The Reagan administration is moving to rein in a unit of government that, under President Carter, was considered by many to be the country's leading environmental law firm: the Justice Department's Land and Natural Resources Division.

The assistant attorney general who headed it in the Carter administration was James Moorman, an environmentalist who went to the Justice Department from the Sierra Club legal defense fund.

He recruited other lawyers of like mind, and made the division into an activist agency, prodding other departments and regulatory bodies into enforcing and complying with the nation's environmental protection laws.

His successor, Carol Dinkins, from the Houston law firm of Vinson & Elkins, has moved to change all that and return the division to its more traditional function as the legal firm for government agencies, defending them from lawsuits and and filing suits on their behalf only when asked to.

"I want the division to be regarded as a strong litigation division whose interest is in serving its clients, not in setting policy," she said. "Moorman was more inclined to initiate matters, to try to bring about changes through case law than I will be doing."

One division source said that lawyers had received explicit instructions from Dinkins that "our role is to be lawyers and provide options to the agencies. We are not policymakers."

These client agencies in turn, following administration policy, are more conservative on environmental questions than in the past.

Dinkins has also made two other changes that have upset environmental groups.

First, she has changed a policy of neutrality on the question of awarding attorneys' fees to environmental groups in major policy suits when they lose.

"They will be even more upset before it's over," she said. "I want to make sure we are not paying out a dollar of U.S. tax money in attorney fees that is not clearly owed. We will question not only whether they're entitled to fees , but also we will be taking a look at the quality of the work performed."

In addition, she has reversed Moorman's policy of generally allowing environmental groups "standing"--the right to enter a lawsuit--in many environmental cases.

Dinkins said, "It's a matter of great importance to me to raise standing in every applicable case . . . . Otherwise, you've got everybody going into the courts on every issue imaginable."

Frederick Middleton, an attorney for the Sierra Club legal defense fund, predicted that the changes in policy, especially the lawyers' fees, could have a "very chilling" effect on lawsuits by environmental groups.

But Dinkins said, "If it's important enough to them, they should be willing to go forward without funding from the government . . . . They shouldn't be in the business of generating fees to keep themselves in business."

Sanford Sagalkin, deputy assistant attorney general in the lands division under Moorman, said that both changes may backfire on Dinkins because of court decisions allowing the environmental groups both standing and fees.

The groups will now be forced to go to court for the fees, he said, a procedure that will not only take the time of Justice Department attorneys but also is likely to result in higher fees than if the department had settled with the groups outside of court.

He added that he believes it is a mistake to "raise standing as a boilerplate defense" because of precedents granting standing to the environmental groups. Once a group has obtained standing by proving some sort of "injury" to its members, Sagalkin said, "you've undermined the rest of your case."

Middleton says that he and others who are working for environmental advocacy groups have been discouraged by the changes in the lands division.

"We have the feeling that in the long run things will get worse," he said. "If you have someone like Interior Secretary James G. Watt ordering them to take position X, then you can have a well-meaning attorney in the Justice Department . . . but they'll be forced into going into court and being a puppet for Watt . . . . And with clients like Watt, that can't be anything but bad news for the environment."

Lawyers in the lands division, many of them environmental activists hired during the Carter administration, are also reported to be discouraged by the changes, not only those brought about by Dinkins but also those that have been imposed from outside by the different environmental policies of the Reagan administration.

"People came in with the understanding that this was the place where you can do good things for the environment for the government. Now they're having to do bad things for the environment for the government," said one attorney who has left the division.

Peter Coppelman, who has also left the division, added, "On a lot of these sticky questions, government isn't initiating anything, just defending against outside suits. The Clean Air Act, the Clean Water Act, I think you're just going to see the government go to sleep for the next four years. A lot depends on what Environmental Protection Agency Director Ann Gorsuch sends over."

Dinkins acknowledges that there are some morale problems. "When you have a new administration, you're always going to have some morale problems . . . until people get to know one another and understand one another," she said.

But few are blaming Dinkins.

Coppelman said, "At this point, things are a lot worse at the Interior Department than people expected and a lot better at Justice than expected."

"From what I've seen so far, it seems that the people still there like Carol Dinkins," Sagalkin added. "They think she's doing a good job.

"But I think there's a general attitude that the whole Reagan administration policy on protection of the environment is taking a number of steps backward. The government is no longer an exciting place to work on behalf of the environment," he said.