A rule to take effect in June also updates requirements for well construction and disposal of water and other fluids used in fracking, a drilling method that has prompted a boom in natural gas production.
The rule has been under consideration for more than three years, drawing criticism from the oil and gas industry and environmental groups.
The industry fears the regulation could hinder the drilling boom, while some environmental groups worry that it could allow unsafe drilling techniques to pollute groundwater.
Interior Secretary Sally Jewell said the rule will allow for continued responsible development of federal oil and gas resources on millions of acres of public lands while assuring the public that "transparent and effective safety and environmental protections are in place."
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Jewell, who worked on fracking operations in Oklahoma long before joining the government in 2013, said decades-old federal regulations have failed to keep pace with modern technological advances.
Fracking involves pumping huge volumes of water, sand and chemicals underground to split open rocks to allow oil and gas to flow.
Improved technology has allowed energy companies to gain access to huge stores of natural gas underneath states from Wyoming to New York but has also raised widespread concerns about alleged groundwater contamination and even earthquakes.
While the new rule only applies to federal land, which makes up just one-tenth of natural gas drilling in the United States, the Obama administration is hoping the rule will serve as a model and set a new standard for hydraulic fracturing that states and other regulators will follow.