Progress is reported in a research and development program to design, build, and test an improved geothermal drill bit. The major tasks of the Phase I effort are entitled: failure mechanisms of existing bits; new steels and new bearing design; and new seals and lubricants. It appears that a significant gain in drill-bit life can be attained by the use of higher-temperature steels which retain more hardness at temperatures above 260/sup 0/C (500/sup 0/F). Such steels are available, and two research bits of high-temperature steels were made and will shortly be tested in a laboratory-simulated full-scale geothermal drilling environment. Two control bits of the same design, but made with conventional drill bit steels, were also obtained for identical laboratory test runs, so that the performance of the research bits can be meaningfully assessed. Base-line properties of the steels, such as hardness and fracture toughness as functions of temperature, are being measured to further assess the value of the high-temperature steels selected for the research bits. A geothermal test vessel was designed and fabricated in which the full-scale drill bits will be tested. The vessel is capable of temperature to 427/sup 0/C (800/sup 0/F) and pressures to 35 MPa (5,000 psi). Seal and lubrication designs were studied, and the state of the art in high-temperature seals and lubricants was assessed. Some candidate seals and lubricants have been obtained for testing, and others are being procured. In addition, a seal test vessel has been designed and will soon be completed which can simulate the geothermal drilling environment in full-scale testing of seal and lubricant designs and materials. (JGB)