WASHINGTON—The Environmental Protection Agency has decided there’s no need to rid drinking water of a toxic rocket fuel ingredient that has fouled public water supplies around the country.

EPA reached the conclusion in a draft regulatory document not yet made public but reviewed Monday by The Associated Press.

The ingredient, perchlorate, has been found in at least 395 sites in 35 states at levels high enough to interfere with thyroid function and pose developmental health risks, particularly for babies and fetuses, according to some scientists.

The EPA document says that mandating a clean-up level for perchlorate would not result in a “meaningful opportunity for health risk reduction for persons served by public-water systems.”

The conclusion, which caps years of dispute over the issue, was denounced by Democrats and environmentalists who accused EPA of caving to pressure from the Pentagon.

“This is a widespread contamination problem, and to see the Bush EPA just walk away is shocking,” said Sen. Barbara Boxer, D-Calif., who chairs the Senate’s environment committee.

Lenny Siegel, director of the Center for Public Environmental Oversight in Mountain View, Calif., added: “This is an unconscionable decision not based upon science or law but on concern that a more stringent standard could cost the government significantly.”