U.S. Backs $1B Loan to Mexico for Oil Drilling Despite Obama Moratorium

Published September 11, 2010

| FoxNews.com

Despite President Obama's moratorium on U.S. deepwater drilling in the Gulf of Mexico, the U.S. Export-Import Bank intends to guarantee $1 billion in loans to PEMEX, the Mexican state oil company, to bolster the company's oil drilling in the region.

The bank, which is the official American export credit agency, loaned more than $1 billion to PEMEX in 2009 -- when the company was the bank's largest borrower -- in support of its drilling activities. That year, the bank also guaranteed two loans totaling $300 million made by a commercial lender.

The latest request comes during a drilling moratorium that was first imposed by Obama in May to find out what was the cause behind the April 20 Deepwater Horizon oil rig explosion killed 11 workers and led to 206 million gallons of oil spewing from BP's undersea well.

After a federal court struck down the ban amid complaints that it threatened thousands of jobs in the offshore oil industry, the Obama administration issued a new moratorium in July on most deep-water drilling activities that is in effect until Nov. 30.

The Export-Import Bank said the moratorium doesn't affect its pending deal with PEMEX.

"None of these projects involve deepwater drilling," bank spokeswoman Maura Policelli told FoxNews.com in an e-mail.

The $1 billion deal is awaiting approval by the bank's board, which is expected to reach a final decision by Sept. 30, the end of the fiscal year. Because the bank is an independent agency, the deal is not subject to congressional approval.

"Before deciding whether to approve applications for financing, Ex-Im Bank performs rigorous environmental, safety and financial due diligence activities, including on-site inspections" Policelli said.

"After financing is approved, the bank monitors the company's financial, environmental and safety activities and performs on-site inspections as often as twice a year," she said.

The 2010 request will support multiple PEMEX projects, including offshore drilling and a $200 million facility to finance sales to U.S. small businesses, Policelli said.

By law, the bank's financing is "directly tied to the export of goods and services produced or provided by American workers," Policelli said.

Since 1998, the bank has guaranteed $7.7 billion in loans that U.S. and international banks have made to PEMEX. The bank agreed to make the direct loan of $1.05 billion to PEMEX last year in the wake of the financial crisis when commercial lenders tightened their lending.

"This loan supported the purchase of U.S. goods and services," Policelli said.

Over that 12-year period, Policelli said, the bank's financing of PEMEX has "helped create or sustain the jobs of over 47,000 American workers at over 1,300 U.S. companies, including 915 small businesses and 400 large companies."

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http://www.foxnews.com/politics/2010/09/11/backs-b-loan-mexico-oil-drilling-despite-obama-moratorium/