http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/100774/index.do 
Repsol Canada Ltd. v. The Queen (January 27, 2015 – 2015 TCC 21, C. Miller, J.).
Précis: The Canaport Partnership, of which the appellant was a partner, constructed a terminal and jetty in Saint John, New Brunswick, at which natural gas was unloaded and subsequently entered a pipeline for transmission to consumers. CRA took the position that the terminal and jetty were simply distribution facilities. The taxpayer took the position that they were processing facilities entitling them to investment tax credits. The Court agreed with the taxpayer. The natural gas would not have been transmissible to the pipeline without the processing done at the terminal and jetty facilities. As a result they were processing properties.
Decision: The decision, which involves two appeals heard on common evidence, commences with a very succinct articulation of the points at issue:
[1] What is a process? What is a distribution? Seemingly simple questions that become anything but when applied to the importation, unloading, regasification and delivery of Liquid Natural Gas (“LNG”). This was the business of the Canaport LNG Limited Partnership (“Canaport Partnership”), of which Repsol Canada Ltd. was a general partner and Repsol Energy Canada Ltd. (“RECL”) [mentioned below] was a limited partner. I will, at times, simply state Repsol to refer to the Repsol group of companies. Irving Canaport LP Company Limited and Irving Canaport GP Company Limited were the other limited partner and general partner respectively (collectively referred to as “Irving”). To conduct this business, the Canaport Partnership constructed a terminal (the “Terminal”) and a jetty (the “Jetty”) at a significant cost in Saint John, New Brunswick.
[2] The issue in this case is how to classify the Terminal and the Jetty for Capital Cost Allowance (“CCA”) purposes (Class 1(n) and Class 3(h) respectively according to the Respondent or Class 43 according to the Appellants). If the assets fall in Class 43 such properties qualify for purposes of the Investment Tax Credits (“ITCs”) pursuant to subsection 127(5) of the
Income Tax Act (the “Act”) for the taxation years 2007 and 2008.
[3] There is considerable interplay between the classes of property and the application of the ITCs. However, fundamental to a correct result is determining whether what occurred at the regasifying Terminal and Jetty was a distribution of natural gas: if so, then the assessment of the Minister of National Revenue (the “Minister”) of the Terminal and the Jetty as being Class 1(n) and Class 3(h) properties respectively is correct.
This is a lengthy [125 paragraphs with 3 appendices] and erudite decision the technical and evidentiary details of which will be of interest to only a handful of taxpayers. The essence of the decision (summarized by the Court in 5 brief paragraphs) is that the Jetty and Terminal were used to transform the natural gas and that transformation was a precondition to the entry of the gas into the Brunswick Pipeline:
[105] With respect to the form, the Respondent argues that the goods arrive at the Jetty as natural gas and leave as natural gas, and going from liquid form to gaseous form is not sufficient to constitute the change contemplated by the case law. The Crown relies on the 1972 Federal Court of Appeal decision in
Consumer’s Gas Company et al v Deputy Minister of National Revenue for Customs and Excise where the court, in dealing with the term “manufacturing and production”, stated the following:
In my view, merely changing the pressure of natural gas, when it is a reversible act such as it appears to be in this case, cannot, within the ordinary sense in which the words are used, be regarded as either “manufacture” or “production”.
[106] With respect, there is a significant difference between production and processing, as there is between changing the pressure of natural gas and changing its form and composition.
[107] To accept the Respondent’s view that there is no significant change between the goods arriving at the Jetty and the goods entering the Brunswick Pipeline is to find that natural gas is natural gas is natural gas. We had a discussion at the hearing with respect to an analogy to water, Respondent’s counsel suggesting that water is water is water. I disagreed, citing the possibility of two municipalities side by side, one which requires fluoride in the town’s water and one which forbids fluoride in the water. It is my view they are not the same, something has had to have happened to one to in fact distinguish it from the other. It is inaccurate to suggest water is water is water.
[108] With respect to the LNG arriving at the Jetty and the natural gas in gaseous form entering the Brunswick Pipeline, there is obviously the difference in form. That is significant. But, more importantly, the evidence satisfies me there is a change in chemical composition. The Respondent argues it is only a little bit: over 90% is still methane. My take on the evidence, however, is that even slight changes in the percentage of the small percent of other chemicals in natural gas can have a significant impact on combustibility, for example.
[109] The Respondent put little stock in the concept of “blending”; yet again the evidence satisfied me this was a critical part of the process. The operating manual went into great detail with respect to the blending process. Mr. Azcarraga was clear it was necessary to meet the specifications required to enter the Brunswick Pipeline. This was a process and a process that changed the very composition of the goods.
[Footnote omitted]
Accordingly the Terminal and the Jetty were processing properties and the appeals were allowed, with costs.