Top Interior Department officials have joined the oil and gas industry in opposing a new environmental restriction that they say could "shut down" most new energy development on federal lands.

The restriction, imposed by an administrative law panel, requires formal environmental impact studies to be completed before industry can be allowed to drill for oil or gas on federal land. Interior Secretary Manuel Lujan Jr. is expected to decide within the next few months whether to side with the industry and overturn the decision.

Interior's Bureau of Land Management has joined Amoco Production Co. and the Rocky Mountain Oil and Gas Association in opposing the law panel's decision, warning that it would sharply reduce new energy exploration and production.

"Basically, if we were to implement that decision to the letter right now, we would probably shut down about 80 percent of the development drilling on federal lands," said Hillary Oden, the BLM's assistant director for energy and minerals. "With the Persian Gulf crisis, people have been more interested in leasing and drilling."

About 70 million acres of federal land, encompassing roughly 70,000 active wells, are currently under lease for energy production, according to the BLM. Oil and gas extracted from onshore federal lands account for 4 to 5 percent of the nation's domestically produced energy.

The BLM contends that formal environmental impact studies of the sort sometimes required for large open-pit mines and other major development projects should not be required for each well that is proposed. Instead, the agency says it is developing area-wide plans that will suffice as environmental impact studies and that in some cases the plans will proscribe new drilling on ecologically fragile lands.

But few of the plans are complete, and in the meantime energy development is proceeding apace in federal forests, deserts and mountains. For example, in northern New Mexico's San Juan Basin, the nation's second largest known gas field, the BLM is continuing to approve new drilling in an area that already contains 9,000 wells, 10,000 miles of road and thousands of miles of pipeline.

Environmentalists contend that the cumulative effects of such development can diminish wildlife habitat and other natural values. They argue that new permits should require formal environmental impact studies, which allow opportunity for public review and comment.

"They just can't get away from this attitude that their environmental responsibilities are sort of an annoyance," said David Alberswerth of the National Wildlife Federation. "Our view is they're at least as responsible for environmental protection as they are for getting oil and gas out of the ground."

The current dispute stems from a case brought by Michael Gold, who operates a children's wilderness camp in the San Juan Basin. The BLM had granted an energy company permission to drill in the area, basing its decision on a four-page environmental "assessment."

But the Interior Board of Land Appeals, a quasi-judicial body within the department, ruled that the assessment was inadequate. The board held that in the absence of an area-wide environmental study for the basin, the BLM should have performed the formal review on the individual drilling permit.

Last summer, Amoco appealed the decision and lost, setting off the current appeal to Lujan, who has the power to overturn the board's decision.

The appeal places Lujan in the somewhat awkward position of ruling on a case in which one of his own agencies has taken sides with the plaintiff, Amoco. In an October memo to Lujan, David C. O'Neal, the assistant interior secretary for land and minerals management, warned that the Gold decision would cause "major disruptions" in the agency's oil and gas program.