Many formations throughout the world are sensitive to oil and water based drilling fluids and are best drilled with air as the drilling medium. However, positive displacement motors do not typically operate well with air. In addition, mud pulse telemetry MWD tools will not operate reliably in an air environment. In the second quarter of 1990, Marathon Oil Company successfully drilled a medium radius horizontal well in Jackson County, Michigan using an aerated mud system and an electromagnetic telemetry link MND tool. This paper will describe the pre-well planning and practical aspects of drilling the well with emphasis on the hydraulic system and drilling fluid mixture.