This is the second 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 Oct 1, 2000 and December 31, 2000. This report presents a review of progress on the following specific tasks: (a) Design and development of an Advanced Cuttings Transport Facility (Task 2: Addition of a foam generation and breaker system), (b) Research project (Task 6): ''Study of Cuttings Transport with Foam Under LPAT Conditions (Joint Project with TUDRP)'', (c) Research project (Task 7): ''Study of Cuttings Transport with Aerated Muds Under LPAT Conditions (Joint Project with TUDRP)'', (d) Research project (Task 8): ''Study of Flow of Synthetic Drilling Fluids Under Elevated Pressure and Temperature Conditions'', (e) Research project (Task 9): ''Study of Foam Flow Behavior Under EPET Conditions'', (f) Research project (Task 10): ''Study of Cuttings Transport with Aerated Mud Under Elevated Pressure and Temperature Conditions'', (g) Research on instrumentation tasks to measure: Cuttings concentration and distribution in a flowing slurry (Task 11), and Foam properties while transporting cuttings. (Task 12), (h) Development of a Safety program for the ACTS Flow Loop. Progress on a comprehensive safety review …