In this project, magnetic fields are used to break emulsions of water in oil. Typically, water-in-oil emulsions are mixed with aqueous solutions containing magnetic additives. The resulting water-in-oil emulsions contain magnetic droplets which can be polarized by low-level magnetic fields. It has been shown in Phase I of this work that the polarized droplets orient and aggregate in drop-strings. These aggregated drops can subsequently be removed more easily by settling. Thus, with low residence time and low energy consumption, emulsions can be broken and drier oils can be produced. The fundamental aspects of viscous, interfacial, and magnetic forces affecting the above processes are studied. A continuously operated pre- pilot bench-scale unit will be built and used to demonstrate the process on a larger scale than previously. The results will be used to help evaluate the commercial feasibility of the process and help evaluate additives and process parameters.