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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                  FORM 10-Q

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

                 For the quarterly period ended September 30, 1998
                                        
                                      OR
                                          
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                         Commission File Number 1-2499
                                        
                       CORNERSTONE PROPANE PARTNERS, L.P.
            (Exact name of registrant as specified in its charter)

            Delaware                                  77-0439862
            --------                                  ----------
(State or other jurisdiction of              (I.R.S. Employer Identification
incorporation or organization)                            Number)

432 Westridge Drive\Watsonville, California             95076
-------------------------------------------            ------
(Address of principal executive officers)             (Zip Code)

        Registrant's telephone number, including area code:  (831) 724-1921
                                          
                                        NONE
     (Former name, former address and former fiscal year, if changed since 
                                   last report.)
                                          

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 the number of shares outstanding of each of the issuer's classes of
common stock, as of November 13, 1998:       13,314,444 - Common Units

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                         CORNERSTONE PROPANE PARTNERS, L.P.
                                          
                                 TABLE OF CONTENTS
                                          
<TABLE>
<CAPTION>
                                                                         PAGES
                                                                         -----
<S>                                                                      <C>

                    Part I.  Financial Information

Item 1. Financial Statements

     CORNERSTONE PROPANE PARTNERS, L.P.

     Consolidated Balance Sheets as of September 30, 1998 and 1997,       1
       and June 30, 1998
  
     Consolidated Statements of Operations for the Three Months Ended     2
       September 30, 1998 and 1997                                         

     Consolidated Statements of Cash Flows for the Three Months Ended
       September 30, 1998 and 1997                                        3

     Notes to Consolidated Financial Statements                           4

Item 2.   Management's Discussion and Analysis of Financial Condition 
          and Results of Operations of Cornerstone Propane Partners, L.P.
          for the Three Months Ended September 30, 1998 compared to the
          Three Months Ended September 30, 1997                           7

                            Part II.  Other Information

Item 5.   Other Information                                              14

Item 6.   Exhibits and Reports on Form 8-K                               14

          Signature                                                      15

</TABLE>
                                         ii
                                          

<PAGE>

                 CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEETS
                    (Dollars in thousands, except unit data)
                                 (Unaudited)



                       ASSETS

<TABLE>
<CAPTION>

                                                             September 30,              June 30,
                                                         -----------------------       ---------
                                                           1998          1997             1998
                                                         --------       --------       ---------
<S>                                                      <C>            <C>            <C>
Current assets:
  Cash and cash equivalents                              $  8,292       $  8,593       $  9,366
  Trade receivables, net                                   25,501         46,391         18,467
  Inventories                                              11,552         15,908         18,238
  Prepaid expenses and other current assets                 9,551          4,225          7,150
                                                         --------       --------       --------
       Total current assets                                54,896         75,117         53,221

Property, plant and equipment, net                        278,479        250,300        275,288
Goodwill and other intangible assets, net                 245,689        220,963        242,199
Other assets                                                1,847          2,404          1,803
                                                         --------       --------       --------
       Total assets                                      $580,911       $548,784       $572,511
                                                         --------       --------       --------
                                                         --------       --------       --------

            LIABILITIES AND PARTNERS' CAPITAL

Current liabilities:
  Current portion of long-term debt                      $  2,822       $  5,010       $  3,800
  Trade accounts payable                                   16,252         42,351         18,460
  Accrued expenses                                         33,166         16,827         29,335
                                                         --------       --------       --------
       Total current liabilities                           52,240         64,188         51,595

Long-term debt, less current portion                      260,321        251,155        237,138

Due to related party                                        1,813            740          1,684
Other noncurrent liabilities                                2,500          5,895          2,500
                                                         --------       --------       --------
       Total liabilities                                  316,874        321,978        292,917
                                                         --------       --------       --------

Commitments and contingencies

Partners' capital:
  Common unitholders (13,283,980 units issued and
    outstanding)                                          173,573        136,542        185,803
  Subordinated unitholders (6,597,619 units issued and
    outstanding)                                           85,101         85,636         88,117
  General partners                                          5,363          4,628          5,674
                                                         --------       --------       --------
       Total partners' capital                            264,037        226,806        279,594
                                                         --------       --------       --------
       Total liabilities and partners' capital           $580,911       $548,784       $572,511
                                                         --------       --------       --------
                                                         --------       --------       --------
</TABLE>

         The accompanying notes are an integral part of these consolidated
                               balance sheets.

                                      -1-
<PAGE>

                         CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                                CONSOLIDATED STATEMENTS OF OPERATIONS
                            (Dollars in thousands, except per unit data)
                                            (Unaudited)


<TABLE>
<CAPTION>
                                                          Three Months Ended  
                                                             September 30     
                                                       -----------------------
                                                          1998           1997       
                                                       ---------       --------
<S>                                                    <C>             <C>
Revenues                                                $169,991       $152,157
 
Cost of sales                                            143,292        127,855
                                                        ---------      --------
  Gross profit                                            26,699         24,302
                                                        ---------      --------
Expenses:
  Operating, general and administrative                   25,681         22,602
  Depreciation and amortization                            5,122          4,592
                                                        ---------      --------
                                                          30,803         27,194
                                                        ---------      --------
  Operating loss                                          (4,104)        (2,892)
Interest expense                                           5,133          4,782
                                                        ---------      --------
  Income before provision for income taxes                (9,237)        (7,674)
Provision for income taxes                                    29             20
                                                        ---------      --------
  Net loss                                              $ (9,266)      $ (7,694)
                                                        ---------      --------
                                                        ---------      --------
  General partner's interest in net loss                $   (185)      $   (155)
                                                        ---------      --------
                                                        ---------      --------
  Limited partners' interest in net loss                $ (9,081)      $ (7,539)
                                                        ---------      --------
                                                        ---------      --------
  Net loss per unit                                     $   (.46)      $   (.44)
                                                        ---------      --------
                                                        ---------      --------

Weighted average number of units outstanding               19,859        17,109
                                                        ---------      --------
                                                        ---------      --------
</TABLE>


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


                                     -2-
<PAGE>


                  CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Dollars in thousands)
                                       (Unaudited)


<TABLE>
<CAPTION>
                                                                         Three Months Ended   
                                                                              September 30     
                                                                       ------------------------
                                                                          1998           1997   
                                                                       ---------      ---------
<S>                                                                    <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                             $  (9,266)     $  (7,694)
  Adjustments to reconcile net loss to net cash used in
     operating activities:
     Depreciation and amortization                                         5,122          4,592
     Loss on Sale of Assets                                                  119             --
     Changes in assets and liabilities, net of effect of 
       acquisitions:
       Trade receivables                                                  (6,780)        (4,467)
       Inventories                                                         6,782           (370)
       Prepaid expenses and other current assets                          (2,397)           268
       Trade accounts payable and accrued liabilities                      1,575          3,658
                                                                       ---------      ---------
          Net cash used in operating activities                           (4,845)        (4,013)
                                                                       ---------      ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Expenditures for property, plant and equipment                          (2,800)        (4,522)
  Acquisitions, net of cash received                                      (6,640)        (1,472)
  Other Investments                                                          (43)            --
                                                                       ---------      ---------
          Net cash used in investing activities                           (9,483)        (5,994)
                                                                       ---------      ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings on Working Capital Facility                                  21,780         19,600
  Additional borrowings on purchase obligations                               --            553
  Advances from General Partners                                             129             --
  Payments on purchase obligations                                        (1,372)          (530)
  General Partners' contribution                                              20             --
  Partnership distributions                                               (7,303)        (9,429)
                                                                       ---------      ---------
          Net cash provided by financing activities                       13,254         10,194
                                                                       ---------      ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                          (1,074)           187

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                             9,366          8,406
                                                                       ---------      ---------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                $  8,292       $  8,593
                                                                       ---------      ---------
                                                                       ---------      ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for Interest                                                $  8,270       $    944
                                                                       ---------      ---------
                                                                       ---------      ---------
NON INVESTING & FINANCING ACTIVITIES
  Assets acquired in exchange for Common Units                          $  1,006       $     --
                                                                       ---------      ---------
                                                                       ---------      ---------
  Assets acquired in exchange for debt                                  $  1,782       $    900
                                                                       ---------      ---------
                                                                       ---------      ---------
</TABLE>


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


                                     -3-
<PAGE>
                                          
                   CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 SEPTEMBER 30, 1998
                      (Dollars in thousands, except unit data)
                                    (Unaudited)
                                          

1.   BASIS OF PRESENTATION

  The consolidated financial statements include the accounts of Cornerstone
Propane Partners, L.P. ("Cornerstone Partners") and its subsidiary, Cornerstone
Propane L.P. (the "Operating Partnership") and the Operating Partnership's
corporate subsidiaries, Cornerstone Sales and Service Corporation ("Sales and
Service") and Flame, Inc., after elimination of all material intercompany
balances and transactions.  Cornerstone Partners, the Operating Partnership,
Sales and Service and Flame, Inc. are collectively referred to as the
"Partnership."

  The accompanying interim consolidated financial statements of the Partnership
are unaudited; however, in the opinion of management, all adjustments necessary
for a fair presentation of such consolidated financial statements have been
reflected in the interim periods presented.  Such adjustments consisted only of
normal recurring items.  The Partnership's business is seasonal and,
accordingly, interim results are not indicative of results for a full year.  The
significant accounting policies and certain financial information which are
normally included in financial statements prepared in accordance with generally
accepted accounting principles, but which are not required for interim reporting
purposes, have been condensed or omitted.  The accompanying consolidated
financial statements of the Partnership should be read in conjunction with the
consolidated financial statements and related notes included in the
Partnership's Annual Report on Form 10-K for the fiscal year ended June 30,
1998.

2.   DISTRIBUTIONS OF AVAILABLE CASH

  The Partnership will make distributions to its partners with respect to 
each fiscal quarter of the Partnership within 45 days after the end of each 
fiscal quarter in an aggregate amount equal to its Available Cash for such 
quarter. The Partnership will distribute 100% of its Available Cash (98% to 
Unitholders and 2% to the General Partners) until the Minimum Quarterly 
Distribution ("MQD") ($.54 per unit) for such quarter has been met.  The MQD 
will be subject to the payment of incentive distributions in the event 
Available Cash exceeds the MQD of $.54 on all units.  During the 
Subordination Period, to the extent there is sufficient Available Cash, the 
holders of Common Units have the right to receive the MQD, plus any 
arrearages, prior to the distribution of Available Cash to holders of 
Subordinated Units.  Subordinated Units do not accrue arrearages with respect 
to distributions for any quarter.

  The MQD for the three-month period from April 1, 1998 to June 30, 1998, of
$.54 per common unit totaling $7,303 was paid on August 14, 1998.  On October
28, 1998, the MQD for the period July 1, 1998 to September 30, 1998 was declared
in the amount of $7,337 representing in the aggregate distributions to the
Common Unit Holders and General Partner at $.54 per


                                     -4-
<PAGE>

                   CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 SEPTEMBER 30, 1998
                      (Dollars in thousands, except unit data)
                                    (Unaudited)

common unit.  This distribution will be paid on November 13, 1998.  No 
distributions have been declared and subsequently paid on the Subordinated 
Units for the period from October 1, 1997 to September 30, 1998.

3.   ACQUISITIONS

  The Partnership consummated five acquisitions during the three months ended
September 30, 1998.  The total consideration for these acquisitions was
approximately $8.8 million of which approximately $.4 million was in the form of
Cornerstone Common Units, $6.6 million was paid in cash and $1.8 million was for
liabilities assumed.  In addition, contingent consideration paid during the
quarter related to prior acquisitions was approximately $.6 million and was in
the form of Cornerstone Common Units.  All acquisitions have been accounted for
using the purchase method of accounting.

4.   NET LOSS PER UNIT

  Basic net income per unit is computed by dividing net income, after
considering the General Partners 2% interest, by the weighted average number of
Common and Subordinated Units outstanding during the quarter.

5.   RECENTLY ISSUED ACCOUNTING STANDARDS

Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about
Segments of an Enterprise and Related Information," was issued in June 1997 and
effective for fiscal years beginning after December 15, 1997.  SFAS No. 131
introduces a new model for segment reporting called the "management approach"
that is based on the way that the chief operating decision maker organizes
segments within a company for making operating decisions and assessing
performance.  The model is used for disclosures of each segment.  The
Partnership is currently assessing its impact on disclosure requirements for
this fiscal year.

SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
was issued in June 1998.  SFAS No. 133 provides a comprehensive standard for the
recognition and measurement of derivatives and hedging activities.  The standard
requires all derivatives to be recorded on the balance sheet at fair value and
establishes special accounting for three types of hedges.  The accounting
treatment for each of these three types of hedges is unique but results in
including the offsetting changes in fair values of cash flows of both the hedge
and hedged item in results of operations in the same period.  Changes in fair
value of derivatives that do not meet the criteria of one of the aforementioned
categories of hedges are included in the results of operations.  


                                     -5-
<PAGE>

                   CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 SEPTEMBER 30, 1998
                      (Dollars in thousands, except unit data)
                                    (Unaudited)

SFAS No. 133 is effective for the Partnership's fiscal year beginning July 1, 
1999.  The Partnership is currently assessing its impact on the Partnership's 
financial position and results of operations.

6.   SUBSEQUENT EVENT

  The Partnership entered into a definitive agreement on October 27, 1998 to
acquire the operations of Propane Continental, Inc.  The price for the
transaction is expected to be approximately $110 to 120 million, including debt
to be refunded.  It is anticipated that the acquisition will be financed
approximately 50% with common unit equity and 50% with long-term debt and that
this transaction will close prior to December 31, 1998.  For the fiscal year
ended June 30, 1998, Propane Continental, Inc. reported annual sales totaling
$142.3 million.


                                     -6-
<PAGE>

                         CORNERSTONE PROPANE PARTNERS, L.P.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following discussion of the historical financial condition and results of
operations for the Partnership should be read in conjunction with the historical
financial statements and notes thereto included elsewhere in this Quarterly
Report on Form 10-Q.

GENERAL

The Partnership is a Delaware limited partnership initially formed to own and
operate the propane business and assets of SYN Inc., Empire Energy Corporation
and CGI Holdings, Inc.  The Partnership's management believes that it is the
fifth largest retail marketer of propane in the United States, serving more than
385,000 residential, commercial, industrial and agricultural customers from 281
customer service centers in 29 states.

Because a substantial portion of the Partnership's propane is used in the
weather-sensitive residential markets, the temperatures in the Partnership's
area of operations, particularly during the six-month peak heating season, have
a significant effect on the financial performance of the Partnership.  In any
given area, warmer-than-normal temperatures will tend to result in reduced
propane use, while sustained colder-than-normal temperatures will tend to result
in greater propane use.  Therefore, information on normal temperatures is used
by the Partnership in understanding how historical results of operations are
affected by temperatures that are colder or warmer than normal and in preparing
forecasts of future operations, which are based on the assumption that normal
weather will prevail in each of the Partnership's regions.

Gross profit margins are not only affected by weather patterns but also by
changes in customer mix.  For example, sales to residential customers ordinarily
generate higher margins than sales to other customer groups, such as commercial
or agricultural customers.  In addition, gross profit margins vary by geographic
region.  Accordingly, profit margins could vary significantly from year to year
in a period of identical sales volumes.


                                     7
<PAGE>

                         CORNERSTONE PROPANE PARTNERS, L.P.
                                          
                      MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS



ANALYSIS OF HISTORICAL RESULTS OF OPERATIONS

The following discussion compares the results of operations and other data of
the Partnership for the three-month period ended September 30, 1998, to the
three-month period ended September 30, 1997.

VOLUME.   During the three months ended September 30, 1998, the Partnership sold
39.4 million retail propane gallons, a decrease of 1.9 million gallons or 4.6%
from the 41.3 million retail propane gallons sold during the three months ended
September 30, 1997. Wholesale volumes were 59.8 million gallons and 140.9
million gallons, respectively, for the quarters ended September 30, 1998 and
1997, which represents a decrease of 81.1 million gallons or 57.6%.  Sales
volumes have been adversely impacted for the quarter ending September 30, 1998
by record high national inventory levels of LPG and associated low product
values.  Acquisitions of new propane businesses since October 1, 1997 accounted
for 2.7 million gallons sold during the three months ended September 30, 1998.

Based on the average number of heating degree days in the markets served by the
Partnership, for September, 1998, temperatures were approximately 30% warmer
than normal.  While this indicator generally measures the impact of temperatures
on the Partnership's business, other factors such as geographic mix, magnitude
and duration of temperature and weather conditions can also impact sales
volumes.  The overall impact of weather is believed by management to have had an
adverse impact on the Partnership's retail sales volume (excluding acquisitions)
and earnings compared to normal levels for the three months ended September 30,
1998.  September historically accounts for substantially all of the
Partnership's first quarter earnings before interest, taxes, depreciation and
amortization ("EBITDA").  The three months ended September 30, historically
accounts for approximately 4% of the Partnership's annual EBITDA. 

REVENUES.  Revenues increased by $17.8 million or 11.7% to $170.0 million for
the three months ended September 30, 1998, as compared to $152.2 million for the
three months ended September 30, 1997.  This increase was attributable to an
increase in wholesale revenues of $20.5 million or 18.6% to $130.8 million for
the three months ended September 30, 1998, as compared to $110.3 million for the
three months ended September 30, 1997.  This increase was due primarily to the
increase in natural gas and crude oil sales.  The revenues for the retail
business decreased by $2.7 million or 6.5% to $39.2 million for the three months
ended September 30, 1998, as compared to $41.7 million for the three months
ended September 30, 1997.  This decrease was a result of the decrease in volume
described above coupled with a decrease in the average sales price per gallon of
propane.
     

                                    8
<PAGE>

                         CORNERSTONE PROPANE PARTNERS, L.P.
                                          
                      MANAGEMENTS'S DISCUSSION AND ANALYSIS OF
                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS



COST OF PRODUCT SOLD.  Cost of product sold increased by $15.4 million or 12.0%
to $143.3 million for the three months ended September 30, 1998, as compared to
$127.9 million for the three months ended September 30, 1997.  The increase in
cost of product sold was primarily due to the increased natural gas and crude
oil sales described above partially offset by lower propane cost per gallon.  As
a percentage of revenues, cost of product sold increased to 84.3% for the three
months ended September 30, 1997, as compared to 84.0% for the three months ended
September 30, 1996. 

GROSS PROFIT.  Gross profit increased $2.4 million or 9.9% to $26.7 million for
the three months ended September 30, 1998, compared to $24.3 million for the
three months ended September 30, 1997.  Retail per gallon margins for the three
months ended September 30, 1998 were 16% better than last year.  This was
attributable to lower cost of product sold per gallon, partially offset by lower
revenue per gallon.  As a percentage of revenues, gross profit decreased to
15.7% for the three months ended September 30, 1998, as compared to 16.0% for
the three months ended September 30, 1997.  Gross profit from propane businesses
acquired since October 1, 1997 was $1.8 million for the three months ended
September 30, 1998.

OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES.  Operating, general and
administrative expenses increased by $3.1 million or 13.7% to $25.7 million for
the three months ended September 30, 1998, as compared to $22.6 million for
three months ended September 30, 1997.  Approximately $1.6 million, or 52%, of
this increase was attributable to increases in salaries and other operating
expenses resulting from the acquisitions of new businesses and the
correspondingly increased sales volumes discussed above.  As a percentage of
revenues, operating, general and administrative expenses increased to 15.1% for
the three months ended September 30, 1998, as compared to 14.8% for the three
months ended September 30, 1997.


                                     9

<PAGE>

                         CORNERSTONE PROPANE PARTNERS, L.P.
                                          
                      MANAGEMENTS'S DISCUSSION AND ANALYSIS OF
                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                          
                                          

LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES.    Cash used for operating activities during the
three-month period ended September 30, 1998 was $4.8 million.  Cash flow from
operations included a net loss of $9.3 million and non-cash charges of $5.2
million for the period, comprised of depreciation and amortization expense, and
loss on asset sales.  The impact of working capital changes decreased cash flow
by approximately $.7 million.

INVESTING ACTIVITIES.    Cash used in investment activities for the three-month
period ended September 30, 1998 totaled $9.4 million, which was principally
related to Partnership acquisitions and for purchases of plant and equipment.

FINANCING ACTIVITIES.    Cash provided by financing activities was $13.3 million
for the three months ended September 30, 1998, which reflects the $21.8 million
proceeds received from borrowings on the working Capital Facility, offset by
repayments of purchase contract obligations of $1.4 million, and cash
distributions paid to Unitholders of $7.3 million.

FINANCING AND SOURCES OF LIQUIDITY 

     The Operating Partnership's obligations under the Note Agreement under
which its Senior Notes were issued and its Bank Credit Agreement are secured by
a security interest in the Operating Partnership's inventory, accounts
receivable and certain customer storage tanks.  The Note and Bank Credit
Agreements contain various terms and covenants including financial ratio
covenants with respect to debt and interest coverage and limitations, among
others, on the ability of the Operating Partnership and its subsidiary to incur
additional indebtedness, create liens, make investments and loans, enter into
mergers, consolidations or sales of all or substantially all assets and sale
assets.  Generally, so long as no default exists or would result, the
Partnership is permitted to make distributions during each fiscal quarter in an
amount not in excess of Available Cash with respect to the immediately preceding
quarter.  The Operating Partnership was in compliance with all terms and
covenants at September 30, 1998.


                                     10 
<PAGE>

                      CORNERSTONE PROPANE PARTNERS, L.P.

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



YEAR 2000 READINESS DISCLOSURE

     The Year 2000 issue is the result of computer programs using only the last
two digits to indicate the year.  If uncorrected, such computer programs will
not be able to interpret dates correctly beyond the year 1999 and, in some cases
prior to that time (as some computer experts believe), which could cause
computer system failures or other computer errors disrupting business
operations.  Recognizing the potentially severe consequences of the failure to
be Year 2000 compliant, the Partnership's management has developed and
implemented a company-wide program to identify and remedy the Year 2000 issues. 
A project team, consisting of the Partnership's Director of Information Systems
and the Partnership's key IS managers who supervise operations at each of the
Partnership's three main regional facilities in California, Missouri and Texas,
together with the Chief Information Officer of Northwestern Corporation, the
Partnership's parent corporation, was created to manage the company's Year 2000
problems, enabling a smooth transition into the Year 2000.  The project team
reports directly to executive management who have assigned a high priority to
such efforts within the Partnership.

     The scope of the Partnership's Year 2000 readiness program includes the
review and evaluation of (i) the Partnership's information technology (IT) such
as hardware and software utilized in the operation of the Partnership's
business; (ii) the Partnership's non-IT systems or embedded technology such as
micro-controllers contained in various equipment and facilities; and (iii) the
readiness of third parties, including customers, suppliers and other key vendors
to the company, and the electronic data interchange (EDI) with those key third
parties.  If needed modifications and conversions are not made on a timely
basis, the Year 2000 issue could have a material adverse effect on the
Partnership's operations.

     The Partnership is currently using internal and external resources to
identify, correct and test large quantities of lines of application software
code for systems that were developed internally.  Remediation of these systems
is expected to be completed by June 1999 except for the Partnership's Retail
Information System, consisting principally of its billing and accounts
receivable systems, which is already Year 2000 compliant.  Since January 1997,
the Partnership has been converting its old billing system installed at each
customer service center to the new Retail Information System.  Currently,
approximately one-half of the Partnership's customer service centers are running
the new system, with the roll-out to the balance of the centers schedule to be
completed by October 1999.


                                     11

<PAGE>

                  CORNERSTONE PROPANE PARTNERS, L.P.

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS


     Software developed externally is being evaluated for Year 2000 compliance
and will be upgraded or replaced.  In the case of the Partnership's existing
NT-platform-based financial systems and oil and gas applications, it is
anticipated that solutions will be acquired from third party vendors.  In
addition, these systems are being evaluated for meeting current and future
business needs (which is an on-going process), and the Partnership is using this
process as an opportunity to upgrade and enhance its information systems.  The
Partnership anticipates completing such upgrades and replacements as needed by
March 1999.

     In addition to internal Year 2000 remediation activities, the Partnership
is in contact with key suppliers, vendors and customers to assure no
interruption from activities with important third parties.  While none of the
Partnership's products are directly date sensitive, the supply and
transportation of propane gas products are dependent upon companies whose own
systems may need to be Year 2000 compliant.  If third parties do not convert
their systems in a timely manner and in a way compatible with the Partnership's
systems, the arrival of the Year 2000 could have an adverse effect on the
company operations.  The Partnership believes that its actions with key
suppliers, vendors and customers will minimize these risks.  Furthermore, no
single customer accounts for more than 10% of the Partnership's consolidated
gross profits, thus mitigating the adverse risk to the Partnership's business if
some but not all customers are not Year 2000 compliant.  Also, only a minimal
number of transactions are conducted through EDI, which reduces the risk.

     The Partnership's primary focus has been directed at resolving the Year
2000 problem.  While the Partnership expects its internal IT and non-IT systems
to be Year 2000 compliant by the dates specified, the Partnership will be
developing a contingency plan specifying what the Partnership will do if it or
important third parties are not Year 2000 compliant by the required dates.  The
Partnership anticipates that a majority of such contingency plan will be based
on manual  back-up systems, procedures and practices.  The contingency plan is
estimated to be completed by December 1998.

     Through September 1998, the Partnership estimates that incremental costs of
approximately $0.3 million have been incurred and expensed related to Year 2000
issues.  Since many systems are being modified to provide significant enhanced
capabilities, the Year 2000 expenses have not been nor are planned to be
specifically tracked.  The current estimated cost to complete remediation is
expected to be less than $1.0 million.  The Partnership expects that a portion
of these costs will be capitalized, as they are principally related to adding
new software applications and functionality.  Other costs will continue to be
expensed as incurred.


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<PAGE>

     The Partnership's current estimates of the amount of time and costs
necessary to remediate and test its computer systems are based on the facts and
circumstances existing at this time.  The estimates were made using assumptions
of future events including the continued availability of existing resources,
Year 2000 modification plans, implementation success by third-parties, and other
factors.  New developments may occur that could affect the Partnership's
estimates of the amount of time and costs necessary to modify and test its IT
and non-IT systems for Year 2000 compliance.  These developments include, but
are not limited to: (i) the availability and cost of personnel trained in this
area, (ii) the ability to locate and correct all relevant computer codes and
equipment and (iii) the planning and Year 2000 compliance success that key
suppliers, vendors and customers attain.

     In October, 1998, President Clinton signed into law the Year 2000 Readiness
Disclosure Act.  The Partnership intends to obtain the benefits of the Act's
protections by implementing certain procedures described in that Act.

FORWARD-LOOKING STATEMENTS

     The information presented herein may contain certain "forward-looking
statements" within the meaning of the federal securities laws.  The
Partnership's actual future performance will be affected by a number of factors,
risks and uncertainties, including without limitation, weather conditions,
regulatory changes, competitive factors, the Partnership's success in dealing
with the Year 2000 issues and the operations of vendors, suppliers and
customers, many of which are beyond the Partnership's control.  Future events
and results may vary substantially from what the Partnership currently foresees,
and there can be no assurance that the Partnership's actual results will not
differ materially from its expectations.  The Partnership undertakes no
obligation to publicly release any revision to these forward-looking statements
to reflect events or circumstances after the date of such statements or to
reflect the occurrence of anticipated or unanticipated events.

ITEM 5.  OTHER INFORMATION

     The Partnership previously disclosed information regarding its Year 2000
readiness program in its Form 10-K for the year ended June 30, 1998, as amended
(the "Form 10-K").  This disclosure, under the heading "Year 2000" contained in
the Management Discussion and Analysis of Financial Condition and Results of
Operations section of the Form 10-K, is attached as Exhibit 99.1 to the Form
10-Q and is incorporated herein by this reference.  Pursuant to the Year 2000
Information and Readiness Disclosure Act recently signed into law by president
Clinton, the Partnership hereby designates this prior disclosure as a "Year 2000
Readiness Disclosure" under that Act.


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<PAGE>

                     CORNERSTONE PROPANE PARTNERS,L.P.


                       PART II.  OTHER INFORMATION

Item 6 Exhibits and Reports on Form 8-K

      a)  Exhibits:

             (10.5)    Form of Employment Agreements for Messrs. Baxter, 
                       Kittrell, Goedde, DiCosimo and Woods, effective 
                       as of July 1, 1998.

             (27)      Financial Data Schedule

             (99.1)    Year 2000 Readiness Disclosure from the Partnership's 
                       Form 10-K for the year ended June 30, 1998, as amended.
                    
      b)  Reports on Form 8-K:

          None

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<PAGE>


                               SIGNATURE

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


                                        Cornerstone Propane Partners, L.P.
                                        ----------------------------------
                                                  (Registrant)


                                        By:  Cornerstone Propane GP, Inc.
                                             as Managing General Partner


Date:  November 13, 1998                By:     /s/ Ronald J. Goedde           
                                           --------------------------------
                                        Name:  Ronald J. Goedde
                                        Title: Executive Vice President
                                               and Chief Financial Officer



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