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**UNITED STATESSECURITIES AND EXCHANGE COMMISSION****Washington, D.C.  20549**

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**FORM10–Q**

| ý | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d)**  |
|--------|--------------------------------------------------------|
|   | **OF THE SECURITIES EXCHANGE ACT OF 1934**             |
|   | **For  the quarterly period ended June 30, 2001**      |
|   |                                                   |
| **OR** |
|   |                                                   |
| o      | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d)** |
|   | **OF THE SECURITIES EXCHANGE ACT OF 1934**             |
|   | **For  the transition period from_______to**           |
|        |                                                        |  |

 

**Commission file number 1-10934**

| **LAKEHEAD PIPE LINE  PARTNERS, L.P.**                   |
|----------------------------------------------------------|
| ****                                                     |
| *(Exact name of Registrant as specified in its charter)* |

 

| **Delaware**                                                      |                                                    | **39-1715850**                          |
|-------------------------------------------------------------------|---------------------------------------------------------|-----------------------------------------|
| *(State or other jurisdiction of  incorporation or organization)* |                                                    | *(I.R.S. Employer  Identification No.)* |
|                                                              |                                                    |                                    |
|                                                              | **Lake Superior Place**                                 |                                    |
|                                                              | **21 West Superior Street**                             |                                    |
|                                                              | **Duluth, MN   55802-2067**                        |                                    |
|                                                              | *(Address of principal executive offices and zip code)* |                                    |
|                                                              |                                                    |                                    |
|                                                              | **(218) 725-0100**                                      |                                    |
|                                                              | *(Registrant's telephone number, including area code)*  |                                    |
|                                                                   |                                                         |                                         |  |  |

----

Indicateby check mark whether the Registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the Registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes  ý  No      o

TheRegistrant had 26,803,634 Class A Common Units outstanding as at August 14,2001.

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**TABLE OF CONTENTS**

**PART I – FINANCIAL INFORMATION**

| **Item 1.**                          | Financial Statements                                                                         |                                                                                                      |
|--------------------------------------|----------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------|
|                                 |                                                                                         |                                                                                                      |
|                                 |                                                                                         | Consolidated Statement  of Income for the three month  and six month periods ended June 30, 2001 and 2000 |   |
|                                 |                                                                                         |                                                                                                      |   |   |   |
|                                 |                                                                                         | Consolidated  Statement of Cash Flows  for the six month periods ended June 30, 2001 and 2000             |   |
|                                 |                                                                                         |                                                                                                      |   |   |   |
|                                 |                                                                                         | Consolidated  Statement of Financial Position  as at June 30, 2001 and December 31, 2000                  |   |
|                                 |                                                                                         |                                                                                                      |   |   |   |
|                                 |                                                                                         | Consolidated  Statement of Partners’ Capital  for the six month period ended June 30, 2001           |   |
|                                 |                                                                                         |                                                                                                      |   |   |   |
|                                 |                                                                                         | Notes  to the Consolidated Financial Statements                                                           |   |
|                                 |                                                                                         |                                                                                                      |   |   |   |
| **Item  2.**                         | Management’s  Discussion and Analysis of  Financial Condition and Results of Operations |
|                                 |                                                                                         |                                                                                                      |
|                                 |                                                                                         |                                                                                                      |   |   |   |
| **Item  3.**                         | Quantitative  and Qualitative Disclosures About Market Risk                                  |
|                                 |                                                                                         |
| **PART II – OTHER INFORMATION** |
|                                 |
| **Item 1.**                          | Legal Proceedings                                                                            |                                                                                                      |
|                                 |                                                                                         |                                                                                                      |
| **Item 6.**                          | Exhibits and Reports  on Form 8-K 11                                                         |                                                                                                      |
|                                 |                                                                                         |                                                                                                      |
| **Signature**                        |                                                                                         |                                                                                                      |
|                                      |                                                                                              |                                                                                                           |  |  |  |  |

 

| *This  Quarterly Report on Form 10-Q contains forward-looking statements. These statements  are based on the Partnership's beliefs as well as assumptions made by and  information currently available to the Partnership. When used in this  document, the words "anticipate," "believe,"  "expect," "estimate," "forecast,"  "project," and similar expressions identify*                                                                          |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| * forward-looking statements. These  statements reflect the Partnership's current views with respect to future  events and are subject to various risks, uncertainties and assumptions  including:*                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | • | *the  Partnership's dependence upon adequate supplies of and demand for western  Canadian crude oil,* |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | • |  *the Partnership's ability to acquire other  companies and assets,* |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | • |  *the price of crude oil and the willingness of  shippers to ship crude oil,* |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | • | *regulation  of the Partnership's tariffs by the Federal Energy Regulatory Commission and  the possibility of unfavorable outcomes of future tariff proceedings, and* |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | • | *the  effects of competition, in particular, by other pipeline systems.* |   |
| *If  one or more of these risks or uncertainties materialize, or should underlying  assumptions prove incorrect, actual results may vary materially from those  described in this Form 10-Q.  Except  as required by applicable securities laws, the Partnership does not intend to  update these forward-looking statements. For additional discussion of such  risks, uncertainties and assumptions, see the Partnership’s Annual Report on  Form 10-K for the fiscal year ended December 31, 2000.* |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |  |  |

 

| ******                                                                  |
|-------------------------------------------------------------------------|
| ***PART I –  FINANCIAL INFORMATION***                              |
| ******                                                                  |
| ***ITEM 1.   FINANCIAL STATEMENTS***                               |
| ******                                                                  |
| ***LAKEHEAD PIPE LINE PARTNERS, L.P.CONSOLIDATED STATEMENT OF INCOME*** |
|                                                                         |
|                                                                    | Three  months ended |   | Six  months ended |   |
|                                                                    | June  30, |   | June  30, |   |
| *(unaudited; dollars in  millions, except per Unit amounts)*            | 2001 |   | 2000 |   | 2001 |   | 2000 |   |
|                                                                    |  |   |  |   |  |   |  |   |
| Operating Revenue                                                       | $ | 81.1 |   | $ | 78.3 |   | $ | 153.0 |   | $ | 157.1 |   |
|                                                                    |  |   |  |   |  |   |  |   |
| Expenses                                                                |   |   |   |   |   |   |   |   |
|                                                                    | Power | 12.8 |   | 12.3 |   | 24.5 |   | 24.8 |   |
|                                                                    | Operating and  administrative | 21.7 |   | 19.6 |   | 41.8 |   | 37.3 |   |
|                                                                    | Depreciation | 15.7 |   | 15.2 |   | 31.1 |   | 30.5 |   |
|                                                                    | Severance and lease  termination costs *(Note 6)* | 5.0 |   | - |   | 5.0 |   | - |   |
|                                                                    |  |   |  |   |  |   |  |   |
|                                                                    | 55.2 |   | 47.1 |   | 102.4 |   | 92.6 |   |
|                                                                    |  |   |  |   |  |   |  |   |
| Operating Income                                                        | 25.9 |   | 31.2 |   | 50.6 |   | 64.5 |   |
| Interest and Other  Income                                              | 0.8 |   | 0.7 |   | 1.5 |   | 2.3 |   |
| Interest Expense                                                        | (15.0 | ) | (15.2 | ) | (30.2 | ) | (29.8 | ) |
| Minority Interest                                                       | (0.1 | ) | (0.2 | ) | (0.2 | ) | (0.4 | ) |
|                                                                    |  |   |  |   |  |   |  |   |
| Net Income                                                              | $ | 11.6 |   | $ | 16.5 |   | $ | 21.7 |   | $ | 36.6 |   |
|                                                                    |  |   |  |   |  |   |  |   |
| Net Income Per Unit *(Note 3)*                                          | $ | 0.32 |   | $ | 0.49 |   | $ | 0.59 |   | $ | 1.11 |   |
|                                                                    |  |   |  |   |  |   |  |   |
| Cash Distributions  Paid Per Unit *(Note 4)*                            | $ | 0.875 |   | $ | 0.875 |   | $ | 1.75 |   | $ | 1.75 |   |
|                                                                    |  |   |  |   |  |   |  |   |

*See accompanying notes to the consolidated financialstatements.*

 

|                                                   |                                                                             |
|---------------------------------------------------|----------------------------------------------------------------------------------|
| ***LAKEHEAD PIPE LINE PARTNERS, L.P.***           |                                                                             |
| ***CONSOLIDATED STATEMENT OF CASH FLOWS***        |                                                                             |
|                                                   |                                                                             |
|                                              | Six  months ended                                                                |   |
|                                              | June  30,                                                                        |   |
| *(unaudited; dollars in millions)*                | 2001                                                                             |   | 2000 |   |
|                                              |                                                                                  |   |  |   |
| Cash Provided from  Operating Activities          |                                                                             |   |   |   |
|                                              | Net income                                                                       | $ | 21.7 |   | $ | 36.6 |   |
|                                              | Adjustments to  reconcile net income to cash provided from operating activities: |   |   |   |   |
|                                              | Depreciation                                                                     | 31.1 |   | 30.5 |   |
|                                              | Other                                                                            | 0.2 |   | (1.4 | ) |
|                                              | Changes in operating  assets and liabilities:                                    |   |   |   |   |
|                                              | Accounts receivable  and other                                                   | (0.7 | ) | (2.0 | ) |
|                                              | Oil inventory                                                                    | 6.5 |   | - |   |
|                                              | Materials and supplies                                                           | (0.1 | ) | (0.3 | ) |
|                                              | General Partner and  affiliates                                                  | 4.4 |   | (1.9 | ) |
|                                              | Accounts payable and  other                                                      | 3.8 |   | (1.7 | ) |
|                                              | Interest payable                                                                 | (0.2 | ) | 0.4 |   |
|                                              | Property and other  taxes                                                        | (4.0 | ) | (3.1 | ) |
|                                              |                                                                                  |   |  |   |
|                                              | 62.7                                                                             |   | 57.1 |   |
|                                              |                                                                                  |   |  |   |
| Investing Activities                              |                                                                             |   |   |   |
|                                              | Repayments from  affiliate                                                       | 0.2 |   | 0.9 |   |
|                                              | Additions to property,  plant and equipment                                      | (5.3 | ) | (4.1 | ) |
|                                              | Changes in  construction payables                                                | (4.1 | ) | (1.1 | ) |
|                                              | Purchase of Enbridge  Pipelines (North Dakota) L.L.C. *(Note 7)*                 | (35.4 | ) | - |   |
|                                              |                                                                                  |   |  |   |
|                                              | (44.6                                                                            | ) | (4.3 | ) |
|                                              |                                                                                  |   |  |   |
| Financing Activities                              |                                                                             |   |   |   |
|                                              | Variable rate  financing, net                                                    | (83.0 | ) | - |   |
|                                              | Loan from General  Partner, net *(Note 7)*                                       | 35.3 |   | - |   |
|                                              | Proceeds from unit  issuance, net *(Note 8)*                                     | 79.9 |   | - |   |
|                                              | Distributions to  partners                                                       | (55.2 | ) | (55.2 | ) |
|                                              | Debt financing costs                                                             | (0.3 | ) | - |   |
|                                              | Minority interest and  other                                                     | 0.3 |   | (0.5 | ) |
|                                              |                                                                                  |   |  |   |
|                                              | (23.0                                                                            | ) | (55.7 | ) |
|                                              |                                                                                  |   |  |   |
| Decrease in Cash and  Cash Equivalents *          | (4.9                                                                             | ) | (2.9 | ) |
| Cash and Cash  Equivalents at Beginning of Period | 37.2                                                                             |   | 40.0 |   |
|                                              |                                                                                  |   |  |   |
| Cash and Cash  Equivalents at End of Period       | $                                                                                | 32.3 |   | $ | 37.1 |   |
|                                              |                                                                                  |   |  |   |
|                                                   |                                                                                  |  |  |  |  |  |  |  |  |

----

** Cash equivalents are defined as all highly marketablesecurities with a maturity of three months or less when purchased.*

*See accompanying notes to the consolidated financialstatements.*

 

| ******                                                                                     |
|--------------------------------------------------------------------------------------------|
| ***LAKEHEAD PIPE LINE PARTNERS, L.P.******CONSOLIDATED STATEMENT OF FINANCIAL  POSITION*** |
| ******                                                                                     |
|                                                                                       | June 30, |   | December 31, |   |
| *(unaudited,  except for December 31, 2000; dollars in millions)*                          | 2001 |   | 2000 |   |
|                                                                                       |  |   |  |   |
|                                                                                       |   |   |   |   |
| ***ASSETS***                                                                               |
|                                                                                       |
| Current Assets                                                                             |   |   |   |   |
|                                                                                       | Cash  and cash equivalents | $ | 32.3 |   | $ | 37.2 |   |
|                                                                                       | Due  from General Partner and Affiliates | - |   | 1.5 |   |
|                                                                                       | Advances  to affiliate | 5.7 |   | 5.9 |   |
|                                                                                       | Accounts  receivable and other | 28.8 |   | 25.7 |   |
|                                                                                       | Oil  inventory | 2.4 |   | 8.9 |   |
|                                                                                       | Materials  and supplies | 8.2 |   | 7.7 |   |
|                                                                                       |   |  |   |  |   |
|                                                                                       | 77.4 |   | 86.9 |   |
|                                                                                       |  |   |  |   |
| Deferred  Charges and Other                                                                | 8.3 |   | 7.9 |   |
|                                                                                       |  |   |  |   |
| Property, Plant and  Equipment                                                             |   |   |   |   |
|                                                                                       | At  cost | 1,626.4 |   | 1,588.5 |   |
|                                                                                       | Accumulated  depreciation | (337.5 | ) | (306.6 | ) |
|                                                                                       |   |  |   |  |   |
|                                                                                       | 1,288.9 |   | 1,281.9 |   |
|                                                                                       |  |   |  |   |
|                                                                                       | $ | 1,374.6 |   | $ | 1,376.7 |   |
|                                                                                       |  |   |  |   |
|                                                                                       |   |   |   |   |
| ***LIABILITIES AND PARTNERS' CAPITAL***                                                    |
| Current Liabilities                                                                        |   |   |   |   |
|                                                                                       | Due  to General Partner and affiliates | $ | 2.9 |   | $ | - |   |
|                                                                                       | Accounts  payable and other | 17.2 |   | 17.4 |   |
|                                                                                       | Interest  payable | 6.4 |   | 6.5 |   |
|                                                                                       | Property  and other taxes | 10.5 |   | 14.4 |   |
|                                                                                       | Loan  from General Partner *(Note 7)* | 35.3 |   | - |   |
|                                                                                       |   |  |   |  |   |
|                                                                                       | 72.3 |   | 38.3 |   |
|                                                                                       |   |   |   |   |
| Other  Deferred Credits                                                                    | 1.3 |   | - |   |
| Long-Term  Debt                                                                            | 716.3 |   | 799.3 |   |
| Minority  Interest                                                                         | 3.7 |   | 3.2 |   |
| Contingencies  *(Note  5)*                                                                 |   |   |   |   |
|                                                                                       |  |   |  |   |
|                                                                                       | 793.6 |   | 840.8 |   |
|                                                                                       |  |   |  |   |
| Partners' Capital                                                                          |   |   |   |   |
|                                                                                       | Class A Common  Unitholders (Units authorized and issued  26,803,634; 2000 – 24,990,000) | 530.7 |   | 488.6 |   |
|                                                                                       | Class  B Common Unitholder (Units authorized and issued – 3,912,750) | 45.8 |   | 42.1 |   |
|                                                                                       | General  Partner | 5.8 |   | 5.2 |   |
|                                                                                       | Accumulated  other comprehensive loss *(Notes 9 &  10)* | (1.3 | ) | - |   |
|                                                                                       |   |  |   |  |   |
|                                                                                       | 581.0 |   | 535.9 |   |
|                                                                                       |  |   |  |   |
|                                                                                       | $ | 1,374.6 |   | $ | 1,376.7 |   |
|                                                                                       |  |   |  |   |
|                                                                                            |  |  |  |  |  |  |  |  |  |

*Seeaccompanying notes to the consolidated financial statements.*

| **                                                                 |
|--------------------------------------------------------------------|
| **LAKEHEAD PIPE LINE PARTNERS, L.P.**                              |
| **CONSOLIDATED STATEMENT OF  PARTNERS' CAPITAL**                   |
|                                                               |
| *(Unaudited, except for  December 31, 2000;  dollars in millions)* | Class A  Common  Unitholders |   | Class B  Common  Unitholder |   | General  Partner |   | Other  Comprehensive  Loss |   | Total  Consolidated  Partners’ Capital |   |
|                                                               |  |   |  |   |  |   |  |   |  |   |
| Partners' Capital at  December 31, 2000                            | $ | 488.6 |   | $ | 42.1 |   | $ | 5.2 |   | $ | - |   | $ | 535.9 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |
| Allocation of net  proceeds  from unit issuance                    | 71.6 |   | 7.5 |   | 0.8 |   | - |   | 79.9 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |
| Net Income Allocation                                              | 14.2 |   | 3.1 |   | 4.4 |   | - |   | 21.7 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |
| Distributions  to Partners                                         | (43.7 | ) | (6.9 | ) | (4.6 | ) | - |   | (55.2 | ) |
|                                                               |   |   |   |   |   |   |   |   |   |   |
| Floating  to fixed interest rate swaps                             | - |   | - |   | - |   | (1.3 | ) | (1.3 | ) |
|                                                               |  |   |  |   |  |   |  |   |  |   |
| Partners' Capital at  June 30, 2001                                | $ | 530.7 |   | $ | 45.8 |   | $ | 5.8 |   | $ | (1.3 | ) | $ | 581.0 |   |
|                                                               |  |   |  |   |  |   |  |   |  |   |

*Seeaccompanying notes to the consolidated financial statements.*

| ******                                                            |
|-------------------------------------------------------------------|
| ***NOTES TO THE CONSOLIDATED FINANCIAL  STATEMENTS (unaudited)*** |
| ******                                                            |

 

| 1.     | Basis  of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | The  accompanying unaudited consolidated financial statements have been prepared  in accordance with United States generally accepted accounting principles for  interim financial information and with the instructions to Form 10-Q and Rule  10-01 of Regulation S-X.  Accordingly,  they do not include all the information and footnotes required by generally  accepted accounting principles for complete financial statements.  In the opinion of management, they contain  all adjustments that management considers necessary to present fairly the  financial position at June 30, 2001 and December 31, 2000; the results of  operations for the three and six month periods ended June 30, 2001 and 2000;  and cash flows for the six month periods ended June 30, 2001 and 2000.  The results of operations for the three  and six months ended June 30, 2001 should not be taken as indicative of the  results to be expected for the full year.   The interim financial statements should be read in conjunction with  the Partnership's consolidated financial statements and notes thereto  presented in the Partnership's Annual Report on Form 10-K for the fiscal year  ended December 31, 2000. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 2.     | Comparative  Amounts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Certain  comparative amounts have been reclassified to conform with the current  quarter’s financial statement presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 3.     | Net  Income Per Unit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Net  income per unit is computed by dividing net income, after deduction of the  General Partner's allocation, by the weighted average number of Class A and  Class B Common Units outstanding.  The  General Partner's allocation is equal to an amount based upon its 1% General  Partner interest, adjusted to reflect an amount equal to incentive  distributions and an amount                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

 

requiredto reflect depreciation on the General Partner's historical cost basis forassets contributed on formation of the Partnership.  Net income per unit was determined as follows:

 

|                                                                  | Three  months ended |   | Six  months ended |   |
|-----------------------------------------------------------------------|---------------------|--------|-------------------|--------|
| *(unaudited; dollars in  millions,*                                   | June 30,            |   | June 30,          |   |
| *except per Unit amounts)*                                            | 2001                |   | 2000              |   | 2001 |   | 2000 |   |
|                                                                  | **                  |   | **                |   | ** |   | ** |   |
| Net income                                                            | $                   | 11.6   |              | $      | 16.5 |   | $ | 21.7 |   | $ | 36.6 |   |
|                                                                  |                     |   |                   |   |  |   |  |   |
| Net income allocated  to General Partner                              | (0.1                | )      | (0.2              | )      | (0.2 | ) | (0.4 | ) |
| Incentive  distributions and historical cost depreciation adjustments | (2.2                | )      | (2.0              | )      | (4.2 | ) | (4.0 | ) |
|                                                                  |                     |   |                   |   |  |   |  |   |
|                                                                  | (2.3                | )      | (2.2              | )      | (4.4 | ) | (4.4 | ) |
|                                                                  |                     |   |                   |   |  |   |  |   |
| Net income allocable  to Common Units                                 | $                   | 9.3    |              | $      | 14.3 |   | $ | 17.3 |   | $ | 32.2 |   |
|                                                                  |                     |   |                   |   |  |   |  |   |
| Weighted Average  Common  Units outstanding *(millions)*              | 29.7                |   | 28.9              |   | 29.3 |   | 28.9 |   |
|                                                                  |                     |   |                   |   |  |   |  |   |
| Net income per unit                                                   | $                   | 0.32   |              | $      | 0.49 |   | $ | 0.59 |   | $ | 1.11 |   |
|                                                                  |                     |   |                   |   |  |   |  |   |

 

| 4.     | Cash Distribution                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | On  July 19, 2001, the Board of Directors of the General Partner declared a cash  distribution for the quarter ended June 30, 2001 of $0.875 per unit.  The distribution will be made on August  14, 2001 to Unitholders of record on July 31, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 5.     | Environmental  Contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | The  Partnership is subject to federal and state laws and regulations relating to  the protection of the environment.   Environmental risk is inherent to liquid pipeline operations and the  Partnership could, at times, be subject to environmental cleanup and  enforcement actions.  The General  Partner manages this environmental risk through appropriate environmental  policies and practices to minimize the impact to the Partnership.  To the extent that the Partnership is  unable to recover environmental costs in its rates (if not recovered through  insurance), the General Partner has agreed to indemnify the Partnership from  and against any costs relating to environmental liabilities associated with  the pipeline system prior to its transfer to the Partnership in 1991.  This excludes any liabilities resulting  from a change in laws after such transfer.   The Partnership continues to voluntarily investigate past leak sites  for the purpose of assessing whether any remediation is required in light of  current regulations, and to date no material environmental risks have been  identified. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 6.     | Severance  and Lease Termination Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | On  May 14, 2001, the Partnership announced the closure of its general partner’s  Duluth, Minnesota headquarters office and relocation of that office to  Houston, Texas.  Estimated employee  severance and lease termination costs of the Duluth office space totalling  $5.0 million were charged to expense and were accrued at June 30, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

 

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 7.     | Acquisition  of Enbridge Pipelines (North Dakota) L.L.C.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | On  May 18, 2001, the Partnership completed its acquisition of the assets of  Enbridge Pipelines (North Dakota) L.L.C. (“ND L.L.C.”) for an aggregate  purchase price of $35.4 million which included working capital and  transaction costs.  This acquisition  was accounted for using the purchase method and ND L.L.C. results of  operations have been included in consolidated earnings since the date of the  acquisition.  The purchase price has  been allocated to current assets, liabilities and to property, plant and  equipment acquired on the basis of estimated fair values with property, plant  and equipment being depreciated over the economic life of the assets.  The acquisition was funded with a  short-term loan from the General Partner.                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 8.     | Common  Units                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | During  the second quarter of 2001, the Partnership issued an additional 1,813,634  Class A Common Units, which generated proceeds, net of issuance expenses, of  approximately $79.9 million and has reduced the effective ownership interest  of Lakehead Pipe Line Company, Inc. (the General Partner) from 15.3% to  14.5%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 9.     | Adoption  of New Accounting Standard                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | Effective  January 1, 2001, the Partnership adopted Statement of Financial Accounting  Standards No. 133, “Accounting for Derivative Instruments and Hedging  Activities.” This Statement requires that  all derivatives be recognized at fair value in the balance sheet and all  changes in fair value be recognized currently in earnings or deferred as a  component of other comprehensive income, depending on the intended use of the  derivative, its resulting designation and its effectiveness.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | The Partnership enters into forward interest rate  agreements, swaps and collars to hedge against the effect of future interest  rate movements on its borrowings.  These agreements meet the criteria for  hedge accounting and are being treated as cash flow hedges under SFAS No.  133.  On January 1, 2001, the  Partnership recorded an unrealized loss of $0.1 million charged to  Accumulated Other Comprehensive Income, representing the transition adjustment  for the cash flow hedges.  During the  six months ended June 30, 2001, this unrealized loss increased to $1.3 million due to revaluation of the floating  to fixed interest rate swaps and is reflected in Partners’ Capital in the  Consolidated Statement of Financial Position. The amounts accumulated in  other comprehensive income are recognized in earnings as settlements of the  swaps occur.  The Partnership does not  intend to settle the interest rate swaps until their maturity date. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.    | Comprehensive  Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | Comprehensive  income for the six months ended June 30, 2001 was $20.4 million (2000 - $36.6  million).  Comprehensive income for  the three month period ended June 30, 2001 was $11.3 (2000 - $16.5).  Comprehensive income is the change in  equity of a business enterprise from transactions and other events and  circumstances from non-owner sources. It includes all changes in equity  during a period, except those resulting from investments by owners and  distributions to owners. Comprehensive income for the Partnership includes  the earnings for the current period less the impact of the floating to fixed  interest rate swap derivative instruments, described in Note 9 above.                                                                                                                                                                                                                                                                                         |

 

| ******        |
|---------------|
| ***ITEM 2.*** | ***MANAGEMENT'S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND  RESULTS OF OPERATIONS*** |
| ******        |

**Results of Operations**

***Six Months Ended June 30, 2001 Comparedwith Six Months Ended June 30, 2000***

Net income for the six months ended June30, 2001, was $21.7 million, or $0.59 per unit, compared to $36.6 million, or$1.11 per unit, for the comparable period in 2000.  The decline in net income reflects lower operating revenue,higher operating and administrative expenses, and a non-recurring charge forDuluth office exit costs. Earnings per unitwere lower due to reduced net income and a greater number of units outstandingfollowing the issuance of 1.8 million units in May 2001.  The weighted-average number of Common Unitsoutstanding increased from 28.9 million for the first half of 2000 to 29.3million for first half of 2001.  Theresults of operations for the first half of 2001 also include the earnings ofEnbridge Pipelines (North Dakota) L.L.C. from the acquisition date of May 18,2001.  The contribution to net incomefrom the acquisition was $0.4 million for the six months ended June 30, 2001.

Operating revenue for the first six monthsof 2001 decreased $4.1 million, to $153.0 million, over the correspondingperiod in 2000 as increased tariffs related to the System Expansion Project II(“SEP II”) and the Terrace Expansion Project (“Terrace”) were more than offsetby declines in deliveries.  Deliveriesaveraged 1.356 million barrels per day for the first six months of 2001,compared to 1.361 million barrels per day for the same period of 2000.  There was also one less pumping day in thefirst half of 2001 compared to 2000, due to the leap year.

Totaloperating expenses for the first six months of 2001 increased $9.8 million fromthe corresponding period last year.  Theincrease resulted from higher operating and administrative and depreciationcosts, and a non-recurring charge of $5.0 million related to the estimatedseverance and lease termination costs of relocating the Partnership’s officesfrom Duluth, Minnesota to Houston, Texas. Operating and administrative costsincreased $4.5 million primarily due to increases in oil measurement losses.

Interest expense for the first six monthsof 2001 was $0.4 million higher than the same period of 2000 due to higherinterest rates associated with the senior unsecured notes that were issued inNovember 2000.

***Three MonthsEnded June 30, 2001 Compared with Three Months Ended June 30, 2000***

Net income for the three months endedJune 30, 2001, was $11.6 million, or $0.32 per unit, compared to $16.5 million,or $0.49 per unit, for the same period last year.  The decline in quarterly results reflects higher operating andadministrative expenses and the non-recurring charge for Duluth office exitcosts, partially offset by higher operating revenue.

Operatingrevenue for the second quarter of 2001 was $81.1 million, an increase of $2.8million over the corresponding period in 2000, due to higher deliveries andincreases in the tariff rates for SEP II and Terrace effective April 1, 2001.Deliveries averaged 1.365 million barrels per day for the second quarter of2001, compared to 1.358 million barrels per day for the same period in 2000.

Totaloperating expenses for the three months ended June 30, 2001, increased by $8.1million from the corresponding period in 2000. Power costs were slightly higher by $0.5 million due to higherdeliveries.  Operating and administrativeexpenses increased by $2.1 million due to higher oil measurement losses.  Depreciation expense increased by $0.5million due to depreciation on the prior year’s capital additions.  As previously noted, the 2001 second quarterresults included a non-recurring charge of $5.0 million related to theestimated severance and lease termination costs of relocating the Partnership’soffices from Duluth, Minnesota to Houston, Texas.

Theresults of operations for the three month and six month periods ended June 30,2001 should not be taken as indicative of the results of operations expectedfor the full year.

**Liquidity and Capital Resources**

ThePartnership anticipates that it will continue to have adequate liquidity tofund future recurring operating, investing and financing activities.  The Partnership intends to fund ongoingcapital expenditures with borrowings, cash generated from operating activities,existing cash and cash equivalents and the proceeds from future equity and debtofferings, if any.  Cash distributionsare expected to be funded with internally generated cash. The Partnership’sability to make future debt and equity offerings will depend on various factorsincluding prevailing market conditions, interest rates and the financial conditionof the Partnership.

AtJune 30, 2001, cash and cash equivalents totaled $32.3 million, as compared to$37.2 million at December 31, 2000. During the third quarter, $29.3 million will be used for the cashdistribution payable August 14, 2001.

Cash flow from operating activities forthe first six months of 2001 was $62.7 million, as compared with $57.1 millionfor the same period last year.  Theincrease is primarily due to changes in working capital, offset by lower netincome.

The Partnership anticipates spendingapproximately $9.0 million for pipeline system enhancements, $10.0 million forcore maintenance activities, and $12.0 million for expansion projects in2001.  Excluding major expansionprojects, ongoing capital expenditures are expected to average approximately$20.0 million on an annual basis (approximately 50% for core maintenance and50% for enhancement of the pipeline system). Core maintenance activities, such as the replacement of equipment andpreventive maintenance programs, will be undertaken to enable the Partnership'spipeline system to continue to operate at its maximum operating capacity.  Enhancements to the pipeline system, such asrenewal and replacement of pipe, are expected to extend the life of theLakehead System and permit the Partnership to respond to developing industryand government standards and the changing service expectations of itscustomers.

**General**

| Future  Prospects |
|-------------------|

Income and cash flows of the Partnershipare sensitive to oil industry supply and demand in Canada and the United Statesand the regulatory environment.  As thePartnership's pipeline system is operationally integrated with the EnbridgePipelines System in western Canada, the Partnership's revenues are dependentupon the utilization of the Enbridge Pipelines System by producers of westernCanadian crude oil.  The Partnershipbelieves the long-term demand for its pipeline system will continue.

Canada has substantial reserves ofnon-conventional hydrocarbon resources consisting predominantly of oil sandsdeposits in the province of Alberta. Firms involved in the production of heavy and synthetic crude oil fromthe oil sands region of western Canada have announced expansion programs inexcess of Cdn $26 billion.  If theseprojects are completed, they are projected to provide substantial increases inthe production of heavy and synthetic crude oil in western Canada in the nextseveral years, which will support the long-term utilization of the LakeheadSystem.

In June, western Canadian oil producersrequested that Lakehead proceed with the third phase of the Terrace ExpansionProgram to add 140,000 bpd of incremental capacity between Clearbrook,Minnesota and Superior, Wisconsin by mid-2003. When this final phase of Terrace is complete, the Lakehead systemconfiguration will have delivery capability in excess of 1.8 million bpd, basedon forecast commodity mixes and usage patterns.  The Partnership’s earnings and cash flow are expected to improvesignificantly over the next few years from increases in deliveries and improvedproject returns from recent expansions. Returns from both the Terrace expansion and the previous SEP IIexpansion contain incentive tolling arrangements, which will benefit fromincreasing volumes expected from the western Canadian basin.

 

The Partnership also expects to increasedistributable cash flow through the development or acquisition of complementarybusinesses with a similar risk profile to that of the Lakehead System.  On May 18, 2001, the Partnership closed itsacquisition of the assets of Enbridge Pipelines (North Dakota) L.L.C., whichwas purchased from Enbridge Inc. for $35.4 million.  The Partnership may in the future acquire other maturetransportation assets from Enbridge. Those acquisitions may include a portion of the assets recently acquiredby Enbridge in connection with its acquisition of Midcoast Energy ResourcesInc. of Houston.  Neither thePartnership nor Enbridge has identified any particular assets owned by Enbridgefor transfer to the Partnership, and no proposal for an acquisition of any ofthese assets is currently pending.  ThePartnership cannot predict which, if any, energy transportation assets owned byEnbridge it may ultimately acquire or the terms of any such acquisitions.  Any acquisitions from Enbridge will dependon a number of factors including the availability of acceptable alternativeacquisition opportunities from third parties and the Partnership’s financingcapability at the time acquisition opportunities may arise.

| Tariff  Matters |
|-----------------|

Effective July 1, 2001, in compliancewith the indexed rate ceilings allowed by FERC, the Partnership increased itsrates for transportation by an average of 2.7%.  The increase in tariff rates is not expected to have a materialimpact on the Partnership.

| Unit  Issuance |
|----------------|

On May 22, 2001, the Partnership issued1,748,635 Class A Common Units at a public offering price of $45.75 per unitfor gross proceeds before fees and expenses of approximately $80.0million.  As well, on June 4, 2001, thePartnership issued an additional 64,999 Class A Common Units to coverunderwriter over-allotments. These units were issued at the public offeringprice of $45.75 per unit, less an underwriting discount.  The entire offering brings the total numberof Class A Common Units outstanding to 26.8 million.

| Accounting  Pronouncements |
|----------------------------|

In June 2001, the Financial AccountingStandards Board (“FASB”) issued Statement of Financial Accounting Standard(“SFAS”) No. 141, "Business Combinations."  This Statement eliminates the pooling-of-interest method of accountingfor business combinations and requires the use of the purchase method.  In addition, it requires the reassessment ofintangible assets to determine if they are appropriately classified eitherseparately or within goodwill.  ThisStatement is effective for business combinations initiated after June 30,2001.  The Partnership adopted SFAS 141on July 1, 2001 with no material impact on net income.

In June 2001, the FASB issued SFAS No.142, "Goodwill and Other Intangible Assets."  This Statement eliminates the amortizationof goodwill and other acquired intangible assets with indefinite economicuseful lives.  SFAS 142 requires anannual impairment test of goodwill and other intangible assets that are notsubject to amortization.  SFAS 142 iseffective for fiscal years beginning after December 15, 2001.  The impact of adopting SFAS 142 to thePartnership has not yet been determined.

In June 2001, the FASB approved forissuance SFAS No. 143, "Accounting for Asset Retirement Obligations,"on the accounting for obligations associated with the retirement of long-livedassets.  SFAS 143 requires a liabilityto be recognized in the financial statements for retirement obligations meetingspecific criteria.  Measurement of theinitial obligation is to approximate fair value with an equivalent amountrecorded as an increase in the value of the capitalized asset.  The asset will be depreciable in accordancewith normal depreciation policy and the liability will be increased, with acharge to the income statement, until the obligation is settled.  SFAS 143 will be effective for fiscal yearsbeginning after June 15, 2002.  Thepotential impact of adopting SFAS 143 to the Partnership has not yet beendetermined.

*** ***

| ******        |
|---------------|
| ***ITEM 3.*** | ***QUANTITATIVE AND QUALITATIVE DISCLOSURES  ABOUT MARKET RISK*** |
| ******        |

The Partnership’s financial instrumentmarket risk is primarily impacted by changes in interest rates.  The Partnership’s exposure to movements ininterest rates is managed through its long-term debt ratio target, itsallocation of fixed and floating rate debt, and the use of interest rate riskmanagement agreements.  Informationabout the Partnership’s financial instruments that are sensitive to changes ininterest rates has not changed from that presented in the Partnership’s AnnualReport on Form 10-K for the fiscal year ended December 31, 2000.

As the Partnership does not own the crudeoil and natural gas liquids (“NGL”) it transports, its cash flows are notdirectly impacted by changes in commodity prices.  However, commodity prices have a direct impact on the underlyingsupply and demand for crude oil and NGL which impacts volumes transported bythe Partnership.

The Partnership does not currently holdor issue derivative instruments for trading or speculative purposes.

 

| ******                                                          |
|-----------------------------------------------------------------|
| ***PART II –  OTHER INFORMATION    *** |
| ***ITEM 1.    LEGAL PROCEEDINGS***               |
| ******                                                          |

The Partnership is a participant invarious legal proceedings arising in the ordinary course of business.  Some of these proceedings are covered, inwhole or in part, by insurance. The Partnership believes that the outcome ofall these proceedings will not, individually or in the aggregate, have amaterial adverse effect on the financial condition of the Partnership.

For information regarding other legalproceedings arising in 2000 or with regard to which material developments werereported during 2000, see Part I. Item 3., "Legal Proceedings," inthe Partnership’s Annual Report on Form 10-K for the fiscal year ended December31, 2000.

 

| ******        |
|---------------|
| ***ITEM 6.*** | ***EXHIBITS AND REPORTS ON FORM 8-K*** |
| ******        |

a)          Exhibits

             None.

b)          Reports on Form 8-K

Areport on Form 8-K was filed June 4, 2001, submitting a press release dated May25, 2001, announcing the successful close of the acquisition of 100% ofEnbridge Pipelines (North Dakota) for cash of $33 million.

Areport on Form 8-K was filed June 13, 2001, submitting a press release datedJune 8, 2001, announcing the appointment of Dan C. Tutcher to President ofLakehead Pipe Line Company, Inc. effective June 5, 2001.  Lakehead Pipe Line Company, Inc. is theGeneral Partner of Lakehead Pipe Line Partners, L.P.

 

**SIGNATURE**

Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

|                                   |
|----------------------------------------|
| **LAKEHEAD  PIPE LINE PARTNERS, L.P.** |
| (Registrant)                           |
|                                   |
| By:                                    | Lakehead Pipe Line  Company, Inc. |
|                                   | as General Partner |
|                                   |   |
|                                   |   |
|                                   |   |
| */s/M.A. Maki*                         |
|                                        |
| M.A.  Maki                             |
| *Controller*                           |
| *(Principal  Financial Officer)*       |
|                                   |
|                                   |
|                                   |
| */s/J.L. Balko*                        |
|                                        |
| J.L.  Balko                            |
| *Chief Accountant*                     |
| *(Principal  Accounting Officer)*      |
|                                   |
|                                   |
|                                   |
| Dated:   August 14, 2001     |
|                                   |