<PAGE>
                      UNITED STATES SECURITIES AND EXCHANGE
                                   COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q



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

For the quarterly period ended SEPTEMBER 30, 2003



                         Commission File Number 1-12202

                         NORTHERN BORDER PARTNERS, L.P.
             (Exact name of registrant as specified in its charter)


                Delaware                              93-1120873
     -------------------------------        -------------------------------
     (State or other jurisdiction of        (I.R.S. Employer Identification
     incorporation or organization)                     Number)



            13710 FNB Parkway
             Omaha, Nebraska                          68154-5200
     -------------------------------        -------------------------------
     (Address of principal executive                  (Zip code)
                offices)


                                 (402) 492-7300
              ----------------------------------------------------
              (Registrant's telephone number, including area code)



         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 [ ]

         Indicate by check mark whether the registrant is an accelerated filer
(as defined by Rule 12b-2 of the Securities Exchange Act of 1934). Yes [X]
No [ ]




                                     1 OF 32
<PAGE>

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES

                                TABLE OF CONTENTS


<Table>
<Caption>
                                                                                         Page No.
                                                                                         --------
<S>                                                                                      <C>
PART I. FINANCIAL INFORMATION

      ITEM 1. Financial Statements

              Consolidated Statement of Income -
                  Three Months Ended September 30, 2003 and 2002
                  and Nine Months Ended September 30, 2003 and 2002                           3
              Consolidated Statement of Comprehensive Income -
                  Three Months Ended September 30, 2003 and 2002
                  and Nine Months Ended September 30, 2003 and 2002                           3
              Consolidated Balance Sheet - September 30, 2003
                  and December 31, 2002                                                       4
              Consolidated Statement of Cash Flows -
                  Nine Months Ended September 30, 2003 and 2002                               5
              Consolidated Statement of Changes in Partners'
                  Equity - Nine Months Ended September 30, 2003                               6
              Notes to Consolidated Financial Statements                                      7

      ITEM 2. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations                              15

      ITEM 3. Quantitative and Qualitative Disclosures About
                  Market Risk                                                                30

      ITEM 4. Controls and Procedures                                                        30

PART II. OTHER INFORMATION

      ITEM 5. Other Information                                                              31

      ITEM 6. Exhibits and Reports on Form 8-K                                               31
</Table>



                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENT OF INCOME
                     (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
                                   (UNAUDITED)

<Table>
<Caption>
                                                 THREE MONTHS ENDED            NINE MONTHS ENDED
                                                   SEPTEMBER 30,                  SEPTEMBER 30,
                                             --------------------------     --------------------------
                                                2003            2002           2003            2002
                                             ----------      ----------     ----------      ----------
<S>                                          <C>             <C>            <C>             <C>

OPERATING REVENUES                           $  138,008      $  123,878     $  410,545      $  361,161
                                             ----------      ----------     ----------      ----------

OPERATING EXPENSES
   Product purchases                             20,409          12,160         60,740          34,878
   Operations and maintenance                    30,682          24,526         89,115          71,289
   Depreciation and amortization,
      including impairment charges
      of $219,080 in 2003                       239,049          18,615        278,586          55,178
   Taxes other than income                        8,632           8,662         26,927          23,367
                                             ----------      ----------     ----------      ----------

      Operating expenses                        298,772          63,963        455,368         184,712
                                             ----------      ----------     ----------      ----------

OPERATING INCOME (LOSS)                        (160,764)         59,915        (44,823)        176,449
                                             ----------      ----------     ----------      ----------

INTEREST EXPENSE                                 19,221          20,704         60,229          63,651
                                             ----------      ----------     ----------      ----------

OTHER INCOME (EXPENSE)
   Equity earnings in
     unconsolidated affiliates                    4,487           3,670         16,519          10,194
   Other income (expense)                         3,087             114           (552)            455
                                             ----------      ----------     ----------      ----------

      Total other income                          7,574           3,784         15,967          10,649
                                             ----------      ----------     ----------      ----------

MINORITY INTERESTS IN NET INCOME                 11,159          11,759         33,464          34,612
                                             ----------      ----------     ----------      ----------

INCOME (LOSS) FROM CONTINUING
   OPERATIONS                                  (183,570)         31,236       (122,549)         88,835

DISCONTINUED OPERATIONS                            (109)            414          4,258             890

CUMULATIVE EFFECT OF CHANGE IN
   ACCOUNTING PRINCIPLE, NET OF TAX                  --              --           (643)             --
                                             ----------      ----------     ----------      ----------

NET INCOME (LOSS) TO PARTNERS                $ (183,679)     $   31,650     $ (118,934)     $   89,725
                                             ==========      ==========     ==========      ==========

PER UNIT INCOME (LOSS) FROM
   CONTINUING OPERATIONS                     $    (3.92)     $     0.66     $    (2.79)     $     1.93
                                             ==========      ==========     ==========      ==========

PER UNIT NET INCOME (LOSS)                   $    (3.92)     $     0.67     $    (2.72)     $     1.95
                                             ==========      ==========     ==========      ==========

NUMBER OF UNITS USED IN COMPUTATION              46,397          43,782         45,027          42,343
                                             ==========      ==========     ==========      ==========
</Table>

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<Table>
<Caption>
                                                THREE MONTHS ENDED               NINE MONTHS ENDED
                                                   SEPTEMBER 30,                   SEPTEMBER 30,
                                             --------------------------      --------------------------
                                                2003            2002            2003            2002
                                             ----------      ----------      ----------      ----------
<S>                                          <C>             <C>             <C>             <C>
Net income (loss) to partners                $ (183,679)     $   31,650      $ (118,934)     $   89,725
Other comprehensive income:
   Change associated with current
     period hedging transactions                  3,214          (4,051)         (2,011)         (8,982)
   Change associated with
      current period foreign
      currency translation                         (146)         (2,223)          1,654             172
                                             ----------      ----------      ----------      ----------

Total comprehensive income (loss)            $ (180,611)     $   25,376      $ (119,291)     $   80,915
                                             ==========      ==========      ==========      ==========
</Table>

        The accompanying notes are an integral part of these consolidated
                              financial statements.


                                       3
<PAGE>

                    PART I. FINANCIAL INFORMATION (CONTINUED)

                    ITEM 1. FINANCIAL STATEMENTS (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                 (IN THOUSANDS)
                                   (UNAUDITED)


<Table>
<Caption>
                                                       SEPTEMBER 30,    DECEMBER 31,
ASSETS                                                     2003             2002
------                                                 ------------     ------------
<S>                                                    <C>              <C>

CURRENT ASSETS
   Cash and cash equivalents                           $     28,634     $     34,689
   Accounts receivable                                       55,114           55,428
   Materials and supplies, at cost                            7,734            5,252
   Prepaid expenses and other                                11,082            9,477
                                                       ------------     ------------

      Total current assets                                  102,564          104,846
                                                       ------------     ------------

PROPERTY, PLANT AND EQUIPMENT
   Property, plant and equipment                          2,885,755        2,869,371
   Less: Accumulated provision for
      depreciation and amortization                         899,353          854,091
                                                       ------------     ------------

      Property, plant and equipment, net                  1,986,402        2,015,280
                                                       ------------     ------------

INVESTMENTS AND OTHER ASSETS
   Investment in unconsolidated affiliates                  275,108          244,515
   Goodwill                                                 152,782          295,848
   Derivative financial instruments                          24,955           36,885
   Other                                                     30,564           28,121
                                                       ------------     ------------

      Total investments and other assets                    483,409          605,369
                                                       ------------     ------------

      Total assets                                     $  2,572,375     $  2,725,495
                                                       ============     ============

LIABILITIES AND PARTNERS' EQUITY
--------------------------------

CURRENT LIABILITIES
   Current maturities of long-term debt                $     32,683     $     67,765
   Accounts payable                                          41,592           56,511
   Accrued taxes other than income                           33,824           31,108
   Accrued interest                                          18,203           16,742
   Derivative financial instruments                           4,425            4,095
                                                       ------------     ------------

      Total current liabilities                             130,727          176,221
                                                       ------------     ------------

LONG-TERM DEBT, NET OF CURRENT MATURITIES                 1,365,577        1,335,978
                                                       ------------     ------------

MINORITY INTERESTS IN PARTNERS' EQUITY                      242,138          242,931
                                                       ------------     ------------

RESERVES AND DEFERRED CREDITS                                22,048           26,330
                                                       ------------     ------------

COMMITMENTS AND CONTINGENCIES

PARTNERS' EQUITY
   Partners' capital                                        804,728          936,521
   Accumulated other comprehensive income                     7,157            7,514
                                                       ------------     ------------

      Total partners' equity                                811,885          944,035
                                                       ------------     ------------

      Total liabilities and partners' equity           $  2,572,375     $  2,725,495
                                                       ============     ============
</Table>

        The accompanying notes are an integral part of these consolidated
                              financial statements.



                                       4
<PAGE>

                    PART I. FINANCIAL INFORMATION (CONTINUED)

                    ITEM 1. FINANCIAL STATEMENTS (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<Table>
<Caption>
                                                                              NINE MONTHS ENDED
                                                                                SEPTEMBER 30,
                                                                       ------------------------------
                                                                           2003              2002
                                                                       ------------      ------------
<S>                                                                    <C>               <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss) to partners                                       $   (118,934)     $     89,725
                                                                       ------------      ------------
   Adjustments to reconcile net income (loss) to partners
    to net cash provided by operating activities:
      Depreciation and amortization, including impairment
        charges of $219,080 in 2003                                         279,544            56,343
      Minority interests in net income                                       33,464            34,612
      Reserves and deferred credits                                          (8,330)             (539)
      Cumulative effect of change in accounting principle                       643                --
      Equity earnings in unconsolidated affiliates                          (16,519)          (10,194)
      Distributions received from unconsolidated affiliates                  16,025             8,688
      Changes in components of working capital,
        net of the effect of the acquired businesses                         (9,180)            2,973
      Non-cash gains from risk management activities                           (254)           (3,639)
      Gain on sale of gathering and processing assets                        (4,872)               --
      Other                                                                  (2,335)            1,230
                                                                       ------------      ------------

           Total adjustments                                                288,186            89,474
                                                                       ------------      ------------

      Net cash provided by operating activities                             169,252           179,199
                                                                       ------------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Investment in unconsolidated affiliates                                   (3,510)           (2,551)
   Acquisitions of businesses                                              (119,331)           (1,154)
   Sale of gathering and processing assets                                   40,250                --
   Capital expenditures for property, plant
      and equipment                                                         (14,971)          (39,892)
                                                                       ------------      ------------

      Net cash used in investing activities                                 (97,562)          (43,597)
                                                                       ------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Cash distributions to Unitholders and
      General Partners                                                     (115,267)         (109,279)
   Distributions to Minority Interests                                      (33,907)          (36,674)
   Issuance of partnership interests, net                                   102,408            75,416
   Issuance of long-term debt                                               270,000           467,894
   Retirement of long-term debt                                            (313,229)         (514,874)
   Proceeds upon termination of derivatives                                  12,250             2,351
   Long-term debt financing costs                                                --            (2,778)
                                                                       ------------      ------------

      Net cash used in financing activities                                 (77,745)         (117,944)
                                                                       ------------      ------------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                      (6,055)           17,658

Cash and cash equivalents-beginning of period                                34,689            16,755
                                                                       ------------      ------------

Cash and cash equivalents-end of period                                $     28,634      $     34,413
                                                                       ============      ============

Supplemental Disclosures of Cash Flow Information:
   Cash paid for:
      Interest (net of amount capitalized)                             $     61,921      $     62,907
                                                                       ============      ============

Changes in components of working capital:
      Accounts receivable                                              $        967      $     (1,840)
      Materials and supplies, prepaid expenses and other                     (1,114)           (2,529)
      Accounts payable                                                      (11,047)            5,366
      Accrued taxes other than income                                           553               487
      Accrued interest                                                        1,461             1,489
                                                                       ------------      ------------

        Total                                                          $     (9,180)     $      2,973
                                                                       ============      ============
</Table>


        The accompanying notes are an integral part of these consolidated
                              financial statements.


                                       5
<PAGE>

                    PART I. FINANCIAL INFORMATION (CONTINUED)

                    ITEM 1. FINANCIAL STATEMENTS (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
              CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' EQUITY
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<Table>
<Caption>
                                                                                     ACCUMULATED
                                                                                        OTHER             TOTAL
                                                    GENERAL           COMMON        COMPREHENSIVE        PARTNERS'
                                                   PARTNERS           UNITS             INCOME            EQUITY
                                                 ------------      ------------     -------------      ------------
<S>                                             <C>               <C>               <C>               <C>

Balance at December 31, 2002                     $     18,730      $    917,791      $      7,514      $    944,035

Net income (loss) to partners                           3,369          (122,303)               --          (118,934)

Change associated with current
  period hedging transactions                              --                --            (2,011)           (2,011)

Change associated with current
  period foreign currency translation                      --                --             1,654             1,654

Issuance of partnership
  interests, net                                        2,048           100,360                --           102,408

Distributions to partners                              (8,053)         (107,214)               --          (115,267)
                                                 ------------      ------------      ------------      ------------

Balance at September 30, 2003                    $     16,094      $    788,634      $      7,157      $    811,885
                                                 ============      ============      ============      ============
</Table>

        The accompanying notes are an integral part of these consolidated
                              financial statements.


                                       6
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                   ITEM 1. FINANCIAL STATEMENTS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.    BASIS OF PRESENTATION

      The consolidated financial statements included herein have been prepared
by Northern Border Partners, L.P. (the "Partnership") without audit pursuant to
the rules and regulations of the Securities and Exchange Commission.
Accordingly, they reflect all adjustments which are, in the opinion of
management, necessary for a fair presentation of the financial results for the
interim periods. Certain information and notes normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to such
rules and regulations. However, the Partnership believes that the disclosures
are adequate to make the information presented not misleading. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Partnership's Annual Report on Form 10-K for the year ended December 31, 2002.

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

      The Partnership owns a 70% general partner interest in Northern Border
Pipeline Company. Crestone Energy Ventures, L.L.C.; Bear Paw Energy, LLC; Border
Midstream Services, Ltd.; Midwestern Gas Transmission Company; Viking Gas
Transmission Company; and Black Mesa Pipeline, Inc. are wholly-owned
subsidiaries of the Partnership. The Partnership also owns a 49% common
membership interest and a 100% preferred A share interest in Bighorn Gas
Gathering, L.L.C.; a 33% interest in Fort Union Gas Gathering, L.L.C.; a 35%
interest in Lost Creek Gathering, L.L.C.; a 36% interest in the Gregg Lake/Obed
Pipeline; and a 33% interest in Guardian Pipeline, L.L.C.

2.    ACQUISITION

      On January 17, 2003, the Partnership acquired all of the common stock of
Viking Gas Transmission including a one-third interest in Guardian Pipeline for
approximately $162 million, which included the assumption of $40 million of
debt. The Viking Gas Transmission system is a 578-mile interstate natural gas
pipeline extending from the U.S.-Canadian border near Emerson, Manitoba to
Marshfield, Wisconsin. Viking Gas Transmission connects to other major pipeline
systems including TransCanada PipeLines Limited, Northern Natural Gas Company,
Great Lakes Gas Transmission and ANR Pipeline Company to provide service to
markets in Minnesota, Wisconsin and North Dakota. Guardian Pipeline is a
141-mile interstate natural gas pipeline system that went into service on
December 7, 2002. This system transports natural gas from Joliet, Illinois to a
point west of Milwaukee, Wisconsin.

      The Partnership has accounted for the acquisition using the purchase
method of accounting. The purchase price has been allocated based upon the
estimated fair value of the assets and liabilities acquired as of the
acquisition date. The investment in Guardian Pipeline is reflected in
investments in unconsolidated affiliates on the consolidated balance sheet.


                                       7
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                   ITEM 1. FINANCIAL STATEMENTS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


      The following is a summary of the effects of the acquisition on the
Partnership's consolidated financial position (amounts in thousands):

<Table>
<S>                                                             <C>
         Current assets                                         $    8,853
         Property, plant and equipment                             126,591
         Investment in unconsolidated affiliates                    27,600
         Other assets                                                2,487
         Current liabilities                                        (5,660)
         Long-term debt, including current maturities              (40,025)
         Other liabilities                                            (515)
                                                                ----------

                  Net cash paid                                 $  119,331
                                                                ==========
</Table>

      If the Viking Gas Transmission acquisition made in 2003 had occurred at
the beginning of 2002, the Partnership's consolidated operating revenues, net
income to partners and per unit net income would have been $132 million, $32
million and $0.68 per unit, respectively, for the three months ended September
30, 2002. For the nine months ended September 30, 2002, the Partnership's
consolidated operating revenues, net income to partners and per unit net income
would have been $384 million, $92 million and $1.99 per unit, respectively.
These unaudited pro forma results are for illustrative purposes only and are not
necessarily indicative of the operating results that would have occurred had the
business acquisitions been consummated at that date, nor are they necessarily
indicative of future operating results.

      The Partnership financed the acquisition under its credit agreement.
Effective with the closing of the Viking Gas Transmission acquisition, the
Partnership amended its credit agreement to increase the allowed ratio of
consolidated funded debt to adjusted consolidated EBITDA (consolidated net
income plus minority interests in net income, consolidated interest expense,
income taxes and depreciation and amortization) to no more than 4.75 to 1
through June 30, 2003, at which time the ratio reverted back to 4.5 to 1. As
part of the acquisition, the Partnership agreed to guarantee its ownership share
of Guardian Pipeline's indebtedness. The amount of the guarantee was $60
million. Pursuant to the terms of Guardian Pipeline's debt agreements, the
guarantee is removed upon Guardian Pipeline meeting certain conditions, which
occurred in the second quarter of 2003.

3.    GOODWILL AND ASSET IMPAIRMENT

      Statement of Financial Accounting Standard ("SFAS") No. 142, "Goodwill and
Other Intangible Assets" requires an entity to allocate goodwill among its
reporting segments and perform annual impairment tests by applying a
fair-value-based analysis on the goodwill in each reporting segment. The
Partnership has selected the fourth quarter to perform its annual impairment
testing. If testing indicates an impairment of goodwill exists in a reporting
segment, the entity must analyze the carrying value of the tangible assets in
that segment under SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." Due to lower throughput volumes experienced and anticipated
in its wholly owned subsidiaries in its natural gas gathering and processing
business segment, the Partnership accelerated its annual impairment test from
the fourth quarter to the third quarter of 2003 for this segment.



                                       8
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                   ITEM 1. FINANCIAL STATEMENTS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The Partnership engaged the services of an outside consultant to assist in the
determination of fair value, as defined by SFAS No. 142, for purposes of
computing the amount of the goodwill impairment. Upon the determination of the
existence of a goodwill impairment, the Partnership further analyzed the
carrying value of the tangible assets in its wholly owned subsidiaries in its
natural gas gathering and processing business segment to determine the
impairment attributed to the tangible assets in the Powder River Basin. The
Partnership recorded total impairment charges of $219.1 million in the third
quarter of 2003. This was comprised of $76.0 million related to the tangible
assets in the Powder River Basin and $143.1 million for the goodwill related to
the natural gas gathering and processing business segment. As a result of the
impairment charges, the Partnership amended its credit facility for certain
definitions related to a financial covenant. Beginning October 1, 2003, the
estimated depreciable life of the Partnership's assets in the Powder River Basin
was reduced to 15 years.

      Changes in the carrying amount of goodwill for the nine months ended
September 30, 2003, are summarized as follows:

<Table>
<Caption>
                                                       Natural
                                     Interstate     Gas Gathering
                                    Natural Gas          and               Coal
         (In thousands)              Pipelines        Processing          Slurry         Total (a)
         --------------             ------------    -------------      ------------     ------------
<S>                                 <C>              <C>               <C>              <C>
         Balance at
           December 31, 2002        $     68,872     $    398,633      $      8,378     $    475,883
         Goodwill acquired                 1,527               --                --            1,527
         Impairment losses                    --         (143,066)               --         (143,066)
                                    ------------     ------------      ------------     ------------
         Balance at
           September 30, 2003       $     70,399     $    255,567      $      8,378     $    334,344
                                    ============     ============      ============     ============
</Table>

(a)   Total goodwill includes $181.6 million recorded in the Partnership's
      investment in unconsolidated affiliates, of which $1.5 million is included
      in the interstate natural gas pipeline business segment and $180.1 million
      in included in the natural gas gathering and processing business segment.

4.    RATES AND REGULATORY ISSUES

      In February 2003, Northern Border Pipeline filed to amend its Federal
Energy Regulatory Commission ("FERC") tariff to clarify the definition of
company use gas, which is gas supplied by its shippers for its operations, by
adding detailed language to the broad categories that comprise company use gas.
Northern Border Pipeline had included in its collection of company use gas,
quantities that were equivalent to the cost of electric power at its
electric-driven compressor stations during the period of June 2001 through
January 2003. On March 27, 2003, the FERC issued an order rejecting Northern
Border Pipeline's proposed tariff sheet revision and requiring refunds with
interest within 90 days of the order. Northern Border Pipeline made refunds to
its shippers of $10.3 million in May 2003.



                                       9
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                   ITEM 1. FINANCIAL STATEMENTS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


5.    DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

      The Partnership uses financial instruments in the management of its
interest rate and commodity price exposure. A control environment has been
established which includes policies and procedures for risk assessment and the
approval, reporting and monitoring of financial instrument activities.

      The Partnership records in accumulated other comprehensive income amounts
related to terminated interest rate swap agreements for cash flow hedges with
such amounts amortized to interest expense over the term of the hedged debt.
During the three months and nine months ended September 30, 2003, the
Partnership amortized approximately $0.6 million and $1.7 million, respectively,
related to the terminated interest rate swap agreements, as a reduction to
interest expense from accumulated other comprehensive income and expects to
amortize $0.6 million in the fourth quarter of 2003.

      Northern Border Pipeline has outstanding interest rate swap agreements
with notional amounts totaling $225 million that expire in May 2007. Under the
interest rate swap agreements, Northern Border Pipeline makes payments to
counterparties at variable rates based on the London Interbank Offered Rate and
in return receives payments based on a 6.25% fixed rate. At September 30, 2003,
the average effective interest rate on Northern Border Pipeline's interest rate
swap agreements was 2.38%.

      The Partnership has outstanding interest rate swap agreements with
notional amounts totaling $150 million that expire in March 2011. Under the
interest rate swap agreements, the Partnership makes payments to counterparties
at variable rates based on the London Interbank Offered Rate and in return
receives payments based on a 7.10% fixed rate. At September 30, 2003, the
average effective interest rate on the Partnership's interest rate swap
agreements was 3.72%.

      Both the Partnership's and Northern Border Pipeline's interest rate swap
agreements have been designated as fair value hedges as they were entered into
to hedge the fluctuations in the market value of the senior notes issued by the
Partnership in 2001 and by Northern Border Pipeline in 2002. The accompanying
consolidated balance sheet at September 30, 2003, reflects a non-cash gain of
approximately $25.0 million in derivative financial instruments with a
corresponding increase in long-term debt.

      In March 2003, the Partnership terminated one of its interest rate swaps
with a notional amount of $75 million that had been previously designated as a
fair value hedge and received $12.3 million. The Partnership records in
long-term debt amounts received or paid related to terminated or amended
interest rate swap agreements for fair value hedges with such amounts amortized
to interest expense over the remaining life of the interest rate swap agreement.
During the three months and nine months ended September 30, 2003, the
Partnership amortized approximately $0.9 million and $2.5 million, respectively,
as a reduction to interest expense. The Partnership expects to amortize
approximately $0.9 million in the fourth quarter of 2003 for these agreements.



                                       10
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                   ITEM 1. FINANCIAL STATEMENTS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


      Bear Paw Energy periodically enters into commodity derivatives contracts
and fixed-price physical contracts. Bear Paw Energy primarily utilizes price
swaps and collars, which have been designated as cash flow hedges, to hedge its
exposure to gas and natural gas liquid price volatility. During the three months
and nine months ended September 30, 2003, Bear Paw Energy recognized losses in
operating revenues of $2.0 million and $6.6 million, respectively, from the
settlement of derivative contracts. At September 30, 2003, Bear Paw Energy
reflected a non-cash loss of approximately $4.4 million in derivative financial
instruments with a corresponding reduction of $4.3 million in accumulated other
comprehensive income. Operating revenues were reduced by $0.1 million, which
represents the ineffective portion of the cash flow hedges. For the fourth
quarter in 2003, if prices remain at current levels, Bear Paw Energy expects to
reclassify approximately $1.8 million from accumulated other comprehensive
income as a reduction to operating revenues. However, this reduction would be
offset with increased operating revenues due to the higher prices assumed.

6.    BUSINESS SEGMENT INFORMATION

      The Partnership's reportable segments are strategic business units that
offer different services. Following are selected financial information for the
Partnership's business segments:

<Table>
<Caption>
                                      Interstate         Natural
                                        Natural            Gas
                                          Gas           Gathering
                                       Pipelines           and               Coal
         (In thousands)                    (a)          Processing          Slurry         Other (b)           Total
         --------------               ------------     ------------      ------------     ------------      ------------
<S>                                   <C>              <C>               <C>              <C>               <C>

         THREE MONTHS ENDED
           SEPTEMBER 30, 2003
         Revenues from
           external customers         $     93,465     $     39,033      $      5,510     $         --      $    138,008
         Operating income (loss)            52,911         (214,210)            1,813           (1,278)         (160,764)

         THREE MONTHS ENDED
           SEPTEMBER 30, 2002
         Revenues from
           external customers         $     86,242     $     32,167      $      5,469     $         --      $    123,878
         Operating income (loss)            54,065            5,882             1,031           (1,063)           59,915

         NINE MONTHS ENDED
           SEPTEMBER 30, 2003
         Revenues from
           external customers         $    279,073     $    115,442      $     16,030     $         --      $    410,545
         Operating income (loss)           161,604         (205,787)            4,079           (4,719)          (44,823)

         NINE MONTHS ENDED
           SEPTEMBER 30, 2002
         Revenues from
           external customers         $    253,058     $     91,973      $     16,130     $         --      $    361,161
         Operating income (loss)           160,342           17,250             3,069           (4,212)          176,449
</Table>



                                       11
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                   ITEM 1. FINANCIAL STATEMENTS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


   Total assets by segment are as follows:

<Table>
<Caption>
                                                      September 30,    December 31,
         (In thousands)                                   2003             2002
         --------------                               ------------     ------------
<S>                                                   <C>              <C>

         Interstate Natural Gas Pipelines (a)         $  1,969,129     $  1,853,796
         Natural Gas Gathering and Processing              566,597          823,917
         Coal Slurry                                        21,942           20,423
         Other (b)                                          14,707           27,359
                                                      ------------     ------------

         Total Assets                                 $  2,572,375     $  2,725,495
                                                      ============     ============
</Table>

(a)   Interstate natural gas pipeline operating results for 2003 include results
      of Viking Gas Transmission, which was acquired by the Partnership
      effective January 17, 2003.

(b)   Includes other items not allocable to segments.

7.    NET INCOME (LOSS) PER UNIT

      Net income (loss) per unit is computed by dividing net income (loss),
after deduction of the general partners' allocation, by the weighted average
number of common units outstanding. The general partners' allocation is equal to
an amount based upon their collective 2% general partner interest adjusted for
incentive distributions. The distribution to partners amount shown on the
accompanying consolidated statement of changes in partners' equity includes
incentive distributions to the general partners of approximately $5.7 million.

      On October 21, 2003, the Partnership declared a cash distribution of $0.80
per unit ($3.20 per unit on an annualized basis) for the quarter ended September
30, 2003. The distribution is payable November 14, 2003, to unitholders of
record at October 31, 2003.

8.    PARTNERS' CAPITAL

      In May and June 2003, the Partnership sold 2,587,500 common units. The net
proceeds from the sale of common units and the general partners' capital
contributions totaled approximately $102.4 million and were primarily used to
repay indebtedness outstanding.

9.    CONTINGENCIES

      On July 31, 2001, the Assiniboine and Sioux Tribes of the Fort Peck Indian
Reservation ("Tribes") filed a lawsuit in Tribal Court against Northern Border
Pipeline to collect more than $3 million in back taxes, together with interest
and penalties. The lawsuit relates to a utilities tax on certain of Northern
Border Pipeline's properties within the Fort Peck Indian Reservation. The Tribes
and Northern Border Pipeline, through a mediation process, have held settlement
discussions and have reached a settlement in principle on pipeline rights-of-way
lease and taxation issues, subject to final documentation and necessary
government approvals. The Partnership believes that the resolution of this
lawsuit will not have a material adverse impact on the Partnership's results of
operations or financial position.

      Various legal actions that have arisen in the ordinary course of business
are pending. The Partnership believes that the resolution of these issues will
not have a material adverse impact on the Partnership's results of operations or
financial position.



                                       12
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                   ITEM 1. FINANCIAL STATEMENTS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.   DISCONTINUED OPERATIONS

      In June 2003, the Partnership sold its Gladys and Mazeppa processing
plants and related gas gathering facilities located in Alberta, Canada for
approximately $40.3 million. Operating revenues, operating expenses and other
income and expense for 2002 have been reclassified for amounts related to the
discontinued operations. Operating revenues for the nine months ended September
30, 2003, were $4.8 million. For the three and nine months ended September 30,
2002, operating revenues were $2.0 million and $6.0 million, respectively.
Discontinued operations on the accompanying consolidated statement of income
consists of the following:

<Table>
<Caption>
                                               Three months ended             Nine months ended
                                                 September 30,                  September 30,
                                           --------------------------     --------------------------
     (in thousands)                           2003            2002           2003            2002
     --------------                        ----------      ----------     ----------      ----------
<S>                                        <C>             <C>            <C>             <C>
     Operating income (loss)               $     (109)     $      414     $     (614)     $      890
     Gain on sale of assets                        --              --          4,872              --
                                           ----------      ----------     ----------      ----------
       Income (loss) from
         discontinued operations           $     (109)     $      414     $    4,258      $      890
                                           ==========      ==========     ==========      ==========
</Table>

11.   ACCOUNTING PRONOUNCEMENTS

      In 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires
entities to record the fair value of a liability for an asset retirement
obligation in the period in which it is incurred, if the liability can be
reasonably estimated. When the liability is initially recorded, the carrying
amount of the related asset is increased by the same amount. Over time, the
liability is accreted to its future value and the accretion is recorded to
expense. The initial adjustment to the asset is depreciated over its useful
life. Upon settlement of the liability, an entity either settles the obligation
for its recorded amount or incurs a gain or loss. In some instances, the
Partnership's subsidiaries are obligated by contractual terms or regulatory
requirements to remove facilities or perform other remediation upon retirement.
The Partnership has, where possible, developed its estimate of the retirement
obligations. Effective January 1, 2003, the Partnership adopted SFAS No. 143.
The implementation of SFAS No. 143 resulted in an increase in net property,
plant and equipment of $2.5 million, an increase in reserves and deferred
credits of $3.1 million and a reduction to net income of $0.6 million for a
net-of-tax cumulative effect of change in accounting principle. The impact of
SFAS No. 143 on prior periods' results of operations is immaterial. A
reconciliation of the beginning and ending aggregate carrying amount of the
Partnership's asset retirement obligations for the nine months ended September
30, 2003, is as follows (in thousands):

<Table>
<S>                                                         <C>
     Balance at December 31, 2002                           $       --
     Cumulative effect of transition adjustment                  3,496
     Accretion expense                                             134
     Liabilities transferred with asset sales                   (2,016)
                                                            ----------
     Balance at September 30, 2003                          $    1,614
                                                            ==========
</Table>


                                       13
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                   ITEM 1. FINANCIAL STATEMENTS - (CONCLUDED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


      In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133
on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. SFAS No. 149 is effective for contracts entered into or modified after
June 30, 2003 and for hedging relationships designated after June 30, 2003. SFAS
No. 149 did not have a material impact on the Partnership's financial position
or results of operations.

      In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." This
statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. SFAS No. 150 is effective for financial instruments entered into or
modified after May 31, 2003. SFAS No. 150 did not have a material impact on the
Partnership's financial position or results of operations.

      In January 2003, the FASB issued Interpretation ("FIN") No. 46,
"Consolidation of Variable Interest Entities." This interpretation of Accounting
Research Bulletin No. 51, "Consolidated Financial Statements," provides guidance
on the identification of, and financial reporting for, entities over which
control is achieved through means other than voting rights; such entities are
known as variable interest entities ("VIE"). FIN No. 46 is effective no later
than the beginning of the first interim or annual reporting period that starts
after June 15, 2003. In October 2003, the FASB deferred the latest date by which
all public entities must apply FIN No. 46, to the first reporting period ending
after December 15, 2003. This broader deferral applies to all VIEs and potential
VIEs that existed prior to February 1, 2003. The requirements of FIN No. 46
applied immediately to VIEs created after January 31, 2003. The Partnership does
not expect FIN No. 46 to have a material impact on its financial position or
results of operations.



                                       14
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

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

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES


      Management's discussion and analysis of financial condition and results of
operations is based on the Consolidated Financial Statements of Northern Border
Partners, L.P. (the "Partnership"). The Consolidated Financial Statements are
prepared in accordance with accounting principles generally accepted in the
United States of America. You should read the following discussion and analysis
in conjunction with the Consolidated Financial Statements included elsewhere in
this report.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

      Certain amounts included in or affecting the Partnership's Consolidated
Financial Statements and related disclosures must be estimated, requiring it to
make certain assumptions with respect to values or conditions that cannot be
known with certainty at the time the financial statements are prepared. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Any effects on the Partnership's business, financial position or results of
operations resulting from revisions to these estimates are recorded in the
period in which the facts that give rise to the revision become known.

      The Partnership's significant accounting policies are summarized in Note 2
- Notes to Consolidated Financial Statements included in the Partnership's
Annual Report on Form 10-K for the year ended December 31, 2002. Certain of the
Partnership's accounting policies are of more significance in its financial
statement preparation process than others.

      The interstate natural gas pipelines' accounting policies conform to
Statement of Financial Accounting Standards ("SFAS") No. 71, "Accounting for the
Effects of Certain Types of Regulation." Accordingly, certain assets that result
from the regulated ratemaking process are recorded that would not be recorded
under accounting principles generally accepted in the United States of America
for nonregulated entities. The Partnership continually assesses whether the
future recovery of the regulatory assets is probable by considering such factors
as regulatory changes and the impact of competition. If future recovery ceases
to be probable, the Partnership would be required to write-off the regulatory
assets at that time. At September 30, 2003, the Partnership has recorded
regulatory assets of $10.5 million, which are being recovered from the
pipelines' shippers over varying periods of time.

      The Partnership's long-lived assets are stated at original cost. The
Partnership must use estimates in determining the economic useful lives of those
assets. For utility property, no retirement gain or loss is included in income
except in the case of retirements or sales of entire operating units. The
original cost of utility property retired is charged to accumulated depreciation
and amortization, net of salvage and cost of removal.

      As discussed in Note 11, Notes to Consolidated Financial Statements,
effective January 1, 2003, the Partnership adopted SFAS No. 143, "Accounting for
Asset Retirement Obligations." SFAS No. 143 requires entities to record



                                       15
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES


the fair value of a liability for an asset retirement obligation in the period
in which it is incurred, if the liability can be reasonably estimated. The
Partnership has, where possible, developed its estimate of the retirement
obligations. The implementation of SFAS No. 143 resulted in an increase in net
property, plant and equipment of $2.5 million, an increase in reserves and
deferred credits of $3.1 million and a reduction to net income of $0.6 million
for a net-of-tax cumulative effect of change in accounting principle.

      The Partnership's accounting for financial instruments follows SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," which
requires that every derivative instrument be recorded on the balance sheet as
either an asset or liability measured at its fair value. The statement requires
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement. At September 30, 2003, the
consolidated balance sheet included assets from derivative financial instruments
of $25.0 million and liabilities from derivative financial instruments of $4.4
million.

      Effective January 1, 2002, the Partnership adopted SFAS No. 142, "Goodwill
and Other Intangible Assets." Except as discussed below, the Partnership has
selected the fourth quarter for the performance of its annual impairment
testing. The Partnership analyzes the carrying value of its tangible assets
under SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets."

RESULTS OF OPERATIONS

      The Partnership owns a 70% general partner interest in Northern Border
Pipeline Company. Crestone Energy Ventures, L.L.C.; Bear Paw Energy, LLC; Border
Midstream Services, Ltd.; Midwestern Gas Transmission Company; Viking Gas
Transmission Company; and Black Mesa Pipeline, Inc. are wholly-owned
subsidiaries of the Partnership. The Partnership also owns a 49% common
membership interest and a 100% preferred A share interest in Bighorn Gas
Gathering, L.L.C.; a 33% interest in Fort Union Gas Gathering, L.L.C.; a 35%
interest in Lost Creek Gathering, L.L.C.; a 36% interest in the Gregg Lake/Obed
Pipeline; and a 33% interest in Guardian Pipeline, L.L.C. Effective January 17,
2003, the Partnership acquired all of the common stock of Viking Gas
Transmission, including a one-third interest in Guardian Pipeline. See Note 2 -
Notes to Consolidated Financial Statements. In June 2003, the Partnership sold
its Gladys and Mazeppa processing plants located in Alberta, Canada. The
operating results for these plants are classified as discontinued operations.
See Note 10 - Notes to Consolidated Financial Statements. Due to lower
throughput volumes experienced and anticipated in its wholly owned subsidiaries
in its natural gas gathering and processing business segment, the Partnership
accelerated its annual impairment test from the fourth quarter to the third
quarter of 2003. See Note 3 - Notes to Consolidated Financial Statements.



                                       16
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES


THIRD QUARTER 2003 COMPARED WITH THIRD QUARTER 2002

      The Partnership's loss from continuing operations was $(183.6) million in
the third quarter of 2003 or $(3.92) per unit as compared to income from
continuing operations of $31.2 million in 2002 or $0.66 per unit. The loss in
2003 is a result of impairment charges totaling $219.1 million for the
Partnership's natural gas gathering and processing business segment. See Note 3
- Notes to Consolidated Financial Statements. Excluding the impairment charges,
income from continuing operations increased $4.3 million in 2003 as compared to
2002. The third quarter 2003 results include a $3.3 million payment received for
a change in ownership of the other partner in Bighorn Gas Gathering and higher
income from the interstate natural gas pipeline segment due to the acquisition
of Viking Gas Transmission.

INTERSTATE NATURAL GAS PIPELINES

      The interstate natural gas pipelines segment reported income of $30.1
million in the third quarter of 2003 as compared to $29.5 million in the third
quarter of 2002. The increase was primarily due to income associated with Viking
Gas Transmission of $1.4 million in 2003.

      Operating revenues were $93.5 million in the third quarter of 2003 as
compared to $86.3 million in 2002. The increase in operating revenues in 2003
over 2002 is primarily due to Viking Gas Transmission.

      Operations and maintenance expenses were $15.6 million in the third
quarter of 2003 as compared to $9.2 million in 2002. The increase in expenses in
2003 over 2002 result from Viking Gas Transmission expenses of $2.7 million, an
increase in Northern Border Pipeline's expenses by $3.5 million and an increase
in Midwestern Gas Transmission's expenses by $0.2 million. Northern Border
Pipeline's expenses increased due primarily to the cost for electricity to power
Northern Border Pipeline's electric-driven compressors. Previously, Northern
Border Pipeline included in its collection of company-use gas quantities that
were equivalent to the cost of electric power. Northern Border Pipeline's
expenses for 2003 also reflect an increase in employee benefits expenses as
compared to 2002.

      Depreciation and amortization was $16.4 million in the third quarter of
2003 as compared to $15.1 million in 2002. The increase between 2002 and 2003 is
primarily due to Viking Gas Transmission.

     Taxes other than income were $8.6 million in the third quarter of 2003 as
compared to $7.9 million in 2002. The increase between 2002 and 2003 is
primarily due to Viking Gas Transmission.

      Interest expense, which relates to Northern Border Pipeline's and Viking
Gas Transmission's financing activities, was $11.7 million in the third quarter
of 2003 as compared to $13.2 million in 2002. Interest expense for Viking Gas
Transmission was $0.7 million in the third quarter of 2003. A $2.1 million
decrease in Northern Border Pipeline's interest expense was due to a decrease in
average interest rates as well as a decrease in average debt outstanding.



                                       17
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES


      Other expense was $0.5 million in the third quarter of 2003 as compared to
other income of $0.4 million in the third quarter of 2002. Income tax expense,
which is included in other income (expense), increased $0.5 million in 2003 over
2002 primarily due to Viking Gas Transmission. The income amount for the third
quarter of 2002 includes Northern Border Pipeline income of $0.6 million for
previously vacated microwave frequency bands.

      Equity earnings from unconsolidated affiliates were $0.6 million in the
third quarter of 2003, which represents earnings from the one-third interest in
Guardian Pipeline.

NATURAL GAS GATHERING AND PROCESSING

      The natural gas gathering and processing segment reported losses from
continuing operations of $(206.7) million in the third quarter of 2003 as
compared to income from continuing operations of $9.4 million in 2002. The
segment recorded impairment charges of $219.1 million in the third quarter of
2003. Excluding the effect of the impairment charges, the segment's income from
continuing operations increased $3.0 million between 2002 and 2003 primarily due
to a $3.3 million payment received for a change in ownership of the other
partner in Bighorn Gas Gathering.

      Operating revenues were $39.0 million in the third quarter of 2003 as
compared to $32.2 million in 2002. The increase in 2003 over 2002 is due to an
increase in natural gas and natural gas liquid prices, partially offset by lower
volumes gathered in the Powder River Basin.

      Product purchases were $20.4 million in the third quarter of 2003 as
compared to $12.2 million in 2002. Under certain gathering and processing
agreements, Bear Paw Energy purchases raw natural gas from producers at a price
tied to a percentage of the price for which it sells extracted natural gas
liquids and residue gas. Total revenues from the sale of these products are
included in operating revenues. Amounts paid to the producers to purchase their
raw natural gas are reflected in product purchases. The increase in 2003 over
2002 is due to an increase in natural gas and natural gas liquid prices.

      Depreciation and amortization was $222.2 million in the third quarter of
2003, which included impairment charges of $219.1 million. Excluding the
impairment charges, depreciation and amortization was $3.1 million in both 2003
and 2002. Beginning October 1, 2003, the estimated depreciable life of the
Partnership's assets in the Powder River Basin was reduced to 15 years. The
impact of the asset impairment recorded in the third quarter and the shorter
depreciable life is expected to increase quarterly depreciation by approximately
$0.6 million.

      Taxes other than income were $(0.1) million in the third quarter of 2003
as compared to $0.7 million in 2002. The 2003 amount includes adjustments for
lower than expected property valuations.

      Other income was $3.8 million in the third quarter of 2003, which includes
a $3.3 million payment received for a change in ownership of the other partner
in Bighorn Gas Gathering.



                                       18
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES

COAL SLURRY

     The coal slurry pipeline segment reported income of $1.5 million in the
third quarter of 2003 on revenues of $5.5 million. In the third quarter of 2002,
the segment reported income of $0.8 million on revenues of $5.4 million. The
increase in income for the segment was primarily due to lower operations and
maintenance expenses. Operations and maintenance expense was $3.1 million in the
third quarter of 2003 as compared to $3.9 million in 2002. The 2002 expense
included costs associated with several unplanned coal slurry discharges.

OTHER

      Items not attributable to any segment include certain of the Partnership's
general and administrative expenses, interest expense on the Partnership's debt
and other income and expense items.

      The Partnership's general and administrative expenses were $1.3 million in
the third quarter of 2003 as compared to $1.1 million in 2002. Interest expense
on the Partnership's debt was $7.4 million in the third quarter of 2003 as
compared to $7.3 million in 2002.

NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 2002

      The Partnership's loss from continuing operations was $(122.6) million in
the nine months ended September 30, 2003 or $(2.79) per unit as compared to
income from continuing operations of $88.8 million in 2002 or $1.93 per unit.
The loss in 2003 is a result of impairment charges totaling $219.1 million for
the Partnership's natural gas gathering and processing business segment. See
Note 3 - Notes to Consolidated Financial Statements. Excluding the impairment
charges, income from continuing operations increased $7.7 million in 2003 as
compared to 2002, which reflects increased equity earnings from unconsolidated
affiliates, a $3.3 million payment received for a change in ownership of the
other partner in Bighorn Gas Gathering and higher income from the interstate
natural gas pipeline segment due to the acquisition of Viking Gas Transmission.
The calculation of per unit income (loss) was also impacted by the Partnership's
issuance of additional partnership interests in May and June 2003. See Note 8 -
Notes to Consolidated Financial Statements. The Partnership's consolidated
income statement reflects discontinued operations of $4.3 million in the nine
months ended September 30, 2003 as compared to $0.9 million in 2002.
Discontinued operations for 2003 include an after-tax gain of $4.9 million on
the sale of the Gladys and Mazeppa processing plants. The consolidated income
statement also reflects a reduction to net income of $0.6 million due to a
cumulative effect of change in accounting principle, which resulted from
adopting SFAS No. 143, "Accounting for Asset Retirement Obligations." See Note
11 - Notes to Consolidated Financial Statements.

INTERSTATE NATURAL GAS PIPELINES

      The interstate natural gas pipelines segment reported income of $89.6
million in the nine months ended September 30, 2003 as compared to $86.9 million
in 2002. The increase was primarily due to income associated with Viking Gas
Transmission of $4.4 million in 2003.



                                       19
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES


      Operating revenues were $279.1 million in the nine months ended September
30, 2003 as compared to $253.1 million in 2002. The increase in operating
revenues in 2003 over 2002 result from Viking Gas Transmission revenues of $21.1
million, a $3.0 million increase in Midwestern Gas Transmission's revenues and a
$1.9 million increase in Northern Border Pipeline's revenues. Midwestern Gas
Transmission's revenues in 2003 reflect an increase in contracted capacity as
compared to the same period in 2002. Northern Border Pipeline's 2002 results
were reduced by uncollected revenues associated with the transportation capacity
previously held by Enron North America Corp., which filed for Chapter 11
bankruptcy protection in December 2001 (see "Update On The Impact Of Enron's
Chapter 11 Filing On The Partnership's Business"). For the nine months ended
September 30, 2002, the revenues lost on this capacity totaled approximately
$1.8 million.

      Operations and maintenance expenses were $43.6 million in the nine months
ended September 30, 2003 as compared to $26.4 million in 2002. The increase in
expenses in 2003 over 2002 result from Viking Gas Transmission expenses of $7.6
million, an increase in Northern Border Pipeline's expenses by $8.3 million and
an increase in Midwestern Gas Transmission's expenses by $1.3 million. Northern
Border Pipeline's expenses increased due primarily to the cost for electricity
to power Northern Border Pipeline's electric-driven compressors. Previously,
Northern Border Pipeline included in its collection of company-use gas
quantities that were equivalent to the cost of electric power. Northern Border
Pipeline's and Midwestern Gas Transmission's expenses for 2003 also reflect an
increase in employee benefits expenses as compared to 2002.

      Depreciation and amortization was $48.9 million in the nine months ended
September 30, 2003 as compared to $45.1 million in 2002. The increase between
2002 and 2003 is primarily due to Viking Gas Transmission.

     Taxes other than income were $25.0 million in the nine months ended
September 30, 2003 as compared to $21.2 million in 2002. The increase in 2003
from 2002 reflects Viking Gas Transmission expenses of $1.8 million and a $1.8
million increase in Northern Border Pipeline's expense. Northern Border
Pipeline's 2002 taxes other than income included a $1.0 million refund of use
taxes previously paid on exempt purchases. Both 2003 and 2002 taxes other than
income for Northern Border Pipeline also include adjustments to ad valorem
taxes. Northern Border Pipeline periodically reviews and adjusts its estimates
of ad valorem taxes. Reductions to previous estimates in 2002 exceeded
reductions to previous estimates in 2003 by approximately $0.4 million.

      Interest expense, which relates to Northern Border Pipeline's and Viking
Gas Transmission's financing activities, was $36.4 million in the nine months
ended September 30, 2003 as compared to $39.9 million in 2002. Interest expense
for Viking Gas Transmission was $2.0 million in 2003. A $5.5 million decrease in
Northern Border Pipeline's interest expense was due to a decrease in average
interest rates as well as a decrease in average debt outstanding.

      Other expense was $3.6 million in the nine months ended September 30, 2003
as compared to other income of $1.0 million in 2002. Income tax expense, which
is included in other income (expense), increased $3.6 million in 2003 over 2002



                                       20
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES


due to Viking Gas Transmission income tax of $3.2 million and an increase in
Midwestern Gas Transmission's income tax expense. The 2003 amount includes $0.3
million of interest expense pertaining to Northern Border Pipeline for refunds
required by the order issued by the Federal Energy Regulatory Commission on
March 27, 2003 (see Note 4 - Notes to Consolidated Financial Statements). The
2002 income amount included $0.6 million of income primarily related to interest
received by Northern Border Pipeline on the refund of use taxes discussed
previously and income of $0.6 million for previously vacated microwave frequency
bands.

      Equity earnings from unconsolidated affiliates were $1.5 million in the
nine months ended September 30, 2003, which represents earnings from the
one-third interest in Guardian Pipeline.

NATURAL GAS GATHERING AND PROCESSING

      The natural gas gathering and processing segment reported losses from
continuing operations of $(187.5) million in the nine months ended September 30,
2003, as compared to income from continuing operations of $26.8 million in 2002.
The segment recorded impairment charges of $219.1 million in the third quarter
of 2003. Excluding the effect of the impairment charges, the segment's income
from continuing operations increased $4.8 million between 2002 and 2003
primarily due to a $3.3 million payment received for a change in ownership of
the other partner in Bighorn Gas Gathering and due to increased equity earnings
of unconsolidated affiliates.

      Operating revenues were $115.4 million in the nine months ended September
30, 2003 as compared to $92.0 million in 2002. The increase in 2003 over 2002 is
due to an increase in natural gas and natural gas liquid prices, partially
offset by lower volumes gathered in the Powder River Basin.

      Product purchases were $60.7 million in the nine months ended September
30, 2003 as compared to $34.9 million in 2002. The increase in 2003 over 2002 is
due to an increase in natural gas and natural gas liquid prices.

      Operations and maintenance expenses were $30.7 million in the nine months
ended September 30, 2003 as compared to $29.2 million in 2002. The increase in
2003 over 2002 is primarily due to increased electric utility costs and employee
benefit expenses.

      Depreciation and amortization was $228.4 million in the nine months ended
September 30, 2003, which included impairment charges of $219.1 million.
Excluding the impairment charges, depreciation and amortization was $9.3 million
in the nine months ended September 30, 2003 as compared to $8.9 million for
2002. Beginning October 1, 2003, the estimated depreciable life of the
Partnership's assets in the Powder River Basin was reduced to 15 years. The
impact of the asset impairment recorded in the third quarter and the shorter
depreciable life is expected to increase quarterly depreciation by approximately
$0.6 million.



                                       21
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES


      Other income was $3.8 million in the nine months ended September 30, 2003,
which included a $3.3 million payment received for a change in ownership of the
other partner in Bighorn Gas Gathering.

      Equity earnings from unconsolidated affiliates were $15.0 million in the
nine months ended September 30, 2003 as compared to $10.2 million for 2002. The
2003 equity earnings include $2.9 million from a special income allocation
related to a retroactive cash distribution for the prior year from the
Partnership's preferred A interest in Bighorn Gas Gathering. This distribution,
determined in accordance with a joint venture agreement, was based on the number
of wells connected to the gathering system in the preceding year. If certain
targets are not met, the Partnership receives a disproportionate share of cash
distributions. The remainder of the increase in equity earnings is primarily due
to an increase in gathering volumes for the unconsolidated affiliates.

COAL SLURRY

      The coal slurry pipeline segment reported income of $2.8 million in the
nine months ended September 30, 2003 on revenues of $16.0 million. In the nine
months ended September 30, 2002, the segment reported income of $2.5 million on
revenues of $16.1 million. Operations and maintenance expenses were $10.2
million in the nine months ended September 30, 2003 as compared to $11.5 million
in 2002. The 2002 expenses were increased by costs associated with unplanned
coal slurry discharges. The coal slurry segment earnings for 2003 were reduced
by $0.4 million for a cumulative effect of change in accounting principle, which
resulted from adopting SFAS No. 143.

OTHER

      Items not attributable to any segment include certain of the Partnership's
general and administrative expenses, interest expense on the Partnership's debt
and other income and expense items. The general and administrative expenses not
allocated to any segment were $4.6 million in the nine months ended September
30, 2003 as compared to $4.2 million in 2002. The increase in expense between
2002 and 2003 was primarily due to an increase in unitholder tax return
processing expenses.

      Interest expense on the Partnership's debt was $23.2 million in the nine
months ended September 30, 2003 as compared to $23.1 million in 2002. Average
debt outstanding has increased between 2002 and 2003 primarily due to the
acquisition of Viking Gas Transmission. In May and June 2003, the Partnership
repaid $135.0 million of its borrowings using proceeds from the issuance of
additional partnership interests and the sale of the Mazeppa and Gladys
processing plants.



                                       22
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES


LIQUIDITY AND CAPITAL RESOURCES

DEBT AND CREDIT FACILITIES

      The Partnership's debt and credit facilities outstanding at September 30,
2003, are as follows:

<Table>
<Caption>
                                                                 Payments Due by Period
                                                            -------------------------------
                                                            Current Portion
                                              (Less Than       Long-Term
                                                Total           1 Year)          Portion
                                             ------------   ---------------    ------------
                                                             (In Thousands)
<S>                                        <C>              <C>               <C>
Northern Border Pipeline
  $175 million Pipeline Credit
    Agreement, average 1.92%,
    due 2005                                 $    126,000     $         --     $    126,000
  6.25% Senior Notes due 2007                     225,000               --          225,000
  7.75% Senior Notes due 2009                     200,000               --          200,000
  7.50% Senior Notes due 2021                     250,000               --          250,000
Viking Gas Transmission
  Series A, B, C and D Senior
    Notes, average 7.38%,
    due 2008 to 2014                               36,851            4,760           32,091
Northern Border Partners, L.P.
  8 7/8% Senior Notes due 2010                    250,000               --          250,000
  7.10% Senior Notes due 2011                     225,000               --          225,000
  $200 million Partnership Credit
    Agreement, average 3.16%,
    due 2004                                       25,000           25,000               --
                                             ------------     ------------     ------------

Total                                        $  1,337,851     $     29,760     $  1,308,091
                                             ============     ============     ============
</Table>

      As discussed in Note 2 - Notes to Consolidated Financial Statements, the
Partnership financed the acquisition of Viking Gas Transmission under its credit
agreement. Effective with the closing of the acquisition, the Partnership
amended the Partnership Credit Agreement to increase the allowed ratio of
consolidated funded debt to adjusted consolidated EBITDA (consolidated net
income plus minority interests in net income, consolidated interest expense,
income taxes and depreciation and amortization) to no more than 4.75 to 1
through June 30, 2003, at which time the ratio reverted back to 4.5 to 1. At
September 30, 2003, the Partnership was in compliance with its debt covenants.

      Northern Border Pipeline has outstanding interest rate swap agreements
with notional amounts totaling $225 million that expire in May 2007. Under the
interest rate swap agreements, Northern Border Pipeline makes payments to
counterparties at variable rates based on the London Interbank Offered Rate and
in return receives payments based on a 6.25% fixed rate. At September 30, 2003,
the average effective interest rate on Northern Border Pipeline's interest rate
swap agreements was 2.38%.



                                       23
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES


      The Partnership has outstanding interest rate swap agreements with
notional amounts totaling $150 million that expire in March 2011. Under the
interest rate swap agreements, the Partnership makes payments to counterparties
at variable rates based on the London Interbank Offered Rate and in return
receives payments based on a 7.10% fixed rate. At September 30, 2003, the
average effective interest rate on the Partnership's interest rate swap
agreements was 3.72%.

      In May and June 2003, the Partnership sold 2,587,500 common units. The net
proceeds from the sale of common units and the general partners' capital
contributions totaled approximately $102.4 million and were primarily used to
repay indebtedness outstanding.

      Short-term liquidity needs will be met by the Partnership's operating cash
flows and through the Partnership Credit Agreement and the Pipeline Credit
Agreement. At September 30, 2003, $175.0 million was available under the
Partnership Credit Agreement and $49.0 million was available under the Pipeline
Credit Agreement. Long-term capital needs may be met through the Partnership's
ability to issue long-term indebtedness as well as additional limited partner
interests.

      After the Partnership announced it would record impairment charges in the
third quarter, Standard & Poor's Ratings Services announced that it placed its
'A-' corporate credit ratings of the Partnership and Northern Border Pipeline on
CreditWatch with negative implications.

      The Partnership's expectations of cash flows for 2004 from its existing
businesses support its current level of cash distributions paid on a quarterly
basis to its partners. The Partnership distributes what is defined as Available
Cash in its Partnership Agreement. In determining Available Cash, the
Partnership may establish, increase or decrease cash reserves in such amounts
deemed necessary or appropriate. The distributions declared to be paid on
November 14, 2003, include the net cash receipts of the Partnership during this
quarter as well as a reduction in the cash reserves previously established. It
is anticipated that distributions paid in 2004, calculated in compliance with
the definition of Available Cash, will also include adjustments to cash
reserves.

CASH FLOWS FROM OPERATING ACTIVITIES

      Cash flows provided by operating activities were $169.3 million in the
nine months ended September 30, 2003 as compared to $179.2 million for the
comparable period in 2002. The decrease is primarily due to Northern Border
Pipeline's refund to its shippers for $10.3 million in 2003 (see Note 4 - Notes
to Consolidated Financial Statements). Operating cash flows were also decreased
due to payments made to NBP Services Corp. for administrative services provided
prior to 2003 and due to a reduction in prepayments in 2003 that Northern Border
Pipeline had required certain shippers make in 2002 for transportation service.
Distributions received from unconsolidated affiliates increased $7.3 million to
$16.0 million. Of this increase, distributions received from Bighorn Gas
Gathering had increased $4.0 million primarily related to the retroactive cash
distribution discussed previously.



                                       24
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES


      The consolidated cash flows provided by operating activities on the
accompanying Consolidated Statement of Cash Flows includes amounts for Northern
Border Pipeline. Northern Border Pipeline makes cash distributions to its
partners, including the Partnership, using a distribution formula approved by
Northern Border Pipeline's management committee. The amounts distributed to the
Partnership by Northern Border Pipeline are less than Northern Border Pipeline's
operating cash flows included in the accompanying statement. For the nine months
ended September 30, 2003, Northern Border Pipeline's operating cash flows
totaled $136.5 million as compared to distributions to its partners of $113.0
million.

CASH FLOWS FROM INVESTING ACTIVITIES

      Cash used in investing activities was $97.6 million in the nine months
ended September 30, 2003 as compared to $43.6 million in 2002. The increase in
2003 over 2002 primarily relates to the acquisition of Viking Gas Transmission
in January partially offset by the sale of the Mazeppa and Gladys processing
plants in June.

      The investment in unconsolidated affiliates was $3.5 million in the nine
months ended September 30, 2003 as compared to $2.6 million in 2002. The 2003
amount primarily represents capital contributions to Guardian Pipeline while the
2002 amount primarily reflects capital contributions to Bighorn Gas Gathering.

      Acquisitions of businesses were $119.3 million in the nine months ended
September 30, 2003 as compared to $1.2 million in 2002. The 2003 amount
represents the net cash paid to acquire Viking Gas Transmission.

      Sale of assets were $40.3 million in the nine months ended September 30,
2003, due to the sale of the Gladys and Mazeppa processing plants.

      Capital expenditures were $15.0 million in the nine months ended September
30, 2003, which included $5.7 million for the natural gas gathering and
processing segment and $7.8 million for the interstate natural gas pipelines
segment. For 2002, capital expenditures were $39.9 million, which included $28.4
million for natural gas gathering and processing facilities and $11.1 million
for interstate natural gas pipeline facilities.

      Total capital expenditures for 2003 are estimated to be $34 million.
Capital expenditures for the interstate natural gas pipelines are estimated to
be $21 million, including approximately $17 million for Northern Border
Pipeline. Capital expenditures for natural gas gathering and processing
facilities are estimated to be $11 million for 2003. Funds required to meet the
capital requirements for 2003 are anticipated to be provided from debt
borrowings, issuance of additional limited partnership interests and operating
cash flows.



                                       25
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES


CASH FLOWS FROM FINANCING ACTIVITIES

      Cash flows used in financing activities were $77.7 million in the nine
months ended September 30, 2003, as compared to $117.9 million in 2002. Cash
distributions to unitholders and general partners in 2003 and 2002 were $115.3
million and $109.3 million, respectively. The increase in 2003 over 2002 is due
to an increase in the number of common units outstanding.

      During the nine months ended September 30, 2003 and 2002, the Partnership
issued additional partnership interests of $102.4 million and $75.4 million,
respectively, which were primarily used to repay indebtedness outstanding.

      For the nine months ended September 30, 2003, borrowings on long-term debt
totaled $270.0 million, which were primarily used for the acquisition of Viking
Gas Transmission and to repay previously existing indebtedness. For the nine
months ended September 30, 2002, borrowings on long-term debt totaled $467.9
million, which were primarily used to repay previously existing indebtedness and
to finance capital expenditures. The 2002 amount included proceeds from the $225
million 6.25% Senior Notes issued by Northern Border Pipeline. Total repayments
of debt in the nine months ended September 30, 2003 and 2002 were $313.2 million
and $514.9 million, respectively.

      In March 2003, the Partnership received $12.3 million from the termination
of an interest rate swap agreement with a notional amount of $75 million. The
proceeds were primarily used to repay existing indebtedness. In April 2002,
Northern Border Pipeline received $2.4 million from the termination of forward
starting interest rate swaps.

OUTLOOK UPDATE

      As a result of commercial activity during July 2003, essentially all of
Northern Border Pipeline's capacity is under contract at least through December
31, 2003 and, assuming no extensions of existing contracts or execution of new
contracts, approximately 70% and 59% is under contract at least through December
31, 2004 and 2005, respectively.

      On July 15, 2003, Northern Border Pipeline announced that Cargill,
Incorporated had assumed all of the firm capacity formerly held by Mirant
Americas Energy Marketing, LP. This represents approximately 10% of Northern
Border Pipeline's contracted firm capacity and extends for terms into 2006 and
2008. Additionally, Cargill assumed the management services of Pan-Alberta Gas,
Ltd., previously performed by Mirant.

      The Bureau of Land Management ("BLM") on April 30, 2003, recorded a Record
of Decision for the Wyoming Environmental Impact Statement for the Powder River
Basin Oil and Gas Project. This Record of Decision opens up drilling on federal
lands for up to 55,000 wells in the Powder River Basin. The decision is not
expected to have a material effect on the Partnership's 2003 operating results
because of the delay between permitting, when the wells are drilled and when gas
is expected to flow from these wells. In addition, a number of lawsuits have
been filed challenging the Record of Decision. While it is anticipated that the
BLM will process permits in accordance with the Record of Decision, the
Partnership cannot predict the timing of such issuances or if any



                                       26
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES


of these lawsuits will be successful in temporarily or permanently enjoining the
implementation of the Environmental Impact Statement.

      For 2004, Powder River Basin volumes on the Partnership's wholly owned
systems are expected to be less than the projected 2003 average by five to
fifteen percent. Inlet volumes in the Williston Basin for 2004 are expected to
be approximately five percent higher than 2003 with natural gas liquids
production essentially the same as 2003 levels.

UPDATE ON THE IMPACT OF ENRON'S CHAPTER 11 FILING ON THE PARTNERSHIP'S BUSINESS

      As more fully discussed in the Partnership's Annual Report on Form 10-K
for the year ended December 31, 2002, on December 2, 2001, Enron Corp. and
certain of its wholly-owned subsidiaries filed a voluntary petition for
bankruptcy protection under Chapter 11 of the United States Bankruptcy Code.

      Northern Plains Natural Gas Company and Pan Border Gas Company,
subsidiaries of Enron, are two of the general partners of the Partnership. Also,
NBP Services Corporation, a subsidiary of Enron, provides administrative and
operating services to the Partnership and its subsidiaries.

      On June 25, 2003, Enron announced the organization of CrossCountry Energy
Corp., a newly formed holding company that will hold, among other things,
Enron's ownership interests in Northern Plains, Pan Border and NBP Services.
Enron also announced it had filed a motion with the U.S. Bankruptcy Court for
the Southern District of New York (the "Bankruptcy Court") to approve the
proposed transfer of those ownership interests to CrossCountry Energy. That
motion was approved by the Bankruptcy Court on September 25, 2003. The transfer
of ownership interests to CrossCountry Energy is pending.

      On September 18, 2003, Enron announced that Enron and its
debtor-in-possession subsidiaries (collectively with Enron, the "Debtors") filed
their proposed amended joint Chapter 11 plan (the "Plan") and related disclosure
statement (the "Disclosure Statement") with the Bankruptcy Court which amended
the Plan and Disclosure Statement previously filed with the Bankruptcy Court on
July 11, 2003. Financial projections for three going-forward businesses,
including CrossCountry Energy, were included in the Plan. Also, under the Plan,
it is anticipated that, if CrossCountry Energy is not sold to a third party, as
permitted by the Plan, shares of CrossCountry Energy would be distributed
directly or indirectly to creditors of the Debtors. Enron has indicated that the
Plan and Disclosure Statement may be further amended. In addition, a number of
objections to the Plan have been filed, including an objection by the court-
appointed examiner for Enron North America Corp.

      When the transfer of interests in Northern Plains, Pan Border and NBP
Services to CrossCountry Energy as contemplated above takes place, the articles
of incorporation of Northern Plains, Pan Border and NBP Services will be amended
to reflect certain shareholder protections that will be retained by Enron until
a distribution of any common stock of CrossCountry Energy pursuant to the Plan.
Northern Plains and Pan Border, subject to any applicable fiduciary duties
and/or contractual obligations, will need the affirmative vote of Enron to vote
its interest at the Partnership Policy Committee to, among other things, (a)
enter into any business other than owning and operating natural gas pipelines,
coal slurry pipelines, natural gas gathering facilities,



                                       27
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES


midstream gas processing facilities, gas and hydrocarbon liquids storage
facilities and related businesses; and (b) enter into any compromise or
settlement of any action, suit, litigation, arbitration or proceeding or any
governmental investigation or audit relating to the assets, liabilities or
business of the entities or the Partnership, in excess of $2 million.

UPDATE TO POTENTIAL PUBLIC UTILITY HOLDING COMPANY ACT ("PUHCA") REGULATION

      Further to the discussion of potential impacts to the Partnership provided
in the quarterly report on Form 10-Q for the periods ended March 31, 2003 and
June 30, 2003, on October 21, 2003, the SEC granted Enron's motion for oral
argument and set the hearing for December 4, 2003. The Initial Decision is
stayed pending the resolution of the SEC's further review.

      If Enron's exemption application is denied by the SEC, the Partnership
cannot estimate the amount of time that the SEC will provide for Enron to
register as a holding company under PUHCA at which time Enron and its holding
company system would become subject to PUHCA. The Partnership intends to seek
orders from the SEC that, if granted, would minimize the impacts previously
described of PUHCA on the Partnership's operations. The Partnership also may
seek exemptions for its operations from regulation under PUHCA. Similar orders
and exemptions have been granted by the SEC to other operating subsidiaries of
holding companies under PUHCA. No assurance can be given that the Partnership
will be successful in obtaining all the orders or exemptions that it intends to
seek or that its operations will not be subject to the full regulatory impact of
PUHCA.

UPDATE ON POTENTIAL INCREASED HEALTH CARE AND PENSION EXPENSES

      Further to the discussion in the annual report on Form 10-K for the year
ended December 31, 2002, on July 22, 2003, Enron filed a motion with the
bankruptcy court requesting authority to terminate the Enron Gas Pipeline
Employee Benefit Trust (the "Trust") and to apportion the Trust's assets among
certain identified pipeline companies, one being Northern Plains. In the motion,
it states that, as of June 30, 2002, the asset/liability allocation percentage
for Northern Plains was 2.7% with a liability allocation of $1.89 million and
asset allocation of $846,000. If approved as filed, the assets of the Trust will
be transferred to one or more qualifying trusts maintained for the benefit of
the pipeline company retirees in accordance with the Enron Corp. Medical Plan
for Inactive Participants.

      Further to the discussion of potential cost impacts to the Partnership as
a result of increased health care expenses and pension benefits in the annual
report on Form 10-K for the period ended December 31, 2002, Enron has advised
Northern Plains and NBP Services that it intends to file to terminate Enron's
Cash Balance Plan, its pension benefit plan. It is possible that costs incurred
by Northern Plains and NBP Services related to termination of the plan could be
material. While the determination of reimbursement of such termination costs by
the Partnership under the operating agreements and administrative services
agreement will be made at the time of occurrence, such costs could be material
to the Partnership.



                                       28
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONTINUED)

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONCLUDED)

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES


INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

      The statements in this Quarterly Report that are not historical
information are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. These forward-looking statements are identified as any statement that does
not relate strictly to historical or current facts. Forward-looking statements
are not guarantees of performance. They involve risks, uncertainties and
assumptions. The future results of the Partnership's operations may differ
materially from those expressed in these forward-looking statements. Such
forward-looking statements include the discussions in "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources" regarding the Partnership's estimated capital expenditures in
2003. Although the Partnership believes that its expectations regarding future
events are based on reasonable assumptions within the bounds of its knowledge of
its business, it can give no assurance that its goals will be achieved or that
its expectations regarding future developments will be realized. Important
factors that could cause actual results to differ materially from those in the
forward-looking statements herein include, without limitation: impacts of
developments in Enron's voluntary petition for bankruptcy protection under
Chapter 11 of the United States Bankruptcy Code proceeding including ongoing
investigations of Enron, its affiliates and their advisors; Enron's formation of
CrossCountry Energy of which Northern Plains and Pan Border would be a part; the
PUHCA proceeding relating to Enron's exemption and the Partnership's ability to
obtain orders or exemptions from the SEC related to PUHCA regulation; actions by
rating agencies; industry results; future demand for natural gas; availability
of supplies of Canadian natural gas; rate of development of gas fields near the
Partnership's natural gas gathering systems in the Powder River and Wind River
Basins and near its investments in the Powder and Wind River Basins; the
Partnership's ability to renegotiate gathering contracts with producers;
regulatory actions and receipt of expected regulatory clearances; renewal of the
coal slurry transportation contract under favorable terms; performance of
contractual obligations by the shippers; prices of natural gas and natural gas
liquids; political and regulatory developments that impact FERC proceedings
involving the interstate natural gas pipelines; the interstate natural gas
pipelines' success in sustaining their positions in such proceedings or the
success of intervenors in opposing their positions; competitive developments by
Canadian and U.S. natural gas transmission peers; political and regulatory
developments in Canada; the Partnership's ability to control operating costs;
and conditions of the capital markets and equity markets.



                                       29
<PAGE>

                   PART I. FINANCIAL INFORMATION - (CONCLUDED)

       ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES


      The Partnership may be exposed to market risk through changes in commodity
prices, exchange rates and interest rates, as discussed below. A control
environment has been established which includes policies and procedures for risk
assessment and the approval, reporting and monitoring of financial instrument
activities.

      The Partnership has utilized and expects to continue to utilize derivative
financial instruments in the management of interest rate risks and natural gas
and natural gas liquids marketing activities to achieve a more predictable cash
flow by reducing its exposure to interest rate and price fluctuations.

      There have not been any material changes in market risk exposures that
would affect the quantitative and qualitative disclosures presented as of
December 31, 2002, in Item 7a of the Partnership's Annual Report on Form 10-K.
For more information on risk management activities, see Note 5 to the
Partnership's consolidated financial statements included elsewhere in this
report.

                         ITEM 4. CONTROLS AND PROCEDURES

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES


      The Partnership's principal executive officer and principal financial
officer have evaluated the effectiveness of the Partnership's "disclosure
controls and procedures," as such term is defined in Rule 13a-14(c) of the
Securities Exchange Act of 1934, as amended, as of September 30, 2003. Based
upon their evaluation, the principal executive officer and principal financial
officer concluded that the Partnership's disclosure controls and procedures are
effective. During the last fiscal quarter, there were no changes in the
Partnership's internal controls over financial reporting that have materially
affected, or are reasonably likely to materially affect, the Partnership's
internal control over financial reporting.





                                       30
<PAGE>

                           PART II. OTHER INFORMATION

                 NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES


ITEM 5. OTHER INFORMATION

      In September 2003, Northwest Border Pipeline Company designated Paul E.
Miller as its member on the Partnership Policy Committee. Mr. Miller is also
Northwest Border's representative on the Northern Border Pipeline Management
Committee. Additionally, Mr. Miller serves as Director Corporate Development of
TransCanada PipeLines Limited, a position he has held since February 2003. From
July 1998 to January 2003, Mr. Miller was Director Finance of TransCanada
Pipelines Limited. Prior to July 1998, Mr. Miller was Manager Finance of
TransCanada PipeLines Limited. Mr. Miller is 45 years old.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits.

      31.1  Certification of Chief Executive Officer pursuant to 18 U.S.C.
            Section 1350, as adopted pursuant to Section 302 of the
            Sarbanes-Oxley Act of 2002.

      31.2  Certification of Chief Financial and Accounting Officer pursuant to
            18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the
            Sarbanes-Oxley Act of 2002.

      32.1  Certification of Chief Executive Officer pursuant to 18 U.S.C.
            Section 1350, as adopted pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002.

      32.2  Certification of Chief Financial and Accounting Officer pursuant to
            18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002.

(b)   Reports on Form 8-K.

      1) Northern Border Partners, L.P. filed a Current Report on Form 8-K,
dated July 10, 2003, including a copy of a press release discussing Northern
Border Pipeline Company's contracted transportation capacity.

      2) Northern Border Partner, L.P. filed a Current Report on Form 8-K, dated
July 11, 2003, discussing an announcement by Enron Corp. that a proposed joint
plan of reorganization and related disclosure statement had been filed with the
U.S. Bankruptcy Court for the Southern District of New York.

      3) Northern Border Partners, L.P. filed a Current Report on Form 8-K,
dated July 15, 2003, including a copy of a press release discussing Northern
Border Pipeline Company's contracted transportation capacity.

      4) Northern Border Partner, L.P. filed a Current Report on Form 8-K, dated
July 24, 2003, including a copy of a press release announcing Northern Border
Partners, L.P. earnings for the second quarter of 2003. The information was
furnished under Items 9 and 12 of the Form.

      5) Northern Border Partner, L.P. filed a Current Report on Form 8-K, dated
September 18, 2003, discussing an announcement by Enron Corp. that a proposed
amended joint plan of reorganization and related disclosure statement had been
filed with the U.S. Bankruptcy Court for the Southern District of New York.




                                       31
<PAGE>

                                   SIGNATURES


      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.


                                    NORTHERN BORDER PARTNERS, L.P.
                                    (A Delaware Limited Partnership)

Date: November 13, 2003             By: /s/ Jerry L. Peters
                                        ----------------------------------------
                                        Jerry L. Peters
                                        Chief Financial and Accounting
                                          Officer



                                       32
<PAGE>


                               INDEX TO EXHIBITS

<Table>
<Caption>
EXHIBIT
NUMBER                   DESCRIPTION
-------                  -----------
<S>                      <C>

   31.1                  Certification of Chief Executive Officer pursuant to 18
                         U.S.C. Section 1350, as adopted pursuant to Section 302
                         of the Sarbanes-Oxley Act of 2002.

   31.2                  Certification of Chief Financial and Accounting Officer
                         pursuant to 18 U.S.C. Section 1350, as adopted pursuant
                         to Section 302 of the Sarbanes-Oxley Act of 2002.

   32.1                  Certification of Chief Executive Officer pursuant to 18
                         U.S.C. Section 1350, as adopted pursuant to Section 906
                         of the Sarbanes-Oxley Act of 2002.

   32.2                  Certification of Chief Financial and Accounting Officer
                         pursuant to 18 U.S.C. Section 1350, as adopted pursuant
                         to Section 906 of the Sarbanes-Oxley Act of 2002.
</Table>