On September 30, 1996, the U.S. Department of Energy-Morgantown Energy Technology Center and Souther Illinois University at Carbondale (SIUC) entered into a cooperative research agreement entitled Management of Dry Flue Gas Desulfurization By-Products in Underground Mines. Under the agreement SIUC will develop and demonstrate two technologies for the placement of coal combustion by-products in abandoned underground coal mines, and will assess the environmental impact of these technologies for the management of coal combustion by-products. The two technologies for the underground placement that will be developed and demonstrated are: (1) pneumatic placement, using virtually dry materials, and (2) hydraulic placement, using a paste mixture of materials with about 70% solids. Phase II of the overall program began April 1, 1996. The principal objective of Phase II is to develop and fabricate the equipment for both the pneumatic and hydraulic placement technologies, and to conduct a surface demonstration-test of both technologies. During the current quarter the main thrust was to develop the equipment necessary for the program. Shop drawings were completed for the pneumatic placement equipment, and purchase orders issued for many of the component parts. The final pneumatic placement system will be assembled in the SIUC Carterville facility.