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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2000

OR

|/ / | 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

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

|Delaware(State or other jurisdiction of
incorporation or organization) |  | 39-1715850(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)

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Indicate
by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes /x/  No / /

The
Registrant had 24,990,000 Class A Common Units outstanding as at May 10, 2000.

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TABLE OF CONTENTS

|                              |  |                                                                                                |  | Page
|----------------------------- |  | ---------------------------------------------------------------------------------------------- |  | ----
|PART I. FINANCIAL INFORMATION
|Item 1.                       |  | Financial Statements                                                                           |  |     
|                              |  | Consolidated Statement of Income for the three month periods ended March 31, 2000 and 1999     |  | 1   
|                              |  | Consolidated Statement of Cash Flows for the three month periods ended March 31, 2000 and 1999 |  | 2   
|                              |  | Consolidated Statement of Financial Position as at March 31, 2000 and December 31, 1999        |  | 3   
|                              |  | Consolidated Statement of Partners' Capital for the three month period ended March 31, 2000    |  | 4   
|                              |  | Notes to Consolidated Financial Statements                                                     |  | 5   
|Item 2.                       |  | Management's Discussion and Analysis of Financial Condition and Results of Operations          |  | 7   
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                     |  | 9   
|PART II. OTHER INFORMATION   
|Item 1.                       |  | Legal Proceedings                                                                              |  | 10  
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                               |  | 10  
|Signature                     |  |                                                                                                |  | 11  

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:



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 1999 Annual
Report on Form 10-K.



PART IFINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

LAKEHEAD PIPE LINE PARTNERS, L.P.

CONSOLIDATED STATEMENT OF INCOME

|                                          |  | Three months ended
March 31, |      
|----------------------------------------- |  | ---------------------------- | -----
|
|
|Operating Revenue                         |  | $                            | 78.8 
|                                          |  |                              |      
|Expenses                                  |  |                              |      
|Power                                     |  |                              | 12.5 
|Operating and administrative              |  |                              | 17.7 
|Depreciation                              |  |                              | 15.3 
|                                          |  |                              |      
|                                          |  |                              | 45.5 
|                                          |  |                              |      
|Operating Income                          |  |                              | 33.3 
|Interest and Other Income                 |  |                              | 1.6  
|Interest Expense                          |  |                              | (14.6
|Minority Interest                         |  |                              | (0.2 
|                                          |  |                              |      
|Net Income                                |  | $                            | 20.1 
|                                          |  |                              |      
|Net Income Per Unit (Note 3)              |  | $                            | 0.62 
|                                          |  |                              |      
|Cash Distributions Paid Per Unit (Note 4) |  | $                            | 0.875
|                                          |  |                              |      

See accompanying notes to the consolidated financial statements.

1



LAKEHEAD PIPE LINE PARTNERS, L.P.

CONSOLIDATED STATEMENT OF CASH FLOWS

|                                                                                |  | Three months ended
March 31, |      
|------------------------------------------------------------------------------- |  | ---------------------------- | -----
|
|
|Cash Provided from Operating Activities                                         |  |                              |      
|Net income                                                                      |  | $                            | 20.1 
|Adjustments to reconcile net income to cash provided from operating activities: |  |                              |      
|Depreciation                                                                    |  |                              | 15.3 
|Interest on accrued rate refunds (Note 5)                                       |  |                              |     
|Minority interests                                                              |  |                              |     
|Other                                                                           |  |                              | (0.1 
|Changes in operating assets and liabilities:                                    |  |                              |      
|Accounts receivable and other                                                   |  |                              | 2.2  
|Materials and supplies                                                          |  |                              | (0.3 
|General Partner and affiliates                                                  |  |                              | (0.4 
|Accounts payable and other                                                      |  |                              | (0.5 
|Interest payable                                                                |  |                              | 10.3 
|Property and other taxes                                                        |  |                              | 2.9  
|Payment of rate refunds and related interest (Note 5)                           |  |                              |     
|                                                                                |  |                              |      
|                                                                                |  |                              | 49.5 
|                                                                                |  |                              |      
|Investing Activities                                                            |  |                              |      
|Additions to property, plant and equipment                                      |  |                              | (0.2 
|Repayments from affiliate                                                       |  |                              | 0.9  
|Changes in construction payables                                                |  |                              | (0.2 
|                                                                                |  |                              |      
|                                                                                |  |                              | 0.5  
|                                                                                |  |                              |      
|Financing Activities                                                            |  |                              |      
|Variable rate financing, net                                                    |  |                              | (10.0
|Loan from General Partner                                                       |  |                              |     
|Distributions to partners                                                       |  |                              | (27.6
|Minority interest                                                               |  |                              | (0.3 
|                                                                                |  |                              |      
|                                                                                |  |                              | (37.9
|                                                                                |  |                              |      
|Increase (Decrease) in Cash and Cash Equivalents*                               |  |                              | 12.1 
|Cash and Cash Equivalents at Beginning of Period                                |  |                              | 40.0 
|                                                                                |  |                              |      
|Cash and Cash Equivalents at End of Period                                      |  | $                            | 52.1 
|                                                                                |  |                              |      

---

See accompanying notes to the consolidated financial statements.

2





LAKEHEAD PIPE LINE PARTNERS, L.P.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

|(unaudited, except for December 31, 1999; dollars in millions)    |  | March 31,
2000 |         | December 31,
1999 |  
|----------------------------------------------------------------- |  | -------------- | ------- | ----------------- | -
|ASSETS                                                            |  |                |         |                   |  
|Current Assets                                                    |  |                |         |                   |  
|Cash and cash equivalents                                         |  | $              | 52.1    |                   | $
|Accounts receivable and other                                     |  |                | 29.3    |                   |  
|Advances to affiliate                                             |  |                | 6.6     |                   |  
|Materials and supplies                                            |  |                | 7.7     |                   |  
|                                                                  |  |                |         |                   |  
|                                                                  |  |                | 95.7    |                   |  
|                                                                  |  |                |         |                   |  
|Deferred Charges and Other                                        |  |                | 6.3     |                   |  
|                                                                  |  |                |         |                   |  
|Property, Plant and Equipment                                     |  |                |         |                   |  
|At cost                                                           |  |                | 1,568.6 |                   |  
|Accumulated depreciation                                          |  |                | (262.4  | )                 |  
|                                                                  |  |                |         |                   |  
|                                                                  |  |                | 1,306.2 |                   |  
|                                                                  |  |                |         |                   |  
|                                                                  |  | $              | 1,408.2 |                   | $
|                                                                  |  |                |         |                   |  
|LIABILITIES AND PARTNERS' CAPITAL                                 |  |                |         |                   |  
|Current Liabilities                                               |  |                |         |                   |  
|Due to General Partner and affiliates                             |  | $              | 1.3     |                   | $
|Accounts payable and other                                        |  |                | 17.5    |                   |  
|Interest payable                                                  |  |                | 16.6    |                   |  
|Property and other taxes                                          |  |                | 16.2    |                   |  
|                                                                  |  |                |         |                   |  
|                                                                  |  |                | 51.6    |                   |  
|Long-Term Debt                                                    |  |                | 774.5   |                   |  
|Minority Interest                                                 |  |                | 3.5     |                   |  
|Contingencies (Note 6)                                            |  |                |         |                   |  
|                                                                  |  |                |         |                   |  
|                                                                  |  |                | 829.6   |                   |  
|                                                                  |  |                |         |                   |  
|Partners' Capital                                                 |  |                |         |                   |  
|Class A Common Unitholders                                        |  |                |         |                   |  
|(Units authorized and issued24,990,000) (Note 7)                 |  |                | 526.3   |                   |  
|Class B Common Unitholder (Units authorized and issued3,912,750) |  |                | 46.7    |                   |  
|General Partner                                                   |  |                | 5.6     |                   |  
|                                                                  |  |                |         |                   |  
|                                                                  |  |                | 578.6   |                   |  
|                                                                  |  |                |         |                   |  
|                                                                  |  | $              | 1,408.2 |                   | $
|                                                                  |  |                |         |                   |  

See accompanying notes to the consolidated financial statements.

3



LAKEHEAD PIPE LINE PARTNERS, L.P.

CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL

|(unaudited, except for December 31, 1999;
dollars in millions) |  | Class A
Common
Unitholders |       | Class B
Common
Unitholder |   | General
Partner |   | Total |     
|-------------------------------------------------------------- |  | -------------------------- | ----- | ------------------------- | - | --------------- | - | ----- | ----
|Partners' Capital at December 31, 1999                         |  | $                          | 533.1 |                           | $ | 47.4            |   | $     | 5.6 
|Net Income Allocation                                          |  |                            | 15.1  |                           |   | 2.7             |   |       | 2.3 
|Distributions to Partners                                      |  |                            | (21.9 | )                         |   | (3.4            | ) |       | (2.3
|                                                               |  |                            |       |                           |   |                 |   |       |     
|Partners' Capital at March 31, 2000                            |  | $                          | 526.3 |                           | $ | 46.7            |   | $     | 5.6 
|                                                               |  |                            |       |                           |   |                 |   |       |     

See accompanying notes to the consolidated financial statements.

4



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 which management considers
necessary to present fairly the financial position as at March 31, 2000 and December 31, 1999; the results of operations for the three month periods ended March 31, 2000 and 1999;
and cash flows for the three month periods ended March 31, 2000 and 1999. The results of operations for the three months ended March 31, 2000 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 1999 Annual Report on Form 10-K.

2.  Comparative Amounts

Certain comparative amounts are 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 required to reflect depreciation on the General Partner's historical cost basis for assets contributed on formation of the Partnership. Net income per unit was determined
as follows:

|Three months ended March 31,                                         |  | 2000 |      | 1999 |  
|-------------------------------------------------------------------- |  | ---- | ---- | ---- | -
|Net income                                                           |  | $    | 20.1 |      | $
|                                                                     |  |      |      |      |  
|Net income allocated to General Partner                              |  |      | (0.2 | )    |  
|Incentive distributions and historical cost depreciation adjustments |  |      | (2.1 | )    |  
|                                                                     |  |      |      |      |  
|                                                                     |  |      | (2.3 | )    |  
|                                                                     |  |      |      |      |  
|Net income allocable to Common Units                                 |  | $    | 17.8 |      | $
|                                                                     |  |      |      |      |  
|Weighted Average Common Units outstanding (millions)                 |  |      | 28.9 |      |  
|                                                                     |  |      |      |      |  
|Net income per unit                                                  |  | $    | 0.62 |      | $
|                                                                     |  |      |      |      |  

4.  Cash Distribution

On April 18, 2000, the Board of Directors of the General Partner declared a cash distribution for the quarter ended March 31, 2000, of $0.875 per
unit. The distribution will be made on May 15, 2000, to Unitholders of record on April 28, 2000.

5.  Accrued Rate Refunds and Related Interest

In October 1996, the Federal Energy Regulatory Commission ("FERC") approved a settlement agreement between the Partnership and customer representatives
on all then outstanding contested tariff rates. The agreement resulted in an approximate tariff rate reduction of 6% and total rate refunds and

5



related
interest of $120.0 million through the effective date of October 1, 1996. Refunds required under the agreement began in 1996 with $41.8 million repaid during the fourth
quarter of 1996, with the balance repaid through a 10% reduction in tariff rates. Interest was accrued on the unpaid balance
based on the 90-day Treasury Bill rate. Effective November 22, 1999, the 10% reduction in tariff rates was removed and during December 1999, the $120.0 million and
related interest was fully repaid.

6.  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 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.

7.  Common Units

On April 28, 1999, the Partnership issued an additional 2,700,000 Class A Common Units, increasing the total number of Class A Common
Units outstanding to 24,990,000. Combined with the General Partner's contribution, the offering provided net proceeds of $119.7 million. Proceeds were used to repay indebtedness under the
Partnership's Revolving Credit Facility incurred to finance pipeline expansion projects.

Prior
to the April 28, 1999 issuance of Class A Common Units, the General Partner held a 1% general partner interest and 14.8% limited partner interest in the
Partnership, as well as a 1% general partner interest in Lakehead Pipe Line Company, Limited Partnership (the "Operating Partnership"). This resulted in an effective 16.6% combined interest in the
Partnership by the General Partner. The Partnership owns a 99% limited partner interest in the Operating Partnership.

Since
the April 28, 1999 issuance of Class A Common Units, the General Partner has held a 1% general partner interest and 13.4% limited partner interest in the
Partnership, as well as a 1% general partner interest in the Operating Partnership. This results in the General Partner holding an effective 15.3% combined interest in the Partnership.

6



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

Results of Operations

Net income for first quarter 2000 was $20.1 million, or $0.62 per unit, compared with 1999 first quarter net income of $21.7 million, or $0.75
per unit, a decrease of $1.6 million, or $0.13 per unit. The decrease in net income was a result of higher operating and administrative, depreciation and interest costs, offset partially by
increased operating revenue and lower power costs. Earnings per unit were lower due to reduced net income and a greater number of units outstanding following the issuance of 2.7 million units
in April 1999. The weighted average number of Common Units outstanding increased from 26.2 million for first quarter 1999 to 28.9 million for first quarter 2000.

Operating
revenue for first quarter 2000 was $78.8 million, $4.8 million higher than first quarter 1999. A slight decline in deliveries was more than offset by increased
tariffs, including the new tariff for the Terrace Expansion Program ("Terrace") which became effective April 1, 1999. The System Expansion Program II ("SEP II") tariff also contributed an
additional $3.5 million as it applied for the full quarter this year compared to only two months last year. Deliveries averaged 1,362,000 barrels per day ("bpd") for the first quarter 2000,
down 2% from the 1,394,000 bpd averaged for the first quarter last year. Average daily volumes were equal with the fourth quarter 1999 and 19,000 bpd over the third quarter 1999. The Partnership
believes that the month to month increases in deliveries since September 1999 are indicative of a gradual return to early 1999 levels in crude oil supply from western Canada, after lagging
behind the recovery in oil prices during the latter part of 1999. System utilization, measured in barrel miles, was 85 billion for the first quarter 2000, as compared to 89 billion for
last year's first quarter, reflecting the decrease in deliveries by the Partnership.

Total
operating expenses for first quarter 2000 increased $4.7 million, or 11.5%, from the corresponding period of 1999. The increase resulted from higher operating and
administrative and depreciation costs offset partially by lower power costs. Operating and administrative expenses increased primarily due to an increase in oil measurement losses resulting from
higher oil prices and an oil measurement gain that was recognized in the same period during 1999. The property additions attributable to SEP II and Terrace resulted in increased property taxes and
depreciation expense in first quarter 2000. These increases were partially offset by lower power costs associated with reduced deliveries.

Interest
expense was $14.6 million for first quarter 2000, compared to $12.7 million for the same period last year. The increase in 2000 reflects interest capitalized of
$2.4 million during first quarter 1999 while the Terrace project was under construction, compared to $0.04 million in the first quarter 2000.

Liquidity and Capital Resources

The Partnership anticipates that it will continue to have adequate liquidity to fund future recurring operating, investing and financing activities. The
Partnership intends to fund ongoing capital expenditures with borrowings, cash generated from operating activities, existing cash and cash equivalents and the proceeds from future equity and debt
offerings. Cash distributions are expected to be funded with internally generated cash. The Partnership's ability to make future debt and equity offerings will depend on prevailing market conditions,
interest rates and the financial condition of the Partnership.

At
March 31, 2000, cash and cash equivalents totaled $52.1 million, as compared to $40.0 million at December 31, 1999. Of this $52.1 million,
$27.9 million ($0.875 per unit) will be used for the cash distribution payable May 15, 2000, with the remaining $24.2 million available for capital expenditures or other business
needs.

Cash
flow from operating activities for first quarter 2000 was $49.5 million, as compared with $29.4 million for the same period last year. A portion of this increase,
$7.3 million, is attributable to the elimination of the rate refunds related to the 1996 settlement agreement. The rate refund obligation was

7



fully
repaid during 1999 and the 10% tariff credit was cancelled effective November 22, 1999. Cash flow from operating activities was also impacted positively from changes in working capital.

The
Partnership anticipates spending approximately $12.0 million for pipeline system enhancements and $10.0 million for core maintenance activities in 2000. Excluding
major expansion projects, ongoing capital expenditures are expected to average approximately $20.0 million on an annual basis (approximately 50% for core maintenance and 50% for enhancement of
the pipeline system). Core maintenance activities, such as the replacement of equipment and preventive maintenance programs, will be undertaken to enable the Partnership's pipeline system to continue
to operate at its maximum operating capacity. Enhancements to the pipeline system, such as renewal and replacement of pipe, are expected to extend the life of the Lakehead System and permit the
Partnership to respond to developing industry and government standards and the changing service expectations of its customers.

General

Future Prospects

Income and cash flows of the Partnership are sensitive to oil industry supply and demand in Canada and the United States and the regulatory environment. As the
Partnership's pipeline system is operationally integrated with the Enbridge Pipelines System in western Canada, the Partnership's revenues are dependent upon the utilization of the Enbridge Pipelines
System by producers of western Canadian crude oil. The Partnership believes the long-term demand for its pipeline system will continue.

The
outlook is believed to be positive for the Partnership. Although crude oil prices were strong for the majority of 1999, exploration and production activity lagged, as producers of
western Canadian crude oil were cautious to invest in real production. Over the past few months, sustained high oil prices have caused a resurgence of investment back into the industry. Drilling rig
utilization in the first quarter 2000 increased to the third highest level in 10 years. Although there has been a bias toward natural gas drilling, crude oil exploration is now on the rise and
this trend is expected to continue through 2000. This resurgence has been bolstered by the Organization of Petroleum Exporting Countries ("OPEC") meeting in March. Production targets were revised
upward to satisfy increased world demand and replenish shrinking inventories while still maintaining an attractive benchmark oil price. This strategy has been successful, as oil prices have settled
into the target range of $22$28 per barrel. At current crude oil prices, the Partnership believes that it is economic for western Canadian producers to invest in crude oil drilling. Due
to the time lag between drilling and production, it is anticipated that recovery of Partnership deliveries will be ongoing through 2000, thus limiting projected 2000 earnings to approximately 1999
levels.

In
the long-term, the Partnership is well positioned to benefit from increases in crude oil supply through a combination of existing capacity and planned future expansion.
Canada has substantial reserves of
non-conventional hydrocarbon resources consisting predominantly of oil sands deposits in the province of Alberta. Firms involved in the production of heavy and synthetic crude oil from the
oil sands region of western Canada have announced expansion programs in excess of Cdn $26 billion. If these projects are completed, they are projected to provide substantial increases in the
production of heavy and synthetic crude oil in western Canada in the next several years, which will support the long-term utilization of the Lakehead System.

Montreal Extension Reversal

The Enbridge Pipelines System includes a section which extends from Sarnia, Ontario to Montreal, Quebec (the "Montreal Extension" or "Line 9"), which
historically flowed in a west-to-east direction. Enbridge Pipelines Inc. and a group of refiners developed the Line 9 reversal project which enables crude oil to be
imported into Quebec through facilities of Portland Pipe Line Corporation and Montreal Pipe Line Limited.

8



The
reversal of Line 9 has resulted in decreased deliveries from the Lakehead System to Ontario beginning in the second quarter of 1999. Displaced volumes originating in western
Canada are being diverted to other markets in the U.S. Midwest. During first quarter 2000, deliveries to Clearbrook, Minnesota and Chicago, Illinois increased compared to the same period last year,
partially offsetting reductions in light crude deliveries to Ontario. Deliveries of U.S. domestic and foreign crude oil volumes between Chicago and Ontario decreased 82,000 barrels per day for first
quarter 2000 as compared to the same period in 1999 due to the reversal of Line 9. The level of decline in deliveries from the Lakehead System to Ontario will be dependent upon global crude oil market
dynamics and the level of utilization of Line 9. For additional discussion on the impact of the Montreal Extension Reversal, see the Partnership's 1999 Annual Report on Form 10-K.

Tariff Matters

On March 13, 2000, the Partnership filed a new tariff with FERC which took effect April 1, 2000. This new tariff reflects the annual adjustment
to the SEP II surcharge, including a true-up of the 1999 actual SEP II cost of service, along with an estimate for 2000. The tariff allows the Partnership to recover the cost of service
for SEP II facilities and earn a return on its SEP II equity investment, which varies with the utilization of SEP II capacity on the Enbridge Pipeline System in western Canada. During 2000, the
Partnership will earn a 7.5% return on its SEP II equity investment, the minimum provided in the SEP II Tariff Agreement.

Accounting Change

In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard 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 plans to adopt this Statement
in 2001, as required. The Partnership has not determined the potential impact of implementing this Statement.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Partnership's financial instrument market risk is primarily impacted by changes in interest rates. The Partnership's exposure to movements in interest
rates is managed through its long-term debt ratio
target, its allocation of fixed and floating rate debt, and the use of interest rate risk management agreements. Information about the Partnership's financial instruments that are sensitive to changes
in interest rates has not changed from that presented in the Partnership's 1999 Annual Report on Form 10-K.

As
the Partnership does not own the crude oil and Natural Gas Liquids ("NGL") it transports, its cash flows are not significantly impacted by changes in commodity
prices. However, commodity prices have a significant impact on the underlying supply and demand for crude oil and NGL that the Partnership transports.

The
Partnership has minimal foreign exchange risk, and has entered into forward contracts to hedge its exposure to movements of future exchange rates.

The
Partnership does not currently hold or issue derivative instruments for trading or any other speculative purpose.

9



PART IIOTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The Partnership is a defendant in various lawsuits and a party to various legal proceedings arising in the ordinary course of business. Some of these lawsuits
and proceedings are covered, in whole or in part, by insurance. The Partnership believes that the outcome of all these lawsuits and proceedings will not, individually or in the aggregate, have a
material adverse effect on the financial condition of the Partnership.

On
three occasions in the summer and fall of 1998, the Partnership's directional drilling operations for SEP II construction caused a discharge of non-hazardous bentonite
drilling mud in a wetlands area. At the end of 1999, the Partnership and the State of Illinois entered into an agreement wherein the State agreed to release the Partnership from liability resulting
from the discharges in exchange for a contribution of property and funding. Consequently, during the first quarter of 2000 the Partnership transferred to the Illinois Department of Natural Resources
("DNR") seven acres of the affected wetlands, $10,000 for the State's use for educational or conservation purposes, and $14,000 for the DNR to carry out invasive species removal in the wetlands.

The
Partnership received a draft complaint on September 21, 1999, from the Department of Justice for the State of Wisconsin alleging violations of state pollution control
regulations. The first violation alleges that during construction on SEP II in the summer of 1998 the Partnership failed to comply with the terms of a discharge permit by failing to monitor all
discharges of water from SEP II construction trenches and, on certain occasions, by exceeding the effluent limitations. The second and unrelated violation alleged in the draft complaint states that
the Partnership failed to immediately report a release of NGL from its Superior terminal in mid-January 1999. The Partnership is currently in negotiations with the Attorney
General's office regarding the allegations and the amount of the penalty. It is anticipated that the resolution of this matter and the penalty to be paid will not have a material impact on the
financial condition of the Partnership.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

27.1  Financial
Data Schedule as of and for the three months ended March 31, 2000.

No
reports on Form 8-K were filed during the quarter ended March 31, 2000.

10



## 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

| |  | LAKEHEAD PIPE LINE PARTNERS, L.P. (Registrant)
| |  | ----------------------------------------------
| |  | By:                                           
| |  | By:                                           
| |  | Dated: May 10, 2000                           

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