By Ayesha Rascoe

WASHINGTON (Reuters) - The Obama administration on Thursday unveiled a new proposal for regulating hydraulic fracturing on federal lands, rolling back some measures from its original, abandoned draft as it sought to ease concerns the rules would be too burdensome for producers.

The U.S. Interior Department scrapped a proposal from 2012 after drawing heat from green groups and the drilling industry over rules aimed at updating decades-old fracking regulations.

"Our thorough review of all the comments convinced us that we could maintain a strong level of protection of health, safety, and the environment while allowing for increased flexibility and reduced regulatory duplication," Interior's Bureau of Land Management Principal Deputy Director Neil Kornze said in a statement.

While the rules would only cover federal lands, which have so far made up only a small portion of the shale oil and gas boom, the administration has said it hopes the regulations can act as a model for state oversight of private lands.

But in attempting to navigate between environmental concerns and economic needs, the latest plan did not please advocates on either side of the debate.

The plan offers "flexibility" to drillers by allowing them to use various tools to evaluate cement integrity and by allowing the use of an industry-backed web site known as FracFocus for the disclosure of chemicals used in hydraulic fracturing after drilling takes place, the Department said.

These added flexibilities raised the ire of environmental groups, who had argued that the department's first attempt at drafting rules did little to address pollution risks often associated with fracking.

And the changes failed to win over some industry backers, who have questioned why federal regulations are needed at all when states already have rules in place.

Interior Secretary Sally Jewell said she expects the rules to be attacked from backers and skeptics of fracking alike, but that the guidance is sound.

"You're going to hear from folks that we've caved in to industry or we're bowing to pressure from environmentalists," Jewell told reporters on a conference call.

"The fact is this is an improved common sense proposal that benefited from the feedback we got from all stakeholders on all sides of this issue."

MORE DRILLING VS MORE SAFETY?

The Obama administration has attempted to walk a fine line on the fracking issue, stressing support for expanded oil and gas drilling, while also promising to ensure safety.

The new draft rules, which will be subject to 30-day public comment period, keep intact many of the measures from the government's first proposal that were maligned by green groups, including requiring disclosure of chemicals used after drilling has already occurred and allowing waste fluids to be stored in open air pits.

"This rule essentially says to oil companies that they can frack first and ask questions later," said Massachusetts Congressman Edward Markey, the top Democrat on the House natural resources committee and a vocal critic of oil and gas interests.

Fracking is mostly exempt from federal regulations, with most of the drilling occurring on state and private lands where the Interior rules would not apply.

Currently production on public lands accounts for about 13 percent of U.S. natural gas output and 5 percent of oil output.

Citing diverse geologic conditions and existing local frameworks, drillers have vigorously fought to keep drilling regulations at the state level.

"The overall concept of the BLM proposing fracturing regulations is completely unnecessary, and duplicative of what the states already do," said Michael Krancer, a former secretary of the Pennsylvania Department of Environmental Protection (DEP) under Governor Tom Corbett.

Krancer, currently a partner at law firm Blank Rome in Philadelphia, said fracking was never intended to be regulated by the federal government, which he argued does not have the expertise to tackle the issue.

Jewell called state regulations "patchwork in nature" and "not consistent," and that the Interior rules would provide baseline safeguards and complement state regimes.

The department pledged to work with states and seek ways to defer to states that were already in line with federal proposal.

Republican Senator John Hoeven of North Dakota said that the proposed rules could exacerbate permitting delays, nothing that it already can take up to 290 days to permit a well on federal land in his state compared with "just weeks" for a similar permit on private late.

(Additional reporting by Braden Reddall; Editing by Ros Krasny, Gerald E. McCormick, Alden Bentley and Bob Burgdorfer)