CONFORMED
                                
                                
             U.S. SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549
                                
                           FORM 10-QSB
                                
                                
   [X] Quarterly Report Pursuant to Section 13 OR 15(d) of the
                 Securities Exchange Act of 1934
            For the Quarter Ended September 30, 1996
                               or
  [  ] Transition Report Pursuant to Section 13 or 15(d) of the
                 Securities Exchange Act of 1934
                                
                 Commission file number 0-18995
                                
                                
                 INTERLINE RESOURCES CORPORATION
(Exact name of small business issuer as specified in its charter)


          Utah                                    87-0461653
(State or other jurisdiction of                   (I.R.S.
employer incorporation or organization)           identification No.)
                                
                                
          160 West Canyon Crest Road, Alpine, UT  84004
            (Address of principal executive offices)
                                
 Registrant's telephone number, including area code:  (801) 756-3031

 Securities registered pursuant to Section 12(b) of the Exchange
                            Act: None
                                
 Securities registered pursuant to Section 12(g) of the Exchange
                            Act: None


Check whether the Issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the 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____.

Common stock outstanding at November 11, 1996 - 14,074,167 shares
of $.005 par value Common stock.


            DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE>


                           FORM 10-QSB
                 INTERLINE RESOURCES CORPORATION

                        TABLE OF CONTENTS


PART I. - FINANCIAL INFORMATION

Item 1         Financial Statements
Page

          Condensed Consolidated Balance Sheet at
          September 30, 1996 and December 31, 1995

          Condensed Consolidated Statement of Operations for the three
          and nine months ended September 30, 1996 and 1995

          Condensed Consolidated Statements of Cash Flows for
          nine months ended September 30, 1996 and 1995

          Notes to Condensed Consolidated Financial Statements

Item 2    Management's Discussion and Analysis of
          Financial Condition and Results of Operations


PART II. - OTHER INFORMATION

Item 1    Legal Proceedings

Item 2    Changes in the Securities

Item 3    Defaults Upon Senior Securities

Item 4    Submission of Matters to a Vote of Security Holders

Item 5    Other Information

Item 6(a) Exhibits

Item 6(b) Reports on Form 8-K

          Signatures

<PAGE>
                 INTERLINE RESOURCES CORPORATION
                        AND SUBSIDIARIES


                         PART I - ITEM 1

                      FINANCIAL STATEMENTS
                           (UNAUDITED)

                       September 30, 1996








The condensed financial statements included have been prepared by
the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission.  Certain information
and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented
not misleading.  The Company presumes that the user of this
interim financial information has read or has access to the
audited financial statements for the preceding fiscal year----and
in that context, this disclosure is adequate for a fair
presentation of the Company's financial position.

In the opinion of the Company, all adjustments consisting of only
normal recurring adjustments as of September 30, 1996, have been
made.  The results of operations for the interim period are not
necessarily indicative of the results to be expected for the
entire year.


<PAGE>
<TABLE>
                 INTERLINE RESOURCES CORPORATION
                        AND SUBSIDIARIES

                   Consolidated Balance Sheet




<CAPTION>

                                              Sept 30,       Dec  31,
                                                 1996          1995
                                             (unaudited)


Assets
<S>                                         <C>           <C> 
Current assets:
  Cash and cash equivalents                     $165,832    $1,705,219
  Accounts receivable - trade                  3,463,731     2,851,804
  Income taxes receivable                         80,000        80,000
  Inventories                                    113,334       117,272
  Note receivable - current portion               40,200        40,200
  Other current assets                           680,847       786,067

     Total current assets                      4,543,944     5,580,562

Property, plant and equipment                 13,471,666    12,698,402
Accumulated depreciation and depletion        (2,948,296)   (2,237,216)

     Net property, plant & equipment          10,523,370    10,461,186

Note receivable                                  153,333       188,238
Technology and marketing rights                2,010,522     1,953,598
Other assets                                     231,990        95,563

        Total assets                         $17,463,159   $18,279,147

</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.

<PAGE>

<TABLE>
                 INTERLINE RESOURCES CORPORATION
                        AND SUBSIDIARIES

                   Consolidated Balance Sheet

<CAPTION>

                                               Sept 30,      Dec  31,
                                                 1996          1995
                                             (unaudited)
Liabilities and Stockholders' Equity
<S>                                         <C>            <C>
Current liabilities:
  Accounts payable                            $2,345,428    $4,492,790
  Accrued liabilities                            213,663       737,201
  Accrued interest to shareholder                185,355           -
  Current portion of long-term debt              892,770     1,187,991
  Current portion of long-term debt
    - shareholder                              5,030,089           -
  Other current liabilities                      261,160       484,847

     Total current liabilities                 8,928,465     6,902,829

Long-term debt less current maturities         1,896,751     2,463,247
Deferred income                                1,104,609       929,445

     Total liabilities                        11,929,825    10,295,521

Stockholders' equity:
  Preferred stock - $.01 par value.
     25,000,000 shares authorized; 1,000,000
     series A shares authorized; 0 series
     A shares issued                                 -             -
  Common stock - $.005 par value. 100,000,000
     shares authorized; 14,063,167 shares and
     13,951,052 shares issued and outstanding
     at Sept 30, 1996 and December 31, 1995,      70,316        69,755
  Additional paid-in capital                   9,177,822     8,574,383
  Subscription receivable                       (600,000)          -
  Retained earnings                           (3,114,804)     (660,512)

       Total stockholders' equity              5,533,334     7,983,626

       Total liabilities & stockholders'
         equity                              $17,463,159   $18,279,147


</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.

<PAGE>
<TABLE>
                 INTERLINE RESOURCES CORPORATION
                        AND SUBSIDIARIES

         Condensed Consolidated Statement of Operations
                           (Unaudited)
<CAPTION>
                 
                                      Three months ended              Nine months ended
                                          Sept 30,                          Sept 30,
                                         1996          1995           1996          1995
<S>                                 <C>            <C>           <C>            <C>
Revenue                              $4,017,977     $5,562,928    $13,346,070    $12,310,304

Direct costs                          3,363,041      3,772,856     11,610,817      8,883,516

Gross margin                            654,936      1,790,072      1,735,253      3,426,788

Selling, general and
   administrative expenses              640,350        690,560      2,224,462      1,995,918
Research and development                 27,798         52,065        372,325        269,287
Depreciation, depletion
  and amortization                      306,354        221,131        899,610        521,789

 Income (loss) from operations         (319,566)       826,316     (1,761,144)       639,794

Other income (expense) net
  Interest income (expense)             (60,296)        (69,981)     (179,402)      (204,662)
  Interest expense to shareholder      (108,790)            -        (185,355)           -
  (Loss) from investment               (207,804)            -        (365,443)           -
  Litigation settlement                     -          (180,000)          -         (180,000)
  Gain from sale of assets                6,206             -          37,051            -

Income (loss) before income tax        (690,250)        576,335    (2,454,293)       255,132

Income tax  provision
    Current                                 -              -              -              -
    Deferred                                -           66,000            -           66,000

  Total tax (benefit)                         0         66,000              0         66,000

Net Income (loss)                     ($690,250)      $510,335    ($2,454,293)      $189,132


 Income (loss) per common share:         ($0.05)         $0.04         ($0.18)         $0.01

Weighted average shares o/s          14,063,167     13,950,200     13,991,090     13,851,435
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.

<PAGE>
<TABLE>
                 INTERLINE RESOURCES CORPORATION
                        AND SUBSIDIARIES
              Consolidated Statement of Cash Flows
                           (Unaudited)
<CAPTION>

                                                 Nine months ended
                                                      Sept 30,
                                               1996               1995
<S>                                       <C>                <C>
Cash flows from operating activities:

 Net income (loss)                         ($2,454,293)         $189,132
 Adjustment to reconcile net income to net
   Cash provided by operating activities:
   Depreciation, depletion and
     amortization                              899,610           521,789
   (Gain) loss on disposal of asset            (37,051)              -
   Common stock issued for services              4,000               -
   (Increase) decease in:
      Accounts receivable                     (611,927)         (841,984)
      Other assets                             105,219          (167,402)
      Prepaid expenses                             -                 -
      Note receivable                           34,905               -
      Inventories                                3,938           (73,811)
   Increase (decease) in:
      Accounts payable                      (2,147,362)          568,861
      Accrued liabilities                     (338,183)          150,453
      Deferred income taxes                        -              66,000
      Deferred income                          175,164          (267,737)
      Other current liabilities               (223,687)          950,620

          Net cash provided (used) by
            operating activities            (4,589,667)        1,095,921

Cash flows from investing activities:
   Proceeds from sale of assets                 69,827               -
   (Increase) in notes receivable
     from shareholder                              -              18,060
   (Increase) decrease in general
     partnership                              (136,427)          112,320
   Purchase of technology and marketing
     rights (nets)                             (56,924)           (8,326)
   Purchase of property, plant and
     equipment                                (994,568)       (2,293,575)

      Net cash (used in) investing
        activities                          (1,118,092)       (2,171,521)
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.

<PAGE>
<TABLE>
                 INTERLINE RESOURCES CORPORATION
                        AND SUBSIDIARIES
              Consolidated Statement of Cash Flows
                           (Unaudited)
<CAPTION>

                                                   Nine months ended
                                                        Sept 30,
                                                1996              1995
<S>                                        <C>               <C>
   Cash flows from financing activities:
      Proceeds from line of credit                 -               9,554
      Proceeds from debt obligations            90,863           422,265
      Proceeds from debt obligations                             
        - shareholder                        4,780,089               -
      Proceeds from issuance of                                      
        common stock                               -           1,298,780
      Payment on long-term debt               (702,580)         (581,515)

      Net cash provided by financing
        activities                           4,168,372         1,149,084

   Net increase (decrease) in cash          (1,539,387)           73,484

   Cash, beginning of year                   1,705,219         2,200,035

   Cash, ending of quarter                    $165,832        $2,273,519

</TABLE>
   Non-Cash Investing and Financing Activities
      On June 21, 1996, the Company issued to Genesis Petroleum
108,115 shares of common stock valued at $600,000 in exchange for
a subscription receivable. Per the agreement dated June 21, 1996,
the Company was required to purchase Genesis Petroleum's interest
in the Salt Lake refinery by October 17, 1996.  The purchase
price of $2.8 million was reduced to $2.2 million for the value of
the stock issued. The Company has not been able to complete the
required purchase.



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

<PAGE>
                 INTERLINE RESOURCES CORPORATION
                        AND SUBSIDIARIES
           Notes to Consolidated Financial Statements

Oil and Gas Accounting
     The Company uses the "successful efforts" method to account
for oil and gas operations. The use of this method results in the
capitalization of costs related to acquisition, exploration and
development of revenue producing oil and gas properties. The
costs of unsuccessful exploration efforts are expensed in the
period in which they are determined unrecoverable by future
revenues. Provision for depreciation and depletion of oil and gas
properties is based on the units of production method, based on
proven oil and gas reserves.
     Segment information concerning oil and gas reserves and
related disclosures are not presented since they are not
significant in relation to the financial statements taken as a
whole.

Construction Accounting
     Construction revenues are recognized on the percentage-of-
completion method of accounting. Profits on contracts are
recorded on the basis of "cost-to-cost" determination of
percentage of completion on individual contracts, commencing when
progress reaches a point where cost and estimate analysis and
other evidence of trend are sufficient to estimate final results
with reasonable accuracy. That portion of the total contract
price which is allocable to contract expenditure incurred and
work performed is accrued as earned income. At the time a loss on
contract becomes known, the entire amount of the estimated
ultimate loss is accrued. Claims for additional revenue are
recognized when settled. The aggregate of cost incurred and
income recognized on uncompleted contracts in excess of related
billings is shown as a current asset, and the aggregate of
billings on uncompleted contracts in excess of related costs
incurred and income recognized is shown as a current liability.

Inventories
     Inventories consisting of supplies and miscellaneous
material are recorded in the financial statements at their
aggregate lower or cost (first-in, first-out) or market.

Income per Common Share
     Income per share of common stock is calculated based on the
weighted average number of common shares outstanding during the
period.  The weighted average shares for the three months ended
September 30, 1996 and 1995 is 14,063,167 and 13,950,200,
respectively. Fully diluted income per share information is not
presented as the per share amounts are not different from
presented per share amounts.
                                
<PAGE>
                 INTERLINE RESOURCES CORPORATION
                        AND SUBSIDIARIES
           Notes to Consolidated Financial Statements

Property, Plant and Equipment
     Property, plant and equipment are carried at cost.
Depreciation is computed using straight-line and accelerated
methods. When assets are retired or otherwise disposed of, the
cost and related accumulated depreciation are removed from the
accounts, and any resulting gain or loss is recognized as income
for the period. The cost of maintenance and repairs is charged to
income as incurred; significant renewals and betterments are
capitalized. Deductions are made for retirements resulting from
renewals or betterments. The estimated useful lives are as
follows:
               Building and equipment        15-25 years
               Equipment and vehicles         3-10 years
Amortization
     The Company has amortized its marketing and technology
rights for the used oil refining process over seventeen years.
This period approximates the assets' useful lives.

Cash Equivalents
     For purposes of the consolidated statement of cash flows,
cash includes all cash and investments with original maturities
to the Company of three months or less.

Convertible Debt
     During 1994, the Company issued a $250,000 senior
convertible note payable to a shareholder. The note bears
interest at 10% and was due in a lump sum on September 1, 1996.
After December 31, 1994, the note was convertible in full to
67,750 shares of the Company's restricted common stock at any
time before the due date, at the option of the note holder.

Senior Secured Notes
     On February 29, 1996 the Company obtained $1,500,000 in a 6%
senior secured note from a shareholder. The obligation was due
September 1, 1996. In the event of a default on the note, the
principal can be converted to shares of the Company's common
stock at the price of the lesser of $3.20 per share or 80 percent
of the average closing price for the Company's shares for the
five consecutive trading days preceding the date of conversion.
The note was secured by all of the issued and outstanding stock
of two subsidiaries, Interline Energy Services and Gagon
Mechanical Contractors.
     On July 19, 1996, the Company obtained $1,000,000 in a 9.5%
senior secured note from the same shareholder. As of November 11,
1996,  the Company has used $780,089 of the $1,000,000.  The note
was due September 1, 1996. The note is secured by the outstanding
shares of Interline Energy Services, Gagon Mechanical and
Interline Hydrocarbon.
<PAGE>
                                
                 INTERLINE RESOURCES CORPORATION
                        AND SUBSIDIARIES
           Notes to Consolidated Financial Statements

     As of November 11, 1996, the Company has not paid the
$2,530,089 in principal amount (or any accrued interest thereon)
in notes due September 1, 1996 from a shareholder (see two notes
above and see section above titled "Convertible Debt"). As a
result, loans from this person are currently in default. The
lender has indicated to Interline that he does not currently
intend to take remedial action against Interline, and the Company
is attempting to renegotiate the terms of these loans, and there
is no assurance it will be successful.

     On May 15, 1996, the Company obtained $2,500,000 in a 9.25%
senior secured note from the same shareholder as the $1,500,000
note. The note is due January 15, 1998 and is secured by the
outstanding shares of Interline Energy Services and Gagon
Mechanical. The loan may be converted, between August 15 and
December 31, 1996, into shares of the Company's common stock at
the lesser of $3.12 per share or 80 percent of the average
closing price for shares of the Company's common stock for five
consecutive trading days preceding the date of conversion. As
additional consideration for the shareholder making the Loan to
the Company, the Company has issued a Warrant to purchase up to
250,000 shares of common stock at $3.90 per share. By virtue of
cross default provisions in this note, an event of default under
this note has occurred and its holder has a right to accelerate
the Company's obligation to repay principal and interest at any
time.

Common Stock
     During the year ended December 31, 1994 as a condition for a
private placement of the Company's restricted common stock, the
Company entered into an agreement which contains certain
restrictive covenants.  The Company may not sell its restricted
common stock for a price less than $4.50 or issue options or
warrants of equal effect.  The Company also may not repay any
related party debt during this period.  These covenants may be
waived upon obtaining written consent of the other party in the
agreement.

Profit Sharing Plan
     During 1995, the Company commenced a defined contribution
retirement plan, which qualifies under code section 401(k), for
all eligible employees.  Employees who work at least 1,000 hours
during a year and are over age 21 are eligible to participate.
Employees may contribute up to fifteen percent of their annual
compensation subject to regulatory limitations.  The Company also
contributes a discretionary amount on behalf of the participating
employees.  The company made contributions of $1,292 for the
three months ended September 30, 1996 and $2,218 for the three
months ended December 31, 1995.

Investments
     Investments in less than majority owned entities are
accounted for using the equity method. Investments are included
in the financial statements under the caption of "Other Assets."

Reclassification
     Certain amounts in the prior years financial statements have
been reclassified to conform to the 1996 presentation.
<PAGE>
                         PART I - ITEM 2

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

     Interline Resources Corporation (the "Company"), a Utah
corporation, is engaged in four areas of business: oil and gas,
construction, manufacturing and used oil refining.  During 1995,
the Company formed three subsidiaries to operate the four
different areas of business.  Interline Hydrocarbon Inc., a
Wyoming corporation, is the subsidiary that owns the used oil
refining technology.  Interline Energy Services, Inc., a Wyoming
corporation, manages the oil and gas operations in Utah and
Wyoming. Gagon Mechanical, a Utah corporation, participates in
commercial and industrial construction and manufactures
refineries for the Company's used oil refining technology.

     Interline Energy Services - Oil and Gas Operations. The
Company has been engaged in the oil and gas industry since 1990.
Its oil and gas operations primarily involve natural gas
gathering, natural gas processing, a crude oil pipeline
operation, propane retail sales and oil well production. The
Company's main oil and gas operations are located in east-central
Wyoming and eastern Utah. Wyoming operations, located near
Douglas, Wyoming, include the Well Draw Gas Plant, Interline
Crude Gathering Company, a 20.4% interest in the Hatcreek
Partnership and various producing oil and gas wells. The
Company's Utah operations are located near Roosevelt, Utah, and
include the Monument Butte Gathering System and Roseland Wells.
Presently, the Company is seeking to sell some of the assets of
Interline Energy Services. A majority of the funds from the sale
of the assets are planned to be used to pay a portion of existing
debt.

     Gagon Mechanical - Industrial and Commercial Construction.
Gagon Mechanical Contractors, a wholly owned subsidiary of the
Company, specializes in mechanical system construction, such as
heating, ventilation, air conditioning, process piping and
plumbing, including piping and controls for hydrocarbon and
chemical products. Gagon's work includes certified pressure
vessel design and construction under regulated American Society
of Mechanical Engineers (ASME) "U" and "R" stamps. Boiler piping
work is done under ASME "PP" stamp regulations. Teams specialize
in piping, structural steel, pressure vessels, instrumentation
and controls, insulation and electrical work.

     Gagon Mechanical - Manufacturing. Part of Gagon's
construction revenues include the manufacture of refineries for
Interline Hydrocarbon. Gagon has the ability to build each
refinery from design and engineering to start up and operation.
Gagon supervised the construction of the Dubai refinery, and has
built and installed refineries in Salt Lake City for Genesis
Petroleum - Salt Lake City L.L.C. and in Stoke-on-Trent, England
for the Interline (UK) joint venture. Currently, Gagon is
installing a refinery in South Korea for Dukeun Industrial
Company and manufacturing a refinery for Transpacific Industries
for location in Australia.

      Interline Hydrocarbon - Used Oil and Low-Grade Hydrocarbon
Refining.  In January 1993, the Company acquired the exclusive
license to a patented reprocessing technology with the right to
exclusively manufacture, market, use, license, sub-license and
fully commercialize the patented technology as it relates to all
areas and facets of the field of hydrocarbons. The Company
subsequently acquired the patent rights relating to the
technology. As of November 11, 1996, the Company had two plants
in production trial stage: a refinery for Genesis Petroleum,
located in Salt Lake City and a refinery in Stoke-on-Trent,
England. On June 21, 1996, Interline announced it had reacquired
the rights to the United States, Canada and Mexico from Genesis
Petroleum, a subsidiary of Quaker State Inc. As a result,
Interline will purchase Genesis Petroleum's interest in the joint
venture for $2.8 million. The Company issued Genesis 108,115
shares of its common stock valued at $600,000 in exchange for a
subscription receivable. The purchase price of $2.8 million was
reduced to $2.2 million for the value of the stock issued.
According to the agreement announced on June 21, Interline was
required to pay the $2.2 million by October 17, 1996. Interline
has not made the payment and is currently negotiating with
Genesis Petroleum for a resolution to the matter; however, there
can be no assurance the Company will be successful in these
negotiations. Interline is now pursuing contract possibilities in
North America. Already, Interline has signed letters of intent
with Research Oil Company of Ohio, Sani Mobile of Montreal,
Canada, and Lorco Petroleum Services of New Jersey.

      Although management continues to evaluate the best marketing
strategy for the refining process, the current approach is to
build the refineries through Gagon, and sell and install them at
locations throughout the world. The Company anticipates revenues
to come from exclusivity fees, engineering fees and ongoing
royalties and from profit generated through ownership in various
refineries throughout the world.
                  
Results of Operations

     The following analysis of the financial condition and
results of operations should be read in conjunction with the
Financial Statements and Notes thereto, included elsewhere in
this report.

Comparison of nine months ending September 30, 1996 and 1995

Total Revenues
     Revenues increased $1,035,766 or 8.41%, to $13,346,070 for
the nine months ended September 30, 1996 as compared to
$12,310,304 for the nine months ended September 30, 1995.  This
revenue increase included a $2,018,843 or 45.16%, increase in oil
and gas revenues, a $249,525, or 5.94%, increase in construction
revenues, a $350,906, or 14.70%, decrease in manufacturing
revenues and a $881,696 or 70.54%, decrease in used oil refining
revenues. The Company's total revenues, on a segment basis, for
nine months ended September 30, 1996 and 1995 were as follows:

      Nine Month Revenues Ended September 30, 1996 and 1995

                        
                    1996           %      1995          %
                                                
Oil and Gas       $6,489,538  48.63%   $4,470,695  36.32%
Construction       4,452,076  33.36%    4,202,551  34.14%
Manufacturing      2,036,152  15.26%    2,387,058  19.39%
Used oil refining    368,304   2.75%    1,250,000  10.15%

Total Revenue    $13,346,070    100%  $12,310,304    100%


Comparison of three months ending September 30, 1996 and 1995

Total Revenues
     Revenues decreased $1,544,951, or 27.77%, to $4,017,977 for
the three months ended September 30, 1996 as compared to
$5,562,928 for the three months ended September 30, 1995.  This
revenue decrease included a $745,307 or 46.82%, increase in oil
and gas revenues, a $1,195,653, or 60.07%, decrease in
construction revenues, a $315,011, or 32.12% decrease in
manufacturing revenues and a $779,594, or 77.96% decrease in used
oil refining revenues. The Company's total revenues, on a segment
basis, for three months ended September 30, 1996 and 1995 were as
follows:

     Three Month Revenues Ended September 30, 1996 and 1995
                                
                             
                     1996          %      1995          %
                                                
Oil and gas       $2,337,008  58.16%   $1,591,701   28.61%
Construction         794,721  19.78%    1,990,374   35.78%
Manufacturing        665,842  16.57%      980,853   17.63%
Used Oil Refining    220,406   5.49%    1,000,000   17.98%

Total Revenue     $4,017,977    100%   $5,562,928     100%
                                                
                                
                      Oil and Gas Revenues
      Oil and gas revenues, contributed approximately 58.16% of
total revenues for the three months ended September 30, 1996, as
compared to approximately 28.61% for the three months ended
September 30, 1995. Revenues increased $745,307, or 46.82%, to
$2,337,008 for the three months ended September 30, 1996 as
compared to $1,591,701 for three months ended September 30, 1995.
      Wyoming operations revenue increased $488,936, or 39.59 %,
to $1,723,832 for the three months ended September 30, 1996 as
compared to $1,234,896 for the three months ended September 30,
1995. The increase in revenues was mainly attributed to several
new NGL liquids purchase contracts entered into during 1996.
      Utah operations revenue increased $256,371 or 71.85%, to
$613,176 for the three months ended September 30, 1996 as
compared to $356,805 for the three months ended September 30,
1995. This increase was attributed to an 26.02% increase in
residue sales price and an 45.49% increase in sales volume. In
1996, the Company has connected approximately 28 new wells to its
gathering system, compared to 30 new wells for 1995.
                                
                      Construction Revenues
      Construction revenues contributed 19.78% of total revenues
for the three months ended September 30, 1996 compared to 35.78%
for the three months ended September 30, 1995. This was a result
of a decrease in revenues of $1,195,653, or 60.07%, to $794,721
for the three months ended September 30, 1996 compared to
$1,990,374 for the three months ended September 30, 1995.
                                
      The $1,195,653 decrease was mainly attributed to the
Company's focus to downsize the commercial and industrial
operations and put more emphasis on its manufacturing operations.
As of September 30, 1996, uncompleted commercial and industrial
work under contract was $844,584 compared to $5,568,614 as of
September 30, 1995.
                                
                     Manufacturing Revenues
      Manufacturing revenues contributed approximately 16.57% of
total revenues for the three months ended September 30, 1996
compared to 17.63% for the three months ended September 30, 1995.
These revenues decreased $315,011, or 32.12%, to $665,842 for the
three months ended September 30, 1996 compared to $980,853 for
the three months ended September 30, 1995. As of September 30,
1996, uncompleted work under contract related to manufacturing
was $3,326,142 compared to $537,353 for September 30, 1995.
                                
                   Used Oil Refining Revenues
      Used oil refining revenues contributed 5.49% of total
revenues for the three months ended September 30, 1996 compared
to 17.98% for the three months ended September 30, 1995. This was
a result of a decrease of $779,594, or 77.96%, to $220,406 for
the three months ended September 30, 1996 compared to $1,000,000
for the three months ended September 30, 1995. The $779,594
decrease was mainly attributed to the Company receiving a one-
time payment of $1,000,000 for an exclusive license agreement in
July 1995.
      If the Company's used oil refinery operations proceed
pursuant to current agreements, the Company anticipates that
future revenues will come from the sale of refineries, ongoing
royalties from sublicense agreements on a per gallon processed
basis and profits from joint venture ownership in refineries.
                                
     Direct Costs. Direct costs decreased $409,815, or 10.86%, to
$3,363,041 for the three months ended September 30, 1996 compared
to $3,772,856 for the three months ended September 30, 1995. The
decrease of $409,815 for the three months ended September 30,
1996 was mainly attributed to a decrease in the Company's total
revenues. As a percent of revenues, direct costs increased to
83.70% for the three months ended September 30, 1996 compared to
67.82% for the three months ended September 30, 1995. This
percent of revenue increase is mainly attributed to the Company's
new NGL liquids purchase contracts which yield lower gross
margins.  The  Company also experienced cost overruns of $203,379
on two large commercial contracts. These overruns were mainly
attributed to an increase in labor costs in the Salt Lake area.
                                
     Selling, General and Administrative. Selling, general and
administrative expenses decreased $50,210, or 7.27%, to $640,350
for three months ended September 30, 1996 compared to $690,560
for three months ended September 30, 1995. As a percent of
revenues, selling, general and administrative expenses were
15.94% for the three months ended September 30, 1996 compared to
12.41% for the three months ended September 30, 1995.  These
expenses consisted principally of salaries and benefits, travel
expenses, legal, information technical services and
administrative personnel of the Company. Also included are
outside legal and accounting fees, and expenses associated with
computer equipment and software used in the administration of the
business.
                                
     Research and Development. Research and development expenses
decreased $24,267 or 46.61%, to $27,798 for three months ended
September 30, 1996 compared to $52,065 for the three months ended
September 30, 1995. As a percent of revenues, research and
development expenses decreased to .69% for the three months ended
September 30, 1996 compared to .94% for the three months ended
September 30, 1995.
     Research and development expenses as of September 30, 1996
were primarily attributable to development and enhancement of the
Company's new hydrocarbon refining technology. These expenses
both in absolute dollars and as a percentage of revenue, reflect
additions to the Company's engineering staff and related costs
required to support its continued emphasis on developing and
testing its new hydrocarbon re-refining technology.  The Company
believes that continued investment in research and development is
critical to its future growth and profitability. The Company
therefore expects that research and development expenses will
continue in future periods.
                                
     Depreciation and Amortization. Depreciation and amortization
expenses increased $85,223, or 38.54%, to $306,354 for the three
months ended September 30, 1996 compared to $221,131 for the
three months ended September 30, 1995. As a percent of revenues,
depreciation and amortization expenses increased to 7.62% for the
three months ended September 30, 1996 compared to 3.98% for the
three months ended September 30, 1995.
                             
                            
Liquidity and Capital Resources
                                
    Sources of liquidity for the Company include revenues from
oil and gas operations, construction operations, manufacturing
operations and revenues from sale of hydrocarbon refining
technology and rights. Management believes that the Company's
cash from operating activities is adequate to meet its operating
needs but not adequate to meet capital and current debt
obligation needs for the foreseeable future. In an effort to
increase future cash flow from operating activities and minimize
expenses, the Company has undergone some operations personnel
changes and corporate restructuring.  Some of these changes have
been reflected in the current quarter. The full impact of these
changes will be reflected in future quarters. Also, the Company
signed an agreement with Transpacific Industries of Australia in
September 1996, and has started construction on a $3.4 million
used oil refinery. The refinery is scheduled to be shipped to the
site in Australia in April 1997.
                                
     As of November 11, 1996, the Company has not paid the
following three Senior Secured notes due to a shareholder
totaling $2,530,089 and $185,355 in interest due September 1,
1996.  As a result, loans from this person are currently in
default. (An event of default under another $2.5 million note
(see IV) has occurred, which permits acceleration of the
Company's obligation to repay the principal and interest.) The
lender has indicated to Interline that he does not currently
intend to take remedial action against Interline, and the Company
is attempting to renegotiate the terms of these loans.
                                
I.   During 1994, the Company issued a $250,000 senior
     convertible note payable to a shareholder. The note bears
     interest at 10% and was due on September 1, 1996. After
     December 31, 1994, the note is convertible in full to 67,750
     shares of the Company's restricted common stock at any time
     before the due date, at the option of the note holder.
                                
II.  On February 29, 1996 the Company obtained $1,500,000 in a 6%
     senior secured note from the same shareholder.  The
     obligation is due September 1, 1996. In the event of a
     default on the note the principal can be converted to shares
     of the Company's common stock at the price of the lesser of
     $3.20 per share or 80 percent of the average closing price
     for the Company's shares for the five consecutive trading
     days preceding the date of conversion. The note was secured
     by all of the issued and outstanding stock of two
     subsidiaries, Interline Energy Services and Gagon Mechanical
     Contractors.
                                
III. On July 19, 1996, the Company obtained $1,000,000 in a 9.5%
     senior secured note from the same shareholder. As of August
     12, 1996 the Company has used $780,089 of the $1,000,000.
     The note is due September 1, 1996. The note is secured by
     the outstanding shares of Interline Energy Services, Gagon
     Mechanical and Interline Hydrocarbon.
                                
IV.  On May 15, 1996,  the Company obtained $2,500,000 in a 9.25%
     senior secured note from the same shareholder as above. The
     note is due January 15, 1998 and is secured by the
     outstanding shares of Interline Energy Services and Gagon
     Mechanical. The loan may be converted, between August 15 and
     December 31, 1996, into shares of the Company's common stock
     at the lesser of $3.12 per share of 80 percent of the
     average closing price for shares of the Company's common
     stock for five consecutive trading days preceding the date
     of conversion. As additional consideration for the
     shareholder making the Loan to the Company, the Company has
     issued a Warrant to purchase up to 250,000 shares of common
     stock at $3.90 per share.
                                
     Presently, the Company is seeking to sell some of the assets
of Interline Energy Services to satisfy a portion of existing
debt. In July, the Company signed a letter of intent to sell the
Well Draw Gas Plant and the crude oil pipeline to a major
operator of gas pipeline and processing facilities in the western
United States. However, the sale was not completed. The Company
is currently negotiating with other companies regarding the sale
of those assets. The associated properties contributed about 21
percent of total revenues and about 16 percent of gross margin
during the year ended December 31, 1995. A majority of the funds
from the sale of the assets are planned to be used to pay a
portion of existing debt from the shareholder. The sale will also
reduce overhead expenses as part of corporate restructuring.
                                
    Genesis Petroleum, as part of the terms of an exclusive
license agreement, decided not to continue with its exclusive
North American rights. As a result, Interline will purchase
Genesis Petroleum's interest in the joint venture for $2.8
million. The Company issued Genesis 108,115 shares of its common
stock valued at $600,000 in exchange for a subscription
receivable. The purchase price of $2.8 million was reduced to
$2.2 million for the value of the stock issued. As a result,
Interline has reacquired the rights to North America and is
pursuing potential contracts. Interline has already signed
nonbinding letters of intent to build a refinery each in
Cleveland, Montreal and New Jersey.
                                
    As of November 11, 1996 the Company was unable to pay the
approximately $2.2 million required to be paid to Genesis
Petroleum, Inc. on October 17, 1996, as required by a June 19,
1996 agreement between the companies. Under this agreement,
Interline was to make this payment in exchange for Genesis'
interest in the Salt Lake City refinery. Interline is engaged in
discussions with Genesis regarding a possible resolution of the
situation; however, there can be no assurance that any agreement
will be reached.
                                
    If the Company is unable to restructure its past due
obligations or sell sufficient assets or raise additional
financing, then there can be no assurance that the Company will
be able to continue its current operations, and the Company may
be compelled to consider filing under Chapter 11 of the federal
bankruptcy laws. In any event, the Company may also need to raise
additional financing in order to fund its current operations,
depending upon its operating results, and notes that it has
required financing for such purposes in the past.
                                
    In the event management elects to participate in a joint
venture in owning and operating refining plants, the Company
would need to raise additional sums through borrowing or equity
financing. Additionally, it is Management's intent that when
potential purchasers of a refining plant place an order, the
payment terms will be tailored to provide construction funds to
build the plants.
                                
Material Changes to the Balance Sheet
                                
    The following represents material changes affecting the
balance sheet as of September 30, 1996 as compared to the balance
sheet as of December 31, 1995.
                                
    Current Assets. Current assets decreased to $4,543,944 as of
September 30, 1996 from $5,580,562 as of December 31, 1995. The
$1,036,618 decrease in current assets was attributed to the
following: a decrease in cash and cash equivalents of $1,539,387
primarily from the Company's current year loss, an increase of
$611,927 in accounts receivable, a decrease of $3,938 in
inventories and a decrease of $105,220 in other assets attributed
to cost plus earning in excess of billings on construction
contracts.
                                
    Property, Plant and Equipment. Net property, plant and
equipment increased to $10,523,370 as of  September 30, 1996 from
$10,461,186 as of December 31,1995. The $62,184 increase was
attributed to capital expenditures of $994,567, a decrease due to
current year depreciation of $899,612 and a decrease of $32,771
due to the sale of assets.
                                
    Other Assets: Other assets increased to $2,395,845 as of
September 30, 1996 from $2,237,399 as of December 31, 1995.  The
$158,446 increase was attributed to a decrease in note receivable
of $34,905, an increase of $56,924 in technology and marketing
rights and an increase of $136,427 in other assets.
                                
    Current Liabilities.  Current liabilities increased to
$8,928,465 as of September 30, 1996 from $6,902,829 as of
December 31, 1995. The $2,025,636 increase in current liabilities
was attributed to a decrease of $2,147,362 in accounts payable
which represents payments to vendors, a decrease of $523,538 in
accrued liabilities attributed to settlement payments made to
Phillips Petroleum, an increase of $185,355 in accrued interest
due to a shareholder, a decrease of $295,221 due to the
reclassification of current portion of long-term debt and capital
lease obligations, an increase of $5,030,089 in current portion
of long-term debt due to a shareholder, a decrease of $223,687 in
other current liabilities attributed to billing in excess of
cost and earned profit on construction contracts.
                                
     Non-Current Liabilities.  Non-current liabilities decreased
to $3,001,360 as of September 30, 1996 from $3,392,692 as of
December 31, 1995. The $391,332 decrease was attributed to a
decrease of $295,221 from reclassification of current portion of
long term debt and capital lease obligations, a decrease of
$271,275 from principle reduction of debt and capital lease
obligations and an increase in deferred income of $175,164.
                                
     Total Stockholders' Equity. Total stockholders' equity
decreased to $5,533,334 as of September 30,1996 from $7,983,626
as of December 31, 1995. The $2,450,292 decrease in equity was
attributed to the issuance of common stock for services of $4,000
and the current year net loss of $2,454,292.
                                
     Inflation
     The Company's business and operations have not been
materially affected by inflation during the past three years and
the current calendar quarter. The Company believes that inflation
will not materially nor adversely impact its business plans for
the future.
                   PART II - OTHER INFORMATION
                                
Item 1.   Legal proceedings
                                
    The lawsuit with Basin Exploration, Inc. disclosed in
previous filings with the SEC was settled in November 1996. As
part of the settlement, the gas purchase contracts between Basin
and the Company are terminated, and the Company conveyed to Basin
about 19 miles of gas gathering pipeline in the Well Draw area in
east-central Wyoming. The Company believes the settlement does
not materially affect the Company's future operations or revenue.
                                
   Genesis Petroleum has filed a lawsuit against the Company
for a breach of contract by the Company. Interline agreed to pay
$2.8 million for Genesis' interest in a used oil refinery in Salt
Lake City by October 17, 1996. The Company issued Genesis 108,115
shares of its common stock valued at $600,000 in exchange for a
subscription receivable. The purchase price of $2.8 million was
reduced to $2.2 million for the value of the stock issued. The
Company is engaged in discussions with Genesis regarding a
possible resolution of the situation; however, there can be no
assurance that any agreement will be reached.
                                
Item 2.   Changes in Securities:
              None
                                
Item 3.   Defaults Upon Senior Securities:
                                
    As of November 11, 1996, the Company has not paid the
following three Senior Securities notes due to a shareholder
totaling $2,530,089 and $185,355 in interest due September 1,
1996.  As a result, loans from this person are currently in
default. The lender has indicated to Interline that he does not
currently intend to take remedial action against Interline, and
the Company is attempting to renegotiate the terms of these
loans.
                                
                                
I.   During 1994, the Company issued a $250,000 senior
     convertible note payable to a shareholder. The note bears
     interest at 10% and was due on September 1, 1996. After
     December 31, 1994, the note is convertible in full to 67,750
     shares of the Company's restricted common stock at any time
     before the due date, at the option of the note holder.
                                
II.  On February 29, 1996 the Company obtained $1,500,000 in a 6%
     senior secured note from a shareholder. The obligation is
     due September 1, 1996. In the event of a default on the note
     the principal can be converted to shares of the Company's
     common stock at the price of the lesser of $3.20 per share
     or 80 percent of the average closing price for the Company's
     shares for the five consecutive trading days preceding the
     date of conversion. The note was secured by all of the
     issued and outstanding stock of two subsidiaries, Interline
     Energy Services and Gagon Mechanical Contractors.
                                
III. On July 19, 1996, the Company obtained $1,000,000 in a 9.5%
     senior secured note from the same shareholder. As of August
     12, 1996 the Company has used $780,089 of the $1,000,000.
     The note is due September 1, 1996. The note is secured by
     the outstanding shares of Interline Energy Services, Gagon
     Mechanical and Interline Hydrocarbon.
                                
IV.  On May 15, 1996,  the Company obtained $2,500,000 in a 9.25%
     senior secured note from the same shareholder as above. The
     note is due January 15, 1998 and is secured by the
     outstanding shares of Interline Energy Services and Gagon
     Mechanical. The loan may be converted, between August 15 and
     December 31, 1996, into shares of the Company's common stock
     at the lesser of $3.12 per share of 80 percent of the
     average closing price for shares of the Company's common
     stock for five consecutive trading days preceding the date
     of conversion. As additional consideration for the
     shareholder making the Loan to the Company, the Company has
     issued a Warrant to purchase up to 250,000 shares of common
     stock at $3.90 per share. By virtue of cross default
     provisions in this note, an event of default under this note
     has occurred, and its holder has a right to accelerate the
     Company's obligation to repay principal and interest at any
     time.
                                
Item 4.   Submission of Matters to a Vote of Security Holders:
          None
                                
Item 5.   Other Information:
          The Company has been notified by the American Stock Exchange
          that the Exchange is reviewing the Company's continued listing
          eligibility, since it has fallen below guidelines for continued
          listing on the Emerging Company Marketplace of the Exchange. The 
          Company is working with the American Stock Exchange for a resolution
          of this matter; however, there is no assurance that Interline will 
          continue to be listed on the exchange.
        
Item 6(a).Exhibits
          None
                                
Item 6(b).Form 8-K
          None
                                
                                
                           SIGNATURES

     In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Dated:  November 11, 1996
                         INTERLINE RESOURCES CORPORATION
                         (Registrant)


                         By:/s/ Michael R. Williams
                         Michael R. Williams, President
                         and Chief Executive Officer
                         Principal Executive Officer
                         Director


                         By:/s/ Mark W. Holland
                         Mark W. Holland, Chief Financial Officer