Australia’s new national agency for environmental protection has approved its first coal project, allowing a Queensland open-cut mine to keep digging until 2055 while clearing threatened woodland and koala habitat.

The confirmation of the extension of the Saraji mine, which digs and exports coal for steel making, comes after the prime minister, Anthony Albanese, denied this week there was tension over Australia’s fossil fuel exports during talks with Pacific leaders.

The National Environmental Protection Agency confirmed to Guardian Australia it had approved the BHP Mitsubishi Alliance (BMA) mine extension to dig a further 55m tonnes of coal between now and 2055.

The approval is the agency’s first green light for a coal project since it began operations on 1 July after being created during reforms to national environment laws last year.

An agency spokesperson said the approval came with “strict conditions to protect threatened species and water resources” and would limit clearing of habitat for threatened koalas, ornamental snakes and squatter pigeons.

In its application, BMA said it would likely have to clear 9.7 hectares of endangered koala habitat, 14.2 hectares of vulnerable ornamental snake habitat, 39 hectares of habitat of the vulnerable squatter pigeon and 3.1 hectares of threatened Brigalow woodland.

The agency’s approval said the company must not clear more than 132.5 hectares of ornamental snake habitat, 162 ha of squatter pigeon habitat and 11.5 ha of koala habitat.

At this week’s Pacific Islands Forum, Albanese said the meeting’s “entry fee for credibility” was “taking climate change seriously”.

When asked about fossil fuel expansions, Albanese denied leaders of Pacific nations who fear for their country’s future because of rising sea levels had raised objections.

“No, they don’t do that,” he said.

“Australia is highly regarded when it comes to climate change, and the talking down of Australia does not happen from outside Australia. I’ll make that point.

“The Pacific leaders have respect for the position that we’ve taken, and they also understand with the transition, because they’re dealing with it as well, that the transition can’t happen overnight, that it requires strategies and policies to be put in place.”

Ben McLeod, a senior adviser at the Climate Council, said burning coal overseas to make steel would release about 120m tonnes of CO₂ into the atmosphere over the life of the mine. Australia’s current annual emissions are 455m tonnes.

“This leaves us incredulous,” said McLeod. “The prime minister said the entry fee for the forum was taking climate change seriously, but then we get this approval of 55 million tonnes of coal. It is hard to see how those two things are compatible.”

He said the approval by the new agency illustrated the government’s reforms to environment laws had not been strong enough in dealing with climate pollution.

He said the climate “does not care” if the emissions from burning coal were to generate electricity or make steel, and pointed to International Energy Agency advice that to meet net zero emissions by 2050 there was no requirement for more coalmines.

Greenpeace Australia Pacific said the Saraji approval was the 37th fossil fuel project approved by the Albanese government, and was a “double talk” and an “affront” to Pacific leaders and communities.

Dr Simon Bradshaw of Greenpeace Australia Pacific said: “It is deeply insincere for prime minister Albanese to meet Pacific leaders here in Palau to discuss security, the energy crisis, and regional threats, while his government fast-tracks the biggest security threat to the Pacific, the climate crisis.

“We are witnessing dangerous climate change driven by the production, export and burning of fossil fuels, wreaking havoc across the world. Continuing down the path of fossil fuels and approving new coal is an act of recklessness at a pivotal moment in the world’s energy transition and response to the climate crisis.”

Dr Coral Rowston, director of the group Environmental Advocacy Central Queensland, said the mine’s extension would put more pressure on threatened species and on water quality in the Fitzroy River catchment during flooding.

A government spokesperson said the National EPA was Australia’s first independent environment regulator and was a “cornerstone” of environmental law reforms.

“The Albanese government remains committed to action on climate change and our net zero targets. That’s why we reformed the safeguard mechanism in our first term, to ensure the country’s biggest emitters begin the work to reduce their emissions. This site is subject to the safeguard mechanism.”

The mechanism does not account for emissions generated from burning Australian fossil fuels overseas.

The statement said the government was reviewing the mechanism, which was “on course to deliver its proportionate contribution to Australia’s legislated 2030 emissions reduction target”.