WASHINGTON (Reuters) - The U.S. Environmental Protection Agency was criticized in an internal report for dropping charges that Range Resources Corp was polluting drinking water while "fracking" for natural gas.

Range is using the hydraulic fracturing technique in Parker County, Texas where one homeowner complained in August 2010 that he could set his drinking water on fire.

Six U.S. senators had asked the agency's internal watchdog - the Office of the Inspector General - to evaluate a 2012 decision to drop an order that had forced Range to provide drinking water to residents, and stop contamination.

The EPA withdrew its order in March of that year after legal action by the company.

That decision was in line with its own rules, the report said, but the agency should have been tougher with the company, and more critical of the data it used.

Tests of 20 wells near the drilling site should have been conducted more broadly, and the EPA should have gone to greater lengths to make sure it trusted Range's data.

The report issued a number of formal recommendations for the agency which the EPA has already agreed to act upon them.

"The EPA agreed with and provided corrective actions that address our recommendations. All recommendations are resolved with corrective actions underway," the report said.

In fracking, companies blast large amounts of sand and water laced with chemicals underground to free oil and natural gas. Environmentalists say this can pollute water and air.

The report, which was released late on Tuesday, was dated December 20.

(Reporting by Douwe Miedema; Editing by Leslie Gevirtz)