MDU RESOURCES GROUP, INC.

                 DIRECTORS' COMPENSATION POLICY

     Each Director who is not a full-time employee of the Company
shall receive compensation made up of annual cash retainers,
common stock and meeting fees.  Each Director is also eligible
for awards under the 1997 Non-Employee Director Long-Term
Incentive Plan.

Annual Retainers, Stock Compensation and Stock Option Grants

     The Board service annual cash retainer shall be $20,000.
The Lead Director shall receive an annual retainer of $33,000.
The annual retainer for service as Chairman of the Audit,
Compensation, Finance and Nominating Committees shall be $4,000.
Such retainers shall be paid in monthly installments.

     The Amended and Restated Deferred Compensation Plan for
Directors adopted on February 13, 1992, and effective January 1,
1992, as amended, permits a Director to defer all or any portion
of the annual cash retainer, as well as meeting fees and any
other cash compensation paid for service as a Director.  The
amount deferred is recorded in each participant's deferred
compensation account and credited with income in the manner
prescribed in the Plan.  For further details, reference is made
to the Plan, a copy of which is attached.

     Each Director shall receive 1,800 shares of Common Stock on
or about the 15th business day following the annual meeting of
stockholders, pursuant to the Non-Employee Director Stock
Compensation Plan, effective April 25, 1995, as amended, or the
1997 Non-Employee Director Long-Term Incentive Plan.  A Director
may decline a stock payment for any plan year, in writing in
advance of the plan year to which stock payment relates.  No cash
compensation shall be paid in lieu thereof.  By written election
a Director may reduce the cash portion of the annual retainer and
have that amount applied to the purchase of additional shares.
The election must be made on a form provided by the
administrative committee and returned to the committee by the
last business day of the year prior to the year in which the
election is to be effective.  The election remains in effect
until changed or revoked.  No election may be changed or revoked
for the current year, but may be changed for a subsequent year.
For further details, reference is made to the Non-Employee
Director Stock Compensation Plan, a copy of which is attached.

Board and Committee Meeting Fee

     The fee for each Board meeting attended shall be $1,500 and
for each meeting attended of each Committee of which the Director
is a member, and for attendance at the Strategic Planning
meeting, shall be $1,500, payable only to Directors who are not
full-time employees of the Company.

Travel Expense Reimbursement

     All Directors will be reimbursed for reasonable travel
expenses including spouse's expenses (providing the spouse
participates in ALL business, community, spouse-specific and
social events), in connection with attendance at meetings of the
Company's Board of Directors and its committees.  If the travel
expense is related to the reimbursement of commercial airfare,
such reimbursement will not exceed full-coach rate.  If the
travel expense is related to reimbursement of non-commercial
airfare, such reimbursement will not exceed the rate for
comparable travel by means of commercial airline at the first-
class rate.

Directors' Liability

     Article Seventeenth of the Company's Restated Certificate of
Incorporation provides that no Director of the Company shall be
liable to the Company or its stockholders for breach of fiduciary
duty as a Director, with certain exceptions stated below.
Section 7.07 of the Company's Bylaws requires the Company to
indemnify fully a Director against expenses, attorneys fees,
judgments, fines and amounts paid in settlement of any suit,
action or proceeding, whether civil or criminal, arising from an
action of a Director by reason of the fact that the Director was
a Director of MDU Resources Group, Inc.

     There are exceptions to these protections:  breaches of the
Directors' duty of loyalty to the Company or its stockholders,
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law, violation of
Section 174 of the Delaware General Corporation Law (relating to
unlawful declaration of dividends and unlawful purchase of the
company's stock), and transactions from which the Director
derived an improper personal benefit (including short-swing
profits under Section 16(b) of the Securities Exchange Act of
1934).

     The Company has and does maintain Directors' and Officers'
liability insurance coverage with a $100,000,000 limit.

Insurance Coverages

     The Company maintains the following insurance for protection
of its Directors as they carry out the business of MDU Resources
Group, Inc.

     1.   General liability and automobile liability insurance:

          The Directors are afforded coverage
          under the general liability and automobile
          liability insurance of the Company. The
          policy limit is $75,000,000 in excess of self-
          insured retentions of $500,000 per
          occurrence for general liability and $250,000
          per occurrence for automobile liability; or
          $1,000,000 per occurrence/$2,000,000
          aggregate for general liability and
          $1,000,000 per occurrence for automobile
          liability, where we are carrying primary
          layer insurance coverage.

     2.   Fiduciary and employee benefit liability
          insurance:

          The Directors are afforded coverage
          under the fiduciary and employee benefits
          liability insurance of the Company.  The
          policy has a $35,000,000 limit with no
          deductible applicable to the Director.

     3.   Aircraft liability insurance:

          The Company's existing aircraft
          liability insurance policy extends coverage
          while a non-owned* aircraft is used by a
          Director in traveling to and from Director or
          Board committee meetings.  This insurance
          coverage constitutes excess liability
          coverage in the amount of $200,000,000.

          *Non-owned aircraft is defined as:  1)
          any aircraft registered under a "standard"
          airworthiness certificate issued by the FAA;
          2) aircraft with a seating capacity not
          exceeding 40 seats; 3) aircraft that are not
          owned by MDU Resources Group, Inc. or any of
          its subsidiaries; 4) aircraft that are not
          partly or wholly owned by or registered in
          the Director's name or the name of any
          Director's household member.

     4.   Travel and sojourn insurance:

          All Directors are protected by a group
          insurance policy with coverage of $250,000
          that provides 24-hour accident protection
          while traveling on Company business.

          Coverage in all instances begins at the
          actual start of a business trip and ends when
          the Director returns to his/her home or
          regular place of employment.

          The beneficiary of the insurance will be
          that beneficiary recorded on a beneficiary
          designation card provided by the Company.

     5.   Group life insurance:

          All outside Directors are protected by a
          non-contributory group life insurance policy
          with coverage of $100,000.

          The coverage begins the day the Director
          is elected to the Board of Directors and
          terminates when the Director ceases to be an
          outside Director.

          A Certificate of Insurance shall be
          provided to the Director and the beneficiary
          of the insurance will be that beneficiary
          recorded on a beneficiary designation card
          provided by the Company.

          This protection is considered taxable
          compensation under current tax laws.
          Consequently, the Company will provide each
          Director annually on Form 1099 the amount of
          taxable income related to this coverage.