CHEYENNE, Wyo. - The Environmental Protection Agency said Thursday for the first time that fracking - a controversial method of improving the productivity of oil and gas wells - may be to blame for causing groundwater pollution.

The draft finding could have significant implications while states try to determine how to regulate the process. Environmentalists characterized the report as a significant development, though it drew immediate criticism from the oil and gas industry and a U.S. senator.

The practice is called hydraulic fracturing and involves pumping pressurized water, sand, and chemicals underground to open fissures and improve the flow of oil or gas to the surface.

Reeking of chemicals

The EPA found that compounds likely associated with fracking chemicals had been detected in the groundwater beneath Pavillion, a small community in central Wyoming where residents say their well water reeks of chemicals. Health officials last year advised them not to drink their water after the EPA found low levels hydrocarbons in their wells.

The EPA announcement could add to the controversy over fracking, which has played a large role in opening up many gas reserves, including the Marcellus Shale in Pennsylvania in recent years.

The industry has long contended that fracking is safe, but environmentalists and some residents who live near drilling sites say it has poisoned groundwater.

The EPA said its announcement was the first step in a process of opening up its findings for review by the public and other scientists.

Specific to area

"EPA's highest priority remains ensuring that Pavillion residents have access to safe drinking water," said Jim Martin, EPA regional administrator in Denver. "We look forward to having these findings in the draft report informed by a transparent and public review process."

The EPA also emphasized that the findings were specific to the Pavillion area. The agency said the fracking in Pavillion differed from fracking methods used elsewhere in regions with different geological characteristics.

The fracking occurred below the level of the drinking-water aquifer and close to water wells, the EPA said. Elsewhere, drilling is more remote and fracking occurs much deeper than the level of groundwater that would normally be used.

Environmentalists welcomed the news of the EPA report, calling it a turning point in the fracking debate.

"This is an important first indication there are potential problems with fracking that can impact domestic water wells," said Steve Jones with the Wyoming Outdoor Council. "It's, I think, a clarion call to industry to make sure they take a great deal of care in their drilling practices."

Pavillion resident John Fenton, chairman of the group Pavillion Area Concerned Citizens, said, "Those of us who suffer the impacts from the unchecked development in our community are extremely happy the contamination source is being identified."

Calgary, Alberta-based Encana owns the Pavillion gas field. An announced $45 million sale to Midland, Texas-based Legacy Reserves fell through last month amid what Encana said were Legacy's concerns about the EPA investigation.

Encana spokesman Doug Hock said there was much to question in the draft study.

The compounds EPA said could be associated with fracking, he said, could have had other origins not related to gas development.

"Those could just have likely been brought about by contamination in their sampling process or construction of their well," Hock said.

"There are still a lot of questions that need to be answered," he said. "This is a probability, and it is one we believe is incorrect."

Sen. James M. Inhofe said the study was "not based on sound science but rather on political science."

"Its findings are premature, given that the Agency has not gone through the necessary peer-review process, and there are still serious outstanding questions regarding EPA's data and methodology," the Oklahoma Republican said in a statement.