FORM 10-K

95

MDU RESOURCES G ROUP, INC.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income taxes. For the years ended

December 31, 2007, 2006 and 2005, the Company recognized approximately $680,000, $7,100 and $7,300, respectively, in interest

expense. Penalties were not material in 2007, 2006 and 2005. The Company recognized interest income of approximately $480,000,

$1.5 million and $62,000 for the years ended December 31, 2007, 2006 and 2005, respectively. The Company had accrued liabilities

of approximately $718,000 and $436,000 at December 31, 2007 and 2006, respectively, for the payment of interest.

NOTE 16 -- BUSINESS SEGMENT DATA

The Company's reportable segments are those that are based on the Company's method of internal reporting, which generally segregates

the strategic business units due to differences in products, services and regulation. The vast majority of the Company's operations are

located within the United States. The Company also has investments in foreign countries, which largely consist of the Company's equity

method investment in the Brazilian Transmission Lines.

Prior to the fourth quarter of 2007, the Company reported seven business segments consisting of electric, natural gas distribution,

construction services, pipeline and energy services, natural gas and oil production, construction materials and contracting, and

independent power production. As discussed in Note 3, the domestic independent power production assets were sold in the third quarter

of 2007, and as a result, the remaining independent power production operations are no longer significant and do not meet the criteria to

be considered a reportable segment. Therefore, the remaining operations of the independent power production segment, including the

Company's equity method investment in the Brazilian Transmission Lines, are reported in the Other category. The other operations do not

meet the criteria to be considered a reportable segment. The Company's operations are now conducted through six reportable segments

and prior period information has been restated to reflect this change.

The electric segment generates, transmits and distributes electricity in Montana, North Dakota, South Dakota and Wyoming. The natural

gas distribution segment distributes natural gas in those states as well as in Minnesota, Oregon and Washington. These operations also

supply related value-added products and services.

The construction services segment specializes in electric line construction, pipeline construction, utility excavation, inside electrical wiring,

cabling and mechanical work, fire protection and the manufacture and distribution of specialty equipment.

The pipeline and energy services segment provides natural gas transportation, underground storage and gathering services through

regulated and nonregulated pipeline systems primarily in the Rocky Mountain and northern Great Plains regions of the United States. The

pipeline and energy services segment also provides energy-related management services.

The natural gas and oil production segment is engaged in natural gas and oil acquisition, exploration, development and production activities

in the Rocky Mountain and Mid-Continent regions of the United States and in and around the Gulf of Mexico.

The construction materials and contracting segment mines aggregates and markets crushed stone, sand, gravel and related construction

materials, including ready-mixed concrete, cement, asphalt, liquid asphalt and other value-added products. It also performs integrated

construction services. The construction materials and contracting segment operates in the central, southern and western United States and

Alaska and Hawaii.

The Other category includes the activities of Centennial Capital, which insures various types of risks as a captive insurer for certain of the

Company's subsidiaries. The function of the captive insurer is to fund the deductible layers of the insured companies' general liability and

automobile liability coverages. Centennial Capital also owns certain real and personal property. The Other category also includes the

Company's equity investment in the Brazilian Transmission Lines.