A recently filed lawsuit in the U.S. District Court for the Western District of Texas highlights the value of comprehensive title diligence, and early awareness of potential surface use conflicts, for data center developers. In Whiptail Polytech, LLC v. Shoe-Bar Ranch, Inc., Case No. 7:26-cv-00389, the surface owner entered into a contract to sell its interest to a data center developer. A basic assumption of the contract, according to the data center plaintiff, was that there were no oil and gas operations on the land. When the developer learned that a large portion of the land was, in fact, held by production under oil and gas leases, it sued the seller for fraud and breach of contract. The case underscores a familiar principle: In jurisdictions with active mineral development, early identification of severed mineral interests, and proactive engagement with lessees to address surface use, can prevent disputes that might otherwise derail or delay a project.
Case overview
Whiptail Polytech, LLC, a Texas-based company, began planning in early 2024 to develop a multi-gigawatt artificial intelligence data center campus in West Texas. After evaluating sites across several counties, Whiptail entered into a purchase and sale agreement with Shoe-Bar Ranch, Inc., a New Mexico corporation, for approximately 8,000 acres in western Ector County. The parties later expanded the deal through an amended agreement covering approximately 18,400 acres of land described as “unencumbered” by oil and gas activity, plus an additional 3,700 acres acknowledged to carry legacy oil and gas assets.
According to the complaint, the combined investment in the data center project, including power plants, data center infrastructure, and AI tenant equipment, could reach hundreds of billions of dollars over 10 to 15 years.
A critical feature of the property was a Sequestration Easement Agreement (SEA) between Shoe-Bar and Oxy Low Carbon Ventures, LLC (OXY LCV), which gave OXY LCV the exclusive right to permanently sequester carbon dioxide beneath the property from its nearby STRATOS direct air capture plant. The SEA expressly restricts new oil and gas drilling and above-ground oil and gas installations on the easement without OXY LCV’s prior written consent.
During negotiations, Shoe-Bar allegedly represented that the 18,400 acres were “unencumbered” as to oil and gas development and pointed to the SEA as a “guarantee and representation” of that status. Whiptail relied on these assurances, disclosing its plans to develop power plants and AI data centers on the property.
The dispute erupted during the due diligence period. Whiptail commissioned a landman title examination of approximately 4,500 of the 18,400 acres and discovered that roughly 86.7% of the examined acreage was “held by production,” meaning that existing oil and gas leases were still in effect. This was in stark contrast to Shoe-Bar’s representations. Because those leases existed as of the SEA’s effective date, OXY LCV’s sequestration rights were expressly subject to them: The SEA acknowledged that Shoe-Bar did not control existing lessees and placed the obligation to obtain surface use waivers on OXY LCV. Without such waivers, holders of those existing leases retain their rights as the dominant mineral estate and could drill through the sequestration zone, potentially rendering the surface unsuitable for a multibillion-dollar data center.
The complaint further alleges that Shoe-Bar refused to cure the title defects and instead began soliciting competing offers, including from OXY LCV itself, in violation of the exclusivity and confidentiality provisions of the amended agreement.
Whiptail has asserted claims for breach of contract, statutory fraud, and declaratory judgment, and seeks specific performance, injunctive relief, and exemplary damages.
Why this case matters
This case is a reminder that data center developers acquiring land in areas with active mineral development should conduct thorough title diligence at the outset to identify severed mineral interests and address potential surface use conflicts before closing. And while not directly at issue in Whiptail, the case implicates the long-standing accommodation doctrine in Texas, a doctrine developed by Texas courts to balance the competing interests of the surface estate against the dominant mineral estate.
Courts are beginning to grapple with these surface use conflicts, and this case is an early high-profile example that has garnered industry and media attention. The outcome may help define how developers, landowners, and mineral rights holders navigate these competing interests going forward.
The accommodation doctrine: background for context
The accommodation doctrine is an important legal principle that shapes the relationship between surface and mineral estates in Texas – and one that data center developers should keep top of mind.
Under Texas law, the mineral estate is the “dominant” estate. This means that the holder of the mineral estate – whether an owner or a lessee – has the implied right to use as much of the surface as reasonably necessary to explore for and produce oil and gas. The surface estate, by contrast, is “servient,” meaning it must generally yield to the mineral estate’s operations.
The accommodation doctrine, first articulated by the Texas Supreme Court in Getty Oil Co. v. Jones, 470 S.W.2d 618 (Tex. 1971), and refined in Merriman v. XTO Energy, Inc., 407 S.W.3d 244 (Tex. 2013), provides a limited check on the mineral estate’s broad rights. To obtain relief under the accommodation doctrine, the surface owner must prove: (1) the mineral lessee’s use completely precludes or substantially impairs an existing surface use; and (2) there is no reasonable alternative method available to the surface owner to continue the existing use. If the surface owner meets that burden, the surface owner must further prove that, given the particular circumstances, reasonable, customary, and industry-accepted alternative methods are available to the lessee that will allow recovery of the minerals while also allowing the surface owner to continue the existing use. Importantly, the surface owner’s burden is not met by showing mere inconvenience or additional expense; the surface owner must prove that the burden of continuing the existing use by an alternative method is so great as to make the alternative unreasonable.
For data center developers, this means that existing or future mineral operations could have a substantial impact on the viability of a surface project, even if the developer has already invested significant capital.
Practical takeaways
- The mineral estate is dominant. The accommodation doctrine provides the mineral estate the right to use as much of the surface as is reasonably necessary for oil and gas operations. Properties with active or potential oil and gas development give priority to the mineral estate owner, which can materially affect a data center’s ability to use the surface for its intended purpose.
- Conduct thorough due diligence before acquisition. Before acquiring property for data center use, buyers should commission comprehensive title work and landman examinations to understand who holds the mineral rights, whether leases are active or held by production, and what subsurface operations exist or are permitted. The Whiptail case demonstrates how damaging it can be to discover these issues after a deal is underway – undisclosed mineral encumbrances threaten to derail a project involving billions of dollars in planned investment. Proactive engagement with mineral rights holders and subsurface operators before closing can help to identify and address potential conflicts early in the process.
This alert is for informational purposes only and does not constitute legal advice. Prior results do not guarantee a similar outcome. If you have questions about the issues discussed in this alert, please contact the authors or your regular firm contact.
Client Alert 2026-194