A statistical analysis was performed with overburden characterization data that was obtained from a U.S. Forest Service study site in the Powder River Basin, Wyoming. The drilling and overburden characterization program had been performed during 1977 and 1978 and this information was provided to the Laramie Energy Technology Center by the U.S. Forest Service. There were three basic goals that were accomplished during this study. First, find out how overburden data obtained from drill cuttings compares with overburden data obtained from core samples. Second, determine the basic chemical and physical characteristics of the overburden. Third, determine the minimum drill hole spacing required to adequately characterize the overburden. The R-Squared statistic was used as a measure of correlation between drill cutting samples and core samples. Most R-Squared values were less than 50%, therefore, it was concluded that geostatistical structure cannot be predicted accurately during an overburden study when drill cuttings are used. Principal component R-Mode factor analysis with Varimax rotation was used to characterize the overburden. Thirty-one variables were used in the factor analysis. The factor analysis yielded twelve distinct factors which explained ninety percent of the total variation. A two stage sequential drilling procedure was developed that moves in a stepwise manner towards the goal of a predetermined level of accuracy until that level is reached. Thus, the desired level of accuracy can be reached without over-drilling an area.