By Laura Zuckerman

(Reuters) - New Mexico on Friday withdrew a temporary permit allowing two new disposal vaults at a U.S. government nuclear waste dump grappling with a release of radiation in February, state regulators said.

Seventeen workers at the Carlsbad-area "waste isolation pilot project" (WIPP) were exposed to radiation after an accidental leak last month from the site which stores waste from U.S. nuclear labs and weapons production facilities.

State regulators were withdrawing the draft expansion permit to identify safety issues that may need to be addressed in the aftermath of that accident, New Mexico Environment Secretary Ryan Flynn told a news conference on Friday afternoon.

"We need to proceed with caution (and) assess any additional risks posed to either workers or the public," Flynn said.

The draft permit would have allowed disposal of machinery, clothing and other items tainted with radioisotopes, like plutonium in two additional storage vaults and it granted changes to the way chambers filled to capacity are sealed.

No workers were underground at the U.S. Energy Department's site when air sensors half a mile below the surface triggered an alarm, indicating unsafe levels of radioactive particles.

The 17 above-ground workers who later tested positive for contamination were not expected to experience any health effects.

But the accident triggered the WIPP's closure and continuous air testing mechanism which showed elevated levels of radiation although not enough to be harmful to human health or the environment, Energy Department officials said.

Waste shipments were suspended after February 5, when a truck hauling salt caught fire below ground. No one has re-entered the underground facility since an air-monitoring system detected the radiation release nine days later.

Teams of investigators equipped with self-contained breathing devices are expected to go below ground in coming weeks to determine what caused the leak, an Energy Department official said.

New Mexico regulates hazardous waste facilities under state law and also is granted authority by the U.S. Environmental Protection Agency to issue federal permits.

The immediate impacts on the repository, which has received up to 6,000 cubic meters of nuclear waste a year since it opened in 1999, were unclear though waste headed its way from a Los Alamos lab was detoured to Texas.

Federal officials could not say what would happen with above-ground drums at the WIPP that had been expected to be stored below ground.

The site's contractor, Nuclear Waste Partnership LLC, did not immediately respond to requests for comment.

(Reporting by Laura Zuckerman in Salmon, Idaho; Editing by Eric M. Johnson)