The BEACON process involves the catalytic deposition of a highly reactive form of carbon from a gas stream which contains carbon monoxide. The carbon-depleted gas is combusted with air to produce power, and the carbon is reacted with steam to produce methane or hydrogen. Process conditions favoring the production of hydrogen were explored this quarter. Excess steam was found to suppress methane formation, and reduction of catalyst methanation activity was demonstrated. The effect of carbon loading on the physical stability of catalyst C77-K2 and the effect of trace sulfur levels on the chemical stability of the catalyst were examined. The carbon loading tests did not show the catalyst breakup that was expected. Tests of chemical stability of the catalyst in the presence of sulfur-containing gases showed a decline in performance even at levels as low as 4 ppM. Experiments conducted using a Paraho-type oil shale retort offgas as a feedstock showed that acceptable performance could be obtained by removing carbon dioxide from the feedgas. Design of the tandem two reactor system is continuing, along with cold flow testing of the proposed solids transfer system. A simplified thermodynamic analysis of the BEACON process shows that BEACON's increased efficiency over competing processes results from more hot gas going to the turbine with less power required to compress the air for combustion. 16 figures, 13 tables.