This report provides a summary of the work performed on the Prototype Culm Combustion Boiler/Heater Unit, Phase I - Engineering Design and Analysis, Phase II - Prototype Plant Construction and Phase III - Start-Up and Operation during the period October 1, 1981 through December 31, 1981. The objectives of the program as well as the technical progress and problem areas encountered during the reporting period are presented. Seven shakedown tests were run. Start-up and shakedown testing was completed. Four parametric tests were run. Performance data are presented with the exception of boiler efficiency which will be reported once chemical analyses are completed. Total boiler operation time through the end of this quarter - 1225 h, 50 min; operating time on culm and culm/limestone - 682 h, 43 min. Inspection revealed no problems with boiler tube wear. Sulfur capture greater than 94% was demonstrated (design is 88%). A turndown of better than 4 to 1 was shown (design is 2.5 to 1). Computer control of most of the loops has been successful and manual control was also demonstrated.