This study proposes to investigate the potential use of streptomyces to accomplish coal liquefaction, (streptomyces is a living microorgranism best known for its ability to produce antibiotics). The research will attempt to understand better the rate determining enzyme kinetics, transport steps and the optimum environmental conditions for coal liquefaction utilizing a three phase (solid, liquid, gas) sparged slurry reactor for the investigation. Finely ground lignite coal will be fed to the reactor containing water and essential nutrients. The reactor will be sterilized and then inoculated with an active and dense culture of streptomyces species along with an excess air. The principal manipulated variables will be pH, oxygen, and particle size. Mass spectroscopy will be used to analyze for microbial biomass, product concentration and key enzymes. Coal is one of the largest sources of energy. However, energy demand is greatest for liquid fuels. Chemical and thermal processing for coal liquefaction require extreme conditions of temperature, pressure and chemical environment. Several species of fungi have been identified that are capable of growing on and degrading coal. However, the process of coal solubilization is not understood and the products have not been well characterized. This is a high risk/high return project in which processes could be developed for the production of novel aromatic chemicals or polymers or for the conversion of solid to liquid fuel. Initial studies have already been carried out demonstrating complete liquefaction of liqnite coal in shake flasks. The selection of streptomyces enhances the probability of success of this project.