COAL OVERVIEW WESTMORELAND MINING

WESTMORELAND RESOURCES WESTMORELAND COAL SALES

WESTMORELAND RESOURCES, INC. (WRI)

WRI was formed by Westmoreland and a group of partners to lease coal reserves from the Crow Tribe of Indians in Montana and develop the Absaloka Mine in the early 1970’s. WRI shipped its first coal from the mine in 1974. Over the years, Westmoreland acquired the partnership interests of others and as part of its renewal strategy increased its ownership to 100% in October 2007. Washington Group International, Inc. (formerly Morrison Knudsen) had been the contract miner for WRI until March 2007 when WRI assumed responsibility for mining operations. Unlike Westmoreland’s other mining operations which supply contiguous power generation facilities, the coal produced at this mine requires rail transport to its principal customers in the Upper Midwest. However, Absaloka also enjoys a proximity advantage to these customers relative to its main competitors.

Absaloka Mine
The Absaloka Mine is a 15,000-acre single pit surface mine complex located near Hardin, Montana and the Crow Indian Reservation. The coal reserves are leased from the Crow Tribe of Indians. The Absaloka Mine was expressly developed to supply Powder River Basin coal to a group of Midwestern utilities, including Xcel Energy’s Sherburne County Station near Minneapolis, Minnesota. Over the years, it has also sold coal to several other upper Midwest utilities. Coal is shipped via a 38-mile rail spur to the main line of the Burlington Northern Santa Fe Railroad near Hysham, Montana.

The Absaloka Mine has produced approximately up to 7.5 million tons of coal annually. For more mine statistics, please see the Coal Operations Table.

Absaloka Coal, LLC
Westmoreland Resources, Inc. (WRI) and its subsidiary, WRI Partners, Inc., have formed Absaloka Coal, LLC (ACL) in 2008 to be a qualified producer of Indian coal under Section 45(e) of the U.S. Internal Revenue Code. WRI subleased a certain amount of coal reserves to ACL and agreed to serve as contract mine operator on behalf of ACL, thereby establishing ACL as the producer and seller of coal from the Absaloka Mine. WRI sold its membership interest in ACL to a large financial entity in October 2008 in exchange for certain equity payments that include notes for most of the value of Indian Coal Production Tax Credits earned by ACL. A portion of these note payments are shared with the Crow Tribe. ACL has received a Private Letter Ruling from the Internal Revenue Service with regard to its qualification for the credits.

WRI continues to hold the overriding Absaloka Mine coal mineral leases with the Crow Tribe, is the mine permittee, and owns or controls and operates all equipment and infrastructure and employs the mine workforce. Westmoreland Coal Sales Company is the exclusive sales agent for ACL.

View Coal Operations Table
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