This is the first quarterly progress report for Year 2 of the ACTS project. It includes a review of progress made in Flow Loop development and research during the period of time between July 14, 2000 and September 30, 2000. This report presents information on the following specific tasks: (a) Progress in Advanced Cuttings Transport Facility design and development (Task 2), (b) Progress on research project (Task 8): ''Study of Flow of Synthetic Drilling Fluids Under Elevated Pressure and Temperature Conditions'', (c) Progress on research project (Task 6): ''Study of Cuttings Transport with Foam Under LPAT Conditions (Joint Project with TUDRP)'', (d) Progress on research project (Task 7): ''Study of Cuttings Transport with Aerated Muds Under LPAT Conditions (Joint Project with TUDRP)'', (e) Progress on research project (Task 9): ''Study of Foam Flow Behavior Under EPET Conditions'', (f) Initiate research on project (Task 10): ''Study of Cuttings Transport with Aerated Mud Under Elevated Pressure and Temperature Conditions'', (g) Progress on instrumentation tasks to measure: Cuttings concentration and distribution (Tasks 11), and Foam properties (Task 12), (h) Initiate a comprehensive safety review of all flow-loop components and operational procedures. Since the previous Task 1 has been completed, we will now designate …