Alaska's immense natural gas reserves should be transported in a 4,175-mile pipeline through Canada that branches into Western and upper Midwestern states, a Federal Power Commission judge recommended yesterday.

Administrative law Judge Nahum Litt said an $8.5 billion proposal by the Alaskan Arctic Gas Pipeline Co., a consortium of 16 U.S. and Canadian companies, is "vastly superior" to proposals by two other companies, El Paso Alaska Co. and Alcan Pipeline Co.

Arctic's proposal would make more gas available sooner, at less cost and with less environmental impact, he said.

The pipeline, which has major political, economic and foreign policy implications, has stirred fierce controversy in Congress, government agencies, industry, and environmental circles.

The judge's decision is the first step in administration compliance with a law passed by Congress last year. The law requires the full Federal Power Commission to recommend a route to President Carter by May 1. By Dec. 1, Carter must make a decision, and Congress may overturn it by joint resolution within 60 days.

While the pipeline will not relieve the current natural gas shortage, it will allow the United States to exploit the estimated 22 trillion cubic feet of Prudhoe Bay gas that represents 10 per cent of the nation's reserves - more than a year's supply for U.S. consumers.

When it is completed in the early 1980s, the pipeline is supposed to carry 2.5 billion cubic feet of gas daily to energy-hungry states from California to New York. It is, the FPC said, the largest private undertaking in the nation's history. (The $8 billion Alaska oil pipeline is 800 miles long).

The judge's decision drew immediate criticism from competing companies and from environmentalists.

John C. Bennett, vice president of El Paso Alaska, said Litt ignored the danger that Canadian provinces could unreasonably tax the pipeline, there by raising consumer prices here.

El Paso wants to build the line across Alaska, paralleling the almost completed oil pipeline, and then carry the gas by tanker to a West Coast terminal.

Bennett said Arctic's line, which would pick up gas from Canada's Mackenzie Delta, could be delayed indefinitely by Canadian Indian and Eskimo land claims now under government review.

A coalition of environmental groups including the Sierra Club, National Audubon Society, and the Environmental Policy Center, called Litt's decision "outrageous. We're going to fight it on the rooftops, in the streets, in the barnyards, in Congress," said Sierra Club attorney Brock Evans.

The Arctic gas route would traverse the length of the 14,000-square-mile Alaskan Wildlife Range, which environmentalists say is the last unspoiled mountain to shore Arctic wilderness area.

From Alaska it would cut southwest into Canada, dividing into two legs at Caroline, Alberta. The western leg would cross British Columbia, Washington and Oregon, ending near San Francisco. The eastern leg would cross Saskatchewan, Montana, North Dakota, South Dakota, Minnesota, Iowa, and Illinois, ending near Chicago.

The El Paso proposal also raises environmental questions because it would rely on liquefied natural gas tankers which are subject to explosions and leaks, and because it would transport the gas to California rather than to energy-starved Midwestern states.

Environmentalists prefer the Alcan route, which would bypass the wildlife range and bring the gas across Canada and into California and the Midwest.

Judge Litt said Alcan's proposal, which would require 4,600 miles of pipeline, is "neither efficient nor economic," and relies on an undersized pipeline and poorly planned construction.

Litt said tht while El Paso's proposal would require more transportation and storage facilities than the company projected, it would be a viable alternative should the Arctic line be rejected.

His decision came after 18 months of hearings. The testimony, briefs and counter-briefs amount to 45,000 pages of transcripts. In the end, however, most participants say the decision will be a political one, fought out in the halls of Congress and White House conference rooms.

Vice President Mondale, who as a senator from Minnesota sponsored the pipeline legislation requiring a prompt decision, represents Midwestern interests that favor the Arctic line.

The legislation forbids court suits, thereby ensuring that critical energy supplies will not be held up in lengthy litigation by environmentalists or competing companies.

Because of transportation costs, the new gas will not be cheap. Sales contracts have not been signed with the energy companies that own the Prudhoe Bay reserves, but the FPC estimated the average wholesale pice will be $2.41 per thousand cubic feet - about $1 more than the present nationwide ceiling on interestate gas. Unregulated gas sells for about $2 per thousand cubic feet.

While Litt acknowledged in his 430-page decision that the Arctic Wildlie Range should be protected he said the pipeline's effect would be small and of limited duration. He added, however, tht the range's oil and gas reserves should be exploited - a possiblity deplored by environmentalists.

He also rejected arguments that migratory snow geese would be severely harmed and that 915 miles of snowroads would disrupt wildlife migration patterns.

Litt said "mitigative construction measures,' can reduce the fine's impact on the birds and that aircraft flights, the most serious hazard, will occur less frequently than once every two hours. Evans, however, said the flat Alaska terrain will carry construction noise for 30 miles.

On the taxation issue Litt said that the United States' long, friendly relationship with Canada assured stability and rational treatment of "a mutually beneficial business enterprise."

However, accounting for growing Canadian nationalism, he added, "Even if it is assumed that a Canadian government would come to power predisposed to act unreasonably, such imprudence could be countered with equally unsavory activities on the part of the U.S."