Biomass feedstocks contain roughly 15-30% lignin, a substance that can not be converted to fermentable sugars. Hence, most schemes for producing biofuels assume that the lignin coproduct will be utilized as boiler fuel. Yet, the chemical structure of lignin suggests that it will make an excellent high value fuel additive, if it can be broken down into smaller compounds. From Fiscal year 1997 through Fiscal year 2001, Sandia National Laboratories participated in a cooperative effort with the National Renewable Energy Laboratory and the University of Utah to develop and scale a base catalyzed depolymerization (BCD) process for lignin conversion. SNL's primary role in the effort was to perform kinetic studies, examine the reaction chemistry, and to develop alternate BCD catalyst systems. This report summarizes the work performed at Sandia during Fiscal Year 1999 through Fiscal Year 2001 with aqueous systems. Work with alcohol based systems is summarized in part 1 of this report.Our study of lignin depolymerization by aqueous NaOH showed that the primary factor governing the extent of lignin conversion is the NaOH:lignin ratio. NaOH concentration is at best a secondary issue. The maximum lignin conversion is achieved at NaOH:lignin mole ratios of 1.5 -2. This is consistent with acidic compounds in the depolymerized lignin neutralizing the base catalyst. The addition of CaO to NaOH improves the reaction kinetics, but not the degree of lignin conversion. The combination of Na 2 CO 3 and CaO offers a cost saving alternative to NaOH that performs identically to NaOH on a per Na basis. A process where CaO is regenerated from CaCO 3 could offer further advantages, as could recovering the Na as Na 2 CO 3 or NaHCO 3 by neutralization of the product solution with CO 2 . Model compound studies show that two types of reactions involving methoxy substituents on the aromatic ring occur: methyl group migration between phenolic groups (making and breaking ether bonds) and the loss of methyl/methoxy groups from the aromatic ring (destruction of ether linkages). The migration reactions are significantly faster than the demethylation reactions, but ultimately demethylation processes predominates.