MDU RESOURCES GROUP, INC.
                   1998 OPTION AWARD PROGRAM


Article 1.  Establishment, Purpose and Duration

     1.1  Establishment of the Plan.  MDU Resources Group, Inc. a
Delaware corporation (hereinafter referred to as the "Company"),
hereby establishes the "MDU Resources Group, Inc., 1998 Option
Award Program" (hereinafter referred to as the "Plan"), as set
forth in this document.  The Plan permits the grant of
Nonqualified Stock Options.

     The Plan shall become effective as of February 12, 1998 (the
"Effective Date"), and shall remain in effect as provided in
Section 1.3 herein.

     1.2  Purpose of the Plan.  The purpose of the Plan is to
promote the success and enhance the value of the Company by
linking the personal interests of Participants to those of
Company stockholders.

     1.3  Duration of the Plan.  The Plan shall commence on the
Effective Date, as described in Section 1.1 herein, and shall
remain in effect until terminated by the Board of Directors
pursuant to Article 9 herein.

Article 2.  Definitions

     Whenever used in the Plan, the following terms shall have
the meanings set forth below and, when such meaning is intended,
the initial letter of the word is capitalized:

     2.1  "Award" means, individually or collectively, a grant
under the Plan of NQSOs.

     2.2  "Award Agreement" or "Option Award Agreement" means an
agreement entered into by each Participant and the Company,
setting forth the terms and provisions applicable to an Award
granted to a Participant under the Plan.

     2.3  "Board" or "Board of Directors" means the Board of
Directors of the Company.

     2.4  "Change in Control" means the earliest of the following
to occur:  (a) the public announcement by the Company or by any
Person (which shall not include the Company, any Subsidiary of
the Company, or any employee benefit plan of the Company or of
any Subsidiary of the Company) that such Person, who or which,
together with all Affiliates and Associates (within the meanings
ascribed to such terms in the Rule 12b-2 of the General Rules and
Regulations under the Exchange Act) of such Person, shall be the
beneficial owner of twenty percent (20%) or more of the voting
stock of the Company outstanding; (b) the commencement of, or
after the first public announcement of any Person to commence, a
tender or exchange offer the consummation of which would result
in any Person becoming the beneficial owner of voting stock
aggregating thirty percent (30%) or more of the then outstanding
voting stock of the Company; (c) the announcement of any
transaction relating to the Company required to be described
pursuant to the requirements of Item 6(e) of Schedule 14A of
Regulation 14A under the Exchange Act; (d) a proposed changed in
constituency of the Board such that, during any period of two (2)
consecutive years, individuals who at the beginning of such
period constitute the Board cease for any reason to constitute at
least a majority thereof, unless the election or nomination for
election by the stockholders of the Company of each new Director
was approved by a vote of at least two-thirds (2/3) of the
Directors then still in office who were members of the Board at
the beginning of the period; (e) the sale or other disposition of
all or substantially all of the assets of Montana-Dakota
Utilities Co., other than to a Subsidiary of the Company; or (f)
any other event that shall be deemed by a majority of the Board
of Directors to constitute a "change in control."

     2.5  "Code" means the Internal Revenue Code of 1986, as
amended from time to time.

     2.6  "Committee" means the committee, as specified in
Article 3, appointed by the Board to administer the Plan with
respect to Awards.

     2.7  "Company" means MDU Resources Group, Inc., a Delaware
corporation, (including its business units) or any successor
thereto as provided in Article 11 herein.

     2.8  "Director" means any individual who is a member of the
Board of Directors of the Company.

     2.9  "Disability" means "permanent and total disability" as
defined under Section 22(e)(3) of the Code.

     2.10 "Dividend Account" is defined in Section 6.3
herein.

     2.11 "Eligible Employee" means an Employee who is eligible
to participate in the Plan, as set forth in Section 5.1 herein.

     2.12 "Employee" means (i) any full-time or regularly-
scheduled part-time employee of the Company or a Subsidiary or
(ii) any bargaining unit employee covered by a collective
bargaining agreement to which the Company or any of its
Subsidiaries is a party.  Directors who are not otherwise
employed by the Company or a Subsidiary shall not be considered
Employees for purposes of the Plan.

     2.13 "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, or any successor act thereto.

     2.14 "Exercise Period" means the period during which an
Option is exercisable, as set forth in the related Award
Agreement.

     2.15 "Fair Market Value" shall mean the average of the high
and low sale prices as reported in the consolidated transaction
reporting system or, if there is no such sale on the relevant
date, then on the last previous day on which a sale was reported.

     2.16 "Nonqualified Stock Option" or "NQSO" means an option
to purchase Shares, granted under Article 6 herein, which is not
intended to be an Incentive Stock Option under Section 422 of the
Code.

     2.17 "Option" means a Nonqualified Stock Option.

     2.18 "Option Exercise Price" means the price at which a
Share may be purchased by a Participant pursuant to an Option, as
determined by the Committee and set forth in the Option Award
Agreement.

     2.19 "Participant" means an Employee who has outstanding an
Award granted under the Plan.

     2.20 "Person" shall have the meaning ascribed to such term
in Section 3(a)(9) of the Exchange Act, as used in Sections 13(d)
and 14(d) thereof, including usage in the definition of a "group"
in Section 13(d) thereof.

     2.21 "Shares" means the shares of common stock, $1.00 par
value, of the Company.

     2.22 "Subsidiary" means any corporation that is a
"subsidiary corporation" of the Company as that term is defined
in Section 424(f) of the Code.

     2.23 "Termination of Service" means leaving the employ
of the Company or any Subsidiary for any reason.   For purposes
of the Plan, transfer of employment of a Participant among the
Company and any Subsidiaries shall not be deemed a termination of
employment.

Article 3.  Administration

     3.1  The Committee. The Plan shall be administered by a
committee  (the "Committee"); the members of the Committee shall
be appointed from time to time by, and shall serve at the
discretion of, the Board of Directors.

     3.2  Authority of the Committee.  The Committee shall have
full power except as limited by law, the Articles of
Incorporation and the Bylaws of the Company, subject to such
other restricting limitations or directions as may be imposed by
the Board and subject to the provisions herein, to determine the
Employees to receive Awards; to determine the size of Awards and
the terms and conditions thereof; to construe and interpret the
Plan and any agreement or instrument entered into under the Plan;
to establish, amend or waive rules and regulations for the Plan's
administration; and (subject to the provisions of Article 9
herein) to amend the terms and conditions of any outstanding
Award.  Further, the Committee shall make all other
determinations which may be necessary or advisable for the
administration of the Plan.  As permitted by law, the Committee
may delegate its authorities as identified hereunder.

     3.3  Restrictions on Distribution of Shares and Share
Transferability.  Notwithstanding any other provision of the
Plan, the Company shall have no liability to deliver any Shares
under the Plan unless such delivery would comply with all
applicable laws (including, without limitation, the Securities
Act of 1933) and applicable requirements of any securities
exchange or similar entity and unless the participant's tax
obligations have been satisfied as set forth in Article 10.  The
Committee may impose such restrictions on any Shares acquired
pursuant to Awards under the Plan as it may deem advisable,
including, without limitation, restrictions to comply with
applicable Federal securities laws, with the requirements of any
stock exchange or market upon which such Shares are then listed
and/or traded and with any blue sky or state securities laws
applicable to such Shares.

     3.4  Decisions Binding.  All determinations and decisions
made by the Committee pursuant to the provisions of the Plan and
all related orders or resolutions of the Board shall be final,
conclusive and binding on all persons, including the Company, its
stockholders, Employees, Participants and their estates and
beneficiaries.

     3.5  Costs. The Company shall pay all costs of
administration of the Plan.

Article 4.  Shares Subject to the Plan

     4.1  Number of Shares.  Subject to Section 4.2 herein, the
maximum number of Shares available for grant under the Plan shall
be one million eight hundred seventy-five thousand (1,875,000).
Shares underlying lapsed or forfeited Awards may be reused for
other Awards.  Shares granted pursuant to the Plan may be
(i) authorized but unissued Shares of Common Stock, (ii) Treasury
Shares or (iii) Shares purchased on the open market.

     4.2  Adjustments in Authorized Shares.  In the event of any
merger, reorganization, consolidation, recapitalization,
liquidation, stock dividend, split-up, spin-off, share
combination, share exchange or other change in the corporate
structure of the Company affecting the Shares, such adjustment
shall be made in the outstanding Awards, the number and class of
Shares which may be delivered under the Plan, and in the number
and class of and/or price of Shares subject to outstanding Awards
granted under the Plan, as may be determined to be appropriate
and equitable by the Committee, in its sole discretion, to
prevent dilution or enlargement of rights.

Article 5.  Eligibility and Participation

     5.1  Eligibility.  Persons eligible to participate in the
Plan ("Eligible Employees") include all Employees, as determined
by the Committee.

     5.2  Actual Participation. Subject to the provisions of the
Plan, the Committee may, from time to time, select from all
Eligible Employees those to whom Awards shall be granted.

Article 6.  Stock Options

     6.1  Grant of Options.  Subject to the terms and conditions
of the Plan, Options may be granted to Eligible Employees, at any
time and from time to time, as shall be determined by the
Committee. The Committee shall have complete discretion in
determining the number of Shares subject to Options granted to
each Participant (subject to Article 4 herein) and, consistent
with the provisions of the Plan, in determining the terms and
conditions pertaining to such Options.

     6.2  Option Award Agreement.  Each Option grant shall be
evidenced by an Option Award Agreement that shall specify the
Option Exercise Price, which shall be the Fair Market Value of a
Share on the date of grant, the term of the Option, the number of
Shares to which the Option pertains, the Exercise Period and such
other provisions as the Committee shall determine.

     6.3  Dividend Account.  At the time of the Award, a
Dividend Account (the "Dividend Account") shall be established
for each Participant.  If a dividend is declared by the Board on
the Common Stock of the Company, an equivalent amount shall be
accrued in the Dividend Account of each Participant for each
share of Common Stock underlying all unvested Options held by the
Participant.  When the Award vests, all amounts in the Dividend
Account shall be paid in cash to the Participant.  If the Award
is forfeited, all amounts in the Dividend Account shall also be
forfeited.

     6.4  Exercise of and Payment for Options.  Options granted
under the Plan shall be exercisable at such times and be subject
to such restrictions and conditions as the Committee shall in
each instance approve.

     A Participant may exercise an Option, in whole but not in
part (subject to the Committee's right to determine otherwise),
at any time during the Exercise Period. Options shall be
exercised by the delivery of a written notice of exercise to the
Company or its designee, setting forth the number of Shares with
respect to which the Option is to be exercised, accompanied by
provision for full payment for the Shares; provided, however,
that the Committee shall have the right in its sole discretion to
establish other procedures for the exercise of Options.

     The Committee shall have the authority to establish
procedures for payment upon the exercise of Options which may
include, in the Committee's sole discretion, payment (a) in cash
or its equivalent, (b) by tendering previously acquired Shares
having an aggregate Fair Market Value at the time of exercise
equal to the total Option Exercise Price (provided that the
Shares which are tendered must have been held by the Participant
for at least (6) months prior to their tender to satisfy the
Option Exercise Price), (c) by broker- assisted cashless exercise
or (d) by a combination of (a), (b) and/or (c).

     As soon as practicable after receipt of a notification of
exercise of an Option and provision for full payment therefor,
there shall be delivered to the Participant, in the Participant's
name, Share certificates in an appropriate amount based upon the
number of Shares purchased under the Option(s).

     6.5  Termination of Service.

          a.  Upon any Termination of Service, unvested Options
and any amounts accrued in a Participant's Dividend Account shall
be forfeited.

          b.  Death

          If the Participant dies while still employed, any
vested Options, to the extent that they are then exercisable, may
be exercised, at any time within one (1) year (even if this
extends the term of the Options) after the date of the
Participant's death by the person designated in the Participant's
last will and testament or by the personal representative of the
Participant's estate.

          c.  Disability

          If the Participant suffers Disability, any vested
Options, to the extent that they are then exercisable, may be
exercised at any time within one (1) year (even if this extends
the term of the Options) after the date of Disability by the
Participant or by a person qualified or authorized to act on
behalf of the Participant.

          d.  Other Termination of Service

          If the Participant's Termination of Service is for any
reason other than Death or Disability, any vested Options, to the
extent that they are then exercisable, may be exercised at any
time within the three (3) months (even if this extends the term
of the Options) following the date of Termination of Service.

     6.6  Transferability of Options.  All Options granted to a
Participant under the Plan shall be exercisable during the
Participant's lifetime only by such Participant, and no Option
granted under the Plan may be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated, other than by
will or by the laws of descent and distribution.

Article 7.  Rights of Employees

     7.1  Employment.  Nothing in the Plan shall interfere with
or limit in any way the right of the Company to terminate any
Participant's employment at any time, for any reason or no reason
in the Company's sole discretion, nor confer upon any Participant
any right to continue in the employ of the Company.

     7.2  Participation.  No Employee shall have the right to be
selected to receive an Award.

     7.3  Limitation of Implied Rights.  Neither a Participant
nor any other Person shall, by reason of the Plan, acquire any
right in or title to any assets, funds or property of the Company
or any Subsidiary whatsoever, including, without limitation, any
specific funds, assets or other property which the Company or any
Subsidiary, in their sole discretion, may set aside in
anticipation of a liability under the Plan.  A Participant shall
have only a contractual right to the Shares or amounts, if any,
payable under the Plan, unsecured by any assets of the Company or
any Subsidiary.  Nothing contained in the Plan shall constitute a
guarantee that the assets of such companies shall be sufficient
to pay any benefits to any Person.

          Except as otherwise provided in the Plan, no Award
under the Plan shall confer upon the holder thereof any right as
a stockholder of the Company prior to the date on which the
individual fulfills all conditions for receipt of such rights.

Article 8.  Change in Control

          The terms of this Article 8 shall immediately become
operative, without further action or consent by any person or
entity, upon a Change in Control, and once operative shall
supersede and take control over any other provisions of this
Plan.

          Upon a Change in Control, any and all Options granted
hereunder shall become immediately exercisable.

Article 9.  Amendment, Modification and Termination

     9.1  Amendment, Modification and Termination.  The Board
may, at any time and from time to time, alter, amend, suspend or
terminate the Plan in whole or in part.

     9.2  Awards Previously Granted.  No termination, amendment
or modification of the Plan shall adversely affect in any
material way any Award previously granted under the Plan without
the written consent of the Participant holding such Award, unless
such termination, modification or amendment is required by
applicable law and except as otherwise provided herein.

Article 10.  Tax Withholding

     10.1 Tax Withholding.

          The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy Federal, state and local
taxes (including the Participant's FICA obligation) required by
law to be withheld with respect to an Award made under the Plan.

     10.2 Share Withholding

          The Committee shall have the authority to establish
procedures with respect to tax withholding required upon the
exercise of Options, which may include payment by Participants
(a) by tendering previously owned Shares held by the Participant
at least six (6) months prior to their tender or (b) by having
the Company withhold Shares having a Fair Market Value on the
date the tax is to be determined equal to the minimum statutory
total tax which could be imposed on the transaction.

Article 11.  Successors

     All obligations of the Company under the Plan, with respect
to Awards granted hereunder, shall be binding on any successor to
the Company, whether the existence of such successor is the
result of a direct or indirect purchase, merger, consolidation or
otherwise, of all or substantially all of the business and/or
assets of the Company.

Article 12.  Legal Construction

     12.1 Gender and Number.   Except where otherwise indicated
by the context, any masculine term used herein also shall include
the feminine, the plural shall include the singular and the
singular shall include the plural.

     12.2 Severability.  In the event any provision of the Plan
shall be held illegal or invalid for any reason, the illegality
or invalidity shall not affect the remaining parts of the Plan,
and the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included.

     12.3 Requirements of Law.  The granting of Awards and the
issuance of Shares under the Plan shall be subject to all
applicable laws, rules and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may
be required.

     12.4 Governing Law.  To the extent not preempted by Federal
law, the Plan, and all agreements hereunder, shall be construed
in accordance with, and governed by, the laws of the State of
Delaware.