* EPA to retest water with Wyoming state, tribes
* Industry had raised questions about the report
* EPA delays peer review of draft report
WASHINGTON, March 9 (Reuters) - The U.S. Environmental Protection Agency has agreed to work with the Wyoming state government to retest water supplies after a federal report last year concluded natural gas drilling likely polluted a local aquifer.
The EPA has been investigating an aquifer near natural gas drilling in Pavillion, Wyoming, for years after residents complained their drinking water smelled and tasted odd.
It concluded in a December draft report that chemicals including benzene, alcohols and glycols likely migrated up into the aquifer from hydraulic fracturing, or fracking, operations.
The oil and gas industry including EnCana, a Canadian company that owns the gas field near Pavillion, criticized the report, saying the contamination could have come from the EPA's building of monitoring wells at the aquifer.
The EPA will now work with Wyoming state regulators and two native American tribes to retest the water and "clarify questions about the initial monitoring results," the agency said in a release on Thursday. The EPA will also work with the U.S. Geological Survey on the methodology and other aspects of the tests.
The EPA has delayed the peer review process of the draft study to include the results from the next phase of testing.
New drilling techniques such as fracking have revolutionized the U.S. natural gas industry by giving companies access to vast new reserves that could supply the country's demand for 100 years, according to the industry.
Environmentalists and health groups worry that some fracking operations near homes and schools pollute water and air. The industry denies that water supplies have ever been tainted by the technique.
WYOMING MORE VULNERABLE
The EPA said in December that Wyoming, which produced more than 10 percent of U.S. natural gas in 2010, was much more vulnerable than most areas to water contamination from fracking because drilling there often takes place closer to the surface than in other states.
In 1987, the agency documented one case of well water pollution from fracking fluids used by Kaiser Exploration and Mining at a site in West Virginia. That was the only previous case in which the federal government said fracking polluted water.
The new tests in Wyoming will take place at monitoring wells the agency built at the aquifer to take the original samples.
EnCana spokesman Doug Hock said the agreement demonstrated that the draft report was "rushed" and that the assertions were not supported by the data. The company said the monitoring wells should be independently re-examined given the questions raised after the draft report was released.
The EPA did not immediately respond to questions about that request.
EnCana and the Wyoming state government have been paying for water deliveries for about 25 homes in the area. This week, Wyoming Governor Matt Mead signed a law that would direct $750,000 to developing a longer-term solution providing safe water to residents.