Work continued on the development activities of the program. The Cold Flow Test Program is complete except for some additional two-dimensional modeling concerned with bubble growth and slugging. Plans have been submitted to modify the 3'x 3'model so that partial defluidization of the bed area can be studied. Design of the Sub-Scale Unit is over 90 percent complete. Materials and vendor's equipment required for the start of construction have arrived. Initial site preparation and construction of the auxiliary equipment enclosure for the fuel handling system has begun. Preliminary design activities on the demonstration plant have included: Establishment of the conceptual design of the fluidized-bed boiler and preliminary block diagrams for the major plant systems. In addition, preliminary selection of a complete boiler water treatment system based on 100 percent plant makeup was begun. Preliminary drawings of the Great Lakes site for the demonstration plant have been started. Requests for coal and limestone suppliers, preliminary coal handling system design, system specifications for the coal and limestone systems, bed material drain and fly ash handling system have been considered and appropriate actions taken.