Located in the “Lower Bthanual” public dungeon. Start at Muth Gnarr Hills Wayshrine, and head southeast following the river. After a while you will notice wooden crates and a wheel-cart in front of a building carved into a cliff. The “War of Two Houses” lorebook is on those wooden crates. Door in the cliff leads inside the dungeon. Follow the dungeon path into the second, northernmost hall. That is where the collectible is located. It’s found next to a big mushroom and rock formations in the southern part of the hall, which is well lit by daylight coming through the crack in the ceiling.
Lower Bthanual entrance
Lower Bthanual entrance shown on the zoomed in map
Skyshards is in the last large room, lit by the sunlight coming through the cracked ceiling.
The location of the skyshard on the dungeon map.