A top Department of Energy official yesterday endorsed, with a few minor reservations, proposed legislation that would sharply restrict major corporate mergers by the 16 largest oil companies operating in the United States.

In testimony before the Senate Judiciary Committee, DOE General Counsel Lynn Coleman called the antitrust legislation -- which would prohibit the oil companies from acquiring other firms with assets of more than $100 million -- "timely" and needed to insure sufficient funding for energy search and development.

Coleman asked for one revision however. Like Assistant Attorney General for Antitrust John Shenfield, Coleman called for a clause in the bill that would permit such a merger if it was shown to "enhance competition," particularly when such mergers might also be shown to increase domestic energy production.

But the legislation, in the form of two bills proposed by Judiciary Committee Chairman Sen. Edward M. Kennedy, (D-Mass.) and the Carter administration through Shenefield, was opposed vigorously by two industry representatives as well as Republican committee members.

"We are hoodwinking ourselves if we think legislation like this is going to create energy supplies," said committee member Sen. Thad Cochran (R-Miss.).

"You are just saying you don't like the money-making intentions of private businesses and so you are going to channel them someplace else," added Sen. Alan K. Simpson (R-Wyo.).

Irving Shapiro, chairman of the Du Pont Co., and a former antitrust lawyer in the Justice Department, said he opposed the legislation because existing laws already protect against antitrust violations that might occur because of any mergers, and because the proposed bills would single out the oil industry unfairly because of political considerations.

He also said that the public is better served by a private sector that can make its own capital investment decisions. "As long as the marketplace is competitive, it is a better steering mechanism for the economy than the government," Shapiro said.

Shapiro said it was "distressing to see this industry being singled out for special constraints." Rather, he said, "Federal policy ought to apply as even-handedly as possibly to all sectors of the economy."

"No convincing evidence has been produced of anti-competitive results from mergers of the kind the bill seeks to prohibit," Shapiro said. "Instead, we are reduced to a flimsy case based on social policy grounds."

George Shultz, president of Bechtel Corp. and a professor at the Stanford University Graduate School of Business, warned that the proposed legislation was the same as loading "every cylinder" of the gun in a game of Russian roulette.

"Government controls, regulations, and arbitrary and constant changes in them have already damaged our energy industry severely," Shultz warned. "We need this bill like we need a hole in the head."

Shultz said the bill would actually restrict the flow of funds into and out of the energy industry. "It would not only cut the interest of investors in a vital field at a vital time," he said, "but would thereby also raise the cost of capital needed for oil and gas development The net result would be "a negative impact on energy production in the U.S., just the opposite of the goal our government purports to pursue."

In a prepared opening statement, Kennedy criticized the major oil companies for buying mining companies, a department store and an electric motor manufacturer instead of reinvesting their funds in energy-related projects.

"Already billions of dollars, which could have been spent on new oil and gas exploration, new production, or the development of new energy technologies, have gone instead to fund these excursions into other industries," Kennedy said.

Only this weekend, a federal judge temporarily blocked an Exxon Corp. acquisition of Reliance Electric Co. because of antitrust considerations.