By Laura Zuckerman

SALMON, Idaho, Sept 28 (Reuters) - Government testing of a drinking water aquifer near a tiny Wyoming town has shown concentrations of gases like ethane and propane and diesel compounds, but a natural gas company said it did not cause the contamination.

A report by the U.S. Geological Survey showed petroleum-based pollutants in samples from a monitoring well in the aquifer adjacent to Pavillion, Wyoming, which is at the center of a national debate over hydraulic fracturing, or fracking.

A draft study released in December by the Environmental Protection Agency linked fluids used in fracking, a drilling method that has unlocked vast shale gas deposits across the nation, to pollution in the underground formation that supplies drinking water to residents near Encana Corp's gas production wells east of Pavillion.

The findings contradicted claims by gas drillers that fluids from fracking, which injects water, sand and chemicals underground to boost extraction of fuel, have never contaminated drinking water.

Criticism by the oil and gas industry and Wyoming officials of the methods the EPA employed to collect water quality data and regulators' interpretation of the findings prompted recent retesting under a monitoring plan designed by the state, the USGS and the EPA.

Compared to the 2011 EPA study, the USGS results from testing of one of two monitoring wells in the aquifer indicated higher levels of gases like methane, lower levels of diesel-range organics and the absence of such solvents as toluene, an Encana analysis showed.

The EPA is expected in coming days to release its testing of water from two groundwater monitoring wells, several domestic wells and a public well. The data sets are to be submitted for peer review.

The EPA said the groundwater monitoring data in its 2011 report and USGS findings were "generally consistent."

But Encana spokesman Doug Hock said the findings are not equal and singled out USGS for providing "credible data" in research whose "implications are not just for Encana but for the whole industry."

Hock and Simon Lomax, research director of an arm of the Independent Petroleum Association of America, underscored a decision by USGS to discount samples from the second of two monitoring wells because of concerns that low water quantity and other factors might skew results.

"The USGS effectively disqualified one of the EPA's two monitoring wells," Lomax said in a statement.

He pointed to a March 1 letter by Donald Simpson, director of the Bureau of Land Management office in Wyoming, that recommended the installation of additional monitoring wells for a "larger and much more robust study effort and investment prior to drawing any conclusions, particularly in the case about the role of hydraulic fracturing use in development of the oil and gas resource."

Encana's Hock said the Canadian company denies the pollution in Pavillion is related to its operations.

But Rob Jackson, professor of environmental sciences at Duke University, said his review of USGS data shows it is consistent with EPA's initial results, "which suggested the contamination at the site from fracking is a real possibility."

Jackson, co-author of a peer-reviewed paper that showed fracking in the Marcellus shale in Pennsylvania did not pollute adjacent drinking water wells with brine, said the report by the USGS should quiet criticism of the EPA.

"You can't say that EPA botched the job if USGS goes on and gets similar numbers," he said.

Jackson said it was difficult to account for the presence of hydrocarbons like ethane and propane without a fossil fuel source.

The financial stakes are high in the battle over tainted water in a state where the oil and gas industry last year paid $2.4 billion in taxes and royalties, said John Robitaille, vice president of the Petroleum Association of Wyoming.

But for retired rancher Jeff Locker - one of two dozen residents near Pavillion advised by federal health officials not to drink from domestic wells impaired by pollutants like methane - the costs have all been personal.

"I'm not a scientist. All this fighting over testing has been a frustration to me. All I know is our quality of life has been taken away," he said.

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  • In this file photo from Oct. 14, 2011, a drilling rig is seen in Springville, Pa. State regulators blamed faulty gas wells drilled for leaking methane into the groundwater in nearby Dimock, Pa. It was the first serious case of methane migration said to be related to the Pennsylvania Marcellus Shale gas field drilling boom. (AP Photo/Alex Brandon, FILE)

  • British police secure the area where demonstrators erected a mock fracking rig with a banner reading 'No fracking in the UK' in a protest against hydraulic fracturing for shale gas outside the Houses of Parliament in London on December 1, 2012. AFP PHOTO / JUSTIN TALLIS

  • SPRINGVILLE, PA - JANUARY 18: A truck with the natural gas industry, one of thousands that pass through the area daily, drives through the countryside to a hydraulic fracturing site on January 18, 2012 in Springville, Pennsylvania. (Photo by Spencer Platt/Getty Images)

  • SAN FRANCISCO, CA - MAY 30: Protestors stage a demonstration against fracking in California outside of the Hiram W. Johnson State Office Building on May 30, 2013 in San Francisco, California. Dozens of protesters with the group Californians Against Fracking staged a protest outside of California Gov. Jerry Brown's San Francisco offices demanding that Gov. Brown ban fracking in the state. (Photo by Justin Sullivan/Getty Images)

  • People demonstrate on August 3, 2013 in La Petite Brosse, near Jouarre, outside Paris, to protest against an exploratory oil shale drilling, considering that it opens the door to the exploration of shale gas in the Parisian Basin. Banner reads 'Stop gas and oil shale'. AFP PHOTO / PIERRE ANDRIEU

  • In this Nov. 26, 2012 photo, Steve Lipsky demonstrates how his well water ignites when he puts a flame to the flowing well spigot outside his family's home in rural Parker County near Weatherford, Texas. The U.S. Environmental Protection Agency had evidence a gas company's drilling operation contaminated Lipsky's drinking water with explosive methane, and possibly cancer-causing chemicals, but withdrew its enforcement action, leaving the family with no useable water supply, according to a report obtained by The Associated Press. The EPA's decision to roll back its initial claim that hydraulic fracturing, or “fracking,” operations had contaminated the water is the latest case in which the federal agency initially linked drilling to water contamination and then softened its position, drawing criticism from Republicans and industry officials who insisted they proved the agency was inefficient and too quick to draw conclusions. (AP Photo/LM Otero)

  • In this file photo of Jan. 17, 2013, Yoko Ono, left, and her son Sean Lennon visit a fracking site in Franklin Forks, Pa., during a bus tour of natural-gas drilling sites in northeastern Pennsylvania. Ono and Lennon have formed a group called “Artists Against Fracking,” which has become the main celebrity driven anti-fracking organization. (AP Photo/Richard Drew, File)

  • In this March 29, 2013 file photo, a worker checks a dipstick to check water levels and temperatures in a series of tanks at a hydraulic fracturing operation at a gas drilling site outside Rifle, Colorado. (AP Photo/Brennan Linsley)

  • In this March 29, 2013 file photo, a worker switches well heads during a short pause in the water pumping phase, at the site of a natural gas hydraulic fracturing and extraction operation outside Rifle, in western Colorado. (AP Photo/Brennan Linsley)

  • In this March 29, 2013 file photo, workers tend to a well head during a hydraulic fracturing operation at a gas well outside Rifle, in western Colorado. (AP Photo/Brennan Linsley)

  • Josh Fox, director of the anti-fracking, Oscar-nominated documentary “Gasland” testifies during a House Committee hearing on oil drilling, "fracking" legislation at the Illinois State Capitol Tuesday, May 21, 2013, in Springfield, Ill. (AP Photo/Seth Perlman)

  • This is a Thursday Aug. 15, 2013 image of the Cuadrilla exploration drilling site in Balcombe, southeast England. (AP Photo/Gareth Fuller/PA)

  • A child plays near a farmers' protest in an area where oil company Chevron plans to put a drilling rig exploring for shale gas in the south-eastern Polish village of Zurawlow on June 11, 2013. AFP PHOTO / JANEK SKARZYNSKI

  • Protesters hold a banner during a protest outside of the Momentive resin plant, Monday, July 8, 2013, in Morganton, N.C. Dozens of environmental activists blocked a chemical plant Monday to protest against the company's sale of products used in the natural gas drilling process called hydraulic fracturing, or fracking. (AP Photo/The News Herald, Mary Elizabeth Robertson)

  • A fracking rig exploring for shale gas of oil company Chevron on June 11, 2013 in a village of Ksiezomierz in south-eastern Poland. AFP PHOTO / JANEK SKARZYNSKI

  • People demonstrate on August 3, 2013 in La Petite Brosse, near Jouarre, outside Paris, to protest against an exploratory oil shale drilling, considering that it opens the door to the exploration of shale gas in the Parisian Basin. AFP PHOTO / PIERRE ANDRIEU

  • Opponents of hydraulic fracturing in New York state attend a news conference and rally against hydraulic fracturing, also known as fracking, on January 11, 2012 in New York City. (Photo by Spencer Platt/Getty Images)

  • Eric Weltman of Food & Water Watch attends a news conference and rally against hydraulic fracturing, also known as fracking, in New York State on January 11, 2012 in New York City. (Photo by Spencer Platt/Getty Images)

  • Opponents and supporters of gas-drilling, or fracking, walk into the last of four public hearings on proposed fracking regulations in upstate New York on November 30, 2011 in New York City. (Photo by Spencer Platt/Getty Images)

  • Engineers on the drilling platform of the Cuadrilla shale fracking facility on October 7, 2012 in Preston, Lancashire. (Photo by Matthew Lloyd/Getty Images)

  • Engineers at work on the drilling platform of the Cuadrilla shale fracking facility on October 7, 2012 in Preston, Lancashire. (Photo by Matthew Lloyd/Getty Images)

  • General views of the Cuadrilla shale fracking facility on October 7, 2012 in Preston, Lancashire. (Photo by Matthew Lloyd/Getty Images)

  • Engineers look at the Cuadrilla shale fracking facility on October 7, 2012 in Preston, Lancashire. (Photo by Matthew Lloyd/Getty Images)

  • A lump of shale rock on display at the Cuadrilla shale fracking facility on October 7, 2012 in Preston, Lancashire. (Photo by Matthew Lloyd/Getty Images)

  • Engineers on the drilling platform of the Cuadrilla shale fracking facility on October 7, 2012 in Preston, Lancashire. (Photo by Matthew Lloyd/Getty Images)

  • Engineers at work on the drilling platform of the Cuadrilla shale fracking facility on October 7, 2012 in Preston, Lancashire. (Photo by Matthew Lloyd/Getty Images)

  • Drill heads on display at the entrance to the Cuadrilla shale fracking facility on October 7, 2012 in Preston, Lancashire. (Photo by Matthew Lloyd/Getty Images)

  • An engineer displays a lump of shale rock at the Cuadrilla shale fracking facility on October 7, 2012 in Preston, Lancashire. (Photo by Matthew Lloyd/Getty Images)

  • Actor/director Mark Ruffalo (C) speaks at the Hydraulic Fracturing prevention press conference urging the protection of the drinking water source of 15 million Americans at Foley Square on April 25, 2011 in New York City. (Photo by D Dipasupil/Getty Images)

  • (L-R) Actor/director Mark Ruffalo, Denise Katzman, Wenonah Hauter, and Water Defense co-founder/campaign director Claire Sandberg attend the Hydraulic Fracturing prevention press conference urging the protection of the drinking water source of 15 million Americans at Foley Square on April 25, 2011 in New York City. (Photo by D Dipasupil/Getty Images)