Ontario releases draft regulation with designation criteria for special economic zones

On June 5, 2025, the Province of Ontario (the Province) enacted Bill 5, Protect Ontario by Unleashing our Economy Act, 2025. Bill 5 included the Special Economic Zones Act, 2025 (SEZA), which grants the lieutenant governor expansive powers to make regulations designating areas of the province as special economic zones, and grants the Minister of Economic Development, Job Creation and Trade (the Minister) the ability to designate trusted proponents or designated projects to which SEZA would apply. 

SEZA permits the lieutenant governor to, by regulation, exempt a trusted proponent or a designated project from requirements under provisions of an act or of a regulation or other instrument under an act, subject to conditions specified in the regulation, as those requirements would apply in a special economic zone.

At the time, the Province did not provide criteria as to what would constitute a “special economic zone,” “trusted proponent,” or “designated project,” but indicated it aimed to promulgate regulations to establish such criteria by September 2025.

On October 2, 2025, the Province released a draft regulation containing criteria for identifying and establishing special economic zones (the Draft Regulation).

The Draft Regulation was published following an initial series of consultations with Indigenous communities across Ontario. The Draft Regulation remains open to comment until November 16, 2025, and consultations remain ongoing. This update summarizes the criteria proposed for identifying “special economic zones,” “trusted proponents,” and “designated projects” under the Draft Regulation. 

Special economic zone

Under SEZA, exemptions for trusted proponents and designated projects only apply within a “special economic zone.” The Draft Regulation proposes describing a special economic zone as (i) a geographic area within the province, where (ii) economically significant or strategically important activities are or will be taking place, and (iii) the zone is “no larger than necessary” to encompass those activities.

Trusted proponent

The Draft Regulations also provide broad definitions for “trusted proponents” and “designated projects.” Trusted proponents may be either a Crown or a non-Crown entity, and may be for-profit or not-for-profit, and the trusted proponent must be the proponent of a designated project. For non-Crown entities, the following additional criteria apply:

• The proponent, and everyone with whom the person has contracted to work on the project must have a good record pertaining to legal, health and safety, environmental, employment, and financial matters, and the proponent has given assurances satisfactory to the Minister that everyone with whom the proponent will contract will have a similar good record.
• If engagement with Indigenous communities is required, the proponent must have a plan for engaging and working with Indigenous communities, and has personnel or agents with a history of working successfully with Indigenous communities.
• The proponent must assure there will be no change of control or ownership of the proponent without the consent of the Minister.

Designated project

The designated project criteria provide broad discretion to the Minister and is largely reliant on the Minister’s opinion that the project will meet certain criteria. A designated project must:

• Be in a special economic zone.
• In the Minister’s opinion, have significant long-term benefits for Ontario considering a variety of potential fiscal, supply chain and labour impacts.
• In the Minister’s opinion, benefit communities within and outside the special economic zone.
• In the Minister’s opinion, have a high likelihood of success considering the existence of various strategic, financial, communication, and stakeholder engagement plans.
• In the Minister’s opinion, be a project that will develop more quickly and experience a higher likelihood of success because of being designated as a designated project.

While the consultation period for the Draft Regulation remains open until November 16, 2025, responses from the Province to consultations to date indicate the Province intends for the final regulations to maintain a similar degree of flexibility as the criteria in the Draft Regulation. We will continue to monitor developments vis-à-vis the Draft Regulations and will provide further updates as new information arises. The next significant update is expected following the closing of the consultation period on November 16, 2025.

The authors would like to thank Charbel Azzi, articling student, for his contribution to preparing this legal update.