The Interior Department, in an unusual action, appealed yesterday to Army Secretary Clifford Alexander to block a Washington company's plans to build a huge oil refinery in south eastern Virginia.

Calling the proposed site "one of the worst locations in the United States" for a refinery, Interior Under-secretary James A. Joseph urged the Army Corps of Engineers to reverse its approval of the $660 million project on the Hampton Roads harbor.

His protest means that Alexander will have to referee the dispute between the Interior Department and the Corps of Engineers over the Washington-based Hampton Roads Energy Co.'s plans for the refinery. It would process upward of 175,000 barrels of foreign crude oil daily and be the largest refinery on the East Coast.

An aide to Interior Secretary Cecil B. Andrus called the protest "unusual, but not unprecedented." The aide said the department is alarmed over the refinery's potential harm to Virginia's seafood industry.

In disclosing a letter to corps chief Lt. Gen. John W. Morris at a Norfolk press conference, Joseph acknowledged the need for increased domestic refinery capacity. But he added, "This isn't the place."

Joseph said the department would not object to new refineries elsewhere but said the Portsmouth project posed a clear threat to the Chesapeake Bay blue crab and James River oyster seedbeds.

Morris approved permits needed to build and operate the refinery over the recommendations of Interior's Fish and Wildife Division, the National Oceanographic and Atmospheric Administration and the Corps' own Norfolk office.

"I find it impossible to agree with your conclusions," Joseph wrote to Morris in the letter disclosed yesterday. The strength of the Interior Department's opposition can be gauged by Joseph's tough language and by the fact that he flew to Norfolk to announce the position, an Interior official said.

"It's no surprise to me," said John K. Evans, president of Hampton Roads Energy. "The fish and wildlife people have been against this from the beginning. They're against any project, needless to say."

The refinery's opponents were pleased. "I'm glad to see they've taken that position on it," said Robert Hicks of the Conservation Council of Virginia.

"We're just ecstatic," said Jack Lorenz, executive director of the Izaak Walton League. "Gen. Morris should now review his stand."

If Alexander approves the permits despite Interior's objections, a group of Tidewater residents, fisherman and environmentalists called Citizens Against Refinery's Effects has said it will to go federal court to reverse the Army secretary.

"It's going to be a pretty big suit," an Interior spokesman said. "And they're going to have the benefit of our statement."