The Energy Department yesterday rejected a $5 billion liquefied natural gas (LNG) pipeline project, raising serious questions about the future of one of the energy industry's most favored growth areas.

While DOE stopped short of saying that LNG projects are dead, a carefully worded decision handed down by Energy Regulatory Administrator David J. Bardin is being interpreted in oil and gas industry circles as a rebuff to LNG's future.

American Gas Association President George H. Lawrence greeted news that the project proposed by Tenneco Atlantic Pipeline Co. (Tapco) had been rejected by saying, "We're disappointed, this is going to be discouraging to long-range LNG supplies." Tapco is a subsidiary of Tenneco.

The Tapco project would have delivered 1 billion cubic feet a day for 20 years from New Brunswick, Canada to Calais, Maine, where, in turn, it would be shipped to customers in 22 eastern U.S. states. According to Tapco's filing with the Energy Regulatory Administration the consumer price of the Algerian LNG would be $4.44 by 1983, which is nearly twice the current cost of delivering conventional gas today.

"We cannot conclude that the large, long-term commitment to an LNG project is now needed," Bardin wrote in the decision turning down Tenneco.

Tenneco issued a brief statement yesterday saying that the Texas-based gas pipeline company would consider taking further action if appropriate. Tenneco, the largest gas shipper in the country, has the option of appealing the decision in the courts.

While Bardin's decision says, "This does not mean a blanket rejection of all LNG imports," it is clear thrust from the Energy Department which has been looking skeptically at all proposed LNG projects.

This process began more than a year ago when Energy Secretary James R. Schlesinger, Jr. told a press conference that his department was considering laying out an LNG policy. Formulating on LNG policy, however, was put aside in favor of pressing for enactment of the controversial Natural Gas Policy Act. In the meantime, the DOE decided that LNG projects would be considered on a "case by case" basis.

There are three operating LNG facilities in the United States-at Everett, Mass., Cove Pt., Md., and Elba Island, Ga. A fourth plant, scheduled to become operative in 1981, is being located at Lake Charles, La.

Earlier this year, DOE issued a decision moving towards final approval of a plan to import Indonesian LNG to Point Conception, California.

The largest LNG deal awaiting approval is the E1 Paso II project, proposed by E1 Paso Natural Gas Co. and to be constructed at Madagorda Bay, Tex. It would use Algerian LNG.

At the DOE, spokeswoman Lynne Church characterized the department's view of LNG, saying, "It is not our most desirable form of gas. We want to encourage production of domestic gas-especially gas from Alaska."

Bardin's decision also argues that there was no need for LNG in the near future because the domestic gas industry "enjoys substantial supply deliverability."

A further objection posed by Bardin was to the pricing mechanism that would have indexed gas prices to world oil prices.

A recent optimistic industry projection of the amount of LNG that would be shipped in world trade said that it could amount to the equivalent of 3 million barrels of oil a day by 1985. So far, however, high costs and consumer government uncertainties have begun to drive some industrial countries away from the once much-vaunted LNG.