This is the seventh Quarterly Report for this project. The background and technical justification for the project are described, including potential benefits of reducing fuel moisture, prior to firing in a pulverized coal boiler. Coal drying experiments were performed with lignite and Powder River Basin coals to determine the effects of inlet air moisture level on the equilibrium relationship between coal moisture and exit air relative humidity and temperature. The results show that, for lignite, there is a slight dependence of equilibrium moisture on inlet humidity level. However, the equilibrium relationship for PRB coal appears to be independent of inlet air humidity level. The specific equilibrium model used for computing lignite coal dryer performance has a significant effect on the prediction accuracy for exit air relative humidity; but its effects on predicted coal product moisture, exit air temperature and specific humidity are minimal. Analyses were performed to determine the effect of lignite product moisture on unit performance for a high temperature drying system. With this process design, energy for drying is obtained from the hot flue gas entering the air preheater and the hot circulating cooling water leaving the steam condenser. Comparisons were made to the same boiler operating with lignite which had been dried off-site.