Steerable modular drilling assembly

In general, the present invention provides a modular drilling assembly having a module for contactless power and data transfer over a nonconductive gap between rotating and non-rotating members of a steering module. The gap usually contains a non-conductive fluid, such as drilling fluid, or oil for operating hydraulic devices in the downhole tool. The downhole tool in one embodiment is a modular drilling assembly wherein a drive shaft is rotated by a downhill motor to rotate a drill bit attached to the bottom end of the drive shaft. A substantially non-rotating sleeve around the drive shaft includes at least one electrically-operated device. The drilling assembly is modular in that it includes at least one steering module at the bottom end of the drilling assembly that has at least one steering device module that provides power to the force application member. A power and data communication uphole of the steering module provides power to the steering module and data communication between the drilling assembly and the surface.