopa, Naropa and Marpa and which passed through Milarepa and Gampopa, even though many of its teachings and practices have been assimilated into, and continue to be transmitted by a few masters of the Karma Kagyu school today. However, there have indeed been early contacts among these two lineages, as evidenced by the biographies of some of the early masters of the Shangpa tradition. Clearly there were contacts with Gampopa and other teachers of the 1st Karmapa as well as the 3rd Karmapa, possibly with others as well. Some early Drukpa Kagyu patriarchs also seem to have received and propagated the Shangpa lineage to some extent. The Shangpa Kagyu tradition is included among the Eight Great Practice Lineages, which were the original lineages of teachings and transmissions as they were transmitted from India to Tibet, long before the so-called major schools and their sectarian affiliations formed.
As a matter of fact "Kagyu" (bka' brgyud) simply means "oral transmission". Therefore, any lineage that has transmitted its teachings orally, could call itself a "Kagyu" lineage. Nowadays the lineages that are associated with Marpa and Gampopa are mostly called "Kagyu", Marpa Kagyu or Dagpo Kagyu, and the Shangpa Kagyu are often erroneously considered part of that group of lineages.
As one of the eight great practice lineages (sgrub brgyud shing rta brgyad) of the Tibetan buddhist tradition, the Shangpa Kagyu exists as an unbroken lineage to the present day. Its most prominent lineage holders outside of Tibet were the previous Kalu Rinpoche (1904-1989) and Bokar Rinpoche (1940-2004). The present main lineage holder is H.E. the second Kalu Rinpoche (b.1990). Other masters, outside of Tibet, who are fully qualified to pass on the transmissions of the full Shangpa cycle of empowerments and teachings are the present 12th Tai Situpa, the present 12th Gyaltshab Rinpoche, the present 4th incarnation of Jamgön Kongtrul Rinpoche and the Vajra Master Kyabje Tenga Rinpoche of Benchen monastery. The Shangpa transmissions were given three times in 2009. First in August by H.E. Tai Situ Rinpoche in his Palpung Sherab Ling monastery in India, then in September by H.E. Kalu Rinpoche in his monastery in Sonada, near Darjeeling and finally in October by Kyabje Tenga Rinpoche in his Benchen monastery in Kathmandu, Nepal.
Both Jetsün Tāranātha and Jamgön Kongtrul Lodrö Thaye, certainly two of the greatest minds ever to appear in Tibet, considered the Shangpa Kagyu unique among all Tibetan lineages of Buddhism and wrote about it in various of their works. In his "jo nang khrid brgya'i brgyud pa'i lo rgyus kha skong" or "Supplement to the Transmission History of the 100 Instructions of the Jonangpas", Tāranātha writes: "Even though the Shangpa lineage has spread throughout countless lineages of masters, the instructions and their meaning have never departed from each other. This is due to the firm seal of the dakini's words. Since there are no polluting embellishments, the Shangpa Kagyu are at the very summit of all lineages of meditation practice." Kongtrul writes in his "shes bya kun khyab mdzod" or "Compendium of All Knowledge": "There are three distinguishing features which make the Shangpa Kagyu unique and superior to all others. (1) The upholders of this lineage have been especially sublime individuals. The succession of lineage holders is exclusively one of bodhisattvas in their final lives (before attaining buddhahood) and has not been interrupted by ordinary people. (2) The instructions are particularly outstanding because their words are neither misleading nor contaminated. They are the vajra words of the dakinis, which have never been altered or embellished by compositions of ordinary individuals. (3) The influence of this lineage is particularly outstanding. It is such, that even at this most extreme of the degenerate times, the fruition of accomplishment will be attained by those diligent practitioners who keep their commitments." Here you'll find the full Introduction to the Shangpa Kagyu by Jamgon Kongtrul.
The lineage was established by the great scholar and accomplished master Khedrub Khyungpo Naljor (11/12th cent.), who traveled several times to India and studied under 150 masters, but predominantly under the two great female Mahasiddhas Niguma and Sukhasiddhi, and under Maitripa, Rahula and Vajrasanapa. Rahula also happened to be one of the early teachers of the great Atisha. Khyungpo Naljor hailed from the same extended family-clan, the clan of Khyungpo, as Jetsun Milarepa. The school, like many others, was named after the location where its founder eventually settled, the valley of Shang in Central Tibet, not far north of the town of Shigatse (gzhis ka rtse). The teachings and practices special to the Shangpa Kagyu school are what is known as "The Five Golden Dharmas of the Shangpa" (shangs pa gser chos lnga), on account of Khyungpo Naljor having offered much gold for these teachings. They are likened to a tree with its roots, trunk, branches, flowers and fruits.
"The Five Golden Dharmas of the Shangpa" are:
The roots: the Six Doctrines of Niguma (rtsa ba ni gu chos drug)
The trunk: the Mahamudra of the Amulet Box (sdong po phyag chen ga'u ma)
The branches: the Three Carry-Overs (of phenomena and appearances) onto the path (yal kha lam khyer rnam gsum)
The flowers: the White and Red Forms of the Dakini (me tog mkha' spyod dkar dmar)
The fruits: the Immortal and the Infallible ('bras bu 'chi med 'chugs med)
But there are also other transmissions, such as the “Six Doctrines of Sukhasiddhi” (su kha siddhi chos drug), the “Combined Accomplishment of the Four Deities” (lha bzhi dril grub), the “Master and Protector Inseparable” (bla ma mgon po dbyer med), the Five Tantra Classes (rgyud sde lnga), Hayagriva according to Kyergangpa’s tradition (skyer sgang rta mgrin), aka Secret Accomplishment Hayagriva or rta mgrin gsang sgrub, and the Thirteen Empowerments of the Protector, to name just a few.
The first seven masters, from the Dharmakayabuddha Vajradhara until Choje Sangye Tonpa, are known as the "Seven Jewels of the Shangpa Kagyu." Curiously, Sukhasiddhi is not counted among these, otherwise there would be eight. The reason for this omission has never been explained. Among these seven, the full lineage transmission was passed on from the master to only a single disciple. After that, it was spread much more widely. Sangye Tonpa (sangs rgyas ston pa brtson 'grus seng ge - 1213-1285) had two main students, Khedrub Tsangma Shangton (mkhas grub gtsang ma shangs ston) and Khetsun Shonu Drub (mkhas btsun gzhon nu grub). From thereon onwards, the Shangpa teachings continued to be transmitted through four main lineages. The Jonang transmission of the Shangpa teachings, as well as the Thanglug (thang lugs) and Jagpa ('jag pa) lineages, originated with Shangton, whereas the Nyangme Samding (nyang smad bsam sding) lineage originated with Shonu Drub. From the students of Tsangma Shangton came a line of masters who are often referred to as the "Later Seven Jewels of the Shangpa Kagyu." For more information see my Shangpa Lineages Outline.
However, none of these lineages, except for the Jonang who were already well established, established themselves with big institutions like monasteries or monastic universities. The Shangpa Kagyu as a lineage have always remained fairly unobtrusive, mainly because most of its principal lineage holders chose to live as hidden yogins, thus avoiding all the many responsibilities that come with running monasteries and affiliated institutions. In this way most Shangpa masters could devote themselves to many years of meditation in solitude. This still seems to be the case even these days. Most authentic Shangpa practitioners clearly prefer the solitude of remote retreat places over the hustle and bustle of large monastic institutions and gatherings and prefer to concern themselves with achieving realization for the benefit of beings rather than seeking power and influence over large monastic institutions or making a big name for themselves.
Many of the Shangpa teachings were also integrated into other schools. It is therefore not surprising that we find teachings and practices of the Shangpa even in the Sakya and Gelug schools. Jagchen Jampa Pal (1310-1391) for instance, a prominent holder of the Jagpa tradition of the Shangpa teachings, was one of the teachers of Tsongkhapa Lobsang Dragpa (1357-1419). Another great master of this particular Shangpa lineage was Lapchiwa Namkha Gyaltsen (la phyi ba nam mkha' rgyal mtshan, 1372-1437), who was also a lineage holder of the Sakya, Karma Kagyu and Drikung Kagyu traditions. Jetsun Kunga Drolchog (1507-1566), a great Sakya and Jonang master, was very fond of the Six Doctrines of Niguma and is known to have taught them many times to many masters from all sorts of schools and traditions.
The various existing streams of Shangpa transmissions were all received by Kongtrul Lodro Thaye and then passed on by him. He received the Tanglug lineage from the great Jamyang Khyentse Wangpo. The Jonang lineage of the Shangpa teachings came to Kongtrul through Karma Shenpen Ozer (karma gshan phan 'od zer), who was also known as Lama Karma Norbu, about whom we know only what little Kongtrul mentions in his autobiography. Apart from his students at his two main seats at Tsadra Rinchen Drak and Dzongshö Desheg Düpe Phodrang, the Shangpa teachings and lineage of Jamgön Kongtrul were continued and maintained, to the present day, at Benchen monastery in Nangchen and at Tshabtsha monastery in the Lingtsang area of Derge. The masters responsible were the Drongpa Lama Tendzin Chögyal of Benchen (the previous incarnation of Kyabje Tenga Rinpoche), who spent nine years at Tsadra and served both as Kongtrul's personal attendant and as retreat master while Kongtrul was away; and the Tshabtsha Drubgen, head lama of Tshabtsha monastery, whose 9th incarnation has just recently been enthroned in Tibet.
In various publications, online and otherwise, one often finds the statement that the Shangpa Kagyu ceased to exist as "an independent lineage" at various points in history. We have to look at that more closely. What is the defining factor that makes a lineage an "independent lineage or school"? Is it the establishment of a certain monastery as its main seat, like for instance Tshurpu, as in the case of the Karma Kagyu? Does that seat have to be the official residence of the recognized head of the lineage in question, like in this case the Karmapas?
Even though the early Shangpa masters, such as Khedrub Khyungpo Naljor or his immediate lineage holder Mokchokpa Rinchen Tsondrü did establish monasteries, they never had the character of "official main seats" of the Shangpa Kagyu, and consequently some of them were abandoned and fell into disrepair soon after these master's demise. The Shangpa Kagyu also never designated a single master, or his reincarnations for that matter, as "the official head of lineage". As one sees quite clearly from their biographies, most Shangpa lineage holders were rather reluctant lineage holders and preferred to spend much of their lives in seclusion, rather than gathering large numbers of students or gaining political or economical influence.
So, if all of these traits were the sole markings of "an independent lineage", one might even say that a "Shangpa lineage" as such, never existed at all. It is rather that their transmissions have always been maintained by masters of many different lineages and backgrounds and they have survived very nicely, and fully intact, in many small retreat centers all over the Himalayas, to the present day.