At least one Australian shale gas company is calling for a ban on toxic chemicals used in the process following a damning report by the US Environmental Protection Agency, The Australian Financial Review reported yesterday.

The EPA for the first time linked water contamination with hydraulic fracturing, or fracking, when it issued a draft report on Friday from its two monitoring wells in central Wyoming that were drilled to a depth of 1000 feet (304.8 metres).

While critics have pointed out the EPA's findings are not conclusive, it seems to debunk two key arguments that the oil and gas industry have used to defend the controversial practice of fracking - that the extreme depth at which the process takes place will keep contaminants far from drinking water and hydrologic pressure will naturally push fluids down.

Central Petroleum managing director John Heugh said the Australian government should mandate that the industry use only non-toxic chemical solutions to make fracking fluids.

"The majority of fracking operations now in North America are conducted using 'slick-water fracs' that basically use straight water with some gelling agents to thicken the water," he said.

"This removes the need to use noxious chemicals that might cause environmental damage in the vast majority of cases."

But the use of slick-water fracs may not remove the controversy around fracking. Environmentalists believe the process still introduces carcinogenic substances into the water table and the practice is likely to face tighter regulation in the US after the EPA's latest report.

This could affect investments in the sector, especially since Australia is likely to take the lead from the US even as it sets up a $150 million independent expert scientific committee to study the effects of exploration and mining on underground water.