The cost-sharing contract between the US Department of Energy and Smith International provides the funding to further develop this concept into two complete steerable percussion air drilling system prototypes, each integrated with a navigation tool (wireline steering tool), a bend sub, stabilizing devices, and to conduct laboratory and field testing necessary to prepare the system for commercial realization. Such a system would make available for the first time the ability to penetrate earthen formations by the percussion method, using compressed air as the drilling fluid, and at the same time allow the directional control and steering of the drill bit. While the drill string is not rotating (slide mode), one can orient to build angle in the desired direction at a predictable rate. This build rate can be in the range of 1--20 degrees per one hundred feet and proceeds until the desired inclination or direction has been obtained. The drill pipe is then set in rotation, nullifying the effect of the bend angle, and causes the assembly to drill straight. The sliding procedure can be repeated as often as corrections for hole`s inclination or direction are needed.