WESTMORELAND MINING LLC 2 North Cascade Avenue 2nd Floor Colorado Springs, Colorado 80903 WAIVER AND CONSENT

Exhibit 10.2

WESTMORELAND MINING LLC

2 North Cascade Avenue
2^nd Floor
Colorado Springs, Colorado 80903

WAIVER AND CONSENT

October 7, 2009

To Each Noteholder Named On
The Signature Pages Hereof

Ladies and Gentlemen:

Reference is made to the Note Purchase Agreement, dated as of June 26, 2008 (the “Note Purchase Agreement”), by and among Westmoreland Mining LLC, a Delaware limited liability company (the “Company”), each of the Guarantors referred to therein, and each of the institutional investors identified in Schedule A thereto, providing, inter alia, for the issue and sale by the Company and the purchase by such investors of the Company’s 8.02% Senior Guaranteed Secured Notes due March 31, 2018 (the “Notes”) in the original aggregate principal amount of $125,000,000. Capitalized terms used and not otherwise defined in this letter (this “Waiver and Consent”) shall have the respective meanings attributed thereto in the Note Purchase Agreement.

Recitals.

A. On the date hereof, the Notes remain outstanding in the aggregate principal amount of $125,000,000 and are registered in the names of the respective Institutional Investors (each a “Noteholder” and, collectively, the “Noteholders”) identified on the signature pages hereof.

B. The Company has heretofore advised each of the Noteholders that, as a result of the unexpected outage and subsequent shutdown of the Colstrip Unit 4 power plant (“Colstrip 4”) and for the other reasons set forth in the Waiver and Amendment Request, dated August 25, 2009 (the “Explanatory Memo”), delivered by or on behalf of the Company to each Noteholder, the Company has failed to comply, as of the end of its fiscal quarter ended June 30, 2009 (“2009 Q2”), and will fail to comply as of the end of each of its three fiscal quarters ending September 30, 2009, December 31, 2009, and March 31, 2010, respectively (collectively, together with 2009 Q2, the “Affected Quarters”), with Section 10.18 of the Note Purchase Agreement, pursuant to which the Company covenants that it will not permit the ratio of Consolidated Net Indebtedness of the Company and its Subsidiaries to Consolidated EBITDA, calculated as of the end of each such Affected Quarter, to exceed 3.00 to 1.00.

C. The Company has requested that each Noteholder, by its execution of this Waiver and Consent, (i) waive, in the manner and subject to the conditions hereinafter set forth, any Potential Defaults or Events of Default consisting of or resulting from the Company’s failure (or, as the case may be, anticipated failure) to comply with Section 10.18 of the Note Purchase Agreement as of the end of each of the Affected Quarters; and (ii) consent, as hereinafter provided, to the making by the Company to Parent of certain distributions and payments of Management Fees hereafter described, notwithstanding any such waived Potential Default or Event of Default (but otherwise subject to the applicable conditions to the making of such distributions and payments of Management Fees set forth in Section 10.5 of the Note Purchase Agreement). Each Guarantor has joined in such request and consents and agrees to the terms and provisions of this Waiver and Consent.

D. The further provisions of this Waiver and Consent set forth the understanding of the Company and each Guarantor of their agreement with each Noteholder concerning such requested waivers and consent.

Section 1. Waiver.

Each Noteholder, by its execution and delivery of this Waiver and Consent, hereby waives any and all Potential Defaults or Events of Default arising solely by reason or as a consequence of the failure on the part of the Company to comply with the Company’s covenant set forth in Section 10.18 of the Note Purchase Agreement as of:

(a) the end of the Affected Quarter ended June 30, 2009;

(b) the end of the Affected Quarter ending September 30, 2009, so long as (and it shall be a condition to the effectiveness of such waiver that) (i) the ratio of Consolidated Net Indebtedness of the Company and its Subsidiaries to Consolidated EBITDA as of the end of such Affected Quarter shall not exceed 3.75 to 1.00, (ii) Consolidated EBITDA of the Company and its Subsidiaries for such Affected Quarter shall have been not less than $5,750,000, and (iii) the Company shall have delivered to each Noteholder, no later than October 20, 2009, the unaudited consolidated interim financial statements of the Company and its Subsidiaries required to be so delivered in respect of such Affected Quarter pursuant to Section 7.1(b) of the Note Purchase Agreement, and such financial statements shall demonstrate fulfillment of each of the conditions set forth in clauses (i) and (ii) of this Section 1(b);

(c) the end of the Affected Quarter ending December 31, 2009, so long as (and it shall be a condition to the effectiveness of such waiver that) (i) the waiver provided for in Section 1(b) hereof shall have theretofore become effective upon satisfaction of the conditions to such effectiveness set forth in such Section 1(b), (ii) the ratio of Consolidated Net Indebtedness of the Company and its Subsidiaries to Consolidated EBITDA as of the end of such Affected Quarter shall not exceed 3.75 to 1.00, (iii) Consolidated EBITDA of the Company and its Subsidiaries for such Affected Quarter shall have been not less than $9,200,000, (iv) Colstrip 4 shall have been continuously operating on a normalized basis at all times from and after November 30, 2009 to and including the end of such Affected Quarter, (v) the aggregate amount of coal sold by the Company during such Affected Quarter shall have been not less than 4,500,000 tons, and (vi) the Company shall have delivered to each Noteholder, no later than January 20, 2010, (A) the unaudited consolidated interim financial statements of the Company and its Subsidiaries of the character required to be so delivered pursuant to Section 7.1(b) of the Note Purchase Agreement in respect of such Affected Quarter (whether or not required to be delivered pursuant to Section 7.1(b) of the Note Purchase Agreement for such Affected Quarter), and such financial statements shall demonstrate fulfillment of each of the conditions set forth in clauses (ii) and (iii) of this Section 1(c), and (B) an Officer’s Certificate certifying that each of the conditions set forth in clauses (iv) and (v) of this Section 1(c) have been fulfilled; and

(d) the end of the Affected Quarter ending March 31, 2010, so long as (and it shall be a condition to the effectiveness of such waiver that) (i) the waiver provided for in Section 1(c) shall have theretofore become effective upon satisfaction of the conditions to such effectiveness set forth in such Section 1(c), (ii) the ratio of Consolidated Net Indebtedness of the Company and its Subsidiaries to Consolidated EBITDA as of the end of such Affected Quarter shall not exceed 4.00 to 1.00, and (iii) the Company shall have delivered to each Noteholder, no later than April 20, 2010, the unaudited consolidated interim financial statements of the Company and its Subsidiaries required to be so delivered in respect of such Affected Quarter pursuant to Section 7.1(b) of the Note Purchase Agreement, and such financial statements shall demonstrate fulfillment of the condition set forth in clause (ii) of this Section 1(d);

provided, however, that (1) no such waiver provided for in any of the foregoing Sections 1(a) through 1(d) shall in any event be or become effective prior to the fulfillment of the conditions to the effectiveness of this Waiver and Consent set forth in Section 4 hereof and (2) any waiver which shall have become effective as provided in this Section 1 of any Potential Default or Event of Default shall cease to be effective during any period that the events or circumstances constituting or giving rise to such Potential Default or Event of Default shall constitute or result in a default or event of default under and within the meaning of the Bank Credit Agreement which shall not have been effectively waived or cured under the terms of the Bank Credit Agreement.

Section 2. Consent.

Each Noteholder, by its execution and delivery of this Waiver and Consent, hereby consents to:

(a) the (i) making of distributions by the Company to Parent of up to $5,400,000 in the aggregate and (ii) the payment of Management Fees by the Company to Parent of up to $1,200,000 in the aggregate each in respect of the Affected Quarter ended September 30, 2009, so long as at the time of any such action set forth in clauses (i) and (ii) of this Section 2(a), the Company shall be permitted to make such distribution or pay such Management Fee pursuant to and in compliance with Section 10.5 of the Note Purchase Agreement (it being understood that, for this purpose, (x) no Potential Default or Event of Default, the conditions to the waiver of which set forth in Section 1(a) or 1(b) hereof shall have been fulfilled, shall be deemed to be continuing at such time and (y) it shall in any event be a condition to the making of any such distribution or payment of such Management Fee that no other Potential Default or Event of Default shall have occurred and be continuing); and

(b) the making of distributions and the payment of Management Fees by the Company to Parent in respect of the Affected Quarters ending December 31, 2009 and March 31, 2010, respectively, so long as at the time of any such action, the Company shall be permitted to make such payment or distribution, as the case may be, pursuant to and in compliance with Section 10.5 of the Note Purchase Agreement (it being understood that, for this purpose, (x) no Potential Default or Event of Default the conditions to the waiver of which set forth in Section 1(c) or Section 1(d) hereof shall have been fulfilled, shall be deemed to be continuing at such time and (y) it shall in any event be a condition to the making of any such distribution or payment of such Management Fee that no other Potential Default or Event of Default shall have occurred and be continuing);

provided, however, that no such consent provided for in either of the foregoing Sections 2(a) and 2(b) shall in any event be or become effective prior to the fulfillment of the conditions to the effectiveness of this Waiver and Consent set forth in Section 4 hereof.

Section 3. Representation and Warranties.

In connection with the matters contemplated by this Waiver and Consent, the Company and each Guarantor hereby represents and warrants to and for the benefit of the Noteholders as follows (it being understood that such representations and warranties shall be deemed made pursuant to and in connection with the Financing Documents for all purposes and shall survive the execution and delivery of this Waiver and Consent and the effectiveness of the waivers and consents provided for herein):

(a) As of the date hereof, no Potential Default or Event of Default has occurred and is continuing, other than as described in Recital B above and, after giving effect to the waivers provided for in Section 1 hereof (assuming fulfillment of the conditions to such respective waivers), no Potential Default or Event of Default shall have occurred and be continuing.

(b) The information set forth in the Explanatory Memorandum (other than the financial results projected for the periods after June 30, 2009 set forth therein) is true and correct in all material respects, and the financial results projected for the periods after June 30, 2009 set forth therein represent a reasonable range of possible results in light of the history of the business, present and foreseeable conditions (including those identified in the Explanatory Memorandum), and the intentions of the Company’s management. The statements set forth in the Recitals to this Waiver and Consent are true and correct in all material respects.

(c) The Company has obtained or will obtain a written consent and waiver (the “Credit Agreement Waiver”) from the Bank Lenders which shall be effective to (i) waive all defaults or events of default, if any, which have occurred or may occur under the Bank Credit Agreement by reason of any one or more of the events or circumstances described or referred to in the Explanatory Memo or which are otherwise the subject of the waivers set forth in Section 1 hereof and (ii) consent to the distributions which are the subject of the consents set forth in Section 2 hereof. Neither the Company nor any other Obligor shall be required, pursuant to the Bank Credit Agreement, the Credit Agreement Waiver or otherwise, or will, directly or indirectly, pay or cause to be paid to the Bank Lenders or any agents for the Bank Lenders, any remuneration of any character for or in connection with the granting of the waivers and consents provided for in the Credit Agreement Waiver, except for fees which shall not exceed (in the aggregate for all Bank Lenders and their agents) 0.25% of the Commitments (as such term is defined in the Bank Credit Agreement) available under the Bank Credit Agreement as of the date hereof.

Section 4. Effectiveness.

It shall be a condition to the effectiveness of the waivers and consents provided for in Sections 1 and 2, respectively, hereof by each Noteholder that:

(a) This Waiver and Consent shall have been executed and delivered by the Company and each Guarantor and the form of acceptance on one or more counterparts hereof shall have been executed and delivered by Noteholders constituting the Required Holders.

(b) The Credit Agreement Waiver shall have been executed and delivered by the parties thereto in form reasonably satisfactory to the Required Holders and shall have become effective in accordance with its terms; and such Noteholder shall have received a true and correct copy thereof.

(c) Each Noteholder shall have received the fee payable to it pursuant to Section 5 hereof.

Section 5. Waiver and Consent Fee.

In connection with, and in consideration of, the waivers and consents provided for in Sections 1 and 2, respectively, hereof, the Company shall pay to each Noteholder (regardless of whether such Noteholder shall have joined in the execution and delivery of this Waiver and Consent and given such waivers and consents), as a condition to the effectiveness of this Waiver and Consent, a fee equal to 0.25% of the outstanding principal balance of each Note held by such Noteholder as of the date hereof. Each payment made by the Company to any Noteholder pursuant to the preceding sentence in respect of the Notes held by such Noteholder shall be made to such Noteholder in the manner set forth in the Note Purchase Agreement for the payment to such Noteholder of interest and principal on such Notes.

Section 6. Miscellaneous.

(a) In accordance with Section 15.1 of the Note Purchase Agreement, the Company will pay all costs and expenses incurred by each Noteholder in connection with this Waiver and Consent, including the fees and disbursements of special counsel for the Noteholders.

(b) The waivers and consents provided for in this Waiver and Consent are limited as expressly provided by the terms hereof, and no other consents, waivers, amendments or other modifications of or under the Note Purchase Agreement, the Security Documents, the Notes or the other Financing Documents shall be inferred from the terms hereof. Except as expressly provided by the terms hereof, no waiver or consent provided for herein shall in any event extend to or affect any obligation, covenant or agreement of any Obligor contained in the Financing Documents, or any Potential Default or Event of Default, or impair any right of the Noteholders or the Collateral Agent consequent upon any such Potential Default or Event of Default, or be deemed to have established or to constitute a course of dealing between the Company or any other Obligor, on the one hand, and the Noteholders (or any of them) and/or the Collateral Agent, on the other, which would require any Noteholder or the Collateral Agent to waive or consent to any Potential Default or Event of Default or other matter.

(c) Except as otherwise expressly provided herein, the terms, covenants and conditions contained in the Note Purchase Agreement, the Security Documents, the Notes and the other Financing Documents (including, without limitation, the terms of the Guaranty Agreement) are hereby ratified and confirmed in all respects, and the Note Agreements, the Security Documents, the Notes and the other Financing Documents are and shall remain in full force and effect.

(d) Any and all notices, requests, certificates, and other instruments executed and delivered subsequent to the effectiveness of this Waiver and Consent may refer to the Note Purchase Agreement and/or the Security Documents and/or the Notes and/or any other Financing Document, as appropriate, without making specific reference to this Waiver and Consent or to any prior waiver, amendment of or other modification to or consent given under the Note Purchase Agreement or any other Financing Document, and all such references nevertheless shall be deemed to include, unless the context otherwise requires, this Waiver and Consent and all such previously-effective waivers, amendments and other modifications and consents, if any.

(e) The descriptive headings of the Sections and other subdivisions of this Waiver and Consent shall not affect the meaning or construction of any of the provisions hereof. Except as otherwise expressly provided, references herein to any section or other subdivision shall be deemed a reference to such section or other subdivision of this Waiver and Consent.

(f) This Waiver and Consent shall be governed by, and construed and enforced in accordance with, the laws of the State of New York applicable to contracts made and to be performed in said State.

(g) This Waiver and Consent may be executed in any number of counterparts, each of which shall constitute an original but all of which together shall constitute one and the same instrument. Each such counterpart may consist of a number of copies hereof, each signed by one or more of the parties hereto. Delivery of an executed counterpart of this Waiver and Consent by facsimile or transmitted electronically in either Tagged Image File Format (“TIFF”) or Portable Document Format (“PDF”) shall be equally effective as delivery of a manually executed counterpart hereof. Any party delivering an executed counterpart of this Waiver and Consent by facsimile, TIFF or PDF shall also deliver a manually executed counterpart hereof, but failure to do so shall not effect the validity, enforceability, or binding effect of this Waiver and Consent.

[Signature pages follow]

If you are in agreement with the foregoing, please sign the appropriate signature block on the accompanying counterparts of this Waiver and Consent and return one of the same to the Company.

NOTEHOLDER SIGNATURE PAGE 1 OF 2 TO WAIVER AND CONSENT DATED OCTOBER 7, 2009

ACCEPTED AND AGREED:

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA						PRINCIPAL LIFE INSURANCE COMPANY
By:		/s/ Lisa M. Ferraro				By:  Principal Global Investors, LLC
		Name: Lisa M. Ferraro						A Delaware limited liability
		Title: Director						Company, its authorized signatory
NEW YORK LIFE INSURANCE COMPANY						By:		/s/ Justin T. Lange   Name: Justin T. Lange
By:		/s/ Kathleen A. Haberkern   Name: Kathleen A. Haberkern						Title: Counsel
		Title: Vice President and Ass. G. C.				By:		/s/ Karen A. Pearston   Name: Karen A. Pearston
								Title: Corporate Vice President
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION						GENWORTH LIFE AND ANNUITY INSURANCE COMPANY
By: New York Life Investment Management
		LLC, Its Investment Manager
By:		/s/ Kathleen A. Haberkern   Name: Kathleen A. Haberkern				By:		/s/ John R. Endres   Name: John R. Endres
		Title: Director						Title: Investment Officer
NATIONWIDE MUTUAL FIRE INSURANCE COMPANY						GENWORTH LIFE INSURANCE COMPANY OF NEW YORK
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY						By:		/s/ John R. Endres   Name: John R. Endres
								Title: Investment Officer
NATIONWIDE LIFE INSURANCE COMPANY						MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By:		/s/ Mary Beth Cadle				By:  Babson Capital Management LLC
		Name: Mary Beth Cadle						As Investment Sub-Advisor
		Title: Authorized Signatory
						By:		/s/ John Wheeler   Name: John Wheeler Title: Managing Director

NOTEHOLDER SIGNATURE PAGE 2 OF 2 TO WAIVER AND CONSENT DATED OCTOBER 7, 2009

ACCEPTED AND AGREED:

C.M. LIFE INSURANCE COMPANY
By:		Babson Capital Management LLC
		As Investment Sub-Advisor
By:		/s/ John Wheeler
		Name:		John Wheeler
		Title:		Managing Director