A field test was carried out of a controlled-source induction procedure in which a source loop was positioned on the surface of the ground encircling a borehole, and the horizontal component of the magnetic field was measured within the hole. The problem of measuring the component of an alternating magnetic field at right angles to a small diameter hole was overcome by the construction of a mu -metal frame for the induction coil that greatly increased the effective cross-section of the coil. Data obtained with this configuration of source and receiver are dependent upon the electrical conductivity of the ground within a broad region around the hole. The method is effective in providing constraints on the location and distribution of regions of anomalous electrical conductivity which are not revealed by the drilling operation. These conclusions are supported by theoretical estimates of the magnetic field that would result from known conductivity distributions obtained using finite element techniques.