On June 5, 2025, Bill 5, the Protect Ontario by Unleashing Our Economy Act, 2025, received Royal Assent, which enacted the controversial Special Economic Zones Act, 2025 (the “SEZ Act”). The SEZ Act establishes a general framework for Special Economic Zones (“SEZs”) by empowering the Lieutenant Governor in Council (“LG”) to designate: SEZs, designated projects within SEZs and trusted proponents responsible for executing designated projects. The LG may then, by regulation, exempt a “trusted proponent” or a “designated project” from requirements under provisions of any Act, regulation or other instrument under an Act, including municipal by-laws, subject to conditions specified in that regulation. The Province stated that the intention of the SEZ Act is to accelerate strategic economic development, safeguard key industries and strengthen Ontario’s economic resilience in response to global trade pressures.
On October 2, 2025, the Province published the first draft of the SEZ regulation (the “Draft Regulation”) on the Environmental Registry of Ontario (“ERO”) for public comment here. For stakeholders, including businesses, municipalities and Indigenous communities, understanding the regulatory framework and ongoing consultations is critical to anticipate potential impacts, opportunities and compliance obligations.
The Draft Regulation proposes that, for an SEZ to be prescribed, it must meet the following criteria:
- The area is a single area in the Province (i.e. a geographically bounded area);
- Activities being proposed within that area are, in the opinion of the LG, economically significant or strategically important to the Ontario economy; and
- The area is, in the opinion of the LG, no larger than necessary for its purpose.
Further, to designate a “trusted proponent”, they must be the proponent of a “designated project”, and either the Crown in right of Ontario, a Crown agency, a municipality or a for-profit or not-for-profit entity who meets various other criteria, including having a good record of compliance with legal requirements; that its contractors have a good record of compliance; that, if indigenous consultation is required, the person has a plan for engaging and working with indigenous communities; and that the person has given reassurances that there will be no change in control of the person (if it is a corporation with share capital) or no change in ownership or membership of the person (if it is not a corporation with share capital), without the consent of the Province.
Finally, the Draft Regulation proposes that the criteria to prescribe a “designated project” is:
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- Location
The project must be situated within a prescribed Special Economic Zone.
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- Economic Benefits
The Minister must be satisfied that the project will deliver significant long-term economic benefits for Ontario, considering its impacts on job creation, workforce development, economic diversification, tax revenue, supply chains, and innovation, as well as its use of Ontario-made goods and services.
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- Community Benefits
The project must provide meaningful benefits to communities within and outside the SEZ, such as supporting local businesses, increasing revenues, and, where applicable, providing benefits to Indigenous communities.
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- Feasibility
The Minister must be of the opinion that the project is likely to succeed, taking into account readiness to proceed after consultations and approvals, strategic and financial planning, engagement with stakeholders and Indigenous communities, and the identification and mitigation of health and environmental risks.
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- Regulatory Efficiency
The Minister must also determine that exemptions or modifications available under the SEZ Act would expedite project completion and enhance its likelihood of success.
The Province also posted a document setting out the intent of the Draft Regulations, which provides further detail on the proposed criteria.
Looking ahead, the Ministry of Economic Development, Job Creation and Trade may refine the Draft Regulation based on consultation feedback prior to finalizing the Regulation. The ERO commenting period is open until November 16, 2025.
For questions or guidance on the Draft Regulation submitting feedback, Davies Howe LLP’s Land Development team is ready to assist.