##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  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, 2007ORo

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:
 Series A Convertible Exchangeable Preferred Stock, par
    value $1.00 per share
  o þ
  o þ
  þ o
  Regulation S-K 10-K Form 10-K. þ
  Rule 12b-2
  Large accelerated filer
    o

Accelerated filer
    þ

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

Smaller reporting
    company o   Rule 12b-2 o þ
      Form 10-K




---



##### 





WESTMORELAND
    COAL COMPANYFORM 10-K
    ANNUAL REPORT
    TABLE OF CONTENTS
   
 Item



PagePART I1


Business


41A


Risk Factors


171B


Unresolved Staff Comments


252


Properties


253


Legal Proceedings


294


Submission of Matters to a Vote of Security
    Holders


32PART II5


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


346


Selected Financial Data


377


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


387A


Quantitative and Qualitative Disclosures about
    Market Risk


568


Financial Statements and Supplementary Data


579


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


1069A


Controls and Procedures


1069B


Other Information


110PART III10


Directors, Executive Officers and Corporate
    Governance


11111


Executive Compensation


11112


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


11113


Certain Relationships and Related Transactions,
    and Director Independence


11114


Principal Accountant Fees and Services


111PART IV15


Exhibits and Financial Statement Schedules


112Signatures


113WarrantFirst Amendment, Consent and Release to Note AgreementsSecond Amendment Amending the Note AgreementsGuaranty AgreementSecond Amended and Restated Loan AgreementSecond Amended and Restated Assignment and Security AgreementThird Amended and Restated General Partner Security and Limited Guaranty AgreementSubsidiaries of the RegistrantConsent of KPMG LLPConsent of KPMG LLPConsent of Deloitte & Touche LLPCertification of CEO Pursuant to Rule 13a-14(a)Certification of CFO Pursuant to Rule 13a-14(a)Certification Pursuant to 18 U.S.C. Section 1350   2




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Forward-Looking
    Disclaimer
  Form 10-K, Form 10-K Form 10-K, Form 10-K.
   3




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##### Table of Contents



PART I    ITEM 1 
    BUSINESS  Overview
      Coal
    Operations
    Our
    Mining Operations
      Absaloka.
  Rosebud.
 4




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##### Table of Contents



Jewett.
  Beulah.
  Savage.
    Year

Absaloka


Rosebud


Jewett


Beulah


Savage


Total2007


7,347



12,583



6,781



2,946



354



30,0112006


7,079



12,430



6,798



2,702



376



29,3852005


6,463



13,377



6,951



2,873



326



29,990   Discontinued
    Operations
    Absaloka
    Mining Contract and Acquisition of Minority Interest
    Restructuring
    Plan
   5




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##### Table of Contents



Coal and
    the Production of Electricity
    ElectricityGenerated by All


Electricity


Coal-GeneratedSources (Billions


Generated by Coal


Electricity as aof Kilowatt


(Billions of


Percentage of allYear

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



2,013



50
%2006


4,065



1,990



49
%     (1)
    
    All sources include all coal, petroleum, natural gas, other
    gases, nuclear, hydroelectric conventional, other renewables,
    hydroelectric pumped storage and other.    Sales,
    Marketing, and Customers
        Competition
   6




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
    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 solid fossil fuels.        300-mile
  Long-Term
    Coal Supply Agreements
  and/or
 7




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Weighted AveragePrice per TonCoal Revenues


Coal Sales in


Percentage of Coal


Received underin Dollars


Equivalent Tons


Sales Under


Long-TermYear

(In 000s)


(in 000s)


Long-Term Contracts


Contracts2007

$
418,870



30,011



99
%

$
14.582006


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
%


10.45   (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 approximately
    $303.0 million and received a weighted average price of
    $10.78 per ton under long-term contracts in 2004.  and/or
  Projected Sales Tonnage UnderExisting Long-Term ContractsAs of December 31, 2007(In millions of tons)2008


30.32009


27.72010


25.42011


20.72012


19.6         four-unit
 8




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Suppliers
    Protecting
    the Environment
        Safety
    Power
    Operations
   9




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Roanoke

RoanokeProject

Valley I

Valley IILocation

Weldon,
    North Carolina

Weldon,
    North CarolinaGross Megawatt Capacity

180 MW

50 MWOur Equity Ownership

100.0%

100.0%Electricity Purchaser

Dominion
    Virginia Power

Dominion
    Virginia PowerSteam Host

Patch Rubber
    Company

Patch Rubber
    CompanyFuel Type

Coal

CoalFuel Supplier

TECO Coal

TECO CoalContracts with fuel supplier expire in

2014

2015Commercial Operation Commencement Date

1994

1995Contracts with electricity purchaser expire in

2019(1)

2020(1)Contracts with steam host expire in

2010(2)

2010(2)     (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 by
    mutual consent for three successive five-year terms.    Insurance
    Subsidiary
      Seasonality
   10




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Government
    Regulation
      Environmental
    Laws
      Surface Mining Control and Reclamation Act.
       11




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Clean Air Act. and/or
  2009-2010
  cap-and-trade
     12




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24-hour 24-hour 24-hour
      Clean Water Act.
   13




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##### Table of Contents



and/or
  Resource Conservation and Recovery Act.
    CERCLA (Superfund).
  Health
    and Benefits
  Mine Safety and Health.
  Black Lung.
  Coal Act.
  
    First, the statute merged the United Mine Workers of America, or
    UMWA, 1950 and 1974 Plans into the Combined Benefit Fund, or
    CBF. The CBF provides benefits to a closed pool of
    beneficiaries, 14




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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 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
    December 31, 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.
  Power
      and/or
  Employees
        Information
    about Segments
   15




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Available
    Information
  1-800-SEC-0330.
  Form 10-K, Form 10-Q, Form 8-K,
 16




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ITEM 1A 
    RISK
    FACTORS    We
    will need to refinance our business, raise additional funding,
    sell assets that are important to our business, or significantly
    cut our costs in order to continue to operate.
          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
    negatively affect 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.  If
    transportation for the coal produced by our Absaloka and Beulah
    Mines becomes unavailable, or if transportation becomes
    uneconomic for Absaloka coal, our revenues could
    suffer.
   17




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##### Table of Contents



Our
    revenues could suffer if our customers reduce or suspend their
    coal purchases.
    Disputes
    relating to our coal supply agreements could harm our financial
    results.
    We are
    a party to numerous legal proceedings, some of which, if
    determined unfavorably to us, could result in significant
    monetary damages.
    Our
    expenditures for postretirement medical benefits could be
    materially higher than we have predicted if our underlying
    assumptions prove to be incorrect.
    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.
   18




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##### Table of Contents




    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.      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
    negatively affected.
   19




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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.
     20




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##### Table of Contents



Our
    mining operations are extensively regulated, which imposes
    significant costs on us, and delays in receiving permits or
    future regulations and developments could increase those costs
    or limit our ability to produce and sell coal.
  and/or and/or
  Concerns
    about the environmental impacts of coal combustion, including
    perceived impacts on global climate change, are resulting in
    increased regulation of coal combustion in many jurisdictions,
    and interest in further regulation, which could significantly
    affect demand for our products.
    2009-10,
   21




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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, we could be
    required to expend greater amounts than we currently anticipate,
    which could negatively affect our profitability in future
    periods.
      Our
    revenues 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.
      A
    decrease in the availability or increase in costs of key
    supplies, capital equipment or commodities such as diesel fuel,
    steel, explosives and tires could affect our financial
    results.
    If we
    experience unanticipated increases in the capital expenditures
    we expect to make over the next several years, our liquidity
    could suffer.
  return-on-investment.
 22




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##### Table of Contents



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 reported material weaknesses in internal control over
    financial reporting in the current year and in the past and
    cannot assure that we will successfully remediate the material
    weaknesses or 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,
   23




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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.
    Our
    financial results may be impacted by the different
    interpretations and application of accounting literature in the
    mining industry.
   24




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##### Table of Contents



ITEM 1B 
    UNRESOLVED
    STAFF COMMENTS    ITEM 2 
    PROPERTIES         25




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##### Table of Contents



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)(2)(3)

87,618

217,755

62,081

39,876

7,641Probable(4)







37,246

Permitted reserves (thousands of tons)

16,503

143,679

62,081

19,158

1,8322007 production (thousands of tons)

7,350

12,381

6,778

2,953

359Estimated life of permitted
    reserves(5)

2009

2019

2009

2013

2013Lessor

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)

7,500

13,300

7,000

3,400

400Coal type

Sub-bituminous

Sub-bituminous

Lignite

Lignite

LigniteAcres disturbed by mining

4,119

16,267

15,604

4,914

556Acres for whichreclamation is complete

2,689

7,583

11,540

3,454

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.) (6)

8,644

8,529

6,573

6,987

6,553Approx. sulfur content(%) (7)

0.65

0.74

0.78

0.91

0.55Year opened

1974

1968(8)

1985

1963

1958Total tons mined since inception (thousands of tons)

155,731

397,241

167,457

93,780

13,439     (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.(3)
    
    We have assigned all proven reserves to operating mining
    equipment and plant facilities. 26




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##### Table of Contents



(4)
    
    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.(5)
    
    Approximate year in which permitted reserves would be exhausted,
    based on current mine plan and production rates. Our Jewett
    Mines permit expires in 2009.(6)
    
    Approximate heat content applies to the coal mined in 2007.(7)
    
    Approximate sulfur content applies to the tons mined in 2007.(8)
    
    Initial sales from the current mine complex began in 1968.
    Mining first occurred at the site in 1924.    Permitted
    Coal Reserves and Applications
       27




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Other
   28




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##### Table of Contents



ITEM 3 
    LEGAL
    PROCEEDINGS    Legal
    proceedings involving Westmoreland Coal Company
  1992
    UMWA Benefit Plan Surety Bond
        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
        Transportation
    Claims
     29




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##### Table of Contents



(2002-2004)
  1998-2001.
    Gross
    Inequity Claim
      Take or
    Pay Claim
    McGreevey
    Litigation
     30




---



##### Table of Contents



Other
   31




---



##### Table of Contents



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

Age

Position

Held SinceKeith E. Alessi(1)


53


President and Chief Executive Officer


2007David J. Blair(2)


54


Chief Financial Officer


2005John V. OLaughlin(3)


56


Vice President, Coal Operations


2005Todd A. Myers(4)


44


Vice President, Coal Sales


2002Kevin A. Paprzycki(5)


37


Controller and Principal Accounting Officer


2006Morris W. Kegley(6)


60


General Counsel


2007     (1)
    
    Mr. Keith E. Alessi was elected President and Chief
    Executive Officer of Westmoreland Coal Company on
    August 16, 2007. He had served as interim President and
    interim Chief Executive Officer since May 2007. Mr. Alessi
    was also elected a director of Westmoreland Coal Company at the
    annual meeting of stockholders on August 16, 2007. He has
    served as a member of the Board of Directors and Chairman of the
    audit committee of Town Sports International Holdings, Inc. from
    April 1997 to present and H&E Equipment Services, Inc. from
    November 2002 to present. He has served as a member of the Board
    of Directors of MWI Veterinary Supply, Inc. from 2003 to
    present. Mr. Alessi is adjunct lecturer at the Ross School
    of Business at the University of Michigan from March 2002 to
    present. Mr. Alessi was also Chief Executive Officer of
    Lifestyle Improvement Centers, LLC from April 2003 to May 2006.(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. 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.(4)
    
    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, power development, and environmental regulation.(5)
    
    Mr. Paprzycki joined Westmoreland as Controller and
    Principal Accounting Officer in June 2006. Prior to joining
    Westmoreland he held the position of Corporate Controller at
    Applied Films Corporation 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.(6)
    
    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 32




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##### Table of Contents



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. 33




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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


Low2006First 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



41.052007First Quarter


23.40



17.83



49.00



41.10Second Quarter


28.75



18.90



52.00



45.00Third Quarter


28.65



16.30



50.50



44.10Fourth Quarter


21.00



12.14



49.00



44.50   Approximate
    Number of Equity Security Holders of Record:
  Number of Holders of RecordTitle of Class

(As of March 1, 2008)Common Stock ($2.50 par value)


1,323Depositary Shares, each representing one-quarter of a share of
    Series A Convertible Exchangeable Preferred Stock


15  34




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##### Table of Contents



Stock
    Performance Graph
    
   December 31,


2002



2003



2004



2005



2006



2007Westmoreland Coal Co.



100




149




259




195




168




118Peer Group Index



100




160




266




445




399




693Amex Market Index



100




136




156




172




192




216   Form 10-K
  Dividends
   35




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36




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ITEM 6 
    SELECTED
    FINANCIAL DATA  Westmoreland
    Coal Company and Subsidiaries
  Five-Year
    Review
  Consolidated Statements of Operations Information

2007


2006(1)


2005


2004


2003(In thousands; except per share data)Revenues:Coal

$
418,870


$
393,482


$
361,017


$
319,648


$
294,892Energy


84,953



43,244











Power and other


394



7,681



12,727



12,741



15,824Total revenues


504,217



444,407



373,744



332,389



310,716Cost and expenses


510,099



439,790



377,374



335,289



310,478Operating income (loss)


(5,882
)


4,617



(3,630
)


(2,900
)


238Interest expense


(24,638
)


(19,234
)


(10,948
)


(10,966
)


(10,804
)Minority interest


(1,194
)


(2,244
)


(950
)


(1,154
)


(773
)Interest and other income


8,395



6,162



5,250



4,808



3,121Loss from continuing operations before income taxes


(23,319
)


(10,699
)


(10,278
)


(10,212
)


(8,218
)Income tax benefit (expense)


(199
)


(2,405
)


(2,667
)


(896
)


1,132Loss from continuing operations


(23,518
)


(13,104
)


(12,945
)


(11,108
)


(7,086
)Income from discontinued operations, net of income tax


1,725



406











2,113Net loss before cumulative effect of changes in accounting
    principles


(21,793
)


(12,698
)


(12,945
)


(11,108
)


(4,973
)Cumulative effect of changes in accounting principles, net










2,662







(22
)Net loss


(21,793
)


(12,698
)


(10,283
)


(11,108
)


(4,995
)Less preferred stock dividend requirements


1,360



1,585



1,744



1,744



1,752Less premium on exchange of preferred stock for common stock






791











Net loss applicable to common shareholders

$
(23,153
)

$
(15,074
)

$
(12,027
)

$
(12,852
)

$
(6,747
)Net loss per share applicable to common shareholders:Basic

$
(2.53
)

$
(1.72
)

$
(1.45
)

$
(1.59
)

$
(0.87
)Diluted

$
(2.53
)

$
(1.72
)

$
(1.45
)

$
(1.59
)

$
(0.87
)Weighted average number of common shares outstanding:Basic


9,166



8,748



8,280



8,099



7,799Diluted


9,385



9,105



8,868



8,662



8,338Balance Sheet InformationWorking capital deficit

$
(94,674
)

$
(66,773
)

$
(20,138
)

$
(6,608
)

$
(16,485
)Net property, plant and equipment


442,426



431,452



211,157



204,557



194,357Total assets


782,528



761,382



495,871



462,730



424,086Total debt


271,448



306,007



112,243



117,259



93,469Shareholders deficit(2)


(177,257
)


(185,933
)


(30,208
)


(19,038
)


(9,389
)     (1)
    
    Effective June 29, 2006, the Company acquired a 50%
    interest in a partnership, which owns the 230 MW ROVA 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)
    
    Effective December 31, 2006, the Company adopted the
    provisions of Statement of Financial Accounting Standards 158,
    or SFAS 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. 37




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##### Table of Contents



ITEM 7 
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Forward-Looking
    Disclaimer
    Overview
  Competitive,
    economic and industry factors
        Revenues
    and expenses
    Challenges
    
    obtaining adequate capital for our on-going operations;
    renegotiating sales prices to reflect higher market prices and
    fully recover increased commodity and production costs;
    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;
    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, most of which we
    believe are subject to reimbursement by our customers.   38




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##### Table of Contents



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
         39




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##### Table of Contents



Postretirement Benefits1% Increase


1% Decrease(In thousands)Effect on service and interest cost components

$
2,138


$
(1,790
)Effect on postretirement benefit obligation

$
30,928


$
(26,243
)       Asset
    Retirement Obligations, Reclamation Costs and Reserve
    Estimates
            Income
    Taxes and Deferred Income Taxes
   40




---



##### Table of Contents



41




---



##### Table of Contents



Contractual
    Obligations and Commitments
    Payments Due by PeriodAfterTotal


2008


2009


2010


2011


2012


2012(In thousands of dollars)Westmoreland Mining long term debt(1)


79,600



44,600



11,500



11,500



12,000







ROVA term debt(2)


130,307



32,268



31,233



15,306



8,500



8,920



34,080ROVA acquisition debt


16,058



3,257



12,801















WRI term debt


8,500



2,125



2,125



2,125



2,125







Other debt


14,994



14,374



182



89



96



102



151Interest on debt(3)


64,495



19,847



13,529



10,076



7,560



5,908



7,575Capital leases


18,741



3,487



3,447



2,858



2,330



1,918



4,701Operating leases


5,010



1,993



1,327



489



300



300



601Workers compensation


13,179



978



969



956



936



921



8,419Combined Benefit Fund(4)


28,741



3,463



3,229



3,002



2,791



2,604



13,652Postretirement medical(5)


704,246



18,114



19,141



20,080



20,864



21,407



604,640Qualified pension benefits(6)


71,828



2,995



7,523



5,415



5,496



4,540



45,859SERP benefits(7)


3,234



299



297



295



292



289



1,762Black lung benefits


14,457



1,718



1,670



1,618



1,563



1,504



6,384Reclamation costs(8)


433,770



7,552



12,666



22,712



19,329



10,994



360,517ROVA Coal Supply Agreement(9)


196,698



27,328



27,328



27,328



27,328



27,328



60,058Totals


1,803,858



184,398



148,966



123,849



111,510



86,735



1,148,399     (1)
    
    At December 31, 2007, Westmoreland Mining had deposited
    $30.3 million in two restricted accounts as collateral for
    these obligations.(2)
    
    At December 31, 2007, ROVA had deposited $29.0 million
    in a restricted account as collateral for 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, 2007.(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 the undiscounted benefit
    payments, net of the estimated Medicare subsidiaries we will
    receive.(6)
    
    The fair value of plan assets at December 31, 2007 was
    $51.0 million. The obligations shown above are our expected
    contributions to the plan assets.(7)
    
    The table presents our estimate of the undiscounted benefit
    payments.(8)
    
    The table presents our estimate of the undiscounted cost for
    final reclamation. The accrued liability of $206.5 million
    as of December 31, 2007, is on a discounted basis and will
    increase in present value as mine closures draw nearer. The
    accrued liability does not consider the contractual obligations
    at December 31, 2007, of our customers to perform
    reclamation. The accrued liability also does not reflect
    $65.6 million held in escrow as of December 31, 2007
    from contributions by customers for reclamation of the Rosebud
    Mine. We estimate that the present value of our net obligation
    for final reclamation of our mines  that is, the
    costs of final reclamation that are not the contractual
    responsibilities of others  is $137.7 million at
    December 31, 2007. 42




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##### Table of Contents



(9)
    
    ROVA has two coal supply agreements with TECO Coal Corporation.
    The amounts shown in this table 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,
       43




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##### Table of Contents



Liquidity
    and Capital Resources
                       44




---



##### Table of Contents



NRGT
    Long-Term Contract
        Factors
    Affecting our Liquidity
      2007


2008Actual


ExpectedPayments


Paymentsand Receipts


and Receipts(In millions)Postretirement medical benefits

$
16.3


$
19.6Pension contributions


3.7



3.2CBF premiums


3.6



3.5Workers compensation benefits


1.0



1.0Medicare D subsidies received


(1.4
)


(1.7
)      45




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##### Table of Contents



30-day
     46




---



##### Table of Contents



Cash
    Balances and Available Credit
    ROVA

$
15,674Westmoreland Risk Management


2,336Westmoreland Mining


813Westmoreland Resources, Inc.


555Other


358Total consolidated cash and cash equivalents

$
19,736         Restricted
    Investments
    Preferred
    Stock
   47




---



##### Table of Contents



Historical
    Sources and Uses of Cash
               48




---



##### Table of Contents



Severance
    Benefits Payable to Former CEO
    Pricing
    Outlook
       49




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
    Results
    of Operations
  2007
    Compared to 2006
  Coal
    Operations
    Years Ended2007


2006


ChangeRevenues  thousands

$
418,870


$
393,482



6
%Volumes  millions of equivalent coal tons


30.0



29.4



2
%Cost of sales  thousands

$
345,395


$
311,629



11
%             Power
     50




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##### Table of Contents



2007


200650% share of ROVA earnings shown as equity in earnings

$



$
7,315Ft. Lupton equity earnings


394



366Total equity earnings


394



7,681Energy revenues


84,953



43,244Costs and expenses:Cost of sales  energy


(54,951
)


(28,376
)Depreciation, depletion, and amortization


(9,685
)


(4,793
)Selling and administrative


(5,845
)


(5,727
)Restructuring charge


(698
)


Loss on sales of assets


(18
)


(123
)Energy revenue less costs and expenses


13,756



4,225Power segment operating income from continuing operations

$
14,150


$
11,906Other income (expense):Interest expense


(13,822
)


(7,845
)Interest income


2,343



1,223Other income (loss)


1



(8
)Income from continuing operations before income taxes

$
2,672


$
5,276     (1)
    
    The Company recorded $27.6 million and $14.5 million
    in deferred revenue in 2007 and 2006, respectively, related to
    capacity payments at ROVA.          Heritage
   51




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##### Table of Contents



Restructuring
    Corporate
    Interest
    Income
    Tax
    2006
    Compared to 2005
  Coal
    Operations
    Years 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
%      52




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##### Table of Contents



Power
      2006


200550% 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


43,244



Costs and expenses:Cost of sales  energy


(28,376
)


Depreciation, depletion, and amortization


(4,793
)


(24
)Selling and administrative


(5,727
)


(3,076
)Restructuring charge






Loss on sales of assets


(123
)


Power segment revenue less costs and expenses


4,225



(3,100
)Power segment operating income from continuing operations

$
11,906


$
9,627Other income (expense):Interest expense


(7,845
)


Interest income


1,223



Other income (loss)


(8
)


1,000Income from continuing operations before income taxes

$
5,276


$
10,627     (1)
    
    The Company recorded $14.5 million in deferred revenue in
    2006 related to capacity payments at ROVA.      Heritage
   53




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##### Table of Contents



Corporate
    Interest
    Income
    Tax
    Significant
    Anticipated Variances between 2007 and 2008
    
    During 2007, we reached a settlement with the CBF for the
    reimbursement of $5.8 million, plus interest, in past
    overpayments for retiree medical benefits. The settlement
    resulted in a $5.8 million reduction in heritage health
    benefit expenses and $0.6 million in interest income during
    2007.
    During 2007, we sold our royalty interest in a property for
    $12.7 million. The sale of the royalty interest resulted in
    a gain of approximately $5.6 million during 2007.
    During 2007, we initiated a restructuring plan in order to
    improve our overall cost structure. The restructuring plan
    resulted in a charge of approximately $4.5 million during
    2007. We expect a significant decrease in our restructuring
    charges during 2008.
    During 2007, we wrote off $1.1 million of our Jewett
    Mines inventory which was made obsolete as a result of
    equipment retired in connection with the Mines new sales
    agreement and related mining equipment plan.
    During 2007, we assumed operation of the Absaloka Mine and
    purchased equipment, tools, and inventory from WGI for
    $3.4 million. As part of assuming the Absaloka Mines
    operations, we also paid WGI a $0.8 million contract
    termination fee. We also redeemed WGIs 20% ownership in
    WRI for $13.5 million, leaving us as the sole shareholder
    in WRI.
    During 2007, we recorded $10.0 million of deferred revenue
    for a reserve dedication fee we received from a customer upon
    the extension of a coal supply agreement.
    During 2007, we sold our power operation and maintenance
    business to NAES for $0.8 million. The sale resulted in a
    gain of $0.5 million during 2007.
    During 2007, we had an unscheduled outage at ROVA, which had a
    $1.7 million negative impact on our power profits, due to
    reduced revenues and increased maintenance costs. 54




---



##### Table of Contents




    We expect tons sold in 2008 to remain comparable to 2007. Coal
    revenues are expected to increase in 2008 due to contract
    renewals at higher prices. However, overall costs of sales are
    also expected to increase more than revenues due to increased
    commodity costs including diesel fuel, electricity, explosives,
    and steel prices.
    We expect higher depreciation, depletion, and amortization
    expense in 2008 as a result of continued capital expenditures at
    our mines and an increase in the carrying value of our
    capitalized asset retirement costs.
    We expect lower selling and administrative expenses in 2008
    primarily as a result of lower headcount and spending resulting
    from our restructuring plan, as well as lower legal and
    professional fees as we incurred $1.6 million of costs for
    our proposed rights offering in 2007.
    We expect increased interest expense in 2008 as a result of
    interest charges related to the refinancing of the ROVA project,
    the planned refinancing of the WML debt, and the sale of
    convertible notes.
    We expect higher capital expenditures during 2008 as we replace
    existing mining equipment and invest for future cost
    efficiencies in our operations.  Recent
    Accounting Pronouncements
         55




---



##### Table of Contents



ITEM 7A 
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    Commodity
    Price Risk
    and/or
        mark-to-market
  Interest
    Rate Risk
    Effect of 1%Increase or1% DecreaseCompanys revolving lines of credit

$
150WMLs Series D notes


150WRIs term debt


100ROVAs project debt


650ROVA acquisition debt


175      56




---



##### 



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

PageConsolidated Balance Sheets


58Consolidated Statements of Operations


59Consolidated Statements of Shareholders
    Deficit and Comprehensive Loss


60Consolidated Statements of Cash Flows


61Notes to Consolidated Financial Statements


62Report of Independent Registered Public
    Accounting Firm


105   57




---



##### Table of Contents



WESTMORELAND
    COAL COMPANY AND SUBSIDIARIES
  Consolidated
    Balance Sheets
  December 31,


December 31,2007


2006(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
19,736


$
26,738Receivables:Trade


52,732



56,923Other


2,630



6,01755,362



62,940Inventories


28,798



24,484Restricted cash and bond collateral


20,118



3,300Excess of trust assets over pneumoconiosis benefit obligation






5,566Other current assets


3,829



4,992Total current assets


127,843



128,020Property, plant and equipment:Land and mineral rights


83,048



79,442Capitalized asset retirement cost


126,532



143,655Plant and equipment


410,379



350,414619,959



573,511Less accumulated depreciation, depletion and amortization


177,533



142,059Net property, plant and equipment


442,426



431,452Excess of trust assets over pneumoconiosis benefit obligation,
    less current portion


2,216



2,266Advanced coal royalties


3,881



3,982Reclamation deposits


65,613



62,486Restricted cash and bond collateral, less current portion


56,386



66,353Contractual third party reclamation receivables


68,811



41,938Intangible assets, net of accumulated amortization
    $2.0 million at December 31, 2007 and
    $0.5 million at December 31, 2006


12,519



13,263Other assets


2,833



11,622Total Assets

$
782,528


$
761,382LIABILITIES AND SHAREHOLDERS DEFICITCurrent liabilities:Current installments of long-term debt

$
86,719


$
76,803Revolving lines of credit


14,200



Accounts payable and accrued expenses:Trade


47,770



50,869Bank overdrafts


6,026



3,734Income taxes


1,571



4,180Interest


2,616



2,907Production taxes


26,112



23,589Workers compensation


956



949Pension and SERP obligations


299



76Postretirement medical benefits


18,114



16,968Deferred revenue


995



886Asset retirement obligations


13,470



13,832Accrued severance and other liabilities


3,669



Total current liabilities


222,517



194,793Long-term debt, less current installments


170,529



216,204Revolving lines of credit, less current portion






13,000Workers compensation, less current portion


8,566



8,589Postretirement medical costs, less current portion


270,569



283,098Pension and SERP obligations, less current portion


23,748



22,815Deferred revenue, less current portion


52,345



15,328Asset retirement obligations, less current portion


193,027



170,230Other liabilities


18,484



17,756Minority interest






5,502Total liabilities


959,785



947,315Shareholders deficit:Preferred stock of $1.00 par valueAuthorized 5,000,000 shares; issued and outstanding
    160,130 sharesat December 31, 2007 and 2006


160



160Common stock of $2.50 par valueAuthorized 30,000,000 shares; issued and outstanding
    9,427,203 sharesat December 31, 2007 and 9,014,078 shares at
    December 31,2006


23,567



22,535Other paid-in capital


85,352



79,246Accumulated other comprehensive loss


(116,093
)


(139,424
)Accumulated deficit


(170,243
)


(148,450
)Total shareholders deficit


(177,257
)


(185,933
)Commitments and contingent liabilities






Total Liabilities and Shareholders Deficit

$
782,528


$
761,382    58




---



##### Table of Contents



WESTMORELAND
    COAL COMPANY AND SUBSIDIARIES
  Consolidated
    Statements of Operations
  Years Ended December 31,2007


2006


2005(In thousands)Revenues:Coal

$
418,870


$
393,482


$
361,017Energy


84,953



43,244



Power projects  equity in earnings


394



7,681



12,727504,217



444,407



373,744Cost and expenses:Cost of sales  coal


345,395



311,629



288,728Cost of sales  energy


54,951



28,376



Depreciation, depletion and amortization


38,123



29,340



21,603Selling and administrative


44,813



42,409



35,272Restructuring charges


4,523







Heritage health benefit expenses


27,589



32,821



31,704Loss (gain) on sales of assets


(5,295
)


(4,785
)


67510,099



439,790



377,374Operating income (loss)


(5,882
)


4,617



(3,630
)Other income (expense):Interest expense


(24,638
)


(19,234
)


(10,948
)Interest income


8,152



6,089



3,523Minority interest


(1,194
)


(2,244
)


(950
)Other income


243



73



1,727(17,437
)


(15,316
)


(6,648
)Loss from continuing operations before income taxes and
    cumulative effect of change in accounting principle


(23,319
)


(10,699
)


(10,278
)Income tax expense from continuing operations


199



2,405



2,667Loss before cumulative effect of change in accounting principle


(23,518
)


(13,104
)


(12,945
)Cumulative effect of change in accounting principle










2,662Loss from continuing operations


(23,518
)


(13,104
)


(10,283
)Discontinued operations:Income from discontinued operations, net of income tax expense
    of less than $0.1 million in 2007 and 2006


1,242



406



Gain on sale of discontinued operations


483







Income from discontinued operations


1,725



406



Net loss


(21,793
)


(12,698
)


(10,283
)Less preferred stock dividend requirements


1,360



1,585



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






791



Net loss applicable to common shareholders

$
(23,153
)

$
(15,074
)

$
(12,027
)Net loss per share from continuing operations before cumulative
    effect of change in accounting principle:Basic

$
(2.71
)

$
(1.77
)

$
(1.77
)Diluted

$
(2.71
)

$
(1.77
)

$
(1.77
)Net income per share applicable to common shareholders from
    cumulative effect of change in accounting principle:Basic

$



$



$
0.32Diluted

$



$



$
0.30Net income per share from discontinued operations:Basic

$
0.19


$
0.05


$
Diluted

$
0.19


$
0.05


$
Net loss per share applicable to common shareholders:Basic

$
(2.53
)

$
(1.72
)

$
(1.45
)Diluted

$
(2.53
)

$
(1.72
)

$
(1.45
)Weighted average number of common shares outstandingBasic


9,166



8,748



8,280Diluted


9,385



9,105



8,868    59




---



##### Table of Contents



WESTMORELAND
    COAL COMPANY AND SUBSIDIARIES
  Consolidated
    Statement of Shareholders Deficit and Comprehensive
    Loss
 Years
    Ended December 31, 2005, 2006 and 2007
  Class A Convertible








Accumulated





TotalExchangeable








Other





ShareholdersPreferred


Common


Other Paid-In


Comprehensive


Accumulated


EquityStock


Stock


Capital


Loss


Deficit


(Deficit)(In thousands)Balance at December 31, 2004 (205,083 preferred and
    8,168,601 common shares outstanding)

$
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


















(10,283
)


(10,283
)Minimum pension liability














(3,388
)






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














508







508Comprehensive loss






















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


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














(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


















(12,698
)


(12,698
)Minimum pension liability














1,744







1,744Settlement of interest rate swap agreement














62







62Comprehensive loss






















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


160



22,535



79,246



(139,424
)


(148,450
)


(185,933
)Common stock issued as compensation (118,209 shares)






295



2,742











3,037Common stock options exercised (294,916 shares)






737



2,019











2,756Warrant issued in connection with loan extension










1,122











1,122Warrant repriced in lieu of consent fee










223











223Net loss


















(21,793
)


(21,793
)Adjustments to accumulated actuarial losses of pension and
    postretirement medical benefit plans














12,878







12,878Amortization of accumulated actuarial loss and transition
    obligations














10,453







10,453Comprehensive income






















1,538Balance at December 31, 2007 (160,130 preferred shares and
    9,427,203 common shares outstanding)

$
160


$
23,567


$
85,352


$
(116,093
)

$
(170,243
)

$
(177,257
)    60




---



##### Table of Contents



WESTMORELAND
    COAL COMPANY AND SUBSIDIARIES
  Consolidated
    Statements of Cash Flows
  Years Ended December 31,2007


2006


2005(In thousands)Cash flows from operating activities:Net loss

$
(21,793
)

$
(12,698
)

$
(10,283
)Adjustments to reconcile net loss to net cash provided by
    operating activities:Deferred power sales revenue


27,587



14,545



Equity in earnings of power projects


(394
)


(7,681
)


(12,727
)Cash distributions from power projects


394



1,307



10,702Provision for obsolete inventory


1,128







Depreciation, depletion and amortization


38,123



29,340



21,603Amortization of intangible assets and liabilities, net


(2,043
)


493



Restructuring charge


4,523







Share-based compensation


2,467



2,963



1,719Amortization of deferred financing costs


1,362



1,626



941Loss (gain) on sales of assets


(5,295
)


(4,785
)


67Minority interest


1,194



2,244



950Warrant repriced in lieu of consent fee


223







Cumulative effect of change in accounting principle










(2,662
)Gain on sales of assets of discontinued operations


(483
)






Changes in operating assets and liabilities:Receivables, net


7,635



(15,244
)


(7,891
)Inventories


(3,140
)


(5,751
)


(2,624
)Excess of trust assets over pneumoconiosis benefit obligation


5,616



(369
)


(3,000
)Accounts payable and accrued expenses


(285
)


12,119



11,746Deferred revenue


9,539



(165
)


2Income tax payable


(567
)


1,887



2,222Accrual for workers compensation


(16
)


195



1,071Asset retirement obligation


6,260



(6,897
)


6,747Accrual for postretirement medical costs


12,460



12,377



10,226Pension and SERP obligations


581



3,598



1,689Other assets and liabilities


(1,549
)


(708
)


(1,739
)Cash provided by continuing operations


83,527



28,396



28,759Cash provided by (used in) discontinued operations


(65
)


1,038



Net cash provided by operating activities


83,462



29,434



28,759Cash flows from investing activities:Additions to property, plant and equipment


(31,358
)


(20,852
)


(18,344
)Increase in restricted cash and bond collateral and reclamation
    deposits


(9,978
)


(10,527
)


(5,143
)ROVA acquisition, net of cash resulting from the ROVA
    consolidation of $21.9 million






(7,714
)


Net proceeds from sales of assets


13,332



5,171



641Acquisition of Absaloka Mining operations, net


(16,905
)






Cash used in continuing investing activities


(44,909
)


(33,922
)


(22,846
)Proceeds from the sale of discontinued operations


704







Net cash used in investing activities


(44,205
)


(33,922
)


(22,846
)Cash flows from financing activities:Increase in bank overdrafts


2,292



3,734



Borrowings from long-term debt, net of debt issuance costs


8,997



30,000



1,712Repayments of long-term debt


(61,164
)


(25,955
)


(12,228
)Borrowings on revolving lines of credit


219,900



196,900



22,500Repayments on revolving lines of credit


(218,700
)


(184,400
)


(17,000
)Exercise of stock options


2,756



998



1,094Dividends paid to minority shareholder of subsidiary


(340
)


(880
)


(1,080
)Dividends paid on preferred shares






(387
)


(820
)Net cash provided by (used in) financing activities


(46,259
)


20,010



(5,822
)Net increase (decrease) in cash and cash equivalents


(7,002
)


15,522



91Cash and cash equivalents, beginning of year


26,738



11,216



11,125Cash and cash equivalents, end of year

$
19,736


$
26,738


$
11,216Supplemental disclosures of cash flow information:Cash paid during the year for:Interest

$
23,215


$
16,649


$
10,056Income taxes


853



713



446      61




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes
    to Consolidated Financial Statements
  1.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Nature
    of Operations and Liquidity
                     62




---



##### 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
   63




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Deferred
    Overburden Removal Costs
  04-6, EITF 04-6,
    Income
    Taxes
      Postretirement
    Health Care Benefits and Pension Plans
     64




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
            Workers
    Compensation Benefits
    Black
    Lung Benefits
   65




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Asset
    Retirement Obligations
      Reclamation
    Deposits and Contractual Third Party Reclamation
    Receivables
    Financial
    Instruments
      Comprehensive
    Income
       66




---



##### Table of Contents



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


Unrealized Gain


OtherUnfunded Pension


Postretirement


(Loss) on Interest


ComprehensiveLiability


Benefit Obligation


Rate Swap


Income(Loss)(In thousands)Balance at January 1, 2005

$
(7,959
)

$



$
(570
)

$
(8,529
)Increase in minimum pension liability


(3,388
)










(3,388
)Unrealized gain 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 on interest rate swap










62



62Balance at December 31, 2006


(14,385
)


(125,039
)






(139,424
)Adjustments to accumulated actuarial losses of pension and
    postretirement medical benefit plans


(1,497
)


14,375







12,878Amortization of accumulated actuarial loss and transition
    obligations


898



9,555







10,453Balance at December 31, 2007

$
(14,984
)

$
(101,109
)

$



$
(116,093
)   Intangible
    Assets and Liabilities
      Derivative
    Financial Instruments
   67




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Earnings
    Per Share
      Years Ended December 31,2007

2006

2005(Shares in thousands)Outstanding SARs, options, and warrants to purchase common stock
    excluded because the strike prices of the options exceeded the
    average price of common stock during the period


378



170



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


219



946



1,166   Reclassifications
    Recent
    Accounting Pronouncements
       68




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
        2.
    DISCONTINUED
    OPERATIONS      3.
    ABSALOKA
    MINING CONTRACT AND ACQUISITION OF WASHINGTON GROUP MINORITY
    INTEREST   69




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
        Assets:Inventory

$
2,301Property, plant, and equipment


7,924Asset retirement cost


4,473Third party reclamation receivable


(11,107
)Total assets


3,591Liabilities:Accounts payable and accrued expenses


1863,405Income Statement:Termination fee included in Cost of sales  coal


813Total cash payment

$
4,218     Assets:Property, plant and equipment

$
10,396Intangible asset


1,548Total assets


11,944Liabilities:Other liabilities


4,800Minority interest


(6,356
)Total liabilities


(1,556
)Total cash payment

$
13,500   4.
    RESTRUCTURING   70




---



##### Table of Contents



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

Restructuring

Restructuring

EndingYear

Balance

Charges

Payments

Balance2007

$



$
4,523


$
923


$
3,600   5.
    CHANGES
    IN ACCOUNTING PRINCIPLES  Pension
    and Postretirement Benefit Plans
      Before Adopting


Adjustments to


After AdoptingSFAS 158


Adopt SFAS 158


SFAS 158Increase/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   Recognition
    of Revenue Under Power Sales Agreements
  EITF 01-08, EITF 01-08.
 71




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Deferred
    Overburden Removal Costs
  EITF 04-06, EITF 04-6
  Share-Based
    Payments
          Staff
    Accounting Bulletin No. 108
   72




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    6.
    INVESTMENT
    IN POWER PLANTS      Six Months Ended


Year EndedJune 30,


December 31,2006


2005(In thousands)Revenues

$
55,104


$
109,991Operating Income


20,136



36,899Net Income


14,512



24,396WELLCs share of earnings

$
7,315


$
12,272   7.
    INVENTORIES    December 31,2007


2006Coal

$
1,889


$
1,384Materials and supplies


26,909



23,100Total

$
28,798


$
24,484    73




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  8.
    RESTRICTED
    CASH AND BOND COLLATERAL    December 31,2007


2006(In thousands)Corporate:Workers compensation bonds

$
5,677


$
5,512Postretirement health benefit bonds


1,247



4,436Coal Segment:Westmoreland Mining  debt reserve account


10,229



10,312Westmoreland Mining  prepayment account


20,118



15,123Reclamation bond collateral:Absaloka Mine


5,469



3,702Jewett Mine


1,126



1,057Rosebud Mine


1,728



89Beulah Mine


70



71ROVA:Debt protection account


28,981



28,141Ash reserve account


608



627Repairs and maintenance account


1,251



583Total restricted cash and bond collateral


76,504



69,653Less current portion


(20,118
)


(3,300
)Total restricted cash and bond collateral, less current
    portion

$
56,386


$
66,353     Corporate
    Coal
    Segment
     74




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    ROVA
      Held-to-Maturity
    Restricted Investments
      Amortized cost

$
71,793Gross unrealized holding gains


147Gross unrealized holding losses


(303
)Fair value

$
71,637     Amortized Cost


Fair ValueDue in five years or less

$
67,118


$
66,839Due after five years to ten years


556



595Due in more than ten years


4,119



4,203$
71,793


$
71,637  75




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  9.
    LINES
    OF CREDIT AND LONG-TERM DEBT    Current Portion of Debt


Total Debt OutstandingDecember 31,


December 31,2007


2006


2007


2006(In thousands)Corporate debt:Revolving line of credit

$



$



$



$
8,500Westmoreland Mining debt:Revolving line of credit


2,500







2,500



4,500Westmoreland Mining term debt:Series B Notes


44,600



12,000



44,600



56,600Series C Notes










20,375



20,375Series D Notes










14,625



14,625Capital lease obligations


2,953



1,212



13,256



3,176Other term debt


174



99



794



298Westmoreland Resources, Inc:Revolving line of credit


11,700







11,700



Term debt


2,125







8,500



Capital lease obligations


534







5,484



ROVA debt:ROVA acquisition loan


3,258



30,000



15,173



30,000ROVA acquisition term loan






5,000







5,000ROVA term debt


33,075



28,492



134,441



162,933Total debt outstanding

$
100,919


$
76,803


$
271,448


$
306,007       2008

$
100,1112009


61,2882010


31,8782011


25,0512012


10,940Thereafter


38,932$
268,200   Corporate
    Revolving Line of Credit
   76




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Westmoreland
    Mining LLC
  1 2
      Westmoreland
    Resources,
    Inc.
    30-day
     77




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  ROVA
                   78




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    10.
    POSTRETIREMENT
    MEDICAL BENEFITS  Single-Employer
    Plans
  20-year
 79




---



##### Table of Contents



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

2007


2006(In thousands)Change in benefit obligations:Net benefit obligation at beginning of year

$
300,066


$
324,144Service cost


807



951Interest cost


16,890



16,907Plan amendments






2,213Plan participant contributions


129



129Actuarial (gain) loss


(14,375
)


(28,650
)Gross benefits paid


(16,217
)


(17,012
)Federal subsidy on benefits paid


1,383



1,384Net benefit obligation at end of year


288,683



300,066Change in plan assets:Employer contributions


14,704



15,500Plan participant contributions


129



129Benefits paid, net of federal subsidy


(14,833
)


(15,629
)Fair value of plan assets at end of year






Funded status at end of year

$
(288,683
)

$
(300,066
)Amounts recognized in the balance sheet consist of:Current liabilities

$
(18,114
)

$
(16,968
)Noncurrent liabilities


(270,569
)


(283,098
)Accumulated other comprehensive income (loss)


101,109



125,039Net amount recognized

$
(187,574
)

$
(175,027
)Amounts recognized in accumulated other comprehensive loss
    consists of:Net actuarial loss

$
64,999


$
80,654Prior service cost


19,200



24,093Transition obligation


16,910



20,292$
101,109


$
125,039Assumptions:Discount rate


6.10
%


5.80
%    80




---



##### Table of Contents



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

2007


2006


2005(In thousands)Components of net periodic benefit cost:Service cost

$
807


$
951


$
650Interest cost


16,890



16,907



17,500Amortization of:Transition obligation


4,849



3,381



3,381Prior service cost


1,325



1,239



1,150Actuarial loss


3,381



6,127



6,213Total net periodic benefit cost

$
27,252


$
28,605


$
28,894Assumptions:Discount rate


5.80
%


5.55
%


5.75
%       Postretirement Benefits1% Increase

1% Decrease(In thousands)Effect on service and interest cost components

$
2,138


$
(1,790
)Effect on postretirement benefit obligation

$
30,928


$
(26,243
)     Multiemployer
    Plan (Combined Benefit Fund)
     81




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Workers
    Compensation Benefits
      Pneumoconiosis
    (Black Lung) Benefits
      December 31,2007


2006(In thousands)Actuarial present value of benefit obligation:Expected claims from terminated employees

$
760


$
948Amounts owed to existing claimants


13,697



13,954Total present value of benefit obligation


14,457



14,902Plan assets at fair value, primarily government-backed securities


16,673



22,734Excess of trust assets over pneumoconiosis benefit obligation


2,216



7,832Less current portion






(5,566
)Excess of trust assets over pneumoconiosis benefit obligation,
    less current portion

$
2,216


$
2,266       11.
    PENSION
    PLANS  Defined
    Benefit Pension Plans
   82




---



##### Table of Contents



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


SERP BenefitsDecember 31,


December 31,2007


2006


2007


2006(In thousands)Change in benefit obligation:Net benefit obligation at beginning of year

$
67,411


$
65,916


$
2,506


$
2,409Service cost


2,995



3,062



78



70Interest cost


4,270



3,979



162



141Actuarial (gain) loss


(1,435
)


(4,511
)


564



(38
)Benefits paid


(1,413
)


(1,035
)


(76
)


(76
)Net benefit obligation at end of year


71,828



67,411



3,234



2,506Change in plan assets:Fair value of plan assets at the beginning of year


47,026



42,543







Actual return on plan assets


1,737



4,135







Employer contributions


3,665



1,383



76



76Benefits paid


(1,413
)


(1,035
)


(76
)


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


51,015



47,026







Funded status at end of year

$
(20,813
)

$
(20,385
)

$
(3,234
)

$
(2,506
)Amounts recognized in the accompanying balance sheet consist
    of:Current liability

$



$



$
(299
)

$
(76
)Noncurrent liability


(20,813
)


(20,385
)


(2,935
)


(2,430
)Accumulated other comprehensive loss


14,517



14,473



467



(88
)Net amount recognized at end of year

$
(6,296
)

$
(5,912
)

$
(2,767
)

$
(2,594
)Amounts recognized in accumulated other comprehensive loss
    consists of:Net actuarial loss

$
14,517


$
14,473


$
432


$
(133
)Prior service costs










35



45$
14,517


$
14,473


$
467


$
(88
)Assumptions:Discount rate


6.20% - 6.30%



5.85% - 5.95%



6.30%



5.95%Expected return on plan assets


8.50%



8.50%



N/A



N/ARate of compensation increase


4.00% - 7.50%



4.00% - 7.50%



4.00% - 7.50%



4.00% - 7.50%    83




---



##### Table of Contents



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


SERP BenefitsYears Ended December 31,

2007


2006


2005


2007


2006


2005(In thousands)Components of net periodic benefit cost:Service cost

$
2,995


$
3,062


$
2,622


$
78


$
70


$
66Interest cost


4,270



3,979



3,468



162



141



138Expected return on plan assets


(4,104
)


(3,638
)


(3,400
)










Amortization of:Prior service cost






4



50



10



10



10Actuarial loss


888



1,387



930











Total net periodic pension cost

$
4,049


$
4,794


$
3,670


$
250


$
221


$
214Assumptions:Discount rate


5.85 - 5.95
%


5.70
%


6.00
%


5.95
%


5.70
%


6.00
%Expected return on plan assets


8.50
%


8.50
%


8.50
%


N/A



N/A



N/ARate of compensation increase


4.20
%


4.20
%


4.50
%


4.00 - 7.50
%


4.20
%


5.00
%       Allocation of Plan Assets at December 31,


Target2007


2006


AllocationAsset categoryCash and equivalents






1
%

0% - 25%Equity securities


70
%


71
%

40% - 75%Debt securities


28
%


26
%

0% - 50%Other


2
%


2
%

0% - 10%Total


100
%


100
%        84




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  12.
    HERITAGE
    HEALTH BENEFIT EXPENSES    Years Ended December 31,2007


2006


2005Health care benefits

$
28,252


$
28,295


$
27,722Combined benefit fund payments (credit)


(2,156
)


3,611



4,560Workers compensation benefits


1,175



1,336



2,472Black lung benefits (credit)


318



(421
)


(3,050
)Total

$
27,589


$
32,821


$
31,704   13.
    ASSET
    RETIREMENT OBLIGATIONS, RECLAMATION DEPOSITS
    ANDCONTRACTUAL THIRD PARTY RECLAMATION RECEIVABLE  Asset
    Retirement Obligation
    Years Ended December 31,2007


2006Asset retirement obligations  beginning of year

$
184,062


$
158,407Accretion


13,408



10,327ROVA asset retirement obligation assumed






414Settlements (final reclamation performed)


(6,772
)


(13,937
)Loss on settlements


209



213Changes due to amount and timing of reclamation


15,590



28,638Asset retirement obligations  end of year

$
206,497


$
184,062     Held-to-Maturity
    Reclamation Deposits
   85




---



##### Table of Contents



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

$
59,311Gross unrealized holding gains


482Gross unrealized holding losses


(307
)Fair value

$
59,486     Amortized Cost


Fair ValueDue in five years or less

$
21,085


$
21,000Due after five years to ten years


11,332



11,436Due in more than ten years


26,894



27,050$
59,311


$
59,486   Contractual
    Third Party Reclamation Receivables
        ContractualAsset


Third PartyRetirement


Reclamation


ReclamationObligation


Receivable


DepositsRosebud

$
126,432


$
17,695


$
65,613Jewett


50,729



50,729



Absaloka


12,256



387



Beulah


12,809







Savage


3,813







ROVA


458







Total

$
206,497


$
68,811


$
65,613   14.
    STOCKHOLDERS
    EQUITY  Preferred
    and Common Stock
   86




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
        Warrants
      Weighted AverageWarrants

Number of Shares





Risk-Free



Value of EachIssued

Included in Warrant

Dividend Yield

Volatility

Rate

Expected Life

Warrant2007


150,000



None



40
%


4.19
%


3.0 years


$
4.84   Restricted
    Net Assets
   87




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  15.
    INCENTIVE
    STOCK OPTIONS, STOCK APPRECIATION RIGHTS, ANDPERFORMANCE UNITS            Non-EmployeeEmployee Plans


Director PlansMaximum number of shares that can be issued or granted


1,150,000



900,000Shares issued or granted


(1,048,636
)


(880,824
)Number of shares available for future grant at December 31,
    2007


101,364



19,176     Year EndedDecember 31,2007


2006Recognition of fair value of SARs, stock options, and restricted
    stock over vesting period

$
766


$
814Matching contributions to the Companys 401(k) plan


2,271



1,750Expense (benefit) for stock-based incentive plans


(570
)


399Total share-based compensation expense

$
2,467


$
2,963   Restricted
    Stock
   88




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  SARs
    Stock Appreciation


Weighted AverageBase Price Range


Rights


Base PriceOutstanding at December 31, 2006

$
18.04 - 29.48



560,747


$
21.66Granted










Exercised


19.37 - 24.41



(103,279
)


19.49Expired or forfeited


20.98 - 24.41



(147,202
)


22.49Outstanding at December 31, 2007

$
19.37 - 29.48



310,266


$
21.98     Weighted











WeightedAverage


Weighted








Average


IntrinsicRemaining


Average


Intrinsic





Base Price


ValueNumber


Contractual Life


Base Price


Value





(Vested


(VestedRange of Base Price

Outstanding


(Years)


(All SARs)


(All SARs)


SARs Vested


SARs)


SARs)$ 19.37 - 20.00


68,667



6.6


$
19.43







68,667


$
19.4320.01 - 25.00


223,765



7.9



22.47







179,492



21.9925.01 - 29.48


17,834



8.4



25.73







4,913



25.85$ 19.37 - 29.48


310,266



7.6


$
21.98


$
216,000



253,072


$
21.37


$
216,000     Number of









Weighted AverageSARs

Dividend



Risk-Free

Expected

Value of Each SARSARs Granted

Granted

Yield

Volatility

Rate

Life

Granted2006


177,567



None



52
%


5.20
%


7.0 years


$
14.18       Stock
    Options
    Weighted AverageIssue Price Range


Stock Option Shares


Exercise PriceOutstanding at December 31, 2006

$
2.81 - 22.86



541,616


$
11.62Granted


23.48



100,000



23.48Exercised


2.81 - 18.19



(294,916
)


9.35Expired or forfeited


22.86



(3,334
)


22.86Outstanding at December 31, 2007

$
3.00 - 23.48



343,366


$
16.92  89




---



##### Table of Contents



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











WeightedAverage


Weighted








AverageRemaining


Average








Exercise


Intrinsic ValueNumber


Contractual


Exercise Price


Intrinsic Value





Price (Vested


(VestedRange of Base Price

Outstanding


Life (Years)


(All Options)


(All Options)


Options Vested


Options)


Options)$  3.00 - 5.00


37,000



1.5


$
3.09







37,000


$
3.0935.01 - 10.00






















10.01 - 15.00


52,135



4.1



11.98







52,135



11.9815.01 - 20.00


147,565



4.7



17.42







147,565



17.4220.01 - 23.48


106,666



9.2



23.44







26,110



23.32$  3.00 - 23.48


343,366



5.7


$
16.92


$
1,802,000



262,810


$
14.91


$
1,802,000     Weighted AverageNumber of











Expected


Value of EachOptions Granted

Options Granted


Dividend Yield


Volatility


Risk-Free Rate


Life


Option Granted2007


100,000



None



51
%


4.56
%


7.0 years


$
13.55         Year Ended December 31,2005Net loss applicable to common shareholders, as reported

$
(12,027
)Add: Stock-based employee compensation included in reported net
    loss


835Less: Total stock-based employee compensation expense determined
    under fair value based on method for all awards


(2,291
)Net loss applicable to common shareholders

$
(13,483
)Net loss per share applicable to common shareholders:Basic  as reported

$
(1.45
)Basic  pro forma

$
(1.63
)Diluted  as reported

$
(1.45
)Diluted  pro forma

$
(1.63
)   Performance
    Units
   90




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    16.
    SIGNIFICANT
    EVENTS  Sale
    of Coal Royalty Interest
    Reserve
    Dedication Fee
    17.
    DERIVATIVE
    INSTRUMENTS            Year Ended December 31,2007


2006Unrealized derivative loss beginning of the year

$
(336
)

$
Change in fair value


1,092



(530
)Realized loss (gain) on settlements


(756
)


194Unrealized loss on derivatives at end of year

$



$
(336
)  91




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  18.
    INCOME
    TAXES    Years Ended December 31,2007


2006


2005(In thousands)Current:Federal

$



$



$
144State


199



2,405



2,523199



2,405



2,667Deferred:Federal










State










Income tax expense

$
199


$
2,405


$
2,667       2007


2006


2005(In thousands)Computed tax benefit at statutory rate

$
(7,292
)

$
(3,490
)

$
(2,590
)Increase (decrease) in tax expense resulting from:Tax depletion in excess of book


(4,079
)


(2,677
)


(2,816
)Minority interest adjustment


465



875



323State income taxes, net


(857
)


1,920



1,455Non-taxable earnings of offshore insurance subsidiary


(309
)


(273
)


Adjustments to deferred tax assets attributable to prior years






1,043



Change in valuation allowance for net deferred tax assets


18,855



15,089



7,059Change in effective tax rate










(823
)Indian Coal tax credits


(6,593
)


(10,167
)


Other, net


9



85



59Income tax expense

$
199


$
2,405


$
2,667  92




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2007


2006(In thousands)Deferred tax assets:Federal net operating loss carryforwards

$
58,230


$
67,246State net operating loss carryforwards


16,578



12,772Alternative minimum tax credit carryforwards


2,607



2,881Indian Coal tax credits


16,749



10,167Accruals for the following:Workers compensation


3,714



3,720Postretirement benefit and pension obligations


122,138



123,214Incentive plans


378



2,389Asset retirement obligations


60,495



18,372Deferred revenues


16,432



5,673Other accruals


7,007



4,971Total gross deferred assets


304,328



251,405Less valuation allowance


(231,794
)


(201,834
)Net deferred tax assets


72,534



49,571Deferred tax liabilities:Property, plant and equipment, differences due to depreciation
    and amortization


(67,330
)


(46,271
)Excess of trust assets over pneumoconiosis benefit obligation


(864
)


(3,055
)Other


(4,340
)


(245
)Total gross deferred tax liabilities


(72,534
)


(49,571
)Net deferred tax asset

$



$
    93




---



##### Table of Contents



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

Regular Tax(In thousands)2010

$
18,9422011


36,4792012


4492018


282019


88,429after 2019


26,939Total

$
171,266     19.
    COMMITMENTS  Coal
    Reserve Lease Obligations
        Real
    Property and Equipment Lease Obligations
   94




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    LeaseObligations2008

$
1,9932009


1,3272010


4892011


3002012 and thereafter


901   Coal
    Supply Agreements
    Long-Term
    Sales Commitments
  and/or
  Projected SalesTonnage UnderExisting Long-Term Contractsas of December 31,2007(In millions of tons)2008


30.32009


27.72010


25.42011


20.72012


19.6     20.
    CONTINGENCIES  Royalty
    Claims
      and/or
 95




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Transportation
    Claims
    (2002-2004)
  1998-2001.
    Gross
    Inequity Claim
      Take or
    Pay Claim
    1992
    UMWA Benefit Plan Surety Bond
   96




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
        McGreevey
    Litigation
          Severance
    Benefits Payable to Former CEO
   97




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    21.
    BUSINESS
    SEGMENT INFORMATION     98




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Year Ended December 31, 2007

Coal


Power


Heritage


Corporate


Total(In thousands)Revenues:Coal

$
418,870


$



$



$



$
418,870Energy






84,953











84,953Equity in earnings






394











394418,870



85,347











504,217Costs and expenses:Cost of sales  Coal


345,395















345,395Cost of sales  Energy






54,951











54,951Depreciation, depletion and amortization


28,108



9,685







330



38,123Selling and administrative


25,587



5,845



322



13,059



44,813Restructuring charges


729



698







3,096



4,523Heritage health benefit expenses










27,589







27,589Loss (gain) on sales of assets


328



18







(5,641
)


(5,295
)Operating income (loss)


18,723



14,150



(27,911
)


(10,844
)


(5,882
)Other income (expense):Interest expense


(10,285
)


(13,822
)


85



(616
)


(24,638
)Interest income


4,795



2,343



712



302



8,152Minority interest


(1,194
)














(1,194
)Other income


149



1







93



243Income (loss) from continuing operations before income taxes

$
12,188


$
2,672


$
(27,114
)

$
(11,065
)

$
(23,319
)Capital expenditures

$
29,507


$
1,761


$



$
90


$
31,358Total assets

$
493,414


$
276,399


$
4,068


$
8,647


$
782,528   99




---



##### Table of Contents



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

Coal


Power


Heritage


Corporate


Total(In thousands)Revenues:Coal

$
393,482


$



$



$



$
393,482Energy






43,244











43,244Equity in earnings






7,681











7,681393,482



50,925











444,407Costs and expenses:Cost of sales  Coal


311,629















311,629Cost of sales  Energy






28,376











28,376Depreciation, depletion and amortization


24,070



4,793







477



29,340Selling and administrative


24,286



5,727



127



12,269



42,409Heritage health benefit expenses










32,821







32,821Loss (gain) on sales of assets


127



123







(5,035
)


(4,785
)Operating income (loss)


33,370



11,906



(32,948
)


(7,711
)


4,617Other income (expense):Interest expense


(10,472
)


(7,845
)


(40
)


(877
)


(19,234
)Interest income


4,197



1,223



100



569



6,089Minority interest


(2,244
)














(2,244
)Other income (loss)


159



(8
)






(78
)


73Income (loss) from continuing operations before income taxes

$
25,010


$
5,276


$
(32,888
)

$
(8,097
)

$
(10,699
)Capital expenditures

$
17,189


$
2,855


$



$
808


$
20,852Total assets

$
449,569


$
290,723


$
9,794


$
11,296


$
761,382   100




---



##### Table of Contents



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

Coal


Power


Heritage


Corporate


Total(In thousands)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
)Other income (expense):Interest expense


(10,483
)










(465
)


(10,948
)Interest income


3,126







95



302



3,523Minority interest


(950
)














(950
)Other income


161



1,000







566



1,727Income (loss) before income taxes

$
17,691


$
10,627


$
(31,643
)

$
(6,953
)

$
(10,278
)Capital expenditures

$
18,214


$
52


$



$
78


$
18,344Total assets

$
417,325


$
38,508


$
9,320


$
30,718


$
495,871     2007


2006


2005(In thousands)Customer A  coal

$
109,390


$
112,470


$
111,224Customer B  coal


102,417



88,510



75,750Customer C  power


84,841



43,205



39,146Customer D  coal


52,041







Percentage of total revenue


69
%


54
%


61
%  101




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  22.
    QUARTERLY
    FINANCIAL DATA (UNAUDITED)    Three Months EndedMarch 31


June 30


September 30


December 31(In thousands except per share data)2007Revenues

$
125,075


$
123,253


$
130,232


$
125,657Costs and expenses


113,012



130,586



133,673



132,828Operating income (loss)


12,063



(7,333
)


(3,441
)


(7,171
)Income (loss) from continuing operations before income taxes


7,459



(11,635
)


(7,815
)


(11,328
)Income tax expense (benefit) from continuing operations


182



(89
)


(96
)


202Income (loss) from continuing operations


7,277



(11,546
)


(7,719
)


(11,530
)Income from discontinued operations


428



608



689



Net income (loss)


7,705



(10,938
)


(7,030
)


(11,530
)Less preferred stock dividend requirements


340



340



340



340Net income (loss) applicable to common shareholders

$
7,365


$
(11,278
)

$
(7,370
)

$
(11,870
)Net income (loss) per share applicable to common shareholders:Basic

$
0.81


$
(1.24
)

$
(0.81
)

$
(1.27
)Diluted


0.79



(1.24
)


(0.81
)


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


9,039



9,092



9,151



9,378Diluted


9,286



9,341



9,332



9,458   102




---



##### Table of Contents



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


June 30


September 30


December 31(In thousands except per share data)2006Revenues

$
99,092


$
94,621


$
129,658


$
121,036Costs and expenses


92,355



96,843



126,373



124,219Operating income (loss)


6,737



(2,222
)


3,285



(3,183
)Income (loss) from continuing operations before income taxes


4,847



(4,532
)


(2,137
)


(8,877
)Income tax expense from continuing operations


277



243



190



1,695Income (loss) from continuing operations


4,570



(4,775
)


(2,327
)


(10,572
)Income (loss) from discontinued operations


(83
)


537



349



(397
)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


$
(0.59
)

$
(0.29
)

$
(1.27
)Diluted


0.45



(0.59
)


(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   23.
    SUBSEQUENT
    EVENT  ROVA
    Refinancing
    Sale
    of Convertible Notes
   103




---



##### Table of Contents



Westmoreland
    Coal Company and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
     104




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm               Internal Control  Integrated Framework
      105




---



##### 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  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
  
    The Company did not maintain adequate controls for the testing,
    verification and review of the electronic spreadsheets that
    impact the Companys financial reporting. This resulted in
    an ineffective review of the assumptions used and the data input
    into the electronic worksheets and errors in the accrual for
    coal reserve lease royalties. As a result, the Companys
    accrual for coal reserve lease royalties contained material
    errors that were corrected in the restatement of the
    Companys interim consolidated financial statements for the
    period ended June 30, 2007.
    The Company did not maintain adequate controls to ensure the
    completeness and accuracy of the census data used to calculate
    the Companys postretirement medical benefit liabilities.
    As a result, the Companys postretirement medical benefit
    liabilities contained material errors that were corrected in the
    restatement of the Companys interim consolidated financial
    statements for the periods ended March 31, 2007 and
    June 30, 2007.
    The Company did not maintain policies, procedures and controls
    that were adequate to account for its Performance Unit Plan in
    accordance with generally accepted accounting principles for
    stock based compensation plans. As a result, the Companys
    accrual for stock based compensation contained material errors
    that were corrected in the restatement of the Companys
    interim consolidated financial statements for the periods ended
    March 31, 2007 and June 30, 2007.   106




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##### Table of Contents



(b)
    Changes
    in Internal Control over Financial Reporting    (c)
    Remediation
    Efforts in Response to Material Weakness    
    Additional levels of review will be added over the calculation
    of our postretirement medical benefit liabilities and expense.
    Additional levels of review will be added over our census data
    and other inputs used to calculate our postretirement medical
    benefits.
    We will evaluate the effectiveness of our controls and
    accounting processes related to the accounting for our
    postretirement medical benefits. We will also provide training
    for the related personnel.
    We will evaluate the effectiveness of our processes, controls,
    and reviews used to account for stock based compensation and
    will evaluate our internal valuation capabilities and our
    third-party advisors capabilities.      (d)
    Evaluation
    of Disclosure Controls and Procedures     107




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(e)
    Report of
    Independent Registered Public Accounting Firm                108




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##### Table of Contents



Internal Control  Integrated Framework
      109




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##### Table of Contents



ITEM 9B 
    OTHER
    INFORMATION   110




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##### Table of Contents



PART III  ITEM 10 
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE        Form 10-K.
    ITEM 11 
    EXECUTIVE
    COMPENSATION    ITEM 12 
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13 
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14 
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   111




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##### Table of Contents



PART IV  ITEM 15 
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES                 112




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##### Table of Contents



SIGNATURES    WESTMORELAND COAL COMPANY
  /s/  David
    J. Blair   Title:
    Chief Financial Officer       Signature

Title

Date/s/  Keith
    E. AlessiKeith
    E. Alessi

President and Chief Executive Officer

March 31, 2008/s/  David
    J. BlairDavid
    J. Blair

Chief Financial Officer

March 31, 2008/s/  Kevin
    A. PaprzyckiKevin
    A. Paprzycki

Principal Accounting Officer and Controller

March 31, 2008/s/  Thomas
    J. CoffeyThomas
    J. Coffey

Director

March 31, 2008/s/  Robert
    E. KillenRobert
    E. Killen

Director

March 31, 2008/s/  Richard
    M. KlingamanRichard
    M. Klingaman

Director

March 31, 2008/s/  William
    M. SternWilliam
    M. Stern

Director

March 31, 2008  113




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
     Form 10-K
          114




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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 31,2007


2006(Amounts in thousands)ASSETSCurrent assets:Cash and cash equivalents

$
306


$
128Receivables:Trade






Other






293



293Restricted cash






3,300Excess of trust assets over pneumoconiosis benefit obligation






2,266Other current assets


366



5,704Total current assets


672



11,691Property, plant and equipment:Plant and equipment


5,507



5,416Less accumulated depreciation, depletion and amortization


4,537



4,206Net property, plant and equipment


970



1,210Investment in subsidiaries and power projects, including
    intercompany balances


150,086



159,470Other assets


10,899



6,655Total Assets

$
162,627


$
179,026LIABILITIES AND SHAREHOLDERS DEFICITCurrent liabilities:Current installments of long-term debt

$



$
5,000Accounts payable and accrued expenses


4,557



7,403Income taxes






162Workers compensation


956



949Pension and SERP obligations


299



51Postretirement medical benefits


16,998



15,771Other current liabilities


2,473



Total current liabilities


25,283



29,336Revolving lines of credit






8,500Workers compensation, less current portion


8,566



8,589Related party payable


53,797



52,551Postretirement medical costs, less current portion


247,400



258,977Pension and SERP obligations, less current portion


3,924



5,147Other liabilities


914



1,859Shareholders deficit:Preferred stock


160



160Common stock


23,567



22,535Other paid-in capital


85,352



79,246Accumulated other comprehensive loss


(116,093
)


(139,424
)Accumulated deficit


(170,243
)


(148,450
)Total shareholders deficit


(177,257
)


(185,933
)Total Liabilities and Shareholders Deficit

$
162,627


$
179,026  115




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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)
  Years Ended December 31,2007


2006


2005(Amounts in thousands)Operating costs and expenses:Depreciation and amortization

$
330


$
477


$
263Selling and administrative


11,629



12,932



7,077Restructuring charges


2,655







Heritage health benefit expenses


25,788



32,821



31,704Loss (gain) on sales of assets


(5,641
)


25



34,761



46,255



39,044Operating loss


(34,761
)


(46,255
)


(39,044
)Other income (expense):Interest expense


(615
)


(877
)


(465
)Interest income


1,255



457



334Other income (loss)


1,086



(78
)


2,6621,726



(498
)


2,531Loss before income taxes and income of consolidated subsidiaries


(33,035
)


(46,753
)


(36,513
)Equity in income of subsidiaries and earnings of power projects,
    net


11,054



34,064



26,409Loss from continuing operations before income taxes


(21,981
)


(12,689
)


(10,104
)Income tax expense (benefit)


188



(9
)


(179
)Net loss

$
(21,793
)

$
(12,698
)

$
(10,283
)  116




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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)
  Years Ended December 312007


2006


2005(Amounts in thousands)Cash flows from operating activities:Net loss

$
(21,793
)

$
(12,698
)

$
(10,283
)Adjustments to reconcile net loss to net cash provided by
    operating activities:Equity in income of subsidiaries and earnings of power projects


(11,054
)


(34,064
)


(26,409
)Depreciation, depletion and amortization


330



477



263Gain on sales of assets


(5,641
)






Share-based payment expense or compensation


2,467



2,564



1,719Changes in operating assets and liabilities:Receivables, net


293



(20,099
)


400Accounts payable and accrued expenses


(2,846
)


1,483



3,912Other assets and liabilities


10,813



12,446



3,091Net cash used by operating activities


(27,431
)


(49,891
)


(27,307
)Cash flows from investing activities:Distributions received from subsidiaries


11,745



14,381



4,318Additions to property, plant and equipment


(91
)






Change in restricted cash and bond collateral


3,300







Net proceeds from sales of assets


12,700



(784
)


(491
)Net cash provided by investing activities


27,654



13,597



3,827Cash flows from financing activities:Net borrowings (repayments) on revolving lines of credit


(8,500
)


8,000



5,500Repayments of long-term debt


(5,000
)






Loans from subsidiaries


10,699



27,119



18,383Exercise of stock options


2,756



998



1,094Dividends on preferred shares






(387
)


(820
)Net cash provided by (used in) financing activities


(45
)


35,730



24,157Net increase (decrease) in cash and cash equivalents


178



(564
)


677Cash and cash equivalents, beginning of year


128



692



15Cash and cash equivalents, end of year

$
306


$
128


$
692  117




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##### Table of Contents



WESTMORELAND
    COAL COMPANY AND SUBSIDIARIES
  Valuation
    Accounts
 Years
    Ended December 31, 2007, 2006 and 2005
  DeductionsBalance at


charged toBeginning of


Costs and





Balance atYear


Expenses


Deductions


End of Year(In thousands)Year ended December 31, 2007:Allowance for doubtful accounts

$



$



$



$
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)     Amounts above include current and non-current valuation accounts.  (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. 118




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##### Table of Contents



Westmoreland 
    LG&E Partners
  Financial
    Statements & Supplementary Data
  119




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##### Table of Contents



WESTMORELAND-LG&E
    PARTNERS
  Balance
    Sheets
 As of
    December 31, 2005
  December 31,2005(In thousands)ASSETSCURRENT ASSETS:Cash and cash equivalents

$
21,430Accounts receivable


22,844Fuel inventories


1,689Prepaid expenses


495Total current assets


46,458PROPERTY, PLANT, AND EQUIPMENT  Net


228,323LOAN ORIGINATION FEES  Net


3,023RESTRICTED ASSETS


22,849OTHER ASSETS


$
300,653LIABILITIES AND PARTNERS CAPITALCURRENT LIABILITIES:Accounts payable and accrued liabilities

$
17,591Accounts payable  affiliate


552Interest payable


1,745Current portion of long-term debt


25,594Total current liabilities


45,482LONG-TERM DEBT


158,002OTHER NONCURRENT LIABILITIES


526Total liabilities


204,010COMMITMENTS AND CONTINGENCIESPARTNERS CAPITAL:Westmoreland-Roanoke Valley L.P.


50,932LG&E-Roanoke Valley L.P.


45,837Unrealized loss on derivative instrument


(126
)Total partners capital


96,643Total

$
300,653    120




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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 year ended
    December 31, 2005
  June 30,


December 31,2006


2005(In thousands)Revenues:Energy

$
55,104


$
109,99155,104



109,991Cost and expenses:Cost of sales


22,777



41,389Cost of sales  affiliate


4,005



9,446Depreciation, depletion and amortization


5,484



10,969Selling and administrative


2,303



10,436Selling and administrative  affiliate


399



85234,968



73,092Operating income


20,136



36,899Other income (expense):Interest expense


(6,619
)


(13,778
)Interest income


995



1,275Other






(5,624
)


(12,503
)Revenues:


14,512



24,396Other comprehensive incomeUnrealized gain on derivative financial instrument


126



1,013Total comprehensive income

$
14,638


$
25,409    121




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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 year ended
    December 31, 2005
  UnrealizedLG&E


GainWestmoreland-


Roanoke


(Loss) onRoanoke


Valley


DerivativeValley L.P.


L.P.


Instrument


Total(In thousands)Balance 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    122




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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 year ended
    December 31, 2005
  June 30,


December 31,2006


2005(In thousands)OPERATING ACTIVITIES:Net income

$
14,512


$
24,396Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation


5,115



10,250Amortization


369



719Ash monofill amortization






Decrease (increase) in accounts receivable


6,302



(2,580
)Decrease (increase) in fuel inventories


517



1,051Decrease (increase) in prepaid expenses


(57
)


63Increase (decrease) in accounts payable and accrued liabilities


(11,027
)


7,973Increase (decrease) in interest payable


48



52Net cash provided by operating activities


15,779



41,924INVESTING ACTIVITIES:Purchases of property, plant, and equipment


(186
)


(1,204
)Increase in restricted assets


(377
)


(294
)Net cash used in investing activities


(563
)


(1,498
)FINANCING ACTIVITIES:Repayment of notes payable


(12,944
)


(22,156
)Partner distributions


(1,801
)


(20,387
)Net cash used in financing activities


(14,745
)


(42,543
)NET INCREASE IN CASH AND CASH EQUIVALENTS


471



(2,117
)CASH AND CASH EQUIVALENTS  Beginning of year


21,430



23,547CASH AND CASH EQUIVALENTs  End of year

$
21,901


$
21,430SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash paid for interest

$
6,670


$
13,726    123




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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
 124




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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
 125




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##### Table of Contents



WESTMORELAND-LG&E
    PARTNERS
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Useful lives in2005


YearsLand

$
1,010Land improvements


300



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


335,073



5 -35Office equipment


991



5Ash monofills


2,231Construction-in-progress


9Asset retirement obligation


203



24Transportation equipment


182



5Total cost


339,999Less accumulated depreciation


(111,676
)Property, plant, and equipment  net

$
228,323   Loan Origination Fees
  Restricted Assets
  Intangible Asset
  Major Maintenance
  Income Taxes
  Derivatives
 126




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##### Table of Contents



WESTMORELAND-LG&E
    PARTNERS
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Asset Retirement Obligation
    2005Asset retirement obligation  beginning of period

$
374Accretion


26Asset retirement obligation  end of period

$
400   Use of Estimates
  Reclassification
  2.
    FINANCIAL
    INSTRUMENTS      2005Carrying


FairValue


Value(In thousands)Long-term debt

$
(183,596
)

$
(192,946
)Interest rate swaps


(126
)


(126
)  127




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##### Table of Contents



WESTMORELAND-LG&E
    PARTNERS
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  3.
    LONG-TERM
    DEBT    2005(In thousands)Notes payable to banks:Tranche A

$
57,468Tranche B


15,604Notes payable to institutional lenders:Tranche A


51,000Tranche B


22,764Bonds payable:Tranche A


29,515Tranche B


7,245Total


183,596Less current portion


25,594Total long-term debt

$
158,002        128




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##### Table of Contents



WESTMORELAND-LG&E
    PARTNERS
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
              2000-2008
   129




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##### Table of Contents



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

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
  Lime Supply Agreement
 130




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##### Table of Contents



WESTMORELAND-LG&E
    PARTNERS
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Rail Transportation Agreement
  Rail Transportation Agreement
  Lime Supply
    Agreement
  Property Tax Audit
  5.
    RELATED-PARTY
    TRANSACTIONS   131




---



##### Table of Contents



WESTMORELAND-LG&E
    PARTNERS
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
         132




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
  
            133




---



##### Table of Contents



INDEPENDENT
    AUDITORS REPORT
                 134




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##### 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

Certificate of Amendment 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 September 7, 2007 (SEC File
    No. 001-11155).3
.4

Certificate of Amendment to the Restated Certificate of
    Incorporation of Westmoreland Coal Company is incorporated
    herein by reference to Exhibit 3.2 to Westmorelands
    Current Report on
    Form 8-K
    filed September 7, 2007 (SEC File
    No. 001-11155).3
.5

Bylaws, as amended and restated effective January 1, 2008,
    are incorporated herein by reference to Exhibit 3.1 to
    Westmorelands Current Report on
    Form 8-K
    filed July 24, 2007 (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

First Amendment to Amended and Restated Rights Agreement dated
    as of May 2, 2007 between Westmoreland Coal Company and
    Computershare Trust Company, N.A. is incorporated by
    reference to Exhibit (l) to Amendment No. 2 to
    Form 8-A
    filed May 4, 2007 (SEC File
    No. 001-11155).4
.10

Second Amendment to Amended and Restated Rights Agreement dated
    as of March 4, 2008 between Westmoreland Coal Company and
    Computershare Trust Company, N.A. is incorporated by
    reference to Exhibit (l) to Amendment No. 3 to
    Form 8-A
    filed March 6, 2008 (SEC File
    No. 001-11155).4
.11

Warrant dated August 20, 2007 in favor of SOF Investments,
    L.P.4
.12

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. 135




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##### Table of Contents



ExhibitNumber

Description10
.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).10
.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/A
    for the quarter ended June 30, 2001, filed on July 25,
    2007 (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/A
    for the quarter ended June 30, 2001, filed on July 25,
    2007 (SEC File
    No. 001-11155). 136




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##### Table of Contents



ExhibitNumber

Description10
.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/A
    for the quarter ended June 30, 2001, filed on July 25,
    2007 (SEC File
    No. 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/A
    for the quarter ended June 30, 2001, filed on July 25,
    2007 (SEC File
    No. 001-11155).10
.15

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).10
.16

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
.17

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
.18

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
.19

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
.20

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
.21

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
.22

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). 137




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##### Table of Contents



ExhibitNumber

Description10
.23

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
.24

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
.25

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
.26

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
.27

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
.28

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
.29

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
.30*

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
.31*

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
.32*

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
.33

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
.34

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). 138




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##### Table of Contents



ExhibitNumber

Description10
.35

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
.36

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
.37*

Westmoreland Coal Company Severance Policy for specified
    employees, including certain executive officers not covered by
    Westmorelands Executive Severance Policy, dated
    July 26, 2004 is incorporated herein by reference to
    Exhibit 10.61 to Westmorelands Annual Report on
    Form 10-K
    for the year ended December 31, 2006 (SEC File
    No. 001-11155).10
.38*

Severance Policy dated May 21, 2007 is incorporated herein
    by reference to Exhibit 10.1 to Westmorelands Current
    Report on
    Form 8-K/A
    filed June 15, 2007 (SEC File
    No. 001-11155).10
.39*

Westmoreland Coal Company 2007 Equity Incentive Plan for
    Employees and Non-Employee Directors is incorporated herein by
    reference to Appendix C to the Companys Definitive
    Proxy Statement on Schedule 14A filed July 19, 2007
    (SEC File
    No. 001-11155).10
.40

First Amendment, Consent and Release, dated as of
    August 22, 2007, to Note Agreements, each dated as of
    June 29, 2006, among Westmoreland Energy LLC, Westmoreland
    Power, Inc., Westmoreland Power Operations, LLC, Westmoreland
    Utility Operations, LLC, Westmoreland  North Carolina
    Power, L.L.C., Westmoreland-Roanoke Valley, L.P., SOF
    Investments, L.P., as collateral agent, and the Purchasers named
    therein.10
.41

Second Amendment, dated as of October 1, 2007, by and
    between Westmoreland Energy LLC and the purchaser named therein,
    amending the Note Agreements, each dated as of June 29,
    2006, among Westmoreland Energy LLC, Westmoreland Power, Inc.,
    Westmoreland Power Operations, LLC, Westmoreland Utility
    Operations, LLC, Westmoreland  North Carolina Power,
    L.L.C., Westmoreland-Roanoke Valley, L.P., SOF Investments,
    L.P., as collateral agent, and each of the Purchasers named in
    the First Amendment.10
.42

Amended and Restated Lignite Supply Agreement dated as of
    September 28, 2007 by and between NRG Texas Power LLC and
    Texas Westmoreland Coal Co. is incorporated herein by reference
    to Exhibit 10.1 to Westmorelands Quarterly Report on
    Form 10-Q
    filed March 17, 2008 (SEC File
    No. 001-11155).10
.43

Guaranty Agreement dated as of September 28, 2007 by
    Westmoreland Coal Company for the benefit of NRG Texas Power LLC.10
.44

Business Loan Agreement dated October 29, 2007 between
    Westmoreland Resources, Inc., 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 November 2, 2007 (SEC File
    No. 001-11155).10
.45

Second Amended and Restated Loan Agreement, dated as of
    February 11, 2008, by and among Westmoreland Partners, The
    Prudential Insurance Company of America, the Purchasing Lenders
    named therein, and Prudential Investment Management, Inc., as
    agent for the Lenders.10
.46

Second Amended and Restated Assignment and Security Agreement,
    dated as of February 11, 2008, by and between Westmoreland
    Partners and Prudential Investment Management, Inc.10
.47

Third Amended and Restated General Partner Security and Limited
    Guaranty Agreement, dated as of February 11, 2008, by and
    among Westmoreland-Roanoke Valley, L.P., Westmoreland-North
    Carolina Power, LLC and Prudential Investment Management, Inc.10
.48

Senior Secured Convertible Note Purchase Agreement dated as of
    March 4, 2008 among Westmoreland Coal Company, Tontine
    Partners, L.P. and Tontine Capital Partners, L.P., and Tontine
    Capital Associates, L.P. is incorporated herein by reference to
    Exhibit 10.1 to Westmorelands Current Report on
    Form 8-K
    filed March 6, 2008 (SEC File
    No. 001-11155). 139




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##### Table of Contents



ExhibitNumber

Description10
.49

Registration Rights Agreement dated as of March 4, 2008
    among Westmoreland Coal Company, Tontine Capital Partners, L.P.,
    Tontine Partners, L.P., Tontine Overseas Associates, L.L.C.,
    Tontine Capital Management, L.L.C., and Jeffrey L. Gendell is
    incorporated herein by reference to Exhibit 10.2 to
    Westmorelands Current Report on
    Form 8-K
    filed March 6, 2008 (SEC File
    No. 001-11155).10
.50

Guaranty dated as of March 4, 2008 from Westmoreland
    Resources, Inc. in favor of Tontine Partners, L.P. and Tontine
    Capital Partners, L.P. is incorporated herein by reference to
    Exhibit 10.3 to Westmorelands Current Report on
    Form 8-K
    filed March 6, 2008 (SEC File
    No. 001-11155).10
.51

Security Agreement dated as of March 4, 2008 between
    Westmoreland Resources, Inc. and Tontine Capital Associates,
    L.P. is incorporated herein by reference to Exhibit 10.4 to
    Westmorelands Current Report on
    Form 8-K
    filed March 6, 2008 (SEC File
    No. 001-11155).10
.52

Pledge Agreement dated as of March 4, 2008 among
    Westmoreland Coal Company, Westmoreland Resources, Inc., and
    Tontine Capital Associates, L.P. is incorporated herein by
    reference to Exhibit 10.5 to Westmorelands Current
    Report on
    Form 8-K
    filed March 6, 2008 (SEC File
    No. 001-11155).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. 140