During second year operations of the jointly funded Penn Grade Micellar Displacement Project, all of the wells and 90 percent of the plant facilities were completed for the 24-acre test designated Phase II. A transient testing program, pre-flush brine injection, and production operations were all initiated during this period. This report details the development, testing, and operations of Phase II. Plans for continuing the test are also included. It is anticipated that micellar slug injection will be initiated by September, 1977.