Progress reports are presented for tasks 1 through 4. Task 1 - Hydraulic/Natural Fracture Interaction. This task was completed in this reporting period. The primary result is a criterion that can be used to predict hydraulic/natural fracture interaction in Devonian shale gas reservoirs. Task 2 - Dynamic/Natural Fracture Interaction. Work during this reporting period focused on development of a scaled down dynamic stimulation tool. Task 3 - Flow Characteristics of Natural Fractures. An initial test matrix was formulated during this period. The testing has been delayed as discussed in item 5 below. Task 4 - In Situ Stresses in the Appalachian Basin. As mentioned in the last report, the milestone regarding a critique of techniques available for measuring stresses is being kept open pending the results from some parallel projects on stress measurement: LLNL's S-wave anisotropy approach, wireline work being done by Columbia University, and borehole elongation work being done for Sandia by SAIC. The theoretical part of the borehole work has been completed and is included in this document along with a detailed analysis of the influence of pore pressure on strain recovery methods in general. 44 refs., 25 figs., 3 tabs.