SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For the quarterly period ended June 30, 2004 or

For the transition period from              to             

Commission file number 1-9356

BUCKEYE PARTNERS, L.P.

Not Applicable

     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 o

     Indicate by check mark whether the registrant is an accelerated filer as defined in Exchange Act 12b-2. Yes x     No o

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

BUCKEYE PARTNERS, L.P.

INDEX

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Part I. Financial Information

Item 1. Condensed Consolidated Financial Statements

Buckeye Partners, L.P.

See notes to condensed consolidated financial statements.

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Buckeye Partners, L.P.

See notes to condensed consolidated financial statements.

2

Buckeye Partners, L.P.

See notes to condensed consolidated financial statements.

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BUCKEYE PARTNERS, L.P.

1. BASIS OF PRESENTATION

     In the opinion of management, the accompanying condensed consolidated financial statements of Buckeye Partners, L.P. (the “Partnership”), which are unaudited except that the Balance Sheet as of December 31, 2003 is derived from audited financial statements, include all adjustments necessary to present fairly the Partnership’s financial position as of June 30, 2004, along with the results of the Partnership’s operations for the three and six month periods ended June 30, 2004 and 2003 and its cash flows for the six months ended June 30, 2004 and 2003. The results of operations for the three and six months ended June 30, 2004 are not necessarily indicative of the results to be expected for the full year ending December 31, 2004.

     The Partnership is a master limited partnership organized in 1986 under the laws of the state of Delaware. The Partnership owns approximately 99 percent limited partnership interests in Buckeye Pipe Line Company, L.P. (“Buckeye”), Laurel Pipe Line Company, L.P. (“Laurel”), Everglades Pipe Line Company, L.P. (“Everglades”) and Buckeye Pipe Line Holdings, L.P. (“BPH”). These entities are hereinafter referred to as the “Operating Partnerships.”

     Buckeye Pipe Line Company LLC (the “General Partner”) serves as the general partner of the Partnership. As of June 30, 2004, the General Partner owned approximately a 1 percent general partnership interest in the Partnership and approximately a 1 percent general partnership interest in each Operating Partnership, for an approximate 2 percent interest in the Partnership. The General Partner is a wholly-owned subsidiary of Buckeye Management Company LLC (“BMC”), which a is a wholly-owned subsidiary of Glenmoor LLC (“Glenmoor”). Approximately 80 percent of the employees that work for the Operating Partnerships are employed by Buckeye Pipe Line Services Company (“Services Company”). Pursuant to a Services Agreement dated August 12, 1997, BMC and the General Partner reimburse Services Company for its direct and indirect expenses. These expenses are reimbursed to the General Partner by the Operating Partnerships except for certain executive compensation costs and related benefits expense.

     Until May 4, 2004, Glenmoor was owned by certain directors and members of senior management of the General Partner, trusts for the benefit of their families and certain other management employees of Services Company. On May 4, 2004, each of the General Partner, BMC and Glenmoor converted from a stock corporation into a limited liability company, and the membership interests of Glenmoor were sold to BPL Acquisition Company L.P. (“BPL Acquisition”) for approximately $235 million. BPL Acquisition is a limited partnership owned by affiliates of Carlyle/Riverstone Global Energy and Power Fund II, L.P. (“Carlyle/Riverstone”) and certain members of senior management.

     Pursuant to the rules and regulations of the Securities and Exchange Commission, the condensed consolidated financial statements do not include all of the information and notes normally included with financial statements prepared in accordance with accounting principles generally accepted in the United States of America. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2003.

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2. SEGMENT INFORMATION

     During the three and six month periods ended June 30, 2004 and 2003, the Partnership had one business segment, the transportation segment. The transportation segment derives its revenues primarily from the transportation of refined petroleum products that it receives from refineries, connecting pipelines and marine terminals. Other transportation segment revenues are received from storage and terminal throughput services of refined petroleum products and contract operation of third-party pipelines. Revenues from the transportation segment are, for the most part, subject to regulation by the Federal Energy Regulatory Commission or are under contract.

3. CONTINGENCIES

     The Partnership and the Operating Partnerships in the ordinary course of business are involved in various claims and legal proceedings, some of which are covered in whole or in part by insurance. The General Partner is unable to predict the timing or outcome of these claims and proceedings. Although it is possible that one or more of these claims or proceedings, if adversely determined, could, depending on the relative amounts involved, have a material effect on the Partnership for a future period, the General Partner does not believe that their outcome will have a material effect on the Partnership’s consolidated financial condition or annual results of operations.

Environmental

     Various claims for the cost of cleaning up releases of hazardous substances and for damage to the environment resulting from the activities of the Operating Partnerships or their predecessors have been asserted and may be asserted in the future under various federal and state laws. The General Partner believes that the generation, handling and disposal of hazardous substances by the Operating Partnerships and their predecessors have been in material compliance with applicable environmental and regulatory requirements. The total potential remediation costs to be borne by the Operating Partnerships relating to these clean-up sites cannot be reasonably estimated and could be material. With respect to certain sites, however, the Operating Partnership involved is one of several or as many as several hundred potentially responsible parties that would share in the total costs of clean-up under the principle of joint and several liability. The General Partner is unable to determine the timing or outcome of pending proceedings.

4. LONG-TERM DEBT AND CREDIT FACILITIES

     Long-term debt consists of the following:

     At June 30, 2004, $30.0 million of debt was scheduled to mature on September 5, 2006, $300.0 million was scheduled to mature on June 15, 2013 and $150.0 million was scheduled to mature on August 15, 2033.

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     The fair value of the Partnership’s debt was estimated to be $449 million as of June 30, 2004 and $429 million at December 31, 2003. The values at June 30, 2004 and December 31, 2003 were calculated using interest rates currently available to the Partnership for issuance of debt with similar terms and remaining maturities.

     The Partnership has a $277.5 million Revolving Credit Agreement with a syndicate of banks led by SunTrust Bank that expires in September 2006. In September 2003, the Partnership entered into a 364-day Revolving Credit Agreement for $100 million with another syndicate of banks also led by SunTrust Bank. Together, the $277.5 million and $100 million agreements are referred to as the “Credit Facilities.” At June 30, 2004, the Partnership had $30 million outstanding under the Credit Facilities and at December 31, 2003, the Partnership had no amounts outstanding under the Credit Facilities.

     The Credit Facilities contain certain covenants that affect the Partnership. Generally, the Credit Facilities (a)limit outstanding indebtedness of the Partnership based on certain financial ratios contained in the Credit Facilities, (b) prohibit the Partnership from creating or incurring certain liens on its property (c) prohibit the Partnership from disposing of property that is material to its operations (d) limit consolidations, mergers and asset transfers by the Partnership. At June 30, 2004, the Partnership was in compliance with the covenants contained in the Credit Facilities.

     On October 28, 2003, the Partnership entered into an interest rate swap agreement with a financial institution in order to hedge a portion of its fair value risk associated with its 4 5/8% Notes. The notional amount of the swap agreement is $100 million. The swap agreement calls for the Partnership to receive fixed payments from the financial institution at a rate of 4 5/8% of the notional amount in exchange for floating rate payments from the Partnership based on the notional amount using a rate equal to the six-month LIBOR (determined in arrears) minus 0.28%. The swap agreement terminates on the maturity date of the 4 5/8% Notes and interest amounts under the swap agreement are payable semiannually on the same date as interest payments on the 4 5/8% Notes. The Partnership designated the swap agreement as a fair value hedge at the inception of the agreement and elected to use the short-cut method provided for in SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities”, which assumes no ineffectiveness will result from the use of the hedge.

     Interest expense in the Partnership’s income statement was reduced by $0.6 million and by $1.6 million in the three and six months ended June 30, 2004 as a result of the interest rate swap agreement. Assuming interest rates in effect at June 30, 2004, the Partnership’s annual interest expense would be reduced by approximately $2.7 million compared to interest expense that the Partnership would incur had it not entered into the swap agreement. Changes in LIBOR, however, will impact the interest expense incurred in connection with the swap agreement. A 1% increase or decrease in LIBOR would increase or decrease annual interest expense by $1 million.

     The fair values of the swap agreement at June 30, 2004 and December 31, 2003 were gains of $32,000 and $200,000, respectively, which have been reflected in other non-current assets in the accompanying consolidated balance sheets of the Partnership with a corresponding increase in the carrying value of the hedged debt.

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5. PARTNERS’ CAPITAL AND EARNINGS PER PARTNERSHIP UNIT

     Partners’ capital consists of the following:

     During the six months ended June 30, 2004, Partnership net income equaled comprehensive income. During the six months ended June 30, 2003, comprehensive income was less than net income by $352,000 due to the accrual of a minimum pension liability.

     The following is a reconciliation of basic and diluted net income per Partnership Unit for the three month and six month periods ended June 30:

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6. CASH DISTRIBUTIONS

     The Partnership will generally make quarterly cash distributions of substantially all of its available cash, generally defined as consolidated cash receipts less consolidated cash expenditures and such retentions for working capital, anticipated cash expenditures and contingencies as the General Partner deems appropriate.

     On July 29, 2004, the Partnership declared a cash distribution of $0.6625 per unit payable on August 31, 2004 to Unitholders of record on August 9, 2004. The total distribution will amount to approximately $19,201,000.

7. RELATED PARTY ACCRUED CHARGES

     Accrued and other current liabilities include $4,027,000 and $4,780,000 due to the General Partner for payroll and other reimbursable costs at June 30, 2004 and December 31, 2003, respectively.

8. UNIT OPTION AND DISTRIBUTION EQUIVALENT PLAN

     The Partnership has adopted Statement of Financial Accounting Standards No. 123 (“SFAS 123”), “Accounting for Stock-Based Compensation,” which requires expanded disclosures of stock-based compensation arrangements with employees. SFAS 123 encourages, but does not require, compensation cost to be measured based on the fair value of the equity instrument awarded. It allows the Partnership to continue to measure compensation cost for these plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”). The Partnership has elected to continue to recognize compensation cost based on the intrinsic value of the equity instrument awarded as promulgated in APB 25.

     If compensation cost had been determined based on the fair value at the time of the grant dates for awards consistent with SFAS 123, the Partnership’s net income and earnings per share would have been as indicated by the proforma amounts below:

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9. PENSIONS AND OTHER POSTRETIREMENT BENEFITS

     Services Company sponsors a retirement income guaranty plan (a defined benefit plan) which generally guarantees employees hired before January 1, 1986 a retirement benefit at least equal to the benefit they would have received under a previously terminated defined benefit plan. Services Company’s policy is to fund amounts necessary to at least meet the minimum funding requirements under ERISA.

     Services Company also provides postretirement health care and life insurance benefits to certain of its retirees. To be eligible for these benefits, an employee had to be hired prior to January 1, 1991 with respect to health care benefits and January 1, 2002 with respect to life insurance benefits, as well as meet certain service requirements. Services Company does not pre-fund this postretirement benefit obligation.

     In the three months ended June 30, 2004 and 2003, the components of the net periodic benefit cost recognized by the Partnership for Services Company’s retirement income guarantee plan and postretirement health care and life insurance plan were as follows:

     In the six months ended June 30, 2004 and 2003, the components of the net periodic benefit cost recognized by the Partnership for Services Company’s retirement income guarantee plan and postretirement health care and life insurance plan were as follows:

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     The Partnership previously disclosed in its financial statements for the year ended December 31, 2003 that it expected to contribute $1,905,000 to the retirement income guarantee plan in 2004. As of June 30, 2004, approximately $376,000 of this amount had been contributed.

10. RECENT ACCOUNTING PRONOUNCEMENTS

     In January 2003, the FASB issued Interpretation No. 46 “Consolidation of Variable Interest Entities (“FIN 46”), which was subsequently modified and reissued in December 2003. FIN 46 establishes accounting and disclosure requirements for ownership interests in entities that have certain financial or ownership characteristics. FIN 46, as revised, is generally applicable for the first fiscal year or interim accounting period ending after March 15, 2004. The adoption of the provisions of FIN 46 has not had a material effect on the Partnership’s consolidated financial statements.

     In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”. SFAS No. 150 affects how an entity measures and reports financial instruments that have characteristics of both liabilities and equity, and is effective for financial instruments entered into or modified after May 31, 2003 and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The FASB continues to address certain implementation issues associated with the application of SFAS No. 150, including those related to mandatory redeemable financial instruments representing non-controlling interests in subsidiaries’ consolidated financial statements. The Partnership will continue to monitor the actions of the FASB and assess the impact, if any, on its consolidated financial statements. The effective provisions of SFAS No. 150 did not have a material impact on the Partnership’s consolidated financial statements.

     In December 2003, the FASB issued SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits.” SFAS No. 132 (as revised) requires additional disclosures regarding pensions and postretirement benefits beyond those previously required in the original version of SFAS No. 132. SFAS No. 132 (revised 2003) was effective for fiscal years and interim periods ending after December 15, 2003, except for certain provisions which generally are not applicable to the Partnership. The Partnership has adopted the provisions of SFAS No. 132 (revised 2003) and has included the appropriate disclosures in the Partnership’s consolidated financial statements.

     In May 2004, the staff of the FASB issued FASB Staff Position No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” which superseded Staff Position 106-1 issued in January 2004. The purpose of FASB Staff Position No. 106-2 is to provide guidance on how recent Federal legislation which provides certain prescription drug benefits and subsidies to sponsors of certain medical plans which substitute benefits for Medicare Part D is to be incorporated into a plan sponsor’s calculation of retiree medical liabilities. There are significant uncertainties about how this Federal legislation will ultimately affect plan sponsors’ liabilities with respect to retiree medical costs.

     FASB Staff Position 106-2, which is effective for the first period beginning after June 15, 2004, generally requires plan sponsors, like the Partnership, to determine the effects of the recent Federal legislation and, if significant, to record those effects as an actuarial experience gain in the retiree medical benefits cost included in its financial statements. As permitted under FASB Staff Position 106-1, the Partnership had elected to

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defer accounting recognition of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) until authoritative guidance on how to account for the Act had been issued. The Partnership intends to measure the effects of the Act in the third quarter of 2004 and to record those effects prospectively, as permitted by FASB Staff Position 106-2, commencing July 1, 2004. Accordingly, because the Partnership has not yet determined the effects of the Act on measures related to the Accumulated Benefit Obligation and net periodic postretirement benefit cost, the effects of the Act are not reflected in the Partnership’s financial statements for the three and six month periods ended June 30, 2004.

11. SUBSEQUENT EVENT

     On July 1, 2004, the Partnership announced that it had signed a definitive agreement to purchase certain refined petroleum products pipelines and terminal assets located in the Midwestern United States from affiliates of Shell Oil Company for approximately $530 million (the “Shell Asset Purchase”). The assets consist of five pipelines totaling approximately 900 miles, eight terminals served by these pipelines and 14 active and three inactive terminals served by other refined products pipelines in the region.

     The Shell Asset Purchase is subject to customary regulatory approvals and closing conditions. The transaction is scheduled to close approximately October 1, 2004.

     Financial commitments for the transaction have been obtained from SunTrust Bank for a $400 million 5-year revolving credit facility and a $300 million 364-day bridge loan.

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

RESULTS OF OPERATIONS

   Overview

     Buckeye Partners, L.P. (the “Partnership”), is a master limited partnership organized in 1986 under the laws of the state of Delaware. The Partnership’s principal line of business is the transportation, terminalling and storage of refined petroleum products for major integrated oil companies, large refined product marketing companies and major end users of petroleum products on a fee basis through facilities owned and operated by the Partnership. The Partnership also operates pipelines owned by third parties under contracts with major integrated oil and chemical companies.

     Products transported by the Operating Partnerships include primarily gasoline, jet fuel, diesel fuel, heating oil, kerosene and liquid petroleum gases (“LPGs”). Revenues generated in these activities are generally a function of the volumes of products transported and the tariffs or transportation fees charged for such transportation. Results of operations are affected by factors that include general economic conditions, weather, competitive conditions, overall and regional demand for refined petroleum products, seasonal factors and regulation.

     The Partnership conducts all its operations through subsidiary entities. These operating subsidiaries are Buckeye Pipe Line Company, L.P. (“Buckeye”), Laurel Pipe Line Company, L.P. (“Laurel”), Everglades Pipe Line Company, L.P. (“Everglades”) and Buckeye Pipe Line Holdings, L.P. (“BPH”). Each of Buckeye, Laurel, Everglades and BPH is referred to individually as an “Operating Partnership” and collectively as the “Operating Partnerships”. The Partnership owns approximately a 99 percent interest in each of the Operating Partnerships.

     Buckeye Pipe Line Company LLC (the “General Partner”) serves as the general partner of the Partnership. As of June 30, 2004, the General Partner owned approximately a 1 percent general partnership interest in the Partnership and approximately a 1 percent general partnership interest in each Operating Partnership, for an approximate 2 percent interest in the Partnership. The General Partner is a wholly-owned subsidiary of Buckeye Management Company LLC (“BMC”), which is a wholly-owned subsidiary of Glenmoor LLC (“Glenmoor”). Until May 4, 2004, Glenmoor was owned by certain directors and members of senior management of the General Partner, trusts for the benefit of their families and certain other management employees of Buckeye Pipe Line Services Company (“Services Company”).

     On May 4, 2004, each of the General Partner, BMC and Glenmoor converted from a stock corporation into a limited liability company, and the member interests of Glenmoor were sold to BPL Acquisition Company L.P. (“BPL Acquisition”) for approximately $235 million. BPL Acquisition is a limited partnership formed by Carlyle/Riverstone Global Energy and Power Fund II, L.P. (“Carlyle/Riverstone”) and certain continuing members of Glenmoor and Services management. Sources of the purchase price were a $100 million term loan from a syndicate of financial institutions led by Goldman Sachs Credit Partners L.P. and equity contributions from Carlyle/Riverstone and the management employees.

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   Recent Developments

     On July 1, 2004, the Partnership signed a definitive agreement to purchase certain refined petroleum products pipelines and terminal assets located in the Midwestern United States from affiliates of Shell Oil Company for approximately $530 million (the “Shell Asset Purchase”). The assets consist of five pipelines totaling approximately 900 miles, eight terminals served by these pipelines and 14 active and three inactive terminals served by other refined products pipelines in the region.

     The Shell Asset Purchase is subject to customary regulatory approvals and closing conditions. The transaction is scheduled to close approximately October 1, 2004.

     Financial commitments for the transaction have been obtained from SunTrust Bank for a $400 million 5-year revolving credit facility and a $300 million 364-day bridge loan.

Results of Operations

   Second Quarter

     Revenues for the quarters ended June 30, 2004 and 2003 were as follows:

     Total revenue for the quarter ended June 30, 2004 was $70.5 million, $3.5 million, or 5.3 percent, greater than revenue of $67.0 million for the same period of 2003.

     Revenue from pipeline transportation was $58.7 million for the three months ended June 30, 2004 compared to $56.2 million for the three months ended June 30, 2003. The increase in transportation revenue was the result of:

	•		a 2.8% average tariff rate increase effective May 1, 2004;
	•		increased distillate transportation revenue of $0.8 million due to a 5.9% increase in distillate volumes delivered;
	•		increased jet fuel transportation revenue of $0.6 million due to a 7.8% increase in jet fuel volumes delivered. Deliveries to New York City (LaGuardia, JFK and Newark) airports increased by 13.5% and were partially offset by declines in deliveries to the Pittsburgh Airport due to US Airways’ schedule reductions;
	•		increased LPG transportation revenue of $0.3 million due to a 5.9% increase in LPG volumes delivered; and
	•		decreased gasoline transportation revenue of $0.2 million on a 0.7% decline in gasoline volumes delivered. Gasoline shipments were negatively impacted by the steep rise in gasoline prices during the quarter.

     Terminalling, storage and rental revenues of $7.3 million for the three months ended June 30, 2004 increased by $0.5 million, or 6.6 percent, from the comparable period in 2003. The increase reflects additional rental revenues

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associated with pipelines and storage along with additional throughput revenues from terminalling services.

     Contract operations services generated revenues of $4.5 million for the three months ended June 30, 2004, an increase of $0.5 million compared to the second quarter of 2003. The increase in revenue for the three months ended June 30, 2004 over the comparable period in 2003 resulted from additional pipeline construction contract activity and was partially offset by a decline in pipeline operation revenues.

     Costs and expenses for the three month periods ended June 30, 2004 and 2003 were as follows:

     Payroll and payroll benefits were $13.6 million in the second quarter of 2004, an increase of $0.2 million compared to the second quarter of 2003. Increases in salaries and wages of $0.5 million, which resulted principally from higher wage rates, and increases in benefits costs of $0.5 million, principally due to increases in retiree medical cost accruals, were mostly offset by increases in capitalized payroll and benefits of $0.8 million resulting from increased charges to capital projects by internal personnel.

     Depreciation and amortization expense was $5.8 million in the second quarter of 2004, an increase of $0.3 million from the second quarter of 2003 due to $0.2 million of depreciation on the crude butadiene pipeline in Texas that was completed in March 2003 (the “Sabina Pipeline”), and other capital additions to the Partnership’s pipeline and terminalling assets of $0.1 million.

     Operating power costs were $5.3 million in the three months ended June 30, 2004 essentially unchanged from the three months ended June 30, 2003. Operating power consists primarily of electricity required to operate pumping facilities.

     Outside services costs decreased $0.8 million from $5.6 million in the second quarter of 2003 to $4.8 million in the second quarter 2004 as a result of timing delays in these activities in 2004. Outside services costs consist principally of third-party contract services for maintenance activities.

     All other costs were $10.5 million in the three months ended June 30, 2004, an increase of $1.7 million compared to $8.8 million in the same period in 2003. The increase reflects additional costs associated with construction management activities at Buckeye Gulf Coast Pipe Lines, L.P. (“BGC”) of $1.0 million and additional casualty and insurance costs of $0.7 million.

     Other income (expenses) for the three month periods ended June 30, 2004 and 2003 was as follows:

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     Investment income in the second quarter of 2004 of $1.8 million increased by $1.2 million over the second quarter of 2003 as a result of equity income from the Partnership’s 20% interest in West Texas LPG Pipe Line, L.P., which was acquired in August 2003, and increased earnings from the Partnership’s interest in West Shore Pipe Line Company. In September 2003, the Partnership increased its interest in West Shore to approximately 25% from 18% previously.

     Interest expense was $5.5 million in the three months ended June 30, 2004, an increase of $0.7 million from $4.8 million in the three months ended June 30, 2003. The increase was caused by higher average debt balances in the second quarter of 2004 resulting in an increase of $1.1 million, partially offset by a reduction in the average interest rates on outstanding debt, resulting in a decrease of $0.4 million, as a result of the capital markets activities undertaken by the Partnership in 2003.

     Minority interest and other of $4.0 million in the second quarter of 2004 increased by $0.3 million over the first quarter of 2003 as a result of increased minority interest expense of $0.2 million and higher incentive payments to the General Partner of $0.1 million.

   Six Months

Revenues for the six months ended June 30, 2004 and 2003 were as follows:

     Total revenue for the six months ended June 30, 2004 was $142.3 million, $9.5 million, or 7.1 percent, greater than revenue of $132.8 million for the same period of 2003.

     Revenue from pipeline transportation was $117.3 million for the six months ended June 30, 2004 compared to $111.2 million for the six months ended June 30, 2003. Transportation revenue increased across all product grades delivered by the Partnership. The increase in transportation revenue was the result of:

•

a 2.8% average tariff rate increase effective May 1, 2004 and a 2.4% average tariff rate increase effective May 1, 2003;

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	•		increased gasoline transportation revenue of $2.1 million due to increases in longer haul moves to the upstate New York area and tariff rate increases. Overall gasoline volumes delivered declined by 0.6%;
	•		increased distillate transportation revenue of $2.7 million due to a 6.6% increase in distillate volumes delivered;
	•		increased jet fuel transportation revenue of $0.9 million due to a 4.2% increase in jet fuel volumes delivered. Deliveries to the New York City airports (LaGuardia, JFK and Newark) increased by 8.7% and were partially offset by declines in deliveries to the Pittsburgh Airport due to US Airways’ schedule reductions; and
	•		increased LPG transportation revenue of $0.8 million due to an 18.2% increase in LPG volumes delivered.

     Terminalling, storage and rental revenues of $15.2 million for the six months ended June 30, 2004 increased by $1.9 million, or 14.1 percent, from the comparable period in 2003. The increase reflects additional rental revenues associated with pipelines and storage along with additional throughput revenues from terminalling services.

     Contract operations services generated revenues of $9.8 million for the six months ended June 30, 2004, an increase of $1.5 million compared to the first six months of 2003. The increase in revenue for the six months ended June 30, 2004 over the comparable period in 2003 resulted from additional pipeline construction contract activity and was partially offset by a decline in pipeline operation revenues.

     Costs and expenses for the six month periods ended June 30, 2004 and 2003 were as follows:

     Payroll and payroll benefits increased to $28.6 million in the first six months of 2004, or $1.9 million over the $26.7 incurred in the first six months of 2003. Increases in salaries and wages of $1.1 million, resulting principally from increases in wage rates were coupled with increases in employee benefits of $1.6 million, partially offset by increases in capitalized salaries and benefits of $0.8 million resulting from increased charges of internal personnel to capital projects.

     Depreciation and amortization expense increased $0.6 million to $11.6 million in the first half of 2004 due to depreciation on the Sabina Pipeline of $0.4 million, and other capital additions to the Partnership’s pipeline and terminalling assets of $0.2 million.

     Operating power costs of $11.2 million in the first half of 2004 were $0.6 million higher than the same period in 2003 as a result of increased pipeline transportation volumes, partially offset by lower power costs in the Partnership’s contract operations.

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     Outside services costs were $8.9 million the first six months of 2004, or $1.7 million less than the same period in 2003, as the Partnership’s activity in these areas was reduced by timing delays in the scheduling of certain maintenance activities.

     All other costs were $20.5 million, an increase of $2.5 million, in the first half of 2004 compared to the first half of 2003. This increase resulted from additional costs associated with construction activity at BGC of $1.9 million and additional casualty and insurance costs of $1.0 million, partially offset by reduced materials and communications costs.

     Other income (expenses) for the three month periods ended June 30, 2004 and 2003 was as follows:

     Investment income in the first six months of 2004 of $3.2 million increased by $2.1 million over the first six months of 2003 as a result of equity income from the Partnership’s 20 percent interest in West Texas LPG Pipe Line, L.P., and increased earnings from the Partnership’s interest in West Shore.

     Interest expense was $10.9 million in the six months ended June 30, 2004, an increase of $0.8 million from $10.1 million in the six months ended June 30, 2003. The increase was caused by higher average debt balances in the first half of 2004 partially offset by a reduction in the average interest rates on outstanding debt as a result of the capital markets activities undertaken by the Partnership in 2003.

     Minority interest and other of $8.0 million in the first six months of 2004 increased by $1.0 million over the second quarter of 2003 as a result of increased minority interest expense of $0.4 million and higher incentive payments to the General Partner of $0.6 million.

LIQUIDITY AND CAPITAL RESOURCES

     The Partnership’s financial condition at March 31, 2004 and December 31, 2003 is highlighted in the following comparative summary:

Liquidity and Capital Indicators

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     During the first six months of 2004, the Partnership’s principal sources of liquidity were cash from operations and borrowings under its lines of credit. The Partnership’s principal uses of cash are capital expenditures, investments and acquisitions and distributions to unitholders.

     At June 30, 2004, the Partnership had $480.0 million in outstanding long-term debt, which includes $300 million of 4 5/8% Notes due 2013 and $150.0 million of 6 3/4% Notes due 2033. The Partnership also has a 5-year $277.5 million Revolving Credit Agreement which was entered into in September 2001 with a syndicate of banks led by SunTrust Bank and a $100 million 364-day Revolving Credit Agreement entered into in September 2003 with another syndicate of banks also led by SunTrust Bank (together, the “Credit Facilities”). At June 30, 2004, $30.0 million was outstanding under the Credit Facilities, at a weighted average interest rate of 4.0 percent. Borrowings under the Credit Facilities bear interest at SunTrust Bank’s base rate or, at the Partnership’s option, a rate based on LIBOR. The Credit Facilities permit borrowings up to $377.5 million, subject to certain limitations contained in the Credit Facility agreements. The Partnership is in the process of replacing the existing credit facilities with a new agreement which is expected to consist of a $400.0 million 5-year revolving credit facility with a one-time option to expand the facility to $550.0 million. Terms of the agreement are expected to be similar to the existing Credit Facilities. The Partnership expects to close on this new facility in the third quarter of 2004.

     The Credit Facilities contain covenants which (a) limit outstanding indebtedness of the Partnership based on certain financial ratios, (b) prohibit the Partnership from creating or incurring certain liens on its property, (c) prohibit the Partnership from disposing of property which is material to its operations and (d) limit consolidation, merger and asset transfers by the Partnership. These covenants apply to the Partnership and all of its direct and substantially all of its indirect subsidiaries. At June 30, 2004, the Partnership and its subsidiaries were in compliance with these covenants.

     In order to hedge a portion of its fair value risk related to the 4 5/8% Notes, on October 28, 2003, the Partnership entered into an interest rate swap agreement with a financial institution with respect to $100 million principal amount (the “notional amount”) of the 4 5/8% Notes. The contract calls for the Partnership to receive fixed payments from the financial institution at a rate of 4 5/8% of the notional amount in exchange for floating rate payments from the Partnership based on the notional amount using a rate equal to the six-month London Interbank Offered Rate (“LIBOR”), determined in arrears, minus 0.28%. The agreement terminates on the maturity date of the 4 5/8% Notes and interest amounts under the agreement are payable semiannually on the same date as the interest payments on the 4 5/8% Notes. At the inception of the agreement, the Partnership designated the agreement as a fair value hedge and determined that no ineffectiveness will result from the use of the hedge. During the second quarter and first half of 2004, the Partnership saved $0.6 million and $1.9 million, respectively, and based on LIBOR at June 30, 2004, the Partnership would save approximately $2.7 million per year compared to interest expense the Partnership would incur had the Partnership not engaged in this transaction. Changes in LIBOR, however, will impact the interest expense incurred in connection with the interest rate swap. For example, a 1% increase or decrease in LIBOR would increase or decrease interest expense by $1 million per year. The fair market value of the interest rate swap was an asset of approximately $32,000 at June 30, 2004.

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     In order to ensure the Partnership’s ability to complete the proposed acquisition of pipeline and terminal assets from affiliates of Shell Oil Company for approximately $530 million, the Partnership obtained commitments from SunTrust Bank for a $400.0 million revolving credit facility (with a one-time expansion feature to $550.0 million) and a $300.0 million 364-day credit facility (the “bridge loan”).

     Upon the completion of the acquisition of the pipeline and terminal assets, the Partnership intends to refinance the bridge loan and a portion of the amounts borrowed under its Credit Facilities on a permanent basis, through the issuance of a combination of long-term debt and equity securities. On July 28, 2004, the Partnership’s shelf registration statement filed with the Securities and Exchange Commission for up to $1.0 billion of debt and equity securities was declared effective. Actual issuances of debt and equity securities will be subject to capital market terms and conditions.

Cash Flows from Operations

     The components of cash flows from operations for the six months ended June 30, 2004 are as follows:

     Cash flows from operations were $47.9 million in the first six months of 2004, an increase of $6.1 million from the first six months of 2003, principally due to higher net income in the current year. Adjustments to reconcile net income to net cash provided by operating activities totaled $7.9 million in the first six months of 2004 compared to $7.5 million in 2003. In 2004, these adjustments consisted of increases related to depreciation and amortization of $11.6 million, and minority interest of $1.8 million, partially offset by decreases related to changes in current assets and liabilities of $3.4 million and noncurrent assets and liabilities of $2.1 million. The decrease from current assets and liabilities resulted principally from certain outstanding insurance payments made during the last two weeks of 2003 which did not clear cash accounts until early January 2004. The decrease in noncurrent assets and liabilities resulted from increases in certain insurance receivables. In 2003, these adjustments consisted of increases related to depreciation and amortization of $11.0 million, minority interests of $0.7 million and changes in noncurrent assets and liabilities of $2.0 million, partially offset by reductions caused by changes in current assets and liabilities of $6.1 million. The change in current assets and liabilities principally reflected increases in prepaid expenses and reductions in accounts payable.

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Cash Flows from Investing Activities

     Cash used in investing activities totaled $46.9 million in the first six months of 2004 compared to $18.5 million in the same period of 2003, an increase of $28.4 million. On June 30, 2004, the Partnership paid a $26.5 million deposit to affiliates of Shell Oil Company in conjunction with the Shell Asset Purchase. The remainder of the increase of $1.9 million related principally to the acceleration of expansion and capacity projects in the Partnership’s pipeline operations.

Cash Flows from Financing Activities

     During the first six months of 2004, the Partnership borrowed $47 million under its Credit Facilities and repaid $17 million. The net increase of $30 million related principally to the $26.5 million deposit paid on June 30, 2004 for the Shell Asset Purchase as well as a portion of the Partnership’s expansion capital program. The $26.5 million deposit will be credited against the purchase price at the closing of the Shell Asset Purchase. In the event that the final closing cannot be completed, the $26.5 million deposit will be returned to the Partnership provided that the Partnership satisfies all pre-closing conditions. In February 2003, the Partnership completed a public offering of 1,750,000 LP units for net proceeds of approximately $60.0 million in cash proceeds. The cash proceeds from that offering were used to reduce amounts outstanding under the Credit Facilities at that time. Distributions to unitholders totaled $37.7 million in the first six months of 2004, compared to $35.5 million in the first six months of 2003. The increase in distributions resulted from an increase in the quarterly distribution rate to $0.65 per unit in each of the first and second quarters of 2004 compared to $0.625 per unit and $0.6375 per unit in the first and second quarters of 2003, respectively, as well as additional units outstanding, principally as a result of the February 2003 LP unit offering.

OTHER MATTERS

Accounting Pronouncements

     In January 2003, the FASB issued Interpretation No. 46 “Consolidation of Variable Interest Entities (“FIN 46”), which was subsequently modified and reissued in December 2003. FIN 46 establishes accounting and disclosure requirements for ownership interests in entities that have certain financial or ownership characteristics. FIN 46, as revised, is generally applicable for the first fiscal year or interim accounting period ending after March 15, 2004. The adoption of the provisions of FIN 46 has not had a material effect on the Partnership’s consolidated financial statements.

     In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”. SFAS No. 150 affects how an entity measures and reports financial instruments that have characteristics of both liabilities and equity, and is effective for financial instruments entered into or modified after May 31, 2003 and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The FASB continues to address certain implementation issues associated with the application of SFAS No. 150, including those related to mandatory redeemable financial instruments representing non-controlling interests in subsidiaries’ consolidated financial statements. The Partnership will continue to monitor the actions of the FASB and assess the impact, if any, on its consolidated financial statements. The effective provisions of SFAS No. 150 did not have a material impact on the Partnership’s consolidated financial statements.

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     In December 2003, the FASB issued SFAS No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits.” SFAS No. 132 (as revised) requires additional disclosures regarding pensions and postretirement benefits beyond those previously required in the original version of SFAS No. 132. SFAS No. 132 (revised 2003) was effective for fiscal years and interim periods ending after December 15, 2003, except for certain provisions which generally are not applicable to the Partnership. The Partnership has adopted the provisions of SFAS No. 132 (revised 2003) and has included the appropriate disclosures in the Partnership’s consolidated financial statements.

     In May 2004, the staff of the FASB issued FASB Staff Position No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” which superseded Staff Position 106-1 issued in January 2004. The purpose of FASB Staff Position No. 106-2 is to provide guidance on how recent Federal legislation which provides certain prescription drug benefits and subsidies to sponsors of certain medical plans which substitute benefits for Medicare Part D is to be incorporated into a plan sponsor’s calculation of retiree medical liabilities. There are significant uncertainties about how this Federal legislation will ultimately affect plan sponsors’ liabilities with respect to retiree medical costs.

     FASB Staff Position 106-2, which is effective for the first period beginning after June 15, 2004, generally requires plan sponsors, like the Partnership, to determine the effects of the recent Federal legislation and, if significant, to record those effects as an actuarial experience gain in the retiree medical benefits cost included in its financial statements. As permitted under FASB Staff Position 106-1, the Partnership had elected to defer accounting recognition of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) until authoritative guidance on how to account for the Act had been issued. The Partnership intends to measure the effects of the Act in the third quarter of 2004 and to record those effects prospectively, as permitted by FASB Staff Position 106-2, commencing July 1, 2004. Accordingly, because the Partnership has not yet determined the effects of the Act on measures related to the Accumulated Benefit Obligation and net periodic postretirement benefit cost, the effects of the Act are not reflected in the Partnership’s financial statements for the three and six month periods ended June 30, 2004.

Forward Looking Statements

     The information contained above in this Management’s Discussion and Analysis and elsewhere in this Report on Form 10-Q includes “forward-looking, statements,” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements use forward-looking words such as “anticipate,” “continue,” “estimate,” “expect,” “may,” ‘will,” or other similar words, although some forward-looking statements are expressed differently. These statements discuss future expectations or contain projections. Specific factors which could cause actual results to differ from those in the forward-looking statements include: (1) price trends and overall demand for refined petroleum products in the United States in general and in our service areas in particular (economic activity, weather, alternative energy sources, conservation and technological advances may affect price trends and demands); (2) changes, if any, in laws and regulations, including, among others, safety, tax and accounting matters or Federal Energy Regulatory Commission regulation of our tariff rates; (3) liability for environmental claims; (4) security issues affecting our assets, including, among others, potential damage to our assets caused by acts of war or terrorism; (5) unanticipated capital expenditures and operating expenses to repair or replace our assets; (6)

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availability and cost of insurance on our assets and operations; (7) our ability to successfully identify and complete strategic acquisitions and make cost saving changes in operations; (8) expansion in the operations of our competitors; (9) our ability to integrate any acquired operations into our existing operations; (10) shut-downs or cutbacks at major refineries that use our services; (11) deterioration in our labor relations; (12) changes in real property tax assessments; (13) disruptions to the air travel system; and (14) interest rate fluctuations and other capital market conditions.

     These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results. Although the expectations in the forward-looking statements are based on our current beliefs and expectations, we do not assume responsibility for the accuracy and completeness of such statements. Further, we undertake no obligation to update publicly any forward-looking statement whether as a result of new information or future events.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market Risk – Trading Instruments

     Currently the Partnership has no derivative instruments and does not engage in hedging activity with respect to trading instruments.

Market Risk – Other than Trading Instruments

     The Partnership is exposed to risk resulting from changes in interest rates. The Partnership does not have significant commodity or foreign exchange risk. The Partnership is exposed to fair value risk with respect to the fixed portion of its financing arrangements (the 4 5/8% Notes and the 6 3/4% Notes) and to cash flow risk with respect to its variable rate obligations. Fair value risk represents the risk that the value of the fixed portion of its financing arrangements will rise or fall depending on changes in interest rates. Cash flow risk represents the risk that interest costs related to the variable portion of its financing arrangements (the Credit Facilities) will rise or fall depending on changes in interest rates.

     At June 30, 2004, the Partnership had total debt of $480 million, consisting of $300 million of its 4 5/8% Notes, $150 million of its 6 3/4% Notes and $30.0 million outstanding under the Credit Facilities. The fair value of these obligations at June 30, 2004 was approximately $449 million. The Partnership estimates that a 1% decrease in rates for obligations of similar maturities would increase the fair value of these obligations by $40 million.

     In order to hedge a portion of its fair value risk related to the 4 5/8% Notes, on October 28, 2003, the Partnership entered into an interest rate swap agreement with a financial institution with respect to $100 million principal amount (the “notional amount”) of the 4 5/8% Notes. The contract calls for the Partnership to receive fixed payments from the financial institution at a rate of 4 5/8% of the notional amount in exchange for floating rate payments from the Partnership based on the notional amount using a rate equal to the six-month LIBOR, determined in arrears, minus 0.28%. The agreement terminates on the maturity date of the 4 5/8% Notes and interest amounts under the agreement are payable semiannually on the same date as the interest payments on the 4 5/8% Notes. At the inception of the agreement, the Partnership designated the agreement as a fair value hedge and determined that no ineffectiveness will result from the use of the hedge. During the three and six months ended June 30, 2004, the Partnership saved $0.6 million and $1.6

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million, respectively and, based on LIBOR at June 30, 2004, the Partnership would save approximately $2.7 million per year compared to interest expense the Partnership would incur had the Partnership not engaged in this transaction. Changes in LIBOR, however, will impact the interest expense incurred in connection with the interest rate swap. For example, a 1% increase or decrease in LIBOR would increase or decrease interest expense by $1 million per year. The fair market value of the interest rate swap was an asset of approximately $32,000 at June 30, 2004.

     The Partnership’s practice with respect to hedge transactions has been to have each transaction authorized by the Board of Directors of the General Partner.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

The management of the General Partner, with the participation of the General Partner’s principal executive officer and its principal financial officer, evaluated the effectiveness of the Partnership’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the General Partner’s principal executive officer and its principal financial officer concluded that the partnership’s disclosure controls and procedures as of the end of the period covered by this report have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Partnership in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The Partnership believes that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

(b) Changes in internal controls.

No change in the Partnership’s internal control over financial reporting occurred during the Partnership’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

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Part II — Other Information

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

10.1 Purchase and Sale Agreement dated June 30, 2004 between Shell Pipeline Company, L.P. (and certain affiliates) and Buckeye Partners, L.P.

10.2 Description of Severance Arrangements for Stephen C. Muther contained in the Amended and Restated Employment and Severance Agreement, dated as of May 4, 2004, by and among Stephen C. Muther and Glenmoor LLC.

31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14 (a) under the Securities Exchange Act of 1934.

31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

32.1 Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350.

32.2 Certification of Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350.

(b) Reports on Form 8-K

     On April 30, 2004, the Partnership filed a Current Report on Form 8-K for the purpose of furnishing the press release announcing its earnings for the first quarter 2004.

     On May 4, 2004, the Partnership filed a Current Report on Form 8-K for the purpose of announcing the change in control of the General Partner as well as the refinancing of the ESOP debt of Services Company.

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SIGNATURE

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

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