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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)
of the Securities
Exchange Act of 1934 (Amendment No. ___)

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þ Definitive Proxy Statement
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o Soliciting Material Pursuant to §240.14a-12
 
Westmoreland Coal Company
(Name of Registrant as Specified In Its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Westmoreland Values
Our Vision, Mission, and Values reflect who we are
and what we stand for as a company.
Our Vision

To deliver the premium value in the coal industry.

Our Mission

Westmoreland Coal Company is dedicated to diligently applying our mining expertise to attain economic advantages.

•   Leverage unique operations
•   Maximize transportation advantages
•   Identify and develop niche reserves
•   Cultivate unique partnerships
•   Sustain efficiency and standardization

Our Values

Our decisions and practices are guided by the values below. They are the core to who we are and how we behave as a company.

To excel at the pillars of coal mining by:
•   Uncompromised safety
•   Environmental stewardship
•   State-of-the-art mining techniques

To exceed partner expectations by:
•   Fair and collaborative approach
•   Community and tribal partnerships
•   Delivery of shareholder value
•   Agile and responsive interactions
•   Commitment focused - we do what we say

To maintain a foundation of integrity by:
•   Honest, transparent, and respectful communication
•   Highest legal and ethical standards
•   Pride in our work and our company
•   Dedication to diversity - respect and honor all
 
  
 
  

2012 was a year of growth at Westmoreland Coal Company.

We achieved strong growth in our core business, achieved record EBITDA and deleveraged the business, all while creating a sustainable platform for the future. We achieved our results through a commitment to our core values of excelling at the pillars of coal mining, exceeding partner expectations and maintaining a foundation of integrity. These values reflect who we are and what we stand for as a company. They are designed to guide us as we move towards the future and they form the basis of our success.

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WESTMORELAND COAL COMPANY
2 North Cascade Avenue, 2ndFloor
9540 S. Maroon Circle, Suite 200
Englewood, Colorado Springs, Colorado 8090380112


(GRAPHIC)

March 31, 201126, 2013

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Westmoreland Stockholders:

We are very pleased that this year's annual meeting will be our first virtual meeting of stockholders. You will be able to attend the 2013 Annual Meeting, vote, and submit your questions during the meeting via live webcast by visitingwww.virtualshareholdermeeting.com/WLB2013. Be sure to have your 12-Digit Control Number to enter the meeting. The Annual Meeting of Stockholders of Westmoreland Coal Company will be held at our corporate offices located at 2 North Cascade Avenue, 2nd Floor, Colorado Springs, Colorado, 80903via the Internet on Tuesday, May 24, 201121, 2013 at 8:30 a.m. Mountain Daylight Time, for the following purposes:

1.The election of seveneight directors to the Board of Directors to serve for a one-year term;

2.Advisory approval of Westmoreland Coal Company's executive compensation;

3.The ratification of the appointment by the Audit Committee of Ernst & Young LLP as principal independent auditor for fiscal year 2011;
3.To hold an advisory vote on executive compensation;
4.To hold an advisory vote on the frequency of the advisory vote on executive compensation;2013; and

5.
4.To transact such other business as may properly come before the meeting or any postponement or adjournment thereof.

Only stockholders of record at the close of business on March 28, 201125, 2013 will be entitled to notice of and to vote at the meeting and any postponement or adjournment thereof.

YOUR VOTE IS IMPORTANT.Whether or not you plan to attend the annual meeting, we hope you will vote as soon as possible. You may vote by proxy over the Internet or by telephone, or, if you received paper copies of the proxy materials, you can also vote by mail by following the instructions on the proxy card or voting instruction card. Voting over the Internet, by telephone or by written proxy or voting instruction card will ensure your representation at the annual meeting regardless of whether you attend in person.attend.

This proxy statement, the annual report to stockholders and the proxy voter card are being mailed on or about April 8, 2011.5, 2013.

 By Order of the Board of Directors,
 
 
 /s/
By Order of the Board of Directors,
Jennifer S. Grafton
General Counsel and Secretary



IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 21, 2013.

This notice, the accompanying proxy statement and Westmoreland Coal Company's annual report to stockholders for the fiscal year ended December 31, 2012 are available at www.proxyvote.com.

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PROXY SUMMARY
We provide below highlights of certain information in this proxy statement. As it is only a summary, please review the complete proxy statement and 2012 annual report before you vote.

2012 Performance Highlights

2012 was a year of growth at Westmoreland Coal Company. We achieved strong growth in our core business through the acquisition of the Kemmerer Mine, achieved record EBITDA and cash flow, and deleveraged the business, while establishing a strong and stable platform for future success.

Our total operating income increased 172%, up to $28.9 million in 2012 from $10.6 million in 2011.
We achieved 44% growth in Adjusted EBITDA in 2012, up over $30 million from 2011.
We lowered our net debt in 2012 through 28% growth in operating cash flow and the extinguishment of $44.8 million in debt.
We received an S&P credit rating upgrade to B-, the only coal company to receive an upgrade in 2012.
We acquired the Kemmerer Mine and, over the course of the year, successfully and seamlessly transitioned it into our operations.
We continued our strong track record of safety, 32% lower than the national average reportable incident rate.
As a result of strong succession planning, we announced plans for the transition of the CEO role from Keith E. Alessi to coal veteran Robert P. King; Mr. Alessi will transition to the Executive Chairman role.

See page 36 for information about reconciliation of non-GAAP financial measures.

Executive Compensation Program

Our executive compensation program is designed to reward our leadership team for delivering results and building long-term value. We believe our program's performance measures align the interests of our stockholders and senior executives by tying pay outcomes to our short- and long-term performance. Several important features of our executive compensation program are:

üNo employment agreements or individual change-in-control agreements for executive officers, other than Mr. Alessi's Transition Agreement described below; all executive officers are at-will employees;
üNo gross-ups;
üNo company aircraft or company-provided vehicles, other than vehicles used at mine operation sites;
üNo SERPS, defined benefit plans or other executive-only retirement plans;
üOur long-term incentive awards included performance-vested restricted stock units whose value is based on achievement of three-year free cash flow targets; and
üWe require our executive officers to have significant ownership of company stock.

For more information on our compensation programs, total compensation in 2012 and our compensation philosophy, see our Compensation Discussion and Analysis that starts on page 15.

Corporate Governance Highlights

At Westmoreland Coal Company, good governance remains a critical component of our corporate culture. Several of our key governance strengths and actions are noted in the table below.
BOARD AND OTHER GOVERNANCE INFORMATION2013*
Size of Board8
Number of Independent Directors6
Diverse Board (as to Gender, Experience and Skills)Yes
Annual Election of All DirectorsYes
Majority Voting for Directors - Bylaw amendment approved by Board in January 2013
Yes
Separate Chairman & CEOYes
Lead Independent Director - Effective as of April 8, 2013
Yes
Independent Directors Meet Without Management PresentYes

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Annual Board Self-Evaluation Conducted by Independent Third-PartyYes
Annual Equity Grant to Non-Employee DirectorsYes
Board Orientation ProgramYes
Code of Business Conduct and Ethics for DirectorsYes
Corporate Governance Guidelines for DirectorsYes
Annual Advisory Approval of Executive CompensationYes
Policy Prohibiting Use of Corporate Funds for Political ExpendituresYes
* As of March 25, 2013 

Meeting Agenda Items

Item 1-Election of Directors

You are being asked to elect 8 directors. One of our current directors, Mr. Michael D'Appolonia, will retire from our board when his current term ends in May. Each of our other current directors is standing for reelection to hold office until the next annual meeting of stockholders and until his or her successor is duly elected and qualified. Effective with Mr. D'Appolonia's retirement, the board is nominating Mr. Craig Mackus to serve for the coming year. All directors attended greater than 75% of the meetings of the board and board committees on which they served in 2012.

SUMMARY INFORMATION ABOUT OUR DIRECTOR NOMINEES
   AGE  
DIRECTOR
SINCE
 OCCUPATION AS OF 3/25/13 INDEPENDENT
    
Keith E. Alessi 58 2007 CEO, Westmoreland Coal Company  
Gail E. Hamilton 63 2011 Retired IT Executive X
Michael G. Hutchinson 57 2012 Retired Audit Partner, Deloitte & Touche X
Robert P. King 60 2012 President and COO, Westmoreland Coal Company  
Richard M. Klingaman 77 2006 Retired Energy Industry Consultant X
Craig R. Mackus 61 — Retired Equipment Manufacturer CFO X
Jan B. Packwood 69 2011 Retired Public Utility CEO X
Robert C. Scharp 66 2011 Retired Coal Industry Executive X

Our board recommends a vote FOR the election of the director candidates nominated by the board.

Item 2-Advisory Approval of Our Executive Compensation - Our board recommends a vote FOR this proposal.

We are asking stockholders to approve on an advisory basis the compensation of our named executive officers, who are discussed in more detail in the Compensation Discussion and Analysis, which starts on page 15. We hold this advisory vote on an annual basis.

Item 3-Ratification of Appointment of Ernst & Young LLP for 2013 - Our board recommends a vote FOR this proposal.

Ernst & Young LLP has been our independent registered public accounting firm since 2009. The fees paid to E&Y are detailed on page 35. One or more representatives of E&Y will be present at the meeting, will be given the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions.


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PROXY STATEMENT

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 Jennifer S. Grafton
General Counsel and Secretary
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 24, 2011.
This notice, the accompanying proxy statement and Westmoreland Coal Company’s Annual Report to stockholders for the fiscal year ended December 31, 2010 are available at www.proxyvote.com.

PROXY STATEMENT
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Page
General Information about the 20112013 Annual Meeting of Stockholders
1
  
Questions and Answers about the 20112013 Annual Meeting of Stockholders
1
  
Directors and Executive Officers
4
  
Corporate Governance
6
  
Committees of the Board of Directors
8
  
Director Compensation for 2010
11
12
  
Beneficial Ownership of Securities
12
  
Section 16(a) Beneficial Ownership Reporting Compliance
13
14
  
Equity Compensation Plan Information
13
14
  
Compensation Discussion and Analysis
14
15
  
Executive Compensation for 20102012
23
28
  
Certain Transactions
27
33
Auditors
28
  
Overview of Proposals
29
33
  
Additional Information
36
  
Miscellaneous
31
36



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WESTMORELAND COAL COMPANY
2 North Cascade Avenue, 2ndFloor
9540 S. Maroon Circle, Suite 200
Englewood, Colorado Springs, Colorado 8090380112

PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To be held May 24, 201121, 2013

GENERAL INFORMATION ABOUT THE 20112013 ANNUAL MEETING OF STOCKHOLDERS

This proxy statement is being furnished by the Board of Directors (the “Board”) of Westmoreland Coal Company (the “Company”) to holders of our common stock and depositary shares in connection with the solicitation by the Board of Directors of proxies to be voted at the Annual Meeting of Stockholders of Westmoreland Coal Company (the “Annual Meeting”) to be held at our corporate offices located at 2 North Cascade Avenue, 2nd Floor, Colorado Springs, Colorado, 80903via the Internet on Tuesday, May 24, 201121, 2013 at 8:30 a.m. Mountain Daylight Time, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders and this proxy statement.

This proxy statement and the enclosed proxy voter card relating to the Annual Meeting of Stockholders are first being mailed to stockholders on or about April 6, 2011.5, 2013. As of March 28, 2011,25, 2013, the record date, members of Westmoreland Coal Company’s senior managementthe Company's officers and directors are the record and beneficial owners of a total of 236,463394,780 shares (approximately 1.8%2.75%) of Westmoreland Coal Company’sthe Company's outstanding common stock and have no ownership in Westmoreland Coal Company’sthe Company's outstanding depositary shares. It is management’smanagement's intention to vote all of its shares in the manner recommended by the Board for each matter to be considered by the stockholders.

QUESTIONS AND ANSWERS ABOUT THE 20112013 ANNUAL MEETING OF STOCKHOLDERS

What is a Virtual Annual Meeting?

A virtual annual meeting of stockholders is an official annual meeting held over the Internet that offers the ability to verify attendance and provides an interactive element that allows for real-time voting in a secure environment. The virtual meeting also enables two-way engagement, allowing stockholders to ask questions of corporate officers and directors. The virtual meeting provides Westmoreland a new, low-cost way for stockholders to attend and interact with management, and has the potential to increase participation and reduce costs associated with meeting facilities and travel.

Westmoreland will be hosting the 2013 Annual Meeting live via the Internet. A summary of the information you need to attend the meeting online is provided below:

Any stockholder can attend the 2013 Annual Meeting live via the Internet atwww.virtualshareholdermeeting.com/WLB2013;
Webcast starts at 8:30 a.m. Mountain Time;
Stockholders may vote and submit questions while attending the Annual Meeting on the Internet;
Please have your 12-Digit Control Number to enter the Annual Meeting;
Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted atwww.virtualshareholdermeeting.com/WLB2013; and
Webcast replay of the Annual Meeting will be available until May 21, 2014.

Who can vote at the meeting?

Only stockholders who owned our common stock or depositary shares, each of which represents one quarter of a share of Series A Convertible Exchangeable Preferred Stock, $1.00 par value (“depositary shares”), of record at the close of business on March 28, 201125, 2013 are entitled to vote. Each holder of common stock is entitled to one vote per share. Each holder of depositary shares is entitled to one vote per share. There were 13,155,26314,357,179 shares of common stock and 640,515639,840 depositary shares outstanding on March 28, 2011.25, 2013.

What constitutes a quorum for the meeting?

The holders of a majority of the aggregate voting power of the common stock and depositary shares outstanding on the record date, present in person or by proxy at the meeting,Annual Meeting, shall constitute a quorum to conduct business at the meeting.Annual Meeting. Abstentions and “broker non-votes” (shares held by a broker or nominee that does not have discretionary authority to

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vote on a particular matter and has not received voting instructions from its client) are counted for purposes of determining the presence or absence of a quorum for the transaction of business at the annual meeting.Annual Meeting.

How do I vote?

Via the Internet at www.proxyvote.com;
By phone at 1-800-690-6903; or
By completing and mailing in a paper proxy card.

If your shares are registered directly in your name with Computershare Trust Company, our transfer agent, you are considered a stockholder of record with respect to those shares and the proxy card and voting instructions have been sent directly to you by Broadridge Financial Solutions, Inc.you. If, like most stockholders, you hold your shares in “street name” through a stockbroker, bank or other nominee rather than directly in your own name, you may not vote your shares in person at the meetingAnnual Meeting without obtaining authorization from your stockbroker, bank or other nominee, and younominee. You need to submit voting instructions to your stockbroker, bank or other nominee in order to cast your vote. Generally, you will receive instructions from your stockbroker, bank or other nominee that you must follow in order to have your shares voted.

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We encourage you to register your vote via the Internet. If you attend the meeting,virtual Annual Meeting, you may also submit your vote in person over the Internet and any votes that you previously submitted —- whether via the Internet, by phone or by mail —- will be superseded by the vote that you cast at the meeting.Annual Meeting. Whether your proxy is submitted by the Internet, by phone or by mail, if it is properly completed and submitted and if you do not revoke it prior to the meeting,Annual Meeting, your shares will be voted at the meetingAnnual Meeting as specified by you or, if you do not specify a choice as to a particular matter, in the manner set forth in this proxy statement.

Can I change my vote after I return my proxy card?

Yes. Even after you have submitted your proxy card, you may change your vote at any time before the proxy is exercised by either filing with our Secretary a written notice of revocation or a duly executed proxy card bearing a later date or by voting in person at the meeting.Annual Meeting. The powers of the proxy holders will be suspended if you attend the meetingAnnual Meeting in person and so request. However, attendance at the meetingvirtual Annual Meeting will not, by itself, revoke a previously granted proxy. If you want to change or revoke your proxy and you hold your shares in “street name,” contact your broker or the nominee that holds your shares. Any written notice of revocation sent to us must include the stockholder’sstockholder's name and must be received prior to the meetingAnnual Meeting to be effective.

What vote is required to approve each item?
The
Due to a recent amendment to our Bylaws approved by the Board, we now have a majority vote standard for election of directors (Proposal 1) requires thatdirectors. In an uncontested election, each director receivewill be elected by a vote of the affirmative votemajority of the votes cast, meaning the number of shares cast “for” a director exceeds the number of votes cast “against” that director. In a contested election, the directors will be elected by a plurality of the votes cast, with respectmeaning the directors receiving the largest number of “for” votes will be elected to that director at the annual meeting. This means that, withopen positions. With respect to Proposal 1, regardless of whether the nominees who receive the largest numbermajority of “FOR” votes cast or plurality standard applies, broker non-votes, abstentions and withheld votes will have no effect because such votes are not treated as being cast.

In an uncontested election, a nominee who does not receive a majority vote will not be elected. Neither broker non-votes nor abstentionsAn incumbent director who is not elected because he or she does not receive a majority vote will have any effectcontinue to serve as a holdover director until the earliest of: (a) 90 days after the date on which the election inspector determines the voting results as to that director, (b) the date on which the Board appoints an individual to fill the office held by that director, or (c) the date of directors. that director's resignation.

Approval of Proposals 2 and 3 requires the affirmative vote of a majority of the shares present or represented by proxy and votingentitled to vote at the Annual Meeting. For Proposal 4, we will treat the option receiving the largest number of votes as the option approved by the stockholders. NeitherWith respect to Proposals 2 and 3, broker non-votes norwill have no effect, but abstentions will have anythe same effect on the outcome of this proposal. Cumulative voting is not permitted for any of the proposals included in this proxy statement.as a vote against such proposals.

Which ballot measures are considered “routine” or “non-routine”?

The ratification of the appointment of Ernst & Young LLP as the Company’sCompany's independent registered public accounting firm for 20112013 (Proposal 2)3) is a matter considered routine under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are not expected to exist in connection with Proposal 2.3.

The election of directors (Proposal 1), and advisory approval of the advisory vote onCompany's executive compensation (Proposal 3) and the advisory vote on the frequency of the advisory vote on executive compensation (Proposal 4)2) are matters considered non-routine under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and therefore there may be broker non-votes on Proposals 1 3, and 4.2.

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How are you handling solicitation of votes?

The accompanying proxy is solicited on behalf of our Board of Directors and the cost of solicitation borne by us. In addition to solicitations by mail, our directors, officers, and employees may solicit proxies by telephone, e-mail and personal interview, but will receive no additional compensation for doing so. We will also request brokerage houses, custodians, nominees, and fiduciaries to forward copies of the proxy material to those persons for whom they hold shares and request instructions for voting the proxies. We will reimburse those brokerage houses and other persons for their reasonable expenses for such services.

Do I have any rights of appraisal?

Under Delaware law, stockholders are not entitled to dissenters’dissenters' rights on any proposal referred to herein.

Where can I find the voting results of the meeting?Annual Meeting?

We will announce preliminary general voting results at the meetingAnnual Meeting and publish final detailed voting results on a Form 8-K that we will file within four business days after the meeting.Annual Meeting.

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How do I submit a stockholder proposal for the 2012 annual meeting?2014 Annual Meeting?

Any proposal that a stockholder wishes to be considered for inclusion in our proxy statement and proxy card for the 20122014 Annual Meeting of Stockholders (the “2012“2014 Annual Meeting”) must be submitted to the Secretary at our offices, 2 North Cascade Avenue, 2nd Floor,9540 S. Maroon Circle, Suite 200, Englewood, Colorado Springs, Colorado 80903,80112, no later than December 7, 2011.November 26, 2013. In addition, such proposals must comply with the requirements of Rule 14a-8 under the Securities Exchange Act of 1934.

If a stockholder wishes to present a proposal before the 20122014 Annual Meeting, but does not wish to havewithout having the proposal considered for inclusionincluded in our proxy statement and proxy card, such stockholder must give written notice to the Secretary at the address noted above. The Secretary must receive such notice no earlier than January 25, 201221, 2014 and no later than February 24, 2012,20, 2014, and the stockholder must comply with the provisions of Sections 2.5 or 2.6, as applicable, of our bylaws. Only proposals included in the proxy statement or that comply with our advance notice bylaw requirements will be considered properly brought before the Annual Meeting.

Does the Company offer an opportunity to receive future proxy materials electronically?

Yes. If you are a stockholder of record or a member of the 401(k) plan, you may, if you wish, receive future proxy statements and annual reports online rather than receiving proxy materials in paper form. If you elect this feature, you will receive an e-mail message notifying you when the materials are available, along with a web address for viewing the materials and instructions for voting by telephone or on the Internet. If you have more than one account, you may receive separate e-mail notifications for each account. You may sign up for electronic delivery in two ways:
•If you vote online, you may sign up for electronic delivery at that time; or
•You may sign up at any time by visiting http://enroll.icsdelivery.com/wlb.
at any time by visiting http://enroll.icsdelivery.com/wlb. If you received this proxy statement electronically, you do not need to do anything to continue receiving proxy materials electronically in the future. If you hold your shares in a brokerage account, you may also have the opportunity to receive proxy materials electronically. Please follow the instructions of your broker.

How can I get electronic access to the proxy materials and the annual report?

This proxy statement and our 20102012 Annual Report are available atwww.proxyvote.com; referencesee your ballot for information.

Will I receive a separate proxy statement if I share the same address and last name as another stockholder?

No. If you are the beneficial owner, but not the record holder, of shares of our stock, your broker, bank or other nominee may only deliver one copy of this proxy statement and our Annual Report to multiple stockholders who share an address, unless that nominee has received contrary instructions from one or more of the stockholders. We will deliver promptly, upon written or oral request, a separate copy of this proxy statement and our Annual Report to a stockholder at a shared address to which a single copy of the documents was delivered. Beneficial owners sharing an address who are receiving multiple copies of proxy materials for access information.and annual reports and who wish to receive a single copy of such materials in the future will need to contact their broker, bank or other nominee to request that only a single copy of each document be mailed to all stockholders at the shared address in the future.


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DIRECTORS AND EXECUTIVE OFFICERS
         
      Director/ Executive  
Name  Age  Officer Since Position
         
Keith E. Alessi  56  2007 Director; President and Chief Executive Officer
         
Thomas J. Coffey  58  2000 Director —Independent
         
Michael R. D’Appolonia  62  2008 Director— Independent
         
Gail E. Hamilton  61  2011 Director —Independent
         
Richard M. Klingaman  75  2006 Director— Independent
         
Jan B. Packwood  67  2011 Director— Independent
         
Robert C. Scharp  64  2011 Director— Independent
         
Kevin A. Paprzycki  40  2008 Chief Financial Officer and Treasurer
         
Douglas P. Kathol  58  2010 Executive Vice President
         
Jennifer S. Grafton  35  2011 General Counsel — Compliance and Corporate Governance and Secretary
         
Morris W. Kegley  63  2007 General Counsel — Mining Operations
NameAgeDirector/ Executive Officer SincePosition
Keith E. Alessi582007
Director and Executive Chairman beginning April 8, 2013; Chief Executive Officer through April 5, 2013
Gail E. Hamilton632011
Director - Independent
Michael G. Hutchinson572012
Director - Independent
Robert P. King602012Director; President and Chief Operating Officer; Chief Executive Officer beginning April 5, 2013
Richard M. Klingaman772006
Director - Independent; Chairman of the Board
Jan B. Packwood692011
Director - Independent
Robert C. Scharp662011
Director - Independent
Jennifer S. Grafton372011General Counsel and Secretary
Douglas P. Kathol602010Executive Vice President
Joseph E. Micheletti472011Senior Vice President - Coal Operations
Kevin A. Paprzycki422008Chief Financial Officer and Treasurer
Director Nominee
NameAgeDirector/ Executive Officer SincePosition
Craig R. Mackus61—Director nominee
Director Information

The Board has fixed the number of directors following the Annual Meeting at eight. All our directors bring to our Board a wealth of leadership experience derived from their service as executives of corporations.and respected professionals. Certain individual qualifications and skills of our directors that contribute to the Board’sBoard's effectiveness as a whole are described in the following paragraphs.

Keith E. Alessicurrently serves as a director and served as our Chief Executive Officer until April 5, 2013. Beginning April 8, 2013, he will assume the Executive Chairman position on our Board. Since he began working for us in 2007, he has assumed roles including President and Chief Executive Officer. In additionother various interim roles. Prior to his work with us,Westmoreland, Mr. Alessi was an adjunct lecturer at the Ross School of Business at the University of Michigan from 20022001 to 2010. Prior2010 and was an Adjunct Professor at The Washington and Lee University Law School from 1999 to Westmoreland, Mr. Alessi was2007. He previously served as Chief Executive Officer, Chief Operating Officer or Chief Financial Officer of Lifestyle Improvement Centers, LLCa number of public and private companies from April 20031982 to May 2006.2000. Mr. Alessi currently serves as a member of the board of directors of Town Sports International Holdings, Inc., H&E Equipment Services, Inc. and MWI Veterinary Supply, Inc.

Mr. Alessi’s wealthAlessi has over 30 years of turnaround management experience gained in turn around management, including his roles as Vice-Chairman of Farm Fresh and Chief Executive Officer of Jackson Hewitt and Telespectrum Worldwide, Inc., givesa senior executive capacity. This has given him unique insights into ourthe hurdles, challenges and opportunities facing Westmoreland and provides him the necessary leadership experience to help lead the Companycompany as it is poised to enter a new phase of growth.its Executive Chairman.
Thomas J. Coffeyhas been a Partner of B2B CFO Partners, LLC, a professional financial services organization, since 2005. Prior to 2005, Mr. Coffey was Vice President-Finance, Global Infrastructure Services from 1999 to 2005 and Vice President-Operations Analysis from 1998 to 1999 of Unisys Corporation, a technology services company.
Mr. Coffey has over 25 years of financial and operational management experience working with both public and private companies. He has served as the Chief Financial Officer of a public company, worldwide divisional Chief Financial Officer of a global technology company and a Partner with a “Big 4” accounting firm, and his extensive experience is invaluable to our Board’s responsibility for financial and accounting issues.
Michael R. D’Appoloniamost recently served as President and Chief Executive Officer of Kinetic Systems, Inc., a global provider of process and mechanical solutions to the electronics, solar and biopharmaceutical industries. From 1986 to 2006, Mr. D’Appolonia was an executive and Principal of Nightingale & Associates, LLC, and its predecessor company Nightingale & Associates, Inc., a global management consulting firm providing financial and operational restructuring services to mid-market companies in the US and overseas. From January 2002 through June 2006, Mr. D’Appolonia served as Nightingale’s President. Mr. D’Appolonia is a member of the board of directors of Exide Technologies, Inc. In addition, he was a member of the board of directors of The Washington Group International, Inc. from 2001 to 2007.

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Mr. D’Appolonia’s experience as a Chief Executive Officer of a large global organization, along with his public company board experience, brings to our Board the perspective of a leader facing a similar set of current external economic, social and governance issues.
Gail E. Hamiltonmost recently served as Executive Vice President of Symantec Corporation, an infrastructure software and services provider, retiring in 2005. Previously, she served as the General Manager of the Communications Division of Compaq Computer Corporation and as the General Manager of the Telecom Platform Division for Hewlett-Packard Company. She is currently a director of Arrow Electronics Inc., OpenText Corp., and Ixia. In the last five years, Ms. Hamilton has also served as a director of Washington Group International and Surgient, Inc.

Ms. Hamilton is a former senior executive with business and operational experience at a public technology company, whose strategic planning and business development experience are invaluable in guiding the development and progression of our information technology infrastructure and programs. In addition, Ms. Hamilton’sHamilton's extensive public and private board experience will bring further professionalism and insight to the board room.

Michael G. Hutchinson recently retired from Deloitte & Touche. His Deloitte career spanned nearly 35 years, leading their Denver Energy and Natural Resources Practice for the last fifteen years while at the same time managing the Audit and Enterprise Risk Management practice of the Denver office.


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As the former lead audit partner at a top four auditing firm, Mr. Hutchinson brings to the Board his substantial expertise in accounting and finance matters, which he gained during his 35 years of experience in public accounting. Mr. Hutchinson is well qualified to serve as a director based on his experience with accounting principles, financial controls and evaluating financial statements of public companies in the energy sector, particularly from an auditor's perspective.

Robert P. King joined Westmoreland in March 2012 as President and Chief Operating Officer. Beginning April 5, 2013, he will serve as our Chief Executive Officer. From 2006 through 2012, Mr. King held various executive leadership roles at Consol Energy, Inc., including Executive Vice President - Business Advancement and Support Services from 2009 through March 2012. Mr. King has over 30 years experience in the coal industry, both underground and surface mines.

Mr. King brings a breadth of coal mining experience to Westmoreland, both as a top executive of a Fortune 500 energy company, as well as his hands-on operational experience running coal mining operations.

Richard M. Klingamanhas been a consultant to the natural resources and energy industries since May 1992. Prior to consulting, Mr. Klingaman was a senior executive with Penn Virginia Corporation, a natural resources company specializing in coal, oil, natural gas, timber, lime and limestone.

Mr. Klingaman’sKlingaman's extensive experience in the mining and energy industries, including as Senior Vice President of a large natural resources company, provides him with an intimate knowledge of our operations and our industry.

Jan B. Packwoodwas the President and Chief Executive Officer of IDACORP, Inc. (NYSE: IDA), a holding company whose main subsidiary, Idaho Power Company, is an electric utility engaged in the generation, transmission, distribution, sale and purchase of electric energy,  from 1999 to 2006.  Prior to such time, Mr. Packwood served in various executive-level capacities of Idaho Power Company beginning in the 1980s.   He currently serves as a director of IDACORP, Inc. and of various IDACORP, Inc. subsidiaries, including Idaho Power Company, IDACORP Financial Services, Inc. and Ida-West Energy Company.

As the former President and Chief Executive Officer of an electric utility involved in the mining and use of coal in the Pacific Northwest, Mr. Packwood brings to the Board a vast knowledge of our and our main customers’customers' business, including an understanding of the risks faced by our own power plant and the power plants we supply.  This expertise will be invaluable in directing the future of our power plant operations, as well as providing insight into potential growth and expansion activities in our mining segment.

Robert C. Scharpwas previously the Chief Executive Officer of Shell Coal Pty Ltd from 1997 to 2000 and then Chief Executive Officer of Anglo Coal Australia from 2000 to 2001. He served as the Chairman of the Shell Canada Energy Mining Advisory Council from 2005 to 2010. He had a 22 year career with Kerr McGee Corporation including serving as President —- Kerr McGee Coal Corporation and Senior Vice President —- Oil and Gas Production. He isMr. Scharp was a director of Bucyrus International from 2005 to 2011 and was a director of Foundation Coal Holdings from 2005 to 2009. Mr. Scharp is also a retired Army National Guard colonel.

Mr. Scharp brings a wealth of coal mining industry experience to the Board, including invaluable chief executive operational oversight of coal mine operations. Mr. Scharp’sScharp's vast industry experience will assist the Board in driving future operational mining excellence and evaluating potential growth and expansion opportunities.

Director Nominee Information

Craig R. Mackus became chief financial officer of Bucyrus International, Inc. in June 2004 after serving as vice president-finance from October 2002 through June 2004 and as controller from February 1988 through May 2006. Mr. Mackus retired from Bucyrus International, Inc. in 2011 upon its merger with Caterpillar. He also served as Bucyrus's secretary from May 1996 through his retirement in 2011.

As a senior manager of an international manufacturing company provided equipment to the mining industry, Mr. Mackus will bring significant financial, governance and operational mining experience to the Board.  As the CFO during a major merger transaction between Bucyrus International Inc. and Caterpillar, Mr. Mackus will also provide the Board with his first-hand experience in significant M&A activity.

Executive Officer Information

Keith E. Alessi, our President and Chief Executive Officer until April 5, 2013, is discussed above under “Director Information.”


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Jennifer S. Grafton joined Westmoreland as Associate General Counsel in December 2008 and was named General Counsel and Secretary in February 2011. Prior to Westmoreland, Ms. Grafton worked in the corporate group of various Denver-based and national law firms focusing her practice on securities and corporate governance. She is a member of the Colorado bar.

Douglas P. Kathol joined Westmoreland in 2003 as Vice President - Development, adding additional responsibility as Treasurer in 2008. In 2010, Mr. Kathol was named Executive Vice President. Prior to Westmoreland, Mr. Kathol spent almost twenty years in various positions, including Senior Vice President of Norwest Corporation, a consulting firm providing expertise to the energy, mining, and natural resources industries.

Robert P. King, our President and Chief Operating Officer and our Chief Executive Officer beginning April 5, 2013, is discussed above under “Director Information.”

Joseph E. Micheletti joined Westmoreland in 2001 and has held a series of positions with Westmoreland since such time, including President and General Manager of our Jewett Mine. In June 2011, Mr. Micheletti was named Senior Vice President - Coal Operations. Mr. Micheletti has worked in the production, maintenance, processing, and engineering disciplines of the mining industry for 24 years and sits as a Director of the Rocky Mountain Coal Mining Institute.

Kevin A. Paprzyckijoined Westmoreland as Controller and Principal Accounting Officer in June 2006 and was named Chief Financial Officer in April 2008. In June 2010, he was also named Treasurer. Prior to Westmoreland, Mr. Paprzycki was Corporate Controller at Applied Films Corporation from 2005 to 2006. Mr. Paprzycki became a certified public accountant in 1994 and a certified financial manager and certified management accountant in 2004.
Douglas P. Katholjoined Westmoreland in 2003 as Vice President — Development, adding additional responsibility as Treasurer in 2008. In 2010, Mr. Kathol was named Executive Vice President. Prior to Westmoreland, Mr. Kathol spent almost twenty years in various positions, including Senior Vice President, of Norwest Corporation, a consultant providing expertise to the energy, mining, and natural resources industries.

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Jennifer S. Graftonjoined Westmoreland as Associate General Counsel in December 2008 and was named General Counsel — Compliance and Corporate Governance and Secretary in February 2011. Prior to Westmoreland, Ms. Grafton worked in the corporate group of various Denver-based and national law firms. She is a member of the Colorado bar.
Morris W. Kegleyjoined Westmoreland in October 2005 as Assistant General Counsel and was named General Counsel in August 2007. Prior to Westmoreland, he worked in the legal department of Peabody Energy Company from 2004 to 2005. He is a member of the bar of Indiana, Illinois, Wyoming, and Colorado.
CORPORATE GOVERNANCE

We are committed to maintaining the highest standards of business conduct and corporate governance, which we believe are essential to running our business efficiently, serving our stockholders and maintaining our integrity in the marketplace. The Code of Conduct Handbook for directors, officers and employees, in conjunction with the Certificate of Incorporation, Bylaws, Board committee charters and Corporate Governance Guidelines, form the framework for the governance of Westmoreland. All of these documents are available on our website at www.westmoreland.com. On an annual basis, all directors, officers and employees sign an acknowledgement that they have received and reviewed the guidelines provided in the Code of Conduct Handbook. All of these documents are available at our website at www.westmoreland.com. We will post on thisour website any amendments to the Code of Conduct Handbook or waivers of the Code of Conduct Handbook for directors and executive officers. You can request a copy of any of these documents by writing to the Corporate Secretary, Westmoreland Coal Company, 2 North Cascade Avenue, 2nd Floor,9540 S. Maroon Circle, Suite 200, Englewood, Colorado Springs, Colorado 80903.80112.

Board Structure and Risk Oversight

The Board separatedof Directors does not have a policy regarding the positionsseparation of the roles of Chief Executive Officer and Chairman of the Board of Directors as the Board believes it is in the best interests of Westmoreland to make that determination based on the position and direction of Westmoreland and the membership of the Board. Currently, the roles of Chairman of the Board and Chief Executive Officer in May 2009 and elected Richard M. Klingaman, an independent director, as our Chairman, and Keith E. Alessi as our President and Chief Executive Officer. Separating these positions allowsCEO are split, allowing our CEO to focus on our day-to-day business, while allowing the Chairman of the Board to lead the Board in its fundamental role of providing advice to and independent oversight of management. On October 26, 2012, the Board announced plans for the transition of Keith Alessi from Chief Executive Officer to Executive Chairman and the transition of Robert King from President and Chief Operating Officer to President and Chief Executive Officer effective April 8, 2013. At this time, we believe that Mr. Alessi transitioning to the role of Executive Chairman, as Mr. King grows into his new role as CEO, is the most desirable approach for promoting long-term stockholder value. Such a structure promotes a unified approach on corporate strategy development and allows for consistency and a smooth transition while our new CEO assumes his responsibilities. The Executive Chairman acts as a bridge between management and the Board, recognizeshelping both to pursue their common purpose more efficiently. As Executive Chairman, Mr. Alessi will continue to play an important role in the time, effort,Company's strategic direction, will chair all regular sessions of the Board and, energy thatin consultation with the Lead Director and with input from the CEO, is requiredset the agenda for Board meetings.
In accordance with our Corporate Governance Guidelines, if our Chairman of the Board does not qualify as an independent director, our Board selects an independent director to devote to his position inpreside over non-management executive sessions of the current business environment, as well asBoard. Mr. Klingaman, an independent director, was appointed by the commitment requiredBoard to serve as Lead Director beginning on April 8, 2013. The role of our Lead Director is to assist the Executive Chairman particularly asand the Board’s oversight responsibilities continue to grow. The Board believes this leadership structure has enhanced the Board’s oversight of risk and independence from our management, the abilityremainder of the Board in assuring effective corporate governance in managing the affairs of the Board and the Company. Our Lead Director works with our Chairman to carry out its rolesapprove all meeting agendas, and responsibilities on behalfpresides at (i) executive sessions of our stockholders,the non-employee directors, which are held in conjunction with each regularly scheduled quarterly meeting of the Board, (ii) executive sessions of the independent directors, which are held at least once a year, and our overall corporate governance.(iii) any other meetings as determined by the Lead Director. Our Lead Director is also a member of the Board's

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Executive Committee, providing additional representation for the independent directors in any actions considered by the Executive Committee between Board meetings.

Risk Oversight by the Board of Directors

Risk is inherent with every business, and how well a business manages risk can ultimately influence its success. We face a number of risks, including economic risks, operational risks, environmental and regulatory risks, and others, such as the impact of competition, weather conditions and weather conditions.pressures from competing fuel sources. Management is responsible for the day-to-day management of risks that we face, while the Board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed.

The Board believes that establishing the right “tone at the top” and that full and open communication between management and the Board isare essential for effective risk management and oversight. OurHistorically, our Chairman talkshas regularly communicated with our CEO to discuss strategy and the risks facing us. Seniorwe face, and we expect the CEO to continue to have similar communications with the Executive Chairman and Lead Director in the future. The executive management attendteam attends the quarterly board meetings and areis available to address any questions or concerns raised by the Board on risk management-related matters. Each quarter, the Board receives presentations from senior management on strategic matters involving our operations and is provided extensive materials that highlight the various factors that could lead to risk in our organization. The Board holds a strategic planning session with seniorthe management team on an annual basis to discuss strategies, key challenges, and risks and opportunities for us. Further, the Board is empowered to hire its own advisors without management approval to assist it in fulfilling its duties.

While the Board is ultimately responsible for our risk oversight, our committees assist the Board in fulfilling its oversight responsibilities in certain areas of risk. The Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to risk management in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements. The Compensation and Benefits Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs. The Nominating and Corporate Governance Committee is tasked with overseeingthe oversight of succession planning for our directors and executive officers. On an annual basis, pursuant to such committee’scommittee's charters, the committees assess risk and have specific conversations with senior management regarding the risks faced.

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Director Independence
Committees
NASDAQ Marketplace Rules require that a majority of the Board be independent. No director qualifies as independent unless the Board determines that the director has no direct or indirect relationship with the Company that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In assessing the independence of its members, the Board examined the commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships of each member. The Board's inquiry extended to both direct and indirect relationships with the Company. Based upon both detailed written submissions by nominees and discussions regarding the facts and circumstances pertaining to each nominee, considered in the context of applicable NASDAQ Marketplace Rules, the Board has determined that all of the nominees for election, other than Messrs. Alessi and King, are independent. Mr. Alessi will not be considered independent until at least three years have elapsed since his last date of employment. The independent directors meet during most Board meetings in separate executive session without management present. Currently, the Chairman of the Board, who is an independent director, presides over these meetings. In the future, the Lead Director will preside over such meetings.

Each member of the Audit Committee must, in addition to the independence requirements of the NASDAQ Marketplace Rules, meet the heightened independence standards required for audit committee members under the NASDAQ Marketplace Rules listing standards, Section 10A of the Securities Exchange Act of 1934, and Rule 10A-3 thereunder. The Board determined that Messrs. D'Appolonia, Packwood and Hutchinson, the 2012 Audit Committee members, each met such heightened independence standards. Beginning in July 2013, each member of the Compensation and Benefits Committee must, in addition to the independence requirements of the NASDAQ Marketplace Rules, meet heightened independence standards required for compensation committee members under the NASDAQ Marketplace Rules listing standards. In 2012, the members of the Compensation and Benefits Committee met such heightened independence standards.

Communicating with the Board

Stockholders who wish to write directly to the Board on any topic should address communications to the Board of Directors in care of the Lead Director, Westmoreland Coal Company Board of Directors, 9540 S. Maroon Circle, Suite 200 Englewood, Colorado 80112. Our Lead Director will report on stockholder communications to the Board and provide copies or specific

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summaries to directors on matters deemed to be of appropriate importance. In general, communications from stockholders relating to corporate governance will be forwarded to the Board unless they are frivolous, obscene, repeat the same information contained in earlier communications, or fails to identify the author.

COMMITTEES OF THE BOARD OF DIRECTORS

As of the date of this proxy statement, our Board has seveneight directors and the following four committees: (1) Audit; (2) Compensation and Benefits; (3) Nominating and Corporate Governance; and (4) Executive. The Board has set the number of directors following the Annual Meeting at eight. The current committee membership, the number of meetings during 20102012 and the function of each of the committees are described below. Each of the committees except for the Executive Committee, operateoperates under a written charter adopted by the Board. All of the committee charters are available on our website at www.westmoreland.com. During 2010,2012, the Board held nine meetings plus a two-day strategic planning session. Each director serving during 20102012 attended at least 75%90% of the aggregate of all Board and applicable committee meetings held during the period that he or she served as a director. Directors are expected to attend the Annual Meeting of Stockholders. All directors attended the last Annual Meeting of Stockholders. The following table highlights meetings and committee membership during fiscal year 2012.
         
      Nominating  
    Compensation and  
Name of Director Audit and Benefits Corporate Governance Executive
Non-Employee Directors:
        
Thomas J. Coffey Chair Member    
Michael R. D’Appolonia   Chair Member Member
Gail E. Hamilton Member Member    
Richard M. Klingaman       Member
Jan B. Packwood Member   Chair  
Robert C. Scharp Member   Member  
Employee Director:
        
Keith E. Alessi       Chair
Number of Meetings in 2010
 4 6 4 1
Name of Director Audit 
Compensation
and
Benefits
 
Nominating
and
Corporate Governance
 Executive
Non-Employee Directors:        
Michael R. D'Appolonia Chair Member   Member
Gail E. Hamilton   Member Member  
Michael G. Hutchinson Member Member    
Richard M. Klingaman       Member
Jan B. Packwood Member   Chair Member
Robert C. Scharp   Chair Member  
Employee Director:        
Keith E. Alessi       Chair
Robert P. King        
Number of Meetings in 2012 8 6 3 1

Audit Committee

The Audit Committee provides oversight of the quality and integrity of our accounting, auditing and financial reporting practices.practices and is responsible for retaining and terminating our independent accounts. The committee exercises its oversight obligations through regular meetings with management, the Director of Internal Audit and our independent registered public accounting firm, Ernst & Young LLP. The Audit Committee is also responsible for oversight of risks relating to accounting matters, financial reporting and regulatory compliance. To satisfy these oversight responsibilities, the committee separately meets with our Chief Financial Officer, the Director of Internal Audit, Ernst & Young LLP and management. The committee also receives periodic reports regarding issues such as the status and findings of audits being conducted by the internal and independent auditors, the status of material litigation, accounting changes that could affect our financial statements and proposed audit adjustments. The Board has determined that Thomas J. Coffey isMichael G. Hutchinson qualifies as an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K.

Audit Committee Report

Under its charter, the Audit Committee assists the Board of Directors in fulfilling the Board’sBoard's responsibility for oversight of Westmoreland’sWestmoreland's financial reporting process and practices, and its internal control over financial reporting. Management is primarily responsible for our financial statements, the reporting process and assurance for the adequacy of the internal control over financial reporting. Our independent registered public accounting firm, Ernst & Young LLP, is responsible for performing an independent audit of Westmoreland’sWestmoreland's financial statements and internal control over financial reporting, and for expressing an opinion on the conformity of our audited financial statements to generally accepted accounting principles used in the United States and the adequacy of our internal control over financial reporting.

The Audit Committee has reviewed and discussed with Ernst & Young LLP Westmoreland’sWestmoreland's audited consolidated financial statements and internal control over financial reporting. The Audit Committee has discussed with Ernst & Young LLP, during the 20102012 fiscal year, the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (Communication

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with Audit Committees) as adopted by the Public Company Accounting Oversight Board in Rule 3200T.Board. The Audit Committee has received and reviewed the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding such firm’sfirm's communications with the Audit Committee concerning independence, and has discussed with the independent accountants their independence.

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The Audit Committee discussed with our internal and independent auditors the overall scope and plans for their respective audits. The Audit Committee meets with the independent auditors, with and without management present, to discuss the results of its examinations, the evaluations of our internal controls and the overall quality of our financial reporting. The Audit Committee also has reviewed and discussed the audited financial statements with management.

Based on the reviews and discussions described above, the Audit Committee recommended to the Board that the audited financial statements and assessment of internal controls over financial reporting be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010.2012. The Audit Committee has selected Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2011.2013.
Thomas J. Coffey, Chairman
Gail E. Hamilton
Jan B. Packwood
Robert C. Scharp

Michael G. Hutchinson, Chairman
Jan B. Packwood
Richard M. Klingaman

Compensation and Benefits Committee

The Compensation and Benefits Committee is responsible for assuring that the Board, our Chief Executive Officer, other executive officers, and our key management are compensated appropriately and in a manner consistent with our approved compensation strategy, internal equity considerations, competitive practice, and any relevant laws or regulations. In addition, the committee reviews our compensation programs to ensure that our programs are not promoting imprudent risk-taking. In accordance with its charter, the committee may retain and terminate outside counsel, compensation consultants, or other experts or consultants, as it deems appropriate, form and delegate authority to subcommittees and delegate authority to one or more designated members of the committee. To assist it in satisfying its oversight responsibilities, the committee retainedchose in February 2012 to continue its relationship with Buck Consulting, atwhich began in February 2010. In late 2012, the beginning of 2010committee hired Pay Governance to serve as its consultant for fiscal year 2013.

Compensation and meets regularly with management to understand the financial, human resources and stockholder implications of compensation decisions being made.
CompensationBenefits Committee Risk Assessment
In February 2011,
On an annual basis, the committee reviewedreviews and discusseddiscusses the structure of our compensation program to assess whether any aspect of the program could potentially be expected to provide an incentive to our executive officers or other employees to take any unnecessary or inappropriate risks that could threaten our operating results, financial condition or impact long-term stockholder value. To assist the committee in their review in February 2013, the committee engaged Buck ConsultingPay Governance to conduct a risk assessment of our incentive-based compensation plans (including the annual and long-term incentive programs) and our compensation practices.

Based on the findings of Buck Consulting,Pay Governance, our internal controls, policies and risk-mitigating components in our incentive arrangements as well as the committee’scommittee's formal review and discussion, the committee believes our compensation programs represent an appropriate balance of short-term and long-term compensation and do not encourage executive officers or other employees to take on unnecessary or excessive risks that are reasonably likely to have a material adverse effect on us.

Our incentive compensation is designed to reward bonus-eligible employees for committing to and deliveringachieving goals that are intended to be challenging yet provide them a reasonable opportunity to reach the threshold amount, while requiring meaningful growth to reach the target level and substantial growth to reach the maximum level. The amount of growth required to reach the maximum level of compensation is developed within the context of the normal business planning cycle and, while difficult to achieve, is not viewed to be at such an aggressive level that it would induce bonus-eligible employees to take inappropriate risks that could threaten our financial or operating stability. In addition, the annual bonus program contains a cap on the maximum financial payout to employees as a whole.

Our executive compensation program includes the following features to help minimize risk:risk.

Compensation Mix. We allocate compensation between fixed and contingent components, between annual cash incentives and long-term equitytime-based incentives, and between time-based and performance-based long-term incentive compensation, based in part on an employee’semployee's position and level of responsibility within the organization. We believe our mix of compensation elements helps to ensure that executives and other employees who are eligible

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for incentive compensation do not focus on achieving short-term results at the expense of the long-term growth and sustainability of the company.Company. None of our employees receives compensation which is primarily derived fromreceive commissions.

Base salary is the only assured portion of compensation that we provide to our executives and other employees. Consequently, our incentive compensation arrangements are intended to reward performance.

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The annual incentive plan establishes cash-based award opportunities that are payable if, and only to the extent that, pre-established corporate financial and individual performance objectives are achieved, subject to the discretion of the committee to exclude certain events outside our direct control.control and to reward exemplary performance.

The equity-basedlong-term component of the executive compensation program consists of two types of equity awards: (1) grants of time-vested restricted stock units, and (2) grants of performance-based restricted stock units. The purpose of the three-year vesting schedule for restricted stock units and the three-year performance period for performance-based restricted stock units isor cash awards. The use of both time-based and performance-based awards for fiscal 2013 balances our desire to underscoredrive long-term growth with the retention pressures we face from our commitment to long-term decision-makingdirect peers, as well as from emerging and growth.evolving competitors.

Stock Ownership Guidelines. We have established stock ownership guidelines to ensure that our executives’executives' interests are aligned with those of stockholders. These guidelines also help ensure that the decisions our executives implement to achieve our financial and strategic objectives are focused on our long-term growth and health. We believe that this policy effectively mitigates the possibility that our executives couldwould make business decisions to influence stock price increases in the short-term that cannot be sustained over the long-term or couldwould liquidate their equity holdings to capture short-term fluctuations in our stock price.

Board Approval of Transactions. Management must obtain approval from the Board for significant transactions (i.e., mergers, acquisitions, dividends, etc.) that could impact the achievement of previously approved financial performance targets used in the executive compensation program, and the Compensation and Benefit Committee retains the discretion to ignore the impact of certain factors over which management has no control (such as accounting changes or force majeure events) for purposes of determining whether pre-established performance targets have been met.

Compensation and Benefits Committee Interlocks and Insider Participation

During 2010,2012, each of Messrs. Klingaman, CoffeyD'Appolonia, Hutchinson and D’AppoloniaScharp and Ms. Hamilton served on our Compensation and Benefits Committee. None of these directors was a current or former officer or employee of our company,the Company, and none had any related party transaction involving our companythe Company that is disclosable under Item 404 of Regulation S-K. During 2010,2012, none of our executive officers served on the board of directors of any entity that had one or more executive officers serving on our Board.

Compensation and Benefits Committee Report

The Compensation and Benefits Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on this review and discussion, the Compensation and Benefits Committee recommended to the Board that the Compensation Discussion and Analysis, provided below,herein, be included in this proxy statement.statement and incorporated by reference into Westmoreland's Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
Michael R. D’Appolonia, Chairman
Thomas J. Coffey
Gail E. Hamilton

Robert C. Scharp, Chairman
Gail E. Hamilton
Michael G. Hutchinson

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee identifies and recommends individuals qualified to be nominated as members of the Board and considers director candidates brought to the Board by stockholders. The committee also provides oversight on corporate governance matters and provides for the evaluation of Board, committee, and individual director performance, as well as provides oversight on succession planning.

The committee regularly assesses the mix of skills and industry experience currently represented on the Board, whether any vacancies on the Board are expected due to retirement or otherwise, the skills represented by retiring directors, and additional skills highlighted during the Board self-assessment process that could improve the overall quality and ability of the Board to carry out its functions. In the event vacancies are anticipated or arise, the Nominating and Corporate Governance Committee considers various potential candidates for director and employs the same process for evaluating all candidates, including those submitted

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by stockholders. The committee is responsible for ensuring all director nominees undergo a thorough background check prior to nomination or appointment as a director and to review any adverse findings prior to such nomination or appointment. Candidates may come to the attention of the committee through current Board members, professional search firms, stockholders or other persons. In late 2010,2012, we utilized the services of the National Association of Corporate Directorsreceived recommendations from local law firms, public audit firms and similar professionals to help identify potentiala director candidatescandidate for electionappointment to the Board.

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The committee initially evaluates a candidate based on publicly available information and any additional information supplied by the party recommending the candidate. If the candidate appears to satisfy the selection criteria and the committee’scommittee's initial evaluation is favorable, the candidate is contacted by the chairman of the committee for an interview to determine the mutual levels of interest in pursuing the candidacy. The committee is tasked with considering whether the candidate is (i) independent pursuant to the requirements of the NYSE Amex,The NASDAQ Stock Market, (ii) accomplished in his or her field and has a reputation, both personal and professional, that is consistent with our ideals and integrity, (iii) able to read and understand basic financial statements, (iv) knowledgeable as to us and the issues affecting our business, (v) committed to enhancing stockholder value, (vi) able to understand fully the legal responsibilities of a director and the governance processes of a public company, (vii) able to develop a good working relationship with other Board members and senior management and (viii) able to suggest business opportunities to us. If these discussions and considerations are favorable, the committee makes a final recommendation to the Board to nominate the candidate for election.

In considering whether to recommend any particular candidate, including incumbent directors, for inclusion in the Board’sBoard's slate of recommended director nominees, the Nominating and Corporate Governance Committee takes into consideration a number of criteria which include: professional work experience; skills; expertise; diversity; personal and professional integrity; character; temperament; business judgment; time availability in light of other commitments; dedication; conflicts of interest; and public company experience. The committee does not assign specific weights to particular criteria and no particular criterion is a prerequisite for each prospective nominee. The committee focuses on issues of diversity, such as diversity of education, professional experience and differences in viewpoints and skills. The committee does not have a formal policy with respect to diversity; however, the Board and the committee believe that it is essential that the Board members represent diverse viewpoints and strives to ensure that the slate of nominees represents a wide breadth of diverse backgrounds and skill sets to adequately represent the needs of the stockholders. With respect to the nomination of continuing directors for re-election, the individual’sindividual's contributions to the Board are also considered. We believe that the backgrounds and qualifications of our directors, considered as a group, provide a composite mix of skills, experience, and knowledge that will assure that the Board can continue to fulfill its responsibilities.

The Board’sBoard's retirement policy mandates that directors elected to the Board at our annual meeting retire from the Board at the first annual meeting of stockholders following the director’sdirector's 75th birthday. The Board grandfathered all current directors then serving as a director at the time the policy was adopted in November 2010, making the new retirement policy only applicable to current and future directors who will turn 75 after May 2010.

Stockholders may recommend individuals to the Nominating and Corporate Governance Committee for consideration as potential director candidates by submitting their names, together with appropriate biographical information and background materials and a statement as to whether the stockholder or group of stockholders making the recommendation has beneficially owned more than 5% of our common stock for at least a year as of the date such recommendation is made, to the Nominating and Corporate Governance Committee, c/o  Corporate Secretary, Westmoreland Coal Company, 2 North Cascade Avenue, 2nd Floor,9540 South Maroon Circle, Suite 200, Englewood, Colorado Springs, Colorado 80903.80112. Assuming that appropriate biographical and background material has been provided on a timely basis, the committee will evaluate stockholder-recommended candidates by following the same process, and applying the same criteria, as it follows for candidates submitted by others. If the Board determines to nominate a stockholder-recommended candidate and recommends his or her election, then his or her name will be included in our proxy statement for the next annual meeting.

Stockholders also have the right to nominate director candidates directly, without any action or recommendation on the part of the committee or the Board, by following the procedures set forth in Section 2.6, “Advance Notice of Nominees,” in our bylaws. Among other things, a stockholder wishing to nominate a director candidate must give notice to us within the specified time period that includes the information about the stockholder and the proposed nominee required by the bylaws. Any stockholder wishing to nominate a candidate for election to the Board pursuant to the bylaw provision must strictly comply with the procedures specified in Section 2.6 of the bylaws. Candidates nominated by stockholders in accordance with these procedures will not be included in our proxy statement for the next annual meeting.
Other Committees
Executive Committee

During 2010,2012, the Board had two other committeesan Executive Committee. Pursuant to its charter adopted by the Board in addition toFebruary 2012, the committees set forth above: the Executive Committee and the Pricing Committee. The Executive Committee is authorized to act on behalf of the Board during periods between Board meetings. During 2010,2012, the Executive Committee held one informal meeting. The Pricing Committee acts in the event


11


DIRECTOR COMPENSATION
Director Independence
The NYSE Amex listing standards generally define an “independent director” asBoard's goal in designing directors' compensation is to provide a non-employee director who is affirmatively determined by the Board not to have a material relationship with the listed companycompetitive package that would interfere with the exercise of independent judgment. Our Board has determined that each of our directors, with the exception of our Chief Executive Officer, is independent as defined by the NYSE Amex. The independent directors meet during most Board meetings in separate executive session without management present. The Chairman of the Board, who is an independent director, presides over these meetings. Each member of the Audit Committee must, in addition to the independence requirements of the NYSE Amex, meet the heightened independence standards required for audit committee members under the NYSE Amex listing standards, Section 10A of the Securities Exchange Act of 1934, and Rule 10A-3 thereunder. The Board has determined that Messrs. Coffey, Packwood and Scharp and Ms. Hamilton each meet such heightened independence standards.
Communicating with the Board
Stockholders who wish to write directly to the Board on any topic should address communications to the Board of Directors in care of the Chairman, Westmoreland Coal Company Board of Directors, 2 North Cascade Avenue, 2nd Floor, Colorado Springs, Colorado 80903. Our Chairman will report on stockholder communications to the Board and provide copies or specific summaries to directors on matters deemed to be of appropriate importance. In general, communications from stockholders relating to corporate governance will be forwarded to the Board unless they are frivolous, obscene, repeat the same information contained in earlier communications, or fail to identify the author.
DIRECTOR COMPENSATION FOR 2010
The elements of our 2010 director compensation are reflected in the table below. We believe thatenable it is important to attract and retain outstanding non-employee directors. One way we achieve this goal is through a competitive compensation program. Tohighly skilled individuals with relevant experience and that end, in 2010, management worked with Buck Consultingreflects the time and talent required to evaluateserve on the competitiveness of our compensation programBoard. Compensation for our non-employee directors. After evaluating competitive market data on non-employee director compensation, an increase in bothdirectors is reviewed by the annual cash and equity retainers was recommended to our Compensation and Benefits Committee so that Westmoreland’s non-employee director compensation remains competitive with our peer group.the assistance of Pay Governance. In June 2010,February 2013, the Compensation and Benefits Committee recommended and the Board approved the below compensation structure which was approved for fiscal year 2011.2013. All non-employee directors receive the “Annual Cash Retainer” in addition to any other retainers they may be entitled for service as the Chair of a committee or for serving as a member of a committee.
Type of Compensation Amount
Annual Cash Retainer $35,000
Annual Stock AwardsAward Retainer (restricted stock units with one-year vest)
 $50,000 valued at fair market value on date7,000 shares of grantcommon stock
Annual Retainer for Executive Chairman (in addition to other retainers)
 $35,000240,000
Annual Retainer for Lead Independent Director $9,000
Annual Retainer for Committee Chair (in addition to other retainers):
Chair:  
Audit Committee $7,000
Compensation and Benefits Committee $5,0007,000
Nominating and Corporate Governance Committee $3,000
Annual Retainer for Serving on the Audit, C&B or N&CG Committees $5,000 per committee
Attendance at Board or Committee Meeting (in-person)
 $1,500 per meeting
Attendance at Board or Committee Meeting (telephonic)
 $1,000 per meeting
2010
2012 Non-Employee Director Compensation
             
  Fees Earned Or  Stock  Total Compensation 
Name(1) Paid In Cash($)  Awards($)(2)  ($) 
Thomas J. Coffey  70,500   29,996   100,496 
Michael R. D’Appolonia  60,600   29,996   90,596 
Richard M. Klingaman  103,500   29,996   133,496 
William M. Stern  56,500   29,996   86,496 
Frank T. Vicino, Jr.  33,462   29,996   63,458 
Name(1)
Fees Earned Or
Paid In Cash($)
Grant Date
Fair Value
of Stock
Awards($)(2)
Total
Compensation ($)
Michael R. D'Appolonia75,97070,005145,975
Gail E. Hamilton67,05070,005137,055
Michael G. Hutchinson28,20456,57684,780
Richard M. Klingaman79,50070,005149,505
Jan B. Packwood67,75070,005137,755
Robert C. Scharp66,80070,005136,805
Former Directors   
Thomas J. Coffey26,286—26,286
__________
(1)Mr. Alessi, who is our Chief Executive Officer and a director, doesMr. King, who is our Chief Operating Officer, do not receive any additional compensation for histheir services as a director.
(2)2,901 shares of common8,952 restricted stock units were awarded to each non-employee director elected to the Board in May 2010. Sale of the shares is2012. The restricted untilstock units vest on May 2011.22, 2013. The grant date fair value of these awards was $10.34$7.82 per share. 8,025 restricted stock units were awarded to Mr. Hutchinson, who was elected to the Board on August 1, 2012. His restricted stock units vest on May 22, 2013. The grant date fair value of this award was $7.05 per share.

Non-Employee Director Stock Ownership Guidelines

In March 2011, the Board adopted stock ownership guidelines for non-employee directors under which the directors are expected to own Westmoreland equity at least equal in value to three times the annual cash retainer, with a five-yearthree-year timetable to comply.

11

2010 Outstanding Equity Awards at Fiscal Year-End for Directors Due to a change in the director equity grant, the directors now are required to own 15,000 shares of common stock. Presently, none of our non-employee directors have met the ownership guideline.
                 
Option Awards 
          Option    
  Securities Underlying  Securities Underlying  Exercise  Option 
  Unexercised Options (#)  Unexercised Options (#)  Price  Expiration 
Name Exercisable  Unexercisable  ($)  Date 
Thomas J. Coffey  10,000   0   18.01   5/31/11 
   5,000   0   15.31   5/24/12 
   1,762   0   25.14   6/23/16 
Richard M. Klingaman  3,733   0   23.99   2/27/16 
William M. Stern  5,000   0   18.01   5/31/11 
   5,000   0   15.31   5/24/12 
   1,762   0   25.14   6/23/16 

BENEFICIAL OWNERSHIP OF SECURITIES

The following table sets forth information, as of March 1, 2011,2013, concerning beneficial ownership by: holders of more than 5% of any class of our voting securities; directors; each of the named executive officers listed in the Summary Compensation Table; and all directors and executive officers as a group. The information provided in the table is based on our records, information

12

filed with the SEC and information provided to us, except where otherwise noted. The number of shares beneficially owned by each entity or individual is determined under SEC rules, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the entity or individual has sole or shared voting power or investment power and also any shares that the entity or individual has the right to acquire within 60 days of March 1, 20112013 through the exercise of any stock options, the conversion of depositary shares at a conversion ratio of 1.708 shares of common stock for each depositary share, the vesting of restricted stock or upon the exercise or conversion of other rights. Unless otherwise indicated, each person has sole voting and investment power with respect to the shares set forth in the table. The percentage calculations set forth in the table are based on 13,098,53114,287,900 shares of common stock outstanding and 640,516639,840 depositary shares outstanding on March 1, 2011.
                 
  Common  % of  Depositary  % of 
Name of Beneficial Owner Stock  Common  Shares  Depositary 
5% or Greater Equity Holders
                
Jeffrey L. Gendell (1)  3,288,025   25.10%  3,700   * 
Frank Vicino Jr. (2)  188,612   1.42%  108,730   16.98%
Stephen D. Rosenbaum (3)  131,404   1.00%  60,000   9.37%
T. Rowe Price (4)  757,320   5.79%  —   — 
Officers and Directors
                
Thomas J. Coffey (5)  51,696   *   —   — 
Michael R. D’Appolonia (6)  9,448   *   —   — 
Gail E. Hamilton  —   —   —   — 
Richard M. Klingaman (7)  10,343   *   —   — 
Jan B. Packwood  —   —   —   — 
Robert C. Scharp  —   —   —   — 
Keith E. Alessi (8)  81,789   *   —   — 
Kevin A. Paprzycki (9)  8,593   *   —   — 
Douglas P. Kathol (10)  40,867   *   —   — 
John V. O’Laughlin (11)  53,377   *   —   — 
Morris W. Kegley (12)  9,297   *   —   — 
Directors and Executive Officers as a Group (11 persons)  213,511   1.62%  —   — 
2013.
Name of Beneficial OwnerCommon Stock
% of
Common
Depositary
Shares
% of
Depositary
Shares
5% or Greater Equity Holders    
Jeffrey L. Gendell(1)2,683,46818.78%3,700*
Frank Vicino, Jr.(2)181,6121.26%106,33016.6%
Stephen D. Rosenbaum(3)131,404*60,0009.4%
T. Rowe Price(4)772,8005.41%——
Officers and Directors
Michael R. D'Appolonia12,388*——
Gail E. Hamilton2,940*——
Michael G. Hutchinson—   
Richard M. Klingaman13,283*——
Jan B. Packwood2,940*——
Robert C. Scharp2,940*——
Keith E. Alessi(5)206,6641.43%——
Kevin A. Paprzycki(6)27,275*——
Douglas P. Kathol(7)63,220*  
Robert P. King(8)36,005*  
Joseph E. Micheletti(9)14,958*——
Directors and Executive Officers as a Group (11 persons)392,2802.71%——
_________
*Percentages of less than 1% are indicated by an asterisk.
asterisk
(1)The total for Mr. Gendell includes shares of common stock, as well as shares of common stock issuable upon conversion of depositary shares. According to a Schedule 13D/A filed February 11, 2011,January 4, 2013, Mr. Gendell owns 549,000 shares of common stock of which he has sole voting and dispositive power. In addition, Tontine Capital Partners, L.P. and other limited partnerships and limited liability companies that are affiliates of Tontine Capital Partners, L.P. own 2,732,7072,128,150 shares of common stock and 3,700 depositary shares that are convertible into 6,318 shares of common stock. Mr. Gendell is either a managing member of, or a managing member of the general partner of, these limited partnerships and limited liability companies and has shared voting and dispositive power over these shares. All of the foregoing shares may be deemed to be beneficially owned by Mr. Gendell. Mr. Gendell disclaims beneficial ownership of these shares for purposes of Section 16(a) under the Exchange Act, or otherwise, except as to shares directly owned by Mr. Gendell or representing Mr. Gendell’sGendell's pro rata interest in, and interest in the profits of, these limited partnerships and limited liability companies. The address for Mr. Gendell is 55 Railroad Avenue, Greenwich, CT 06830.
(2)According to a Schedule 13D/A filed on February 19, 2010 and a Form 4 filed on December 28, 2012, Mr. Frank Vicino Jr. beneficially owns 108,730106,330 depositary shares of which he has sole voting and sole dispositive power for 86,75084,350 shares, and shared voting and dispositive power over 21,980 shares. The common stock total for Mr. Vicino includes 184,857181,612 common shares issuable upon conversion of depositary shares plus an additional 2,901 sharesshares. The address for which saleMr. Vicino is restricted until May 2011.

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3312 NE 40th Street, Fort Lauderdale, Fl 33308.
(3)The total for Mr. Rosenbaum includes shares of common stock, as well as shares of common stock issuable upon conversion of depositary shares. The depositary shares are convertible into 102,480102,459 shares of common stock. The address for Mr. Rosenbaum is 817 N. Calvert Street, Baltimore, MD 21202.
(4)According to a Schedule 13G/A filed on February 10, 2011,11, 2013, these securities are owned by various individual and institutional investors, including T. Rowe Price Small Cap Stock Fund, Inc. (which owns 591,800 shares, representing 4.5% of the shares outstanding), which T. Rowe Price Associates, Inc. (Price Associates) serves as an investment adviser with power to direct investments and/or sole power to vote the securities. For purposes of the reporting requirements of the Securities Exchange Act of 1934, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities. The principal business address of T. Rowe Price is 100 East Pratt St., Baltimore, Maryland 21202.
(5)Includes 15,0007,043 shares of common stock held by Prudential Retirement, as trustee of the Westmoreland's 401(k) plan, 30,556 shares of common stock that may be purchased upon the exercise of options under our 2002 Plan, 60,000 shares of common stock that may be purchase upon the exercise of options under our 2007 Plan and 2,901 common34,000 shares for which sale isof restricted until May 2011.stock issued under our 2007 Plan that will vest on April 1, 2013.

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(6)Includes 2,9015,848 shares of common shares for which sales are restricted until May 2011.
(7)Includes 2,901 common shares for which sales are restricted until May 2011.
(8)Includes 4,341 common sharesstock held throughby Prudential Retirement, as trustee of the Westmoreland's 401(k) plan, and 70,5567,000 shares of common sharesstock that may be purchased upon exercise of options under equity plans.our 2007 Plan and 6,067 shares of restricted stock issued under our 2007 Plan that will vest on April 1, 2013.
(9)(7)Includes 2,6406,559 shares of common sharesstock held throughby Prudential Retirement, as trustee of the Westmoreland's 401(k) plan, and 4,6667,500 shares of common sharesstock that may be purchased upon exercise of options under the 2007 plan.
(10)Includes 3,938our 2002 Plan, 7,000 shares of common shares held through the 401(k) plan, 7,500 common shares thatstock which may be purchased upon exercise of options under the 2002 planour 2007 Plan and 4,666 common7,752 shares of restricted stock issued under our 2007 Plan that may be purchased upon exercise of options under the 2007 plan.will vest on April 1, 2013. In addition, beneficial ownership includes 9,41013,878 shares of common stock and 14,066 options under various plans that are owned by Mr. Kathol’sKathol's wife. Mr. Kathol expressly disclaims beneficial ownership of these securities, and this disclosure shall not be an admission that hethe reporting person is the beneficial owner of such securities for purposes of Section 16 or for any other purpose.
(11)(8)Includes 5,6561,301 shares of common sharesstock held throughby Prudential Retirement, as trustee of the Westmoreland's 401(k) plan and 44,2999,704 shares of restricted stock issued under our 2007 Plan that will vest on April 1, 2013.
(9)Includes 2,387 shares of common stock held by Prudential Retirement, as trustee of the Westmoreland's 401(k) plan, 5,000 shares of common stock that may be purchased upon exercise of options under equity plans.
(12)Includes 3,344 commonour 2007 Plan and 4,356 shares held through the 401(k) plan and 4,666 common sharesof restricted stock issued under our 2007 Plan that may be purchased upon exercise of options under the 2007 plan.will vest on April 1, 2013.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors and persons who own more than ten percent of a registered class of our equity securities to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC and the NYSE Amex.The NASDAQ Stock Market. To the knowledge of management, based solely on its review of such reports, no person who at any time during the fiscal year ended December 31, 2010,2012, was a director, executive officer, or beneficial owner of more than ten percent of any class of equity securities of Westmoreland Coalthe Company failed to file on a timely basis reports required by Section 16(a) of the Securities Exchange Act of 1934 during the most recent fiscal year. However, while all directors and officers timely filed in 2012 according to our understanding of the interpretations governing Section 16 at such time, we recently amended a number of Form 4s dating back to 2010 to restate the manner in which we are reporting restricted stock units with time-based vesting provisions. After a thorough review and discussion with outside counsel, we felt it appropriate to restate these forms so that stock ownership by all directors and officers was reflected as derivatives in Table 2 at the date of grant and report vesting on Table 1, as opposed to the manner in which grants had been reported on Table 1.

EQUITY COMPENSATION PLAN INFORMATION

At December 31, 2010,2012, we had stock options and stock appreciation rights (“SARs”) outstanding from fourtwo stockholder-approved stock plans and one plan for non-employee directors that was not approved by stockholders. The 2000 Nonemployee Directors’Directors' Stock Incentive Plan is the only plan not approved by stockholders and provided for the grant of stock options to non-employee directors at the time they were first elected to the Board and at the time of each subsequent re-election to the Board. In October 2009, the Board terminated the 2000 Nonemployee Directors’Directors' Stock Incentive Plan and several other stock-holder approved plans. The termination of these plans does not impair the rights of any participant under any award granted pursuant to the plans. All new equity issuances, whether to directors or officers, are made out of our stockholder-approved 2007 plan.
             
          Number of Securities 
          Remaining Available for Future 
  Number of Securities to  Weighted Average  Issuance Under Equity 
  be Issued Upon Exercise  Exercise Price  Compensation Plans (Excluding 
  of Outstanding Options  of Outstanding Options  Securities Reflected in Column (a)) 
Plan Category (a)  (b)  (c) 
Equity plans approved by security holders  243,590(1) $19.96   288,261(3)
Equity plans not approved by security holders  75,000(2) $15.85   0 
Total  318,590  $18.99   288,261 
Plan Category
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options
(a)
Weighted Average
Exercise Price
of Outstanding Options
(b)
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in
Column (a))
(c)
Equity plans approved by security holders193,123(1)$21.18164,683(3)
Equity plans not approved by security holders0(2)$——
Total193,123$21.18164,683
__________
(1)Excludes SARs to acquire 102,86788,967 shares of common stock with exercise prices above $11.94,$9.34, the closing price of a share of our common stock as reported on the NYSE AmexThe NASDAQ Stock Market on December 31, 2010.30, 2012. At December 31, 2010, 139,2672012, 88,967 SARs were outstanding with base prices between $19.37 and $29.48.
(2)Excludes SARs to acquire 16,067 shares of common stock with exercise prices above $11.94,$9.34, the closing price of a share of our common stock as reported on the NYSE AmexThe NASDAQ Stock market on December 31, 2010.30, 2012. At December 31, 2010,2012, 16,067 SARs were outstanding with base prices between $23.985 and $25.14.
(3)Number of securities remaining available for future issuance reflects the reservation of 200,758416,032 shares for issuance to certain employees and directors upon the completion of certain time-based and performance-based vesting restrictions related to restricted stock units issued on July 1, 20092010, April 1, 2011, June 1, 2012 and July 1, 2010.May 22, 2012.

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Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS
Westmoreland Coal Company has experienced dramatic changes since its inception in 1854. Originally focused on underground mining
The purpose of this Compensation Discussion and Analysis (“CD&A”) is to provide stockholders with a description of the material elements of our Company's compensation program for our executive officers, including our executive officers named in the Appalachian Basin, we have since divested ourselves of all eastern mining properties and assets, movedtables below, referred to as our headquarters to Colorado and purchased five surface coal mining operations. Since 2001, we have dramatically recreated ourselves as an energy company focused on niche coal markets where we take advantage of long-term coal contracts and rail transportation advantages. To understand our companyNamed Executive Officers, for fiscal year 2012, and the way inpolicies and objectives which we compensate our executives, itsupport the program. This discussion is important to understand our business environment oversupplemented by compensation tables and accompanying narratives that follow below.

The CD&A is divided into the last several years,following sections:

Executive Summary
Components of the recent struggles that we have facedExecutive Compensation Program for 2012
Compensation Program and Governance
Role of the Compensation Consultant and the progress we have made towards bringing the company to profitability. CEO in Compensation Program
Components of Executive Compensation in Fiscal Year 2012
Named Executive Officer Compensation in Fiscal Year 2012
Realized Pay vs. Reported Total Compensation
Review of Performance-Based Compensation
Compensation for Fiscal Year 2013

Executive Summary

We believe that fully understanding who2012 was a strong year for the Company in a challenging environment. The Company increased its operating income 172%, despite the adverse impacts from a slowing worldwide economy and a difficult regulatory environment. Sales from our new Kemmerer Mine fueled this growth, and the Company finished 2012 with record Adjusted EBITDA of $105.8 million, a 44% increase over 2011. Westmoreland generated increased cash flow that allowed the Company to deleverage the business and extinguish approximately $45.0 million in debt. Standard & Poor's Ratings Services upgraded Westmoreland's corporate credit rating and issue-level rating on its senior secured notes in late 2012 to B- from CCC+. A stable outlook was assigned to all ratings. In addition, Moody's Investors Service, Inc. upgraded the issue-level rating on the senior secured notes to Caa1 from Caa2 in February 2013, while also changing the outlook on the company from stable to positive. Westmoreland was the only company in the coal space to receive an upgrade in 2012.

Key business highlights for Westmoreland in 2012 include:

We acquired and integrated the Kemmerer Mine, which created additional revenue, cash flow and operating income;
We successfully closed on the issuance of add-on notes to our senior secured notes in January 2012, which financed the Kemmerer transaction;
We entered into a $20.0 million revolving credit facility with The Private Bank, increasing the Company's liquidity;
We had a commendable safety year achieving a reportable incident rate 32% below the national average, which included safety award recognition for our mines and our power facility;
We forged good working relationships with our union workforces, highlighted by a new six-year agreement with the UMWA at our Kemmerer Mine, a four-year agreement with the IUOE at our Savage Mine and a six-year agreement with the IUOE at our Colstrip Mine;
We formally announced our succession plan for our CEO role in October, the transition of Keith Alessi from CEO to Executive Chairman in April 2013 and Bob King from COO to CEO at the same time;
We continued our dedication to environmental stewardship, highlighted by the receipt of a state-wide reclamation award at our Jewett Mine for innovative techniques in stream channel restoration; and
We focused on the long-term viability of the business through the acquisition of 56.4 million tons of new coal resources at our Colstrip Mine.

Aligned with the Company's strong 2012 performance and significant business accomplishments, the amount of the annual incentive compensation earned by each of the named executive officers for 2012 paid out at 138% of targeted levels. The above-target payout was a result of the Company's free cash flow performance significantly exceeding the performance target the Board established for 2012. The value of long-term incentive compensation awards remained at a static percentage in 2012, with any increase in value a reflection in an increase in base salary. In 2012, base salaries were largely increased at a modest inflationary rate. Mr. Paprzycki's base salary increased 6% to help better align his base pay with peer group data and the responsibility of his position. Mr. Alessi's base salary increased 16% in 2012 to reflect his lack of a base salary increase since he joined the company in 2007.


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Table of Contents

Factors Creating Alignment between Pay and Performance and Balancing Risk

Our pay programs strongly support our key business objectives and are aligned with the success of our stockholders.  Accordingly, if our stockholder value declines, so does the compensation delivered in the form of equity to our executives.  Further, as an executive's level of responsibility within our organization increases, so does the percentage of total compensation that we arelink to performance. The chart below shows base salary and annual and long-term incentive compensation as a companypercentage of total compensation opportunity (on average and using target awards for fiscal 2012) for our Chief Executive Officer and other named executive officers. 

            
Westmoreland's executive compensation program includes the steps we have taken overfollowing features designed to maintain an appropriate alignment between corporate performance and incentives to perform and deliver competitive total compensation, while also protecting the lastCompany against inappropriate risk-taking and conflicts among the interests of the Company, its stockholders and its executives:
A substantial portion of each executive's total compensation (cash plus long-term incentives) is performance-based, varying from approximately 70 percent for the CEO to a range of 50 to 70 percent for the other named executive officers; 
An incentive compensation program that utilizes several years to position ourselves to forge ahead into the next decade will provide insight into our past compensation practicesperformance-based metrics, focused on growth in EBTIDA and the steps wefree cash flow; 
Stock ownership guidelines that are takingdesigned to align the payfinancial interests of our executives with creating long-term stockholder value.those of the Company's stockholders; 
Historical Business EnvironmentA Compensation and Benefits Committee of experienced and independent individuals, who are assisted by an independent compensation consultant that provides no other services to the Company; 
OurNo tax gross-up provisions in any compensation plans;
No employment agreements or individual change-in-control agreements with any employees, other than Mr. Alessi's Transition Agreement; and
No excessive perquisites such as company aircraft or car leases, other than for vehicles used at mine operation sites.

We believe our executive compensation programs, as more fully described in this CD&A and accompanying tables contained in this Proxy Statement, are structured in the best manner possible to support our Company and grow our business is unusual in that a high proportion ofprofitably for many years, as well as to support our revenues, and therefore cash flows, are set or limited by contractual relationships. As such, management must focus on cost control, standardization, and efficiency in order to generate cash and profits. Along with these long-term contracts, we have the ongoing responsibility for substantial post-retirement health care liabilities associated with our discontinued Appalachian Basin underground mining operations. We have been challenged over the past years with generating sufficient cash at our operating subsidiaries to fund both the cost of corporate overhead and these additional post-retirement liabilities. In 2007, we hired Mr. Keith E. Alessi as Chief Executive Officer (“CEO”) at a difficult time in our history. At that time, we were not producing cash flows sufficient to fund our operationsculture and the substantial legacy costs. The Board charged Mr. Alessi with standardizing our operations, implementing procedures and controls, reducing corporate overhead, stabilizing cash flow and setting a new, focused strategic vision. From 2007 through the end of 2009, management radically overhauled the business through staffing changes, elimination of unnecessary perquisites and compensation structures, the redesign or termination of certain benefit programs, settling of various outstanding litigation matters, consolidating and leveraging benefit programs across all business units, negotiating favorable modifications to certain agreements with our union partners, standardizing and streamlining financial and business reporting and restructuring many of our major debt arrangements.traditions that have guided us for nearly 150 years.
Fiscal 2010 — The Year in Review
Fiscal year 2010 was a notable year at Westmoreland Coal Company. We improved operating income $52.3 million year-over-year. This significant improvement in performance was a direct result of the implementation of key cost-saving initiatives over the preceding three years. In addition, each of our mines recorded improved safety performance measured by reportable incident rates for surface coal mines that exceeded the national average. Over the course of the year, we cut our liabilities and decreased cash spend through the successful implementation of a modernized prescription drug plan for our heritage retirees. In addition, we also realized material cost savings of efforts from 2008 and 2009 through streamlined processes, lower overall benefit expenses, the accomplishment of major information technology standardization projects, lowered legal costs,Significant Compensation Actions During 2012

During 2012 and the commencementfirst two months of a new coal supply contract at2013, the Rosebud mine. We undertook a number of value-add projects, including enhanced operationalCompany and financing reporting, an overhaul of the budgeting process and the commencement of reserve acquisition to extend the life of our mines.
Fiscal 2011 — The Year Ahead
Historically, the Compensation and Benefits Committee (the “Committee”) recognizedmade the unique difficulties presented by our business modelfollowing decisions and that traditional incentive measurements were not always an appropriate measure for incentive compensation. took the following actions with respect to the Company's executive compensation program:

As such, individual project-based accountabilities for senior managers were set and a large percentage of cash incentive bonuses were tied to achievement of these short-term goals during the 2008 through 2010 period. To better align the management team with the long-term interestspart of the stockholders, we performed a dramatic overhaulcommittee's annual review of the executive compensation programpeer group, we removed several companies from this group and added several new companies to ensure that each of the peer companies in the group remain reasonably similar to us in terms of key metrics, such as revenues and employees, as well as added companies to the peer group to better reflect the public companies with whom we compete for talent; 
Adjusted the assistance of Buck Consulting. The new program places a larger portion of total compensation at risk under a long-term incentive plan that is both time and performance based. The new program also tiesmetrics used in the annual incentive program for 2012 to key metrics that drive management behavior towards creating operating incomeinclude EBITDA and free cash flowflow; and 

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Table of Contents

Thoroughly reviewed and set the achievementcompensation package for Mr. King who began employment with the Company in March 2012 as President and COO with an eye toward his eventual succession to the CEO role, which compensation package was 70% performance-based and included an immediate grant of identified strategic business objectives. In all instances,stock to ensure his alignment with stockholder success.

Components of the newExecutive Compensation Program for 2012

Throughout this CD&A, the individuals who served as Chief Executive Officer and Chief Financial Officer during fiscal year 2012, as well as the other individuals included in the “Summary Compensation Table” on page 28 of this proxy statement, are referred to as the “named executive officers.” They were (i) Keith Alessi, our Chief Executive Officer, (ii) Kevin Paprzycki, our Chief Financial Officer and Treasurer, (iii) Robert P. King, our President and Chief Operating Officer; (iv) Doug Kathol, our Executive Vice President, and (v) Joseph Micheletti, our Senior Vice President - Coal Operations.

Our executive compensation program is designed to drive management behavior toward creating stockholder value without imprudent risk-taking behavior. In addition, Buck Consulting assisted the Committee in creating a more appropriate peer group that we are using to better align total executive compensation packages to the market median.consists of three main elements.

14

Element of Executive Officer
Compensation
DescriptionPurpose
Base Salary
Ongoing cash compensation based on the executive officer's role. Salary levels are evaluated annually and are based on each executive's role and responsibility, applicable experience, unique skills, past performance, and future potential with us.
Individual increases to base salary are not guaranteed for our named executive officers and are provided only at the committee's discretion after a review of an individual's performance and relevant market data.
•    Provide a degree of financial certainty and stability.

•    Retention and attraction of executive talent.

•    Recognize competitive market conditions and reward individual performance through periodic increases.
Annual Incentive AwardThe annual incentive plan is intended to provide compensation for performance based on the achievement of strategic goals and objectives. The incentive pay is based on financial performance and personal performance, while executives with direct mining operational responsibility also have a safety component. If the thresholds for the financial and safety components are not met, then no payout is made for that particular component. 
•    Motivate executive officers to achieve key annual goals and position the Company for long-term success.

•    Reward executive officers for individual performance and overall Company performance during the year.
Long-Term AwardsLong-term incentive awards are designed to align the interests of our executives with those of our stockholders. Awards typically are granted annually under the Company's equity incentive plan. The performance-based awards vest upon the achievement of a preset three-year cumulative free cash flow measure. The number of shares issued is based on a percentage of the executive's base salary divided by the stock price on the date of grant.
•    Provide an incentive for executive officers to achieve long-term, sustainable success for the Company and to create stockholder value.

• Attract, motivate, reward and retain executive talent.
Post-Employment BenefitsWe have a severance policy that provides, under certain circumstances, executives with 12 months of base pay, in addition to 9 months of outplacement assistance and 12 months of health benefits at the same cost share as active employees. Payment is triggered upon: involuntary termination that is not for cause; the sale of a facility or division; or a position being relocated by at least fifty miles. Otherwise, we do not guarantee or provide any other compensation or benefits to our executives upon their departure.
•    Provide a degree of financial certainty and stability.

•    Retention and attraction of executive talent.

•    Recognize competitive market conditions


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Compensation Program and Governance

General Compensation Practices and Philosophy

Based on a holistic review, and overhaul of the compensation program in 2010, our philosophy for total compensation packages for fiscal year 2011 is significantly different than in prior periods. Our prior approach was reflective of the state of the company and the need to incent management to bring the company through the difficult period of turning around its financial performance. The new compensation philosophy is forward-looking in nature and is intended to more closely align the performance of the companyCompany to that of enhancing stockholder value. Our compensation program is intended to retain and reward our executives and is guided by several key principles:

Design a program that aligns with long-term stockholder interests through the use of equity awards;
Target compensation is at median of peer group, with the long-term goal of bringing lower compensated executives to target levels as they continue to gain experience;
Link pay to performance by making a substantial portion of total executive compensation variable or “at risk” over the short- and long-term; and
Provide a compensation program that emphasizes direct compensation as opposed to perquisites and other benefits.

Westmoreland now bases its total compensation strategy on a moderate growth model. As a moderate growth company, Westmoreland maintainsseeks to maintain salaries at or near marketpeer group medians, shiftsprovides a portion of short-term incentive to long-term incentivebased on financial, safety and increases thepersonal goals and provides a significant percentage of pay in the form of long-term incentives as a percentage of total compensation to bring total pay to median.incentives. Our named executive officers remainare at-will employees and do not have employment agreements, including the CEO. In addition, we do notagreements.

The Westmoreland benefits philosophy is to provide any perquisites to our executivesofficers with protection and our executives participate in the standardsecurity through health and welfare, programsretirement, disability insurance and life insurance programs. During fiscal year 2012, the management team was eligible to receive the same benefits that are consistent with industry standards. Our compensation programgenerally available to other Westmoreland employees. In addition to the company-wide benefits, the Board elected to provide executive physical examinations to officers starting in fiscal year 2012, for which we cover the costs that are not otherwise covered under each executive officer's chosen health plan. We believe that the executive physical is intendeda prudent measure to attract, retain, reward, and motivatehelp ensure the health of our executivesexecutives. The executive physical is a benefit generally provided by our peer companies and is guided by several key principles:available at a reasonable cost to Westmoreland.

DesignIn 2012, our disability benefit was capped at a programcertain dollar threshold, which did not allow the management team to have 60% disability pay replacement as did the general employee population. As such, for 2013, Westmoreland is providing additional long-term disability insurance to the management team so that is simple, easy to understand, incents performance and aligns with long-term stockholder interests through the useteam can achieve the same percentage of equity awards;
disability coverage as non-executives.
Target compensation levels set at or near market median of our peer group;

Link pay to performance by making between 30 and 43 percent of total executive compensation, depending on the executive, variable or “at risk” over the long-term; and
Provide a compensation program that emphasizes direct compensation as opposed to perquisites and other benefits.
Stock Ownership Guidelines and Clawback Policies
In order to better
To align the interests of our executive management team with the interests of our stockholders and to promote our commitment to sound corporate governance, the Compensation and Benefits Committee approved stock ownership guidelines in 2011. The executive management team is expected to be in compliance with these guidelines within five years of becoming subject to the policy. The ownership requirement for our named executive officers is calculated as a multiple of base salary as follows:

Multiple of Base
Executive LevelMultiple of Base Salary
CEO3.0x
COO3.0x2.0x
CFO, EVP and SVP1.5x1.5x
Other named executive officers1.0x1.0x

At this time, the Committee has not adopted a clawback policy for the executive management team. While in full support of such a policy, in concept, the Compensation and Benefits Committee is waiting for more formal guidance from the Securities and Exchange Commission in response to the recent Dodd Frank legislation before adoption and implementation of a formal policy.
Compensation Methodology
Peer Comparisons and Survey Data

In 2010, we developed a modified peer group based on criteria that representsorder to facilitate an understanding of trends and comparative practices in executive compensation generally and with respect to the characteristics that definespecific levels and mix of target compensation opportunities provided to our executives as well as program design in the markets inmarket within which we compete for top talent, rather than simply the markets in which we compete for business.our Compensation and Benefits Committee considers executive compensation comparative data of our peer group companies. In creating our peer group, we noted that there are very few comparably-sized publicly-tradedpublicly-

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traded coal companies to align ourselves with for comparative purposes. In addition, a third of our executive team comes from segments other than mining. With these and other factorsThe companies in mind, we identified two characteristics that we believe wouldour peer group have the greatest influence on how we perform, as well as on the leadership talent that we need to drive outstanding performance. First, we are capital-intensive and second, we maintain long-term contracts as partat least one of the business relationship that is establishedfollowing characteristics:

Are focused on comparable industry (energy-related), specifically, coal, mining and oil and gas-related companies;
Have a comparable size in relation to revenue and employees; and
Are publicly-traded Colorado headquartered companies with customers. Based on such characteristics,whom we identifiedcompete for top public company talent.

Our Compensation and Benefits Committee reviews the belowcomposition and appropriateness of our peer group for 2010companies annually. Following a review in early 2013, the committee determined, with the assistance of Pay Governance, that our compensation consultant. The companies included in the2012 peer group differ from those listed in the indices usedcompanies needed to prepare our stock price performance graph, which can be found in our 2010 Annual Report to Stockholders. We believe that theupdated for executive compensation comparative purposes. The 2013 peer group companies are listed below, when used in conjunction with third-party compensation survey information, enabled us to provide an accurate assessment of market practices for the compensation of our executive management team.below:

15


         
Name FY 2009 Net Income in Millions ($)  FY 2009 Revenues in Millions ($) 
Atwood Oceanics  256   650 
Calgon Carbon Corp.  39   412 
Drew Industries Inc.  -24   398 
Dril-Quip Inc.  105   540 
Forward Air Corp.  10   417 
Genessee & Wyoming Inc.  60   545 
Gulf Island Fabrication Inc.  21   311 
Hecla Mining Co.  68   312 
Heico Corp.  45   538 
Hornbeck Offshore Services Inc.  50   386 
Horsehead Holding Corp.  -27   216 
James River Coal Co.  51   681 
Pioneer Drilling Co.  -23   325 
Stillwater Mining Co.  -9   394 
Superior Well Services Inc.  -80   399 
Union Drilling Inc.  -12   169 
Unit Corp.  -55   703 
         
Westmoreland Coal Company  -29   443 
Access Midstream PartnersAtwood OceanicsCal Dive InternationalDril-Quip
HEICOOxford Resources PartnersParker Drilling Co.Pioneer Energy Services
Bill Barrett Corp.BioFuel EnergyForest OilHecla Mining
Intrepid PotashMolycorpPenford CorporationStillwater Mining
Genesee & WyomingRhino Resource PartnersInnospecThompson Creek Metals

In 2010,2012, we used Economic Research Institute CompAnalyst and Hay GroupCompAnalyst market data as additional comparison points. Total market data was compared with individual pay for each position, and “compra-ratios” were determined. Compra-ratios are an individual’sindividual's current salary divided by the reference point of the market data. For example, if an individual’sindividual's salary is $125,000 and the mid-point of the market data for that position was $100,000, the compra-ratio for that individual would be 125%, meaning such person is earning 25% more than the average of the market.

Internal Pay Equity

The Compensation and Benefits Committee considers internal pay equity when making compensation decisions for the executive management team. However, the Committeecommittee does not use a fixed ratio or formula when comparing compensation among executive officers. Our CEO is compensated at a higher level than other executive officers due to his significantly greater level of experience, accountability and responsibility. Mr. Alessi’s targetedAlessi's total cash compensation was 3.63.25 times greater than the average of our four other named executive officers which differential includes his 2010 discretionary bonus.in 2012. We feel that Mr. Alessi’sAlessi's cash compensation for 20102012 as compared to the other named executive officers is appropriate based on his significant contributionsrole in refocusing and improving our business operations since 2007.leading the team to meet the Board's strategic objectives for 2012. Our next highest paid named executive officer makes 1.32.29 times our lowest paid named executive officer. We believe such internalWhile this pay equity highlightsis more disparate than in past years, it reflects the reasonablenesshiring of Mr. King as the CEO successor, whose pay was targeted at a higher level than the other members of executive management.

Federal Income Tax and Other Consequences

Under Section 162(m) of the dispersionInternal Revenue Code, we may not be able to deduct certain forms of paycompensation in excess of $1,000,000 paid per year to our named executive officers.
officers who are employed by us at year-end. The Compensation Administrationand Benefits Committee believes that it is generally in our best interest to satisfy the requirements for deductibility under Internal Revenue Code Section 162(m). Accordingly, the Compensation and Benefits Committee has taken appropriate actions, to the extent it believes feasible, to preserve the deductibility of annual incentive and long-term performance awards. However, notwithstanding this general policy, the Compensation and Benefits Committee also believes that there may be circumstances when our interests are best served by maintaining flexibility in the way compensation is provided, whether or not compensation is fully deductible under Internal Revenue Code Section 162(m). Accordingly, we reserve the authority to award non-deductible compensation in appropriate circumstances. Further, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued thereunder, no assurance can be given, notwithstanding our efforts, that compensation intended by us to satisfy the requirements for deductibility under Section 162(m) does in fact do so.

Role of Managementthe Compensation Consultant and the CEO in Determining Executive Compensation Program

Compensation Consultant

The Committee establishes overall compensation strategy to ensure that our executives are rewarded appropriatelyCompensation and that executive compensation supports our business strategy and objectives. At the beginning of the calendar year, each executive sets personal performance goals, which are approved by the CEO for the executive team and by the Committee for the CEO, targeted to positively influence stockholder value. At the end of the calendar year, performance is evaluated by the CEO, for the other named executive officers, and by the Board, for the CEO, against the established goals and individual accomplishments during the year. The Committee reviews and approves the compensation, including base salaries, annual incentives, long-term incentives, and other benefits, of our named executive officers. The Committee also reviews and approves the compensation for other key executives who are not identified in this report. The annual incentive bonuses are paid out during the first quarter of the calendar year while increases to base salaries occur at the beginning of the second quarter. Long-term equity incentives, which are based on management tiers, were awarded on July 1, 2010. However, on a going-forward basis, long-term equity incentive awards will be issued on April 1st.
While theBenefits Committee has the responsibilityauthority to monitorretain outside counsel, consultants and approve allother advisors to assist it in evaluating compensation or in otherwise discharging its duties and responsibilities. In October 2012, the Compensation and Benefits Committee engaged Pay Governance (the “Consultant”) to advise the committee regarding the

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structuring of executive compensation for our named executive officers, management2013. The Consultant also plays an important roleassists the committee in determining appropriate peers for purposes of comparing (but not benchmarking) market compensation, and provides other related services. The committee has authorized Pay Governance to interact with management on behalf of the committee, as needed in connection with advising it. In prior years, the committee had also retained the services of compensation consultants to assist it in fulfilling its duties.
The Consultant has not provided any services for the Company other than the services it provided to the Compensation and Benefits Committee. After considering, among other things, the absence of any business or personal relationship between the Consultant and any member of the committee or any executive compensation. officer of the Company, the committee has concluded the Consultant's work does not raise any conflict of interest.

Determining Executive Compensation

At the Committee’s request, management recommends appropriate company-wide and mine and power financial and non-financial performance goals. After review and discussion, the Committee adopts performance goals for the coming year. Management works with the Committee to establish the agenda and prepare information for each Committee meeting. In addition, the CEO assists the Committee by providing his evaluationFebruary 2013 meeting of the performanceCompensation and Benefits Committee, it made determinations regarding 2012 and 2013 executive officer compensation. The following table summarizes the roles of the Compensation and Benefits Committee, the Consultant, and executive officers who report directly to him, and recommending compensation levels for such officers. The Committee also has a process for soliciting from the CEO an assessment of his own performance, whichmanagement in conjunction with each director’s independent analysis of the CEO’s performance, is used to assist the Committee and the Board in their evaluation of the CEO’s performance. The CEO is not present during the Committee and Board review and assessment of the CEO’s performance evaluation.

16

Role of Compensation Consultants
The Committee retained Buck Consulting in February 2010 to serve as the Committee’s compensation consultant to assist the Committee in thoroughly reviewing our executive compensation program for future periods. Buck Consulting provided high-level guidance to the Committee in early 2010 in determining the total compensation packages for executive management. In addition, throughout 2010, Buck Consulting assisted management and the Committee in developing a modified total compensation philosophy and a more appropriate compensation package for the executive management team.decision making.
Components of the Executive Compensation Program for 2010
Our executive compensation program consists of three main elements:
Base Salary
In determining base salaries, each executive’s role and responsibility, applicable experience, unique skills, past performance, future potential with us, salary data for similar positions (compra-ratios), and internal equity are considered. The Committee is guided in its base salary determinations by a merit matrix that takes into account compra-ratios and performance. This matrix, which is utilized for all employees and includes our named executive officers, allows the Committee to approve recommended base pay increases out of the available merit pool, which was set at 3.0% for 2011. For example, an outstanding performing executive who has a low compra-ratio, such as 75%, would be eligible for a 4.5% merit increase, while, conversely, a lower performing executive with a high compra-ratio, such as 125%, would generally not be eligible for a merit increase. Individual increases to base salary are not guaranteed for our named executive officers and are provided only at the discretion of the Committee after a review of an individual’s performance and relevant market data.
Base Salaries for 2010
Responsible Party Roles and Responsibilities
Compensation and
Benefits Committee
of the Board of Directors

The committee is currently
comprised of four
Independent Directors
and reports to the Board.
•    Retains independent counsel, consultants and other advisers to assist it in evaluating compensation or in otherwise discharging its responsibilities.
• Works with the CEO to set performance goals at the beginning of each year targeted to positively influence stockholder value and evaluates CEO performance in relation to those goals and overall performance of the Company.
• Authority to determine and approve compensation for our executive officers.
• Reviews and approves overall compensation strategy and all programs in which our executive officers participate, including equity, bonus (including all performance-based goals), retirement and other benefit plans.
• Reviews compensation philosophy, metrics and amounts, and the results of stockholder say-on-pay votes, before establishing executive compensation.
• Considers comparable metrics in the Company's peer group.
Consultant to the Compensation
Committee
Pay Governance, as an independent
consultant retained directly by the
committee, provides consulting advice
on matters of governance and
executive compensation
• Provides advice and opinion on the appropriateness and competitiveness of our compensation programs relative to market practice.
• Performs all functions at the direction of the committee.
• Attends Compensation and Benefit Committee meetings.
• Provides advice regarding compensation decision-making governance.
• Provides market data, as requested.
• Consults on various compensation matters and recommends compensation program designs and practices.
• With the cooperation of management, works to conduct an assessment of the risks arising from our compensation programs.
• Confers with CEO and VP of HR on compensation levels, incentives and goals.
Chief Executive Officer
With the support of other members
of the management team
• Works with the other executive officers to set personal performance goals at the beginning of each year targeted to positively influence stockholder value.
• Reviews performance of the other executive officers against the set goals and makes recommendations to the committee with respect to their compensation.
• Confers with the committee concerning design and development of compensation and benefit plans for Company employees.
• Recommends appropriate company-wide and mine and power financial and non-financial performance goals for the annual incentive program.

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Table of Contents


Components of Executive Compensation in Fiscal Year 2012

Base Salaries

2012 Base Salaries for Named Executive Officers
   
NamePositionPositionBase Salary
Keith E. AlessiCEO and PresidentChief Executive Officer$600,000/ $400,0001700,000
Robert P. KingPresident and COO$425,000
Douglas P. KatholExecutive Vice President$212,672/ $275,0002287,513
Kevin A. PaprzyckiChief Financial Officer and Treasurer$212,175/ $217,1753260,000
John V. O’LaughlinJoseph E. MichelettiSenior Vice President —- Coal Operations$225,508
Morris W. KegleyGeneral Counsel$215,671230,603
1Mr. Alessi’s base salary was set at $600,000 through June of 2010. In June of 2010, Mr. Alessi’s base salary was adjusted to $400,000 to reflect the change in his role with us.
2Mr. Kathol’s base salary was set at $212,672 through June of 2010. In June of 2010, Mr. Kathol’s base salary was increased to $275,000 to reflect his promotion to Executive Vice President.
3Mr. Paprzycki’s base salary was set at $212,175 through June of 2010. In June of 2010, Mr. Paprzycki’s base salary was increased $5,000 to reflect the addition of the Treasury role.

Annual Incentive Compensation
The annual incentive plan is intended to provide variable compensation awarded for performance based on the achievement of strategic goals and objectives. The incentive pay is based on financial performance and personal performance, while executives with direct mining operational responsibility also have a safety component. If the thresholds for the financial and safety components are not met, then no payout is made for that particular component.
The annual incentive plan goals for fiscal year 20102012 were set by the Compensation and Benefits Committee in February 20102012 and encompassed the following:
GOALCOMPONENTSPERCENT OF TOTAL BONUS
FinancialThreshold =
Goal: Annual budgeted operating incomeEBITDA and free cash flow of the mine/ divisionWestmoreland Coal Company
• 50% payout upon meeting 80% of goal (threshold)
• 100% payout upon meeting 100% of goal (target)
• 200% payout upon meeting 120% of goal (maximum)
•
•
40% for mine operationalMr. Micheletti
• 60% for other executives
55% for corporate office executives
•    50% of goal will be paid out upon meeting the threshold
•    Achievement in excess of the threshold is prorated
SafetyThreshold =
Goal: Annual National Mine Safety and Health Administration (MSHA) average for reportable incident rate for surface mines in the coal industry
• 50% payout upon meeting 100% of goal (threshold)
• 100% payout upon meeting 125% of goal (target)
• 200% payout upon meeting 150% of goal (maximum)
•
•
30% 20% for mine operational executives
Mr. Micheletti
• Not applicable for corporateother executives
•    50% of goal will be paid out upon meeting the threshold
•    Achievement in excess of the threshold is prorated
IndividualThe percentage payout is evaluated on achievement of certain individual goals established between the executive and the CEO (or, in the case of the CEO, between him and the Board) and will be based on the executive’sexecutive's overall performance. An executive may receive greater than 100% payout for the individual goal based on exemplary performance, as approved by the Compensation and Benefits Committee, or in the case of the CEO, by the Board. The Board has great flexibility in exercising discretion relating to the individual AIP component and has the ability to reward executives based on the results of the year, notwithstanding that a particular executive did not meet the specific goal laid out at the beginning of the year.•
•		30% for mine operational executives
45% for corporate office executives   40% of AIP

17


Target vs. Actual Annual Incentive Bonuses
Paid for 2010 Performance
                        
 Percentage of Target Percentage of Percentage of   
Target vs. Actual Annual Incentive Bonuses
Paid for 2012 Performance for Named Executive Officers
Target vs. Actual Annual Incentive Bonuses
Paid for 2012 Performance for Named Executive Officers
 Percentage of Total Target Total Cash Individual Bonus Target Financial Target Safety   
Name Compensation Incentive Bonus Approved Bonus Approved3 Bonus Approved4 Total Cash Bonus 
Percentage of
Annual Base
Salary in 2012
Target Total
Cash Incentive
Bonus(1)
Percentage of
Target
Individual
Bonus
Approved
Percentage
of Target
Financial
Bonus
Approved(2)
Percentage
of Target
Safety Bonus
Approved(3)
Total Cash
Bonus
Keith E. Alessi  70%/100%1 $404,614  235%  135% NA $882,240 100%$700,000200%138%—$1,141,423
Douglas Kathol  40%/50%2 $113,106  100%  135% NA $134,805 
Robert P. King100%$318,750100%138%—$392,302
Douglas P. Kathol40%$115,005100%138%—$141,543
Kevin A. Paprzycki  40% $85,568  100%  135% NA $101,994 35%$91,000100%138%—$111,998
Morris W. Kegley  40% $78,700  100%  135% NA $93,799 
John V. O’Laughlin  50% $112,119  0%  63%  114% $66,465 
Joseph E. Micheletti35%$80,711100%138%128%$103,656
__________

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1
(1)In June of 2010, Mr. Alessi’s total compensation package shifted, resulting in less base salary and more compensation at-risk.King began working for Westmoreland on March 26, 2012. As such, his percentage oftarget AIP payout was increased from 70%is prorated to 100%.reflect his start date.
2(2)In June of 2010, Mr. Kathol was promoted to Executive Vice President. As such, his percentage of AIP payout was increased from 40% to 50%.
3In 2010,2012, the annual budgeted operating income thresholdEBITDA goal and free cash flow goal for Messrs. Alessi, Kathol, KegleyWestmoreland Coal Company was $116.6 million and Paprzycki$51.9 million, respectively. The 2012 actual EBITDA and free cash flow were $105.9 million and $72.4, respectively. The weighted actual performance for corporate financial was $14.304 million. The 2010 actual operating income was $20.922 million. While the actual operating income would have brought the payout to 200%, management recommended and the Committee approved105% of goal, resulting in 138% financial payout. See page 36 for a 135% payout reflecting certain one-time adjustments being backed out. In 2010, the annual budgeted operating income threshold for Mr. O’Laughlin was $32.006 million. The 2010 actual operating income was $32.922 million.reconciliation of non-GAAP financial numbers.
4(3)In 2010,2012, the average national reportable incident rate was 1.83,1.65, which is a calculation based on total hours worked and reportable incidents. In 2010,2012, the average reportable incident rate for Westmoreland as a whole was 1.12, 32% below the minesnational average. This safety performance resulted in 128% payout. In 2012, the safety goals were only relevant to Mr. O’Laughlin oversaw was 1.31.Micheletti.

Long-Term Incentive Compensation
Long-term incentive awards are designed to align the interests of our executives with those of our stockholders. In 2010,
On June 1, 2012, we issued time-based restricted stock units with a three-year vest on July 1, 2010 based on a tiered system that provides an identical number ofand performance-based restricted stock units to executives in that tier, which awards represent between approximately 20% and 40% of such executive’s base salary compensation. To determine the number of restricted stock units awarded towith a named executive officer in a given tier, the Committee multiplies the assigned percentage of base salary compensation, such as 20%, times the average of the base salaries of all individuals assigned to such tier. The resulting number is divided by the fair value of our common stock based on a 10-day average price immediately preceding grant date to determine the number of restricted stock units granted to such tier, rounded for ease of administration.three-year cliff vest.
Long-Term Incentive Awards for 2010
             
Name Long-Term Incentive Tier  Number of RSUs  Grant Date Fair Value of RSUs 
Keith E. Alessi  125%  59,775  $484,775 
Douglas P. Kathol  45%  14,796  $119,996 
Kevin A. Paprzycki  34%  8,916  $72,309 
John V. O’Laughlin  31%  9,852  $79,900 
Morris W. Kegley  22%  6,570  $53,283 
Post-Employment Benefits
Long-Term Incentive Awards for Named Executive Officers for 2012
 
Name
Percentage of
Base Salary
Number of
Time-Based RSUs
Number of
Performance-Based
RSUs
Grant Date
Fair Value of RSUs
Keith E. Alessi150%71,91971,918$1,050,010
Robert P. King100%29,11229,110$425,021
Douglas P. Kathol80%15,75615,754$230,023
Kevin A. Paprzycki70%12,46812,466$182,018
Joseph E. Micheletti70%11,05811,056$161,432
We have a severance policy that provides, under certain circumstances, our executives with twelve months of base pay, in addition to nine months of outplacement assistance and 12 months of health benefits at the same cost share as active employees. Payment under the severance policy is triggered upon the following events: involuntary termination that is not for cause, such as a layoff; the sale of a facility or division, such as the sale of a specific mine; or a position being relocated by at least fifty miles. Except for this severance policy, we do not guarantee or provide any other cash compensation or benefits to our executives upon their departure from Westmoreland. For full walk-away amounts for each of our named executive officers upon the happening of certain events, such as involuntary termination without cause or change-in-control, see “EXECUTIVE COMPENSATION FOR 2010-Potential Payments upon Termination or Change-in-Control” below.

18

2011 Compensation Program
As illustrated in the graph below, we believe that performance and equity-based compensation should increase as a percentage of total direct compensation as salary grade levels and responsibility increases. As such, for 2011, the CEO has the highest percentage of total compensation at risk through both the annual and long-term incentive opportunities.
(PIE CHART)       (PIE CHART)
(PIE CHART)       (PIE CHART)
As approved by the Committee and the Board, the following table illustrates the total compensation packages for the projected named executive officers for 2011.
                   
            Targeted  Targeted Total 
Name Position Base Salary  Targeted AIP  LTIP  Compensation 
Keith E. Alessi CEO and President $600,000   100%  150% $2,100,000 
Douglas P. Kathol Executive Vice President $280,500   40%  80% $617,100 
Kevin A. Paprzycki Chief Financial Officer and Treasurer $245,000   35%  70% $502,300 
Vacant
 Senior Vice President TBD   35%  70% $TBD 
Morris W. Kegley General Counsel $224,300   30%  60% $426,200 
Summary of Named Executive Officer Compensation in Fiscal Year 2012

Keith E. Alessi: President and Chief Executive Officer
             
Total Cash Received         # of RSUs / Grant Date Fair 
for 2010 2010 Base Salary  Bonus for 2010  Value of 2010 RSUs 
$974,544 $600,000/$400,0001  $882,2402 59,775 RSUs/ $484,775
1Mr. Alessi’s base salary was set at $600,000 through June of 2010. In June of 2010, Mr. Alessi’s base salary was adjusted to $400,000 to reflect the transition of oversight of various operational divisions to Mr. Kathol as Executive Vice President.
2The Board issued $400,000 worth of Mr. Alessi’s AIP payout in the form of unrestricted fully-vested common stock, issued on March 15, 2011.

19

Total Salary and Bonus Cash
Received for 2012
2012 Base SalaryBonus for 2012
# of RSUs / Grant Date Fair
Value of 2012 RSUs
$1,814,500$700,000$1,141,423143,837 RSUs/ $1,050,050

Base Salary

For 2011,2012, the CommitteeBoard increased Mr. Alessi’sAlessi's base salary back to $600,000,$700,000, which putsput this component of compensation betweennear 75% of the peer group. The Board reviewed Mr. Alessi's compensation history and comparative data from the Company's peer group, median and 75%.noting that his base salary had not increased since he joined the Company in 2007. The Committee feelsBoard felt that this new base salary iswas appropriate given Mr. Alessi’s skill setAlessi's experience and experience, as well as our improving performance.past performance meeting strategic goals.

Annual Incentive Compensation

Financial Component: The financial component was based on budgeted operating incomeEBITDA and free cash flow at the consolidated corporate level. As we exceeded threshold budgeted operating income, this componentThe weighted actual performance for these corporate financial goals was paid out at 135%.105%, resulting in 138% financial payout.

Individual Component:The Compensation and Benefits Committee recommended and the Board approved a 235%200% individual performance payout for Mr. Alessi. Mr. Alessi for his performanceoversaw the best year in 2010. The non-employee directorsthe Company's history from a financial perspective, including record operating income and EBITDA. Mr. Alessi provided high-level leadership in the integration of the Board reviewedKemmerer Mine, which achieved and provided feedback on Mr. Alessi’s financialexceeded first year acquisition performance strategic effectiveness, business management, talent managementassumptions. Additionally, the Company successfully entered into a six year agreement with the UMWA at Kemmerer, improved safety by 40%, lowered MSHA citations by 60% and personal effectiveness.reduced grievances by 80%. Mr. Alessi was provided above average ratingspivotal in all categories bydeveloping alternative strategies to affect a material deleveraging of the directors. Coupled with such ratings,balance sheet in 2012 and establishing a long-term strategy to continue deleveraging the Committee took particular notebusiness through free cash flow generation and the potential monetization of Mr. Alessi’s leadership in making significant progress with our financial performance including a $52.3 million increase in operating income and a $43.4 million improvement in pretax income from 2009.assets. The Board also recognized his leadership in 2010Mr. Alessi's strong contribution to succession planning and initiative and management of the successful refinancing of the company’s debt via a high yield note offering.succession planning for his successor.

Safety Component: Not applicable.


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Table of Contents

Long-Term Incentive Compensation

For fiscal year 2010,2012, Mr. Alessi was awarded long-term equity at a targeted 125%150% of his base salary, which iswas at a substantially higher tier than the other named executive officers. The Board felt such grant was warranted due to Mr. Alessi’sAlessi's direct responsibility for overseeing the entire organization, as well as direct responsibility for our company’sCompany's profits and losses. The Board and Mr. Alessi felt strongly that his compensation should be directly tied to that of the stockholders and our overall financial results.
Douglas Kathol: Executive Vice
Robert P. King: President and Chief Operating Officer
             
Total Cash Received         # of RSUs / Grant Date Fair 
for 2010 2010 Base Salary  Bonus for 2010  Value of 2010 RSUs 
$383,197 $212,672/$275,0001  $134,805  14,796 RSUs/ $119,995
1Mr. Kathol’s base salary was set at $212,672 through June of 2010. In June of 2010, Mr. Kathol’s base salary was increased to $275,000 to reflect his promotion to Executive Vice President.
Total Salary and Bonus Cash
Received for 2012
2012 Base SalaryBonus for 2012
# of RSUs / Grant Date Fair
Value of 2012 RSUs
$761,052$425,000$392,30258,222 RSUs/ $425,021

Base Salary
In June 2010,
Mr. King was brought on board as part of a long-term succession plan in March 2012 with the title of President and Chief Operating Officer. The Compensation and Benefits Committee approveddetermined Mr. Kathol’s base pay increase to $275,000 reflective of his promotion to Executive Vice President. Taking into account his mid-year promotion and accompanying salary adjustment, in February 2011 the Committee awarded Mr.��Kathol an additional 2.0% merit increase, bringing hisKing's base salary to $280,500 effective aswith the assistance of March 31, 2011. Mr. Kathol’s base salary is slightly over median for the compensation consultant, utilizing peer group which reflects his extensive mining and operational experience.market survey data.

Annual Incentive Compensation

Financial Component: The financial component was based on budgeted operating incomeEBITDA and free cash flow at the consolidated corporate level. As we exceeded threshold budgeted operating income, this componentThe weighted actual performance for these corporate financial goals was paid out at 135%.105%, resulting in 138% financial payout.

Individual Component:  Management proposed and the Committee approved a 100% individual performance payout for Mr. Kathol due toKing. Mr. King joined the Company in 2012 and immediately established expectations for operations and the Company. Mr. King focused his efforts on developing plans for an optimal organizational structure and was active in reducing bonding collateral needs at Westmoreland Mining, LLC. In addition Mr. Kathol increased Director and Officer Insurance and Property and Casualty coverage at a lower premium, enhanced customer interactions, which included meetings with a significant number of existing customers and worked on the renegotiationstrategy of the Rocky Mountain Power contractbusiness and in potential growth projects. Mr. King was particularly effective in reinforcing safety objectives and setting a new tone-at-the-top for expected safety performance, while putting renewed emphasis on customer relationships and the beginningimportance of negotiations for the 2016 renewal of the Coyote contract.communicating with our customers.

Safety Component: Not applicable.

20


Long-Term Incentive Compensation

For fiscal year 2010,2012, the Compensation and Benefits Committee awarded Mr. Kathol 14,796King 58,222 restricted stock units representing 45%100% of his base salary, which is the second largest equity grant on the executive team. The Compensation and Benefits Committee felt this award appropriate given Mr. Kathol’s role in the organization andKing's direct operational responsibilities and to more closely alignincentivize Mr. Kathol’s performanceKing to creatingmake decisions that will create and sustain stockholder value.
Kevin A. Paprzycki: Chief Financial Officer
On-Boarding Benefits

Mr. King was hired by Westmoreland in March 2013. As part of his package, he was provided relocation, a cash signing bonus and Treasureran initial equity grant. Mr. King was granted 25,000 shares in March 2013 to ensure his alignment with long-term strategic goals and the creation of stockholder value. Mr. King was also given $50,000 upon joining the Company, and is entitled to an additional $50,000 on his one-year anniversary.
             
Total Cash Received         # of RSUs / Grant Date Fair 
for 2010 2010 Base Salary  Bonus for 2010  Value of 2010 RSUs 
$315,892 $212,175/$217,1751  $101,944  8,916 RSUs/ $72,309

1Mr. Paprzycki’s base salary was set at $212,175 through June of 2010. In June of 2010, Mr. Paprzycki’s base salary was increased $5,000 to reflect the addition of the Treasury role.
Mr. King was offered a relocation package for his move from Pennsylvania to Colorado. The Company paid $79,002 in 2012 primarily towards final moving expenses, transportation of household goods, temporary living expenses, and a miscellaneous allowance of one-month's salary.

Douglas Kathol: Executive Vice President
Total Salary and Bonus Cash
Received for 2012
2012 Base SalaryBonus for 2012
# of RSUs / Grant Date Fair
Value of 2012 RSUs
$427,168$287,513$141,54331,510 RSUs/ $230,023


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Table of Contents

Base Salary
The
For 2012, the Compensation and Benefits Committee approvedincreased Mr. Paprzycki’s new base salary for 2011 commensurate with his added responsibilities and in line with the peer group, bringing hisKathol's base salary to $245,000$287,513 effective asApril 1, 2012, which puts this component of February 4, 2011. Mr. Paprzycki’s adjusted base salary reflects his commendable performance in 2010, growth incompensation near the CFO/ Treasury role and market data.25% of the peer group.

Annual Incentive Compensation

Financial Component: The financial component was based on budgeted operating incomeEBITDA and free cash flow at the consolidated corporate level. As we exceeded threshold budgeted operating income, this componentThe weighted actual performance for these corporate financial goals was paid out at 135%.105%, resulting in 138% financial payout.

Individual Component: Management proposed and the Committee approved a 100% individual performance payout for Mr. Paprzycki as he met his goals for 2010. In 2010, through bothKathol. Mr. Kathol had a strong year in 2012 focused on pursuing potential acquisition opportunities and enhancing the retention of new talent and the utilization of existing resources,sales function. Under Mr. Paprzycki led the Finance Team to achieve a number of key objectives. During such time frame, Mr. Paprzycki developed a free cash flow projection and measurement system, which brought value add performance information to the management team and the Board of Directors. In addition, the Finance Team incorporated better reporting and analysis of our heritage cash spending, ensuringKathol's leadership, the Company generated its targeted savings for onerenewed several critical coal supply contracts, He also was a key player in the rationalization of the Company’s largest liabilities. Through Mr. Paprzycki’s leadership, the Finance Team also executed several successful tax minimization opportunitiesCompany's bonding collateral and implementedreplacing a new software system for the Company’s income tax accounting.key surety supplier.

Safety Component: Not applicable.

Long-Term Incentive Compensation

For fiscal year 2010,2012, the Compensation and Benefits Committee awarded Mr. Paprzycki 8,916Kathol 31,510 restricted stock units which reflected the target percentagerepresenting 80% of his base salary. The Compensation and Benefits Committee felt this award fromappropriate given Mr. Kathol's direct responsibility for strategic growth initiatives.

Kevin A. Paprzycki: Chief Financial Officer and Treasurer
Total Salary and Bonus Cash
Received for 2012
2012 Base SalaryBonus for 2012
# of RSUs / Grant Date Fair
Value of 2012 RSUs
$367,960$260,000$111,99824,934 RSUs/ $182,018

Base Salary

The Compensation and Benefits Committee approved Mr. Paprzycki's new base salary for 2012 in line with peer group data, bringing his set tier plus an additional 2,000 sharesbase salary to $260,000 effective as of April 1, 2012. This increase in base salary brings this component of compensation for his additional responsibilities as Treasurer.to near 25% of peer group data.
John V. O’Laughlin: Vice President — Coal Operations
             
Total Cash Received         # of RSUs / Grant Date Fair 
for 2010 2010 Base Salary  Bonus for 2010  Value of 2010 RSUs 
$290,704 $225,508  $66,465  9,852 RSUs/ $79,900
Change in Role
On February 21, 2011, John O’Laughlin, our former Vice President — Coal Operations, accepted a new position with us as Vice President — Strategic Sourcing and Asset Management. This new role is not a named executive officer position.
Annual Incentive Compensation

Financial Component: The financial component was based on budgeted operating incomeEBITDA and free cash flow at the consolidated minecorporate level. As we exceeded threshold budgeted operating income,The weighted actual performance for these corporate financial goals was 105%, resulting in 138% financial payout.

Individual Component: Management proposed and the Committee approved a 100% individual performance payout for Mr. Paprzycki. In 2012, Mr. Paprzycki strengthened the Company's relationships with Standard & Poor's and Moody's that resulted in an upgrade to our credit rating. He also worked with new bond investors and obtained analyst coverage for the Company. Mr. Paprzycki was also particularly effective in working to amend covenants in loan documents to provide cushion and reduce pension funding requirements.

Safety Component: Not applicable.

Long-Term Incentive Compensation

For fiscal year 2012, the Compensation and Benefits Committee awarded Mr. Paprzycki 24,934 restricted stock units, which reflected 70% of his base salary. This percentage reflects his key leadership role in the Company.


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Table of Contents

Joseph E. Micheletti: Senior Vice President - Coal Operations
Total Salary and Bonus Cash
Received for 2012
2012 Base SalaryBonus for 2012
# of RSUs / Grant Date Fair
Value of 2012 RSUs
$332,751$230,603$103,65622,114 RSUs/ $161,432

Base Salary

For 2012, the Compensation and Benefits Committee increased Mr. Micheletti's base salary to $230,603 effective April 1, 2012, which puts this component was paid out at 63%.of compensation below the 25% of the peer group, but commensurate with his limited time in this new role.

21


Annual Incentive Compensation
Individual
Financial Component: The financial component was based on budgeted EBITDA and free cash flow at the consolidated corporate level. The weighted actual performance for these corporate financial goals was 105%, resulting in 138% financial payout.

Individual Component: Management proposed and the Committee did not approveapproved a 100% individual performance payout for individual performance for Mr. O’Laughlin for 2010 dueMicheletti. Mr. Micheletti led the highly successful integration of Westmoreland Kemmerer, Inc. while adjusting to the underperformance of the mine over which he had direct operational responsibility for the majority of the year.customers' needs and challenging market conditions. He also standardized safety reports and worked to share best practices across all mines. Mr. Micheletti also made significant progress in cost control initiatives.

Safety Component: Mr. O’Laughlin was paid 114% of hisMicheletti's safety component due to above average industry safety records at all of our significant mines.was based on his role as Senior Vice President - Coal Operations. With direct operational responsibility for all of our mines as Senior Vice President - Coal Operations, Mr. O’Laughlin’sMicheletti's safety component payout isin such role was based upon an average of reportable incident rates at all mine locations. In 2010,2012, the average national reportable incident rate was 1.83,1.65, which is a calculation based on total hours worked and reportable incidents. In 2010,2012, the average reportable incident rate for the mines Mr. O’LaughlinMicheletti oversaw was 1.31,1.12, which is significantly less than the national average. In addition, this average reportable incident rate is an improvement over results in 2009.This commendable safety record correlated into a 128% safety component payout.

Long-Term Incentive Compensation

For fiscal year 2010,2012, Mr. O’LaughlinMicheletti was awarded 9,85222,114 restricted stock units, which is a higher tier award than other vice presidents.presidents at 70% of his base salary. The Compensation and Benefits Committee felt such higher tier level was warranted due to Mr. O’Laughlin’sMicheletti's direct responsibility for overseeing more employees than any other named executive officer, direct responsibility for a large portion of our company’scompany's profits and losses, and his direct operational responsibility for all mining operations.
Morris W. Kegley: General Counsel
             
Total Cash Received         # of RSUs / Grant Date Fair 
for 2010 2010 Base Salary  Bonus for 2010  Value of 2010 RSUs 
$290,5511
 $215,671  $93,799  6,570 RSUs/ $53,283
Relocation
1Mr. Kegley’s total cash received reflects a leave of absence that he took during the year for an extended period of time.
Base Salary
Mr. Micheletti was offered a relocation package as part of his promotion to Senior Vice President - Coal Operations to cover his move from Texas to Montana. In 2012, the Company paid $8,812 towards final moving expenses, transportation of household goods, and home purchase closing costs.

Realized Pay vs. Reported Total Compensation

The SEC's calculation of total compensation includes several items that are driven by accounting and actuarial assumptions, which are not necessarily reflective of compensation actually realized by the named executives in 2012. To supplement the SEC-required disclosure, we have included an additional table that shows compensation actually realized by each of the named executives in 2012. Set forth below we have provided a table showing for each named executive: (1) 2012 compensation actually realized by the named executive, as reported on each named executive's W-2 form (Realized Compensation Total), and (2) 2012 compensation as determined under SEC rules (Summary Compensation Total). We believe this information provides a helpful view of compensation actually received by our named executive officers in 2012, and is useful to our stockholders in assessing the alignment between executive pay and our performance. The amounts reported in this table differ from the amounts reported as total compensation in the 2012 Summary Compensation Table and are not a substitute for those amounts.


25
Table of Contents

Name and Principal
Position
Year
Salary
($)
Bonus
($)
Stock
Awards
($)
Non-Equity
Incentive
Plan
Compen-
sation
($)
Change in
Pension
Value
Earnings
($)
All Other
Compen-
sation
($)
Summary
Compen-
sation
Total
($)
Realized
Compen-
sation
Total
($)
Keith E. Alessi(5)
CEO
2012673,077—1,050,0101,141,4234,51716,8482,885,8751,689,171
Kevin A. Paprzycki
CFO and Treasurer
2012255,962—182,018111,9988,95716,774575,709458,729
Robert P. King(5)
President and COO
2012318,75050,000730,771392,302—88,7601,580,583746,395
Douglas P. Kathol
Executive Vice President
2012285,625—230,023141,54317,78216,848691,821505,569
Joseph E. Micheletti
SVP - Coal Operations
2012229,095—161,432103,65634,15925,400553,742385,839

Reconciliation of Realized Compensation Column to Summary Compensation Table

The amounts reported in the Realized Compensation Column reflect income for 2012 shown as reported on the named executives' W-2 forms. These amounts differ from the amounts reported as total compensation in the 2012 Summary Compensation Table required under SEC rules and are not a substitute for the amounts reported in the 2012 Summary Compensation Table. For 2012, realized compensation represents: (1) total compensation, as determined under applicable SEC rules, minus (2) the aggregate grant date fair value of equity awards (as reflected in the Stock Awards and Option Awards columns), minus (3) the year-over-year change in pension value (as reflected in the Change in Pension Value column), plus (4) the value realized in 2012 from the vesting of RSUs before payment of any applicable withholding taxes. In addition, realized compensation reflects any bonus actually paid in the year shown, whereas total compensation under SEC rules reflects any bonus earned for the year shown. For more information on total compensation as calculated under the SEC rules, see the narrative and notes accompanying the 2012 Summary Compensation Table set forth on page 28.

Review of Performance-Based Compensation

The Board is keenly focused on tying executive compensation to the performance of the Company. On an annual basis, the management team has a significant portion of their compensation aligned with key financial metrics and performance indicators. These metrics are approved by the Compensation and Benefits Committee in February each year. In 2012, the committee elected to tie the management team's short-term bonus to EBITDA and free cash flow. Due to extraordinary performance by the management team and the Company in 2012, the short-term bonus paid out at 138%.

26
Table of Contents

Beginning in 2011, the Compensation and Benefits Committee began issuing 50% of the long-term incentive component of compensation in the form of performance-based awards. These awards cliff vest over three years and pay out if the threshold goal has been met. If the team exceeds the target goal by 20% or more, the awards pay out at 150%. In 2011, the Compensation and Benefits Committee set a three-year cumulative free cash flow goal for the performance-based LTIPs. As of December 31, 2012, the Company was approximately 100% of the way towards meeting the goal due to the successful acquisition and on-boarding of the Kemmerer Mine. As such, free cash flow generated in 2013 will likely result in the Company exceeding the target by 20%, resulting in the award paying out at 150%. In 2012, the Compensation and Benefits Committee set a three-year cumulative free cash flow goal for that year's performance-based LTIPs. As of December 31, 2012, the Company was 31% towards achieving such goal.
Compensation for Fiscal Year 2013

As approved by the recommendationCompensation and Benefits Committee and, for the CEO, by the Board, the following table illustrates the total targeted compensation packages for the projected named executive officers for 2013 who are expected to provideserve in the capacities below following the Annual Meeting:
NamePosition
Base
Salary ($)
Targeted
AIP ($)
Targeted
LTIP ($)
Targeted
Total
Compensation ($)
Robert P. KingPresident and CEO500,000500,000625,0001,625,000
Kevin A. PaprzyckiCFO and Treasurer300,000105,000210,000615,000
Douglas P. KatholExecutive Vice President296,138103,648207,297607,083
Joseph E. MichelettiSVP - Coal Operations263,00092,050184,100539,150
Jennifer S. GraftonGeneral Counsel and Secretary230,00080,500161,000471,500

New Chief Executive Officer Compensation

On October 26, 2012, the Company announced the transition of Mr. KegleyKeith Alessi from CEO to Executive Chairman and the transition of Mr. Robert King from President and COO to President and CEO effective as of Monday, April 8, 2013. When Mr. King was hired in March 2012 as President and COO, his compensation was determined taking into account his anticipated transition into the CEO role, including having his short-term and long-term bonus opportunity, both variable components of compensation, set at 100% of his base salary.

In February 2013, the Compensation and Benefits Committee, with the assistance of Pay Governance, discussed the appropriate compensation package for Mr. King upon transitioning into the CEO role. After deliberation, the committee recommended to the Board a 4.0% merit increase to hiscompensation package for Mr. King as CEO, which the Board approved. The compensation package for Mr. King will be $500,000 base salary, 100% of base salary for 2011, bringing hisAIP target, and 125% of base salary to $224,298 effective asfor LTIP target.


27
Table of March 31, 2011. Mr. Kegley’s 4.0% merit increase was based on an outstanding performance rating and a compra-ratio of 94% of peer and survey data. The Committee feels Mr. Kegley’s base salary is appropriate given his experience relating to corporate governance and SEC-related disclosure and compliance requirements.
Annual Incentive Compensation
Financial Component: The financial component was based on budgeted operating income at the consolidated corporate level. As we exceeded threshold budgeted operating income, this component was paid out at 135%.
Individual Component: Management proposed and the Committee approved a 100% individual performance payout for Mr. Kegley due to his continued exemplary negotiation work with the UMWA. Mr. Kegley actively participated in UMWA negotiations to reduce medical expenses and liabilities associated with the deferred vested population. Mr. Kegley also provided superior legal support in the full settlement of reclamation disputes with the Colstrip 3&4 buyers, resulting in a contract amendment that will result in favorable economics in the out years.
Safety Component: Not applicable.
Long-Term Incentive Compensation
For fiscal year 2010, the Committee awarded Mr. Kegley 6,570 restricted stock units based on his placement in the 22% long-term incentive tier, as discussed above.

22

Contents

EXECUTIVE COMPENSATION FOR 20102012

Summary Compensation Table

The following table summarizestables set forth information regarding the fiscal 2012 compensation paid to each individual who served asfor our principal executive officer or principal financial officer in 2010 andChief Executive Officer, Chief Financial Officer, our other three next most highly compensated executive officers who were serving as executive officers at December 31, 2010. We referthe end of fiscal 2012 (collectively, our “named executive officers”). Columns required by SEC rules are omitted where there is no amount to thesereport. The table also sets forth information regarding the fiscal 2010 and/or fiscal 2011 compensation for those individuals as ourwho were also named executive officers.
                                     
                          Change in       
                      Non-Equity  Pension       
              Stock  Option  Incentive Plan  Value  All Other    
Name and Principal     Salary  Bonus  Awards  Awards  Compensation  Earnings  Compensation  Total 
Position Year  ($)  ($)  ($)(1)(2)  ($)(1)  ($)(3)  ($)  ($)(4)  ($) 
Keith E. Alessi  2010   492,305   —   884,775   —   482,239   4,004   16,572   1,879,895 
CEO and President  2009   588,461   350,000   245,100   —   370,731   20,044   16,643   1,590,979 
   2008   403,846   —   —   710,400   242,308   3,775   12,222   1,372,551 
Kevin A. Paprzycki  2010   213,948   —   72,309   —   101,994   5,907   16,202   410,360 
CFO and Treasurer  2009   213,077   —   45,752   —   38,354   3,599   12,467   313,249 
   2008   189,450   —   —   82,880   34,101   8,741   7,088   322,260 
Douglas P. Kathol  2010   248,392   —   119,996   —   134,806   16,409   16,444   536,047 
Executive Vice President                                    
John V. O’Laughlin  2010   224,239   —   79,900   —   66,465   28,987   16,274   415,865 
VP — Coal Operations  2009   225,222   —   68,628   —   80,535   (5,611)  12,552   381,326 
   2008   211,374   —   —   177,600   45,657   52,408   6,971   494,010 
Morris W. Kegley  2010   196,752   —   53,283   —   93,779   13,398   16,199   373,411 
General Counsel  2009   213,463   —   45,752   —   76,847   38,224   12,472   386,758 
   2008   200,156   —   —   82,880   36,028   30,301   7,411   356,776 
officers in fiscal 2010 and/or fiscal 2011.
Name and Principal
Position
Year
Salary
($)
Bonus
($)
Stock
Awards
($)(1)
Non-Equity
Incentive
Plan
Compen-
sation
($)(2)
Change in
Pension
Value
Earnings
($)
All Other
Compen-
ation
($)(3)(4)
Total
($)
Keith E. Alessi(5)
CEO
2012673,077—1,050,0101,141,4234,51716,8482,885,875
2011588,460—900,009668,4608,02716,5722,181,528
2010492,305—884,775482,2394,00416,5721,879,895
Kevin A. Paprzycki
CFO and Treasurer
2012255,962—182,018111,9988,95716,774575,709
2011237,720—171,516133,20214,47816,369573,285
2010213,948—72,309101,9945,90716,202410,360
Robert P. King(5)
President and COO
2012318,75050,000730,771392,302—88,7601,580,583
Douglas P. Kathol
Executive Vice President
2012285,625—230,023141,54317,78216,848691,821
2011273,942—224,400159,57731,89376,515766,327
2010248,392—119,996134,80616,40916,444536,047
Joseph E. Micheletti
SVP - Coal Operations
2012229,095—161,432103,65634,15925,400553,742
2011191,736—60,139128,54657,06153,194483,826
__________
(1)Amounts in these columns represent the aggregate grant date fair value of the equity awarded calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 —- Share-Based Payment. Amounts for 2008 have been recalculated to comply with the new requirements. These columns were prepared assuming none of the awards will be forfeited.  Additional information is set forth in the “Grants of Plan-Based Awards” table below. Details regarding the 2010, 20092012, 2011 and 20082010 stock awards that are outstanding as of December 31, 20102012 may be found in the “2010“2012 Outstanding Equity Awards At Fiscal Year-End” table below. A more detailed discussion of the assumptions used in the valuation of stock awards made in fiscal year 20102012 may be found in the Notes to the Financial Statements in the Company’sCompany's Form 10-K for the year ended December 31, 2010.
2012.
(2)The Board elected to issue $400,000 worth of Mr. Alessi’s AIP payout for exemplary performance in 2010 in the form of unrestricted fully-vested common stock, issued on March 15, 2011 at a grant date fair value of $13.90.
(3)Represents the cash bonus awarded under our Annual Incentive Plan, a discretionary performance-based award made in the first quarter of each fiscal year for performance in the prior fiscal year.
(4)(3)“All Other Compensation” for 20102012 includes reimbursements and payments for our contributions to the Westmoreland's 401(k) Planplan and life insurance premiums. We contributed $14,700, $14,700, $14,700, $14,700, and $14,700$15,000 in matching contributions to the 401(k) Planplan on behalf of Messrs. Alessi, Paprzycki, Kathol, O’Laughlin and Kegley, respectively.each named executive officer except for Mr. King, who received $8,336. Our 401(k) match program provided for a match of total cash compensation earned in 20102012 up to a maximum allowable cash compensation of $245,000$250,000 equaling 6% of total cash compensation. We paid life insurance premiums of $1,872, $1,502, $1,744, $1,574,$1,848, $1,774, $1,422, $1,848, and $1,499$1,589 during 20102012 for Messrs. Alessi, Paprzycki, King, Kathol, O’Laughlin, and Kegley,Micheletti, respectively.
(4)“All Other Compensation” for 2012 also includes $79,002 and $8,812 for Messrs. King and Micheletti, respectively, for relocation of their home. Mr. King was eligible for relocation under our Relocation Policy upon accepting his position with us in Englewood, Colorado. Upon Mr. Micheletti accepting the position of Senior Vice President - Coal Operations, he was eligible for relocation under the Relocation Policy for his move from Texas to Montana.
(5)Mr. Alessi and Mr. King did not receive any additional compensation for their services as a director.

Components of Total Compensation

We believe in compensating our executive officers with a mix of both base salary and at-risk compensation made up of cash and equity. For a thorough discussion of our compensation components and the percentage of at-risk compensation, see “Components of the Executive Compensation Program for 2012” in the Compensation Discussion and Analysis section above.

Non-Equity Incentive Plan Compensation

Non-equity incentive plan compensationamounts are annual cash incentives under our Annual Incentive Plan (“AIP”). The AIP is funded based on various components, which are unique to each named executive officer, and may include our annual

28
Table of Contents

budgeted operating income performance,EBITDA, annual budgeted free cash flow, MSHA average for reportable incident rate for surface mines in the coal industry, and individual performance goals, all of which are discussed above in “Compensation Discussion and Analysis.”

Equity Awards

Values for stock grants in the summary compensation table and numbers included in the grants of plan-based awards table relate to restricted stock and restricted stock units granted to the named executive officers under our stockholder-approved 2007 plan. The plan is administered by the Compensation and Benefits Committee, which has retained the exclusive authority to make awards under the plan. The committee approves all long-term incentive grants to executive officers other than the CEO, whose grants are approved by the Board. The committee also approves the overall grant pool for all other participants. The primary purpose of the long-term incentive plan is to link compensation with the long-term interests of stockholders. RestrictedTime-based restricted stock units, representing 50% of the total award, granted to the named executives officers on JulyJune 1, 20102012 vest over three years beginning 1210 months from the grant date, with 33% of the shares becoming vested and available for release at that time, and an additional 33% vesting and becoming available for release on each successive anniversary of the grant date.April 1st. Full vesting occurs on the third anniversaryApril 1, 2015. Performance-based restricted stock units, representing 50% of the grant date.total award, were also granted on June 1, 2012 and will cliff vest on April 1, 2015 upon achievement of a three-year cumulative free cash flow amount that was set by the Compensation and Benefits Committee in early 2012. Awards not yet released are forfeited upon separation.

23


20102012 Grants of Plan-Based Awards
               
    Approval Date by  All Other Stock Awards:  Grant Date Fair Value of 
Name Grant Date Committee/ Board  Number of Units (#)  Stock Awards($)(1) 
Keith E. Alessi 7/01/2010  6/21/2010   59,775(1)  484,775 
Kevin A. Paprzycki 7/01/2010  6/17/2010   8,916(1)  72,309 
Douglas P. Kathol 7/01/2010  6/17/2010   14,769(1)  119,996 
John V. O’Laughlin 7/01/2010  6/17/2010   9,852(1)  79,900 
Morris W. Kegley 7/01/2010  6/17/2010   6,570(1)  53,283 
Keith E. Alessi 3/15/2011  3/09/2011   19,836(2)  400,000 

   
Estimated Future Payouts Under
Performance- Based Equity Incentive
Plan Awards(1)
  
NameGrant Date
Approval Date
by Board
Threshold
(#)
Target
(#)
Maximum
(#)
All Other
Stock
Awards(#)(1)
Grant Date
Fair Value
of Stock
Awards($)(1)
Keith E. Alessi6/1/20125/22/201257,53471,91886,30271,9191,050,010
Kevin A. Paprzycki6/1/20125/22/20129,97312,46614,95912.468182,018
Robert P. King6/1/20125/22/201223,28829,11034,93229,112425,020
Douglas P. Kathol6/1/20125/22/201212,60315,75418,90515,756230,023
Joseph Micheletti6/1/20125/22/20128,84511,05613,26711,058161,432
__________
(1)The 20102012 LTIP award granted by the Compensation and Benefits CommitteeBoard of Directors on June 17, 2010May 22, 2012 to all named executive officers except Mr. Alessi, whose grant was approved by the Board on June 21, 2010, consisted of time-based restricted stock units with a three-year vest and performance-based restricted stock units with a three-year cliff vest issued out of the 2007 plan with a grant date of JulyJune 1, 2010.2012. The grant date fair value on JulyJune 1, 20102012 was $8.11$7.30 per share.
(2)The Board granted to Mr. Alessi, as part of the 2010 AIP award, fully-vested unrestricted stock out of the 2007 plan with a grant date of March 15, 2011. The grant date fair value on March 15, 2011 was $13.90 per share.
2010
2012 Outstanding Equity Awards at Fiscal Year-End
                         
  Option Awards  Stock Awards 
  Securities  Securities                
  Underlying  Underlying  Option            
  Unexercised  Unexercised  Exercise  Option      Market value of units 
  Options (#)  Options (#)  Price  Expiration  Units that have  that have not 
Name Exercisable  Unexercisable  ($)  Date  not vested (#)(2)  vested as of 12/31/10($)(3) 
Keith E. Alessi  30,556   0   24.12   5/02/17         
   40,000   20,000(1)  21.40   7/01/18         
                   20,000   238,800 
                   59,775   713,713 
Kevin A. Paprzycki  2,500   0   29.48   6/05/16         
   1,900   0   24.41   7/01/16         
   4,666   2,334(1)  21.40   7/01/18         
                   3,734   44,584 
                   8,916   106,457 
Douglas P. Kathol  7,500   0   16.17   8/18/13         
   6,700   0   19.37   7/01/14         
   6,700   0   20.98   7/01/15         
   4,300   0   24.41   7/01/16         
   4,666   2,334(1)  21.40   7/01/18         
                   3,734   44,584 
                   14,796   176,664 
John V. O’Laughlin  491   0   18.09   5/29/11         
   1,809   0   18.19   5/29/11         
   4,700   0   12.86   6/24/12         
   3,650   0   18.08   6/30/13         
   3,650   0   17.80   12/31/13         
   9,800   0   19.37   7/01/14         
   14,600   0   20.98   7/01/15         
   9,900   0   24.41   7/01/16         
   10,000   5,000(1)  21.40   7/01/18         
                   5,600   66,864 
                   9,852   117,633 
Morris W. Kegley  1,900   0   24.41   7/01/16         
   4,666   2,334(1)  21.40   7/01/18         
                   3,734   44,584 
                   6,570   78,446 
 Option AwardsStock Awards
Name
Securities
Underlying
Unexercised
Options(#)
Exercisable
Option
Exercise
Price
($)
Option
Expiration
Date
Units that
have
not
vested
(#)(1)
Market
value of units
that have not
vested as of
12/30/12($)(2)
Unearned
units that
have
not vested
(#)(3)
Market value
of unearned
units
that have not
vested as of
12/30/12($)(2)
Keith E. Alessi30,556
24.12
5/2/2017    
 60,000
21.40
7/1/2018    
    19,925
186,100
  
    20,054
187,304
  
    71,919
671,723
  
      30,080
280,947
      71,918
671,714
Kevin A. Paprzycki2,500
29.48
6/5/2016    
 1,900
24.41
7/1/2016    
 7,000
21.40
7/1/2018    
    2,972
27,758
  

29
Table of Contents


 Option AwardsStock Awards
Name
Securities
Underlying
Unexercised
Options(#)
Exercisable
Option
Exercise
Price
($)
Option
Expiration
Date
Units that
have
not
vested
(#)(1)
Market
value of units
that have not
vested as of
12/30/12($)(2)
Unearned
units that
have
not vested
(#)(3)
Market value
of unearned
units
that have not
vested as of
12/30/12($)(2)
    3,82235,697  
    12,468116,451  
      5,73253,537
      12,466116,432
Robert P. King   29,112271,906  
      29,110271,887
Douglas P. Kathol7,50016.178/18/2013    
 6,70019.377/1/2014    
 6,70020.987/1/2015    
 4,30024.417/1/2016    
 7,00021.407/1/2018    
    4,93246,065  
    5,00046,700  
    15,756147,161  
      7,50075,050
      15,754147,142
Joseph E. Micheletti5,00021.407/1/2018    
    1,25211,694  
    1,34012,516  
    11,058103,282  
      2,01018,773
      11,056103,263
__________
(1)These options were awarded by the Compensation and Benefits Committee in June 2008 as part of the annual LTIP award. The options vest in three annual increments beginning July 1, 2009, with the remaining two increments vesting in July 2010 and July 2011.
(2)Awards in this column consist of restricted stock units with a grant dates of July 1, for both 20092010, April 1, 2011 and 2010.June 1, 2012. Awards of restricted stock units vest in thirds over a three-year period beginning on the first anniversary of the date of grant. To the extent vested, these units are reflected in the “Stock Vested in 2010”2012” table below.
(3)(2)The market value of the awards of restricted stock units that have not yet vested was determined by multiplying the closing price of a share of common stock on December 31, 201030, 2012 ($11.94)9.34) by the number of shares.
(3)Awards in this column consist of performance-based restricted stock units with a grant date of April 1, 2011 and June 1, 2012. These awards pay out at Threshold, Target and Maximum depending on the achievement of a free cash flow metric designated by the Compensation and Benefits Committee in 2011 and 2012. Upon achievement of the performance goal on April 1, 2014 and April 1, 2015, these awards cliff vest. If performance is not achieved, all awards will forfeit.

24


Stock Vested in 20102012
         
Name Shares Acquired on Vesting(#)  Stock Value Realized on Vesting($)(1) 
Keith E. Alessi  10,000   81,100 
Kevin A. Paprzycki  1,866   15,133 
Douglas P. Kathol  1,866   15,133 
John V. O’Laughlin  2,800   22,708 
Morris W. Kegley  1,866   15,133 

Name(2)
Shares Acquired
on Vesting(#)
Stock Value Realized
on Vesting($)(1)
Keith E. Alessi39,952372,159
Kevin A. Paprzycki6,75063,470
Douglas P. Kathol9,29987,075
Joseph E. Micheletti2,98927,624
__________
(1)The market value of the awards was determined by multiplying the closing price of a share of common stock on July 1, 20112012 ($8.11)8.63) by the number of shares.shares for those shares that vested on July 1, 2012 and multiplying the close price of a share of common stock on April 1, 2012 (11.36).
(2)As Mr. King did not begin employment with us until March 2012, he did not vest in any awards in 2012.

2010
30

2012 Pension Benefits
               
        Present Value of    
        Accumulated Benefit    
    Number of Years  as of  Payments During Last 
    Credited Service  December 31, 2010  Fiscal Year 
Name Plan Name (#)  ($)(1)  ($) 
Keith E. Alessi Westmoreland Retirement Plan (WCC)  3.08   27,823   — 
Kevin A. Paprzycki Westmoreland Retirement Plan (WCC)  4.0   27,148   — 
Douglas P. Kathol Westmoreland Retirement Plan (WCC)  5.81   122,124   — 
John V. O’Laughlin Westmoreland Retirement Plan (BSS)  10.0   229,237   — 
Morris W. Kegley Westmoreland Retirement Plan (WCC)  4.67   124,615   — 

NamePlan Name
Number of
Years Credited
Service
(#)
Present Value of
Accumulated
Benefit as of
December 31, 2012
($)(1)
Payments During
Last
Fiscal Year
($)
Keith E. AlessiWestmoreland Retirement Plan (WCC)2.0835,850—
Kevin A. PaprzyckiWestmoreland Retirement Plan (WCC)3.041,627—
Douglas P. KatholWestmoreland Retirement Plan (WCC)5.81154,017—
Joseph E. MichelettiWestmoreland Retirement Plan (WECO)10.0183,891—
__________
(1)Pension economic assumptions are consistent with our SFAS 87 financial reporting for fiscal year 2010.2012. Demographic assumptions are also consistent with our pension financial reporting, with the exception that per SEC guidance, pre-retirement decrements are not used. A discount rate of 5.4%4.25% was used for 2010.2012.

Effective July 1, 2009, the Board froze all structures of our pension plan for non-union employees, including our named executive officers, resulting in no future benefits accruing under these plans. Prior to July 2009, each of the named executive officers except Mr. King who began employment with us in 2012, participated in one of the same defined benefit pension plan structures offered to other non-union employees. Eligible employees become fully vested after five years of vested service. The Westmoreland Coal CompanyCompany's pension plan structure provides for normal retirement at 65. Early retirement benefits are available at age 55 with 10 years of service, however at reduced benefits. Mr. O’Laughlin is the only named executive eligible to retire as of December 31, 2010. The executive may choose optional forms of benefit, all reduced to be actuarially equivalent to the single life annuity benefit. The optional forms available are 50%, 66 2/3% and 100% joint and survivor options, a 10-year certain and life option, and a single life annuity.
In addition, to the main Westmoreland pension plan structure, Mr. O’Laughlin is covered under plan provisions for two subsidiaries where he has worked. Aspects of each subsidiary’s plan provisions may be more or less attractive than the plan provisions applicable to us. Based on Mr. O’Laughlin’s service and salary, the Beulah and Savage Salaried Employee’s (“BSS”) benefits are the most valuable as of December 31, 2010. Under the BSS plan, normal retirement age is 65. Early retirement benefits are available at age 55 with 5 years of service, but reduced 3% per year for early commencement before age 62. Mr. O’Laughlin may choose optional forms of benefit, all reduced to be actuarially equivalent to the single life annuity benefit. The optional forms available are lump sum, 50%, 66 2/3%, and 100% joint and survivor options, a 10-year certain and life option, and a single life annuity.
20102012 Pension Benefits Upon Retirement, Termination, Disability or Death

Messrs. Paprzycki, Kathol, and KegleyMicheletti are vested in the pension plan and entitled to an annual lifetime benefit payable upon voluntary or involuntary termination or death (paid for the life of the spouse). Mr. O’LaughlinAlessi is not vested in the pension plan. Benefits shown assume that the event entitling the individual to benefits occurred on December 31, 2012.

Mr. Paprzycki is vested in the pension plan and is entitled to an annual lifetime benefit payable upon retirement, voluntary or involuntary termination, disability or death (paid for the life of the spouse). Benefits shown assume that the event entitling the individual to benefits occurred on December 31, 2010.
The benefits for Mr. Paprzycki are first payable on September 1, 2035. Mr. Paprzycki currently is not eligible for early retirement benefits.
             
            Time or Period of
Name Type of Termination Plan Benefit Amount  Form of Payment Payment
Kevin A. Paprzycki Termination Pension Plan $732  Monthly Annuity Life
  Death Pension Plan $559  Monthly Annuity Life of Spouse

25

NameType of Termination
Plan
Benefit
Amount
Form of Payment
Time or Period of
Payment
Kevin A. PaprzyckiTerminationPension Plan$732
Monthly AnnuityLife
 DeathPension Plan$559
Monthly AnnuityLife of Spouse

Mr. Kathol is vested in the pension plan and is entitled to an annual lifetime benefit payable upon retirement, voluntary or involuntary termination, disability or death (paid for the life of the spouse). The benefits for Mr. Kathol are first payable on December 1, 2017. Mr. Kathol currently is not eligible for early retirement benefits.
             
            Time or Period of
Name Type of Termination Plan Benefit Amount  Form of Payment Payment
Douglas P. Kathol Termination Pension Plan $1,291  Monthly Annuity Life
  Death Pension Plan $985  Monthly Annuity Life of Spouse
NameType of TerminationPlan
Benefit
Amount
Form of Payment
Time or Period of
Payment
Douglas P. KatholTerminationPension Plan$1,291
Monthly AnnuityLife
 DeathPension Plan$985
Monthly AnnuityLife of Spouse

Mr. Micheletti is vested in the pension plan and is entitled to an annual lifetime benefit payable upon retirement, voluntary or involuntary termination, disability or death (paid for the life of the spouse). The benefits for Mr. O’LaughlinMicheletti are first payable on JanuaryAugust 1, 2011.2015.
             
            Time or Period of
Name Type of Termination Plan Benefit Amount  Form of Payment Payment
John V. O’Laughlin Retirement/Termination Pension Plan $2,072  Monthly Annuity Life
  Disability Pension Plan $2,072  Monthly Annuity Life
  Death Pension Plan $947  Monthly Annuity Life of Spouse
The benefits for Mr. Kegley are first payable on July 1, 2012. Mr. Kegley currently is not eligible for early retirement benefits.
NameType of TerminationPlan
Benefit
Amount
Form of Payment
Time or Period of
Payment
Joseph E. MichelettiTerminationPension Plan$840
Monthly AnnuityLife
 DeathPension Plan$319
Monthly AnnuityLife of Spouse

             
            Time or Period of
Name Type of Termination Plan Benefit Amount  Form of Payment Payment
Morris W. Kegley Termination Pension Plan $993  Monthly Annuity Life
  Death Pension Plan $758  Monthly Annuity Life of Spouse
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Table of Contents

Potential Payments upon Termination or Change-in-Control

Our named executive officers are not entitled to any additional payments or benefits relating to termination of employment other than the retirement benefits described in the preceding compensation tables and participation in a severance policy that is generally available to all our employees. Our severance policy covers virtually all our employees, although the amount of the severance benefit depends upon employee tier.tier and years of service with us. The highest tier, which includes our named executive officers, provides for severance compensation equal to 12 months of monthly base pay, 9 months of outplacement assistance and 12 months of health benefit continuation. Severance benefits are payable under the policy only in the following circumstances: involuntary termination that is not for cause; termination due to sale of a facility, division or business segment; or relocation of more than 50 miles that the employee declines. Our executives do not have employment contracts or any benefits triggered by a change-in-control, unless the change-in-control results in an involuntary termination of the executive without cause. In addition, our Annual Incentive Policy provides that program participants are only entitled to payment of incentive payouts if they are employed on the date of payment, which typically occurs in March of the following year. All incentive payouts are forfeited should a named executive officer leave our employment for any reason, unless otherwise expressly agreed to by the Compensation and Benefits Committee.

The following table represents full walk-away amounts for each of our named executive officers upon the occurrence of certain events, assuming in each case that the event in question occurred as of December 31, 2010.2012. The following tables do not include amounts payable upon termination for pension benefits, as those benefits are described above in the “2010“2012 Pension Benefits” tables.
                       
    Termination for Cause/  Involuntary  Termination upon       
Name Type of Compensation Voluntary Termination  Not for Cause  Change-in-Control  Retirement  Death 
Keith Alessi Salary $0  $400,000  $0  $0  $0 
  Vested Equity(1)(2) $0  $0  $952,513  $0  $952,513 
  Outplacement Services and health benefits $0  $22,812  $0  $0  $0 
  
TOTAL
 $0  $422,812  $952,513  $0  $952,513 
                       
    Termination for Cause/  Involuntary  Termination upon       
Name Type of Compensation Voluntary Termination  Not for Cause  Change-in-Control  Retirement  Death 
Kevin Paprzycki Salary $0  $217,175  $0  $0  $0 
  Vested Equity(1)(2) $0  $0  $151,041  $0  $151,041 
  Outplacement Services and health benefits $0  $21,873  $0  $0  $0 
  
TOTAL
 $0  $239,048  $151,041  $0  $151,041 

26

                       
    Termination for Cause/  Involuntary  Termination upon       
Name Type of Compensation Voluntary Termination  Not for Cause  Change-in-Control  Retirement  Death 
Douglas Kathol Salary $0  $275,000  $0  $0  $0 
  Vested Equity(1)(2) $0  $0  $221,248  $0  $221,248 
  Outplacement Services and health benefits $0  $13,911  $0  $0  $0 
  
TOTAL
 $0  $288,911  $221,248  $0  $221,248 
                       
    Termination for Cause/  Involuntary  Termination upon       
Name Type of Compensation Voluntary Termination  Not for Cause  Change-in-Control  Retirement  Death 
John O’Laughlin Salary $0  $225,508  $0  $0  $0 
  Vested Equity(1)(2) $0  $0  $184,497  $0  $184,497 
  Outplacement Services and health benefits $0  $17,163  $0  $0  $0 
  
TOTAL
 $0  $242,671  $184,497  $0  $184,497 
                       
    Termination for Cause/  Involuntary  Termination upon       
Name Type of Compensation Voluntary Termination  Not for Cause  Change-in-Control  Retirement  Death 
Morris Kegley Salary $0  $215,671  $0  $0  $0 
  Vested Equity(1)(2) $0  $0  $123,030  $0  $123,030 
  Outplacement Services and health benefits $0  $18,371  $0  $0  $0 
  
TOTAL
 $0  $234,042  $123,030  $0  $123,030 

NameType of Compensation
Termination for Cause/
Voluntary Termination
Involuntary
Not for Cause
Termination upon
Change-in-Control
RetirementDeath(3)
Keith AlessiSalary$—$700,000$—$—$—
 Vested Equity(1)(2)$—$—$1,045,127$—$1,378,029
 Outplacement services and health benefits$—$23,024$—$—$—
 TOTAL$—$23,024$1,045,127$—$1,378,029
NameType of Compensation
Termination for Cause/
Voluntary Termination
Involuntary
Not for Cause
Termination upon
Change-in-Control
RetirementDeath(3)
Kevin PaprzyckiSalary$—$260,000$—$—$—
 Vested Equity(1)(2)$—$—$179,907$—$240,439
 Outplacement services and health benefits$—$22,644$—$—$—
 TOTAL$—$22,644$179,907$—$240,439
NameType of Compensation
Termination for Cause/
Voluntary Termination
Involuntary
Not for Cause
Termination upon
Change-in-Control
RetirementDeath(3)
Robert P. KingSalary$—$425,000$—$—$—
 Vested Equity(1)(2)$—$—$271,906$—$340,188
 Outplacement services and health benefits$—$19,380$—$—$—
 TOTAL$—$19,380$271,906$—$340,188
NameType of Compensation
Termination for Cause/
Voluntary Termination
Involuntary
Not for Cause
Termination upon
Change-in-Control
RetirementDeath(3)
Douglas KatholSalary$—$287,513$—$—$—
 Vested Equity(1)(2)$—$—$239,926$—$317,822
 Outplacement services and health benefits$—$17,981$—$—$—
 TOTAL$—$17,981$239,926$—$317,822
NameType of Compensation
Termination for Cause/
Voluntary Termination
Involuntary
Not for Cause
Termination upon
Change-in-Control
RetirementDeath(3)
Joseph MichelettiSalary$—$230,603$—$—$—
 Vested Equity(1)(2)$—$—$127,491$—$164,397
 Outplacement services and health benefits$—$22,644$—$—$—
 TOTAL$—$22,644$127,491$—$164,397

32
Table of Contents

________
(1)Various unvested options and SARs held by our named executive officers automatically vest upon a change-in-control. However, all outstanding options held by our named executive officers have an exercise price greater than $11.94,$9.34, the closing price of our stock on December 31, 2010.2012. There is no intrinsic value in any accelerated options or vested stock options because options with an exercise price greater than $11.94$9.34 have zero intrinsic value.
The value of vested equity was determined by multiplying the number of vested shares times $9.34, the closing stock price on December 30, 2012.
(2)We recently awarded long-term equity to the named executive officers in the form of restricted stock units with grant dates of July 1, 20092010, April 1, 2011 and JulyJune 1, 2010,2012, vesting in thirds on an annual basis. Pursuant to the restricted stock unit agreements, the units automatically vest immediately prior to a change-in-control, death, disability or qualified retirement of the recipient. No named executive officer met the qualifications for a “qualified retirement” as of December 31, 2010.2012.
(3)The performance-based restricted stock units vest pro rata upon death of disability. For valuation purposes, we assume the triggering event (death) occurred on December 31, 2012 resulting in the vesting of a third of the award.

Executive Transition Agreement

In connection with Mr. Alessi's previously announced retirement as our CEO on April 5, 2013 and expected transition to the role of Executive Chairman of the Board, the Company and Mr. Alessi have entered into an executive transition agreement (the “Transition Agreement”).  Pursuant to the Transition Agreement, Mr. Alessi will serve as our Executive Chairman for a period of approximately two years. In consideration for serving as Executive Chairman, Mr. Alessi will receive an annual cash retainer of $240,000 and equity compensation consistent with the Company's standard awards for non-executive directors. The Transition Agreement also restricts Mr. Alessi's ability to compete with the Company in the future and provides that the outstanding, unvested restricted stock units awarded to Mr. Alessi prior to his retirement as CEO will continue to vest while he is serving as Executive Chairman.

CERTAIN TRANSACTIONS

Policies and Procedures for Related Person Transactions

Our Board has adopted written policies and procedures for the review of any transaction, arrangement, or relationship in which Westmoreland Coalthe Company is a participant the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees or 5% stockholders (or their immediate family members), each of whom we refer to as a related person, has a direct or indirect material interest.

If a related person proposes to enter into a related person transaction, the related person must report the proposed related person transaction to our general counsel. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by our Audit Committee. Whenever practicable, the reporting, review, and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the Audit Committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the Chairman of the Audit Committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the Audit Committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually. As appropriate for the circumstances, the Audit Committee will review and consider:
the related person’s interest in the related person transaction;
the approximate dollar value of the amount involved in the related person transaction;
whether the terms of the transaction are no less favorable to us than could have been reached with an unrelated third party; and
the purpose of, and the potential benefits to us of, the transaction.

The Board has determined that certain transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of the policy, such as compensation to an executive officer if the compensation has been approved, or recommended to the Board for approval by the Compensation and Benefits Committee or an arrangement that is specifically contemplated by provisions of our certificate of incorporation or bylaws, such as the exculpation, indemnification, and directors’directors' and officers’officers' insurance arrangements contemplated by the certificate of incorporation and bylaws.

27


Based on a review of the questionnaires that our directors, director nominee and executive officers completed and a review of our internal records on any related person that was identified in such questionnaires, we have determined that there are no related party transactions in excess of $120,000, since the beginning of 2012 or currently proposed, involving the Company.

OVERVIEW OF PROPOSALS

This proxy statement contains three proposals requiring stockholder action. Proposal No. 1 requests the election of eight directors to the Board, Proposal No. 2 requests advisory approval of the Company's executive compensation and Proposal No. 3 requests the ratification of the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for 2013. Each of the proposals is discussed in more detail below.


Certain Relationships33
Table of Contents

Proposal 1 - Election of Directors

The Board has nominated directors Alessi, Hamilton, Hutchinson, King, Klingaman, Packwood and Related Transactions
Scharp to be elected to serve until the next annual meeting of stockholders and until their successors are duly elected and qualified. The Board has also nominated a new individual for election, Mr. Craig Mackus. While Tontine Note Transaction
On March 4, 2008, we completed the sale of $15 million of senior secured convertible notes to TontineCapital Partners, L.P. and Tontine Capital Partners, L.P. have the right to designate two individuals for election to our Board as directors pursuant to a Seniorthe Secured Convertible Note Purchase Agreement dated as of March 4, 2008, among us,they have not so designated any directors at this time.

Vote Required

Each director will be elected by a vote of the Tontine partnerships,majority of the votes cast, meaning the number of shares cast “for” a director exceeds the number of votes cast “against” that director. Each director elected will serve until the next Annual Meeting of Stockholders and Tontine Capital Associates, L.P.until their successors are duly elected and qualified.

Recommendation of the Board

The Board of Directors recommends you vote “FOR” the election of directors Alessi, Hamilton, Hutchinson, King, Klingaman, Mackus, Packwood and Scharp.

Proposal 2 - Advisory Approval of the Company's Executive Compensation

The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, enables our stockholders to vote to approve, on an advisory or nonbinding basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the SEC's rules. As background to compensation paid to our named executive officers in 2012 is the following business highlights:

Our total operating income increased 172%, as collateral agent.up to $28.9 million in 2012 from $10.6 million in 2011;
We achieved 44% growth in Adjusted EBITDA in 2012, up $30 million from 2011;
We lowered our net debt in 2012 through 28% growth in operating cash flow and the extinguishment of $44.8 million in debt;
We received an S&P credit rating upgrade to B-, the only coal company to receive an upgrade in 2012;
We acquired and integrated the Kemmerer Mine, which created additional revenue, cash flow and operating income;
We entered into a $20.0 million revolving credit facility with The senior notes bore interest atPrivate Bank, increasing the Company's liquidity;
We had a commendable safety year achieving a reportable incident rate of 9% (which increased to 10% per annum in July 2010), payable in cash or in kind32% below the national average, which included safety award recognition for our mines and our power facility;
We forged good working relationships with our union workforces, highlighted by a new six-year agreement with the UMWA at our option,Kemmerer Mine, a four-year agreement with the IUOE at our Savage Mine and were payablea six-year agreement with the IUOE at our Colstrip Mine; and
We formally announced our succession plan for our CEO role in full on March 4, 2013. In 2010, we paidOctober, the Tontine entities $1,236,438transition of Keith Alessi from CEO to Executive Chairman in kind interestApril 2013 and $462,363 in cash. On February 4, 2011,Bob King from COO to CEO at the closing of a note transaction, Tontine Partners L.P.same time.

In addition, compensation and Tontine Capital Partners, L.P. each converted $15,962,541governance practices implemented in principal amountrecent years include the following:

Neither the CEO nor any other executive officer has an employment contract, other than Mr. Alessi's Transition Agreement;
We have eliminated all tax gross-ups and executive supplemental retirement policies, froze pension plans and terminated retiree health care;
The Compensation and Benefits Committee engaged Pay Governance, an independent compensation consultant to advise them, who does no other work for us;
Approximately 70% of the senior secured convertible notes into common stock of Westmoreland at a conversion price of $8.50 per share. This conversion, coupled with the cash payment made on the closing date of the note transaction, resulted in full satisfaction of these senior secured convertible notes. Mr. Jeffrey Gendell, whoCEO's total compensation package is either a managing member of, or a managing member of the general partner of, the Tontine partnerships is deemed to beneficially own greater than 20% of our outstanding common stock.at-risk compensation;
Familial Employment of an Executive OfficerWe have minimal executive perquisites;
Doug Kathol, our Executive Vice President and aThe named executive officer, is married to Diane Kathol who served as our Vice President — Mining and Power during allofficers receive annual long-term equity awards in the form of fiscal year 2010. Ms. Kathol retired from Westmoreland on December 31, 2010. During 2010, Ms. Kathol received cash compensation of $198,912 and was granted restricted stock units with half of the shares vesting at the end of a grant date fair valuethree-year period upon the attainment of $53,283. Ms. Kathol is also entitleda three-year free cash flow goal. Restricted stock units represent a significantly larger percentage of each officer's total compensation opportunity as compared to receiveshort term annual incentive opportunities. We believe this alignment ensures that a significant portion of our officer's compensation is tied to long-term stock price performance;
The Board implemented stock ownership guidelines at three times salary for the CEO and between two and one times salary for other members of the management team; and
The Board approved stock ownership guidelines for directors of 15,000 shares of common stock.


34
Table of Contents

Compensation Philosophy and Approach

As described in 2011greater detail in the CD&A above, Westmoreland's compensation philosophy for her 2010 performance. Upon her retirement, she forfeited all unvested restricted stock, which constitutedits named executive officers is designed to achieve several key objectives, including: focusing decision-making and behavior on goals that are consistent with the entire award. Ms. Kathol has held various positionsoverall business strategy; creating a pay-for-performance culture, and allowing us to attract and retain employees with the skills critical to our long-term success. To achieve these objectives, Westmoreland since 1993, including servinguses a mix of base pay and incentive opportunities (short and long-term), while concentrating a majority of the executives' reward opportunities in at-risk incentive pay. The design of the compensation program is intended to support our overall business objectives and to increase long-term stockholder value. In 2012, greater than 50% of target total compensation for each named executive officer was at-risk based on our performance and the named executive officer.

We considered the most recent stockholder advisory vote on executive compensation required by the proxy rules in reassessing these compensation policies and our compensation decisions and, based on the 97% favorable vote cast in 2012, believe stockholders support our approach and actions. The Compensation and Benefits Committee made no material changes to 2012 compensation packages given the overwhelming stockholder support. We intend to continue to seek stockholder guidance on executive compensation through an annual say-on-pay vote. To the extent there is any significant vote against our named executive officers' compensation as disclosed in this Proxy Statement, we will consider our stockholders' concerns and the Compensation and Benefits Committee will evaluate whether any actions are necessary to address the concerns.

We are asking our stockholders to indicate their support for our named executive officer compensation as described in this proxy statement. This proposal, commonly known as a Vice President“say-on-pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers' compensation. This vote is not intended to address any specific item of Westmoreland sincecompensation, but rather the early 2000s.
AUDITORS
Changeoverall compensation of our named executive officers and the philosophy, policies and practices described in Independent Public Accounting Firm
On January 6, 2009,this proxy statement. Accordingly, we notified KPMG LLP that, upon completionask our stockholders to vote “FOR” Proposal 2 approving, on an advisory basis, the compensation of the 2008 audit engagementnamed executive officers, as disclosed in this proxy statement.

The say-on-pay vote is advisory, and therefore not binding on us. Our Board of Directors and our Compensation and Benefits Committee value the opinions of our stockholders and to the extent there is any significant vote against the named executive officer compensation, we will consider our stockholders' concerns and the filingCompensation and Benefits Committee will evaluate whether any actions are necessary to address those concerns. The Board has adopted a policy providing for annual say-on-pay advisory votes. Unless the Board modifies this policy, the next say-on-pay advisory vote will be held at our 2014 Annual Meeting.

Vote Required

Approval of Proposal 2 requires the affirmative vote of a majority of the Form 10-K forshares present or represented by proxy and voting at the year ending December 31, 2008, it would be dismissed as our independent registered public accounting firm. The decision to change accounting firms was approved by our Audit Committee. On March 13, 2009, KPMG completed its audit services for the Company for the fiscal year ended December 31, 2008.Annual Meeting.
During the years ended December 31, 2008 and 2007 and the subsequent period through the date
Recommendation of the filingBoard

The Board of Directors recommends a vote FOR Proposal 2.

Proposal 3 - Ratification of Principal Independent Auditor

The Audit Committee has appointed Ernst & Young LLP as the Form 8-K/A on March 23, 2009, we had no: (1) disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to KPMG’s satisfaction, would have caused KPMG to make reference in connection with their opinion to the subject matter of the disagreement; or (2) reportable events, except as described below. Our management has authorized KPMG to respond fully to the inquiries of the newCompany's independent registered public accounting firm regarding all matters.
KPMG’s reports onand as auditors of our consolidated financial statements as of and for the years ended December 31, 2008 and 2007 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles, except that the audit report of KPMG on the consolidated financial statements of Westmoreland and subsidiaries for the year ended December 31, 2008 expressed the opinion that various factors raised substantial doubt about our ability to continue as a going concern. The audit reports of KPMG on the effectiveness of internal control over financial reporting as of December 31, 2008 did not contain any adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or accounting principles. The audit reports of KPMG on the effectiveness of internal control over financial reporting as of December 31, 2007 did not contain any adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or accounting principles, except that KPMG’s report indicated that we did not maintain effective internal control over financial reporting as of December 31, 2007 because of the effect of material weaknesses on the achievement of the objectives of the control criteria and contained an explanatory paragraph that stated that: “Management identified and included in its assessment material weaknesses related to electronic spreadsheets that impact the Company’s financial reporting, census data used to calculate postretirement medical benefit obligations, and the accounting for one of the Company’s stock based compensation plans.”
We requested and obtained from KPMG a letter addressed to the Securities and Exchange Commission stating whether or not it agreed with the above statements. A copy of KPMG’s letter, dated March 16, 2009, is filed as Exhibit 16.1 to our Current Report on Form 8-K/A filed March 23, 2009.

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Engagement of Ernst & Young LLP
On January 8, 2009, our Audit Committee approved the engagement of Ernst & Young LLP as our new independent registered public accounting firm beginning with fiscal year 2009, and to perform procedures related to the financial statements to be included in our quarterly report on Form 10-Q, beginning with, and including, the quarter ending March 31, 2009. We did not consult with Ernst & Young during the fiscal years ended December 31, 2007 and December 31, 2008, or during any subsequent period prior to its appointment as our auditor with respect to any of the matters or events listed in Regulations S-K 304(a)(2)(i) and (ii).2013.
Auditor’s
Auditor's Fees

The following table summarizes the fees of Ernst & Young LLP for fiscal years 20092011 and 2010.2012. For 2010,2012, audit fees include an estimate of amounts not yet billed.
         
Fee Category(1) 2010  2009 
Audit Fees(2) $911,000  $856,000 
Total Fees $911,000  $856,000 

Fee Category(1)20122011
Audit Fees(2)$883,000
$855,000
Audit Related Fees (3)$234,807
$120,321
Total Fees$1,117,807
$975,321
__________

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Table of Contents

(1)We did not pay any “Audit Related Fees,” “Tax Fees” or “All Other Fees” to Ernst & Young in fiscal years 20092011 or 2010.
2012.
(2)Audit fees consist of fees for the audit of our financial statements, including fees related to the audit of our internal controls over financial reporting, the review of the interim financial statements included in our quarterly reports on Form 10-Q, and other professional services provided in connection with statutory and regulatory filings.
(3)Audit Related Fees in 2011 consist of fees we paid to Ernst & Young as part of the high-yield note financing in February 2011, as well as $43,321 in out-of-pocket expenses incurred as part of the audit largely related to travel to our mines. Audit Related Fees in 2012 consist of fees we paid to Ernst & Young in connection with Kemmerer Mine acquisition and the high-yield note financing in January 2012, as well as $30,107 in out-of-pocket expenses incurred as part of the audit largely related to travel to our mines.

Pre-Approval Policy and Procedures

The Audit Committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by our registered public accounting firm. This policy generally provides that we will not engage our registered public accounting firm to render audit or non-audit services unless the service is specifically approved in advance by the Audit Committee or the engagement is entered into pursuant to one of the pre-approval procedures. From time-to-time, the Audit Committee may pre-approve specified types of services that are expected to be provided to us by our registered public accounting firm during the next 12 months. Any such pre-approval is detailed as to the particular service or type of services to be provided and is also generally subject to a maximum dollar amount. The Audit Committee has delegated to the Chairman of the Audit Committee the authority to approve any audit or non-audit services to be provided to us by our registered public accounting firm. Any approval of services by the Chairman of the Audit Committee pursuant to this delegated authority is reported on at the next meeting of the Audit Committee. All fees paid to Ernst & Young in 20092011 and 20102012 were pre-approved by the Audit Committee.
OVERVIEW OF PROPOSALS
This Proxy Statement contains four proposals requiring stockholder action. Proposal No. 1 requests the election of seven directors to the Board. Proposal No. 2 requests the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2011. Proposal No. 3 requests an advisory vote on executive compensation and Proposal No. 4 requests an advisory vote on the frequency of the vote on executive compensation. Each of the proposals is discussed in more detail in the pages that follow.
Proposal 1 — Election of Directors
The Board has nominated directors Alessi, Coffey, D’Appolonia, Hamilton, Klingaman, Packwood and Scharp to be elected to serve until the next annual meeting of stockholders and until their successors are duly elected and qualified. Messrs. Stern and Vicino, our preferred directors, left the Board on February 4, 2011 upon the set aside of payment of all accrued and outstanding dividends on the Series A Preferred Stock. The Board increased the size of the Board to seven directors and appointed Ms. Hamilton and Messrs. Packwood and Scharp to fill the vacancies effective February 7, 2011 and has nominated all three directors for election at the Annual Meeting. While Tontine Capital Partners, L.P. and Tontine Partners, L.P. have the right to designate two individuals for election to our Board as directors pursuant to the Secured Convertible Note Purchase Agreement dated March 4, 2008, they have not so designated any directors at this time.
At the Annual Meeting, proxies cannot be voted for a greater number of individuals than the seven nominees named in this Proxy Statement. Holders of proxies solicited by this Proxy Statement will vote the proxies received by them as directed on the proxy card or, if no direction is made, for the election of the Board’s seven nominees.

29

Vote Required
The seven nominees receiving the highest number of affirmative votes of the shares entitled to be voted for them, up to the seven directors to be elected by those shares, will be elected as directors to serve until the next Annual Meeting of Stockholders and until their successors are duly elected and qualified.
Recommendation of the Board
The Board of Directors recommends you vote “FOR” the election of directors Alessi, Coffey, D’Appolonia, Hamilton, Klingaman, Packwood and Scharp.
Proposal 2 — Ratification of Principal Independent Auditor
The Audit Committee has appointed Ernst & Young LLP as the Company’s independent registered public accounting firm and as auditors of our consolidated financial statements for 2011. In January 2009, EY began serving as our independent registered public accounting firm. Prior to that, KPMG LLP served as our independent registered public accounting firm.
At the Annual Meeting, the stockholders are being asked to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2011.fiscal year 2013. In the event of a negative vote on such ratification, the Audit Committee will reconsider its selection.selection but is not obligated to appoint a different independent registered public accounting firm. Even if this appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in our best interest. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting andin order to respond to questions.questions and may make a statement if they desire to do so.

Vote Required
Approval of Proposal 2 requires the affirmative vote of a majority of the shares present or represented by proxy and voting at the Annual Meeting.
Recommendation of the Board
The Board of Directors recommends you vote “FOR” Proposal 2.
Proposal 3 — Advisory Vote on Executive Compensation
We are providing our stockholders with the opportunity to cast an advisory vote on executive compensation as described below. We believe that it is appropriate to seek the views of stockholders on the design and effectiveness of our executive compensation program. The goal of our executive compensation program is to attract, motivate and retain a skilled and proactive team of executives who will provide leadership for our success in our unique marketplace and circumstance. We seek to accomplish this goal in a way that rewards performance and is aligned with our stockholders’ long-term interests. We believe that our executive compensation program, which emphasizes long-term equity awards, satisfies this goal and is strongly aligned with the long-term interests of our stockholders.
The Compensation Discussion and Analysis, beginning on page 14 of this Proxy Statement, describes our executive compensation program and the decisions made by the Compensation and Benefits Committee in 2010 in more detail. Highlights of the program include the following:
70% of Mr. Alessi’s total compensation package is at-risk compensation.
The named executive officers receive annual long-term equity awards in the form of restricted stock units with half of the shares vesting at the end of a three-year period upon the meeting of certain long-term performance goals. Restricted stock units represent a significantly larger percentage of each officer’s total compensation opportunity as compared to short term annual incentive opportunities. We believe this alignment ensures that a significant portion of our officers’ compensation is tied to long-term stock price performance.

30

None of the named executive officers has an employment agreement. In addition, we do not provide any perquisites, tax reimbursements or change in control benefits to the named executive officers that are not available to other employees.
Each of the named executive officers is employed at-will and is expected to demonstrate exceptional personal performance in order to continue serving as a member of the executive team.
We request stockholder approval of the compensation of our named executive officers as disclosed pursuant to the SEC’s compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables and the narrative disclosures that accompany the compensation tables).
As an advisory vote, this proposal is not binding upon us. However, the Compensation and Benefits Committee, which is responsible for designing and administering our executive compensation program, values the opinions expressed by stockholders in their vote on this proposal and will continue to consider the outcome of the vote when making future compensation decisions for named executive officers.
Vote Required
Approval of Proposal 3 requires the affirmative vote of a majority of the shares present or represented by proxy and voting at the Annual Meeting.

Recommendation of the Board

The Board of Directors recommends ayou vote FOR“FOR” Proposal 3.
Proposal No. 4 — Advisory Vote
ADDITIONAL INFORMATION

Explanation of Non-GAAP Financial Measures

The Company's fiscal 2012 Form 10-K includes a reconciliation of Adjusted EBITDA and EBITDA to net loss on Frequencya GAAP basis and a discussion of Say-on-Pay Votes
As described in Proposal 3 above,why we believe these non-GAAP financial measures are useful to investors. A copy of our stockholders arefiscal 2012 Form 10-K is being provided the opportunity to cast an advisory vote on our executive compensation program. The advisory vote on executive compensation described in Proposal 3 above is referred to as a “say-on-pay vote.”
This Proposal 4 affords stockholders the opportunity to cast an advisory vote on how often we should include a say-on-pay vote inwith our proxy materials for future annual stockholder meetings (or special stockholder meeting for which we must include executive compensation informationstatement to our stockholders. As discussed in the proxy statement for that meeting). Under this Proposal 4, stockholders may vote to have the say-on-pay vote every year, every two years, every three years or abstain.
RecommendationCompensation Discussion and Analysis, one of the Boardperformance targets for the Company's AIP and LTIP awards is free cash flow. Free cash flow is defined as Adjusted EBITDA modified for book to cash differences in pension, postretirement medical, reclamation liabilities and deferred revenue, less expenditures for capital investments, reserve acquisition and bonding requirements. 
The Board recommends that stockholders vote on Proposal 4 to hold say-on-pay votesEVERY YEAR (as opposed to every two years or every three years).
MISCELLANEOUS

MISCELLANEOUS
Upon the written request of any person who on the record date was a record owner ofour stock, or who represents in good faith that he or she was on such date abeneficial owner of such stock entitled to vote at the annual meeting,Annual Meeting, wewill send such person, without charge, a copy of our Annual Report onForm 10-K for 2010,2012, as filed with the Securities and Exchange Commission.Requests for this report should be directed to Corporate Secretary, Westmoreland Coal Company, 2nd Floor, 2 North Cascade Avenue,9540 S. Maroon Circle, Suite 200, Englewood, Colorado Springs, Colorado 80903.80112.


36
Table of Contents

The Board has no present intention of bringing any other business before the meetingAnnual Meeting and has not been informed of any other matters that are to be presented to the Annual meeting. If any other matters properly come before the meeting,Annual Meeting, however, the persons named in the enclosed proxy will vote in accordance with their best judgment.

March 31, 201126, 2013

31





(IMAGE)37

(IMAGE)
Westmoreland Coal Company
VOTE BY INTERNET —
Before The Meeting - Go to www.proxyvote.com
WESTMORELAND COAL COMPANY
9540 SOUTH MAROON CIR.
SUITE 200
ENGLEWOOD, CO 80112
ATTN: JENNIFER S. GRAFTON
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

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You may attend the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronicallyMeeting via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and when prompted, indicatevote during the Meeting. Have the information that you agree to receive or access proxy materials electronicallyis printed in future years.

the box marked by the arrow available and follow the instructions.
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VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.


(IMAGE)

(IMAGE)
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:         x
 
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 KEEP THIS PORTION FOR YOUR RECORDS
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

WESTMORELAND COAL COMPANY
For
All
Withhold
All
For All
Except
To withhold authority to vote for any individual
nominee(s), mark "For All Except" and write the
number(s) of the nominee(s) on the line below.

The Board of Directors recommends you vote FOR
the following:


1. Election of Directors¨¨¨
Nominees        
 01) Keith E. Alessi05) Richard M. Klingaman
02) Gail E. Hamilton06) Craig R. Mackus
03) Michael G. Hutchinson07) Jan B. Packwood
04) Robert P. King08) Robert C. Scharp

The Board of Directors recommends you vote FOR proposals 2 and 3.
ForAgainstAbstain


2) Advisory approval of Westmoreland Coal Company's executive compensation.¨¨¨
3) Ratification of the appointment of Ernst & Young LLP as principal independent auditor for fiscal year 2013.¨¨¨
          
For
All		Withhold
All		For All
Except		To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.

(IMAGE)
The Board of Directors recommends you vote FOR the following:
ooo
1.   Election of Directors
Nominees
01   Keith E. Alessi02   Thomas J. Coffey03   Michael R. D’Appolonia04   Gail E. Hamilton      05   Richard M. Klingaman
06   Jan B. Packwood07   Robert C. Scharp
The Board of Directors recommends you vote FOR proposals 2 and 3.ForAgainstAbstain
2     Ratification of the appointment of Ernst & Young LLP as principal independent auditor for fiscal year 2011.
ooo
3     To cast an advisory vote on executive compensation.
ooo
The Board of Directors recommends you vote 1 YEAR on the following proposal:1 year2 year3 yearAbstain
4     To cast an advisory vote on the frequency of executive compensation votes.
oooo
NOTE:Such other business as may properly come before the meeting or any adjournment thereof.   




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WESTMORELAND COAL COMPANY

Annual Meeting of Stockholders
May 24, 201121, 2013 8:30 AM
This proxy is solicited by the Board of Directors
 
The undersigned hereby constitutes and appoints Jennifer S. Grafton as true and lawful agent and proxy with power of substitution, to represent the undersigned and to vote all shares of Common Stock held by the undersigned at the Annual Meeting of Stockholders to be held via live webcast at www.virtualshareholdermeeting.com/WLB2013 on Tuesday, May 21, 2013, at 8:30 a.m. (mountain daylight time), and at any adjournments thereof, on all matters coming before said meeting as noted on the reverse side of the card.

This proxy, when properly executed, will be voted in the manner directed herein. If no directions are given, this proxy will be voted in accordance with the Board of Directors' recommendations. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY AND PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.

You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors' recommendations. The proxies cannot vote the shares unless they sign and return this card.
 
Continued and to be signed on reverse side
The undersigned hereby constitutes and appoints Morris W. Kegley and Jennifer S. Grafton and each of them, as true and lawful agents and proxies with power of substitution, to represent the undersigned and to vote all shares of Common Stock held by the undersigned at the Annual Meeting of Stockholders to be held at our corporate offices, 2 N. Cascade Avenue, 2nd Floor, Colorado Springs, CO 80903, on Tuesday, May, 24, 2011, at 8:30 a.m. (mountain time), and at any adjournments thereof, on all matters coming before said meeting as noted on the reverse side of this card.
This proxy, when properly executed, will be voted in the manner directed herein. If no directions are given, this proxy will be voted in accordance with the Board of Directors’ recommendations. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY AND PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’ recommendations. The proxies cannot vote your shares unless you sign and return this card.
Continued and to be signed on reverse side