A federal appeals court Friday threw out some of the U.S. government's largest leasing programs for offshore oil and gas exploration, potentially halting development in the Gulf of Mexico, Virginia and Alaska.

The Washington federal court of appeals told the Department of Interior in its ruling that the agency needed to better consider the environmental impact of oil exploration in those regions.

The decision further delays exploration and development of Outer Continental Shelf resources at a time when energy analysts warn that more investment is needed in the sector to prevent price spikes in coming years. It also comes as producers are finding it increasingly difficult to find new reserves and boost production at home and abroad and have seen their reserves subsequently fall.

The three-judge panel found that an Interior Department ranking of environmentally sensitive areas conducted under the Bush administration was "irrational." The agency must first reconsider its assessment, the court ruled, before moving ahead with its 2007-2012 lease sale program, especially in the Beaufort, Bering, and Chukchi seas off Alaska.

Interior Department spokesman Frank Quimby said the agency was reviewing the decision. It was unclear, however, whether the ruling would halt development in acreage leased in five previous Gulf of Mexico sales that companies have invested billions of dollars to explore and develop, or just the scheduled lease sales in Alaska and Virginia.

Peter Van Tyne, the lawyer who represented several Alaska native and environmental groups in the claim, said the ruling gives Interior Secretary Ken Salazar a legal reason to revisit at the very least the Alaskan lease sales.

The American Petroleum Institute said in a statement the ruling could deal a "devastating blow to the economy" if the decision delayed development of domestic oil and natural gas resources.

Oil majors Royal Dutch Shell (RDSA) and ConocoPhillips (COP), which have spent billions of dollars on Alaska lease sales and seismic surveys, couldn't immediately comment on the ruling and how it would affect their operations.

The Alaska seas are considered some of the most ecologically sensitive areas of the world, hosting polar bears, whales, seals and walruses. The lawsuit was brought by three environmental groups that want to protect the ecosystem and the Native Village of Point Hope, Alaska, a tribe that lives off the wildlife on the Chukchi Sea coast.

Even if the Interior Department reassesses the environmental sensitivity in a manner deemed "rational" by the courts, the ruling leaves the door open for the same groups to challenge the lease sales under other federal laws, specifically the National Environmental Protection Act.

By Ian Talley, Dow Jones Newswires; (202) 862 9285; ian.talley@dowjones.com;