How can I extract a .bz2 files directly into an external hard drive?
The Unarchiver is a great tool where mac os's own extractor comes in short. You can download the utility via official website.
Once installed just open the app via Spotlight search or something. The preferences windows will open.

Make sure to activate bzip2 file archive type.

When you head to Extraction section of the preferences, you can click the dropdown menu mentioned as &quot;Extract archives to:&quot; and select &quot;Ask for a destination folder&quot;.
Then, when you try to extract anything, you can select the destination folder as desired.
I hope this utility solves the issue for you. Feel free to comment if anything goes wrong.
Cheers!
Update: In order to extract to an external drive, you have to create a new folder inside the storage unit for unarchiver getting write permissions to your hard-disk. Minor thing mentioned by question owner in comments down below.