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** **

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

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**FORM 10–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 333-59597**

**LAKEHEAD PIPE LINE COMPANY, LIMITED PARTNERSHIP***(Exact name of Registrant as specified in its charter)*

| **Delaware**                                                                | **39-1715851**        |
|-----------------------------------------------------------------------------|-----------------------|
| *(State or other jurisdiction of*                                           | *(I.R.S. Employer*    |
| *incorporation or organization)*                                            | *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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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

 

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**TABLE OF CONTENTS**

| **PART I – FINANCIAL  INFORMATION** |                                                                                         |
|------------------------------------------|----------------------------------------------------------------------------------------------|
|                                     |                                                                                         |   |
| **Item 1.**                              | Financial Statements                                                                         |   |
|                                     |                                                                                         |   |
|                                     | Statement  of Income for the three month and six month periods ended June 30, 2001 and  2000 |   |
|                                     |                                                                                         |   |
|                                     | Statement  of Cash Flows for the six month periods ended June 30, 2001 and 2000              |   |
|                                     |                                                                                         |   |
|                                     | Statement of Financial  Position as at June 30, 2001 and December 31, 2000                   |   |
|                                     |                                                                                         |   |
|                                     | Statement of Partners’  Capital for the six month period ended June 30, 2001            |   |
|                                     |                                                                                         |   |
|                                     | Notes to  the 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                                                            |   |
|                                     |                                                                                         |   |
| **Signature**                            |                                                                                         |   |
|                                          |                                                                                              |  |  |

             *ThisQuarterly Report on Form 10-Q contains forward-looking statements. Thesestatements are based on the Partnership's beliefs as well as assumptions madeby and information currently available to the Partnership. When used in thisdocument, the words "anticipate," "believe,""expect," "estimate," "forecast," "project,"and similar expressions identify forward-looking statements. These statementsreflect the Partnership's current views with respect to future events and aresubject 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 varymaterially from those described in this Form 10-Q.  Except as required by applicable securities laws, the Partnershipdoes not intend to update these forward-looking statements. For additionaldiscussion of such risks, uncertainties and assumptions, see the Partnership’sAnnual Report on Form 10-K for the fiscal year ended December 31, 2000.*

*** ***

| ******                                                |
|-------------------------------------------------------|
| ***PART I – FINANCIAL INFORMATION***             |
| ******                                                |
| ***ITEM 1.   FINANCIAL STATEMENTS***             |
| ******                                                |
| ***LAKEHEAD PIPE LINE COMPANY, LIMITED PARTNERSHIP*** |
| ***STATEMENT OF INCOME***                             |
| ******                                                |
|                                                  |   | Three  months ended |   | Six  months ended |   |   |
|                                                  |   | June  30, |   | June  30, |   |   |
|                                                  | *(unaudited; dollars in  millions)* | 2001 |   | 2000 |   | 2001 |   | 2000 |   |   |
|                                                  |   |  |   |  |   |  |   |  |   |   |
|                                                  | Operating Revenue | $ | 80.1 |   | $ | 78.3 |   | $ | 152.0 |   | $ | 157.1 |   |   |
|                                                  |   |   |   |   |   |   |   |   |   |   |
|                                                  | Expenses |   |   |   |   |   |   |   |   |   |
|                                                  |   | Power | 12.7 |   | 12.3 |   | 24.4 |   | 24.8 |   |   |
|                                                  |   | Operating and  administrative | 21.3 |   | 19.6 |   | 41.4 |   | 37.3 |   |   |
|                                                  |   | Depreciation | 15.5 |   | 15.2 |   | 30.9 |   | 30.5 |   |   |
|                                                  |   | Severance and lease  termination costs (Note 4) | 5.0 |   | - |   | 5.0 |   | - |   |   |
|                                                  |   |  |   |  |   |  |   |  |   |   |
|                                                  |   | 54.5 |   | 47.1 |   | 101.7 |   | 92.6 |   |   |
|                                                  |   |  |   |  |   |  |   |  |   |   |
|                                                  | Operating Income | 25.6 |   | 31.2 |   | 50.3 |   | 64.5 |   |   |
|                                                  | Interest and Other  Income | 0.8 |   | 0.7 |   | 1.5 |   | 2.3 |   |   |
|                                                  | Interest Expense | (14.8 | ) | (15.2 | ) | (30.0 | ) | (29.8 | ) |   |
|                                                  |   |  |   |  |   |  |   |  |   |   |
|                                                  | Net Income | $ | 11.6 |   | $ | 16.7 |   | $ | 21.8 |   | $ | 37.0 |   |   |
|                                                  |   |  |   |  |   |  |   |  |   |   |
|                                                       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

*See accompanying notes to the financial statements.*

*** ***

| ******                                                |
|-------------------------------------------------------|
|                                                  |
| ***LAKEHEAD PIPE LINE COMPANY, LIMITED PARTNERSHIP*** |
| ***STATEMENT OF CASH FLOWS***                         |
| ******                                                |
|                                                  |   | Six months ended  June 30, |   |   |
|                                                  |   |   |
|                                                  | *(unaudited;  dollars in millions)* | 2001 |   | 2000 |   |   |
|                                                  |   |  |   |  |   |   |
|                                                  | Cash  Provided from Operating Activities |   |   |   |   |   |
|                                                  |   | Net  income | $ | 21.8 |   | $ | 37.0 |   |   |
|                                                  |   | Adjustments  to reconcile net income to cash provided from operating activities: |   |   |   |   |   |
|                                                  |   | Depreciation | 30.9 |   | 30.5 |   |   |
|                                                  |   | Other | - |   | (1.8 | ) |   |
|                                                  |   | Changes  in operating assets and liabilities: |   |   |   |   |   |
|                                                  |   | Accounts  receivable and other | (0.5 | ) | 2.0 |   |   |
|                                                  |   | Oil  inventory | 6.5 |   | (4.0 | ) |   |
|                                                  |   | Materials  and supplies | (0.1 | ) | (0.3 | ) |   |
|                                                  |   | General  Partner and affiliates | 4.7 |   | (1.9 | ) |   |
|                                                  |   | Accounts  payable and other | 3.8 |   | (1.7 | ) |   |
|                                                  |   | Interest  payable | (0.1 | ) | 0.4 |   |   |
|                                                  |   | Property  and other taxes | (4.2 | ) | (3.1 | ) |   |
|                                                  |   |  |   |  |   |   |
|                                                  |   | 62.8 |   | 57.1 |   |   |
|                                                  |   |  |   |  |   |   |
|                                                  | Investing  Activities |   |   |   |   |   |
|                                                  |   | Repayments  from affiliate | 0.2 |   | 0.9 |   |   |
|                                                  |   | Additions  to property, plant and equipment | (5.2 | ) | (4.1 | ) |   |
|                                                  |   | Changes  in construction payables | (4.1 | ) | (1.1 | ) |   |
|                                                  |   |  |   |  |   |   |
|                                                  |   | (9.1 | ) | (4.3 | ) |   |
|                                                  |   |  |   |  |   |   |
|                                                  | Financing  Activities |   |   |   |   |   |
|                                                  |   | Variable  rate financing, net | (83.0 | ) | - |   |   |
|                                                  |   | Loan  from General Partner, net | (0.2 | ) | - |   |   |
|                                                  |   | Partners’  capital contributions, net | 80.7 |   | - |   |   |
|                                                  |   | Debt  financing costs | (0.3 | ) | - |   |   |
|                                                  |   | Distributions  to partners | (55.8 | ) | (55.7 | ) |   |
|                                                  |   |  |   |  |   |   |
|                                                  |   | (58.6 | ) | (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 |   |   |
|                                                  |   |  |   |  |   |   |
|                                                       |  |  |  |  |  |  |  |  |  |  |  |

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| * | *Cash equivalents are defined as all highly marketable  securities with a maturity of three months or less when purchased.* |
|---|-----------------------------------------------------------------------------------------------------------------------------|

*See accompanying notes to the financial statements.*

*** ***

| ******                                                |
|-------------------------------------------------------|
|                                                  |
| ***LAKEHEAD PIPE LINE COMPANY, LIMITED PARTNERSHIP*** |
| ***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 | 26.2 |   | 25.7 |   |   |
|                                                  |   | Oil inventory | 2.4 |   | 8.9 |   |   |
|                                                  |   | Materials and supplies | 7.8 |   | 7.7 |   |   |
|                                                  |   |  |   |  |   |   |
|                                                  |   | 74.4 |   | 86.9 |   |   |
|                                                  |   |  |   |  |   |   |
|                                                  | Deferred Charges and Other | 8.2 |   | 7.9 |   |   |
|                                                  |   |  |   |  |   |   |
|                                                  | Property,  Plant and Equipment |   |   |   |   |   |
|                                                  |   | At cost | 1,593.5 |   | 1,588.5 |   |   |
|                                                  |   | Accumulated depreciation | (337.3 | ) | (306.6 | ) |   |
|                                                  |   |  |   |  |   |   |
|                                                  |   | 1,256.2 |   | 1,281.9 |   |   |
|                                                  |   |  |   |  |   |   |
|                                                  |   | $ | 1,338.8 |   | $ | 1,376.7 |   |   |
|                                                  |   |  |   |  |   |   |
|                                                  |   |   |   |   |   |   |
|                                                  | ***LIABILITIES AND PARTNERS' CAPITAL*** |   |   |   |   |   |
|                                                  | Current  Liabilities |   |   |   |   |   |
|                                                  |   | Due to General Partner and affiliates | $ | 3.2 |   | $ | - |   |   |
|                                                  |   | Loan from General Partner | - |   | 0.2 |   |   |
|                                                  |   | Accounts payable and other | 17.1 |   | 17.4 |   |   |
|                                                  |   | Interest payable | 6.4 |   | 6.5 |   |   |
|                                                  |   | Property and other taxes | 10.2 |   | 14.4 |   |   |
|                                                  |   |  |   |  |   |   |
|                                                  |   | 36.9 |   | 38.5 |   |   |
|                                                  |   |   |   |   |   |   |
|                                                  | Other Deferred Credits | 1.3 |   | - |   |   |
|                                                  | Long-Term Debt | 716.3 |   | 799.3 |   |   |
|                                                  | Contingencies *(Note 3)* | - |   | - |   |   |
|                                                  |   |  |   |  |   |   |
|                                                  |   | 717.6 |   | 837.8 |   |   |
|                                                  |   |  |   |  |   |   |
|                                                  | Partners'  Capital |   |   |   |   |   |
|                                                  |   | Limited Partner | 581.9 |   | 535.7 |   |   |
|                                                  |   | General Partner | 3.7 |   | 3.2 |   |   |
|                                                  |   | Accumulated Other Comprehensive Loss *(Notes 5 & 6)* | (1.3 | ) | - |   |   |
|                                                  |   |  |   |  |   |   |
|                                                  |   | 584.3 |   | 538.9 |   |   |
|                                                  |   |  |   |  |   |   |
|                                                  |   | $ | 1,338.8 |   | $ | 1,376.7 |   |   |
|                                                  |   |  |   |  |   |   |
|                                                       |  |  |  |  |  |  |  |  |  |

*Seeaccompanying notes to the financial statements.*

 

| ******                                                |
|-------------------------------------------------------|
|                                                  |
| ***LAKEHEAD PIPE LINE COMPANY, LIMITED PARTNERSHIP*** |
| ***STATEMENT OF PARTNERS' CAPITAL***                  |
| ******                                                |
|                                                  | *(Unaudited, except for* |   |   |   |   | Other |   |   |   |   |
|                                                  | *December 31, 2000* | Limited |   | General |   | Comprehensive |   |   |   |   |
|                                                  | *dollars in millions)* | Partner |   | Partner |   | Loss |   | Total |   |   |
|                                                  |   |  |   |  |   |  |   |  |   |   |
|                                                  | Partners'  Capital at December 31, 2000 | $ | 535.7 |   | $ | 3.2 |   | – |   | $ | 538.9 |   |   |
|                                                  |   |   |   |   |   |   |   |   |   |   |
|                                                  | Partners’  contributions, net | 79.9 |   | 0.8 |   | – |   | 80.7 |   |   |
|                                                  |   |   |   |   |   |   |   |   |   |   |
|                                                  | Net Income Allocation | 21.5 |   | 0.3 |   | – |   | 21.8 |   |   |
|                                                  |   |   |   |   |   |   |   |   |   |   |
|                                                  | Distributions to Partners | (55.2 | ) | (0.6 | ) | – |   | (55.8 | ) |   |
|                                                  |   |   |   |   |   |   |   |   |   |   |
|                                                  | Floating to Fixed Interest Rate Swaps | – |   | – |   | (1.3 | ) | (1.3 | ) |   |
|                                                  |   |  |   |  |   |  |   |  |   |   |
|                                                  |   |   |   |   |   |   |   |   |   |   |
|                                                  | Partners' Capital at June 30, 2001 | $ | 581.9 |   | $ | 3.7 |   | (1.3 | ) | $ | 584.3 |   |   |
|                                                  |   |  |   |  |   |  |   |  |   |   |
|                                                       |  |  |  |  |  |  |  |  |  |  |  |  |  |

*See accompanying notes to the financial statements.*

| ******                                               |
|------------------------------------------------------|
| ***NOTES TO THE 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. | 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. |   |
|                                                      |  |  |  |

|   |
|--------|
|   | 4. | 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. |   |
|   |   |   |   |
|   | 5. | 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. |   |
|   |   |   |   |
|   | 6. | Comprehensive  Income |   |
|   |   |   |   |
|   |   | Comprehensive  income for the six months ended June 30, 2001 was $20.5 million (2000 - $37.0  million).  Comprehensive income for  the three month period ended June 30, 2001 was $11.3 (2000 - $16.7).  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 5 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 $21.8 million, compared to $37.0 million for the same period in2000.  The decline in net incomereflects lower operating revenue, higher operating and administrative expenses,and a non-recurring charge for Duluth office exit costs.

Operating revenue for the first sixmonths of 2001 decreased $5.1 million, to $152.0 million, over thecorresponding period in 2000 as increased tariffs related to the SystemExpansion Project II (“SEP II”) and the Terrace Expansion Project (“Terrace”)were more than offset by declines in deliveries.  Deliveries averaged 1.356 million barrels per day for the firstsix months of 2001, compared to 1.361 million barrels per day for the sameperiod of 2000.  There was also one lesspumping day in the first half of 2001 compared to 2000, due to the leap year.

Totaloperating expenses for the first six months of 2001 increased $9.1 million fromthe corresponding period last year.  Theincrease resulted from higher operating and administrative and depreciation costs,and a non-recurring charge of $5.0 million related to the estimated severanceand lease termination costs of relocating the Partnership’s offices fromDuluth, Minnesota to Houston, Texas. Operating and administrative costsincreased $4.1 million primarily due to increases in oil measurement losses.

Interest expense for the first six monthsof 2001 was $0.2 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 compared to $16.7 million for the same periodlast year.  The decline in quarterlyresults reflects higher operating and administrative expenses and thenon-recurring charge for Duluth office exit costs, partially offset by higheroperating revenue.

Operatingrevenue for the second quarter of 2001 was $80.1 million, an increase of $1.8million 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 $7.4million from the corresponding period in 2000. Power costs were slightly higher by $0.4 million due to higherdeliveries.  Operating and administrativeexpenses increased by $1.7 million due to higher oil measurement losses.  Depreciation expense increased by $0.3million 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 partner capitalcontributions and debt offerings, if any. Cash distributions are expected to be funded with internally generatedcash. The Partnership’s ability to complete future debt offerings and receivepartner capital contributions and the timing of any such transactions willdepend on various factors including prevailing market conditions, interestrates and the financial condition of 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 $62.8 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 next severalyears, which will support the long-term utilization of the Lakehead System.

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 II expansioncontain incentive tolling arrangements, which will benefit from increasingvolumes 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 material impacton the Partnership.

AccountingPronouncements

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 ofaccounting for business combinations and requires the use of the purchasemethod.  In addition, it requires thereassessment of intangible assets to determine if they are appropriatelyclassified either separately or within goodwill.  This Statement is effective for business combinations initiatedafter June 30, 2001.  The Partnershipadopted SFAS 141 on 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 amortization of goodwill and otheracquired intangible assets with indefinite economic useful lives.  SFAS 142 requires an annual impairment testof goodwill and other intangible assets that are not subject toamortization.  SFAS 142 is effective forfiscal years beginning after December 15, 2001.  The impact of adopting SFAS 142 to the Partnership has not yetbeen 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 been determined.***************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   A  report on Form 8-K was filed April 27, 2001, submitting an audited  Consolidated Statement of Financial Position of Lakehead Pipe Line Company,  Inc., the General Partner of Lakehead Pipe Line Partners, L.P., at December  31, 2000 and 1999, together with the report of Independent Public  Accountants.
 

**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 Company, Limited Partnership**(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