Nancy Sticht, a spokeswoman with the U.S. Army Corps of Engineers, said Friday that the agency received a letter requesting the project be abandoned.
The decision comes four months after a government-appointed committee rejected plans for the pipeline that would have bisected the island, and offered three alternatives.
Gov. Luis Fortuno originally backed the project as a way to reduce dependence on oil. He said the 92-mile (148-kilometer) pipeline would have saved $1 billion a year and reduced greenhouse gas emissions by 64 percent.
The pipeline would have originated in southern Puerto Rico and traversed 235 rivers and wetlands, bisecting the island as it veered east toward the capital of San Juan. Critics said it would have damaged fragile ecosystems and archaeological sites and exposed people to deadly explosions.
Government officials said they will consider other natural gas alternatives and expect to choose a new project by mid-2013.
Puerto Rico relies on petroleum to generate nearly 70 percent of its power, and electric bills are at least twice as expensive as those on the U.S. mainland. The government has thus made it a priority to attract more privately funded renewable energy projects to the U.S. territory.
AES Solar, a Virginia-based company, this month began operating the Caribbean's largest solar energy project. It features more than 101,000 solar panels in Puerto Rico's southern region that is providing energy to more than 6,000 homes daily.
Puerto Rico also expects to soon inaugurate what will be the Caribbean's largest wind farm, a project that would feature 44 turbines on the island's southern coast.