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The Export-Import Bank of the United States (US Exim) has approved a transaction supporting the expansion of an Indonesian oil refinery, drawing criticism from campaign groups that claim the deal contradicts the US’ pledge not to fund overseas fossil fuel projects.

The US$99.7mn deal will support facility expansion as well as fuel efficiency and safety upgrades at the Balikpapan refinery, run by Indonesia’s national oil company Pertamina.

“This project would support hundreds of US jobs at dozens of manufacturers across the country, and allow Indonesia to substantially reduce its reliance on imported, refined transportation fuels while upgrading to a cleaner standard, protecting human health and the environment in the process,” says US Exim president and board chair Reta Jo Lewis.

But climate campaign groups have accused the export credit agency of contradicting US president Joe Biden’s executive order mandating the phasing out of support for overseas fossil fuel projects, as well as the US’ commitment at the Glasgow Cop26 climate summit to end direct support for unabated fossil fuel projects.

Action on the joint promise made by a group of governments and public finance institutions at Cop26 has stalled elsewhere, with Italy recently walking away from its original pledge.

And German think tank Perspectives Climate Group claimed at the end of last year that US Exim was unaligned with the Paris Agreement due to the extent of its exposure to the fossil fuel and aviation sectors.

Friends of the Earth US and NGO Wahana Lingkungan Hidup Indonesia wrote to the US government in January asking US Exim to reject support for the Balikpapan project due to “the negative impacts on the local communities and climate”.

They point out that fires and oil spills have already occurred at the refinery, putting the workers, the community and the environment at risk.

In 2018, an oil spill caused by a ruptured pipe caught fire and resulted in the deaths of five people. The spill detrimentally affected public health for days afterwards, the organisations say.

They also claim the environmental and social impact assessment for the project is “wholly insufficient” as it was produced in 2017, provides no analysis of alternative courses of action and uses outdated data, meaning the climate impact is “grossly” underestimated.

“Exim cannot properly assess the impacts of the project when the assessment of those potential impacts is so out of date,” the letter says.

Kate DeAngelis, international finance programme manager at Friends of the Earth US, says that “Exim’s support of an oil refinery in Indonesia thumbs its nose at Biden’s pronounced need for responsible climate action, and his commitment in Glasgow to end overseas fossil fuel finance”.

In a written statement provided to GTR, a senior US Exim official says that the organisation “seeks to align with the Administration’s climate agenda while still respecting Exim’s statutory limitations”, noting that the deal “satisfies all Exim criteria and Exim is prevented from discriminating against deals solely on the basis of industry, sector or business”.

Addressing the risk of fires and oil spills, the official says the project “makes significant improvements in public health and environmental protection through significant reductions in tailpipe emissions of toxic gases and problematic emissions”, including sulphur dioxide, unburned hydrocarbons and carbon monoxide.

“The Exim staff has performed a full due diligence review of the transaction according to the agency’s statutory and policy requirements, including a feasibility review and alignment with Exim’s environmental and social due diligence procedures and guidelines,” they say.

US Exim will “monitor the borrower’s adherence to its environmental and social commitments to determine compliance with all applicable requirements and regulations throughout the life of the loan”.

On the subject of alternative options, the official says that “extensive” analysis was carried out “to ensure that all feasible emissions containment technologies would be included in the project’s scope” and notes that the project includes “design features and processes to minimise greenhouse gas emissions and flaring”.

The export finance institution also last week approved a 90% guarantee of a US$500mn facility to support Boeing via its supply chain finance guarantee programme. US Exim estimates that the transaction will support more than 2,100 jobs at Boeing and US$982mn in export sales of commercial aircraft to airlines worldwide.

“Boeing remains one of the United States’ top exporters and through their commitments to innovation and sustainability, it is squarely within Exim’s mandate to support the workers and companies, including small businesses, within their vast supply chain,” says Lewis.