##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
 
 Form 10-K/A
 
 
  Amendment No. 2 to
    Form 10-K
 
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to          .   Commission File No. 001-11155
  WESTMORELAND COAL
    COMPANY
 (Exact name of registrant as
    specified in its charter)
   
 Delaware

23-1128670(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)2 North Cascade Avenue
    2nd Floor Colorado Springs, CO

80903(Zip Code)(Address of principal executive
    offices)  
   Registrants telephone number, including area code:
 (719)
    442-2600
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Stock Exchange on Which RegisteredCommon Stock, par value $2.50 per share

American Stock ExchangeDepositary Shares, each representing
    one-quarter of a share of Series A Convertible
    Exchangeable Preferred Stock
    Preferred Stock Purchase Rights   Securities registered pursuant to Section 12(g) of the
    Act:
     o þ
  o þ
 
  o þ
 
 
  Regulation S-K Form 10-K/A. þ
 
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ




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##### 





WESTMORELAND
    COAL COMPANY
  FORM 10-K/A
  ANNUAL
    REPORT
  TABLE OF
    CONTENTS
 
  
 Item



PagePART IExplanatory Note


31


Business


61A


Risk Factors


181B


Unresolved Staff Comments


272


Properties


273


Legal Proceedings


334


Submission of Matters to a Vote of Security
    Holders


39PART II5


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


426


Selected Financial Data


457


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


467A


Quantitative and Qualitative Disclosures About
    Market Risk


668


Financial Statements and Supplementary Data


689


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


1259A


Controls and Procedures


1259B


Other Information


129PART III10


Directors, Executive Officers and Corporate
    Governance


12911


Executive Compensation


13112


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


15313


Certain Relationships and Related Transactions,
    and Director Independence


15714


Principal Accountant Fees and Services


159PART IV15


Exhibits and Financial Statement Schedules


160Signatures


161Subsidiaries of the RegistrantConsent of KPMG LLPConsent of KPMG LLPConsent of Deloitte & Touche LLPCertification of Chief Executive Officer pursuant to Rule 13a-14(a)Certification of Chief Financial Officer pursuant to Rule 13a-14(a)Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350  
  2




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Explanatory
    Note  Form 10-K
 
 
  Postretirement
    Medical Benefit Obligations
 
 
   
 
   
 
   
 
   
 
   
 
   
 3




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Stock
    Based Compensation Expense
 
 
   
 
  Income
    Tax Expense
 
 
   
 
  10-K
    Amendments
 
 
  Form 10-K Form 10-K. Form 10-K Form 10-K Form 10-K,
 
 
  Internal
    Controls
 
 
   
  Forward-Looking
    Disclaimer
 
  Form 10-K,
 
 4




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Form 10-K Form 10-K), Form 10-K.
 
   5




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##### Table of Contents



PART I    ITEM 1 
    BUSINESS  Overview
          Coal
    Operations
    Mines
    
    the Absaloka Mine,
    the Rosebud Mine,
    the Jewett Mine,
    the Beulah Mine, and
    the Savage Mine.     6




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##### Table of Contents



Year

Absaloka


Rosebud


Jewett


Beulah


Savage


Total2006


7,079



12,430



6,798



2,702



376



29,3852005


6,463



13,377



6,951



2,873



326



29,9902004


6,488



12,655



6,453



3,053



375



29,024   Coal and
    the Production of Electricity
    Electricity


Electricity


Coal-GeneratedGenerated by all


Generated by Coal


Electricity as aSources (Billions of


(Billions of


Percentage of allYear

Kilowatt Hours)(1)


Kilowatt Hours)


Electricity1950


334



154



46
%1960


759



403



53
%1970


1,535



704



46
%1980


2,290



1,162



51
%1990


3,027



1,594



53
%2000


3,789



1,966



52
%2004


3,941



1,976



50
%2005


4,055



2,015



50
%  7




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##### Table of Contents



(1)
    
    All sources include all fossil fuels, nuclear electric power,
    hydroelectric pumped storage, renewable energy (including
    conventional hydroelectric power), and other.    Customers,
    Competition, and Coal Supply Agreements
      
    all of our mines are the most economic suppliers to each of
    their respective principal customers;
    nearly all of the power plants we supply were specifically
    designed to use our coal; and
    the plants we supply are among the lower cost producers of
    electric power in their respective regions and are among the
    cleaner producers of power from fossil fuels.        
    The Absaloka Mine supplies coal to Xcel Energy under two primary
    contracts, one covering 3.0 to 3.4 million tons per year
    that expires at the end of 2007 and one covering
    1.3 million tons per year that was renewed effective
    January 1, 2007 and expires at the end of 2010. We receive
    prices under these contracts that are adjusted throughout their
    terms by specified inflation indices. 8




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
    The Absaloka Mine also supplies coal to Western Fuels
    Association, the fuel buyer for Southern Minnesota Municipal
    Power Agency or SMMPA, covering almost all of SMMPAs fuel
    requirements for Unit 3 at the Sherburne County Station, or
    approximately 1.5 million tons per year. This contract
    expires at the end of 2009. The price we receive under this
    contract is adjusted throughout its term by specified inflation
    indices.    four-unit
  two-unit
 9




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Weighted AveragePercentage of


Price per TonCoal Revenues


Coal Sales in


Coal Sales


Received underin Dollars


Equivalent Tons


Under Long-


Long-TermYear

(in 000s)


(in 000s)


Term Contracts


Contracts2006

$
393,482



29,385



98
%

$
13.362005


361,017



29,990



99
%


11.442004


319,648
(1)


29,024



98
%


11.38
(1)2003


294,892



27,762



99
%


10.452002


301,235



26,062



100
%


11.29
(2)     (1)
    
    In 2004, we concluded arbitration with the owners of Colstrip
    Units 1&2. The arbitration determined the price we received
    for coal that we delivered to Colstrip Units 1&2 from July
    2001. Our coal revenues for 2004, and the weighted average price
    per ton received under long-term contracts in 2004, include the
    entire amount we received pursuant to this arbitration.
    Excluding the portion of the arbitration award that covered coal
    that we had delivered to Colstrip Units 1&2 in previous
    years, we earned coal revenues of $302,753,000 and received a
    weighted average price of $10.78 per ton under long-term
    contracts in 2004.(2)
    
    The weighted average price per ton that we received declined
    from 2002 to 2003 principally because the Jewett Mine
    transitioned from cost-plus-fees pricing to a market-based
    pricing mechanism, effective July 1, 2002. That mechanism
    was, in turn, replaced by a fixed price agreement in January
    2004 and then a modified cost and index-based agreement in
    September 2005.   10




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and/or
  and/or
  Projected SalesTonnage UnderExisting Long-TermContracts as ofDec 31, 2006(In millions of tons)2007


30.02008


27.32009


26.62010


21.92011


17.6     Protecting
    the Environment
    top-soils
    Safety
   11




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Independent
    Power Operations
    
    100% of the interests in the 180 MW and 50 MW ROVA I
    and ROVA II coal-fired plants located in Weldon, North Carolina;
    a 4.49% interest in the Ft. Lupton Project, a 290 MW
    natural gas-fired plant located in Ft. Lupton, Colorado.  power-generating
    Project

Roanoke Valley I

Roanoke Valley II

Ft. LuptonLocation

Weldon,
    North Carolina

Weldon,
    North Carolina

Ft. Lupton, 
    ColoradoGross Megawatt Capacity

180MW

50MW

290MWOur Equity Ownership

100.0%

100.0%

4.49%Electricity Purchaser

Dominion 
    Virginia Power

Dominion 
    Virginia Power

Xcel EnergySteam Host

Patch Rubber 
    Company

Patch Rubber 
    Company

Rocky Mtn. 
    Produce,Ltd.Fuel Type

Coal

Coal

Natural GasFuel Supplier

TECO Coal

TECO Coal

Xcel EnergyContracts with fuel supplier expire in

2014

2015

Unit 1 - 2019
    Unit 2 - 2009Commercial Operation Commencement Date

1994

1995

1994Contracts with electricity purchaser expire in

2019(1)

2020(1)

Unit 1 - 2019 
    Unit 2 - 2009Contracts with steam host expire in

2010(2)

2010(2)

N/A     (1)
    
    ROVA and Dominion Virginia Power can extend these contracts by
    mutual consent for five-year terms at mutually agreeable pricing.(2)
    
    ROVA and Patch Rubber Company can extend these contracts for
    three successive five-year terms.   12




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Other
    Activities
      Insurance
    Subsidiary
      Seasonality
    
    The owners of the power plants to which we supply coal typically
    schedule maintenance for those plants in the spring and fall,
    when demand for electric power is typically less than it is
    during other seasons. For this reason, our coal revenues are
    usually higher in the winter and summer.
    ROVA also typically undergoes scheduled maintenance in the
    spring and fall, so our earnings from independent power are also
    lower in those seasons.  Government
    Regulation
     13




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Environmental
    Laws
   
  Surface Mining Control and Reclamation Act.
 
      Clean Air Act. and/or
  2
 14




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2
    Clean Water Act. and/or
  Resource Conservation and Recovery Act.
  New
    Environmental Rules
    Clean Air Interstate Rule. 2
  
    A state may require power plants to participate in an
    EPA-administered interstate cap and trade system that caps
    emissions in two stages, or
    A state may meet an air emission budget specific to it through
    measures of the states choosing.    Mercury Rule.
 15




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2010-2017,
  Health
    and Benefits
  Mine Safety and Health.
  Black Lung.
  Coal Act.
  
    First, the statute merged the UMWA 1950 and 1974 Plans into the
    Combined Benefit Fund, or CBF. The CBF provides benefits to a
    closed pool of beneficiaries, retirees who were actually
    receiving benefits from either the 1950 or the 1974 Plan as of
    July 20, 1992. The Coal Act requires that the benefits
    provided to this group remain substantially the same as provided
    by the 1950 and 1974 Plans as of January 1, 1992.
    Second, the Coal Act requires companies, like our company, that
    had established individual employer plans, or IEPs, pursuant to
    prior collective bargaining agreements to maintain those IEPs
    and provide the beneficiaries a level of benefits substantially
    the same as they received as of January 1, 1992.
    Third, the Coal Act established the 1992 UMWA Benefit Plan which
    serves three distinct populations: miners who were eligible to
    retire as of February 1, 1993 and actually retired before
    September 30, 1992 and whose employers are no longer in
    business; miners receiving benefits under an IEP but whose
    former employer went out of business; and new spouses or new
    dependants of retirees in the CBF.  Workers Compensation.
 16




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Independent
    Power
      and/or
  Employees
      Information
    about Segments
 
   
  Available
    Information
  Form 10-K, Form 10-Q, Form 8-K,
 17




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ITEM 1A 
    RISK
    FACTORS    Our
    coal mining operations are inherently subject to conditions that
    could affect levels of production and production costs at
    particular mines for varying lengths of time and could reduce
    our profitability.
    
    unplanned equipment failures, which could interrupt production
    and require us to expend significant sums to repair our capital
    equipment, including our draglines, the large machines we use to
    remove the soil that overlies coal deposits;
    geological conditions, such as variations in the quality of the
    coal produced from a particular seam, variations in the
    thickness of coal seams and variations in the amounts of rock
    and other natural materials that overlie the coal that we are
    mining; and
    weather conditions.    
    During the first quarter of 2006, the dragline at the Absaloka
    Mine was unable to operate for almost six weeks, while we were
    repairing a broken walking shoe and its electrical systems.
    In the second quarter of 2005, our Beulah Mine experienced
    unusually heavy rainfall including record rainfall in June that
    adversely impacted overburden stability and resulted in highwall
    and spoil sloughage, a condition in which the side of the pit
    partially collapses and must be stabilized before mining can
    continue. Unstable conditions in the pits impacted dragline
    operations at that mine for a period of time. This resulted in a
    reduction in coal production during the quarter which negatively
    affected our financial results for the third and fourth quarter
    of 2005.  Our
    revenues and profitability could suffer if our customers reduce
    or suspend their coal purchases.
    Disputes
    relating to our coal supply agreements could harm our financial
    results.
   18




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We are
    a party to numerous legal proceedings, some of which, if
    determined unfavorably to us, could result in significant
    monetary damages.
 
   
  We may
    not be able to manage our expanding operations effectively,
    which could impair our profitability.
    The
    implementation of a new company-wide computer system could
    disrupt our internal operations.
    Our
    growth and development strategy could require significant
    resources and may not be successful.
    Our
    expenditures for postretirement medical benefits could be
    materially higher than we have predicted if our underlying
    assumptions prove to be incorrect.
 
   
 19




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We
    have a significant amount of debt, which imposes restrictions on
    us and may limit our flexibility, and a decline in our operating
    performance may materially affect our ability to meet our future
    financial commitments and liquidity needs.
              
    increasing our vulnerability to general adverse economic and
    industry conditions;
    limiting our ability to obtain additional financing to fund
    future working capital, capital expenditures or other general
    corporate requirements; and
    limiting our flexibility in planning for, or reacting to,
    changes in our business and in the industry.     20




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If the
    cost of obtaining new reclamation bonds and renewing existing
    reclamation bonds continues to increase or if we are unable to
    obtain additional bonding capacity, our profitability could be
    reduced.
    Our
    financial position could be adversely affected if we fail to
    maintain our Coal Act bonds.
        We
    face competition for sales to new and existing customers, and
    the loss of sales or a reduction in the prices we receive under
    new or renewed contracts would lower our revenues and could
    reduce our profitability.
   21




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Stricter
    environmental regulations, including regulations recently
    adopted by the EPA, could reduce the demand for coal as a fuel
    source and cause the volume of our sales to
    decline.
       22




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
    Different types of coal vary in their chemical composition and
    combustion characteristics. For example, the lignite from our
    Jewett and Beulah Mines is inherently higher in mercury than
    bituminous and sub-bituminous coal, and sub-bituminous coal from
    different seams can differ significantly.
    Different EGUs have different levels of emissions control
    technology. For example, ROVA has state of the art
    emissions control technology that reduces its emissions of
    sulfur dioxide, nitrogen oxide and, collaterally, mercury.
    The CAIR is likely to affect the existing national market for
    sulfur dioxide emissions allowances, thereby indirectly
    affecting coal producers and consumers that are not directly
    subject to the CAIR.    and/or
  New
    legislation or regulations in the United States aimed at
    limiting emissions of greenhouse gases could increase the cost
    of using coal or restrict the use of coal, which could reduce
    demand for our coal, cause our profitability to suffer and
    reduce the value of our assets.
    Demand
    for our coal could also be reduced by environmental regulations
    at the state level.
   23




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We
    have significant reclamation and mine closure obligations. If
    the assumptions underlying our accruals are materially
    inaccurate, or if we are required to cover reclamation
    obligations that have been assumed by our customers or
    contractors, we could be required to expend greater amounts than
    we currently anticipate, which could affect our profitability in
    future periods.
      Our
    profitability could be affected by unscheduled outages at the
    power plants we supply or own or if the scheduled maintenance
    outages at the power plants we supply or own last longer than
    anticipated.
      Increases
    in the cost of the fuel, electricity and materials and the
    availability of tires we use in the operation of our mines could
    affect our profitability.
    If we
    experience unanticipated increases in the capital expenditures
    we expect to make over the next several years, our liquidity
    and/or profitability could suffer.
  return-on-investment.
 24




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Our
    ability to operate effectively and achieve our strategic goals
    could be impaired if we lose key personnel.
    Provisions
    of our certificate of incorporation, bylaws and Delaware law,
    and our stockholder rights plan, may have anti-takeover effects
    that could prevent a change of control of our company that
    stockholders may consider favorable, and the market price of our
    common stock may be lower as a result.
    Our
    ability to operate effectively and achieve our strategic goals
    depends on maintaining satisfactory labor
    relations.
    We
    have had material weaknesses in internal control over financial
    reporting in the past and cannot assure that additional material
    weaknesses will not be identified in the future. Our failure to
    maintain effective internal control over financial reporting
    could result in material misstatements in our financial
    statements which could require us to restate financial
    statements, cause investors to lose confidence in our reported
    financial information and have a negative effect on our stock
    price.
 
  Form 10-K Form 10-K
 
   25




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We may
    face risks related to an SEC investigation and securities
    litigation in connection with the restatement of our financial
    statements.
 
   
 26




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ITEM 1B 
    UNRESOLVED
    STAFF COMMENTS    ITEM 2 
    PROPERTIES       27




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Absaloka

Rosebud

Jewett

Beulah

SavageMine

Mine

Mine

Mine

MineOwned by

Westmoreland
    Resources, Inc.

Western
    Energy
    Company

Texas Westmoreland
    Coal Co.

Dakota
    Westmoreland
    Corporation

Westmoreland
    Savage
    CorporationLocation

Big Horn County, MT

Rosebud and
    Treasure
    Counties,
    MT

Leon, Freestone and
    Limestone Counties,
    TX

Mercer and Oliver
    Counties, ND

Richland
    County, MTCoal Reserves
    (thousands of tons)
    Proven(1)(4) Probable(3)

95,076(2)
    0

230,086(2)
    0

68,681(2)
    0

41,411(2)
    81,218

8,000(2)
    0Permitted Reserves (thousands of tons)

20,445

155,766

68,621

19,500

2,1912006 Production (thousands of tons)

6,778

12,732

6,799

2,679

379Lessor

Crow Tribe

Federal Govt;
    State of MT;
    Great
    Northern
    Properties

Private parties;
    State of Texas

Private parties;
    State of ND;
    Federal Govt

Federal Govt;
    Private partiesLease Term

Through exhaustion

Varies

Varies

2009-2019

VariesCurrent production capacity (thousands of tons)

7,000

13,300

7,000

3,200

400Coal Type

Sub-bituminous

Sub-bituminous

Lignite

Lignite

LigniteAcres disturbed by Mining

3,858

15,819

14,973

4,521

534Acres for which reclamation is complete

2,637

7,374

11,140

3,237

209Major Customers

Xcel Energy, Western Fuels Assoc., Midwest Energy, Rocky
    Mountain Power

Colstrip 1&2
    owners,
    Colstrip
    3&4 owners,
    Minnesota Power

NRGT

Otter Tail,
    MDU, Minnkota,
    Northwestern
    Public Service

MDU, Sidney
    SugarsDelivery Method

Rail/Truck

Truck/Rail/
    Conveyor

Conveyor

Conveyor/Rail

TruckApprox. Heat Content (BTU/lb.)(5)

8,700

8,529

6,642

7,016

6,371Approx. Sulfur Content(%)(6)

0.65

0.74

0.90

0.91

0.45Year Opened

1974

1968(7)

1985

1963

1958Total Tons Mined Since Inception (thousands of tons)

148,381

384,910

161,000

90,770

13,080     (1)
    
    Proven coal reserves are reserves for which (a) quantity is
    computed from dimensions revealed in outcrops, trenches,
    workings or drill holes; grade and/or quality are computed from
    the results of detailed sampling; and (b) the sites for
    inspection, sampling and measurement are spaced so closely and
    the geologic character is so well defined that size, shape,
    depth and mineral content of reserves are well-established. In
    addition, all coal reserves are assigned coal
    reserves: coal that we have committed to operating mining
    equipment and plant facilities.(2)
    
    Includes tons for each mine as described below that are not
    fully permitted but otherwise meet the definition of
    proven coal reserves. 28




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(3)
    
    Probable reserves are reserves for which quantity and grade
    and/or quality are computed from information similar to that
    used for proven reserves, but the sites for inspection,
    sampling, and measurement are farther apart or are otherwise
    less adequately spaced. The degree of assurance, although lower
    than that for proven reserves, is high enough to assume
    continuity between points of observation.(4)
    
    We have assigned all proven reserves to operating mining
    equipment and plant facilities.(5)
    
    Approximate heat content applies to the coal mined in 2006.(6)
    
    Approximate sulfur content applies to the tons mined in 2006.(7)
    
    Initial sales from the current mine complex began in 1968.
    Mining first occurred at the site in 1924.    Absaloka
    Mine
             29




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Rosebud
    Mine
              Jewett
    Mine
   30




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Beulah
    Mine
         31




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Savage
    Mine
              Other
 
   
 32




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ITEM 3 
    LEGAL
    PROCEEDINGS    Legal
    proceedings involving Westmoreland Coal Company
  Combined
    Benefit Fund Litigation
          i.e.
     33




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1992
    UMWA Benefit Plan Surety Bond
          Legal
    Proceedings involving Westmoreland Coal Company
    and/or
    Westmoreland Energy
  Rensselaer
    Tax Assessment
     34




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##### Table of Contents



Legal
    Proceedings involving Westmoreland Coal Company, Westmoreland
    Resources, and/or Western Energy
  Royalty
    Claims by Minerals Management Service and Related Tax Claims by
    Montana Department of Revenue
            No. M18-080697-0.
   35




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1998-2001.
        2004-and
      Litigation
    with Washington Group International, Inc.
   36




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##### Table of Contents



McGreevey
    Litigation
       37




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Texas
    Westmoreland Price Arbitration
    Other
   38




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##### Table of Contents



ITEM 4 
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS    Executive
    Officers of the Company
    Name

Age

Position

Held SinceChristopher K. Seglem(1)


60


Chairman of the Board, President and Chief Executive Officer


1996,
    1992,
    1993David J. Blair(2)


53


Chief Financial Officer


2005Roger D. Wiegley(3)


58


General Counsel and Secretary


2005Robert W. Holzwarth(4)


59


Senior Vice President, Power


2004John V. OLaughlin(5)


55


Vice President, Coal Operations


2005Todd A. Myers(6)


43


Vice President, Coal Sales


2002Ronald H. Beck(7)


62


Vice President, Finance and Treasurer


2001Mark K. Seglem(8)


49


Vice President, Strategic Planning and Administration


2006Thomas G. Durham(9)


58


Vice President, Planning and Engineering


2005Douglas P. Kathol(10)


54


Vice President, Development


2003Mary S. Dymond(11)


54


Vice President, Human Resources and Risk Management


2006Gregory S. Woods(12)


53


Vice President, Eastern Operations


2000Diane S. Jones(13)


48


Vice President, Corporate Relations and Assistant Secretary


2000Bronwen J. Turner(14)


52


Vice President, Government and Community Relations


2006Kevin A. Paprzycki(15)


36


Controller and Principal Accounting Officer


2006Morris W. Kegley(16)


59


Assistant General Counsel and Assistant Secretary


2005     (1)
    
    Mr. Christopher Seglem was elected President and Chief
    Operating Officer in June 1992, and a Director of the Company in
    December 1992. In June 1993, he was elected Chief Executive
    Officer, at which time he relinquished the position of Chief
    Operating Officer. In June 1996, he was elected Chairman of the
    Board. He is a member of the bar of Pennsylvania.(2)
    
    Mr. Blair joined Westmoreland in April 2005. He joined
    Westmoreland after seventeen years with Nalco Chemical Company
    where he was most recently acting Chief Financial Officer for
    Ondeo Nalco Company, a global specialty chemical company.(3)
    
    Mr. Wiegley joined Westmoreland in May 2005. Prior to
    joining Westmoreland he held legal positions with Credit Suisse
    Group from 1999 to 2005 and served as General Counsel for one of
    its affiliates. Mr. Wiegley served as outside counsel for
    Westmoreland from 1992 to 1994 while a partner with Sidley
    Austin LLP and from 1994 to 1997 with Pillsbury Winthrop Shaw
    Pittman LLP.(4)
    
    Mr. Holzwarth joined Westmoreland in November 2004. Prior
    to joining Westmoreland, he was Chief Executive Officer of
    United Energy, a publicly-traded utility in Australia. From 1993
    to 2003 he was 39




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employed by Aquila, Inc. in various management positions,
    including from 1997 to 2000 as Vice President and General
    Manager of Power Services and Generation, in which capacity he
    managed power plants capable of generating over 2,000 MW of
    electricity, and from 2002 to 2003 as Chief Executive Officer of
    United Energy, Australia, an electric distribution utility
    serving 600,000 customers.(5)
    
    Mr. OLaughlin joined Westmoreland in February 2001 as
    Vice President, Mining, and was named President and General
    Manager of Dakota Westmoreland Corporation in March 2001. He
    later became President and General Manager of Western Energy
    Company and President of Texas Westmoreland Coal Company and was
    promoted to Vice President of Coal Operations for Westmoreland
    Coal Company in May 2005. Prior to joining Westmoreland,
    Mr. OLaughlin was with Morrison Knudsen
    Corporations mining group for twenty-eight years, most
    recently as Vice President of Mine Operations which included
    responsibility for the contract mining services at the Absaloka
    Mine.(6)
    
    Mr. Myers rejoined Westmoreland in January 2000 as Vice
    President, Marketing and Business Development and in 2002 became
    Vice President, Sales and Marketing. He originally joined
    Westmoreland in 1989 as a Market Analyst and was promoted in
    1991 to Manager of the Contract Administration Department. He
    left Westmoreland in 1994. Between 1994 and 2000, he was Senior
    Consultant and Manager of the environmental consulting group of
    a nationally recognized energy consulting firm, specializing in
    coal markets, independent power development, and environmental
    regulation.(7)
    
    Mr. Beck joined Westmoreland in July 2001 as Vice
    President, Finance and Treasurer. From September 2003 to April
    2005, he also served as Acting Chief Financial Officer. He was
    appointed Assistant Secretary in April 2005. Prior to joining
    Westmoreland he was a financial officer at Columbus Energy Corp.
    from 1985 to 2000, lastly as Vice President and Chief Financial
    Officer.(8)
    
    Mr. Mark Seglem joined Westmoreland in July 2003 as Vice
    President, Business Operations of Texas Westmoreland Coal
    Company. In May 2006 he was promoted to President of Texas
    Westmoreland and elected Vice President, Strategic Planning and
    Administration of Westmoreland Coal Company. Mr. Seglem
    came to Westmoreland from the Secretary of Defenses office
    where he had served as a division director since August of 2001.
    Prior to that he worked for two years as a manager of the
    defense consulting firm, Whitney, Bradley, and Brown of Vienna,
    Virginia. Mr. Seglem served in the United States Navy as a
    Surface Warfare Officer from 1979 to 1999 retiring at the grade
    of Captain (select).(9)
    
    Mr. Durham joined Westmoreland as Vice President, Coal
    Operations in April 2000 and was named Vice President, Planning
    and Engineering in May 2005. For the four years prior to joining
    Westmoreland, he was a Vice President of NorWest Mine Services,
    Inc. which provides worldwide mining consulting services on
    surface mining and other projects. Mr. Durham has over
    30 years of surface mine management and operations
    experience. He became a registered professional engineer in 1976.(10)
    
    Mr. Kathol joined Westmorland in August 2003. Prior to
    joining Westmoreland, Mr. Kathol was Vice President and
    Controller of NorWest Mine Services, Inc. which provides
    worldwide mining consulting services. Mr. Kathol has over
    27 years experience evaluating and developing energy
    related projects.(11)
    
    Ms. Dymond joined Westmoreland in June 2006, as Vice
    President, Human Resources and became Vice President, Human
    Resources and Risk Management in November 2006. From 2000 to
    June 2006, she was with Cenveo, Inc., a publicly-held printing
    and paper conversion company, where she served as Vice President
    of Human Resources. Ms. Dymond has held senior human
    resources and risk management positions with publicly-held
    companies in the energy and manufacturing sectors since 1987
    including serving as Vice President of Human Resources of ACX
    Technologies, the publicly-held spin-off of the Adolph Coors
    Brewing Co. Ms. Dymond is a Certified Compensation
    Professional.(12)
    
    Mr. Woods joined Westmoreland in May 1973 and held various
    corporate accounting and management information systems
    positions while at Westmorelands Virginia and West
    Virginia coal mining operations. Mr. Woods has been with
    Westmoreland Energy LLC since 1990 and has held the positions of
    Controller, Asset Manager, and Vice President, Finance and Asset
    Management. Mr. Woods was elected to his current positions
    as Vice President, Eastern Operations of Westmoreland Coal
    Company in June 2000, as Executive Vice President of
    Westmoreland Energy LLC in February 1997, and as President of
    Westmoreland Technical Services, Inc. in April 2001. 40




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##### Table of Contents



(13)
    
    Ms. Jones joined Westmoreland in March 1993 as Manager,
    Business Development of Westmoreland Energy LLC and became
    Manager of Business Development and Corporate Relations for
    Westmoreland Coal Company in 1995. She was named Vice President
    Corporate Business Development and Corporate Relations in 2000
    and then named Vice President Corporate Relations in August
    2003. Prior to joining Westmoreland, Ms. Jones held
    engineering and business development positions in the utility
    industry. She became a registered professional engineer in 1985.(14)
    
    Ms. Turner joined Westmoreland in August 2003 as Director,
    Government and Community Relations and was named Vice President,
    Corporate Government and Community Relations in January 2006.
    Prior to joining Westmoreland she was a policy analyst for the
    Education Commission of the States and director of marketing and
    communications for Quark Inc. She has over 25 years
    experience in various positions in marketing, communications and
    public policy, including representing communities impacted by
    energy development.(15)
    
    Mr. Paprzycki joined Westmoreland as Controller and
    Principal Accounting Officer in June 2006. Prior to joining
    Westmoreland he held positions at Applied Films Corporation as
    Corporate Controller from November 2005 to June 2006. From June
    2004 to November 2005 he was Chief Financial Officer at Evans
    and Sutherland Computer Corporation, and the companys
    Director of Finance from June 2001 to June 2004.
    Mr. Paprzycki became a certified public accountant in 1994
    and a certified financial manager and certified management
    accountant in 2004.(16)
    
    Mr. Kegley joined Westmoreland in October 2005. Prior to
    joining Westmoreland he held legal positions with Peabody Energy
    Company from February 2004 to October 2005, AngloGold North
    America from June 2001 to February 2004, Kennecott Energy
    Company from August 1998 to June 2001, and Amax Coal Company and
    Cyprus Amax Minerals Company from February 1981 to July 1998. He
    is a member of the bar of Indiana, Illinois, Wyoming and
    Colorado. 41




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##### Table of Contents



PART II  ITEM 5 
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES  Market
    Information:
      Sales PricesCommon Stock


Depositary SharesHigh


Low


High


Low2005First Quarter

$
33.65


$
24.26


$
59.00


$
48.50Second Quarter


25.80



16.92



49.25



38.00Third Quarter


28.70



20.54



52.00



42.00Fourth Quarter


29.42



20.48



51.50



41.752006First Quarter


26.25



22.40



50.00



43.00Second Quarter


33.55



23.05



59.50



44.50Third Quarter


25.61



18.65



49.00



44.00Fourth Quarter


23.85



18.76



48.25



41.05     Number of Holders of RecordTitle of Class

(as of March 1, 2007)Common Stock ($2.50 par value)


1,361Depositary Shares, each representing one-quarter of a share of
    Series A Convertible Exchangeable Preferred Stock


13  42




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##### Table of Contents



Stock
    Performance Graph
    
  December 31,


2001


2002


2003


2004


2005


2006Westmoreland Coal Co.



100




86




129




224




168




145Peer Group Index



100




80




127




213




357




321Amex Market Index



100




96




131




150




165




185  
  Form 10-K
 
  Dividends
     43




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##### Table of Contents



44




---



##### Table of Contents



ITEM 6 
    SELECTED
    FINANCIAL DATA  Westmoreland
    Coal Company and Subsidiaries
  Five-Year
    Review
  
 2006(1)


2005


2004


2003


2002(As Restated)(2)(In thousands; except per share data)Consolidated Statements of Operations InformationRevenues:Coal

$
393,482


$
361,017


$
319,648


$
294,892


$
301,235Energy


47,904















Independent power and other


7,681



12,727



12,741



15,824



14,506Total revenues


449,067



373,744



332,389



310,716



315,741Cost and expenses


444,016



377,374



335,289



310,478



303,683Operating income (loss)


5,051



(3,630
)


(2,900
)


238



12,058Interest expense


(19,234
)


(10,948
)


(10,966
)


(10,804
)


(11,511
)Minority interest


(2,244
)


(950
)


(1,154
)


(773
)


(800
)Interest and other income


6,162



5,250



4,808



3,121



4,128Income (loss) from continuing operations before income taxes


(10,265
)


(10,278
)


(10,212
)


(8,218
)


3,875Income tax benefit (expense)


(2,433
)


(2,667
)


(896
)


1,132



(3,288
)Net income (loss) from continuing operations


(12,698
)


(12,945
)


(11,108
)


(7,086
)


587Income (loss) from discontinued operations














2,113



(3,583
)Loss before cumulative effect of changes in accounting principles


(12,698
)


(12,945
)


(11,108
)


(4,973
)


(2,996
)Cumulative effect of changes in accounting principles, net






2,662







(22
)


Net loss


(12,698
)


(10,283
)


(11,108
)


(4,995
)


(2,996
)Less preferred stock dividend requirements


1,585



1,744



1,744



1,752



1,772Less premium on exchange of preferred stock for common stock


791















Net loss applicable to common shareholders

$
(15,074
)

$
(12,027
)

$
(12,852
)

$
(6,747
)

$
(4,768
)Net loss per share applicable to common shareholders:Basic

$
(1.72
)

$
(1.45
)

$
(1.59
)

$
(0.87
)

$
(0.63
)Diluted

$
(1.72
)

$
(1.45
)

$
(1.59
)

$
(0.87
)

$
(0.63
)Weighted average number of common shares outstanding:Basic


8,748



8,280



8,099



7,799



7,608Diluted


9,105



8,868



8,662



8,338



8,147Balance Sheet InformationWorking capital deficit

$
(66,773
)

$
(20,138
)

$
(6,608
)

$
(16,485
)

$
(25,954
)Net property, plant and equipment


431,452



211,157



204,557



194,357



238,954Total assets


761,382



495,871



462,730



424,086



434,208Total debt


306,007



112,243



117,259



93,469



100,157Shareholders deficit(3)


(185,933
)


(30,208
)


(19,038
)


(9,389
)


(6,120
)  
    (1)
    
    Effective June 29, 2006, the Company acquired a 50%
    interest in a partnership which owns the 230 MW Roanoke
    Valley power plants from a subsidiary of E.ON U.S. LLC. The
    acquisition increased the Companys ownership interest in
    the partnership to 100%. 
  (2)
    
    See Note 2 to the Consolidated Financial Statements. 
 
  (3)
    
    Effective December 31, 2006, the Company adopted the
    provisions of Statement of Financial Accounting Standards
    No. 158 (SFAS No. 158). Upon adoption
    of the Standard, the Company recorded an increase in
    stockholders deficit of $129.8 million to reflect on
    its balance sheet the underfunded status of its pension and
    postretirement benefit plans. 
 45




---



##### Table of Contents



ITEM 7 
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS 
 
  Form 10-K
 
 
  Postretirement
    Medical Benefit Obligations
 
 
   
 
   
 
   
 
   
 
   
 
   
 46




---



##### Table of Contents



Stock
    Based Compensation Expense
 
 
   
 
  Income
    Tax Expense
 
 
   
 
   
 
 
  
 For Years Ended December 31,2006


2005


2004


2003


2002(In thousands)Net loss applicable to common shareholders, as previously
    reported

$
(9,969
)

$
(7,678
)

$
(8,991
)

$
(2,773
)

$
(1,010
)Increase in heritage health benefit expenses related to the 2001
    court decision


(3,708
)


(4,233
)


(3,763
)


(3,892
)


(3,758
)Increase in heritage health benefit expenses related to an error
    in 2006 census data


(1,211
)














Increase in selling and administrative expenses related to other
    census data errors


(122
)


(116
)


(98
)


(82
)Increase in stock compensation expense related to stock based
    incentive plan


(653
)














Decrease in income tax expense related to an error in the state
    income tax calculation


589















Total adjustments


(5,105
)


(4,349
)


(3,861
)


(3,974
)


(3,758
)Net loss applicable to common shareholders, as restated

$
(15,074
)

$
(12,027
)

$
(12,852
)

$
(6,747
)

$
(4,768
)  
 47




---



##### Table of Contents



10-K
    Amendments
 
 
  Form 10-K Form 10-K. Form 10-K Form 10-K Form 10-K,
 
 
  Internal
    Controls
 
 
   
 
  Effects
    of Restatement
 
 
   
 
 
  
 For Years Ended December 31,2006


2005


2004


2003


2002Selling and administrative expenses:As previously reported


42,853



35,156



30,762



33,386



31,732As restated


43,628



35,272



30,860



33,468



31,732Heritage health benefit expenses:As previously reported

$
27,902


$
27,471


$
33,203


$
29,922


$
26,921As restated

$
32,821


$
31,704


$
36,966


$
33,814


$
30,679Income tax benefit (expense) from continuing operations:As previously reported

$
(3,022
)

$
(2,667
)

$
(896
)

$
1,132


$
(3,288
)As restated

$
(2,433
)

$
(2,667
)

$
(896
)

$
1,132


$
(3,288
)Net earnings (loss):As previously reported

$
(7,593
)

$
(5,934
)

$
(7,247
)

$
(1,021
)

$
762As restated

$
(12,698
)

$
(10,283
)

$
(11,108
)

$
(4,995
)

$
(2,996
)Effect on per share amounts :Basic, as previously reported

$
(1.14
)

$
(0.93
)

$
(1.11
)

$
(0.36
)

$
(0.13
)Basic, as restated

$
(1.72
)

$
(1.45
)

$
(1.59
)

$
(0.87
)

$
(0.63
)Diluted, as previously reported

$
(1.14
)

$
(0.93
)

$
(1.11
)

$
(0.36
)

$
(0.13
)Diluted, as restated

$
(1.72
)

$
(1.45
)

$
(1.59
)

$
(0.87
)

$
(0.63
)  
 48




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##### Table of Contents



First


Second


Third


FourthQuarter


Quarter


Quarter


QuarterEffects on Quarterly Statements of OperationsSelling and administrative expenses:As previously reported

$
9,426


$
9,854


$
11,773


$
11,800As restated

$
9,498


$
9,972


$
12,141


$
12,017Heritage health benefit expenses:As previously reported

$
7,024


$
7,076


$
5,862


$
7,940As restated

$
8,254


$
8,306


$
7,091


$
9,170Income tax expense:As previously reported

$
(277
)

$
(243
)

$
(213
)

$
(2,289
)As restated

$
(277
)

$
(243
)

$
(213
)

$
(1,700
)Change in net earnings (loss):As previously reported

$
5,789


$
(2,890
)

$
(379
)

$
(10,113
)As restated

$
4,487


$
(4,238
)

$
(1,978
)

$
(10,969
)Effect on per share amounts :Basic, as previously reported

$
0.63


$
(0.44
)

$
(0.11
)

$
(1.17
)Basic, as restated

$
0.48


$
(0.60
)

$
(0.29
)

$
(1.27
)Diluted, as previously reported

$
0.60


$
(0.44
)

$
(0.11
)

$
(1.17
)Diluted, as restated

$
0.45


$
(0.60
)

$
(0.29
)

$
(1.27
)  
 
   
 
  
 
 2005First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(In thousands; except per share data)Effects on Quarterly Statements of OperationsSelling and administrative expenses:As previously reported

$
6,334


$
8,531


$
9,195


$
11,096As restated

$
6,363


$
8,560


$
9,224


$
11,125Heritage health benefit expenses:As previously reported

$
7,772


$
7,810


$
7,015


$
4,874As restated

$
8,830


$
8,868


$
8,073


$
5,933Change in net earnings (loss):As previously reported

$
2,692


$
(6,299
)

$
(7,424
)

$
5,097As restated

$
1,605


$
(7,386
)

$
(8,511
)

$
4,009Effect on per share amounts :Basic, as previously reported

$
0.28


$
(0.81
)

$
(0.95
)

$
0.56Basic, as restated

$
0.14


$
(0.95
)

$
(1.08
)

$
0.43Diluted, as previously reported

$
0.25


$
(0.81
)

$
(0.95
)

$
0.52Diluted, as restated

$
0.13


$
(0.95
)

$
(1.08
)

$
0.40  
  Forward-Looking
    Disclaimer
 
   
 49




---



##### Table of Contents



Overview
  Competitive,
    economic and industry factors
        Revenues
    and expenses
 
   
  Meeting
    Our Commitment to Preferred Stockholders
      Challenges
    
    obtaining adequate capital for our on-going operations and our
    growth initiatives;
    continuing to fund high heritage health benefit expenses which
    continue to be adversely affected by inflation in medical costs,
    longer life expectancies for retirees and the failure of the
    UMWA retirement fund trustees to manage medical costs;
    maintaining and collateralizing, where necessary, our Coal Act
    and reclamation bonds; 50




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##### Table of Contents




    funding required contributions to pension plans that are
    underfunded;
    complying with new environmental regulations, which have the
    potential to significantly reduce sales from our mines; and
    defending against claims for potential taxes and royalties
    assessed by various governmental entities, some of which we
    believe are subject to reimbursement by our customers.    Internal
    Control over Financial Reporting
   
  Form 10-K Form 10-K. Form 10-K.
 
  Critical
    Accounting Estimates and Related Matters
        Postretirement
    Benefits and Pension Obligations
 
   
   51




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##### Table of Contents



Postretirement Benefits1% Increase

1% Decrease(As restated, note 2)(In thousands)Effect on service and interest cost components

$
1,954


$
(1,643
)Effect on postretirement benefit obligation


31,610



(26,679
)  
 
   
        Asset
    Retirement Obligations, Reclamation Costs and Reserve
    Estimates
       52




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##### Table of Contents



Deferred
    Income Taxes
             53




---



##### Table of Contents



Contractual
    Obligations and Commitments
    
 Payments Due by PeriodTotal


2007


2008


2009


2010


2011


After 2011(As Restated, note 2)Contractual Obligations and CommitmentsWestmoreland Mining term debt(1)


91,600



12,000



44,600



11,500



11,500



12,000



ROVA term debt(2)


158,003



27,696



32,269



31,232



15,306



8,500



43,000ROVA acquisition debt


35,000



35,000



















Other debt


16,474



1,311



14,011



770



382







Interest on debt(3)


69,851



22,016



16,135



9,552



7,340



5,337



9,471Operating leases


7,498



4,613



1,855



1,014



16







Workers compensation


9,538



949



895



837



785



736



5,336Combined Benefit Fund (Multiemployer plan)(4)


33,229



3,613



3,383



3,158



2,936



2,733



17,406Postretirement medical benefits(5)


300,066



16,968



19,046



19,988



20,790



21,244



202,030Qualified pension benefits(6)


67,411



4,140



2,626



6,270



4,435



3,369



46,571SERP benefits(7)


2,506



76



74



71



68



255



1,962Black lung benefits


14,902



1,987



1,488



1,440



1,387



1,330



7,270Reclamation costs(8)


488,437



10,543



11,110



16,640



14,077



15,380



420,687ROVA coal supply agreement(9)


217,160



26,488



26,488



26,488



26,488



26,488



84,720  
    (1)
    
    At December 31, 2006, Westmoreland Mining had deposited
    $25.4 million in two restricted accounts as collateral
    against these obligations.(2)
    
    At December 31, 2006, ROVA had deposited $28.1 million
    in a restricted debt account as collateral against these
    obligations.(3)
    
    In calculating the amount of interest on debt, we have assumed
    that the interest rates applicable to our floating rate debt
    would not increase or decrease from the rates in effect at
    December 31, 2006.(4)
    
    We have not accrued the present value of this obligation,
    because this plan is a multiemployer plan. We expense our
    premium payments when due.(5)
    
    The table presents our estimate of our discounted benefit
    obligation.(6)
    
    The fair value of plan assets at December 31, 2006 was
    $47 million. The obligations shown above are our expected
    contributions to the plan assets.(7)
    
    The table presents our estimate of our discounted benefit
    obligations.(8)
    
    The table presents our estimate of the undiscounted cost for
    final reclamation. The accrued liability of $184.1 million
    as of December 31, 2006 will increase in present value as
    mine closures draw nearer. The accrued liability does not
    consider the contractual obligations at December 31, 2006,
    of our customers and of Washington Group, the contract miner at
    the Absaloka Mine to perform reclamation. Effective
    March 30, 2007, WRI acquired the contract to mine the
    Absaloka Mine, and assumed the final reclamation obligation. We
    estimate that the present value of Washington Groups
    receivable that we assumed is $11.6 million, and the
    receivables of our other customers total $30.4 million. The
    accrued liability also does not reflect $62.5 million held
    in escrow as of December 31, 2006 from contributions by
    customers for reclamation of the Rosebud Mine, or
    $1.2 million in restricted cash for reclamation of other
    mines. In addition, the Absaloka contract mine operator is
    funding a separate reclamation escrow account which has a
    balance of approximately $6.5 million as of
    December 31, 2006. We estimate that the present value of
    our net 54




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##### Table of Contents



obligation for final reclamation of our
    mines  that is, the costs of final reclamation
    that are not the contractual responsibilities of
    others  is $142.1 million at December 31,
    2006. Responsibility for these amounts may change in certain
    circumstances. For example, at the Jewett Mine, if there is a
    cessation of mining the customer assumes responsibility for all
    reclamation. At December 31, 2006, if there had been a
    cessation of mining, the customer would have assumed
    responsibility for approximately $37.1 million (on a
    present value basis) of the reclamation obligation that is
    currently the responsibility of the Company.(9)
    
    ROVA has two coal supply agreements with TECO Coal Corporation.
    The amounts shown in this row assume that ROVA continues to
    purchase coal under these contracts at the current volume and
    does not extend these contracts and that the price per ton
    payable under these contracts does not increase.  Financial
    Implications of the ROVA Acquisition
    MW-hour MW-hour
    91-06, EITF 01-08, EITF 01-08. EITF 01-08,
 
  Form 8-K/A Form 8-K/A
 
 55




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##### Table of Contents



Form 8-K/A.
   
   
    Liquidity
    and Capital Resources
       
   
     56




---



##### Table of Contents



Factors
    Affecting our Liquidity
 
   
   
   
     57




---



##### Table of Contents



Cash
    Balances and Use of Credit
 
      Restricted
    Cash
    Preferred
    Stock
    Westmoreland
    Mining Debt Facilities
   58




---



##### Table of Contents



Historical
    Sources and Uses of Cash
 
   
 
   
 
   
       
   
 59




---



##### Table of Contents



Operational
    and Capital Expenditure Outlook
    
    Tons sold in 2007 are expected to increase by approximately 2%
    compared to tons sold in 2006. Coal margins are expected to
    increase reflecting higher prices from customer contract
    renewals offset in part by increases in the costs of operating
    the mines.
    We will receive a reserve dedication payment of $10 million
    from a customer in early 2007.
    We anticipate that capital expenditures and new investments
    related to our mining activities will increase in 2007 from 2006
    as a result of the replacement of operational equipment at our
    mines. As a result, we expect higher depreciation, depletion and
    amortization expense.
    In February 2007, the Company sold its interest in a coal
    royalty for $12.7 million and will recognize a
    $5.6 million gain on the sale in the first quarter.
    We anticipate a reduction in our 2007 heritage health benefit
    expenses as a result of lower health care costs, combined
    benefit fund premiums, workers compensation costs as well
    as the $5.8 million and additional interest refund expected
    from the CBF.
    2007 results will reflect the consolidation of the operating
    results of ROVA for a full year compared to only six months in
    2006.  Pricing
    Outlook
       60




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
    Results
    of Operations
  2006
    Compared to 2005
  Coal
    Operations
    Year Ended2006


2005


ChangeRevenues  thousands

$
393,482


$
361,017



9
%Volumes  millions of equivalent coal tons


29.4



30.0



(2
)%Cost of sales  thousands

$
311,629


$
288,728



8
%           Independent
    Power
   61




---



##### Table of Contents



2006


2005WELLCs share of ROVA earnings shown as equity in earnings

$
7,315


$
12,272Ft. Lupton equity earnings


366



455Total equity earnings


7,681



12,727Energy revenue


47,904



Costs and expenses:Cost of sales  energy


(31,381
)


Depreciation, depletion, & amortization


(4,795
)


(24
)Selling and administrative


(6,946
)


(3,076
)Loss on sales of assets


(123
)


Power segment revenue less costs & expenses


4,659



(3,100
)Independent power segment operating income

$
12,340



9,627     (1)
    
    The Company recorded $14.5 million in deferred revenue in
    2006 related to capacity payments at ROVA.        Heritage
 
   
  Corporate
 
   
  Interest
   62




---



##### Table of Contents



Income
    Tax
    Results
    of Operations
  2005
    Compared to 2004
  Coal
    Operations
    Year Ended2005


2004


ChangeRevenues  thousands

$
361,017


$
319,648



13
%Volumes  millions of equivalent coal tons


30.0



29.0



3
%Cost of sales  thousands

$
288,728


$
249,131



16
%   catch-up
        Independent
    Power
  start-up
 63




---



##### Table of Contents



Heritage
 
   
  
    Costs for pneumoconiosis (black lung) benefits were
    $1.6 million in 2004, compared to a benefit of
    $3.1 million recorded in 2005 as a result of updated
    actuarial projections.
    Workers compensation expense was $0.9 million less
    than in 2004 with the conclusion of the case audits discussed
    below.
    Costs for the Combined Benefit Fund were $0.8 million less
    than in 2004 as a result of a court ruling which reduced our
    2005 CBF premiums. 
   
      Corporate
    Interest
    Income
    Tax
   64




---



##### Table of Contents



New
    Accounting Pronouncements
     65




---



##### Table of Contents



ITEM 7A 
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    Commodity
    Price Risk
    and/or
          Interest
    Rate Risk
   66




---



##### Table of Contents



67




---



##### Table of Contents



ITEM 8 
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  
 Index to Financial Statements

PageConsolidated Balance Sheets


69Consolidated Statements of Operations


70Consolidated Statements of Shareholders
    Deficit and Comprehensive Loss


72Consolidated Statements of Cash Flows


73Notes to Consolidated Financial Statements


74Report of Independent Registered Public
    Accounting Firm


124  
 68




---



##### Table of Contents



WESTMORELAND
    COAL COMPANY AND SUBSIDIARIES
  Consolidated
    Balance Sheets
  
 December 31,


December 31,2006


2005(As Restated, note 2)(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
26,738


$
11,216Receivables:Trade


56,923



29,138Other


6,017



7,33062,940



36,468Inventories


24,484



17,576Deferred overburden removal costs






14,090Restricted cash


3,300



Excess of trust assets over pneumoconiosis benefit obligation


5,566



Other current assets


4,992



4,816Total current assets


128,020



84,166Property, plant and equipment:Land and mineral rights


79,442



77,591Capitalized asset retirement cost


143,655



122,561Plant and equipment


350,414



127,063573,511



327,215Less accumulated depreciation, depletion and amortization


142,059



116,058Net property, plant and equipment


431,452



211,157Investment in independent power projects






50,869Excess of trust assets over pneumoconiosis benefit obligation,
    less current portion


2,266



7,463Advanced coal royalties


3,982



3,874Deferred overburden removal costs






2,717Reclamation deposits


62,486



58,823Restricted cash and bond collateral


66,353



34,563Contractual third party reclamation receivables


41,938



31,615Intangible assets


13,263



0Other assets


11,622



10,624Total Assets

$
761,382


$
495,871LIABILITIES AND SHAREHOLDERS DEFICITCurrent liabilities:Current installments of long-term debt

$
76,803


$
12,437Accounts payable and accrued expenses:Trade


54,603



33,307Deferred revenue  current


886



583Income taxes


4,180



2,293Interest


2,907



Production taxes


23,589



19,609Workers compensation


949



949Pension and SERP obligations


76



76Postretirement medical benefits


16,968



17,160Asset retirement obligations


13,832



17,890Total current liabilities


194,793



104,304Long-term debt, less current installments


216,204



94,306Revolving lines of credit


13,000



5,500Workers compensation, less current portion


8,589



8,394Postretirement medical costs, less current portion


283,098



144,762Pension and SERP obligations, less current portion


22,815



16,095Deferred revenue, less current portion


15,328



1,251Asset retirement obligations, less current portion


170,230



140,517Other liabilities


17,756



6,810Minority interest


5,502



4,140Commitments and contingent liabilities






Shareholders deficit:Preferred stock of $1.00 par valueAuthorized 5,000,000 shares; Issued and outstanding
    160,130 shares at December 31, 2006 and
    208,083 shares at December 31, 2005


160



205Common stock of $2.50 par valueAuthorized 20,000,000 shares; Issued and outstanding
    9,014,078 shares at December 31, 2006 and
    8,413,312 shares at December 31, 2005


22,535



21,033Other paid-in capital


79,246



75,344Accumulated other comprehensive loss


(139,424
)


(11,409
)Accumulated deficit


(148,450
)


(115,381
)Total shareholders deficit


(185,933
)


(30,208
)Total Liabilities and Shareholders Deficit

$
761,382


$
495,871  
  69




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##### Table of Contents



WESTMORELAND
    COAL COMPANY AND SUBSIDIARIES
  Consolidated
    Statements of Operations
  
 Year Ended December 31,2006


2005


2004(As Restated, note 2)(In thousands)Revenues:Coal

$
393,482


$
361,017


$
319,648Energy


47,904







Independent power projects  equity in earnings


7,681



12,727



12,741449,067



373,744



332,389Cost and expenses:Cost of sales  coal


311,629



288,728



249,131Cost of sales  energy


31,381







Depreciation, depletion and amortization


29,342



21,603



18,409Selling and administrative


43,628



35,272



30,860Heritage health benefit expenses


32,821



31,704



36,966Loss (gain) on sales of assets


(4,785
)


67



(77
)444,016



377,374



335,289Operating income (loss)


5,051



(3,630
)


(2,900
)Other income (expense):Interest expense


(19,234
)


(10,948
)


(10,966
)Interest income


6,089



3,523



3,811Minority interest


(2,244
)


(950
)


(1,154
)Other income


73



1,727



997(15,316
)


(6,648
)


(7,312
)Loss before income taxes and cumulative effect of change in
    accounting principle


(10,265
)


(10,278
)


(10,212
)Income tax expense


(2,433
)


(2,667
)


(896
)Loss before cumulative effect of change in accounting principle


(12,698
)


(12,945
)


(11,108
)Cumulative effect of change in accounting principle






2,662



Net loss


(12,698
)


(10,283
)


(11,108
)Less preferred stock dividend requirements


1,585



1,744



1,744Less premium on exchange of preferred stock for common stock


791







Net loss applicable to common shareholders

$
(15,074
)

$
(12,027
)

$
(12,852
)  
   70




---



##### Table of Contents



WESTMORELAND
    COAL COMPANY AND SUBSIDIARIES
  Consolidated
    Statements of Operations  (Continued)
  
 Year Ended December 31,2006


2005


2004(As Restated, note 2)(In thousands, except per share data)Net loss per share applicable to common shareholders before
    cumulative effect of change in accounting principle:Basic

$
(1.72
)

$
(1.77
)

$
(1.59
)Diluted

$
(1.72
)

$
(1.77
)

$
(1.59
)Net income per share applicable to common shareholders from
    cumulative effect of change in accounting principle:Basic






0.32



Diluted






0.30



Net loss per share applicable to common shareholders:Basic

$
(1.72
)

$
(1.45
)

$
(1.59
)Diluted

$
(1.72
)

$
(1.45
)

$
(1.59
)Weighted average number of common shares outstandingBasic


8,748



8,280



8,099Diluted


9,105



8,868



8,662Pro forma amounts assuming the change in accounting for
    workers compensation is applied retroactively:Net loss applicable to common shareholders









$
(12,028
)Net loss per share applicable to common shareholders:Basic









$
(1.49
)Diluted









$
(1.49
)  
   71




---



##### Table of Contents



WESTMORELAND
    COAL COMPANY AND SUBSIDIARIESConsolidated Statement of Shareholders
    Deficit and Comprehensive LossYears Ended December 31, 2004, 2005 and 2006
  
 Class AConvertible








AccumulatedExchangeable








Other





TotalPreferred


Common


Other Paid-in


Comprehensive


Accumulated


ShareholdersStock


Stock


Capital


Loss


Deficit


Equity (Deficit)(In thousands)Balance at December 31, 2003 (205,083 preferred and
    7,957,166 common shares outstanding) (As Restated, note 2)

$
205


$
19,893


$
71,192


$
(8,247
)

$
(92,432
)

$
(9,389
)Common stock issued as compensation (80,135 shares)






200



1,417











1,617Common stock options exercised (131,300)






328



534











862Dividends declared


















(738
)


(738
)Net loss (As Restated, note 2)


















(11,108
)


(11,108
)Minimum pension liability














(1,222
)






(1,222
)Net unrealized gain on interest rate swap agreement














940







940Comprehensive loss (As Restated, note 2)






















(11,390
)Balance at December 31, 2004 (205,083 preferred and
    8,168,601 common shares outstanding) (As Restated, note 2)


205



20,421



73,143



(8,529
)


(104,278
)


(19,038
)Common stock issued as compensation (72,863 shares)






183



1,536











1,719Common stock options exercised (171,848 shares)






429



665











1,094Dividends declared


















(820
)


(820
)Net loss (As Restated, note 2)


















(10,283
)


(10,283
)Minimum pension liability














(3,388
)






(3,388
)Net unrealized gain on interest rate swap agreement














508







508Comprehensive loss (As Restated, note 2)






















(13,163
)Balance at December 31, 2005 (205,083 preferred shares and
    8,413,312, common shares outstanding) (As Restated, note 2)


205



21,033



75,344



(11,409
)


(115,381
)


(30,208
)Common stock issued as compensation (89,939 shares)






225



2,339











2,564Common stock options exercised (174,732 shares)






437



561











998Dividends declared


















(387
)


(387
)Exchange of preferred shares for common stock
    (336,095 shares)


(45
)


840



(4
)






(791
)


Cumulative effect of change in accounting for deferred
    overburden removal costs


















(16,805
)


(16,805
)Adjustment for funded status of pension and postretirement
    medical benefit plans upon adoption of SFAS 158 (As
    Restated, note 2)














(129,821
)






(129,821
)Cumulative effect of adjustment upon adoption of SAB 108


















(2,388
)


(2,388
)Adjustment for stock appreciation rights previously classified
    as a liability upon adoption of SFAS 123(R)










1,006











1,006Net loss (As Restated, note 2)


















(12,698
)


(12,698
)Minimum pension liability














1,744







1,744Settlement of interest rate swap agreement














62







62Comprehensive loss (As Restated, note 2)






















(10,892
)Balance at December 31, 2006 (160,130 preferred shares and
    9,014,078 common shares outstanding) (As Restated, note 2)

$
160


$
22,535


$
79,246


$
(139,424
)

$
(148,450
)

$
(185,933
)  
   72




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##### Table of Contents



WESTMORELAND
    COAL COMPANY AND SUBSIDIARIES
  Consolidated Statements of Cash Flows
  
 Years Ended December 31,2006


2005


2004(As Restated, note 2)(In thousands)Cash flows from operating activities:Net loss

$
(12,698
)

$
(10,283
)

$
(11,108
)Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Deferred power sales revenue


14,545







Cash distributions from independent power projects


1,307



10,702



3,227Equity in earnings of independent power projects


(7,681
)


(12,727
)


(12,741
)Depreciation, depletion and amortization


29,342



21,603



18,409Stock compensation expense


2,963



1,719



1,617Loss (gain) on sales of assets


(4,785
)


67



(77
)Minority interest


2,244



950



1,154Cumulative effect of change in accounting principle






(2,662
)


Amortization of intangible assets and liabilities


493







Amortization of debt origination cost


1,626



941



882Changes in operating assets and liabilities:Receivables, net


(15,679
)


(7,891
)


(66
)Inventories


(5,751
)


(2,624
)


(663
)Excess of trust assets over pneumoconiosis benefit obligation


(369
)


(3,000
)


1,771Accounts payable and accrued expenses


16,204



11,748



561Income tax payable


1,887



2,222



71Accrual for workers compensation


195



1,071



1,456Accrual for postretirement medical costs


13,105



10,226



7,322Pension and SERP obligations


3,682



1,689



(250
)Other assets and liabilities


(7,462
)


5,008



(2,075
)Net cash provided by operating activities


33,168



28,759



9,490Cash flows from investing activities:Additions to property, plant and equipment


(20,852
)


(18,344
)


(18,324
)Change in restricted cash and bond collateral and reclamation
    deposits


(10,527
)


(5,143
)


(10,488
)ROVA acquisition, net of cash resulting from the ROVA
    consolidation of $21.9 million


(7,714
)






Net proceeds from sales of assets


5,171



641



311Net cash used in investing activities


(33,922
)


(22,846
)


(28,501
)Cash flows from financing activities:Proceeds from long-term debt, net of debt issuance costs






1,712



34,104Repayment of long-term debt


(25,570
)


(12,228
)


(11,679
)Net borrowings (repayments) on revolving lines of credit


42,115



5,500



(500
)Exercise of stock options


998



1,094



862Dividends paid to minority shareholder of subsidiary


(880
)


(1,080
)


(1,180
)Dividends paid on preferred shares


(387
)


(820
)


(738
)Net cash provided by (used in) financing activities


16,276



(5,822
)


20,869Net increase in cash and cash equivalents


15,522



91



1,858Cash and cash equivalents, beginning of year


11,216



11,125



9,267Cash and cash equivalents, end of year

$
26,738


$
11,216


$
11,125Supplemental disclosures of cash flow information:Cash paid during the year for:Interest

$
16,649


$
10,056


$
9,629Income taxes


713



446



552  
   73




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes
    to Consolidated Financial Statements
  1.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Nature
    of Operations and Liquidity
   
   
   
   
       74




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
  Consolidation
    Policy
    Use
    of Estimates
      Coal
    Revenues
    Cash
    Equivalents
    Inventories
    Property,
    Plant and Equipment
   75




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
    Deferred
    Overburden Removal Costs
  No. 04-6, No. 04-6). No. 04-6,
    Income
    Taxes
    Postretirement
    Health Care Benefits and Pension Plans
       76




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
       
   
  Workers
    Compensation Benefits
        Asset
    Retirement Obligations
   77




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
    Reclamation
    Deposits and Contractual Third Party Reclamation
    Receivables
    Financial
    Instruments
    Comprehensive
    Income
   
   
   78




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
    
 Unfunded


Unrealized


AccumulatedUnfunded


Postretirement


Gain (Loss) on


OtherPension


Benefit


Interest Rate


ComprehensiveLiability


Obligation


Swap


Income (Loss)(As Restated, note 2)(In thousands)Balance at January 1, 2004

$
(6,737
)

$



$
(1,510
)

$
(8,247
)Increase minimum pension liability


(1,222
)










(1,222
)Unrealized gain (loss) on interest rate swap










940



940Balance at December 31, 2004


(7,959
)






(570
)


(8,529
)Increase minimum pension liability


(3,388
)










(3,388
)Unrealized gain (loss) on interest rate swap










508



508Balance at December 31, 2005


(11,347
)






(62
)


(11,409
)Decrease minimum pension liability


1,744











1,744Adjustment for funded status of pension and postretirement
    medical benefit plans upon adoption of SFAS 158


(4,782
)


(125,039
)






(129,821
)Unrealized gain (loss) on interest rate swap










62



62Balance at December 31, 2006

$
(14,385
)

$
(125,039
)

$



$
(139,424
)  
  Earnings
    Per Share
      Years Ended December 31,2006


2005


2004(Shares in thousands)Outstanding SARs and options to purchase common stock and
    restricted stock excluded because the strike prices of the
    options exceeded the average price of common stock during the
    period


170







10Other outstanding SARs and options to purchase common stock and
    restricted stock excluded because the impact would have been
    anti-dilutive


946



1,166



1,062  79




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
  Reclassifications
    Recent
    Accounting Pronouncements
      2.
    RESTATEMENT 
  Form 10-K
 
 
  Postretirement
    Medical Benefit Obligations
 
 
   
 
   
 
   
 80




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
  Stock
    Based Compensation Expense
 
 
   
 81




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
 
  Income
    Tax Expense
 
 
   
 
 
 
   
  
 For Years Ended December 31,2006


2005


2004(In thousands)Net loss applicable to common shareholders, as previously
    reported

$
(9,969
)

$
(7,678
)

$
(8,991
)Increase in heritage health benefit expenses related to the 2001
    court decision


(3,708
)


(4,233
)


(3,763
)Increase in heritage health benefit expenses related to an error
    in 2006 census data


(1,211
)






Increase in selling and administrative expenses related to other
    census data errors


(122
)


(116
)


(98
)Increase in stock compensation expense related to stock based
    incentive plan


(653
)






Decrease in income tax expense related to an error in the state
    income tax calculation


589







Total adjustments


(5,105
)


(4,349
)


(3,861
)Net loss applicable to common shareholders, as restated

$
(15,074
)

$
(12,027
)

$
(12,852
)  
 82




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
 
   
  
 Years Ended December 31,2006


2005


2004As





As





AsPreviously


As


Previously


As


Previously


AsReported


Restated


Reported


Restated


Reported


Restated(In thousands; except per share data)Consolidated Statement of OperationsSelling and administrative expenses

$
42,853


$
43,628


$
35,156


$
35,272


$
30,762


$
30,860Heritage health benefit expenses


27,902



32,821



27,471



31,704



33,203



36,966Operating income (loss)


10,745



5,051



719



(3,630
)


961



(2,900
)Loss before income taxes and cumulative effect of change in
    accounting principle


(4,571
)


(10,265
)


(5,929
)


(10,278
)


(6,351
)


(10,212
)Income tax expense from continuing operations


(3,022
)


(2,433
)


(2,667
)


(2,667
)


(896
)


(896
)Net loss before cumulative effect of change in accounting
    principle


(7,593
)


(12,698
)


(8,596
)


(12,945
)


(7,247
)


(11,108
)Net loss


(7,593
)


(12,698
)


(5,934
)


(10,283
)


(7,247
)


(11,108
)Net loss applicable to common shareholders


(9,969
)


(15,074
)


(7,678
)


(12,027
)


(8,991
)


(12,852
)Net loss per share applicable to common shareholders before
    cumulative effect of change in accounting principle:Basic earnings per share

$
(1.14
)

$
(1.72
)

$
(1.25
)

$
(1.77
)

$
(1.11
)

$
(1.59
)Diluted earnings per share


(1.14
)


(1.72
)


(1.25
)


(1.77
)


(1.11
)


(1.59
)Net loss per share applicable to common shareholders:Basic earnings per share

$
(1.14
)

$
(1.72
)

$
(0.93
)

$
(1.45
)

$
(1.11
)

$
(1.59
)Diluted earnings per share


(1.14
)


(1.72
)


(0.93
)


(1.45
)


(1.11
)


(1.59
)  
 
   
  
 December 31,2006


2005As





AsPreviously


As


Previously


AsReported


Restated


Reported


Restated(In thousands)Consolidated Balance SheetIncome taxes

$
4,769


$
4,180


$
2,293


$
2,293Postretirement medical benefits, current portion


16,968



16,968



17,160



17,160Total current liabilities


195,382



194,793



104,304



104,304Postretirement medical costs, less current portion


223,414



283,098



124,746



144,762Other liabilities


17,103



17,756



6,810



6,810Total liabilities


887,567



947,315



506,063



526,079Accumulated other comprehensive loss


(104,797
)


(139,424
)


(11,409
)


(11,409
)Accumulated deficit


(123,329
)


(148,450
)


(95,365
)


(115,381
)Total shareholders deficit


(126,185
)


(185,933
)


(10,192
)


(30,208
)  
 83




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
 
   
  
 2006First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Total(In thousands)(Unaudited)Net income (loss) applicable to common shareholders, as
    previously reported

$
5,353


$
(3,827
)

$
(961
)

$
(10,534
)

$
(9,969
)Increase in heritage health benefit expenses related to the 2001
    court decision


(927
)


(927
)


(927
)


(927
)


(3,708
)Increase in heritage health benefit expenses related to an error
    in 2006 census data


(303
)


(303
)


(303
)


(302
)


(1,211
)Increase in selling and administrative expenses related to other
    census data errors


(30
)


(31
)


(30
)


(31
)


(122
)Increase in stock compensation expense related to stock based
    incentive plan


(42
)


(87
)


(339
)


(185
)


(653
)Decrease in income tax expense related to an error in the state
    income tax calculation














589



589Total adjustments


(1,302
)


(1,348
)


(1,599
)


(856
)


(5,105
)Net income (loss) applicable to common shareholders, as restated

$
4,051


$
(5,175
)

$
(2,560
)

$
(11,390
)

$
(15,074
)  
  
 2005First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Total(In thousands)(Unaudited)Net income (loss) applicable to common shareholders, as
    previously reported

$
2,256


$
(6,735
)

$
(7,860
)

$
4,661


$
(7,678
)Increase in heritage health benefit expenses related to the 2001
    court decision


(1,058
)


(1,058
)


(1,058
)


(1,059
)


(4,233
)Increase in selling and administrative expenses related to other
    census data errors


(29
)


(29
)


(29
)


(29
)


(116
)Total adjustments


(1,087
)


(1,087
)


(1,087
)


(1,088
)


(4,349
)Net income (loss) applicable to common shareholders, as restated

$
1,169


$
(7,822
)

$
(8,947
)

$
3,573


$
(12,027
)  
 84




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
 
   
  
 2006First Quarter


Second QuarterAs





AsPreviously


As


Previously


AsReported


Restated


Reported


Restated(In thousands; except per share data)(Unaudited)Consolidated Statement of OperationsSelling and administrative expenses

$
9,426


$
9,498


$
9,854


$
9,972Heritage health benefit expenses


7,024



8,254



7,076



8,307Operating income (loss)


7,873



6,571



(643
)


(1,991
)Income (loss) before income taxes


6,066



4,764



(2,647
)


(3,996
)Income tax expense


(277
)


(277
)


(243
)


(243
)Net income (loss)


5,789



4,487



(2,890
)


(4,239
)Net income (loss) applicable to common shareholders


5,353



4,051



(3,827
)


(5,175
)Net income (loss) per share applicable to common shareholders:Basic earnings per share

$
0.63


$
0.48


$
(0.44
)

$
(0.60
)Diluted earnings per share


0.60



0.45



(0.44
)


(0.60
)  
  
 2006Third Quarter


Fourth QuarterAs





AsPreviously


As


Previously


AsReported


Restated


Reported


Restated(In thousands; except per share data)(Unaudited)Consolidated Statement of OperationsSelling and administrative expenses

$
11,773


$
12,141


$
11,800


$
12,017Heritage health benefit expenses


5,862



7,092



7,940



9,170Operating income (loss)


5,152



3,553



(1,637
)


(3,082
)Loss before income taxes


(166
)


(1,765
)


(7,824
)


(9,269
)Income tax expense


(213
)


(213
)


(2,289
)


(1,700
)Net loss


(379
)


(1,978
)


(10,113
)


(10,969
)Net loss applicable to common shareholders


(961
)


(2,560
)


(10,534
)


(11,390
)Net loss per share applicable to common shareholders:Basic earnings per share

$
(0.11
)

$
(0.29
)

$
(1.17
)

$
(1.27
)Diluted earnings per share


(0.11
)


(0.29
)


(1.17
)


(1.27
)  
 85




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
 
   
  
 2005First Quarter


Second QuarterAs





AsPreviously


As


Previously


AsReported


Restated


Reported


Restated(In thousands; except per share data)(Unaudited)Consolidated Statement of OperationsSelling and administrative expenses

$
6,334


$
6,363


$
8,531


$
8,560Heritage health benefit expenses


7,772



8,830



7,810



8,868Operating income (loss)


3,724



2,637



(4,441
)


(5,528
)Income (loss) before income taxes and cumulative effect of
    change in accounting principle


1,522



435



(6,163
)


(7,250
)Net income (loss) before cumulative effect of change in
    accounting principle


30



(1,057
)


(6,299
)


(7,386
)Net income (loss)


2,692



1,605



(6,299
)


(7,386
)Net income (loss) applicable to common shareholders


2,256



1,169



(6,735
)


(7,822
)Net loss per share applicable to common shareholders before
    cumulative effect of change in accounting principle:Basic earnings per share

$
(0.05
)

$
(0.18
)

$
(0.81
)

$
(0.95
)Diluted earnings per share


(0.05
)


(0.18
)


(0.81
)


(0.95
)Net income (loss) per share applicable to common shareholders:Basic earnings per share

$
0.28


$
0.14


$
(0.81
)

$
(0.95
)Diluted earnings per share


0.25



0.13



(0.81
)


(0.95
)  
  86




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##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
  
 2005Third Quarter


Fourth QuarterAs





AsPreviously


As


Previously


AsReported


Restated


Reported


Restated(In thousands; except per share data)(Unaudited)Consolidated Statement of OperationsSelling and administrative expenses

$
9,195


$
9,224


$
11,096


$
11,125Heritage health benefit expenses


7,015



8,073



4,874



5,933Operating income (loss)


(4,382
)


(5,469
)


5,818



4,730Income (loss) before income taxes and cumulative effect of
    change in accounting principle


(6,056
)


(7,143
)


4,768



3,680Net income (loss) before cumulative effect of change in
    accounting principle


(7,424
)


(8,511
)


5,097



4,009Net income (loss)


(7,424
)


(8,511
)


5,097



4,009Net income (loss) applicable to common shareholders


(7,860
)


(8,947
)


4,661



3,573Net income (loss) per share applicable to common shareholders
    before cumulative effect of change in accounting principle:Basic earnings per share

$
(0.95
)

$
(1.08
)

$
0.56


$
0.43Diluted earnings per share


(0.95
)


(1.08
)


0.52



0.40Net income (loss) per share applicable to common shareholders:Basic earnings per share

$
(0.95
)

$
(1.08
)

$
0.56


$
0.43Diluted earnings per share


(0.95
)


(1.08
)


0.52



0.40  
  3.
    ROVA
    ACQUISITION     
   
   87




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##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
      Purchase Price AllocationsAssets:Cash

$
10,951Accounts receivable


9,113Inventory


570Property, plant, and equipment


91,441Restricted assets


11,613Intangible assets


14,266Other assets


276Total assets


138,230Liabilities:Accounts payable


2,298Accrued interest


896Debt


90,660Other liabilities


14,054Total liabilities


107,908Total purchase price

$
30,322    88




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
    AssetsCash

$
21,901Accounts receivable


10,794Inventory


1,157Property, plant, and equipment


205,720Restricted assets


28,226Intangible assets


14,266Other assets


3,261Total assets


285,325LiabilitiesAccount payable


5,368Accrued interest


1,793Debt


205,986Other liabilities


14,856Total liabilities

$
228,003Elimination of equity method investment in ROVA

$
57,322       
 Year Ended


Year EndedDecember 31,


December 31,2006


2005(As Restated, note 2)(In thousands)Revenues

$
483,205


$
443,148Income (loss) from operations


4,057



(7,475
)Net loss applicable to common shareholders


(23,509
)


(31,011
)Earnings (loss) per share:Basic

$
(2.68
)

$
(3.74
)Diluted

$
(2.68
)

$
(3.74
)  
  EITF 91-06, EITF 01-08,
 89




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
  (EITF 01-08),
  EITF 01-08. EITF 01-08
   
  4.
    CHANGES
    IN ACCOUNTING PRINCIPLES 
 
   
    
 BeforeAdopting


Adjustments to


After AdoptingSFAS 158


Adopt SFAS 158


SFAS 158(As restated, note 2)Increase/DecreaseASSETSPension assets  noncurrent

$
4,469


$
(4,469
)

$
LIABILITIESPostretirement medical costs  current


16,968







16,968Pension and SERP obligations  current


76







76Postretirement medical costs  noncurrent


158,059



125,039



283,098Pension and SERP obligations  noncurrent


22,502



313



22,815SHAREHOLDERS DEFICITAccumulated other comprehensive loss


9,603



129,821



139,424  
 90




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
  Recognition
    of Revenue Under Power Sales Agreements
 
  EITF 01-08, EITF 01-08.
 
  Deferred
    Overburden Removal Costs
  EITF 04-06. EITF 04-6
  Share-Based
    Payments
   
   
 
   
 
   
 91




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
 
   
  Staff
    Accounting Bulletin No. 108
    (SAB 108)
    5.
    INVESTMENT
    IN INDEPENDENT POWER PLANTS      ROVA Balance Sheet December 31,

2005(In thousands)AssetsCurrent assets

$
46,458Property, plant and equipment, net


228,323Other assets


25,872Total assets

$
300,653Liabilities and equityCurrent liabilities

$
45,482Long-term debt and other liabilities


158,002Other Liabilities


526Equity


96,643Total liabilities and equity

$
300,653WELLCs share of equity

$
50,869   92




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
  Income StatementsSix Months Ended June 30, 2006 andYears Ended December 31, 2005 & 2004

2006


2005


2004(In thousands)Revenues

$
55,104


$
109,991


$
112,669Operating Income


20,136



36,899



38,665Net Income


14,512



24,396



25,063WELLCs share of earnings

$
7,315


$
12,272


$
12,559     6.  RESTRICTED
    CASH AND BOND COLLATERAL
    Restricted Cash and Bond CollateralDecember 31, 2006


December 31, 2005(In thousands)Corporate:Workers compensation bonds

$
5,512


$
5,349Postretirement health benefit bonds


4,436



4,225Coal Segment:Westmoreland Mining  debt reserve account


10,312



10,018Westmoreland Mining  prepayment account


15,123



12,217Reclamation bond collateral:Absaloka Mine


3,702



1,613Jewett Mine


1,057



1,000Rosebud Mine


89



71Beulah Mine


71



70ROVA:Debt protection account


28,141



Ash reserve account


627



Repairs and maintenance account


583



Total restricted cash & bond collateral


69,653



34,563Less current portion


(3,300
)


Total restricted cash and bond collateral, less current
    portion

$
66,353


$
34,563     Corporate
   93




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
    Coal
    Segment
      ROVA
     94




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
  7.
    LINES
    OF CREDIT AND LONG-TERM DEBT    Current Portion of Debt


Total Debt OutstandingDecember 31,


December 31,


December 31,


December 31,2006


2005


2006


2005(In thousands)Corporate debt:Revolving line of credit

$



$



$
8,500


$
5,500Westmoreland Mining debt:Revolving line of credit










4,500



Westmoreland Mining term debt:Series B Notes


12,000



11,300



56,600



67,900Series C Notes










20,375



20,375Series D Notes










14,625



14,625Other term debt


1,311



1,137



3,474



3,843ROVA debt:ROVA acquisition bridge loan


30,000







30,000



ROVA acquisition term loan


5,000







5,000



ROVA term debt


28,492







162,933



Total debt outstanding

$
76,803


$
12,437


$
306,007


$
112,243       2007

$
76,0082008


90,8802009


43,5022010


27,1872011


20,500Thereafter


43,000$
301,077   Corporate Revolving Line of Credit
   95




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
  Westmoreland
    Mining LLC
  1 2
      ROVA
       96




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
              8.
    POSTRETIREMENT
    MEDICAL BENEFITS  Single-Employer
    Plans
  20-year
 97




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
    
 December 31,

2006


2005(As restated, note 2)(In thousands)Change in benefit obligations:Net benefit obligation at beginning of year

$
324,144


$
318,327Service cost


951



650Interest cost


16,907



17,500Plan amendments


2,213



Plan participant contributions


129



113Actuarial (gain) loss


(28,650
)


4,542Gross benefits paid


(17,012
)


(16,988
)Federal subsidy on benefits paid


1,384



Net benefit obligation at end of year


300,066



324,144Change in plan assets:Employer contributions


15,500



16,875Plan participant contributions


129



113Benefits paid, net of federal subsidy


(15,629
)


(16,988
)Fair value of plan assets at end of year






Funded status at end of year

$
(300,066
)

$
(324,144
)Amounts recognized in the balance sheet consist of:Current liabilities

$
(16,968
)

$
(17,160
)Noncurrent liabilities


(283,098
)


(144,762
)Accumulated other comprehensive loss


125,039



Net amount recognized

$
(175,027
)

$
(161,922
)Amounts recognized in accumulated other comprehensive loss
    consists of:Net actuarial loss

$
80,654Prior service cost


24,093Transition obligation


20,292$
125,039Assumptions:Discount rate


5.80
%


5.55
%  
 
   
 98




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
 
   
  
 Year Ended December 31,

2006


2005


2004(As Restated, note 2)Components of net periodic benefit cost:Service cost

$
951


$
650


$
580Interest cost


16,907



17,500



17,457Amortization of:Transition obligation


3,381



3,381



4,100Prior service cost


1,239



1,150



1,301Actuarial loss


6,127



6,213



4,120Total net periodic benefit cost

$
28,605


$
28,894


$
27,558Assumptions:Discount rate


5.55
%


5.75
%


6.25
%  
 
   
      
 Postretirement Benefits1% Increase


1% Decrease(As Restated, note 2)Effect on service and interest cost components

$
1,954


$
(1,643
)Effect on postretirement benefit obligation


31,610



(26,679
)  
 
   
  Multiemployer
    Plan (Combined Benefit Fund)
 
   
 99




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
  Workers
    Compensation Benefits
      Pneumoconiosis
    (Black Lung) Benefits
      December 31,

2006


2005(In thousands)Actuarial present value of benefit obligation:Expected claims from terminated employees

$
948


$
1,556Claimants


13,954



15,323Total present value of benefit obligation


14,902



16,879Plan assets at fair value, primarily government-backed securities


22,734



24,342Excess of trust assets over pneumoconiosis benefit obligation


7,832



7,463Less current portion


(5,566
)


Excess of trust assets over pneumoconiosis benefit obligation,
    less current portion

$
2,266


$
7,463       9.
    PENSION
    PLANS  Defined
    Benefit Pension Plans
    Supplemental
    Executive Retirement Plan
   100




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
      
 Qualified Pension Benefits


SERP BenefitsDecember 31,

2006


2005


2006


2005(In thousands)Change in benefit obligation:Net benefit obligation at beginning of year

$
65,916


$
55,955


$
2,409


$
2,199Service cost


3,062



2,622



70



66Interest cost


3,979



3,468



141



138Actuarial (gain) loss


(4,511
)


4,571



(38
)


82Benefits paid


(1,035
)


(700
)


(76
)


(76
)Net benefit obligation at end of year


67,411



65,916



2,506



2,409Change in plan assets:Fair value of plan assets at the beginning of year


42,543



39,103







Actual return on plan assets


4,135



2,527







Employer contributions


1,383



1,613



76



76Benefits paid


(1,035
)


(700
)


(76
)


(76
)Fair value of plan assets at end of year


47,026



42,543







Funded status at end of year

$
(20,385
)

$
(23,373
)

$
(2,506
)

$
(2,409
)Amounts recognized in the accompanying balance sheet consist
    of:Current liability

$



$



$
(76
)

$
(76
)Noncurrent liability


(20,385
)


(13,798
)


(2,430
)


(2,373
)Accumulated other comprehensive loss


14,473



11,347



(88
)


Net amount recognized at end of year

$
(5,912
)

$
(2,451
)

$
(2,594
)

$
(2,449
)Amounts recognized in accumulated other comprehensive loss
    consists of:Minimum pension liability

$



$
11,347


$



$
Net actuarial loss


14,473







(133
)


Prior service costs










45



$
14,473


$
11,347


$
(88
)

$
  
  Assumptions:Discount rate

5.85%-5.95%

5.70%

5.95%

5.70%Expected return on plan assets

8.50%

8.50%

N/A

N/ARate of compensation increase

4.00%-7.50%

4.20%

4.00%-7.50%

4.20%    101




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
    Qualified Pension Benefits


SERP BenefitsYear Ended December 31,

2006


2005


2004


2006


2005


2004(In thousands)Components of net periodic benefit costService cost

$
3,062


$
2,622


$
2,407


$
70


$
66


$
58Interest cost


3,979



3,468



3,174



141



138



128Expected return on plan assets


(3,638
)


(3,400
)


(2,774
)










Amortization of:Transition asset










(4
)










Prior service cost


4



50



50



10



10



10Actuarial (gain) loss


1,387



930



851











(6
)Total net periodic pension cost

$
4,794


$
3,670


$
3,704


$
221


$
214


$
190Assumptions:Discount rate


5.70
%


6.00
%


6.25
%


5.70
%


6.00
%


6.25
%Expected return on plan assets


8.50
%


8.50
%


8.50
%


N/A



N/A



N/ARate of compensation increase


4.20
%


4.50
%


4.50
%


4.20
%


5.00
%


5.00
%       Allocation of Plan Assets at December 31,2006

2005

Target AllocationAsset categoryCash and equivalents

1%

1%

0%-25%Equity securities

71%

70%

40%-75%Debt securities

26%

27%

0%-50%Other

2%

2%

0%-10%Total

100%

100%

100%        102




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##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
   
  10.
    HERITAGE
    HEALTH BENEFIT EXPENSES 
    
 Year End December 31,2006


2005


2004(As Restated, note 2)Health care benefits

$
28,295


$
27,722


$
26,672Combined benefit fund payments


3,611



4,560



5,390Workers compensation benefits


1,336



2,472



3,354Black lung benefits (credit)


(421
)


(3,050
)


1,550Total

$
32,821


$
31,704


$
36,966  
  11.
    ASSET
    RETIREMENT OBLIGATIONS, RECLAMATION DEPOSITS ANDCONTRACTUAL THIRD PARTY RECLAMATION RECEIVABLES  Asset
    Retirement Obligations
 
   
  2006


2005Asset retirement obligations  beginning of year

$
158,407


$
134,348Accretion


10,327



8,945ROVA asset retirement obligation assumed


414



Settlements (final reclamation performed)


(13,937
)


(2,944
)Losses on settlements


213



732Changes due to amount and timing of reclamation


28,638



17,326Asset retirement obligations  end of year

$
184,062


$
158,407  
   
  Reclamation
    Deposits
   103




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##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
  held-to-maturity Held-to-maturity
  held-to-maturity
  Amortized cost

$
45,183Gross unrealized holding gains


Gross unrealized holding losses


(1,249
)Fair value

$
43,934   held-to-maturity
  Amortized Cost


Fair ValueDue in five years or less

$
22,294


$
21,765Due after five years to ten years


9,640



9,321Due in more than ten years


13,249



12,848$
45,183


$
43,934   Contractual
    Third Party Reclamation Receivables
   
   
     104




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##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
        
 ContractualAsset


Third PartyRetirement


Reclamation


ReclamationObligation


Receivable


Deposits(In thousands)Rosebud

$
98,249


$
3,825


$
62,486Jewett


63,671



26,537



Beulah


5,894







Savage


1,687







Absaloka


14,133



11,576



ROVA


428







Total

$
184,062


$
41,938


$
62,486  
  12.
    STOCKHOLDERS
    EQUITY  Preferred
    and Common Stock
       105




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##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
    Restricted
    Net Assets
 
   
  13.
    INCENTIVE
    STOCK OPTIONS AND STOCK APPRECIATION RIGHTS           
 
    Stock Appreciation


Weighted AverageBase Price Range


Rights


Base PriceOutstanding at December 31, 2005

$
18.04-24.73



401,194


$
20.37Granted


23.99-29.48



177,567



24.53Exercised


19.37-24.73



(13,914
)


20.61Expired or forfeited


24.41



(4,100
)


24.41Outstanding at December 31, 2006

$
18.04-29.48



560,747


$
21.66  106




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##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
    
 WeightedAverage


Weighted





WeightedRemaining


Average Base





Average BaseNumber


Contractual Life


Price (All


SARs


Price (VestedRange of Base Price

Outstanding


(Years)


SARs)


Vested


SARs)$18.04 - 29.48


560,747



8.5


$
21.66



387,280


$
20.37  
 
   
    Number of SARsSARs Granted

Granted


Dividend Yield


Volatility


Risk-Free Rate


Expected Life2006


177,567



None



52
%


5.20
%


7.0 years2005


246,100



None



48
%


3.85
%


5.2 years     
 Issue Price


Stock Option


Weighted AverageRange


Shares


Exercise PriceOutstanding at December 31, 2005

$
2.81 - 22.86



717,950


$
10.20Granted










Exercised


2.81 - 18.19



(174,732
)


5.71Expired or forfeited


17.80 - 18.08



(1,602
)


17.89Outstanding at December 31, 2006

$
2.81-22.86



541,616


$
11.62  
    Weighted


Weighted





WeightedAverage


Average





AverageRemaining


Exercise





ExerciseRange of

Number


Contractual


Price (All


Number


PriceExercise Price

Outstanding


Life (Years)


Options)


Exercisable


(Vested Options)$2.81 - 5.00


188,150



3.0


$
2.92



188,150


$
2.925.01 - 10.00


















10.01 - 15.00


95,835



5.3



12.38



90,835



12.4815.01 - 22.86


257,631



5.9



17.70



233,678



17.61$2.81 - 22.86


541,616



4.8


$
11.62



512,663


$
11.31    
   
 107




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##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
 
   
 
   
      
 Years Ended December 31,2005


2004(As Restated, note 2)(In thousands of shares, except per share data)Net loss applicable to common shareholders, as reported:

$
(12,027
)

$
(12,852
)Add: Stock-based employee compensation included in reported net
    loss


835



731Less: Total stock-based employee compensation expense determined
    under fair value based on method for all awards


(2,291
)


(2,044
)Net loss applicable to common shareholders

$
(13,483
)

$
(14,165
)Net loss per share applicable to common shareholders:Basic  as reported

$
(1.45
)

$
(1.59
)Basic  pro forma

$
(1.63
)

$
(1.75
)Diluted  as reported

$
(1.45
)

$
(1.59
)Diluted  pro forma

$
(1.63
)

$
(1.75
)  
 
  14.
    TRANSACTIONS
    WITH AFFILIATED COMPANIES 
   
  15.
    SALE
    OF MINERAL LEASES 
   108




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##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
 
  16.
    DERIVATIVE
    INSTRUMENTS 
      mark-to-market
   
   
  2006Realized loss

$
(194
)Unrealized loss


(336
)   
 2006Unrealized derivative loss beginning of the year


Change in fair value


(530
)Realized loss on settlements


194Unrealized loss on derivatives at the end of the year

$
(336
)  
 109




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##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
 
  17.
    INCOME
    TAXES 
    
 2006


2005


2004(As Restated, note 2)(In thousands)Current:Federal

$



$
144


$
295State


2,433



2,523



6012,433



2,667



896Deferred:Federal










State


















Income tax expense

$
2,433


$
2,667


$
896  
      
 2006


2005


2004(As Restated, note 2)(In thousands)Computed tax benefit at statutory rate

$
(3,490
)

$
(2,590
)

$
(3,472
)Increase (decrease) in tax expense resulting from:Tax depletion in excess of book


(2,677
)


(2,816
)


(1,923
)Minority interest adjustment


875



323



406State income taxes, net


1,920



1,455



52Non-taxable earnings of offshore insurance subsidiary


(273
)






Adjustments to deferred tax assets attributable to prior years


1,043







Change in valuation allowance for net deferred tax assets


15,089



7,059



5,839Change in effective tax rate






(823
)


Indian coal production tax credits


(10,167
)






Other, net


113



59



(6
)Income tax expense

$
2,433


$
2,667


$
896  
 110




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##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
    
 2006


2005(As restated, note 2)(In thousands)Deferred tax assets:Federal net operating loss carryforwards

$
67,246


$
63,334State net operating loss carryforwards


12,772



10,559Alternative minimum tax credit carryforwards


2,881



3,026Indian coal production tax credits


10,167



Accruals for the following:Workers compensation


3,720



3,643Postretirement benefit and pension obligations


123,214



64,833Incentive plans


2,389



Deferred stripping






Asset retirement obligations


18,372



21,138Deferred revenues


5,673



Other accruals


4,971



6,280Total gross deferred assets


251,405



172,813Less valuation allowance


(201,834
)


(123,168
)Net deferred tax assets


49,571



49,645Deferred tax liabilities:Investment in independent power projects






(15,123
)Property, plant and equipment


(46,271
)


(31,611
)Excess of trust assets over pneumoconiosis benefit obligation


(3,055
)


(2,911
)Other


(245
)


Total gross deferred tax liabilities


(49,571
)


(49,645
)Net deferred tax asset

$



$
  
   
  EITF 04-06
 
 111




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##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
      
 Expiration Date

Regular Tax(In thousands)2010

$
45,2972011


36,4792012


4492018


282019


88,429after 2019


23,086Total

$
193,768  
 
   
  18.
    COMMITMENTS  Lease
    Obligations
      Lease Obligations2007

$
4,6132008


1,8552009


1,0142010


162011 and thereafter


   Coal
    Supply Agreements
   112




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##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
  Long-Term
    Sales Commitments
  and/or
  Projected SalesTonnage Under ExistingLong-Term Contracts(In millions of tons)2007


30.02008


27.32009


26.62010


21.92011


17.6     19.
    CONTINGENCIES  Royalty
    Claims
 
   
     113




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
        No. M18-080697-0.
    1998-2001.
       114




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
    2004-and
      Rensselaer
    Tax Assessment
      Combined
    Benefit Fund
     115




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
        i.e.
         116




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
  1992
    UMWA Benefit Plan Surety Bond
   
   
     
  Derivative
    Action Brought by Washington Group International, Inc. in
    Connection With Sales Agency Agreement
 
      McGreevey
    Litigation
   117




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
          20.
    BUSINESS
    SEGMENT INFORMATION   
   
 118




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
      
 Year Ended December 31, 2006IndependentCoal


Power


Heritage


Corporate


Total(As Restated, note 2)(In thousands)(Unaudited)Revenues:Coal

$
393,482


$



$



$



$
393,482Energy






47,904











47,904Equity in earnings






7,681











7,681393,482



55,585











449,067Costs and expenses:Cost of sales  Coal


311,629















311,629Cost of sales  Energy






31,381











31,381Depreciation, depletion and amortization


24,070



4,795







477



29,342Selling and administrative


24,285



6,946



127



12,270



43,628Heritage health benefit expenses










32,821







32,821Loss (gain) on sales of assets


127



123







(5,035
)


(4,785
)Operating income (loss)

$
33,371


$
12,340


$
(32,948
)

$
(7,712
)

$
5,051Capital expenditures

$
17,189


$
2,855


$



$
808


$
20,852Total assets

$
449,569


$
290,723


$
9,794


$
11,296


$
761,382  
  119




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##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
  
 Year Ended December 31, 2005IndependentCoal


Power


Heritage


Corporate


Total(As Restated, note 2)(In thousands)(Unaudited)Revenues:Coal

$
361,017


$



$



$



$
361,017Equity in earnings






12,727











12,727361,017



12,727











373,744Costs and expenses:Cost of sales


288,728















288,728Depreciation, depletion and amortization


21,316



24







263



21,603Selling and administrative


24,959



3,076



34



7,203



35,272Heritage health benefit expenses










31,704







31,704Loss (gain) on sales of assets


177











(110
)


67Operating income (loss)

$
25,837


$
9,627


$
(31,738
)

$
(7,356
)

$
(3,630
)Capital expenditures

$
18,214


$
52


$



$
78


$
18,344Total assets

$
417,325


$
38,508


$
9,320


$
30,718


$
495,871  
  
 Year Ended December 31, 2004IndependentCoal


Power


Heritage


Corporate


Total(As Restated, note 2)(In thousands)(Unaudited)Revenues:Coal

$
319,648


$



$



$



$
319,648Equity in earnings






12,741











12,741319,648



12,741











332,389Costs and expenses:Cost of sales


249,131















249,131Depreciation, depletion and amortization


18,244



19







146



18,409Selling and administrative


19,119



1,685



157



9,899



30,860Heritage health benefit expenses










36,966







36,966Loss (gain) on sales of assets


(77
)














(77
)Operating income (loss)

$
33,231


$
11,037


$
(37,123
)

$
(10,045
)

$
(2,900
)Capital expenditures

$
17,710


$
47


$



$
567


$
18,324Total assets

$
383,280


$
35,303


$
6,174


$
37,973


$
462,730  
 120




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
    2006


2005


2004(In thousands)Customer A

$
112,470


$
111,224


$
83,196Customer B


88,510



75,750



70,909Customer C


43,205



39,146



50,951Percentage of total revenue


54
%


61
%


62
%    
  21.
    QUARTERLY
    FINANCIAL DATA (UNAUDITED) 
    
 Three Months EndedMarch 31


June 30


Sept 30


Dec 31(As Restated, note 2)(In thousands except per share data)2006Revenues

$
99,092


$
94,621


$
131,748


$
123,606Costs and expenses


92,521



96,612



128,195



126,688Operating income (loss)


6,571



(1,991
)


3,553



(3,082
)Income (loss) before income taxes


4,764



(3,995
)


(1,765
)


(9,269
)Income tax expense


(277
)


(243
)


(213
)


(1,700
)Net income (loss)


4,487



(4,238
)


(1,978
)


(10,969
)Less preferred stock dividend requirements


436



388



340



421Less premium on exchange of preferred stock for common stock






549



242



Net income (loss) applicable to common shareholders

$
4,051


$
(5,175
)

$
(2,560
)

$
(11,390
)Net income (loss) per share applicable to common shareholders:Basic

$
0.48


$
(0.60
)

$
(0.29
)

$
(1.27
)Diluted


0.45



(0.60
)


(0.29
)


(1.27
)Weighted average number of common and common equivalent shares
    outstanding:Basic


8,430



8,629



8,948



8,978Diluted


8,928



9,145



9,222



9,248  
  121




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
  
 Three Months EndedMarch 31


June 30


Sept 30


Dec 31(As Restated, note 2)(In thousands except per share data)2005Revenues

$
91,032


$
88,923


$
95,823


$
97,966Costs and expenses


88,395



94,451



101,292



93,236Operating income (loss)


2,637



(5,528
)


(5,469
)


4,730Income (loss) before income taxes and cumulative effect of
    change in accounting principle


435



(7,250
)


(7,143
)


3,680Income tax benefit (expense)


(1,492
)


(136
)


(1,368
)


329Cumulative effect of change in accounting principle


2,662











Net income (loss)


1,605



(7,386
)


(8,511
)


4,009Less preferred stock dividend requirements


436



436



436



436Net income (loss) applicable to common shareholders

$
1,169


$
(7,822
)

$
(8,947
)

$
3,573Net income (loss ) per share applicable to common shareholders:Basic

$
0.14


$
(0.95
)

$
(1.08
)

$
0.43Diluted


0.13



(0.95
)


(1.08
)


0.40Weighted average number of common and common equivalent shares
    outstanding:Basic


8,192



8,269



8,302



8,357Diluted


8,874



8,269



8,302



8,909  
  22.
    SUBSEQUENT
    EVENT  Sale
    of Coal Royalties Rights at Wyoming Mine
    Agreement
    to Terminate WGIs Mining Contract at WRI
   
  23.
    EVENTS
    SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT REGISTERED PUBLIC
    ACCOUNTING FIRM (UNAUDITED) 
 
   
 122




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##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
 
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 123




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm  
 
 
   
     
   
 
   
 
   
 
   
   
   
 
  
 124




---



##### Table of Contents



ITEM 9 
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE 
 
   
 
  ITEM 9A 
    CONTROLS
    AND PROCEDURES 
 
  (a) Managements
    Report on Internal Control Over Financial Reporting (As
    Restated)
 
 
 
 
  Rules 13a-15(f) 15d-15(f)
 
 
  
    pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and dispositions
    of our assets; 
 
  
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that our receipts and expenditures are being made only in
    accordance with authorizations of our management and our board
    of directors; and 
 
  
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use, or disposition of
    our assets that could have a material effect on our financial
    statements. 
 
  Internal Control  Integrated Framework 10-K
 
 
   
 
   
 
   
 
   
 125




---



##### Table of Contents



(b)
    Changes
    in Internal Control over Financial Reporting 
 
   
 
  (c)
    Remediation
    Efforts in Response to Material Weaknesses 
 
   
 
  
    The calculations for asset retirement obligations have been
    standardized at all of our mines and have been simplified. 
 
  
    An additional layer of financial supervision and review has been
    added at each of our mines. 
 
  
    Personnel in our Corporate office perform a detailed review of
    all asset retirement obligation calculations. 
 
  
    Additional training will be provided to those responsible for
    performing and reviewing asset retirement obligation
    calculations. 
 
  
    An additional level of review will be added over the calculation
    of our postretirement medical benefit liability and expense. 
 
  
    An additional level of review will be added over our census data
    used to calculate our postretirement medical benefits. 
 
  
    An additional level of review will be added over the preparation
    of our income tax accrual. 
 
   
 
  (d)
    Evaluation
    of Disclosure Controls and Procedures 
 
  Rules 13a-15(e) 15d-15(e)
 
 126




---



##### Table of Contents



(e)
    Report
    of Independent Registered Public Accounting Firm 
 
  
 
 
 
 
  Internal Control 
    Integrated Framework
 
 
   
 
   
 
   
 127




---



##### Table of Contents



Internal Control  Integrated Framework Internal Control  Integrated Framework
 
 
   
 
  KPMG LLP
 
 
   
 
  
 
  
 
  
 
  
 
  
 128




---



##### Table of Contents



ITEM 9B 
    OTHER
    INFORMATION   PART III  ITEM 10 
    DIRECTORS,
    OFFICERS AND CORPORATE GOVERNANCE 
  Directors
 
 
   
  
 Business ExperienceDuring Past Five Years



DirectorName

and Other Directorships

Age

SinceMichael Armstrong

Private Investor (since 1995); Stockbroker, Southwest
    Securities, a stock brokerage company (from 1983 until 1995).


56



2000Thomas J. Coffey

Partner, B2BCFO/CIO, LLP, a professional services organization
    (since December 2005); Vice President-Finance, Global
    Infrastructure Services (from July 1999 until May 2005) and
    Vice President-Operations Analysis (from April 1998 until July
    1999) of Unisys Corporation, a technology services company;
    Senior Vice President, Chief Financial Officer and Treasurer of
    Intelligent Electronics, Inc., a technology distribution company
    (from 1995 until September 1997); and Partner of KPMG (from 1985
    until 1995).


54



2000Robert E. Killen

Vice Chairman of Westmoreland Coal Company (since May 2006);
    Chairman of the Board and Chief Executive Officer of The Killen
    Group, Inc., an investment advisory firm (since April 1996);
    Chairman of the Board of Berwyn Financial Services, an
    institutional and retail brokerage company (since October 1991).


66



1996Richard M. Klingaman

Consultant, natural resources and energy (since May 1992);
    Retired Senior Vice President, Penn Virginia Corporation, a
    natural resources company specializing in coal, oil, natural
    gas, timber, lime and limestone (from
    1977-1992);
    Director of Westmoreland Resources, Inc. (from
    1980-1993).


71



2006Thomas W. Ostrander

Managing Director, Global Industries Group, Banc of America
    Securities LLC, an investment banking firm (since November
    2006); Managing Director, Citigroup Global Markets Inc., an
    investment banking firm (and predecessor firms) (from 1989 until
    September 2006).


56



1995Christopher K. Seglem

Chairman of the Board of Directors (since June 1996) and
    Chief Executive Officer of the Company (since June 1993);
    President of the Company (since June 1992); Chief Operating
    Officer of the Company (from June 1992 until June 1993); and
    Executive Vice President of the Company (from December 1990
    until June 1992).


60



1992William M. Stern

Executive Vice President and Director, Stern
    Brothers & Company, a broker-dealer (since 1999); Vice
    President, Mercantile Bank Capital Markets Group, a banking
    company
    (1998-1999);
    Senior Vice President, Mark Twain Capital Markets Group, a
    banking company
    (1983-1998).


61



2000 
 129




---



##### Table of Contents



Business ExperienceDuring Past Five Years



DirectorName

and Other Directorships

Age

SinceDonald A. Tortorice

St. George Tucker Adjunct Professor of Law at the College of
    William & Mary School of Law (since Jan. 1999);
    Affiliate Professor of Law and Medicine at the Medical College
    of Virginia (from Sept. 2002 until May 2003); Partner in the law
    firm of Duane, Morris & Heckscher (from 1979 until
    1998) and Managing Partner of the Harrisburg, Pennsylvania
    office of that law firm (from 1979 until 1998); Director of Gear
    CGI, Ltd. (from 1998 until 1999); Director of Eastern Holding
    Co. Ltd. (from 1985 until 1999); Director of Eastern Alliance
    Insurance Co., Ltd. (from 1985 until 1999); Director of
    Educators Alliance Insurance Co. (from 1997 until 1999).


64



2003  
 
  Officers
 
 
  Form 10-K,
 
 
  Code of
    Ethics
 
 
  Form 10-K.
 
 
  Director
    Candidate Nomination Process
 
 
   
 
   
 
  c/o Corporate
 
 130




---



##### Table of Contents



Audit
    Committee and Audit Committee Financial Expert
 
 
  Regulation S-K
 
 
  Section 16(a)
    Beneficial Ownership Reporting Compliance
 
 
   
  ITEM 11 
    EXECUTIVE
    COMPENSATION 
  Compensation
    Discussion and Analysis
 
 
  Business
    Context
 
 
   
 
   
 131




---



##### Table of Contents



Compensation
    Principles and Objectives
 
 
   
 
   
 
  
    Target compensation levels that are at least at the median of
    our industry, peer group and the markets in which we compete for
    executive talent; 
 
  
    Structure executive compensation to reflect the Companys
    presence in the renewal stage; 
 
  
    Link pay to performance by making a substantial percentage of
    total executive compensation variable, or at risk,
    by relying on annual and long-term incentive compensation
    programs; 
 
  
    Use equity awards, or awards with equity-like features, to align
    executive compensation with shareholder interests; and 
 
  
    Provide a total compensation program that emphasizes direct
    compensation over indirect compensation such as perquisites and
    other benefits. 
 132




---



##### Table of Contents



Establishing
    the Executive Compensation Program
 
 
   
 
   
 
  The
    Compensation-Setting Process
 
 
   
 
   
 
   
 
   
 
   
 133




---



##### Table of Contents



Setting
    Compensation Targets
 
 
   
 
   
 
   
 
   
 134




---



##### Table of Contents



Peer
    Comparisons
 
 
   
 
   
 
   
 
  Components
    of the Executive Compensation Program
 
 
   
 
  
    Base salary, 
 
  
    Annual incentive compensation, and 
 
  
    Long-term incentive compensation. 
 
  Base
    Salary
 
 
   
 
   
 
   
 
  Annual
    Incentive Compensation
 
 
   
 
   
 135




---



##### Table of Contents



Long-Term
    Incentive Compensation.
 
 
  General.
 
 136




---



##### Table of Contents



50th-75th percentile
 
 
  Timing of Grants Disclosure and
    Rationale.
 
 
  Current Framework.
 
 
  Stock Appreciation Rights (SARs).
 
 
   
 
   
 
   
 
  Performance Units.
 
 137




---



##### Table of Contents



2000-2002 2004-2006.
 
 
   
 
  Tax
    Deductibility Policy
 
 
   
 
  Benefits
 
 
   
 
   
 
  
    Supplemental Retirement and Savings.  The
    Internal Revenue Code limits the amount of compensation that may
    be taken into account for the purpose of determining the
    retirement benefits payable under tax-qualified ERISA retirement
    plans. The limitation for 2006 is $220,000. Consequently, so
    that we could provide retirement income to certain of our senior
    executives and other key individuals that is commensurate as a
    percentage of pre-retirement income with that paid to other
    employees, we have established a nonqualified Supplemental
    Executive Retirement Plan, or SERP, effective January 1, 
 138




---



##### Table of Contents



1992. Because of attrition in or retirement of the individuals
    originally covered by the SERP, only Mr. Seglem is eligible
    for benefits among currently active employees. 
 
  
    Deferred Compensation.  The Compensation and
    Benefits Committee has the authority under the 2000 PUP to
    mandate deferral of any 2000 PUP award. Several named executive
    officers are currently subject to deferrals under this plan.
    Deferred compensation is also discussed under the heading
    Deferred Compensation below. 
 
  Perquisites
 
 
   
 
   
 
   
 
   
 
  Employment
    Contracts
 
 
   
 
  Post-Termination
    Compensation
 
 
   
 
   
 
   
 
  Executive
    Compensation
 
 
  Summary
    Compensation
 
 
   
 139




---



##### Table of Contents



2006
    SUMMARY COMPENSATION
 
  
 Change inPensionValue andNon-Equity


NonqualifiedIncentive


DeferredStock


Option


Plan


Compensation


All OtherName and Principal




Salary


Bonus


Awards


Awards(1)


Compensation


Earnings(2)


Compensation(3)(4)


TotalPosition

Year


($)


($)


($)


($)


($)


($)


($)


($)Christopher K. Seglem


2006



536,780



225,296







177,934







353,103



16,025



1,309,138Chief Executive Officer
    and PresidentDavid J. Blair


2006



256,250



110,551







19,742







17,115



7,508



411,166Chief Financial OfficerRoger D. Wiegley


2006



253,688



128,947







44,847







23,840



24,204



475,526General Counsel
    and SecretaryRobert W. Holzwarth


2006



241,913



113,667







58,034







26,449



8,169



448,232Senior Vice President, PowerJohn V. OLaughlin


2006



198,044



81,657







29,756







23,263



8,445



341,165Vice President,
    Coal Operations  
   
  (1)
    
    The amounts in this column reflect the amount expensed by us in
    2006 for financial reporting purposes pursuant to
    SFAS No. 123R. The assumptions used in calculating
    these amounts are discussed in note 12 to our financial
    statements for the year ended December 31, 2006. Unlike the
    amount reflected in our financial statements, these amounts do
    not reflect any estimate of forfeitures related to service-based
    vesting. Instead, these amounts assume that each executive will
    perform the requisite service to vest in his award. 
 
  (2)
    
    Includes above-market interest on deferred
    compensation for Messrs. Seglem and OLaughlin of
    $36,404 and $1,501, respectively. Also includes change in
    pension value for Messrs. Seglem, Blair, Wiegley, Holzwarth
    and OLaughlin of $316,699, $17,115, $23,840, $26,449 and
    $21,762, respectively. The change in pension value for
    Mr. Seglem includes $265,224 from the Supplemental
    Executive Retirement Plan. Pension economic assumptions utilized
    for our SFAS 87 financial reporting for fiscal years ended
    in 2006 and 2005 were used for calculations at the end of those
    years respectively. A discount rate of 5.7% was used for 2005
    and 5.95% for 2006. 
 
  (3)
    
    All Other Compensation includes reimbursements and
    payments, as applicable, for our contributions to the 401(k)
    Plan and life insurance premiums. We contributed $6,600 in
    matching contributions to the 401(k) Plan during 2006 on behalf
    of each of Messrs. Seglem, Blair, Wiegley, and Holzwarth
    and $7,714 on behalf of Mr. OLaughlin. In 2006, we
    paid life insurance premiums of $9,425; $908; $1,637; $1,569;
    and $731 for Messrs. Seglem, Blair, Wiegley, Holzwarth and
    OLaughlin, respectively. For Mr. Wiegley, All
    Other Compensation includes $1,600 in financial planning
    fees and $14,367 for temporary living and transportation
    expenses. 
 
  (4)
    
    In accordance with SEC rules, other compensation in the form of
    perquisites and other personal benefits has been omitted in
    those instances where the aggregate of such perquisites and
    other personal benefits is less than $10,000. Further
    information regarding our practices with respect to perquisites
    may be found in the Perquisites section of the
    Compensation Discussion and Analysis above. 
 
   
 140




---



##### Table of Contents



141




---



##### Table of Contents



Grants
    of Plan Based Awards
 
 
   
 
  2006
    GRANTS OF PLAN-BASED AWARDS
 
  
 All Other


All OtherNumber of




















Stock


Option





Grant DateNon-Equity




















Awards:


Awards:


Exercise


Fair ValueIncentive


Estimated Future


Estimated Future


Number


Number of


or


of StockPlan


Payouts Under Non-


Payouts Under Equity


of Shares


Securities


Base Price


andUnits


Equity Incentive Plan Awards


Incentive Plan Awards


of Stock


Underlying


of Option


OptionsGrant


Approval


Granted(1)


Threshold


Target


Maximum


Threshold


Target


Maximum


or Units


Options


Awards(2)


Awards(3)Name

Date


Date


(#)


($)


($)


($)


(#)


(#)


(#)


(#)


(#)


($ / Sh)


($)Christopher K. Seglem


7/1/06



6/23/06



6,808



0



680,800



1,361,600



























7/1/06



6/23/06



































52,700



24.41



768,366David J. Blair


7/1/06



6/23/06



1,050



0



105,000



210,000



























7/1/06



6/23/06



































8,100



24.41



118,098Roger D. Wiegley


7/1/06



6/23/06



2,376



0



237,600



475,200



























7/1/06



6/23/06



































18,400



24.41



268,272Robert W. Holzwarth


7/1/06



6/23/06



1,558



0



155,800



311,600



























7/1/06



6/23/06



































12,100



24.41



176,418John V. OLaughlin


7/1/06



6/23/06



1,275



0



127,500



255,000



























7/1/06



6/23/06



































9,900



24.41



144,342  
   
  (1)
    
    Performance units granted pursuant to the 2000 PUP for the
    performance period July 2006-July 2009. Performance units vest
    in one-third increments but payout is not determined until the
    end of the three-year performance period. Payouts may then be
    deferred by the Compensation and Benefits Committee as allowed
    under the 2000 PUP. 
 
  (2)
    
    The base price is defined by the 2002 Plan as the average of the
    high and low prices per share on the date of grant. The
    corresponding closing price on the date of grant was $23.72. 
 
  (3)
    
    Represents a grant date fair value of $14.58 per SAR. 
 
   
 
   
 
  2006-2009.
 
 
   
 142




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##### Table of Contents



Outstanding
    Equity Awards at Fiscal Year-End
 
 
   
 
  2006
    OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
 
  
 Option Awards


Stock AwardEquityIncentivePlanAwards:Equity














Equity


Market orIncentive














Incentive


Payout ValuePlan Awards:














Plan Awards:


ofNumber of


Number of


Number of











Market


Number of


UnearnedSecurities


Securities


Securities








Number of


Value of


Unearned


Shares,Underlying


Underlying


Underlying








Shares or


Shares or


Shares, Units


UnitsUnexercised


Unexercised


Unexercised


Option





Units of


Units of


or Other


or OtherOptions


Options


Unearned


Exercise


Option


Stock That


Stock That


Rights That


Rights ThatOption

(#)


(#)


Options


Price


Expiration


Have Not


Have Not


Have Not


Have NotName

Exercisable


Unexercisable


(#)


($)


Date


Vested


Vested


Vested


VestedChristopher K. Seglem


117,200
(1)










2.81



6/8/10















10,000
(2)










3.00



6/7/09















31,900
(3)










12.86



6/23/12















32,100
(4)










17.80



12/30/13















32,100
(5)










18.08



6/29/13















3,352
(6)










18.09



5/28/11















12,348
(6)










18.19



5/28/11















63,300
(7)










19.37



6/30/14















82,100
(8)










20.98



6/30/15



















52,700
(12)






24.41



6/30/16















David J. Blair


10,000
(8)










19.78



4/24/15















19,900
(8)










20.98



6/30/15



















8,100
(12)






24.41



6/30/16















Roger D. Wiegley


10,000
(8)










18.035



5/15/15















17,900
(8)










20.98



6/30/15















18,400
(12)






24.41



6/30/16















Robert W. Holzwarth


6,666
(9)


3,334
(13)






27.86



10/31/14















17,900
(8)










20.98



6/30/15















13,300
(10)










22.86



10/31/14



















12,100
(12)






24.41



6/30/16















John V. OLaughlin


20,000
(11)










12.04



3/4/11















4,700
(3)










12.86



6/23/12















3,650
(4)










17.80



12/30/13















3,650
(5)










18.08



6/29/13















491
(6)










18.09



5/28/11















1,809
(6)










18.19



5/28/11















9,800
(7)










19.37



6/30/14















14,600
(8)










20.98



6/30/15



















9,900
(12)






24.41



6/30/16















  
 143




---



##### Table of Contents



(1)
    
    Vested in two annual increments beginning 6/9/01. 
 
  (2)
    
    Vested in four annual increments beginning 6/8/00. 
 
  (3)
    
    Vested in two annual increments beginning 6/24/03. 
 
  (4)
    
    Vested in three annual increments beginning 12/31/04. 
 
  (5)
    
    Vested in three annual increments beginning 6/30/04. 
 
  (6)
    
    Vested in two annual increments beginning 5/29/02. 
 
  (7)
    
    SARs; one third vested on 7/1/05 and the balance vested 12/30/05. 
 
  (8)
    
    SARs vested 12/30/05. 
 
  (9)
    
    Vested in two annual increments beginning 11/1/05. 
 
  (10)
    
    SARs; one third vested on 11/1/05 and the balance vested
    12/30/05. 
 
  (11)
    
    Vested in two annual increments beginning 3/5/02. 
 
  (12)
    
    SARs vest in 3 equal annual installments, with the first
    increment vesting on 7/1/07. 
 
  (13)
    
    3,334 options vest on 11/1/07. 
 
  Option
    Exercises and Vested Stock
 
 
   
 
  2006
    OPTION EXERCISES AND STOCK VESTED
 
  
 Option Awards


Stock AwardsNumber of Shares


Value Realized on


Number of Shares


Value Realized onAcquired on Exercise


Exercise


Acquired on Vesting


VestingName

(#)


($)


(#)


($)Christopher K. Seglem


40,000



793,200







David J. Blair














Roger D. Wiegley














Robert W. Holzwarth














John V. OLaughlin














  
 
  Pension
    Benefits
 
 
   
 
  2006
    PENSION BENEFITS
 
  
 Present Valueof AccumulatedBenefit as ofNumber of Years


December 31,


Payments During LastCredited Service


2006(1)


Fiscal YearName

Plan Name


(#)


($)


($)Christopher K. Seglem


Pension Plan



26.33



363,680



0SERP(2
)


26.33



2,255,949



0David J. Blair


Pension Plan



1.67



27,831



0Roger D. Wiegley


Pension Plan



1.58



36,622



0Robert W. Holzwarth


Pension Plan



2.17



54,149



0John V. OLaughlin


Pension Plan



4.75



88,617



0  
 144




---



##### Table of Contents



(1)
    
    Pension economic assumptions are consistent with our
    SFAS 87 financial reporting for fiscal year 2006.
    Demographic assumptions are also consistent with our pension
    financial reporting, with the exception that per SEC guidance,
    pre-retirement decrements are not used. A discount rate of 5.95%
    was used for 2006. 
 
  (2)
    
    Supplemental Executive Retirement Plan  see description
    below. 
 
   
 
   
 
   
 
   
 
   
 
  
    The benefit equals 1.2% of average earnings plus 0.5% of average
    earnings in excess of covered compensation times years of
    service. Covered compensation is a 35 year average of
    Social Security wage bases at Social Security retirement age. 
 
  
    Normal Retirement age is 65. Early retirement benefits are
    available at age 55 with 10 years of service. Benefits
    are reduced actuarially for early commencement before
    age 65. Participants with 20 or more years of service may
    retire at age 62, instead of 65, with no reduction in
    benefits. Christopher Seglem has 26 years of service and is
    eligible to retire with full benefits at age 62. None of
    the other executives covered under this plan are eligible to
    retire. 
 
  
    The executive may choose optional forms of benefit, all reduced
    to be actuarially equivalent to the single life annuity benefit.
    The optional forms available are 50%,
    662/3%
    and 100% joint and survivor options, a
    10-year
    certain and life option, and a single life annuity. 
 145




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##### Table of Contents




    Mr. Seglem is also eligible to benefit under the SERP. This
    plan has the same plan provisions discussed above, with the
    exception of the pay considered for the calculation of the
    benefit formula. Bonuses are included in the definition of
    compensation. Additionally, the limitations on pay allowed to be
    considered in qualified pension plans are disregarded. 
 
   
 
  
    The benefit value equals a cash balance account increasing with
    6% interest annually and credited annually with pay credits of
    3% to 12% of pay based on age plus service, plus 1.5% to 6.0% of
    pay in excess of 50% of the Social Security Wage Base, again
    based on age plus service. 
 
  
    The account balance is converted to an annuity based on
    actuarial equivalent conversion factors based on age. 
 
  
    Early retirement benefits are available at age 50 with
    5 years of service. Benefits are reduced actuarially for
    early commencement before age 65, based on the conversion
    factors discussed above. Mr. OLaughlin is eligible
    for early retirement. 
 
   
 
   
 
  Supplemental Executive Retirement Plan.
 
 
   
 146




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##### Table of Contents



Pension Benefits Upon Retirement/Termination, Disability or
    Death.
 
 
  2006
    PENSION BENEFITS UPON RETIREMENT/TERMINATION, DISABILITY OR
    DEATH
 
  
 Benefit





Time or Period ofName

Type of Termination


Plan


Amount


Form of Payment


PaymentChristopher K. Seglem


Retirement/Termination



Pension Plan


$
2,579



Monthly Annuity



LifeSERP


$
15,997



Monthly Annuity



LifeDisabilityPension Plan


$
2,964



Monthly Annuity



LifeSERP


$
18,388



Monthly Annuity



LifeDeathPension Plan


$
2,066



Monthly Annuity



Life of SpouseSERP


$
12,814



Monthly Annuity



Life of SpouseJohn V. OLaughlinRetirement/Termination



Pension Plan


$
592



Monthly Annuity



LifeDisability



Pension Plan


$
592



Monthly Annuity



LifeDeath



Pension Plan


$
283



Monthly Annuity



Life of Spouse  
 
  Retiree
    Medical Benefits
 
 
   
 
  Deferred
    Compensation
 
 
   
 
  2006
    NONQUALIFIED DEFERRED COMPENSATION
 
  
 RegistrantExecutive


Contributions in


Aggregate Earnings


Aggregate


Aggregate BalanceContributions


Last


in Last Fiscal


Withdrawals/


at Last Fiscalin Last Fiscal Year


Fiscal Year(1)


Year(2)


Distributions


Year-EndName

($)


($)


($)


($)


($)Christopher K. Seglem(3)


0



346,620



95,959



735,796
(4)


852,175
(5)David J. Blair


0



68,581



0



0



0Roger D. Wiegley


0



137,051



0



0



0Robert W. Holzwarth


0



100,963



0



0



0John V. OLaughlin(6)


0



92,531



4,025



16,902
(7)


34,787
(8)  
   
  (1)
    
    Amounts reported in this column represent annual bonus amounts
    for 2005 performance that would generally have been paid in
    2006, but were deferred by the Compensation and Benefits
    Committee and paid in first quarter 2007. These amounts were
    reported as bonus in the Summary Compensation Table
    for 2005, except for Mr. Blair who was not included among
    the top five most highly compensated officers in 2005. 
 147




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##### Table of Contents



(2)
    
    Aggregate Earnings represents interest earned on all deferred
    compensation during 2006. The portion included in this total
    that is considered at an above-market rate is also
    reported in the Summary Compensation table. 
 
  (3)
    
    We deferred payments related to the 2000 award of performance
    units which vested in 2003 and payments related to the 2001
    award of performance units which vested in 2004, the value of
    which was reported in the Summary Compensation Table for 2003
    and 2004, respectively. 
 
  (4)
    
    Includes interest of $130,389. 
 
  (5)
    
    Includes $146,207 in accrued interest. 
 
  (6)
    
    We deferred payments related to the 2001 award of performance
    units which vested in 2004. 
 
  (7)
    
    Includes interest of $2,465. 
 
  (8)
    
    Includes $5,912 in accrued interest. 
 
  Deferred Compensation Plan.
 
 
  Performance Unit Plan Deferral
    Provision.
 
 
   
 
   
 
   
 
   
 
  Severance
    Benefits
 
 
  Form S-1
 
 148




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##### Table of Contents



Executive
    Policy
 
 
   
 
  
    Unacceptable job performance other than that resulting from
    gross or willful misconduct, which is defined as an act or acts
    constituting larceny, fraud, gross negligence, crime or crimes,
    moral turpitude in the course of employment, or willful and
    material misrepresentation to our directors or officers, 
 
  
    A significant reduction or increase, without adequate
    compensation, in the nature or scope of the executives
    authority or duties, 
 
  
    A reduction in base compensation, the aggregate value of
    employee benefits or cessation of eligibility for incentive
    bonus payments, or 
 
  
    A change in control of our company. 
 
   
 
   
 
   
 
   
 149




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##### Table of Contents



Employee
    Policy
 
 
   
 
  
    Involuntary termination not for cause, where cause is defined as
    unsatisfactory job performance, or gross or willful misconduct
    that is injurious to us, 
 
  
    A reduction in work force, or 
 
  
    A liquidation of our company. 
 
   
 
   
 
   
 150




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##### Table of Contents



Director
    Compensation
 
 
   
  
 Changein PensionValue andNonqualifiedNon-Equity


DeferredFees Earned or








Incentive Plan


Compensation


All OtherPaid in Cash


Stock Awards


Option Awards(1)


Compensation


Earnings


Compensation


TotalName

($)


($)


($)


($)


($)


($)


($)Michael Armstrong


46,000







3,444
(2)














49,444Thomas J. Coffey


52,875







3,444
(3)














56,319Robert E. Killen


53,175







3,444
(4)














56,619Richard M. Klingaman


39,000







14,793
(5)














53,793Thomas W. Ostrander


44,000







3,444
(6)














47,444James W. Sight


29,500







3,444
(7)














32,944William M. Stern


44,000







3,444
(8)














47,444Donald A. Tortorice


48,800







4,882
(9)














53,682  
   
  (1)
    
    The amounts in this column reflect the dollar amount recognized
    for financial statement reporting purposes of the stock
    appreciation rights granted to the directors in 2006. The grant
    date fair value of these awards, computed in accordance with
    FAS 123R, was, for Mr. Klingaman, $14.13, and for each
    of Messrs. Armstrong, Coffey, Killen, Ostrander,
    Sight, Stern, and Tortorice, $14.94. 
 
  (2)
    
    Mr. Armstrong had no stock options and 1,762 SARS
    outstanding at December 31, 2006. 
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##### Table of Contents



(3)
    
    Mr. Coffey had 15,000 stock options and 1,762 SARs
    outstanding at December 31, 2006. 
 
  (4)
    
    Mr. Killen had 7,500 stock options and 1,762 SARs
    outstanding at December 31, 2006. 
 
  (5)
    
    Mr. Klingaman had no stock options and 3,733 SARs
    outstanding at December 31, 2006. 
 
  (6)
    
    Mr. Ostrander had 66,000 stock options and 1,762 SARs
    outstanding at December 31, 2006. 
 
  (7)
    
    Mr. Sight had no stock options and 1,762 SARS outstanding
    at December 31, 2006. 
 
  (8)
    
    Mr. Stern had 10,000 stock options and 1,762 SARs
    outstanding at December 31, 2006. 
 
  (9)
    
    Mr. Tortorice had 7,500 stock options and 1,762 SARs
    outstanding at December 31, 2006. 
 
   
 
  Annual
    Retainer and Meeting Fees
 
 
   
 
  Long-Term
    Compensation
 
 
  employee-directors
 
 
   
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##### Table of Contents



Compensation
    Committee Interlocks and Insider Participation
 
 
   
 
  Compensation
    and Benefits Committee Report
 
 
  Regulation S-K
 
 
   
 
  
 
  
  ITEM 12 
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS 
  Beneficial
    Ownership of Securities
 
 
   
 
  Number of
    Shares and Nature of Beneficial Ownership(1)
 
  
 Percentage ofName and Address

Common

Common

Depositary

Percentage ofof Beneficial Owner

Stock

Stock

Shares

Depositary SharesAlan A. Blase










70,659
(2)


11.0
%1073 SW
    119th Ave.,
    #5
    Davie, FL 33325Jeffrey L. Gendell


1,543,600
(3)


17.1
%


4,300
(4)



*55 Railroad Avenue,
    3rd
    Fl
    Greenwich, CT 06830Stephen D. Rosenbaum


28,924




*


60,000
(5)


9.4
%817 N. Calvert Street
    Baltimore, MD 21202Wellington Management


549,900
(6)


6.1
%






Company, LLP
    75 State Street
    Boston, MA 02109  
   
  (1)
    
    Information in this table is as of March 1, 2007, unless
    otherwise indicated, and is based solely on information
    contained in Schedules 13D, Schedules 13G and Section 16
    Forms filed by the beneficial owners with the Securities and
    Exchange Commission, or the SEC, or information furnished to us.
    Except as indicated below, the respective beneficial owners have
    reported that they have sole voting power and sole dispositive
    power with respect to the securities set forth opposite their
    names. For ease of analysis, the common stock information in the
    table and the related footnotes does not include the number of
    shares of common stock into which the depositary shares may be
    converted. A holder of depositary shares may convert such
    depositary shares into shares of common stock at any time at a
    conversion ratio of 1.708 shares of common stock for each
    depositary share. Consequently, a holder of depositary shares is
    deemed to beneficially own all of the shares of common stock
    into which such holders depositary shares may be
    converted. However, for so long as we are in arrears on six or
    more preferred stock dividends, holders of 
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##### Table of Contents



depositary shares are not entitled to vote for the election of
    directors to be elected by holders of the common stock unless
    such depositary shares are actually converted prior to the
    record date for the annual meeting. Percentages of less than 1%
    are indicated by an asterisk. 
 
  (2)
    
    According to a Schedule 13G filed on February 14,
    2007, Mr. Alan Blase beneficially owns 70,659 depositary
    shares of which he has shared dispositive power over shares
    owned by several investors. No single investor has more than 5%
    ownership and only has shared dispositive power with
    Mr. Blase with respect to its/his/her own shares The
    depositary shares are convertible into 120,685 shares of
    common stock, which would represent 1.3% of the total shares of
    common stock outstanding. See Note (1). 
 
  (3)
    
    According to a Form 4 filed October 3, 2005 with the
    SEC, Mr. Gendell has direct ownership of
    549,000 shares of common stock and the remaining
    994,600 shares of common stock are held by limited
    partnerships and limited liability companies of which
    Mr. Gendell is either a managing member or general partner.
    See Note (1). 
 
  (4)
    
    According to information supplied to us on March 13, 2007,
    Mr. Gendell personally owns 4,300 depositary shares. These
    depositary shares are convertible into 7,343 shares of
    common stock, which shares of common stock together with the
    1,543,600 shares of common stock reported in the table
    would represent 17.2% of the total shares of common stock
    outstanding. See Notes (1) and (3). 
 
  (5)
    
    The depositary shares are convertible into 102,480 shares
    of common stock, which together with the 28,924 shares of
    common stock reported in the table, would represent 1.5% of the
    total shares of common stock outstanding. See Note (1). 
 
  (6)
    
    According to a Schedule 13G filed on February 14,
    2007, Wellington Management Company, LLP, or Wellington, in its
    capacity as investment adviser, may be deemed to beneficially
    own 549,900 shares of common stock. Wellington has shared
    voting power over 265,300 shares and shared dispositive
    power over all 549,900 shares. 
 
   
 
  Number
    of Shares and Nature of Beneficial
    Ownership(1)
 
  
 Percentage ofName of Directors, Named Executive

Common


Percentage of


Depositary


DepositaryOfficers and Persons as a Group

Stock


Common Stock


Shares


SharesMichael Armstrong


53,984
(2)



*


11,334
(3)


1.8
%David J. Blair


562
(4)



*






Thomas J. Coffey


41,853
(5)



*






Robert W. Holzwarth


7,235
(6)



*






Richard M. Klingaman


500




*






Robert E. Killen


239,814
(7)


2.7
%


750
(8)



*John V. OLaughlin


38,003
(9)



*






Thomas W. Ostrander


104,368
(10)


1.2
%






Christopher K.Seglem


420,502
(11)


4.5
%


1,187
(12)



*William M. Stern


47,103
(13)



*


7,850
(14)


1.2
%Donald A. Tortorice


23,853
(15)



*






Roger D. Wiegley


298
(16)



*






Directors and Executive 
    Officers as a Group (23 persons)


1,139,031
(17)


12.0
%


21,500
(18)


3.4
%  
   
  (1)
    
    This information is based on information known to us or
    furnished to us by directors and executive officers. Except as
    indicated below, we are informed that the respective beneficial
    owners have sole voting power and sole dispositive power with
    respect to all of the shares set forth opposite their names.
    Percentages of less than 1% are indicated by an asterisk. For
    ease of analysis, the common stock information in 
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##### Table of Contents



the table and the related footnotes does not include the number
    of shares of common stock into which the depositary shares may
    be converted. A holder of depositary shares may convert such
    depositary share into shares of common stock at any time at a
    conversion ratio of 1.708 shares of common stock for each
    depositary share. Consequently, a holder of depositary shares is
    deemed to beneficially own all of the shares of common stock
    into which such holders depositary shares may be
    converted. However, for so long as we are in arrears on six or
    more preferred stock dividends, holders of depositary shares are
    not entitled to vote for the election of directors to be elected
    by holders of common stock unless such depositary shares are
    actually converted prior to the record date for the Annual
    Meeting. Also, shares which may be purchased under option plans
    are reflected in the table but are not entitled to vote unless
    exercised prior to the record date for the Annual Meeting. The
    Westmoreland Coal Company and Subsidiaries Employees
    Savings Plan, or the 401(k) Plan, provides investment
    alternatives which include a common stock fund and a depositary
    share fund. All amounts included herein held through the 401(k)
    Plan are as of March 1, 2007. 
 
  (2)
    
    See Notes (1) and (3). 
 
  (3)
    
    Includes 4,000 depositary shares held by two trusts of which
    Mr. Armstrong is trustee, 3,500 shares held by a trust
    for which Mr. Armstrong exercises voting and dispositive
    power on behalf of the trustee, and 3,834 shares held by
    Mr. Armstrong as a personal investment. The depositary
    shares are convertible into 19,358 shares of common stock,
    which together with the 53,984 shares of common stock
    reported in the table, would represent 0.8% of the total shares
    of common stock outstanding. See Notes (1) and (2). 
 
  (4)
    
    Includes 562 shares of common stock held by Prudential
    Retirement, as trustee of the 401(k) Plan. 
 
  (5)
    
    Includes 15,000 shares of common stock which may be
    purchased upon exercise of options under our
    2000 Directors Plan. 
 
  (6)
    
    Includes 569 shares of common stock held by Prudential
    Retirement, as trustee of the 401(k) Plan, and 6,666 shares
    of common stock which may be purchased upon exercise of options
    under our 2002 Plan. 
 
  (7)
    
    Includes 88,990 shares of common stock owned by
    Mr. Killen as a personal investment, 59,184 shares of
    common stock held jointly by Mr. Killen and his spouse,
    61,500 shares of common stock held by a limited partnership
    of which Mr. Killen and his spouse are general partners and
    22,640 shares of common stock held by a limited partnership
    of which Mr. Killen is the general partner. Mr. Killen
    has voting and dispositive power over all 22,640 shares.
    Also includes 7,500 shares of common stock which may be
    purchased upon exercise of options under the
    2000 Directors Plan. See Notes (1) and (8). 
 
  (8)
    
    Includes 750 depositary shares jointly held by Mr. Killen
    and his spouse. These depositary shares are convertible into
    1,281 shares of common stock, which shares of common stock,
    together with the 239,814 shares of common stock reported
    in the table, would represent 2.7% of the total shares of common
    stock outstanding. See Notes (1) and (7). 
 
  (9)
    
    Includes 2,103 shares of common stock held by Prudential
    Retirement, as trustee of the 401(k) Plan. Also includes
    34,300 shares of common stock which may be purchased upon
    exercise of options under the 1995 Plan, the 2000 Plan, and the
    2002 Plan. 
 
  (10)
    
    Includes 66,000 shares of common stock which may be
    purchased upon exercise of options under the 1991 Plan, the 1996
    Plan and the 2000 Directors Plan. 
 
  (11)
    
    Includes 4,623 shares of common stock held by Prudential
    Retirement, as trustee of the 401(k) Plan, and
    239,000 shares of common stock which may be purchased upon
    exercise of options under the 1995 Plan, the
    1996 Directors Plan, the 2000 Plan, and the 2002 Plan. 
 
  (12)
    
    Includes 87 depositary shares held by Prudential Retirement, as
    trustee of the 401(k) Plan. The depositary shares are
    convertible into 2,027 shares of common stock, which
    together with the 420,502 shares of common stock reported
    in the table, would represent 4.5% of the total shares of common
    stock outstanding. See Notes (1) and (11). 
 
  (13)
    
    Includes 10,000 shares of common stock which may be
    purchased upon exercise of options under the
    2000 Directors Plan. 
 
  (14)
    
    Includes 2,800 depositary shares held in trust for which
    Mr. Stern is a trustee and beneficiary, 3,000 shares
    held by a trust for which Mr. Stern is sole trustee, and
    2,050 shares held in trust for which Mr. Stern is 
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##### Table of Contents



sole trustee and beneficiary. The depositary shares are
    convertible into 13,407 shares of common stock, which
    together with the 47,103 shares of common stock reported in
    the table, would represent 0.7% of the total shares of common
    stock outstanding. See Notes (1) and (13). 
 
  (15)
    
    Includes 12,500 shares of common stock which may be
    purchased upon exercise of options under the
    2000 Directors Plan. 
 
  (16)
    
    Includes 298 shares of common stock held by Prudential
    Retirement, as trustee of the 401(k) Plan. See Note (1). 
 
  (17)
    
    See Notes (2), (4) - (7), (9) - (11), (13) and (15) - (16). 
 
  (18)
    
    See Notes (3), (8), (12) and (14). 
 
   
 
  Equity
    Compensation Plan Information
 
 
   
 
   
 
   
 
   
 156




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##### Table of Contents



2006
    EQUITY PLAN COMPENSATION
 
  
 Number of Securities RemainingAvailable for Future IssuanceNumber of Securities to be





Under Equity CompensationIssued Upon Exercise of


Weighted Average Exercise Price


Plans (Excluding SecuritiesOutstanding Options,


of Outstanding Options,


ReflectedWarrants and Rights


Warrants and Rights


in Column (a))Plan Category

(a)


(b)


(c)Equity compensation plans approved by security holders


396,060
(1)(2)

$
11.86
(1)


210,472
(1)(2)Equity compensation plans not approved by security holders


148,500


$
11.00



19,176Total


544,560
(1)(2)

$
11.62
(1)


229,648
(1)(2)  
   
  (1)
    
    Includes 2,944 shares of Common Stock issuable on
    settlement of in-the-money SARs outstanding at December 31,
    2006, which is the number of shares of Common Stock that the
    Company would have been required to issue, if it had been
    required to settle all outstanding SARs on December 31, 2006,
    and if it had elected to settle all outstanding SARs in shares
    of Common Stock. At December 31, 2006, 544,680 SARs were
    outstanding in the employee plans; those SARs had base prices
    between $18.035 and $29.48. The SARs were originally granted on
    a three-year vesting schedule. On December 30, 2005 the Company
    accelerated the vesting of all unvested SARs as described in
    Compensation Discussion and Analysis above. The base
    prices of the SARs are not reflected in column (b) of this table
    but are described in this note. 
 
  (2)
    
    The maximum number of shares of common stock the Company could
    be required to issue to settle the SARs outstanding in the
    employee plans at December 31, 2006 is 544,680 if one share of
    stock is required for each SAR outstanding. Similarly, the
    maximum number of shares of common stock the Company could be
    required to issue to settle the SARs outstanding in the director
    plans at December 31, 2006 is 16,067 if one share of stock is
    required for each SAR outstanding. (No director SARs were
    in-the-money at December 31, 2006.) If the Company were required
    to issue this total number of shares in settlement of its SARs,
    the number of securities to be issued upon the exercise of
    outstanding options, warrants and rights (column(a)) would be
    1,102,363, which exceeds the number of securities available for
    futureissuance under the Companys existing equity
    compensation plans. 
  ITEM 13 
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE 
  Certain
    Relationships and Related Transactions
 
 
  Policies
    and Procedures for Related Person Transactions
 
 
   
 
   
 157




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##### Table of Contents




    the related persons interest in the related person
    transaction; 
 
  
    the approximate dollar value of the amount involved in the
    related person transaction; 
 
  
    the approximate dollar value of the amount of the related
    persons interest in the transaction without regard to the
    amount of any profit or loss; 
 
  
    whether the transaction was undertaken in the ordinary course of
    our business; 
 
  
    whether the terms of the transaction are no less favorable to us
    than terms that could have been reached with an unrelated third
    party; 
 
  
    the purpose of, and the potential benefits to us of, the
    transaction; and 
 
  
    any other information regarding the related person transaction
    or the related person in the context of the proposed transaction
    that would be material to investors in light of the
    circumstances of the particular transaction. 
 
   
 
   
 
  
    interests arising solely from the related persons position
    as an executive officer of another entity (whether or not the
    person is also a director of such entity), that is a participant
    in the transaction, where (a) the related person and all
    other related persons own in the aggregate less than a 10%
    equity interest in such entity, (b) the related person and
    his or her immediate family members are not involved in the
    negotiation of the terms of the transaction and do not receive
    any special benefits as a result of the transaction,
    (c) the amount involved in the transaction equals less than
    the greater of $200,000 or 5% of the annual consolidated gross
    revenues of the other entity that is a party to the transaction,
    and (d) the amount involved in the transaction equals less
    than 2% of our annual consolidated gross revenues; and 
 
  
    compensation to an executive officer if the compensation has
    been approved, or recommended to the Board of Directors for
    approval, by the Compensation and Benefits Committee of the
    Board or a group of independent directors performing a similar
    function; or 
 
  
    an arrangement that is specifically contemplated by provisions
    of our certificate of incorporation or bylaws, such as the
    exculpation, indemnification, and directors and
    officers insurance arrangements contemplated by the
    certificate of incorporation and bylaws. 
 
   
 158




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##### Table of Contents



Related
    Person Transactions
 
 
   
 
  Director
    Independence
 
 
   
 
   
 
   
  ITEM 14 
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES 
   
 
  Auditors
    Fees
 
 
   
  
 Fee Category

2005


2006Audit Fees(1)

$
1,040,000


$
1,892,000Audit Related Fees(2)

$
19,250


$
20,750Tax Fees(3)

$
19,435


$
24,115All Other Fees

$



$
Total Fees

$
1,078,685


$
1,936,865  
   
  (1)
    
    Audit fees consist of fees for the audit of our financial
    statements, including fees related to the audit of our restated
    financial statements and that related to acquisition activity,
    the audit of our internal controls over financial reporting, the
    review of the interim financial statements included in our
    quarterly reports on
    Form 10-Q,
    and other professional services provided in connection with
    statutory and regulatory filings. 
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##### Table of Contents



(2)
    
    Audit-related fees consist of fees for assurance and related
    services that are reasonably related to the performance of the
    audit and the review of our financial statements and which are
    not reported under Audit Fees. These services relate
    to employee benefit audits. 
 
  (3)
    
    Tax fees consist of fees for tax compliance and tax advice
    services. Tax compliance services, which relate to preparation
    of original and amended tax returns, claims for refunds and tax
    payment-planning services, accounted for none of the total tax
    fees paid for 2005 and 2006. Tax advice services relate to
    assistance with tax audits and appeals and employee benefit
    plans. 
 
  Pre-Approval
    Policy and Procedures
 
 
   
 
   
 
   
 
   
 PART IV  ITEM 15 
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES     
  
 
       160




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##### Table of Contents



SIGNATURES     WESTMORELAND COAL COMPANYBy: /s/  David
    J. BlairDavid
    J. BlairChief Financial Officer
    (A Duly Authorized Officer)  
    
    
 Signature

Title

Date/s/  Keith
    E. AlessiKeith
    E. Alessi

President, and
    Chief Executive Officer

March 17, 2008/s/  David
    J. BlairDavid
    J. Blair

Chief Financial Officer

March 17, 2008/s/  Kevin
    A. PaprzyckiKevin
    A. Paprzycki

Principal Accounting Officer
    and Controller

March 17, 2008/s/  Thomas
    J. CoffeyThomas
    J. Coffey

Director

March 17, 2008/s/  Robert
    E. KillenRobert
    E. Killen

Director

March 17, 2008/s/  Richard
    M. KlingamanRichard
    M. Klingaman

Director

March 17, 2008/s/  William
    M. SternWilliam
    M. Stern

Director

March 17, 2008  
 161




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
 
   
 
  Form 10-K
 
   
   
 
   
     
  
 162




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##### Table of Contents



WESTMORELAND
    COAL COMPANY
  SCHEDULE I 
    CONDENSED BALANCE SHEET
 (Parent
    Company Information  See Notes to Consolidated
    Financial Statements)
  
 December 31,


December 31,2006


2005(As restated, note 2)(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
128


$
692Receivables:Trade






Other


293



92293



92Restricted cash


3,300



Excess of trust assets over pneumoconiosis benefit obligation


2,266



Other current assets


5,704



398Total current assets


11,691



1,182Property, plant and equipment:Plant and equipment


5,416



4,686Less accumulated depreciation, depletion and amortization


4,206



3,783Net property, plant and equipment


1,210



903Investment in subsidiaries and independent power projects,
    including intercompany balances


159,470



169,598Other assets


6,655



20,541Total Assets

$
179,026


$
192,224LIABILITIES AND SHAREHOLDERS DEFICITCurrent liabilities:Current installments of long-term debt

$
5,000


$
Accounts payable and accrued expenses


7,403



5,792Intercompany payable


52,551



50,610Income taxes


162



Workers compensation


949



Pension and SERP obligations


51



Postretirement medical benefits


15,771



Total current liabilities


81,887



56,402Revolving lines of credit


8,500



5,500Workers compensation, less current portion


8,589



8,396Postretirement medical costs, less current portion


258,977



144,710Pension and SERP obligations, less current portion


5,147



Other liabilities


1,859



7,424Shareholders deficit:Preferred stock


160



205Common stock


22,535



21,033Other paid-in capital


79,246



75,344Accumulated other comprehensive loss


(139,424
)


(11,409
)Accumulated deficit


(148,450
)


(115,381
)Total shareholders deficit


(185,933
)


(30,208
)Total Liabilities and Shareholders Deficit

$
179,026


$
192,224  
 163




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##### Table of Contents



WESTMORELAND
    COAL COMPANY
  SCHEDULE I 
    CONDENSED STATEMENT OF OPERATIONS
 (Parent
    Company Information  See Notes to Consolidated
    Financial Statements)
  
 Year Ended December 31,2006


2005


2004(As Restated, note 2)(In thousands)Operating costs and expenses:Depreciation, depletion and amortization

$
477


$
263


$
146Selling and administrative


12,932



7,077



7,661Heritage health benefit expenses


32,821



31,704



36,966Loss on sales of assets


25







46,255



39,044



44,773Operating loss


(46,255
)


(39,044
)


(44,773
)Other income (expense):Interest expense


(877
)


(465
)


(421
)Interest income


457



334



722Minority interest










Other income


(78
)


2,662



1(498
)


2,531



302Loss before income taxes and income of consolidated subsidiaries


(46,753
)


(36,513
)


(44,471
)Equity in income of subsidiaries and earnings of independent
    power projects, net


34,064



26,409



33,509Loss from continuing operations before income taxes


(12,689
)


(10,104
)


(10,962
)Income tax expense


(9
)


(179
)


(146
)Net loss

$
(12,698
)

$
(10,283
)

$
(11,108
)  
 164




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##### Table of Contents



WESTMORELAND
    COAL COMPANY
  SCHEDULE I 
    CONDENSED STATEMENT OF CASH FLOWS
 (Parent
    Company Information  See Notes to Consolidated
    Financial Statements)
  
 Year Ended December 31,2006


2005


2004(As Restated, note 2)(In thousands)Cash flows from operating activities:Net loss

$
(12,698
)

$
(10,283
)

$
(11,108
)Adjustments to reconcile net loss to net cash provided by
    operating activities:Equity in income of subsidiaries and earnings of independent
    power projects


(34,064
)


(26,409
)


(33,509
)Depreciation, depletion and amortization


477



263



146Stock compensation expense


2,564



1,719



1,617Changes in operating assets and liabilities:Receivables, net


(20,099
)


400



(180
)Accounts payable and accrued expenses


1,483



3,912



(129
)Other assets and liabilities


12,446



3,091



6,875Net cash used by operating activities


(49,891
)


(27,307
)


(36,288
)Cash flows from investing activities:Distributions received from subsidiaries


14,381



4,318



4,720Additions to property, plant and equipment


(784
)


(491
)


(637
)Net cash provided by investing activities


13,597



3,827



4,083Cash flows from financing activities:Net borrowings on revolving lines of credit


8,000



5,500



Loans from subsidiaries


27,119



18,383



32,600Exercise of stock options


998



1,094



862Dividends on preferred shares


(387
)


(820
)


(738
)Net cash provided by financing activities


35,730



24,157



32,724Net increase (decrease) in cash and cash equivalents


(564
)


677



519Cash and cash equivalents, beginning of year


692



15



(504
)Cash and cash equivalents, end of year

$
128


$
692


$
15  
 165




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##### Table of Contents



WESTMORELAND
    COAL COMPANY AND SUBSIDIARIES
  Valuation
    Accounts
 Years
    ended December 31, 2006, 2005 and 2004
  DeductionsBalance at


Charged toBeginning of


Costs and





Balance atYear


Expenses


Deductions


End of Year(In thousands)Year Ended December 31, 2006:Allowance for doubtful accounts

$
2,441


$



$
(2,441
)(A)

$
Year Ended December 31, 2005:Allowance for doubtful accounts

$
2,441










$
2,441
(B)Year Ended December 31, 2004:Allowance for doubtful accounts

$
2,441










$
2,441
(B)    
   
  (A)
    
    Uncollectible note charged to allowance 
  (B)
    
    Consists of reserves related to the uncollectibility of notes
    receivable reported as a reduction of other assets in the
    Companys Consolidated Balance Sheets. 
 166




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##### Table of Contents



Westmoreland 
    LG&E Partners
  Financial Statements & Supplementary Data
 167




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##### Table of Contents



WESTMORELAND-LG&E PARTNERS
  Balance Sheets
 As of December 31, 2005 and 2004
  December 31,


December 31,2005


2004(In thousands)ASSETSCURRENT ASSETS:Cash and cash equivalents

$
21,430


$
23,547Accounts receivable


22,844



20,263Fuel inventories


1,689



2,740Prepaid expenses


495



559Total current assets


46,458



47,109PROPERTY, PLANT, AND EQUIPMENT  Net


228,323



237,343LOAN ORIGINATION FEES  Net


3,023



3,732RESTRICTED ASSETS


22,849



22,555OTHER ASSETS






10$
300,653


$
310,749LIABILITIES AND PARTNERS CAPITALCURRENT LIABILITIES:Accounts payable and accrued liabilities

$
17,591


$
9,347Accounts payable  affiliate


552



823Interest payable


1,745



1,693Current portion of long-term debt


25,594



22,156Total current liabilities


45,482



34,019LONG-TERM DEBT


158,002



183,596OTHER NONCURRENT LIABILITIES


526



1,513Total liabilities


204,010



219,128COMMITMENTS AND CONTINGENCIES
    PARTNERS CAPITAL:Westmoreland-Roanoke Valley L.P.


50,932



48,906LG&E-Roanoke Valley L.P.


45,837



43,854Unrealized loss on derivative instrument


(126
)


(1,139
)Total partners capital


96,643



91,621$
300,653


$
310,749    168




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##### Table of Contents



WESTMORELAND-LG&E
    PARTNERS
  Statements
    of Operations and Comprehensive Income
 For the
    six months ended June 30, 2006 and the years ended
    December 31, 2005 and 2004
  June 30,


December 31,


December 31,2006


2005


2004(In thousands)Revenues:Energy

$
55,104


$
109,991


$
112,66955,104



109,991



112,669Cost and expenses:Cost of sales


22,777



41,389



44,292Cost of sales  affiliate


4,005



9,446



8,637Depreciation, depletion and amortization


5,484



10,969



10,906Selling and administrative


2,303



10,436



9,352Selling and administrative  affiliate


399



852



81734,968



73,092



74,004Operating income


20,136



36,899



38,665Other income (expense):Interest expense


(6,619
)


(13,778
)


(14,001
)Interest income


995



1,275



393Other










6







(5,624
)


(12,503
)


(13,602
)Revenues:


14,512



24,396



25,063Other comprehensive incomeUnrealized gain on derivative financial instrument


126



1,013



2,255Total comprehensive income

$
14,638


$
25,409


$
27,318    169




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##### Table of Contents



WESTMORELAND-LG&E
    PARTNERS
  Statements
    of Partners Capital
 For the
    six months ended June 30, 2006 and the years ended
    December 31, 2005 and 2004
  UnrealizedWestmoreland-


LG&E


Gain (Loss) onRoanoke


Roanoke


DerivativeValley L.P.


Valley L.P.


Instrument


Total(In thousands)Balance as of December 31, 2003

$
39,257


$
34,241


$
(3,394
)

$
70,104Net Income


12,559



12,504







25,063Partner distributions


(2,910
)


(2,891
)






(5,801
)Unrealized gain on derivative instrument










2,255



2,255Balance as of December 31, 2004


48,906



43,854



(1,139
)


91,621Net Income


12,272



12,124







24,396Partner distributions


(10,246
)


(10,141
)






(20,387
)Unrealized gain on derivative instrument










1,013



1,013Balance as of December 31, 2005


50,932



45,837



(126
)


96,643Net Income


7,320



7,192







14,512Partner distributions


(946
)


(855
)






(1,801
)Unrealized gain on derivative instrument










126



126Balance as of June 30, 2006

$
57,306


$
52,174


$



$
109,480    170




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##### Table of Contents



WESTMORELAND-LG&E
    PARTNERS
  Statements
    of Cash Flows
 For the
    six months ended June 30, 2006 and the years ended
    December 31, 2005 and 2004
  June 30,


December 31,


December 31,2006


2005


2004(In thousands)OPERATING ACTIVITIES:Net income

$
14,512


$
24,396


$
25,063Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation


5,115



10,250



10,173Amortization


369



719



733Ash monofill amortization










13Decrease (increase) in accounts receivable


6,302



(2,580
)


462Decrease (increase) in fuel inventories


517



1,051



(639
)Decrease (increase) in prepaid expenses


(57
)


63



(110
)Increase (decrease) in accounts payable and accrued liabilities


(11,027
)


7,973



1,393Increase (decrease) in interest payable


48



52



(74
)Net cash provided by operating activities


15,779



41,924



37,014INVESTING ACTIVITIES  
    Purchases of property, plant, and equipment


(186
)


(1,204
)


(708
)Increase in restricted assets


(377
)


(294
)


(1,763
)Net cash used in investing activities


(563
)


(1,498
)


(2,471
)FINANCING ACTIVITIES:Repayment of notes payable


(12,944
)


(22,156
)


(20,199
)Partner distributions


(1,801
)


(20,387
)


(5,801
)Net cash used in financing activities


(14,745
)


(42,543
)


(26,000
)NET INCREASE IN CASH AND CASH EQUIVALENTS


471



(2,117
)


8,543CASH AND CASH EQUIVALENTS  Beginning of year


21,430



23,547



15,004CASH AND CASH EQUIVALENTS  End of year

$
21,901


$
21,430


$
23,547SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash paid for interest

$
6,670


$
13,726


$
14,074    171




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##### Table of Contents



WESTMORELAND-LG&E
    PARTNERS
  NOTES TO
    FINANCIAL STATEMENTS
  1.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Organization
      Power Sales Agreement
  kilowatt-hour kilowatt-hour. kilowatt-hours
 172




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##### Table of Contents



WESTMORELAND-LG&E
    PARTNERS
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    kilowatt-hour kilowatt-hour kilowatt-hour,
  Energy Services Agreement
  Cash Equivalents
  Fuel Inventories
  Property, Plant, and Equipment
 173




---



##### Table of Contents



WESTMORELAND-LG&E
    PARTNERS
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Useful Lives2005


2004


in YearsLand

$
1,010


$
1,010Land improvements


300



300


29Plant and related equipment, including capitalized interest of
    $34,486,000 in 2005 and 2004


335,073



332,950


5 - 35Office equipment


991



912


5Ash monofills


2,231



2,231Construction-in-progress


9



1,007Asset retirement obligation


203



203


24Transportation equipment


182



182


5Total cost


339,999



338,795Less accumulated depreciation


(111,676
)


(101,452
)Property, plant, and equipment  net

$
228,323


$
237,343   Loan Origination Fees
  Restricted Assets  Long-Term Debt.
  Intangible Asset 
  Major Maintenance 
  Income Taxes 
  Derivatives  Accounting for
    Derivative Instruments and Hedging Activities Accounting for Certain Derivative
    Instruments and Certain Hedging Activities Amendment of Statement 133 on
    Derivative Instruments and Hedging Activities
 174




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##### Table of Contents



WESTMORELAND-LG&E
    PARTNERS
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      Asset Retirement Obligation  Accounting for Asset
    Retirement Obligations
    2005


2004Asset retirement obligation  beginning of period

$
374


$
350Accretion


26



24Asset retirement obligation  end of period

$
400


$
374   Use of Estimates
  Reclassification
  2.
    FINANCIAL
    INSTRUMENTS  Disclosures
    about Fair Value of Financial Instruments
    2005Carrying

FairValue

Value(In thousands)Long-term debt

$
(183,596
)

$
(192,946
)Interest rate swaps


(126
)


(126
)  175




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##### Table of Contents



WESTMORELAND-LG&E
    PARTNERS
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  2004Carrying

FairValue

Value(In thousands)Long-term debt

$
(205,752
)

$
(218,837
)Interest rate swaps


(1,139
)


(1,139
)   3.
    LONG-TERM
    DEBT    2005


2004(In thousands)Notes payable to banks:Tranche A

$
57,468


$
71,588Tranche B


15,604



19,204Notes payable to institutional lenders:Tranche A


51,000



54,400Tranche B


22,764



23,800Bonds payable:Tranche A


29,515



29,515Tranche B


7,245



7,245Total


183,596



205,752Less current portion


25,594



22,156Total long-term debt

$
158,002


$
183,596      176




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##### Table of Contents



WESTMORELAND-LG&E
    PARTNERS
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
                 177




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##### Table of Contents



WESTMORELAND-LG&E
    PARTNERS
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  2000-2008 Restricted Assets
    Restricted Assets
  Restricted
    Asset
    Year

Total(In thousands)2006

$
12,6502007


27,6952008


32,2682009


31,2332010


15,306Thereafter


51,500$
170,652   4.
    COMMITMENTS
    AND CONTINGENCIES  Coal Supply Agreement 
 178




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##### Table of Contents



WESTMORELAND-LG&E
    PARTNERS
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Lime Supply Agreement 
  Rail
    Transportation Agreement
  Rail Transportation Agreement 
  Lime Supply
    Agreement
  Property Tax Audit
 179




---



##### Table of Contents



5.
    RELATED-PARTY
    TRANSACTIONS         180




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
   
           
 181




---



##### Table of Contents



INDEPENDENT
    AUDITORS REPORT
                
 182




---



##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber

Description3
.1

Restated Certificate of Incorporation of Westmoreland Coal
    Company is incorporated herein by reference to Exhibit 3.1
    to Westmorelands Registration Statement on
    Form S-1
    (Registration
    No. 333-117709)
    filed July 28, 2004.3
.2

Certificate of Correction to the Restated Certificate of
    Incorporation of Westmoreland Coal Company is incorporated
    herein by reference to Exhibit 3.1 to Westmorelands
    Current Report on
    Form 8-K
    filed October 21, 2004 (SEC File
    No. 001-11155).3
.3

Bylaws, as amended and restated on May 18, 2006, are
    incorporated herein by reference to Exhibit 3.1 to
    Westmorelands Current Report on
    Form 8-K
    filed May 19, 2006 (SEC File
    No. 001-11155).4
.1

Certificate of Designation of Series A Convertible
    Exchangeable Preferred Stock of the Company, defining the rights
    of holders of such stock, filed July 8, 1992 as an
    amendment to the Companys Certificate of Incorporation, is
    incorporated herein by reference to Exhibit 3(a) to
    Westmorelands Annual Report on
    Form 10-K
    for the year ended December 31, 1992 (SEC File
    No. 001-11155).4
.2

Indenture between Westmoreland and Fidelity Bank, National
    Association, as Trustee, relating to the Exchange Debentures, is
    incorporated herein by reference to Exhibit 4.2 to
    Westmorelands Registration Statement on
    Form S-1
    (Registration
    No. 333-117709)
    filed July 28, 2004.4
.3

Form of Exchange Debenture is incorporated herein by reference
    to Exhibit 4.3 to Westmorelands Registration
    Statement on
    Form S-1
    (Registration
    No. 333-117709)
    filed July 28, 2004.4
.4

Deposit Agreement among Westmoreland, First Chicago
    Trust Company of New York, as Depository, and the holders
    from time to time of the Depository Receipts is incorporated
    herein by reference to Exhibit 4.4 to Westmorelands
    Registration Statement on
    Form S-1
    (Registration
    No. 333-117709)
    filed July 28, 2004.4
.5

Specimen certificate representing the Common Stock is
    incorporated by reference to Exhibit 4(c) to
    Westmorelands Registration Statement on
    Form S-2
    (Registration
    No. 33-1950)
    filed December 4, 1985.4
.6

Specimen certificate representing the Preferred Stock is
    incorporated by reference to Exhibit 4.6 to
    Westmorelands registration statement on
    Form S-2
    (Registration
    No. 33-47872)
    filed May 13, 1992, and Amendments 1 through 4 thereto.4
.7

Form of Depository Receipt is incorporated by reference to
    Exhibit 4.5 to Westmorelands Registration Statement
    on
    Form S-1
    (Registration
    No. 333-117709)
    filed July 28, 2004.4
.8

Amended and Restated Rights Agreement, dated as of
    February 7, 2003, between Westmoreland Coal Company and
    EquiServe Trust Company, N.A. is incorporated by reference
    to Exhibit 4.1 to Westmorelands Current Report on
    Form 8-K
    filed February 7, 2003 (SEC File
    No. 001-11155).4
.9

In accordance with paragraph(b)(4)(iii) of Item 601 of
    Regulation S-K,
    Westmoreland hereby agrees to furnish to the Commission, upon
    request, copies of all other long-term debt instruments.10
.1*

In 1990, the Board of Directors of Westmoreland established an
    Executive Severance Policy for certain executive officers, which
    provides a severance award in the event of termination of
    employment. The Executive Severance Policy is incorporated by
    reference to Exhibit 10.2 to Westmorelands
    Registration Statement on
    Form S-1
    (Registration
    No. 333-117709)
    filed July 28, 2004.10
.2*

Westmoreland Coal Company 1991 Non-Qualified Stock Option Plan
    for Non-Employee Directors is incorporated herein by reference
    to Exhibit 10(i) to Westmorelands Annual Report on
    Form 10-K
    for the year ended December 31, 1990 (SEC File
    No. 0-752).10
.3*

Supplemental Executive Retirement Plan, effective
    January 1, 1992, for certain executive officers and other
    key individuals, to supplement Westmorelands Retirement
    Plan is incorporated herein by reference to Exhibit 10(d)
    to Westmorelands Annual Report on
    Form 10-K
    for the year ended December 31, 2000 (SEC File
    No. 001-11155).10
.4

Amended Coal Lease Agreement between Westmoreland Resources,
    Inc. and Crow Tribe of Indians, dated November 26, 1974, as
    further amended in 1982, is incorporated herein by reference to
    Exhibit 10(a) to Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 1992 (SEC File
    No. 0-752).10
.5*

Westmoreland Coal Company 1995 Long-Term Incentive Stock Plan is
    incorporated herein by reference to Appendix 3 to
    Westmorelands Definitive Schedule 14A filed
    April 28, 1995 (SEC File
    No. 0-752).




---



##### Table of Contents



ExhibitNumber

Description10
.6

Master Agreement dated as of January 4, 1999 between
    Westmoreland Coal Company, Westmoreland Resources, Inc.,
    Westmoreland Energy, Inc., Westmoreland Terminal Company, and
    Westmoreland Coal Sales Company, the UMWA 1992 Benefit Plan and
    its Trustees, the UMWA Combined Benefit Fund and its Trustees,
    the UMWA 1974 Pension Trust and its Trustees, the United Mine
    Workers of America, and the Official Committee of Equity
    Security Holders in the chapter 11 case of Westmoreland
    Coal and its official members is incorporated herein by
    reference to Exhibit No. 99.2 to Westmorelands
    Current Report on
    Form 8-K
    filed February 4, 1999 (SEC File
    No. 001-11155).10
.7*

Westmoreland Coal Company 1996 Directors Stock
    Incentive Plan is incorporated herein by reference to
    Exhibit 10(i) to Westmorelands Annual Report on
    Form 10-K
    for the year ended December 31, 2000 (SEC File
    No. 001-11155).10
.8*

Westmoreland Coal Company 2000 Nonemployee Directors Stock
    Incentive Plan is incorporated herein by reference to
    Exhibit 10(j) to Westmorelands Annual Report on
    Form 10-K
    for the year ended December 31, 2000 (SEC File
    No. 001-11155).10
.9*

Westmoreland Coal Company 2000 Long-Term Incentive Stock Plan is
    incorporated herein by reference to Annex A to
    Westmorelands Definitive Schedule 14A filed
    April 20, 2000 (SEC File
    No. 001-11155).10
.10*

Westmoreland Coal Company 2001 Directors Compensation
    Policy is incorporated herein by reference to Exhibit 10.11
    to Westmorelands Registration Statement on
    Form S-1
    (Registration
    No. 333-117709)
    filed July 28, 2004.10
.11

Amended and Restated Coal Supply Agreement dated August 24,
    1998 by and among The Montana Power Company, Puget Sound Energy,
    Inc., The Washington Water Power Company, Portland General
    Electric Company, PacifiCorp and Western Energy Company is
    incorporated herein by reference to Exhibit 10.1 to
    Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2001 (SEC File
    No. 001-11155).10
.12

Coal Transportation Agreement dated July 10, 1981 by and
    among the Montana Power Company, Puget Sound Power &
    Light Company, Puget Colstrip Construction Company, The
    Washington Water Power Company, Portland General Electric
    Company, Pacific Power & Light Company, Basin Electric
    Power Cooperative, and Western Energy Company is incorporated
    herein by reference to Exhibit 10.2 to Westmorelands
    Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2001 (SEC File
    No. 001-11155).10
.13

Amendment No. 1 to the Coal Transportation Agreement dated
    September 14, 1987 by and among The Montana Power Company,
    Puget Sound Power & Light Company, Puget Colstrip
    Construction Company, The Washington Water Power Company,
    Portland General Electric Company, Pacific Power &
    Light Company and Western Energy Company is incorporated herein
    by reference to Exhibit 10.3 to Westmorelands
    Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2001 (SEC File #001-11155).10
.14

Amendment No. 2 to the Coal Transportation Agreement dated
    August 24, 1998 by and among The Montana Power Company,
    Puget Sound Power & Light Company, Puget Colstrip
    Construction Company, The Washington Water Power Company,
    Portland General Electric Company, Pacific Power &
    Light Company, Basin Electric Power Cooperative, and Western
    Energy Company is incorporated herein by reference to
    Exhibit 10.4 to Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2001 (SEC File
    No. 001-11155).10
.15

Lignite Supply Agreement dated August 29, 1979 between
    Northwestern Resources Co. and Utility Fuels Inc. is
    incorporated herein by reference to Exhibit 10.5 to
    Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2001 (SEC File
    No. 001-11155).10
.16

Settlement Agreement and Amendment of Existing Contracts dated
    August 2, 1999 between Northwestern Resources Co. and
    Reliant Energy, Incorporated is incorporated herein by reference
    to Exhibit 10.6 to Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2001 (SEC File
    No. 001-11155).10
.17

Term Loan Agreement dated as of April 27, 2001 by and among
    Westmoreland Mining LLC,
    WCCO-KRC
    Acquisition Corp., Dakota Westmoreland Corporation, Western
    Energy Company, Northwestern Resources Co., the other entities
    from time to time party thereto as guarantors, and the
    purchasers named in Schedule A thereto is incorporated
    herein by reference to Exhibit 99.2 to Westmorelands
    Current Report on
    Form 8-K
    filed May 15, 2001 (SEC File
    No. 001-11155).




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##### Table of Contents



ExhibitNumber

Description10
.18

Credit Agreement dated as of April 27, 2001 by and among
    Westmoreland Mining LLC, WCCO-KRC Acquisition Corp., Dakota
    Westmoreland Corporation, Western Energy Company, Northwestern
    Resources Co., the other entities from time to time party
    thereto as guarantors, the banks party thereto, and PNC Bank,
    National Association, in its capacity as agent for the banks, is
    incorporated herein by reference to Exhibit 99.3 to
    Westmorelands Current Report on
    Form 8-K
    filed May 15, 2001 (SEC File
    No. 001-11155).10
.19

First Amendment to Credit Agreement dated as of August 15,
    2001 among Westmoreland Mining LLC, the Loan Parties under the
    Credit Agreement, the Banks under the Credit Agreement, and PNC
    Bank, National Association, as Agent, is incorporated herein by
    reference to Exhibit 10.7 to Westmorelands Quarterly
    Report on
    Form 10-Q
    for the quarter ended June 30, 2001 (SEC File
    No. 001-11155).10
.20

First Amendment to Note Purchase Agreement dated as of
    August 15, 2001 among Westmoreland Mining LLC, the other
    Obligors under the Agreement, the Purchasers under the
    Agreement, and PNC Capital Markets, Inc., as lead arranger, is
    incorporated herein by reference to Exhibit 10.8 to
    Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2001 (SEC File
    No. 001-11155).10
.21

Amendment No. 2 to Credit Agreement dated February 27,
    2002 among Westmoreland Mining LLC, the Loan Parties under the
    Credit Agreement, the Banks under the Credit Agreement, and PNC
    Bank, National Association, as Agent, is incorporated herein by
    reference to Exhibit 10(w) to Westmorelands Annual
    Report on
    Form 10-K
    for the year ended December 31, 2001 (SEC File
    No. 001-11155).10
.22

Second Amendment to Term Loan Agreement dated February 27,
    2002 among Westmoreland Mining LLC, the other Obligors under the
    Agreement, the Purchasers under the Agreement, and PNC Capital
    Markets, Inc., as lead arranger, is incorporated herein by
    reference to Exhibit 10(x) to Westmorelands Annual
    Report on
    Form 10-K
    for the year ended December 31, 2001 (SEC File
    No. 001-11155).10
.23

Third Amendment to Term Loan Agreement dated March 8, 2004
    among Westmoreland Mining LLC, the other Obligors under the
    Agreement, the Purchasers under the Agreement, and PNC Capital
    Markets, Inc., as lead arranger, is incorporated herein by
    reference to Exhibit 10.1 to Westmorelands Current
    Report on
    Form 8-K
    filed March 10, 2004 (SEC File
    No. 001-11155).10
.24

Third Amendment to Credit Agreement dated March 8, 2004
    among Westmoreland Mining LLC, the Loan Parties under the Credit
    Agreement, the Banks under the Credit Agreement, and PNC Bank,
    National Association, as Agent, is incorporated herein by
    reference to Exhibit 10.2 to Westmorelands Current
    Report on
    Form 8-K
    filed March 10, 2004 (SEC File
    No. 001-11155).10
.25

Fourth Amendment to Credit Agreement dated December 21,
    2005 among Westmoreland Mining LLC, the Loan Parties under the
    Credit agreement, the Banks under the Credit Agreement, and PNC
    Bank, National Association, as Agent, is incorporated herein by
    reference to Exhibit 10.1 to Westmorelands Current
    Report on
    Form 8-K
    filed December 22, 2005 (SEC File
    No. 001-11155).10
.26

Loan Agreement dated as of December 14, 2001 between
    Westmoreland Coal Company, a Delaware corporation, and First
    Interstate Bank, a Montana corporation, is incorporated herein
    by reference to Exhibit 10.1 to Westmorelands Current
    Report on
    Form 8-K
    filed December 19, 2001
    (SEC File
    No. 001-11155).10
.27

First Amendment dated as of December 24, 2002 to Loan
    Agreement dated December 14, 2001 between Westmoreland Coal
    Company, a Delaware corporation, and First Interstate Bank, a
    Montana corporation, is incorporated herein by reference to
    Exhibit 10.1 to Westmorelands Current Report on
    Form 8-K
    filed January 28, 2003 (SEC File
    No. 001-11155).10
.28

Second Amendment dated as of January 24, 2003 to Loan
    Agreement dated December 14, 2001 between Westmoreland Coal
    Company, a Delaware corporation, and First Interstate Bank, a
    Montana corporation, is incorporated herein by reference to
    Exhibit 10.2 to Westmorelands Current Report on
    Form 8-K
    filed January 28, 2003 (SEC File
    No. 001-11155).10
.29

Third Amendment effective as of June 24, 2004 to Loan
    Agreement dated December 14, 2001 between Westmoreland Coal
    Company, a Delaware corporation, and First Interstate Bank, a
    Montana corporation, is incorporated herein by reference to
    Exhibit 10.1 to Westmorelands Current Report on
    Form 8-K
    filed June 30, 2004 (SEC File
    No. 011-11155).




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##### Table of Contents



ExhibitNumber

Description10
.30

Fourth Amendment dated June 9, 2006 to Loan Agreement dated
    December 14, 2001 between Westmoreland Coal Company, a
    Delaware corporation, and First Interstate Bank, a Montana
    corporation, is incorporated herein by reference to
    Exhibit 10.1 to Westmorelands Current Report on
    Form 8-K
    filed June 14, 2006 (SEC File
    No. 001-11155).10
.31

Pledge Agreement dated as of April 27, 2001, by and among
    Westmoreland Coal Company, Westmoreland Mining LLC, the other
    entities from time to time party thereto as pledgors, and
    Firstar Bank, N.A., as collateral agent for the purchasers in
    connection with the Term Loan Agreement, is incorporated herein
    by reference to Exhibit 99.4 to Westmorelands Current
    Report on
    Form 8-K
    filed May 15, 2001 (SEC File
    No. 001-11155).10
.32

Pledge Agreement dated as of April 27, 2001, by and among
    Westmoreland Coal Company, Westmoreland Mining LLC, the other
    entities from time to time party thereto as pledgors, and
    Firstar Bank, N.A., as collateral agent for the banks in
    connection with the Revolving Credit Agreement, is incorporated
    herein by reference to Exhibit 99.5 to Westmorelands
    Current Report on
    Form 8-K
    filed May 15, 2001 (SEC File
    No. 001-11155).10
.33

Continuing Agreement of Guaranty and Suretyship dated as of
    April 27, 2001, by and among
    WCCO-KRC
    Acquisition Corp., Dakota Westmoreland Corporation, Western
    Energy Company, Northwestern Resources Co., and each of the
    other persons which becomes a guarantor thereunder, in favor of
    the purchasers under the Term Loan Agreement, is incorporated
    herein by reference to Exhibit 99.6 to Westmorelands
    Current Report on
    Form 8-K
    filed May 15, 2001 (SEC File
    No. 001-11155).10
.34

Continuing Agreement of Guaranty and Suretyship dated as of
    April 27, 2001, by and among
    WCCO-KRC
    Acquisition Corp., Dakota Westmoreland Corporation, Western
    Energy Company, Northwestern Resources Co., and each of the
    other persons which becomes a guarantor thereunder, in favor of
    PNC Bank, National Association, as agent for the banks in
    connection with that Credit Agreement, is incorporated herein by
    reference to Exhibit 99.7 to Westmorelands Current
    Report on
    Form 8-K
    filed May 15, 2001 (SEC File
    No. 001-11155).10
.35

Security Agreement dated as of April 27, 2001, by and among
    Westmoreland Mining LLC, WCCO-KRC Acquisition Corp., Dakota
    Westmoreland Corporation, Western Energy Company, Northwestern
    Resources Co., and each of the other persons which becomes a
    guarantor under the Term Loan Agreement and Firstar Bank, N.A.,
    as collateral agent for the purchasers under the Term Loan
    Agreement, is incorporated herein by reference to
    Exhibit 99.8 to Westmorelands Current Report on
    Form 8-K
    filed May 15, 2001 (SEC File
    No. 001-11155).10
.36

Stock Purchase Agreement dated as of September 15, 2000 by
    and between Westmoreland Coal Company and Entech, Inc. is
    incorporated herein by reference to Exhibit 99.1 to
    Westmorelands Current Report on
    Form 8-K
    filed February 5, 2001 (SEC File
    No. 001-11155).10
.37*

Westmoreland Coal Company 2002 Long-Term Incentive Stock Plan is
    incorporated herein by reference to Annex A to
    Westmorelands Definitive Proxy Statement filed
    April 23, 2002 (SEC File
    No. 001-11155).10
.38

Letter Agreement dated June 18, 2002, between
    Reliant-HL&P and Northwestern Resources Co. is incorporated
    herein by reference to Exhibit 10.1 to Westmorelands
    Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2002 (SEC File
    No. 001-11155).10
.39*

Westmoreland Coal Company 2000 Performance Unit Plan, dated
    May 22, 2003, is incorporated herein by reference to
    Exhibit 10.1 to Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2003 (SEC File
    No. 001-11155).10
.40*

First Amendment to Westmoreland Coal Company 2000 Non-employee
    Directors Stock Incentive Plan, dated May 22, 2003,
    is incorporated herein by reference to Exhibit 10.2 to
    Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2003 (SEC File
    No. 001-11155).10
.41*

Termination Agreement for Robert J. Jaeger, Chief Financial
    Officer, is incorporated herein by reference to
    Exhibit 10.3 to Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2003 (SEC File
    No. 001-11155).10
.42

Supplemental Settlement Agreement and Amendment of Existing
    Contracts between Northwestern Resources Company and Texas
    Genco, L.P., dated January 30, 2004, is incorporated herein
    by reference to Exhibit 10(nn) to Westmorelands
    Annual Report on
    Form 10-K
    for the year ended December 31, 2003 (SEC File
    No. 001-11155).




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##### Table of Contents



ExhibitNumber

Description10
.43

Letter Agreement Regarding Lignite Supply Agreement dated
    September 21, 2005 between Texas Genco II, L.P. and Texas
    Westmoreland Coal Company is incorporated herein by reference to
    Exhibit 10.1 to Westmorelands Quarterly Report
    Form 10-Q
    for the quarter ended September 30, 2005 (SEC File
    No. 001-11155).10
.44

Purchase Agreement dated June 23, 2006 by and between
    LG&E Roanoke Valley L.P., LG&E Power Services LLC, and
    Westmoreland Coal Company is incorporated herein by reference to
    Exhibit 10.1 to Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006
    (SEC File
    No. 001-11155).10
.45

Third Amendment and Restatement of the Power Purchase and
    Operating Agreement effective as of December 1, 2000
    between Westmoreland-LG&E Partners and Virginia Electric
    and Power Company is incorporated herein by reference to
    Exhibit 10.2 to Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006 (SEC File
    No. 001-11155).10
.46

Second Amendment and Restatement of the Power Purchase and
    Operating Agreement dated November 21, 2000 between
    Westmoreland-LG&E Partners and Virginia Electric and Power
    Company for the Roanoke Valley II Project is incorporated
    herein by reference to Exhibit 10.3 to Westmorelands
    Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006 (SEC File
    No. 001-11155).10
.47

Amended and Restated Construction and Term Loan Agreement dated
    as of December 1, 1993 among Westmoreland-LG&E
    Partners, the Lenders named therein, the Institutional Lenders,
    the Issuing Bank, the Co-Agents and Agent (each as defined
    therein) is incorporated herein by reference to
    Exhibit 10.4 to Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006 (SEC File
    No. 001-11155).10
.48

Amendment No. 1 to Amended and Restated Construction and
    Term Loan Agreement dated as of November 4, 1994 among
    Westmoreland-LG&E Partners, the Lenders named therein, the
    Institutional Lenders, the Issuing Bank, the Co-Agents and Agent
    (each as defined therein) is incorporated herein by reference to
    Exhibit 10.5 to Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006 (SEC File
    No. 001-11155).10
.49

Amendment No. 2 to Amended and Restated Construction and
    Term Loan Agreement dated as of December 30, 1994 among
    Westmoreland-LG&E Partners, the Lenders named therein, the
    Institutional Lenders, the Issuing Bank, the Co-Agents and Agent
    (each as defined therein) is incorporated herein by reference to
    Exhibit 10.6 to Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006 (SEC File
    No. 001-11155).10
.50

Amendment No. 3 to Amended and Restated Construction and
    Term Loan Agreement dated as of January 31, 1995 among
    Westmoreland-LG&E Partners, the Lenders named therein, the
    Institutional Lenders, the Issuing Bank, the Co-Agents and Agent
    (each as defined therein) is incorporated herein by reference to
    Exhibit 10.7 to Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006 (SEC File
    No. 001-11155).10
.51

Amendment No. 4 to Amended and Restated Construction and
    Term Loan Agreement dated as of October 19, 1995 among
    Westmoreland-LG&E Partners, the Lenders named therein, the
    Institutional Lenders, the Issuing Bank, the Co-Agents and Agent
    (each as defined therein) is incorporated herein by reference to
    Exhibit 10.8 to Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006 (SEC File
    No. 001-11155).10
.52

Amendment No. 5 to Amended and Restated Construction and
    Term Loan Agreement dated as of December 15, 1996 among
    Westmoreland-LG&E Partners, the Lenders named therein, the
    Institutional Lenders, the Issuing Bank, the Co-Agents and Agent
    (each as defined therein) is incorporated herein by reference to
    Exhibit 10.9 to Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006 (SEC File
    No. 001-11155).10
.53

Amendment No. 5 to Amended and Restated Construction and
    Term Loan Agreement dated as of August 23, 2000 among
    Westmoreland-LG&E Partners, the Lenders named therein, the
    Institutional Lenders, the Institutional Agent, the Issuing
    Bank, the Co-Agents and Agent (each as defined therein) is
    incorporated herein by reference to Exhibit 10.10 to
    Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006 (SEC File
    No. 001-11155).




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##### Table of Contents



ExhibitNumber

Description10
.54

Amendment No. 6 to Amended and Restated Construction and
    Term Loan Agreement dated as of November 21, 2000 among
    Westmoreland-LG&E Partners, the Lenders named therein, the
    Institutional Lenders, the Institutional Agent, the Issuing
    Bank, the Co-Agents and Agent (each as defined therein) is
    incorporated herein by reference to Exhibit 10.11 to
    Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006 (SEC File
    No. 001-11155).10
.55

Amendment No. 7 to Amended and Restated Construction and
    Term Loan Agreement dated as of November 15, 2001 among
    Westmoreland-LG&E Partners, the Lenders named therein, the
    Institutional Lenders, the Institutional Agent, the Issuing
    Bank, the Co-Agents and Agent (each as defined therein) is
    incorporated herein by reference to Exhibit 10.12 to
    Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006 (SEC File
    No. 001-11155).10
.56

Amendment No. 8 to Amended and Restated Construction and
    Term Loan Agreement dated as of November 28, 2001 among
    Westmoreland-LG&E Partners, the Lenders named therein, the
    Institutional Lenders, the Institutional Agent, the Issuing
    Bank, the Co-Agents and Agent (each as defined therein) is
    incorporated herein by reference to Exhibit 10.13 to
    Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006 (SEC File
    No. 001-11155).10
.57

Amendment No. 9 to Amended and Restated Construction and
    Term Loan Agreement dated as of March 1, 2002 among
    Westmoreland-LG&E Partners, the Lenders named therein, the
    Institutional Lenders, the Institutional Agent, the Issuing
    Bank, the Co-Agents and Agent (each as defined therein) is
    incorporated herein by reference to Exhibit 10.14 to
    Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006 (SEC File
    No. 001-11155).10
.58

Amendment No. 10 to Amended and Restated Construction and
    Term Loan Agreement dated as of April 8, 2003 among
    Westmoreland-LG&E Partners, the Lenders named therein, the
    Institutional Lenders, the Institutional Agent, the Bond L/C
    Issuing Bank, the Co-Agents (each as defined therein), Credit
    Suisse First Boston in the capacities named therein and Dexia
    Credit Local, New York Agency, in the capacities named therein
    is incorporated herein by reference to Exhibit 10.15 to
    Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006 (SEC File
    No. 001-11155).10
.59

Note Purchase Agreement dated June 29, 2006 between
    Westmoreland Energy LLC and SOF Investments, L.P. is
    incorporated herein by reference to Exhibit 10.16 to
    Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006 (SEC File
    No. 001-11155).10
.60*

Description of Annual Bonus Opportunities for Fiscal 2006 for
    the Named Executive Officers of Westmoreland Coal Company is
    incorporated herein by reference to Exhibit 10.1 to
    Westmorelands Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2006 (SEC File
    No. 001-11155).10
.61*,**

Westmoreland Coal Company Severance Policy for specified
    employees, including certain executive officers not covered by
    Westmorelands Executive Severance Policy, dated
    July 26, 2004.21


Subsidiaries of the Registrant23
.1

Consent of KPMG LLP23
.2

Consent of KPMG LLP23
.3

Consent of Deloitte & Touche LLP31
.1

Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a)31
.2

Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a)32


Certifications of Chief Executive Officer and Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350  
    *
    
    Compensatory benefit plan or arrangement or management contract. 
  **
    
    Filed as an exhibit to the Registrants Annual Report on
    Form 10-K filed April 2, 2007 and incorporated herein
    by reference.