Sustainability

  • Commitment to Sustainability
  • Company Profile
  • Company Organizational Structure

OUR COMMITMENT TO SUSTAINABILITY

MDU Resources Group manages its business with a long-term view toward sustainable operations, focusing on how economic, environmental and social impacts help us in Building a Strong America®.

Sustainability efforts are integrated into our business strategy because they directly affect long-term business viability and profitability. Our focus on sustainability strengthens our ability to increase revenues and profitability and create a competitive advantage.

A sustainable corporation is one that meets the needs of stakeholders while operating in a manner that ensures its future success. To ensure that MDU Resources remains a sustainable corporation, we will:

  • Maintain a healthy, viable, skilled workforce.
  • Maintain adequate financial resources.
  • Be a good steward of the environment.
  • Ensure asset and operational longevity.
  • Develop and nurture relationships with stakeholders.


MDU Resources’ board of directors established an Environmental and Sustainability Committee in 2019 that oversees and provides recommendations to management and the board with respect to the company’s policies, strategies, public policy positions, programs, and performance related to environmental, health, safety and other social sustainability matters and related laws, regulations and developments. The committee is a standing committee of the board of directors and meets quarterly in conjunction with quarterly meetings of the board.

In all business operations and projects, management at MDU Resources’ companies strategically evaluates ESG factors, particularly in areas of safety, integrity and the environment.

In its sustainability reporting, MDU Resources uses the following guidelines for reporting:

  • The Sustainability Accounting Standards Board’s Engineering & Construction Services framework for the company’s construction services business.
  • The Sustainability Accounting Standards Board’s Construction Materials framework for the company’s construction materials and contracting business.
  • The environmental, social, governance and sustainability reporting template developed by the Edison Electric Institute (EEI) and the American Gas Association (AGA) for the company’s electric and natural gas utility business and its natural gas pipeline business.

MDU Resources intends to further incorporate Task Force on Climate-related Disclosure (TCFD) recommendations into its future reporting.

Read more about our efforts:
Environment
Social
Governance

Company Profile
Company Organizational Structure
Financial Profile

Forward-Looking Statements

Information contained on this website relating to environment, social and governance practices highlights key strategies, projections and certain assumptions for the company and its subsidiaries. Some of these statements are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. Although the company believes that its expectations are based on reasonable assumptions, there is no assurance that the company’s projections will in fact be achieved. Please refer to the various important factors listed in Part I, Item 1A - Risk Factors in the company's most recent Form 10-K. Changes in such factors could cause actual future results to differ materially from projections. All forward-looking statements are expressly qualified by such cautionary statements and by reference to the underlying assumptions. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. We do not undertake to update forward-looking statements, whether as a result of new information, future events or otherwise.

MDU Resources Group, Inc., a member of the S&P MidCap 400 index and the S&P High-Yield Dividend Aristocrats index, started as a small utility company in 1924, serving customers in Montana and the Dakotas. Today, MDU Resources is Building a Strong America® in 43 states through our regulated energy delivery and construction materials and services businesses.

MDU Resources is headquartered in Bismarck, North Dakota, and employed 13,359 people as of December 31, 2019. Employee numbers may reach more than 15,000 during peak construction season.

MDU Resources trades on the New York Stock Exchange under the symbol MDU. We began trading on the NYSE in 1948. As of December 31, 2019, there were 198.6 million weighted average common shares outstanding, diluted, and we had total assets of $7.7 billion.

Our Vision: With integrity, create superior shareholder value by expanding upon our expertise to be the supplier of choice in all of our markets while being a safe and great place to work.

Our Mission: Provide value-added natural resource products and related services that exceed customer expectations.

Company Organizational Structure

MDU Resources’ subsidiaries include:

  • Three utilities — Cascade Natural Gas Corporation, Intermountain Gas Company and Montana-Dakota Utilities Co.
  • Natural gas storage and transportation with pipeline-related businesses under WBI Energy, Inc.
  • A construction materials and contracting business - Knife River Corporation.
  • A construction services business - MDU Construction Services Group, Inc.
Utilities

The electric segment, Montana-Dakota Utilities Co., generates, transmits and distributes electricity in Montana, North Dakota, South Dakota and Wyoming. This segment served 143,346 customers at December 31, 2019.

The natural gas distribution segment includes Cascade Natural Gas, Intermountain Gas and Montana-Dakota Utilities, and distributes natural gas in Idaho, Minnesota, Montana, North Dakota, Oregon, South Dakota, Washington and Wyoming. These operations also supply related products and services. This segment served 977,468 customers at December 31, 2019.

Our companies:
Cascade Natural Gas Corporation
Intermountain Gas Company
Montana-Dakota Utilities Co.

Pipeline

The pipeline segment, under WBI Energy, Inc., provides natural gas transportation and gathering through approximately 4,000 miles of regulated and nonregulated pipeline systems, mainly in the Rocky Mountain and northern Great Plains regions of the United States, as well as natural gas underground storage in Montana and Wyoming. This segment also includes a variety of other energy-related services such as cathodic protection and energy efficiency product sales and installation services. Volumes of natural gas transported through this segment’s pipeline system have increased significantly each of the past three years:

(in thousand dekatherms)
2019   429,660
2018   351,498
2017   312,520

Our companies:
WBI Energy, Inc.
WBI Energy Corrosion Services
WBI Energy Midstream, Inc.
WBI Energy Transmission, Inc.

Construction Materials and Contracting

The construction materials and contracting segment, Knife River Corporation and its subsidiaries, mines aggregates and markets crushed stone, sand, gravel and related construction materials, including ready-mix concrete, cement, asphalt, liquid asphalt and other value-added products. It also performs integrated contracting services and provides transloading services. Knife River operates in the central, southern and western United States and Alaska and Hawaii. Knife River has approximately 1.1 billion tons of aggregate reserves.

Our operating companies include:
Alaska Basic Industries, Inc.
Anchorage Sand & Gravel Company, Inc.
Baldwin Contracting Company, Inc. dba Knife River Construction
Concrete, Inc. dba Knife River
Connolly-Pacific Co.
DSS Company dba Knife River Construction
Fairbanks Materials, Inc.
Granite City Ready Mix, Inc. dba Knife River Materials
Hawaiian Cement
Jebro Incorporated
JTL Group, Inc. dba Knife River
Kent’s Oil Service dba Pacific Northwest Oil
Knife River Corporation — Midwest
Knife River Corporation — Mountain West
Knife River Corporation — Northwest
Knife River Corporation — North Central
Knife River Corporation — South
LTM, Incorporated. dba Knife River Materials
Northstar Materials, Inc. dba Knife River
Rail to Road, Inc.
Sweetman Construction Co. dba Concrete Materials
WHC, Ltd. dba West Hawaii Concrete

Construction Services

The construction services segment, MDU Construction Services Group, Inc., and its subsidiaries, offers a diverse array of products and services to utilities and large manufacturing, commercial, government and institutional customers. It specializes in constructing and maintaining electric and communication lines, gas pipelines, fire suppression systems, and external lighting and traffic signalization equipment. It also provides utility excavation services and inside electrical wiring, cabling and mechanical services, and manufactures and distributes specialty equipment.

Our operating companies include:
Bell Electrical Contractors, Inc.
Bombard Electric, LLC
Bombard Mechanical, LLC
Capital Electric Construction Company, Inc.
Capital Electric Line Builders, Inc.
Desert Fire Protection, LLC
Duro Electric Company
E.S.I., Inc.
International Line Builders, Inc.
Lone Mountain Excavation & Utilities, LLC
Loy Clark Pipeline Co.
OEG, Inc.
PerLectric Inc.
Rocky Mountain Contractors, Inc.
USI Industrial Services, Inc.
Wagner-Smith Equipment Co.

Other

Centennial Holdings Capital, through its subsidiary InterSource Insurance Company, insures various risks as a captive insurer for the corporation and its subsidiaries, and it owns certain real and personal property through its subsidiary FutureSource Capital Corp.

  • Introduction
  • Construction Materials
  • Construction Services
  • Electric and Natural Gas Utilities
  • Pipelines

ENVIRONMENT

Because we know having a sound, stable environment is critical to continuing our businesses, MDU Resources Group operates in a way that minimizes impacts and promotes conservation while maximizing resource use in meeting our customers’ needs.

Among our efforts, MDU Resources engages in wildlife protection practices, promotes emission reduction and fuel conservation, works with wildlife regulatory agencies, develops water enhancement practices, protects water quality, controls and prevents the spread of noxious weeds, reduces noise, and implements programs to develop and enhance public spaces in the communities we serve.

MDU Resources has three primary environmental goals:

  • Minimize waste and maximize resources.
  • Be a good steward of the environment. While providing high-quality and reasonably priced products and services.
  • Comply with or surpass all applicable environmental laws, regulations and permit requirements.

We strive to meet these goals through established operational practices and by leading or participating in a number of programs that help ensure a viable environment.

MDU Resources’ pledge to operate in an environmentally responsible manner is reviewed and encouraged through several measures, including oversight by professional environmental staff at company operations, through audits of operating activities and through property reviews during due diligence on potential acquisitions.

Environmental policy
MDU Resources’ corporate policy addresses environmental practices. The environmental policy, as adopted by the board of directors, directs that the corporation will operate efficiently to meet the needs of the present without compromising the ability of future generations to meet their needs.

Our company environmental leaders have responsibility for administering the environmental policy, and our corporate officers are responsible for compliance.

ENVIRONMENTAL IMPACT
Our Construction Materials Business
Our Construction Services Business
Our Electric and Natural Gas Utilities
Our Pipeline Business

SASB Reporting Table

Knife River Corporation is the sixth-largest sand and gravel producer in the United States. With approximately 1.1 billion tons of aggregate reserves, Knife River mines aggregates and markets crushed stone, sand, gravel and related construction materials, including ready-mix concrete, cement, asphalt, liquid asphalt and other value-added products, to public and private-sector clients. The company also specializes in related services, such as concrete accessories sales, precast concrete structures, rock and landscaping products, underground utility work and more.

Knife River has operations in the central, western and southern United States, plus Alaska and Hawaii. It maintains physical locations in 15 states and performs work in 19 states. The company’s operations include approximately 60 hot-mix asphalt sites, 100 ready-mix sites, seven cement terminals, several hundred aggregate sites, five liquid-asphalt terminal sites, and several used-petroleum-product collection points.

Materials sales

  2017 2018 2019
    (In thousands)  
Aggregates (tons) 28,213 29,795 32,314
Asphalt (tons) 6,237 6,838 6,707
Ready-mix concrete (cubic yards) 3,548 3,518 4,123

Environmental-related investments

As part of its capital investment planning, Knife River annually assesses continual investment in environmental impact mitigation efforts in its operations, particularly in regard to meeting or exceeding permit requirements and environmental regulations. Up to 20% of Knife River's annual capital budget is allocated to replacing or upgrading equipment and plants to comply with changing environmental targets. Examples include:

  • In Oregon, Knife River has installed additional emissions capture equipment, such as wet scrubbers on asphalt plants, to meet or exceed air quality requirements.
  • Knife River operates a soil reclamation business to handle contaminated soils for customers. Alaska Soil Recycling pioneered the first thermal remediation service in Alaska to treat contaminated soil and operates its facility under permits issued and enforced by the Alaska Department of Environmental Conservation.
  • Depending on the climate of particular geographic areas, Knife River has implemented additional measures in response to local conditions. For instance, in arid regions such as California and Texas, Knife River has implemented more stringent measures for dust control at its plants and job sites. In areas with high precipitation, such as Oregon, Knife River uses enhanced water containment controls to handle potential storm runoff.

Vehicle emission reduction efforts

Knife River continually evaluates fleet vehicles to ensure the appropriate-size vehicle is purchased for specific needs. The company buys smaller, more fuel-efficient vehicles whenever possible.

As Knife River updates its equipment and vehicles, its fuel usage and fleet emissions are reduced because of manufacturers’ advancements in motor efficiency. The average model year of Knife River’s on-road trucking fleet is 2010. The average model year of Knife River’s construction equipment is 2010.

Knife River has implemented fuel conservation programs that educate employees and promote fuel conservation measures. Training sessions encourage employees to efficiently use resources and inform employees of the proper procedures for shutting down diesel-fueled engines.

Knife River has an engine idling policy. The policy establishes a companywide diesel and gasoline engine idling limit and institutionalizes the company’s Shut Down & Save fuel conservation program.

Knife River installs automatic shutdown systems on heavy-haul construction trucks that help reduce emissions. These systems can automatically shut off a vehicle's engine after five minutes of idling. Knife River also installs equipment on haul vehicles that lets the company monitor operating times, idle times and emissions.

Toxic Release Reporting

Knife River provides toxic release inventory reporting to the U.S. Environmental Protection Agency for nitrate compounds released with process wastewater from ready-mix concrete operations and polycyclic aromatic compounds emitted during the handling and processing of liquid asphalt oils and binders.

The TRI data for reporting facilities can be accessed at www.epa.gov/tri/tridata/index.htm.

Land impacts

Knife River uses mine planning to manage aggregate reserves and aggregate mine sites in an environmentally sound manner. The company works regularly with government agencies, landowners and other stakeholders to develop reclamation plans that return mined land to viable and productive use. In some cases, land that may not have been useful before mining has been made into wetlands or other wildlife habitat.

Recycling

Knife River continues its long-standing practice of recycling and reusing building materials. Recycling conserves natural resources, uses less energy, reduces waste disposal at local landfills and ultimately costs less for the consumer. Knife River recycles or reuses asphalt pavement, pre-consumer asphalt shingles, refined fuel oil, demolition concrete, returned concrete at ready-mix plants, fly ash, slag, silica fume and other cement-replacement materials, and dimension stone reject material.

Recycled Asphalt Pavement Used in Asphalt Production (tons in thousands)

2017   1,096
2018   765
2019   840

Jebro Inc., a Knife River company in Sioux City, Iowa, has recycled used oil since 1989 and used oil filters since 2006. After being emptied of oil, used oil filters are turned into No. 1-grade recycled steel that are shipped to smelters in the United States. Recovered oil is recycled and used in emulsified asphalt products. Jebro’s service area includes parts of Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, South Dakota and Wyoming.

Jebro Recycled Oil (million gallons)
2017   3.1
2018   2.9
2019   3.2

Jebro Recycled Steel (tons)
2017   360
2018   320
2019   314

Environmentally friendlier asphalts
Knife River Corporation is experienced in producing and placing warm-mix asphalt and rubberized asphalt. In applications where warm-mix asphalt is allowed, the product enables conservation.

Warm-mix asphalt is produced at cooler temperatures than traditional hot-mix asphalt, which reduces the amount of fuel needed in the production process, thereby reducing emissions and fumes.

Knife River, where allowed by the applicable government entity, also uses ground-up tire rubber blended with asphalt to beneficially modify the properties of asphalt in highway construction. The U.S. Environmental Protection Agency says asphalt rubber is the largest single market for ground rubber. It provides a beneficial use for an estimated 220 million pounds, or approximately 12 million scrap tires, annually. Asphalt rubber also provides longer-lasting road surfaces, reduces road maintenance, is more cost effective over the long term and lowers road noise. Asphalt rubber is being used in greater amounts by state Departments of Transportation.

Produced Warm-Mix Asphalt (tons in thousands)
2017   722
2018   591
2019   646

Spills
No Environmental Protection Agency-reportable or National Response Center-reportable spills occurred within Knife River’s operations in 2017-19. A number of minor spills were documented internally, some of which are reported to state and local agencies based on their reporting requirements.

Fines for noncompliance
Knife River is committed to fully complying with all environmental rules and regulations. Regrettably, we have not always achieved full compliance.

  2017 2018 2019
Fines paid $22,742 $1,600 $27,950
Number of violations 13 7 12

Impacts of regulations and laws
Knife River is reliant on federal and state infrastructure-funding mechanisms. Long-term funding mechanisms established at the state and federal levels help ensure road, highway and bridge construction projects, which provide opportunities for Knife River. The absence of long-term funding mechanisms can negatively impact workloads.

Additionally, certain regulatory efforts may impact Knife River’s operations. For instance, a carbon pricing program being considered in the state of Oregon would add to Knife River’s costs of operations.

California emission reductions and regulatory compliance are more stringent than other Knife River’s operating areas. The California Air Resources Board (CARB) in the past 14 years has implemented several regulations around air quality standards. These regulations are based on source categories, several of which impact Knife River. The three categories having the most impact to Knife River’s California operations are:

  • Off-road diesel particulate and oxides of nitrogen. This regulation affects construction and mining equipment with greater than 25 horsepower. The regulation requires each fleet to meet an emissions target based on the combined total horsepower and emissions factors of all engines in the fleet. Compliance targets began in 2009 and go through 2024. To better comply with this regulation, Knife River combined all its California assets into one fleet pool. This gives Knife River the flexibility to upgrade machines in locations with better utilization. Knife River was proactive in meeting the early targets, which provided early action credits. These credits allow Knife River to better time its capital investments. With its fleet management program, Knife River anticipates meeting the 2024 target.
  • On-road diesel particulate and oxides of nitrogen. This regulation requires fleets to meet or exceed a 2010 emissions standard via fleet replacement targets affecting on-highway trucks that are greater than 14,000 pounds in gross vehicle weight. Knife River is meeting this regulation by replacing all vehicles older than 20 years. In 2020, the company will have replaced all vehicles that are 17 years or older. In 2023, Knife River will have no vehicles in its California fleet that are older than a 2010 model. Knife River is on track to meet the regulation two years ahead of schedule.
  • Harbor craft diesel particulate and oxides of nitrogen. This regulation pertains to Knife River’s marine construction equipment and boats but varies based on local air districts and ports superseding compliance targets. To comply, Knife River repowered its equipment in 2008-09 to meet the highest regulation. The company is in the process of repowering its equipment again, where practicable, to meet newer standards. Knife River continuously works with its equipment manufacturers on these upgrades.

Potential Impacts of climate change
Based on predictions by the scientific community about potential impacts of climate change, Knife River may benefit from longer construction seasons in certain areas where it operates and from opportunities presented when infrastructure repairs are needed after storms and natural disasters impact an area. However, the company’s construction activities may be negatively impacted by greater volatility in weather patterns.

SASB Reporting Table

MDU Construction Services Group, Inc. and its subsidiary operating companies, collectively referred to here as MDU Construction Services Group, provide inside and outside specialty contracting services. Its outside services include design, construction and maintenance of overhead and underground electrical distribution and transmission lines, substations, external lighting, traffic signalization, and natural gas pipelines, as well as utility excavation, and the manufacture, sale and rental of transmission line construction equipment. Its inside services include design, construction and maintenance of electrical and communication wiring and infrastructure, fire suppression systems, and mechanical piping and services. MDU Construction Services Group also constructs and maintains renewable energy projects. These specialty contracting services are provided to utilities and large manufacturing, commercial, industrial, institutional and government customers.

MDU Construction Services Group operates a fleet of owned and leased trucks and trailers, support vehicles and specialty construction equipment, such as backhoes, excavators, trenchers, generators, boring machines and cranes.

As of December 31, 2019, MDU Construction Services owned or leased facilities in 19 states. This space is used for offices, equipment yards, manufacturing, warehousing, storage and vehicle shops.

Read more about MDU Construction Services Group’s workforce here.

Environmental Regulations
MDU Construction Services Group’s operations are subject to federal, state and local regulations that are customary for the industry. The company believes it is in compliance with these regulations.

Few, if any, environmental permits are required for the type of work MDU Construction Services Group performs. Where used, petroleum storage tanks are permitted under state programs authorized by the Environmental Protection Agency. MDU Construction Services Group has no ongoing remediation related to releases from petroleum storage tanks.

Federal permits for specific construction and maintenance jobs that may require these permits are typically obtained by the hiring entity, and not by MDU Construction Services Group.

Waste Management
MDU Construction Services Group’s operations are conditionally exempt small-quantity waste generators, subject to limited regulation under the Resource Conservation and Recovery Act. MDU Construction Services Group believes it is in compliance with regulations under the act.

Environmental-Related Expenses
MDU Construction Services did not incur any material environmental-related expenditures in 2019 and does not expect to incur any material capital expenditures related to environmental compliance with current laws and regulations through 2022.

Renewable Energy Service Providers
MDU Construction Services Group provides power line and substation construction services for new wind and other renewable electric generating facilities; it also is a national leader in solar panel installation services.

Bombard Electric, an MDU Construction Services Group company headquartered in Las Vegas, is a leader in solar system installation.

An example of Bombard Renewable’s work includes a project completed in 2016, when the company constructed a 17.5-megawatt community solar project near Pahrump, Nevada. Bombard Renewable installed more than 51,400 solar photovoltaic panels on the 80-acre site, and it constructed a 2,640-foot, 24.9-kilovolt distribution line for the project.

EEI and AGA Reporting Tables

MDU Resources Group’s utility companies serve approximately 1.1 million customers. Cascade Natural Gas Corporation distributes natural gas in Oregon and Washington. Intermountain Gas Company distributes natural gas in southern Idaho. Montana-Dakota Utilities Co., and its division Great Plains Natural Gas Co., distributes natural gas in Minnesota, Montana, North Dakota, South Dakota and Wyoming. Montana-Dakota also generates, transmits and distributes electricity in Montana, North Dakota, South Dakota and Wyoming. These operations also supply related value-added services.

MDU Resources’ utility companies’ customer base is expected to continue to grow at a rate of 1-2% per year. Our utility companies strive to maintain compliance and operate in an environmentally proactive manner, while taking into consideration the cost to customers.

ELECTRIC OPERATIONS

Montana-Dakota provides electric service at retail, serving more than 143,346 residential, commercial, industrial and municipal customers in 185 communities and adjacent rural areas in Montana, North Dakota, South Dakota and Wyoming as of December 31, 2019.

As of December 31, 2019, renewable resources comprised approximately 27% of its electric generation resource nameplate capacity. As its renewable generation resource capacity has increased, the carbon dioxide emission intensity of its electric generation resource fleet has been reduced by approximately 31% since 2003.

MDU Resources has a target, through its electric utility, to reduce greenhouse gas emissions intensity by 45% by 2030 compared to 2003 levels from its generating facilities. Montana-Dakota intends to achieve this target through continued diversity in its electric generating fleet, including retiring certain of its coal-based generation units.

The principal properties owned by Montana-Dakota for use in its electric operations include interests in 16 electric generating units at 11 facilities and two small portable diesel generators, approximately 3,300 miles of transmission lines and 4,800 miles of distribution lines, and 79 transmission and 297 distribution substations. At December 31, 2019, Montana-Dakota's net electric plant investment was $1.6 billion and its rate base was $1.2 billion.

Retail electric rates, service, accounting and certain security issuances are subject to regulation by the public service or public utility commission in each state where Montana-Dakota operates. The interstate transmission and wholesale electric power operations of Montana-Dakota also are subject to regulation by the Federal Energy Regulatory Commission under provisions of the Federal Power Act, as are interconnections with other utilities and power generators, the issuance of certain securities, accounting and other matters.

Through Midcontinent Independent System Operator Inc. (MISO), Montana-Dakota has access to wholesale energy, ancillary services and capacity markets for its interconnected system. MISO is a regional transmission organization responsible for operational control of the transmission systems of its members. MISO provides security center operations, tariff administration and operates day-ahead and real-time energy markets, ancillary services and capacity markets. As a member of MISO, Montana-Dakota's generation is sold into the MISO energy market and its energy needs are purchased from that market.

Through an interconnected electric system, Montana-Dakota serves markets in portions of western North Dakota, eastern Montana and northern South Dakota. The interconnected system consists of 15 electric generating units at 10 facilities and two small portable diesel generators, which have an aggregate nameplate rating attributable to Montana-Dakota's interest of 750,318 kilowatts and total net zonal resource credits of 549.0 in 2019. ZRCs are a megawatt demand equivalent measure and are allocated to individual generators to meet planning reserve margin requirements within MISO. For 2019, Montana-Dakota's total ZRCs, including its firm purchase power contracts, were 591.3. Montana-Dakota's planning reserve margin requirement within MISO was 537.2 for 2019

The maximum electric peak demand experienced to date attributable to Montana-Dakota's sales to retail customers on the interconnected system was 611,542 kW in August 2015. Montana-Dakota's latest forecast for its interconnected system indicates that its annual peak will continue to occur during the summer and the sales growth rate through 2023 will be approximately 2% annually.

Montana-Dakota's interconnected system electric generating capability includes five steam-turbine generating units at four facilities using coal for fuel, four combustion turbine units that combust natural gas or fuel oil, depending on the unit and time of year, at three facilities, three wind electric generating facilities, two natural gas-fired reciprocating internal combustion engines at one facility, a heat recovery electric generating facility and two small portable diesel generators.

Additional energy is purchased as needed, or in lieu of generation if more economical, from the MISO market. In 2019, Montana-Dakota purchased approximately 23% of its net kilowatt-hour needs through the MISO market.

Montana-Dakota also serves electricity to Sheridan, Wyoming, and neighboring communities in the Western Electricity Coordinating Council jurisdiction. The maximum peak demand experienced to date attributable to Montana-Dakota sales to retail customers on that system was approximately 63,686 kilowatts in July 2018. Montana-Dakota has a power supply contract with Black Hills Power Inc. to purchase up to 49,000 kW of capacity annually through December 31, 2023. Montana-Dakota is a 25% co-owner of Wygen III, a coal-fired electric generating unit near Gillette, Wyoming, that serves a portion of the needs of its Sheridan-area customers.

Retirement of Coal Facilities

Montana-Dakota Utilities announced in early 2019 that it intends to retire three aging coal-fired electric generation units at two locations within the next two to three years and construct a new simple-cycle natural gas combustion turbine to cost-effectively meet the needs of its customers.

Analysis done while preparing the company’s integrated resource plan (IRP), which is completed every two years and filed with regulatory commissions, indicates the retirement of two aging coal-fired plants and the construction of the natural gas combustion turbine is the best sustainable option for customers. The retirements are expected around the end of March 2021 for the Lewis & Clark Station in Sidney, Montana, and around the end of March 2022 for units 1 and 2 at the Heskett Station in Mandan, North Dakota. These dates could be impacted by various factors.

The company has begun the process to construct an 88-megawatt simple-cycle peaking unit at the Heskett Station site. The new generation resource was selected as part of Montana-Dakota’s IRP. The total cost of building and operating a new simple-cycle combustion turbine, coupled with market purchases, is expected to be about half the total cost of continuing to run the Heskett and Lewis & Clark coal-fired units.

The first coal-fired unit at Heskett went online in 1954 and the second unit in 1963. They combine for 100 megawatts of power. Lewis & Clark went online in 1958 and provides 44 MW of power. If the company meets the proposed retirement timeline, the plants will range in age from 58-67 years old at their retirement.

Montana-Dakota expects that it has secured adequate capacity through existing baseload generating stations, renewable generation, turbine peaking stations, demand reduction programs and firm contracts to meet its peak customer demand requirements through 2020. The company expects to construct new generation resources or acquire additional capacity through power purchase contracts or the MISO capacity auction to meet future capacity needs that arise from expiring power contracts, generation retirements and system growth. The company also routinely assesses self-build generation options through its IRP process and as opportunities occur.

Montana-Dakota has major interconnections with its neighboring utilities and considers these interconnections adequate for coordinated planning, emergency assistance, exchange of capacity, and energy and power supply reliability.

Additional information about Montana-Dakota’s electric load forecasting, demand and supply analysis, and risk analysis can be found in the company’s Integrated Resource Plan at https://www.montana-dakota.com/rates-services/electric-generation/

Electric Environmental Matters

Montana-Dakota's electric operations are subject to federal, state and local laws and regulations providing for air, water and solid waste pollution control; state facility-siting regulations; zoning and planning regulations of certain state and local authorities; federal health and safety regulations; and state hazard communication standards. Montana-Dakota believes it is in compliance with these regulations.

Montana-Dakota's electric generating facilities have Title V Operating Permits, under the federal Clean Air Act, issued by the states in which they operate. Each of these permits has a five-year life. Montana-Dakota submits renewal applications when these permits near their expiration. Permits continue in force beyond the expiration date, provided the application for renewal is submitted by the required date, usually six months prior to expiration.

State water discharge permits issued under the requirements of the federal Clean Water Act are maintained for power production facilities on the Yellowstone and Missouri rivers. Each of these permits has a five-year life. Montana-Dakota renews these permits as necessary prior to expiration. Other permits held by these facilities may include an initial siting permit, which is typically a one-time, preconstruction permit issued by the state; state permits to dispose of combustion byproducts; state authorizations to withdraw water for operations; and U.S. Army Corps of Engineers permits to construct water intake structures. Montana-Dakota's Army Corps permits grant one-time permission to construct and do not require renewal. Other permit terms vary and the permits are renewed as necessary.

Hazardous Waste

Montana-Dakota's electric operations are very small-quantity generators of hazardous waste and subject only to minimum regulation under the Resource Conservation and Recovery Act.

PCB Elimination

Montana-Dakota Utilities routinely handles polychlorinated biphenyls from its electric operations in accordance with federal requirements. The company has a policy of proactively identifying and eliminating PCBs from its electric transmission and distribution system equipment.

In 2016, the company began a multiyear project to expedite removal of PCB-regulated distribution system transformers and continues to make annual progress on this effort. The company’s continuing efforts to remove these units from service helps avoid potential impacts to the environment from PCB spills and reduces company risk.

PCB storage areas are registered with the Environmental Protection Agency as required.

Coal Combustion Residuals Management

Montana-Dakota Utilities complies with Coal Combustion Residual (CCR) rule requirements at its coal-fired electric generating facilities. The CCR rule requires proper management of coal ash, groundwater monitoring and may require a facility to conduct corrective action for impoundments and landfills.

In 2019, Coyote Station, a coal-fired electric generating facility that is co-owned by Montana-Dakota, implemented a retrofit of its bottom ash handling system equipment to meet CCR rule requirements. This retrofit included installing a submerged flight conveyor and closing three surface impoundments by removing all CCR material. Closure of the surface impoundments was completed by the end of 2019. Montana-Dakota’s ownership share of the costs associated with the retrofit and impoundment closure project was approximately $2.5 million.

Water Use

Montana-Dakota Utilities’ electric generating facilities use water from rivers, lakes and wells for various processes. The majority of water these facilities remove from water bodies is used for noncontact cooling purposes and is discharged back to the water bodies. Some facilities have once-through cooling, which requires water to be withdrawn and discharged continuously, and some plants use cooling towers and air-cooled condensers that require periodic withdrawals of water. Usually, no chemicals are added to water used for once-through cooling.

A smaller portion of water is withdrawn from a water body for use in an electric generating facility’s condenser, air emissions scrubbing process or in other smaller plant operations. Cooling water or process wastewater that is returned to surface waters is discharged in compliance with National Pollutant Discharge Elimination System permit requirements. Water withdrawals at company electric generating facilities will be significantly reduced starting in 2021 as Lewis & Clark Station Unit 1 is scheduled to be retired around the end of March 2021 and Heskett Station Units 1 and 2 are scheduled to be retired around the end of March 2022.

Renewable Energy

Montana-Dakota has been involved with renewable energy analysis and development for many years and has several renewable energy installations. It has 205 MW of installed wind generation capacity at three locations, providing more than 25% of its customers’ electric energy requirements. Montana-Dakota also owns a 7.5-MW heat recovery facility in south-central North Dakota, which uses high-temperature exhaust gas as the primary heat source. Because waste heat is used to drive this generating facility, no additional fossil fuel is required and incremental emissions to generate electricity are negligible.

Owned renewable generation facilities include:

  • 155-MW Thunder Spirit Wind farm near Hettinger, North Dakota.
  • 30-MW Diamond Willow Wind farm near Baker, Montana.
  • 19.5-MW Cedar Hills Wind farm near Rhame, North Dakota.
  • 7.5-MW Glen Ullin Waste Heat electric generation facility near Glen Ullin, North Dakota, which uses waste heat from a pipeline compressor station to produce electricity.

Carbon Sequestration Research

Montana-Dakota Utilities has been active in researching options for carbon dioxide capture, sequestration and beneficial uses. The company has been a member of the Plains CO2 Reduction Partnership since the partnership’s inception in 2003. The partnership is led by the Energy and Environmental Research Center at the University of North Dakota and is one of seven regional partnerships across the United States. More information about the partnership and its achievements is available at www.undeerc.org/pcor.

Montana-Dakota also has been a member of the Partnership for CO2 Capture project since 2014, which also is led by the Energy and Environmental Research Center. The Partnership for CO2 Capture provides support of pilot-scale demonstrations and researches and evaluates promising CO2 capture technologies that can enhance the cost and performance of CO2 capture systems.

Montana-Dakota has actively participated in environmental workgroups of the North Dakota Lignite Energy Council, such as the Lignite Technology Development Workgroup and the Environmental Workgroup. In the recent years, these workgroups have focused on CO2-related issues such as lignite gasification, oxyfuel combustion, pre- and post-combustion CO2 capture technologies and beneficial uses of CO2.

Environmental-Related Investments

Montana-Dakota Utilities has invested approximately $137 million in environmental emission control equipment and other pollution control improvement at our coal-fired electric generation plants since 2013. The investments have resulted in substantial reductions in mercury, SO2, NOX and filterable particulate from these plants.

In 2019, Montana-Dakota incurred $5.5 million of environmental capital expenditures for its electric operations, mainly for an embankment stabilization project at Lewis & Clark Station and coal ash management projects at Big Stone Station and Coyote Station. Environmental capital expenditures are estimated to be $700,000, $1.1 million and $3.3 million in 2020, 2021 and 2022, respectively, for various environmental projects, including a coal ash impoundment closure project at Lewis & Clark Station.

Montana-Dakota's capital and operational expenditures could be affected by future air emission regulations, such as regional haze emission reductions.

NATURAL GAS DISTRIBUTION OPERATIONS

MDU Resources’ natural gas distribution operations consist of Montana-Dakota, Cascade and Intermountain, which sell natural gas at retail, serving 977,468 residential, commercial and industrial customers in 337 communities and adjacent rural areas across eight states as of December 31, 2019, and provide natural gas transportation services to certain customers on the company’s systems.

These services are provided through distribution systems aggregating approximately 20,300 miles. At December 31, 2019, the natural gas distribution operations’ net natural gas distribution plant investment was $1.8 billion and rate base was $1.2 billion.

These companies are subject to regulation regarding retail sales, service, accounting and certain security issuances by the state public service or public utility commission in each state where they operate.

Montana-Dakota, Cascade and Intermountain and various distribution transportation customers obtain their natural gas directly from natural gas producers, processors and marketers. Demand for natural gas, which is a widely traded commodity, has historically been sensitive to seasonal heating and industrial load requirements as well as changes in market price. Our companies believe that, based on current and projected domestic and regional supplies of natural gas and the pipeline transmission network currently available through their suppliers and pipeline service providers, supplies are adequate to meet their system natural gas requirements for at least the next decade.

Natural Gas Distribution Environmental Matters

Montana-Dakota, Cascade and Intermountain are subject to federal, state and local environmental, facility-siting, zoning and planning laws and regulations. These companies believe they are in substantial compliance with the regulations.

These operations are very small-quantity generators of hazardous waste, and subject only to minimum regulation under the Resource Conservation and Recovery Act. A Washington state rule defines Cascade as a small-quantity generator but regulation under that rule is similar to RCRA regulation as a very small-quantity generator.

Certain of these companies’ locations routinely handle PCBs from their natural gas operations in accordance with federal requirements. PCB storage areas are registered with the EPA as required.

Capital and operational expenditures for natural gas distribution operations could be affected in a variety of ways by potential new greenhouse gas legislation or regulation. In particular, such legislation or regulation would likely increase capital expenditures for energy efficiency and conservation programs, and operational costs associated with GHG emissions compliance. Montana-Dakota, Cascade and Intermountain expect to recover the operational and capital expenditures for GHG regulatory compliance in rates consistent with the recovery of other reasonable costs of complying with environmental laws and regulations.

Montana-Dakota, Cascade and Intermountain did not incur any material environmental expenditures in 2019. Except as to what may be ultimately determined with regard to the issues described in the following paragraph, Montana-Dakota, Cascade and Intermountain do not expect to incur any material capital expenditures related to environmental compliance with current laws and regulations through 2022.

Montana-Dakota has ties to six historic manufactured gas plants as a successor corporation or through direct ownership of the plant. Montana-Dakota is investigating these former manufactured gas plant sites. To the extent not covered by insurance, Montana-Dakota may seek recovery in its natural gas rates charged to customers for certain investigation and remediation costs incurred for these sites. One claim has been made against Montana-Dakota for a site operated by Montana-Dakota and its predecessors, seeking that Montana-Dakota participate in investigation and remediation of environmental contamination at a site in Missoula, Montana. The site operated as a manufactured gas plant from approximately 1907 to 1938, when it was converted to a butane-air plant that operated until 1956. Montana-Dakota or its predecessors owned or controlled the site for a period of the time it operated as a manufactured gas plant and Montana-Dakota operated the butane-air plant from 1940 to 1951, at which time the company sold the plant. There are no documented wastes or byproducts resulting from the mixing or distribution of butane-air gas. Preliminary assessment of a portion of the site provided a recommended remedial alternative for that portion of approximately $560,000. However, the recommended remediation would not address any potential contamination to adjacent parcels that may be impacted by contamination from the manufactured gas plant. Montana-Dakota and another party agreed to voluntarily investigate and remediate the site, and that Montana-Dakota will pay two-thirds of the costs for further investigation and remediation of the site. Montana-Dakota received notice from a prior insurance carrier that it will participate in payment of defense costs incurred relative to the claim. Montana-Dakota has accrued $375,000 for the remediation of this site.

Cascade has ties to nine historic manufactured gas plants as a successor corporation or through direct ownership of the plant. In 2019, under the oversight of the Oregon Department of Environmental Quality, Cascade and other potentially responsible parties completed remediation of a former manufactured gas plant site in Eugene, Oregon. The parties are sharing the costs for the remediation, with Cascade to pay 50% of the estimated $3.5 million cost.

A claim was made against Cascade for contamination at the Bremerton Gasworks Superfund Site in Bremerton, Washington, which was received in 1997. A preliminary investigation found soil and groundwater at the site contain contaminants requiring further investigation and cleanup. The EPA conducted a Targeted Brownfields Assessment of the site and released a report summarizing the results of that assessment in August 2009. The assessment confirms that contaminants have affected soil and groundwater at the site, as well as sediments in the adjacent Port Washington Narrows. Alternative remediation options have been identified, with preliminary cost estimates ranging from $340,000 to $6.4 million. In April 2010, the Washington DOE issued notice it considered Cascade a potentially responsible party for hazardous substances at the site. In May 2012, the EPA added the site to the National Priorities List of Superfund sites. Cascade has entered into an administrative settlement agreement and consent order with the EPA regarding the scope and schedule for a remedial investigation and feasibility study for the site. Current estimates for the cost to complete the remedial investigation and feasibility study are approximately $7.6 million.

A claim was made against Cascade for contamination at a site in Bellingham, Washington. Cascade received notice from a party in May 2008 that Cascade may be a potentially responsible party, along with other parties, for contamination from a manufactured gas plant owned by Cascade and its predecessor from about 1946 to 1962. Other potentially responsible parties reached an agreed order and work plan with the Washington DOE for completion of a remedial investigation and feasibility study for the site. A feasibility study prepared in March 2018 identifies five cleanup action alternatives for the site, with estimated costs ranging from $8.0 million to $20.4 million with a selected preferred alternative having an estimated total cost of $9.3 million. Cascade believes its proportional share of any liability will be relatively small in comparison to other potentially responsible parties. The plant manufactured gas from coal between approximately 1890 and 1946. In 1946, shortly after Cascade's predecessor acquired the plant, it converted the plant to a propane-air gas facility. There are no documented wastes or byproducts resulting from the mixing or distribution of propane-air gas.

Cascade has received notices from and entered into agreement with certain of its insurance carriers that they will participate in defense of Cascade for certain of the contamination claims subject to reservations of rights and defenses to insurance coverage. To the extent these claims are not covered by insurance, Cascade will seek recovery of investigation and remediation costs through its natural gas rates charged to customers.


Customer Energy Efficiency and Conservation Programs

MDU Resources’ utility companies actively pursue programs to increase energy efficiency and conservation for electric and natural gas residential and commercial customers. State regulatory agencies also set program requirements, in some circumstances, to which our utility companies must adhere.

Montana-Dakota Utilities has residential and commercial incentive programs in Montana and South Dakota that promote installation of energy-efficient natural gas and electric equipment. Montana-Dakota also has commercial demand-response programs in its electric service areas in Montana, North Dakota and South Dakota. These programs include interruptible rates and an electric demand-response program in which customers can enroll.

Great Plains Natural Gas offers residential and commercial incentive programs in Minnesota to promote installation of energy-efficient natural gas equipment.

Intermountain Gas’ Energy Efficiency Program promotes home-energy efficiency by offering rebates for installation of high-efficiency natural gas appliances and incenting new home construction incorporating energy-efficient design. In its inaugural year, Intermountain’s program received an Energy Star Certified Home Market Leader Award from the EPA for outstanding commitment to energy-efficient new homes. Intermountain also partners with organizations throughout its service territory to inform and raise awareness about energy efficiency and its program.

Intermountain also is a member company of the Gas Technology Institute, which is a national leader in natural gas research. GTI’s Utilization Technology Development group creates and advances products, systems and technologies to save consumers money, save energy, integrate renewable energy with natural gas, and achieve safe, reliable, resilient end-user operation with superior environmental performance. To ensure the advanced products developed through GTI are accepted in the marketplace, Intermountain also has joined the North American Gas Heat Pump Collaborative. This group works to encourage early adoption of new highly efficient technologies.

Cascade actively partners with communities in Oregon and Washington to promote efficient and sustainable use of natural gas for residential, commercial, industrial and low-income customers. In its Oregon service territory, the company offers rebate programs for high-efficiency upgrades and weatherization through the Energy Trust of Oregon to its residential, commercial and industrial customers.

In Washington, Cascade manages and offers rebates through its long-standing Conservation Incentive Program, which encourages customers to install high-efficiency appliances and use efficiency measures. The rebates are available to residential, commercial and industrial customers. The company presents its proposed program in a Conservation Plan submitted annually by December 1 to the Washington Utilities and Transportation Commission. Results of the program are reported in the company’s Annual Conservation Report annually by June 1 to the WUTC.

In addition to its rebate program, Cascade supports innovations in energy efficiency efforts and regularly works with local partners to encourage community-focused cooperative reduction efforts. Some other programs Cascade continues to support include Built Green® Certifications, Sustainable Connections, the Sustainable Living Center, Community Action agencies and the Northwest Clean Air Agency, as well as collaborating with Western Washington University on energy policy, mentoring and efficiency-related education through the Energy Institute.

In 2015, Cascade joined the Northwest Energy Efficiency Alliance Natural Gas Market Transformation Collaborative. This five-year effort, with a combined $18.3 million commitment from participants, was focused on advancing development and market adoption of energy-efficient natural gas products, practices and services in the Pacific Northwest. In 2019, Cascade renewed its membership in the alliance through 2024, obtained a director position on the collaborative’s board, and started funding the NW Power Council’s Regional Technical Forum to support regionally vetted and reviewed energy savings estimates for efficient natural gas technologies.

MDU Resources’ utility companies all partner with local community action agencies in providing low-income assistance for utility customers.

EPA Natural Gas Star Methane Challenge Program

Programs have been established at the federal level to provide platforms to encourage utility companies to voluntarily commit to reducing greenhouse gas emissions, including the EPA’s Natural Gas Star Methane Challenge Program. The EPA established the Methane Challenge Program in collaboration with oil and natural gas companies, and MDU Resources’ natural gas distribution companies participated as founding partners of the program in March 2016.

As founding partners, MDU Resources’ utility companies participated in the program under the Best Management Practice (BMP) Commitment – Excavation Damages within the natural gas distribution sector. The BMP Commitment includes companywide implementation of BMPs to reduce methane emissions. The program also provides a forum for companies to share knowledge on successfully implementing BMPs and reducing methane emissions.

As an example of our companies’ involvement in the program, each has a Public Awareness and Damage Prevention Coordinator who assists in providing community education and outreach opportunities that focus on damage prevention and further reducing potential releases of methane from excavation damages. The coordinators also work with contractors and other third parties that have repeatedly caused damages. By proactively engaging with those third parties, our companies expect to see a reduction in excavation damages.

Each of our utility companies also actively participates in 811, Common Ground Alliance, and damage complaint programs, and the companies continually explore other voluntary actions that could reduce methane emissions from excavation damage.

Beyond the commitment to reduce methane emissions from excavation damages, our companies have completed operational and infrastructure changes to comply with federal requirements that lower methane emissions. A significant area of focus has been replacing older pipelines with pipelines made of newer materials, such as those made with polyethylene and steel. Our utility companies have no unprotected steel pipeline and no leak-prone cast iron pipe in their systems.

Local GHG Reduction Goals

Certain communities within and adjacent to Cascade Natural Gas Corporation’s service territory have expressed interest in adopting greenhouse gas emission reduction targets. Cascade engages with these communities on their goals to reduce GHG emissions.

Renewable Natural Gas

Renewable natural gas (RNG) is biogas or biomethane that is produced from a number of non-geologic sources and processed to meet pipeline-quality standards. RNG comes from a variety of sources, including municipal solid waste landfills, digesters at water resource recovery facilities (wastewater treatment plants), livestock farms, food production facilities and organic waste management operations. RNG can provide benefits such as energy diversity, economic revenues or savings, improved air quality and greenhouse gas emission reductions.

MDU Resources’ natural gas utilities review and evaluate RNG development opportunities. Our companies review regional, state and federal guidelines and studies that involve RNG, and engage in developing standards for acceptable delivery of RNG in natural gas distribution systems.

Montana-Dakota Utilities produces RNG from the Billings Regional Landfill in Montana. The project came online at the end of 2010 and has produced approximately 1.2 million dekatherms of RNG through year-end 2019. The RNG is supplied to the vehicle fuel market generating renewable identification numbers (RINS) and low carbon fuel standard (LCFS) credits in California and Oregon. In 2019, the Billings Landfill Plant produced approximately 1.63 million RINs and 4,303 LCFS credits.

In Idaho, Intermountain Gas has been involved in supporting development of dairy digester projects, providing pipeline services for dairy digesters to transport and sell RNG. The first dairy digester project on which Intermountain assisted began delivering biomethane into the Intermountain’s distribution system in mid-October 2019. Three additional dairy digester projects in Intermountain’s service area are planned and expected to come online by the end of 2020.

Our natural gas utility companies continue reviewing opportunities in their service areas for RNG development and exploring options to partner with developers and customers on RNG projects.

AGA Reporting Table

WBI Energy, through its subsidiaries WBI Energy Transmission and WBI Energy Midstream, conducts both regulated and nonregulated natural gas transmission and gathering pipeline, natural gas storage and related operations. WBI Energy Transmission, the regulated business, owns and operates approximately 4,000 miles of natural gas transmission, gathering and storage lines in Minnesota, Montana, North Dakota, South Dakota and Wyoming. WBI Energy Transmission’s underground storage fields in Montana and Wyoming provide storage services to local distribution companies, industrial customers, natural gas marketers and others, and enhance system reliability. Our system is strategically located near four natural gas-producing basins, making natural gas supplies available to our transportation and storage customers. Our system has 13 interconnecting points with other pipeline facilities, allowing for the receipt or delivery of natural gas to and from other regions of the country and from Canada. Under the Natural Gas Act, WBI Energy Transmission is subject to the jurisdiction of the Federal Energy Regulatory Commission regarding certificate, rate, service and accounting matters and, at December-31, 2013, its net plant investment was $519.3 million.

WBI Energy’s nonregulated business, WBI Energy Midstream, owns and operates gathering facilities in Montana and Wyoming. In total, our facilities include approximately 800 miles of operated field gathering lines, some of which interconnect with WBI Energy's regulated pipeline system. The nonregulated business provides natural gas gathering services and a variety of other energy-related services, including cathodic protection and energy efficiency product sales and installation services to large end-users.

A majority of WBI Energy’s business is transacted in the northern Great Plains and Rocky Mountain regions of the United States.

Environmental Matters

WBI Energy’s operations are subject to federal, state and local environmental, facility-siting, zoning and planning laws and regulations.

Administration of certain provisions of federal environmental laws has been delegated to the states where WBI Energy and its subsidiaries operates. Permits are renewed and modified, as necessary, based on defined permit expiration dates, operational demand, facility upgrades or modifications, or regulatory changes. We believe we are in substantial compliance with these regulations.

Detailed environmental assessments or environmental impact statements, as required by the National Environmental Policy Act, are included in the FERC’s environmental review process for both the construction and abandonment of WBI Energy Transmission’s natural gas transmission pipelines, compressor stations and storage facilities.

WBI Energy did not incur any material environmental expenditures in 2019 and does not expect to incur any material capital expenditures related to environmental compliance with current laws and regulations through 2022.

Fuel Use Reduction Efforts

WBI Energy continually evaluates the efficiency and effectiveness of its operating facilities, and maintains a program to replace existing facilities with newer, more fuel-efficient and lower-emitting equipment. More recent replacement projects include:

  • 2011 — Replaced five natural gas-fired compressor engines with one natural gas-fired engine subject to New Source Performance Standards (NSPS).
  • 2012 — Replaced five natural gas-fired compressor engines with one electric-driven compressor unit.
  • 2014 — Replaced two natural gas-fired compressor engines with one natural gas-fired engine subject to NSPS.
  • 2019 — Replaced three natural gas-fired compressor engines with one natural gas-fired engine with emission controls.

Together, these projects have reduced the amount of potential natural gas consumed by more than 250,000 thousand cubic feet per year.

Additionally, when designing and building new facilities, WBI Energy installs electric compression where feasible. For example, the company’s Tioga Compressor Station constructed in 2017 and the Mapleton Compressor Station constructed in 2018 are electric-driven compressors, saving approximately 195,000 thousand cubic feet per year of natural gas fuel from being burned.

Greenhouse Gas Emissions

WBI Energy recognizes the importance of reducing operational methane emissions. Along with the other member companies of the Interstate Natural Gas Association of America (INGAA), WBI Energy has committed to continuously improving practices to minimize methane emissions by implementing best practices at its facilities. These practices include reducing pressures prior to “blowing down” lines for planned maintenance, routine replacement of rod packing on compressors, conducting leak surveys at compressor stations and well sites and repairing leaks in a timely manner, reporting emissions as required, and continuing to participate in efforts to evaluate emissions data and identify opportunities for methane reductions.

Additionally, WBI Energy is working on a plan to participate in the EPA’s Natural Gas STAR Program. Voluntary partnerships such as the STAR Program encourage companies to adopt cost-effective technologies and practices to reduce methane emissions. To prepare for participation in the program, WBI Energy is developing a plan to implement methane control technologies and quantify emission reductions from these efforts.

WBI Energy’s efforts to replace legacy facilities with lower-emitting equipment and install electric-driven compression where feasible at new facilities have resulted in reductions and savings of potential greenhouse gas emissions at these facilities of approximately 14,000 and 10,500 metric tons of carbon dioxide equivalent, respectively. These projects also reduced nitrogen oxide emissions by more than 800 tons per year.

Minimizing Construction Impacts

WBI Energy understands the importance of protecting environmental resources when developing plans to expand or replace its pipeline system. When developing routes for pipeline rights-of-way, extensive studies relating to cultural resources, wetlands and waterbodies, endangered species, and other sensitive resources are conducted. The company puts significant effort into routing lines to the extent possible to avoid sensitive environmental resources. When resources are crossed by a pipeline or exist adjacent to a construction corridor, WBI Energy works closely with subject matter experts and resource management agencies to develop plans to reduce or mitigate impacts.

Third-party environmental inspectors closely monitor construction activities to ensure adequate protection of resources. Work adheres to applicable regulations and permits as well as company-developed, project-specific plans for dust mitigation, protection of unanticipated discoveries of cultural resources, spill prevention, and noxious weed management, as examples.

WBI Energy recognizes that the land crossed by its pipeline system belongs to other stakeholders, whether privately held or public lands, and it is critical to return construction workspaces to their original condition or better. WBI Energy works closely with landowners and land managing agencies to reclaim pipeline right-of-way and continuously monitors reclamation activities until they are complete.

Environmental Fines and Costs

WBI Energy did not incur any fines related to environmental compliance in 2017-19. Additionally, WBI Energy companies did not incur any material environmental capital expenditures related to environmental compliance with current laws and regulations in 2017-19 and do not expect to incur any material capital expenditures related to environmental compliance with current laws and regulations through 2022. Expenditures related to environmental impact management are primarily annual operating expenses.

SOCIAL

MDU Resources knows that it operates at the discretion of various stakeholders, including customers, shareholders, employees, regulators, lawmakers and the communities where we do business. It is these stakeholders who allow us to conduct our business and are vital to our success. MDU Resources remains committed to maintaining the trust of these stakeholders by operating with integrity and being a good corporate citizen.

Our Communities
Our Customers
Our Employees
Our Shareholders

Our Communities

SAFETY AND HEALTH
MDU Resources Group is committed to safety and health in the workplace and in the communities where we do business. Safety metrics related to each our businesses can be found in the reports under the environmental tab.

Safe natural gas pipeline operation
Operating a safe natural gas pipeline system requires diligence and the proper tools. This is a sample of the precautions taken at our companies:

  • Cathodic protection. This applies an electric current along a steel pipeline to protect against corrosion.
  • Rectifier inspection. We inspect corrosion rectifiers every two months to ensure they are adequately protecting the steel pipeline system. All aboveground facilities are checked for atmospheric corrosion every three years.
  • Patrol. We patrol pipeline facilities to look for changes to exposed piping, as well as areas where excavation activity may have taken place.
  • Leak survey. We use highly sensitive instruments to check annually for leaks on distribution lines in business districts and every four years in non-business districts. We conduct leak surveys on transmission lines annually and instrument leak surveys in populated (Class 3) and high-consequence areas twice a year.


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Our Customers

Our Commitment to Customers
MDU Resources Group is committed to competing in business only by lawful and ethical means. Our long-term success can be achieved only through fair, honest and intelligent decisions in dealing with customers.

Customer Service
MDU Resources’ successful relationship with customers requires that we provide quality products and services competently and efficiently and treat customers with courtesy. The corporation makes many commitments to customers about the availability, quality and price of our products and services in furtherance of the corporation’s vision to be the customers’ supplier of choice in all our markets. Each employee is expected to ensure that MDU Resources lives up to these promises, including maintaining open communication with customers and responding promptly to inquiries, requests and complaints.

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Our Employees

MDU Resources’ commitment to employees is based on a firm belief in the value and dignity of the individual. Through the following, we strive to maintain an environment in which each employee can perform effectively and efficiently:

  • Comply with applicable labor and employment laws and regulations in every market where we operate.
  • Provide a workplace free from discrimination, harassment, retaliation and violence.
  • Recruit, hire, train, promote, discipline and discharge employees fairly and impartially based on job-related criteria without regard to age, race, color, religion, gender, sexual orientation, gender identity, national origin, disability, veteran status or any other personal characteristics determined to be a protected category under applicable state law.
  • Prevent workplace injuries by adhering to applicable workplace safety laws and regulations and corporate standards.
  • Maintain a workplace free from the influence of illegal drugs and abuse of alcohol or prescription drugs.


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Our Shareholders

MDU Resources Group’s management is committed to acting in the best interest of the corporation and protecting its assets, and serving the long-term interests of the company’s shareholders. This includes protecting our tangible interests, such as property and equipment, as well as intangible assets, such as our reputation, information and intellectual property.

Accounting and Financial Reporting
Every employee is responsible for protecting MDU Resources’ assets, and management is responsible for establishing and maintaining appropriate internal controls to ensure assets are used only for lawful and proper purposes, protected against loss from unauthorized use, recorded using reliable information and scrupulously accounted for. Every employee is responsible for abiding by management’s internal controls for protecting the corporation’s assets.

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GOVERNANCE

MDU Resources Group is committed to strong corporate governance practices. For more detailed information about the company’s governance practices and policies, please see our most recent annual proxy statement. These are highlights of our practices:

  • Annual election of all directors.
  • Majority voting for directors.
  • Succession planning for executive officers.
  • Separate board chair and CEO.
  • Executive sessions of independent directors at every regularly scheduled board meeting.
  • Annual board and committee self-evaluations.
  • Risk oversight by full board and committees.
  • All directors are independent, other than our CEO.
  • “Proxy Access” allowing shareholders to nominate directors in accordance with the terms of our bylaws.
  • Standing committees consist entirely of independent directors.
  • Active investor outreach program.
  • Stock ownership requirements for directors and executive officers.
  • Anti-hedging and anti-pledging policies for directors and executive officers.
  • No related-party transactions by our directors or executive officers.
  • Compensation recovery/clawback policy.
  • Annual advisory approval on executive compensation.
  • Mandatory retirement for directors at age 76.
  • Directors may not serve on more than three public boards, including our board.
Integrity Code

MDU Resources’ corporate code of conduct or “Integrity Code,” outlined in its “Leading With Integrity Guide,” provides a summary of the expected behaviors that guide our employees to perform with integrity in all matters.

Through the Integrity Code, MDU Resources makes a commitment to:

  • Integrity — Employees will conduct the corporation’s business legally and ethically with their best skills and judgment.
  • Shareholders — Employees will act in the best interests of the corporation and protect its assets.
  • Employees — Employees will work together to provide a safe and positive workplace.
  • Customers, Suppliers and Competitors — MDU Resources will compete in business only by lawful and ethical means.
  • Communities — MDU Resources will be a responsible and valued corporate citizen.
Board of Directors

MDU Resources’ board of directors is made up of seven men and three women. As of December 31, 2019, they range in age from 49 to 70.

Dennis W. Johnson, 70, is chair of MDU Resources’ board of directors. Johnson has served on the board for 19 years. He is chair, president and CEO of TMI Corp., an architectural woodwork manufacturer. He also is a former president of the Dickinson, North Dakota, City Commission and a former director of Federal Reserve Bank of Minneapolis.

MDU Resources’ board of directors, as a whole and through its committees, has responsibility for oversight of the company’s risk management. Management is responsible for identifying material risks, implementing appropriate risk management processes, and providing information regarding material risks and risk management to the board. The board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by company management are adequate for identifying, assessing and managing risk. Management regularly provides risk assessment and mitigation reports to the audit committee or the full board, which provides opportunities for discussions about areas in which the company may have material exposure, steps taken to manage such exposure, and the company’s risk tolerance relative to company strategy. For disclosure of risk factors facing MDU Resources, see the Risk Factor section of the MDU Resources’ most recent Annual Report.

The board chair meets regularly with MDU Resources’ CEO to discuss strategy and risks facing the company. Senior management attends the board’s quarterly meetings and is available to address any questions or concerns raised by the board on risk management-related and other matters. Each quarter, the board receives presentations from senior management on strategic matters involving operations. Senior management annually presents an assessment to the board of critical enterprise risks that threaten the company’s strategy and business model, including risks inherent in the key assumptions underlying the company’s business strategy for value creation.

Periodically, the board receives presentations from external experts on matters of strategic importance to the board. At least annually, the board holds strategic planning sessions with senior management to discuss strategies, key challenges, and risks and opportunities for the company.

While the board is ultimately responsible for risk oversight at MDU Resources, the four standing board committees assist in fulfilling oversight responsibilities in certain areas of risk.

  • The audit committee assists the board in fulfilling its responsibilities with respect to risk management in a general manner and specifically in the areas of financial reporting, internal controls, cybersecurity, and compliance with legal and regulatory requirements, and, in accordance with NYSE requirements, discusses with the board policies with respect to risk assessment and risk management and their adequacy and effectiveness. The audit committee receives regular reports on the company’s compliance program, including reports received through the company’s anonymous reporting hotline. It also receives reports and regularly meets with the company’s external and internal auditors.
  • The compensation committee assists the board in fulfilling its oversight of risks relative to company compensation policies and programs.
  • The environmental and sustainability committee assists the board with oversight of policies, strategies, public policy positions, programs, and performance related to environmental, workplace health and safety, and other social sustainability matters and related laws, regulations and developments.
  • The nominating and governance committee assists the board in oversight of risks associated with board organization, membership and structure, succession planning for directors and executive officers, and corporate governance.
Company Officers

MDU Resources’ corporate management team, referred to as the Management Policy Committee, is made up of six men and three women who, at December 31, 2019, ranged in age from 42 to 66.

Officers of MDU Resources are elected by the board of directors and include a president, chief executive officer, vice presidents, treasurer, general counsel and secretary.

MDU Resources President and CEO David L. Goodin, 58, has been with the corporation for 37 years. He serves on the board of directors and as chair of the board of the corporation’s major subsidiary companies. He was formerly the president and CEO of MDU Resources’ utility companies.

Compliance Program

MDU Resources has developed a robust compliance program to promote a culture of legal and ethical compliance, consistent with the right tone at the top, to mitigate risk. The program includes training and adherence to the company code of conduct and Leading With Integrity Guide.

Grievance Reporting

MDU Resources has a Compliance Reporting and Investigation Policy, which also covers whistleblower protection. Employees are encouraged to report if they have concerns that something may be unethical or illegal within the company. Employees can report concerns to their manager, human resources representative, a company executive or their compliance officer. MDU Resources also has a reporting tool in place called EthicsPoint® that allows for anonymous reporting.

EthicsPoint is a telephone- and internet-based third-party system. Employees, customers and other stakeholders can report confidentially and anonymously any concerns about possible unethical or illegal activities. Reports are carefully considered and investigated, with reports and investigative summaries provided to the board of directors. Anyone who wishes to file an anonymous report can call 1-866-294-4676 or visit http://ethics.mdu.com.

PUBLIC POLICY PARTICIPATION

Employee participation in politics
MDU Resources’ corporate policy on Employee Participation in Political Affairs encourages employees to actively exercise their individual citizenship responsibilities, including voting, serving in civic bodies, keeping informed on political matters, volunteering time for political causes, contributing financially to the corporate political action committee, contributing financially to a political party or candidates, campaigning for a political party or public office, and holding a political party or public office.

The policy also says an employee engaging in political activity does so as a private citizen and not as a representative of the company. Also, to avoid potential job-related conflicts, an employee who wants to seek public office or serve in a civic body must consult with his or her manager prior to seeking such office or position.

Communications and Public Affairs Department

MDU Resources’ Communications and Public Affairs Department provides public affairs and lobbying services for MDU Resources and its companies. The department actively monitors, tracks and testifies on legislation affecting company and business interests, and spends approximately $250,000 per year on lobbying efforts.

The department works closely with state and national trade associations, various state chambers and other industry groups that share the company’s position on issues of interest.

Department staff members encourage MDU Resources’ employees to be aware of political activities.

Good Government Fund PAC

The MDU Resources Group Good Government Fund is a political contributions program for eligible employees. It is a voluntary, not-for-profit political action committee organized to encourage the financial participation of eligible employees in the state and federal election process.

The purpose of the Good Government Fund is to receive personal contributions from eligible MDU Resources employees, directors and shareholders and make contributions to candidates for local, state and federal office who support the private enterprise system and the interests of MDU Resources’ constituencies.

Every member of the Good Government Fund has an opportunity to recommend contributions to candidates. The Good Government Fund board of directors and certain MDU Resources Communications and Public Affairs Department personnel review all recommendations.

Whenever possible, an effort is made to deliver Good Government Fund contributions in person, directly to the candidate, which gives MDU Resources’ employees an opportunity to describe firsthand the issues that are important to them.

The Good Government Fund is nonpartisan and independent of any political party. It supports deserving candidates from any political party whose voting record or beliefs support MDU Resources’ interests.

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