Order Code RS21588
August 12, 2003
CRS Report for Congress
Received through the CRS Web
Environmental Review Procedures
James K. Jackson
Specialist in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Congress requires the Export-Import Bank, and other U.S. agencies whose
programs have the potential for adversely affecting the environment abroad, to develop
and follow an established set of guidelines to mitigate the environmental impact of its
programs. The Bank’s current procedures and guidelines, as revised on April 2, 1998,
were extended on June 26, 2003 and will remain in effect until March 31, 2004. These
guidelines apply to all long-term transactions and project finance cases valued over $10
million with a repayment period of more than seven years and that have potentially
adverse environmental effects. Short and medium transactions under $10 million with
a repayment period of less than seven years are reviewed on a case-by-case basis. The
Bank estimates that in 2002, its programs supported $800 million in U.S. exports of
environmentally beneficial U.S. goods and services. This report will be updated as
warranted by events.
The Export-Import Bank (Eximbank) is an independent U.S. government agency
that is charged with financing and promoting exports of U.S. goods and services. To
accomplish these goals, Eximbank uses its authority and resources to: assume commercial
and political risks that exporters or private financial institutions are unwilling, or unable,
to undertake alone; overcome maturity and other limitations in private sector export
financing; assist U.S. exporters to meet foreign, officially sponsored, export credit
competition; and provide guidance and advice to U.S. exporters and commercial banks
and foreign borrowers. With a budget of around $600 million, the Bank finances about
1% of U.S. exports a year. Eximbank provides guarantees and insurance to commercial
banks to make trade credits available to U.S. exporters. The Bank operates under a
renewable charter, the Export-Import Bank Act of 1945, as amended, and has been
authorized through September 30, 2006. Congress has amended the Bank’s statutes at
Congressional Research Service ˜ The Library of Congress
various times to restrict Eximbank’s ability to approve transactions with firms involved
in certain specified activities.1
Eximbank has three main programs it uses to finance U.S. exports: direct loans,
export credit guarantees, and export credit insurance. Eximbank’s direct lending program
is used primarily to aid U.S. exporters in instances where they face a foreign competitor
that is receiving officially subsidized financing by a foreign government. These loans
carry fixed interest rates and generally are made at terms that are the most attractive
allowed under the provisions of international agreements. They are made primarily to
counter attempts by foreign governments to sway purchases in favor of their exporters
solely on the basis of subsidized financing, rather than on market conditions (price,
quality, etc.), and to enforce internationally agreed upon terms and conditions for export
financing. Guarantees and insurance are the main programs the Bank uses to assist
American exporters. Both programs reduce some of the risks involved in exporting by
insuring against commercial or political uncertainty.
Eximbank’s Environmental Mandate
When Congress established the Bank in 1947, it directed the Bank to “aid in
financing and to facilitate exports and imports and the exchange of commodities and
services,” and to assist small businesses. Over the years, Congress has added various
requirements that restrict the Bank’s actions. Congress has restricted the Bank’s ability
to deny applications for credit for nonfinancial or noncommercial factors, except under
a number of special conditions. These conditions are determined by the President of the
United States after consulting with the House Banking and Financial Services Committee
(now Committee on Financial Services) and the Senate Committee on Banking, Housing,
and Urban Affairs, and must be determined to be in the national interest of the United
States in such areas as “international terrorism, nuclear proliferation, environmental
protection and human rights (including child labor).”2
In addition, Congress has adopted various measures that require the Export-Import
Bank, and other government agencies whose operations have an effect beyond U.S.
borders, to consider the impact their programs may have on the environment of
developing countries. For instance, the Bank is subject to Executive Order No. 12144
(44FR 1957) entitled “Environmental Effects Abroad of Major Federal Actions.” This
Executive Order requires federal agencies that take actions that are subject to the Order
to implement procedures that are consistent with the Order. In 1979, through Executive
Order No. 12166 (Oct. 19, 1979, 44 F.R. 60971) and P.L. 95-630 Congress granted the
Bank the authority to deny an application for credit, where, “such action could clearly and
importantly advance United States policy in such areas as international terrorism, nuclear
proliferation, environmental protection and human rights.”3
See CRS Report RL32007, Export-Import Bank: Financing Requirements and Restrictions, by
James K. Jackson.
12 USC Sec 635(b)(1)(B)
In 1992, through P.L. 102-429 (12 USC Sec 635i-5) Congress required the Bank to
establish procedures to, “take into account the potential beneficial and adverse
environmental effects of goods and services for which support is requested under its direct
lending and guarantee programs.”4 These procedures apply to any transaction considered
by the Bank for a long-term support of $10 million or more, or for which the Bank’s
support is critical, and which may have “significant environmental effects upon the global
commons or any country not participating in the project.”5 In addition, Congress directed
that the Bank’s environmental standards could be used as a basis for withholding
“financing from a project for environmental reasons or to approve financing after
considering the potential environmental effects of a project.”6
Eximbank’s Environmental Procedures
In order to fulfill its Congressional mandate to establish environmental procedures,
the Bank adopted a set of guidelines for evaluating the environmental impact of proposed
projects and has encouraged other national export credit agencies to adopt a similar set
of policies. Eximbank's environmental procedures and guidelines were issued on
February 1, 1995 following the implementation of interim procedures in October, 1993.
The Bank’s procedures and guidelines were revised on April 2, 1996 and on April 2, 1998
following a review of their effectiveness in mitigating adverse environmental effects of
Eximbank supported projects and their effect on the competitiveness of U.S. exporters.
The procedures and guidelines, as revised on April 2, 1998, were extended on June 26,
2003 and will remain in effect until March 31, 2004.
Eximbank’s environmental procedures apply to all long-term transactions and project
finance cases valued over $10 million with a repayment period of more than seven years
and that have potentially adverse environmental effects. Short and medium transactions
under $10 million with a repayment period of less than seven years are not reviewed
unless the Bank’s Engineering and Environment Division believes that such a transaction
has the potential for causing a “significant adverse environmental effect.” When the Bank
is conducting an environmental review on long-term transactions or on project finance
cases, it solicits information from other government agencies and also from nongovernment sources by posting the proposed transaction on the Bank’s web site.7 Each
long-term transaction or project finance case is required to complete an “Environmental
Screening Document” that is reviewed by the Bank’s Engineering and Environment
After reviewing the Environmental Screening Document, the Division places each
project into one of four categories, N, A, B, or C.
12 USC Sec 635i-5(a)(1)
12 USC Sec 635i-5(a)(1)(A)-(C)
12 USC Sec 635i-5(a)(2)
The Bank’s web address is: http://www.exim.gov/products/policies/noticeindex.html
Category N projects involve all transactions associated with nuclear
power projects, nuclear research and related facilities and the production
of nuclear fuel.8
Category A projects are excluded from any further environmental
screening because they are determined to have no significant
Category B projects are those that are determined to be constructed in,
or sufficiently near, areas that they believe will have a perceptible
Category C projects are those that are not included in any of the other
three categories. Such projects are considered on a case-by-case basis.
In evaluating projects, Eximbank uses both quantitative10, or numerical, guidelines
and qualitative guidelines11 according to seven objectives:
Air quality. Protecting air quality to a degree that safeguards both
human health and the environment.
Water use and quality. Protecting surface and groundwater resources
from excess demand and from project related contamination.
The Bank has developed a separate set of procedures for projects that fall within this category,
titled “Nuclear Procedures and Guidelines,” to “ensure that the nuclear projects Ex-Im Bank
supports are environmentally responsible and that the projects include reasonable measures and
provisions to address the public health and safety.” Projects are classified according to: the type
of export; specifications of the recipient nuclear facility; and the function of the export in the
operations of the facility. The type and scope of information the Bank requires from an applicant
is related to how a project is classified. After a review by the Bank, each project is given a
second classification (after receiving a “N” classification) from A to E.
Such areas include: primary forests, tropical forests, nationally designated wetlands, protected
wild lands, national parks, nationally-designated refuges, coral reefs or mangrove swamps,
nationally-designated seashore areas, habitat of endangered species, properties on the World
Heritage List, areas reserved for ethnic minorities or indigenous peoples, or areas in which the
project will require large-scale resettlement. Transactions generally included in this category are:
hydroelectric projects, water resources management projects, and project finance transactions.
Quantitative guidelines are numerical guidelines that are used to assess air emissions, water
quality, and noise impacts. These guidelines are used to identify the acceptable concentrations
of pollutants in air, water, and soil, and to define noise levels.
Qualitative guidelines are used to assess a project in three areas: 1) the management of solid,
hazardous, and toxic materials and wastes; 2) the ability of a project to withstand the potential
impact of natural hazards, based on elements such seismic coefficients, and other design features;
and 3) the potential impact on the project’s ecological context, the socioeconomic impact, and
the impact on the sociocultural environment based on informed analysis of the results of social,
economic, and scientific surveys, investigations and projections.
Waste management. Managing, recycling, and disposing of solid,
hazardous, and toxic materials and wastes in a manner that safeguards
human health and the environment.
Natural hazards. Siting and design of a project to acceptable levels of
natural, ecological, and economic risk.
Ecology. Protecting ecological resources, encouraging conservation, and
promoting practices that result in the reduction of greenhouse gases.
Socioeconomic and sociocultural framework. Developing the project
in order to avoid or to mitigate significant adverse impacts.
Noise. Protecting sensitive receptors from unhealthy project related
Eximbank excludes from consideration for export credits exports of 48 different
pesticides that are banned and six pesticides that are severely restricted by the
Environmental Protection Agency (EPA). In addition, Eximbank excludes from
consideration 30 industrial and consumer chemicals that are banned or severely restricted
by the EPA. The Bank also provides environmental guidelines for nine different
categories, which include: general industrial projects; pulp and paper mills; iron and steel
mills; mining and milling; oil and gas development; thermal, gas, turbine and engine
power plants; forest operations; petroleum refineries and petrochemical facilities; and
hydro power and water resources management. In each of the nine categories, the Bank
provides specific numerical guidelines in the areas of air quality, water quality, solid and
liquid non-hazardous wastes, hazardous and toxic materials and wastes, and noise.
Iron and steel mills.
Eximbank requires that projects such as iron and steel mills and mining and milling
take additional environmental precautions before they are approved. The Bank requires
steel mills to take extra environmental precautions because such projects entail extensive
air emissions and wastewater discharge issues. Similarly, mining and milling operations
face extensive environmental screening because they involve the disposal of large
amounts of non-ore bearing materials and the disposal of tailings and wastewater. In such
projects, the Bank requires the firms involved to provide an erosion and sediment control
plan and a mine reclamation plan to return the land to conditions capable of supporting
the prior land uses and to eliminate significant adverse effects on adjacent water
Oil and gas development.
Exports of energy-related goods and services are a major component of the Bank’s
activities and accounted for over $3.0 billion in U.S. exports in 2002, or about one-fourth
of the Bank’s total activities. In the area of oil and gas development, the Bank places
quantitative requirements on a wide range of activities. The Bank places restrictions on
air emissions and liquid emissions for both on- and offshore oil and gas development, and
it requires that firms take extra precautions to reduce the risks of oil spills and to prepare
contingency plans for such potential occurrences. For power plants, which have often
been an important part of the Bank’s business, Eximbank encourages projects that use
renewable energy as the prime electricity producer and provides financial support through
its Environmental Exports Program.12 The Bank also provides enhanced financial support
for energy projects that produce electricity while emitting low levels of CO2. This support
also extends to coal-fired and oil- and gas-fired plants in order to encourage the reduction
of greenhouse gases and water emissions.
Forestry operations is another area in which the Bank has developed a broad set of
guidelines. These guidelines are meant to minimize the destruction of forests and other
vegetative cover, soil stability siltation of waterways, pressure on human and livestock
population, wildlife, bird sanctuaries, game refuges, and on regional microclimate. The
Bank does not extend its programs to cover commercial logging in primary tropical
forests and evaluates projects on their impact on ecologically critical boreal and temperate
primary forest ecosystems. In addition, forestry operations must be able to demonstrate
that the project displays a commitment to sustainable development and to the
conservation of natural resources. Projects also must demonstrate that they are not
harming or diminishing habitats of threatened or endangered species and that they address
the interest and livelihoods of indigenous and other affected local populations. Projects
are also required to develop a forest management plan, to demonstrate safeguards for
water resources, and to minimize the development of new roads.
Petroleum refineries, petrochemical facilities, and power plants.
The Bank also places stringent requirements on projects that involve petroleum
refineries and petrochemical facilities. Such facilities may have substantial environmental
impact on air and water quality due to emissions and may also involve toxic materials.
Projects are required to install monitors for gas emissions and to develop and implement
contingency plans for petroleum spills. Projects must also submit to guidelines for
pipelines and solid and hazardous wastes and for hazardous and toxic materials and
wastes. Hydro power and water resource projects also are subject to guidelines: to ensure
water quality; to preserve the ecology; to mitigate the risks from natural hazards; and to
mitigate the impact on the regional socioeconomic and sociocultural environment. The
Bank requires an environmental assessment for hydroelectric power projects that generate
more than 10 megawatts of power and power projects that incorporate a dam of 15 meters
or more in height. Projects that entail the construction of a dam also must provide a
feasibility study to assess natural hazards and risks and provide assurances that design
features have been incorporated into the project to mitigate these risks.
The Bank’s Environmental Exports Program provides enhanced levels of support for a broad
range of energy-related exports in order to promote U.S. exports of renewable energy and
environmentally beneficial goods and services as well as to assist U.S. exporters participating in
foreign environmental projects. This program provides: short-term environmental export
insurance for multi-buyer and single-buyer insurance coverage for small business environmental
exporters; and medium-term export credit insurance and guarantees and loans for exports of
capital goods and environmental services at the maximum allowable terms permissible under the
guidelines adopted by the Organization for Economic Cooperation and Development and may
also include the use of the Bank’s tied aid resources to offset any offers of foreign concessionary
financing for environmental projects.