The results of Laboratory and Bench-Scale experiments and supporting technical and economic assessments conducted under DOE Contract No. DE-AC22-91PC91040 is reported for the period April 1, 1998 to June 30, 1998. This contract is with the University of kentucky Research Foundation, which supports work with the University of Kentucky Center for Applied Energy Researc, CONSOL, Inc., LDP Associates, and Hydrocarbon Technologies, Inc. This work involves the introduction into the basic two-stage liquefaction process several novel concepts, which include dispersed lower-cost catalysts, coal cleaning by oil agglomeration, and distillate hydrotreating and dewaxing