NEWPORT BEACH, Calif. — The vast, dusty stretch of land in one of Southern California’s wealthiest beachfront communities is littered with rusting pipes from once-thriving oil production.

Beneath its drought-stricken exterior, however, environmentalists say the Newport Beach property is teeming with life and provides critical habitat for burrowing owls and endangered San Diego fairy shrimp that could be destroyed if developed into homes.

The dramatically differing views are at the crux of a sizzling debate in California over the future of what state coastal officials consider to be the largest remaining privately-owned coastal property that could be developed south of Los Angeles.

While many Southern Californians want the oil mess cleaned up, they want to see much more of its 401 acres returned to its natural state.

Newport Banning Ranch — a three-way partnership involving an oil producer and investment and real estate companies — wants to build 895 homes, a 75-room hotel and retail outlets on about 70 acres and leave roughly 80 percent of the land as open space.

“There are some who would like to see nothing built out there and they’re entitled to that point of view, but they offer no solution to the property,” said Michael Mohler, senior project manager for Newport Banning Ranch. “We have created an action plan to clean the site up if the project is approved. And if you ask about development? That is what pays for all of this.”

Environmentalists argue the oil field should be remediated regardless, and that a much larger area should remain untouched because these kinds of sensitive habitats are protected under California law. The land provides nesting space for the threatened California gnatcatcher, a small, blue-gray songbird, and a rare vernal pool system where fairy shrimp — tiny aquatic crustaceans — are known to thrive.

“If you degrade a site, it is your responsibility to clean it up,” said Susan Jordan, executive director of the California Coastal Protection Network. “What they’re trying to do here in my mind is hold the public hostage and say, ‘We’re not going to clean up that site unless you give us this.'”

State coastal regulators are set to consider the plan on September 7. Last year, California Coastal Commission staff members opposed a larger version of the development, but board members urged them to work with the builder to downsize the proposal.

This time, commission staff are recommending the plan be approved but downsized. They want development confined to 20 acres to protect habitat for the burrowing owl, which lives in holes dug by ground squirrels and is considered a species of special concern in California.

Newport Banning Ranch property owners said the commission staff’s recommendation amounts to a “de-facto denial” of the project and promised to fight it.

For years, the property was farmed, and oil drilling began in the mid-20th century. More 400 wells have been drilled on the site but most have since been abandoned.

If the plan is approved, the developer would confine drilling to 15 acres. The rest would be restored for use as open space or the development, where many of the homes with sweeping ocean views would sell for more than $1 million, Mohler said.

Mohler declined to reveal how much the project would generate in revenue for Aera Energy, Cherokee Investment Partners and Brooks Street. He said remediation costs would run between $30 million and $40 million and would be covered by the project.

To opponents, building that many homes is like erecting a new small town in the heart of already congested Orange County, where residents long for untarnished coastal views and relish how vernal pools fill with rainwater each spring, bringing the rundown site to life.

Many would rather see the land lay idle since once homes are built it would be impossible to return to nature.

“You can’t replace it. It is just unique,” said Terry Welsh, president of Banning Ranch Conservancy, which would like to buy the land but can’t afford it. “It doesn’t look like much to the untrained eye — you’ll see a dry browned oil field with old rusty pipes and gravel road and scraped earth — but look at the data.”

Much of the debate by regulators will likely focus on how much space, and which areas, should be protected.

Earlier this year, the Commission received more than 2,000 letters from project opponents. Among the much smaller number in favor, many want to see the site used for hands-on science programs in schools, which a developer-funded land trust has already begun running.

Robyn Vettraino, who oversees the Newport Banning Land Trust, said the goal is to expand public access to the coastal habitat while restoring and preserving it.

“If the project doesn’t get approved, they will drill oil for the next 100 years and their legal responsibility is once they stop operating the very last well,” she said. “We see this as the best way and the best kind of public-private compromise.”