Document:

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 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 1,000 shares of Common Stock on
or about the 15th business day following the annual meeting of
stockholders, pursuant to the Non-Employee Directors Stock
Compensation Plan, effective April 25, 1995, as amended.  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.

     Each Director shall receive an option grant annually to
purchase 3,000 shares of Company Common Stock.  The option shall
vest immediately and is exercisable for 10 years from the date of
the grant.  The option price is the fair market value of the
stock at the time of the grant.  The option grant is made
pursuant to the 1997 Non-Employee Director Long-Term Incentive
Plan.

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 Planning and Pension meetings,
shall be $1,000, 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.MDU RESOURCES GROUP, INC

                      Amended and Restated
            DEFERRED COMPENSATION PLAN FOR DIRECTORS
                    Effective January 1, 1992

  I. PURPOSE

     The Board of Directors of MDU Resources Group, Inc. (the
"Company") established the Deferred Compensation Plan for
Directors (the "Plan") effective as of September l, 1988.  The
Plan is hereby amended and restated effective January 1, 1992,
and is substituted for the Restated Plan established by the
Company on August 1, 1991.  The Plan shall continue until
terminated by the Board of Directors of the Company, subject to
the provisions of Article XII, below.

     The purpose of this Plan is to aid the Company in attracting
and retaining as Directors persons whose abilities, experience
and judgment can contribute to the continued progress of the
Company.  The Plan will provide a method of deferring
compensation to the Directors.

 II. DEFINITIONS

     A.   Beneficiary.  "Beneficiary" means the person or
          persons designated as such in accordance with Article
          XI.

     B.   Change in Control.  "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) ("Person") 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 change in constituency
          of the Board of Directors such that, during any period
          of two (2) consecutive years, individuals who at the
          beginning of such period constitute the Board of
          Directors 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 least two-thirds
          (2/3) of the Directors then still in office who were
          members of the Board of Directors at the beginning of
          the period; or (e) any other event which shall be
          deemed by a majority of the Board of Directors to
          constitute a "Change in Control."

     C.   Compensation and Deferral Amount. "Compensation"
          means any cash retainer, meeting fees and any other
          cash compensation payable to Eligible Directors by the
          Company for services as a Director.  This Deferred
          Compensation Plan for Directors governs any or all of
          that Compensation which the Participant elects to
          credit to his Deferred Compensation Account, which is
          hereafter referred to as the "Deferral Amount."

     D.   Deferred Compensation Account.  "Deferred
          Compensation Account" means the account maintained on
          the books of account of the Company for each
          Participant pursuant to Article VI.

     E.   Effective Date.  "Effective Date" means January 1,
          1992, the date on which the restated and amended Plan
          became effective.

     F.   Eligible Director.  "Eligible Director" means
          those Directors of the Company who are not employees of
          the Company.

     G.   Investment Units.  This term shall have the
          meaning defined in Article VI.B.

     H.   Market Price.  "Market Price" means the average of
          the highest and lowest transaction prices for the
          Company's common stock on the New York Stock Exchange
          for a given day.

     I.   Participant.  "Participant" means an Eligible
          Director participating in the Plan in accordance with
          the provisions of Article IV.

     J.   Plan Year.  "Plan Year" means the calendar year.

III. ADMINISTRATION OF THE PLAN

     The Board of Directors shall be the sole administrator of
the Plan.

     The Board of Directors may from time to time establish
rules and regulations for the administration of the Plan.

     All determinations of the Board of Directors, irrespective
of their character or nature, including, but not limited to, all
questions of construction and interpretation, shall be final,
binding and conclusive upon all parties.  Without limiting the
generality of the foregoing, the determination of the Board of
Directors as to whether a Participant has terminated his services
and the date thereof shall be final, binding and conclusive upon
all persons.

     The Company and/or the Board of Directors may consult with
legal counsel, who may be counsel for the Company or other
counsel, with respect to its obligations and duties hereunder or
with respect to any claim, action or proceeding or any other
matter, and shall not be liable for any action taken or not taken
by it in good faith pursuant to the advice of such counsel.

     The Chairman, at the direction of the Board of Directors
shall be responsible for maintaining books and records for the
Plan and adopting standard forms for such matters as beneficiary
designations and applications for benefits, provided such rules
and forms are not inconsistent with the provisions of the Plan.
Such books and records shall only be open for examination by a
Participant or his duly designated beneficiary to the extent that
they specifically involve the Deferred Compensation Account
created for his benefit or any payments which are to be made to
him or his beneficiary hereunder.  Each Participant or his duly
designated beneficiary shall be notified no less frequently than
annually of the balance in his account.

     Neither the Board of Directors nor any member of the Board
of Directors nor the Company nor any other person who is acting
on behalf of the Board of Directors or the Company shall be
liable for any act or failure to act hereunder except for gross
negligence or fraud.

 IV. PARTICIPATION

     All Eligible Directors, including any person who becomes a
Director after the effective date hereof, shall be Participants
in the Plan.

     Each Participant in the Plan shall have the right to elect
to defer the payment of all or any part of his Compensation, with
such Deferral Amount to be payable at the time or times and in
the manner hereinafter stated.

     Each Participant who elects to defer the payment of all or
any part of his Compensation shall execute and deliver to the
Board of Directors a "Notice of Election."  Such Notice will
provide the percentage of his Compensation to be deferred, the
date such deferral is to commence and the beneficiary
designations of the Director.  Such deferral election shall be
applicable only to Compensation earned by reason of services
rendered after the date of such Notice.

     An election to defer Compensation shall continue in effect
until revoked or modified by a subsequent "Notice of Election,"
provided however, (1) that every election to defer shall be
irrevocable as to Compensation earned prior to the date of
revocation and (2) that such election may be changed no more
often than annually.  Revocation or modification shall be made in
writing to the Board of Directors and shall be effective upon the
date stated therein.

  V. VESTING OF DEFERRED COMPENSATION ACCOUNT

     A Participant's interest in his Deferred Compensation
Account shall vest immediately with regard to Deferral Amounts
and earnings thereon.

 VI. ACCOUNTS AND VALUATIONS

     A.   Deferred Compensation Accounts.  The Board of
          Directors shall establish and maintain a separate
          Deferred Compensation Account for each Participant.  The
          Participant's Deferral Amount shall be credited to the
          Participant's Deferred Compensation Account quarterly
          on the first day of March, June, September and December
          in amounts as nearly equal as possible.

     B.   Conversion to Investment Units.  At the time a
          Deferral Amount is credited to the Deferred
          Compensation Account, it shall be converted to
          Investment Units, by dividing the amount deferred by
          the Market Price of the Company's stock on the first
          trading day immediately preceding the deferral.
          Fractional share Investment Units will be maintained in
          the Account.

VII. DIVIDEND EQUIVALENTS

     If a dividend is declared on the common stock of the
Company, an equivalent amount shall be credited to the
Participant's Deferred Compensation Account for each Investment
Unit.  Such amounts shall be converted to additional Investment
Units, pursuant to Article VI.B.

VIII.DISTRIBUTION

     A.   Conversion of Investment Units to Dollars.  When a
          Participant leaves the Board of Directors, dies, or
          becomes disabled, Investment Units in the Participant's
          Deferred Compensation Account shall be converted into
          dollars, on the dates set forth below, based on the
          Market Price of the Company's common stock on the date
          of conversion.  If the New York Stock Exchange is not
          open that day, then it shall be the Market Price on the
          next day the New York Stock Exchange is open.  During
          the period before conversion, if a dividend is declared
          on common stock of the Company, an equivalent amount
          shall be credited to the Participant's Deferred
          Compensation Account for each Investment Unit then
          remaining credited and not converted.  Such amounts
          shall be converted into additional Investment Units.

     B.   Payment.  On the day that is six full calendar
          months after the Participant's date of leaving the
          Board, death or disability, 20 percent of the value of
          the Investment Units credited to the Participant's
          Deferred Compensation Account shall be converted to
          dollars and paid to the Participant in substantially
          equal monthly payments over a one-year period (the
          "First Year Payout").  On the day that is one year
          after the date of the first conversion, 25 percent of
          the remaining value of the Investment Units shall be
          converted to dollars and paid to the Participant in
          substantially equal monthly payments over a one-year
          period (the "Second Year Payout").  The following year,
          33 1/3 percent of the remaining value shall be
          converted and paid out as above (the "Third Year
          Payout"), the fourth year, 50 percent of the remaining
          value shall be paid out as the "Fourth Year Payout",
          and the fifth year, the remaining balance shall be paid
          out as the "Fifth Year Payout."  As indicated above,
          "dividends" shall be credited on Investment Units
          before they are converted, which shall be converted
          into additional Investment Units.  No interest will be
          paid on amounts in the Deferred Compensation Account.

     C.   Change in Control.  The terms of this Article
          VIII.C 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 the Plan.

          Upon a Change in Control, all Investment Units in
          a Participant's Deferred Compensation Account shall be
          multiplied by the Market Price of the Company's common
          stock on such day.  If the New York Stock Exchange is
          not open on that day, then it shall be the Market Price
          on the next day the New York Stock Exchange is open.
          The dollar value of the Investment Units contained in
          each Participant's Deferred Compensation Account shall
          be paid out immediately thereafter to the Participant
          (a "Change in Control Payment".)

          In addition, the Company shall pay to the
          Participant an additional payment (a "Gross-Up
          Payment") in an amount such that after payment by the
          Participant of all federal and state income taxes
          (including, without limitation, any and all federal and
          state income taxes imposed upon the Gross-Up Payment)
          the Participant retains an amount of the Gross-Up
          Payment equal to the federal and state income taxes
          imposed upon the Change in Control Payment.

          All determinations required to be made under this
          Article VIII.C, including when a Gross-Up Payment is
          required, the amount of such Gross-Up Payment, and the
          assumptions to be utilized in arriving at such
          determination, shall be made by a certified public
          accounting firm designated by the Participant (the
          "Accounting Firm"), which shall provide detailed
          supporting calculations both to the Company and the
          Participant within 15 business days of the receipt of
          notice from the Participant that there has been a
          Change in Control Payment (or such earlier time as is
          requested by the Company).  All fees and expenses of
          the Accounting Firm related to the calculations
          required by this Article VIII.C shall be borne solely
          by the Company.  Any Gross-Up Payment, as determined
          pursuant to this Article VIII.C, shall be paid by the
          Company to the Participant within five days of the
          receipt of the Accounting Firm's determination.  Any
          determination by the Accounting Firm shall be binding
          upon the Company and the Participant.

 IX. TAX WITHHOLDING UPON DISTRIBUTION

     To the extent required by law, the Company shall withhold
from payments made hereunder any taxes required to be withheld by
the federal or any state or local government.

  X. COMMENCEMENT OF PAYMENTS

     Except as otherwise provided in this Plan, commencement of
payments under this Plan shall begin as soon as administratively
feasible after the value of the Investment Units is determined
according to Article VIII.

 XI. BENEFICIARY DESIGNATION

     Each Participant shall have the right at any time to
designate any person or persons as Beneficiary or Beneficiaries
(both principal and contingent) to whom payment under this Plan
shall be paid in the event of death prior to complete
distribution of the deferred amounts under the Plan.  Each
beneficiary designation shall become effective only when filed in
writing with the Board of Directors during the Participant's
lifetime on a form provided by the Board of Directors.

     The filing of a new beneficiary designation form will cancel
all beneficiary designations previously filed.  Any finalized
divorce of a Participant subsequent to the date of filing of a
beneficiary designation form shall revoke such designation.  The
spouse of a married Participant domiciled in a community property
jurisdiction shall join in any designation of Beneficiary or
Beneficiaries other than the spouse.

     If a Participant fails to designate a Beneficiary as
provided above or if the beneficiary designation is revoked by
divorce, or otherwise, without execution of a new designation, or
if all designated Beneficiaries predecease the Participant or die
prior to complete distribution of the Participant's benefits,
then the distribution of such benefits shall be made to the
Participant's estate.

     If any distribution to a Beneficiary is to be made in
installments, and the primary Beneficiary dies before receiving
all installments, the remaining installments, if any, shall be
paid to the estate of the primary Beneficiary in a lump sum.

XII. AMENDMENT AND TERMINATION OF PLAN

     A.   Amendment.  The Company may at any time amend the
          Plan in whole or in part, provided, however, that
          except as provided in Article XII.B., no amendment
          shall act to reduce the benefits under the Plan payable
          to any Participant with respect to any Deferral Amount
          credited to the Participant's Deferred Compensation
          Account prior to the date of the amendment.  Written
          notice of any amendments shall be given to each
          Participant.

     B.   Termination of Plan

          1.   Company's Right to Terminate.  The Board
               of Directors may at any time terminate the Plan.

          2.   Payments Upon Termination.  Upon any
               termination of the Plan under this section no
               additional Deferral Amounts will be credited to
               the Participant's Deferred Compensation Account.
               The Investment Units recorded in such Account
               shall be converted into dollars pursuant to
               Article VIII.A. and paid in a lump sum to the
               Participant or the Participant's Beneficiary.

XIII. MISCELLANEOUS

     A.   Unsecured General Creditor.  Participants and
          their beneficiaries, heirs, successors, and assigns
          shall have no legal or equitable rights, interests, or
          other claims in any property or assets of the Company,
          nor shall they be beneficiaries of, or have any rights,
          claims, or interests in any specified assets of the
          Company.  Any and all of the Company's assets shall be
          and remain general, unpledged, unrestricted assets of
          the Company.  The Company's obligation under the Plan
          shall be that of an unfunded and unsecured promise of
          Company to pay money in the future.

     B.   Obligations to the Company.  If a Participant
          becomes entitled to a distribution of benefits under
          the Plan, and if at such time the Participant has
          outstanding any debt, obligation, or other liability
          representing an amount owed to the Company, then the
          Company may offset such amounts owing it or an
          affiliate against the amount of benefits otherwise
          distributable.  Such determination shall be made by the
          Board of Directors.

          Establishment of this Plan and the participation
          by any person shall not be construed to confer any
          right on the part of such person to be nominated for
          reelection, or to be reelected, to the Board of
          Directors of the Company.

     C.   Nonassignability.  Neither a Participant nor any
          other person shall have any right to commute, sell,
          assign, transfer, pledge, anticipate, mortgage, or
          otherwise encumber, transfer, hypothecate, or convey in
          advance of actual receipt the amounts, if any, payable
          hereunder, or any part thereof, which are, and all
          rights to which are, expressly declared to be
          unassignable and nontransferable.  No part of the
          amounts payable shall, prior to actual payment, be
          subject to seizure or sequestration for the payment of
          any debts, judgments, alimony or separate maintenance
          owed by a Participant or any other person, nor be
          transferable by operation of law in the event of a
          Participant's or any other person's bankruptcy or
          insolvency.

     D.   Protective Provisions.  A Participant will
          cooperate with the Company by furnishing any and all
          information requested by the Company in order to
          facilitate the payment of any amounts hereunder.  If a
          Participant refuses to cooperate, the Company shall
          have no further obligation to the Participant under the
          Plan.

     E.   Gender, Singular and Plural.  Wherever the context
          so requires, words in the masculine include the
          feminine and words in the feminine include the
          masculine and the definition of any term in the
          singular may include the plural.

     F.   Captions.  The captions to the articles, sections,
          and paragraphs of this Plan are for convenience only
          and shall not control or affect the meaning or
          construction of any of its provisions.

     G.   Applicable Law.  This Plan shall be construed,
          administered and governed in accordance with the laws
          of the State of North Dakota.

     H.   Validity.  In the event any provision of this Plan
          is held invalid, void, or unenforceable, the same shall
          not affect, in any respect whatsoever, the validity of
          any other provision of this Plan.

     I.   Notice.  Any notice or filing required or
          permitted to be given to the Board of Directors shall
          be sufficient if in writing and hand delivered, or sent
          by registered or certified mail, to the principal
          office of the Company, directed to the attention of the
          Secretary of the Company.  Such notice shall be deemed
          given as of the date of delivery or, if delivery is
          made by mail, as of the date shown on the postmark on
          the receipt for registration or certification.

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