OIL & GAS LAW ALERT: When You Bought Those Leases, Did You Think About The FCC?

    16 June 2009

    Many oil and gas businesses are required to obtain private radio licenses from the Federal Communications Commission (FCC) for internal communications needs, including the monitoring of pipelines, gas plants and other production operations. Section 310(d) of the Communications Act of 1934, as amended (“Communications Act”), requires that all licensees obtain FCC consent before assigning licenses or transferring control of companies that hold FCC licenses. Therefore, prior approval from the FCC is required before closing on an asset acquisition that involves FCC licenses, the sale of stock of a company that holds FCC licenses or controls subsidiaries that hold FCC licenses, mergers, reorganizations or any other change in control of companies that own those licenses. FCC approval is also required if companies that hold licenses file for bankruptcy, although in some bankruptcies, prior FCC approval is not required.

    Failure to obtain the appropriate FCC authority prior to closing is a violation of the Communications Act and may subject the company to monetary penalties. Moreover, failure to inventory FCC licenses in the due diligence process may lead to licenses expiring and the frequencies being reassigned to third parties, because appropriate renewal applications or other regulatory filings are not filed on a timely basis.

    If you are acquiring or selling oil and gas assets or a company that holds oil and gas assets, the due diligence process should include an inventory of FCC licenses, and making the requisite FCC filings. If you hold FCC licenses and are merging, reorganizing or otherwise changing control of the company (including filing for or exiting from bankruptcy), obtaining the appropriate FCC approval prior to closing can eliminate financial penalties. Patton Boggs can assist in verifying the status of licenses, conducting due diligence and securing FCC approval for transactions.