A sprawling stretch of salt ponds on the western edge of San Francisco Bay, once eyed for the creation of a virtual mini-city, is back at the center of debate over regional development after the Trump administration this month exempted the site from the Clean Water Act.

With the regulatory hurdle out of the way, real estate company DMB Pacific Ventures says it’s reopening discussion about what to do with the unusually large chunk of undeveloped land at the heart of Silicon Valley in Redwood City.

The Phoenix-based firm hasn’t offered a plan for the property. It’s only said it won’t pursue the same 12,000-home proposal it sought a decade ago. That idea was dropped amid fierce opposition, but with emotions still raw from the fight, renewed talk of development is once again igniting tension between such competing interests as housing and bay restoration.

“What was proposed before was huge and controversial ... and divided our community,” said Redwood City Mayor Ian Bain. “There’s very little appetite in the community for another big project.”

Bain said his preference is to return the land to its original, marshy state. This option was popularized during the last dispute because natural wetlands would help buffer the city from the rising bay water that has come with climate change.

Any proposed construction on the roughly 2-square-mile salt-harvesting site would still have to be approved by the city as well as other local and state agencies. But DMB Ventures, which is working with the property’s owner, agribusiness giant Cargill, believes the Bay Area’s acute housing shortage plus the land’s proximity to such employers as Facebook, Oracle and Kaiser Permanente could warm the community to new residential development.

“It’s a critical site, it’s a critical size and it’s a critical location,” said attorney David Smith, representing DMB Ventures. “It’s uniquely poised to help facilitate solutions to some of Silicon Valley’s most vexing challenges.”

The prospect of building over the salt ponds comes after the U.S. Environmental Protection Agency last week tossed the findings of the local EPA office and determined that the land is not bound to the Clean Water Act. The 1972 law is designed to restrict water pollution as well as prevent the destruction of wetlands.

Agency Administrator Andrew Wheeler wrote that the Redwood City property had been turned from marsh into a salt farm before the passage of the Clean Water Act and, therefore, future development wouldn’t be subject to the law. The land was diked and filled in the early 1900s to create a series of pinkish-red pools where briny water, to this day, is dried to produce salt.

Jared Blumenfeld, former administrator of the EPA’s West Coast office and now California’s secretary of environmental protection, said the agency’s decision is a misguided interpretation of the Clean Water Act.

During his tenure at the federal EPA, Blumenfeld’s office determined that the Redwood City site was subject to the law because it covers areas that can be easily converted back to wetlands, which is the case with the salt ponds. That determination was not made official, however, before President Trump took office, and the new administration moved forward with its own review.

“This is a very troubling precedent,” Blumenfeld said. “More than 90 percent of coastal wetlands have been destroyed in California, and this opens up the potential of (more) development” on the bayfront.

Bayfront marshland provides habitat for fish, birds and small mammals and filters pollution from dirty water as well as offers flood protection from rising seas.

Speaking on the floor of the House of Representatives on Tuesday, Democratic Rep. Jackie Speier, who represents the area, took the opportunity to blast the EPA for changing its tune on the Clean Water Act.

“This administration has completely hijacked the jurisdictional process away from the experts on the ground,” she said. “It’s completely in line with this administration’s record of gutting environmental protections in the name of corporate interests.”

Speier told The Chronicle that, even if new development isn’t approved, the EPA’s “flip-flop” raises the value of the property and would allow Cargill to sell the land for more. This could hamper efforts by local environmental groups that are trying to buy bayfront property to protect it.

Cargill has been considering development of the site since at least 2009. The Minnesota company, which once harvested salt in several spots around the bay, at the turn of this century sold off much of its holdings, a lot of which is now being restored to wetlands. The more accessible Redwood City location, just east of Highway 101, commanded a premium price that hasn’t attracted a buyer.

Cargill, with the help of DMB Ventures, drew up a proposal for a planned community at the site with 12,000 homes and 25,000 people. The project included schools, stores and parks as well as a possible train and ferry service. The proposed community would have been the largest development along the bay since fill material was brought in to create Foster City in the 1960s.

In 2012, however, Cargill withdrew the plan amid rising concerns about building on flood-prone property and creating more traffic. The company said it would come up with a new proposal, but the EPA’s original interpretation of the Clean Water Act complicated the effort.

Housing advocates who have long fought to increase the stock of new homes in the Bay Area have been supportive of at least limited development on the salt ponds. Some were pleased to hear that the opportunity has resurfaced.

“I know there’s a lot of strong feelings about that particular site,” said Evelyn Stivers, executive director of Housing Leadership Council of San Mateo County. But “given the breadth and depth of the shortfall we have on housing, I hope we can have an honest and thoughtful conversation about it.”

Bain, the Redwood City mayor, said significant residential development is a nonstarter. He said the city has already done more than most to increase its housing supply, focusing on the creation of new homes close to downtown and near public transportation.

“It’s not about being antidevelopment,” he said. “It’s about having the right uses in the right places.”

David Lewis, executive director of the environmental advocacy group Save the Bay, agrees that the right use for the salt ponds is re-submerging them.

“We have this amazing opportunity in parts of the bay to restore wetlands,” he said, “which is basically green infrastructure to protect shoreline communities and reduce the need for levees and seawalls.”

Kurtis Alexander is a San Francisco Chronicle staff writer. Email: kalexander@sfchronicle.com Twitter: @kurtisalexander