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, profitability and competitive advantage, while attracting a diverse and skilled workforce. [Gb]

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.
    • Safety is our top priority.
    • We are committed to an inclusive environment that respects the differences and embraces the strengths of our diverse employees.
  • Maintain adequate financial resources.
  • Be a good steward of the environment.
    • Comply with or surpass all applicable environmental laws, regulations and permit requirements.
    • Reduce greenhouse gas emissions intensity from our electric utility by 45% by 2030 compared to 2005 levels.
  • 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. [Ga]

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

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 has begun incorporating Task Force on Climate-related Disclosure (TCFD) guidance into its reporting. Throughout the Sustainability section of our website, you will find information tagged to indicate the portion of the TCFD guidance to which it relates. For example, a tag of [Ga] indicates the information relates to the TCFD guidance outlined under Governance recommended disclosure “a) Describe the board’s oversight of climate-related risks and opportunities.” A list of the incorporated tags can be found here.

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 and subsequent filings with the SEC. 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.

Company Profile

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 46 states through our regulated energy delivery and construction materials and services businesses.

MDU Resources is headquartered in Bismarck, North Dakota, and employed 12,994 people as of December 31, 2020. Employee numbers may reach more than 16,000 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, 2020, there were 200.6 million weighted average common shares outstanding, diluted, and we had total assets of $8.1 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.

Our Strategy: Deliver superior value with a two-platform model, regulated energy delivery and construction materials and services businesses, while also pursuing organic growth opportunities and using a disciplined approach to strategic acquisitions of well-managed companies and properties.

Company Organizational Structure [Gb]

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, generates, transmits and distributes electricity in Montana, North Dakota, South Dakota and Wyoming. This segment served 143,782 customers at December 31, 2020.

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 997,146 customers at December 31, 2020.

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 through approximately 3,700 miles of regulated 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:

Our companies:
WBI Energy, Inc.
WBI Energy Corrosion Services
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-mixed concrete, cement, asphalt, liquid asphalt and other value-added products. It also performs integrated contracting 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, industrial, governmental 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

The other category includes the activities of Centennial Holdings Capital, which insures through its subsidiary InterSource Insurance Company various risks as a captive insurer for certain of MDU Resources’ subsidiaries, and it owns certain real and personal property. The other category includes certain assets, liabilities and tax adjustments of the holding company primarily associated with corporate functions and certain general and administrative costs and interest expense, which were previously allocated to MDU Resources’ refining business and exploration and production business and do not meet the criteria for income (loss) from discontinued operations. The other category also includes Centennial Resources’ former investment in Brazil.

  • 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.

Some of MDU Resources’ efforts include engaging in wildlife protection practices, promoting emission reduction and fuel conservation, working with wildlife regulatory agencies, developing water enhancement practices, protecting water quality, controlling and preventing the spread of noxious weeds, reducing noise, and implementing 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 with reporting and direct accountability to the CEOs at our operating companies, through audits of operating activities and through property reviews during due diligence on potential acquisitions. [Gb]

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. [Ga]

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

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

Construction Materials

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-mixed 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 14 states and performs work in 15 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.

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. [Sb, RMa] 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.
  • Knife River has invested in Blue Planet Systems Corp. to pursue the use of synthetic aggregates in ready-mix concrete. Blue Planet is testing methods of creating synthetic limestone, using carbon dioxide captured from existing sources. The synthetic limestone could then be used as a component of concrete. In addition to sequestering carbon dioxide through this process, the use of synthetic limestone would prolong the life of natural aggregate sources.

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 to mitigate fuel costs and help reduce emissions whenever feasible.

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 2011. 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, which helps 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, which can be used to evaluate performance.

In California, off-road and on-road diesel fleet requirements are more stringent than other areas where Knife River operates. On-road diesel fleets must 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. In 2020, Knife River replaced all vehicles in its California fleet that were 17 years or older. In 2023, the company will have no vehicles in its California fleet that are older than a 2010 model, putting Knife River on track to meet the regulation two years ahead of schedule. Off-road diesel construction and mining equipment fleets must meet a target based on the combined total horsepower and emissions factors of all engines in the fleet, with compliance targets that began in 2009 and go through 2024. Knife River has been proactive in meeting early targets and anticipates meeting the 2024 target.

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-mixed concrete operations and polycyclic aromatic compounds emitted during the handling and processing of liquid asphalt oils and binders. [MTa]

The TRI data for reporting facilities can be accessed at www.epa.gov.

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 our customers. 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.

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. Jebro’s service area includes parts of Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, South Dakota and Wyoming.

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.

Spills
No Environmental Protection Agency-reportable or National Response Center-reportable spills occurred within Knife River’s operations in 2018-20. A number of minor spills were documented internally, some of which were 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.

  2018 2019 2020
Fines paid $1,600 $27,950 $25,680
Number of violations 7 12 7

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, carbon pricing programs being implemented in the states of Oregon and Washington are expected to add to Knife River’s costs of operations. [Sa]

California emission reductions and regulatory compliance are more stringent than other Knife River operating areas. The California Air Resources Board (CARB) in the past 15 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 replaced all vehicles that were 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. [Sa]

Additional information
Read more about environmental matters related to Knife River in MDU Resources’ most recent 10-K.

Construction Services

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, 2020, MDU Construction Services owned or leased facilities in 17 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 substantial compliance with these regulations.

Few, if any, environmental permits are required for the type of work MDU Construction Services Group performs. In several locations, MDU Construction Services Group uses petroleum storage tanks for operational convenience. Where used, these 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 minimal 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 2020 and does not expect to incur any material capital expenditures related to environmental compliance with current laws and regulations through 2023.

Renewable energy service providers

MDU Construction Services Group provides power line, substation and system installation construction services for wind, solar, combined heat and power, and other renewable electric projects. The company has helped construct more than 1,000 megawatts of solar electric facilities throughout its service area. MDU Construction Services Group continues to expand renewable installation offerings, including battery energy storage systems, electric vehicle charging infrastructure, microgrids and renewable natural gas/hydrogen-fueled electric generating units.

Additional information
Read more about environmental matters related to MDU Construction Services Group in MDU Resources’ most recent 10-K.

Electric and Natural Gas Utilities

EEI/AGA Reporting Table

TCFD Climate Scenario Analysis

MDU Resources is working toward incorporating guidance provided by the Task Force on Climate-related Financial Disclosure (TCFD) into its sustainability reporting. TCFD guidance encourages organizations to conduct climate scenario analyses relative to their entities.

"Scenario analysis is a process for identifying and assessing the potential implications of a range of plausible future states under conditions of uncertainty. Scenarios are hypothetical constructs and not designed to deliver precise outcomes or forecasts. Instead, scenarios provide a way for organizations to consider how the future might look if certain trends continue or certain conditions are met. In the case of climate change, for example, scenarios allow an organization to explore and develop an understanding of how various combinations of climate-related risks, both transition and physical risks, may affect its businesses, strategies, and financial performance over time." (Source: TCFD)

Most of MDU Resources’ direct greenhouse gas emissions are from its electric utility operations. As such, MDU Resources is focusing its initial climate scenario analysis efforts on these operations. The company expects to publish soon its climate scenario analysis report specific to its electric utility operations.

MDU Resources Group’s utility companies serve approximately 1.14 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 143,782 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, 2020.

As of December 31, 2020, renewable resources comprised approximately 27% of Montana-Dakota's 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 28% since 2005.

MDU Resources has a target, through its electric utility, to reduce greenhouse gas emissions intensity by 45% by 2030 compared to 2005 levels from its generating facilities. Montana-Dakota intends to achieve this target through continued diversity in its electric generating fleet, including through retirement of aging coal-fired generating units. The following chart shows Montana-Dakota’s progress, and anticipated progress upon planned retirement of two coal-fired electric generating facilities, in reaching its intensity target.

The principal properties owned by Montana-Dakota as of April 1, 2021, for use in its electric operations include interests in 15 electric generating units at 11 facilities and two small portable diesel generators, approximately 3,400 miles of transmission lines and 4,900 miles of distribution lines, and 81 transmission and 298 distribution substations. At December 31, 2020, Montana-Dakota's net electric plant investment was $1.5 billion and its rate base was $1.3 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. These markets are highly seasonal and sales volumes depend largely on weather. Additionally, the average customer consumption has tended to decline with higher use of energy-efficient lighting and appliances. The interconnected system consists of 14 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 512.3 in 2020. ZRCs are a megawatt demand equivalent measure and are allocated to individual generators to meet planning reserve margin requirements within MISO. For 2020, Montana-Dakota's total ZRCs, including its firm purchase power contracts, were 553.2. Montana-Dakota's planning reserve margin requirement within MISO was 531.4 for 2020.

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 four 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 2020, Montana-Dakota purchased approximately 25% 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 64,129 kilowatts in July 2020. 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

In February 2019, Montana-Dakota announced the retirement of three aging coal-fired electric generating units. Lewis & Clark Station Unit 1 was retired March 31, 2021. The retirement of Units 1 and 2 at Heskett Station are expected to be complete in early 2022.

Montana-Dakota also announced its intent to construct a new 88-MW simple-cycle natural gas-fired combustion turbine peaking unit at the Heskett Station site. On February 16, 2021, the company obtained a final Permit to Construct from the North Dakota Department of Environmental Quality. The new generation resource was selected as part of Montana-Dakota’s 2019 Integrated Resource Plan process. 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/. [RMa, RMb]

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 substantial 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. Through 2020, the project is approximately 81 percent complete. 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.

Electric generation emissions reductions

Since 2005, Montana-Dakota Utilities has reduced greenhouse gas emissions from its electric generating facilities through a variety of efforts, including retiring older generation plants and installing emission control and pollution control equipment. The following charts show Montana-Dakota’s progress, and anticipated progress upon planned retirement of two coal-fired electric generating facilities, in reducing annual GHG and other air emissions.

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.

Several projects have been completed at Montana-Dakota’s owned and co-owned coal-fired electric generation resources for compliance with CCR rule requirements. These projects include pond closures, temporary storage pad closures, a pond retrofit, and bottom ash handling system retrofits.

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 was retired on March 31, 2021, and Heskett Station Units 1 and 2 are scheduled to be retired in early 2022. By 2023, as a result of retiring these three generating units, water withdrawals are projected to decrease about 97% compared to 2020 levels.

Renewable energy

Montana-Dakota Utilities 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 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 $168 million in environmental emission control equipment and other pollution control improvement at our coal-fired electric generation plants since 2005. The investments have resulted in substantial reductions in mercury, SO2, NOX and filterable particulate from these plants.

In 2020, Montana-Dakota incurred $800,000 of environmental capital expenditures for its electric operations, mainly for an embankment stabilization project at Lewis & Clark Station and coal ash management projects at Lewis & Clark Station and Coyote Station. Environmental capital expenditures are estimated to be $600,000, $3.9 million and $4.1 million in 2021, 2022 and 2023, respectively, for various environmental projects, including a coal ash impoundment closure project at Lewis & Clark Station and coal landfill closure project at Heskett Station, to coincide with retirement of coal-fired electric generating facilities.

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

Electric utility customer energy efficiency and conservation programs

Montana-Dakota Utilities actively pursues programs to increase energy efficiency and conservation for electric residential and commercial customers, and partners with local community action agencies in providing low-income assistance for utility customers. State regulatory agencies also set program requirements, in some circumstances, to which our utility companies must adhere. The total kilowatt-hour savings from electric energy efficiency and conservation programs completed in 2020 was about 1.42 million kWh, equating to a reduction of more than 1,000 metric tons of CO2 equivalent.

Montana-Dakota has residential and commercial incentive programs in Montana and South Dakota that promote installation of energy-efficient 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.

Also, in 2017, Montana-Dakota started an LED conversion program for company-owned street lighting and company-owned private lighting rental throughout its service territory to reduce energy usage and thus help reduce emissions. The project concluded in early 2021 with more than 25,585 energy-saving LED lights installed, resulting in approximately 17.6 million kWh in annual energy savings, which is the equivalent of approximately 13,775 metric tons of CO2 emissions reduced annually.


NATURAL GAS DISTRIBUTION OPERATIONS

MDU Resources’ natural gas distribution operations consist of Montana-Dakota, Cascade and Intermountain, which sell natural gas at retail, serving 997,146 residential, commercial and industrial customers in 340 communities and adjacent rural areas across eight states as of December 31, 2020, and provide natural gas transportation services to certain customers on the company’s systems.

These services are provided through distribution systems aggregating approximately 20,600 miles. At December 31, 2020, the natural gas distribution operations’ net natural gas distribution plant investment was $2.0 billion and rate base was $1.3 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 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 2020. Except as to what may be ultimately determined with regard to the issues described in the following paragraph, our natural gas distribution operations do not expect to incur any material capital expenditures related to environmental compliance with current laws and regulations through 2023.

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 possible soil and groundwater impacts from the operation of two of 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. An environmental assessment was started in 2020, which is estimated to cost $800,000. 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 has accrued $800,000 for remediation and investigation costs, and has incurred costs of $130,000 as of December 31, 2020. Montana-Dakota received notice from a prior insurance carrier that it will participate in payment of defense costs incurred relative to the claim.

Cascade has ties to nine historic manufactured gas plants as a successor corporation or through direct ownership of the plant.

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. 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, of which $5.0 million has been incurred as of December 31, 2020. Based on the site investigation, preliminary remediation alternative costs were provided by consultants in August 2020; therefore, the accrual for these costs was increased in the third quarter of 2020 by $11.1 million. The preliminary report projected possible costs for a variety of site configurations, remedial measures and potential natural resource damage claims of between $13.6 million and $71.0 million. As of December 31, 2020, Cascade had accrued $2.6 million for the remedial investigation and feasibility study, as well as $17.5 million for remediation of the site. The accrual for remediation costs will be reviewed and adjusted, if necessary, after the feasibility study is completed. In April 2010, Cascade filed a petition with the Washington Utilities and Transportation Commission for authority to defer the costs incurred for the environmental remediation of this site. The WUTC approved the petition in September 2010, subject to conditions set forth in its order.

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. In 2020, the other potentially responsible parties developed a cleanup action plan. Design documents are expected to be complete in 2022, with construction of the cleanup action estimated for 2023. 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.

The company 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.

Natural gas utility customer energy efficiency and conservation programs

MDU Resources’ utility companies actively pursue programs to increase energy efficiency and conservation for natural gas residential and commercial customers. State regulatory agencies also set program requirements, in some circumstances, to which our utility companies must adhere. The total savings in 2020 from our natural gas utility company programs was approximately 2.25 million therms, equating to a reduction of nearly 12,000 metric tons of CO2 equivalents.

Montana-Dakota Utilities has residential and commercial incentive programs in Montana and South Dakota that promote installation of energy-efficient natural gas equipment. 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. Intermountain’s program received an Energy Star Certified Home Market Leader Award from the EPA for two consecutive years 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.

Intermountain recently signed on to participate in the newly formed Low-Carbon Resources Initiative. A joint venture of GTI and the Electric Power Research Institute, LCRI is a unique, international collaboration spanning the natural gas and electric sectors that will help advance global, deep decarbonization of all segments of the economy. The goal of the five-year initiative is to accelerate the development and demonstration of low-carbon energy technologies. The LCRI is targeting advancements in low-carbon electric generation technologies and low-carbon energy carriers, such as hydrogen, ammonia, synthetic fuels and biofuels.

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 energy-efficiency upgrades and weatherization through the Energy Trust of Oregon to its residential, commercial and industrial customers. Weatherization services also are offered in partnership with low-income assistance agencies

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. Cascade also offers rebates to qualified agencies for delivery of weatherization services to income-qualified natural gas 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 annually by June 1 in the company’s Annual Conservation Report 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.

Methane emissions reductions

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.

Our companies have a Public Awareness and Damage Prevention Manager and three coordinators who assist in providing public outreach that focuses on damage prevention and further reducing potential releases of methane from excavation damages. The Public Awareness and Damage Prevention Department and local utility management and staff also engage directly with contractors and excavators with face-to-face interactions in the field, and through meetings and training events. By proactively engaging with these third parties, in certain jurisdictions our companies have experienced a decreasing trend in overall excavation damages and excavation damage rates, as well as an increase in locate ticket requests.

Our utility companies conduct investigations when damages occur to company natural gas distribution pipeline and infrastructure. Key information, such as location, root cause, type of excavator, type of equipment used and type of work performed, is collected to analyze and trend on a quarterly basis. This data is used to assess ways to mitigate risks associated with excavation and, along with effectiveness surveys, helps our utilities assess the success of their programs, outreach strategies and messaging.

Some examples of our utility companies’ outreach efforts includes annual direct mailers to public officials, emergency response organizations, excavators, customers, schools and individuals who live along our distribution lines; participation in a variety of general public outreach events; development of materials that deliver multifaceted education campaigns, including campaigns via television, radio, online, newspapers, magazines, social media and billboards. The utility companies provide publications in up to eight languages to align with the demographics of its jurisdictions. The utility companies also sponsor community events, such as golf tournaments, chamber of commerce events, county fairs and rodeos, and sporting events, where pipeline safety and Call 811 information is displayed and distributed to attendees. The utilities also provide excavation safety and emergency response training upon request.

Each of our utility companies 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.

In 2020, the state of Washington enacted HB 2518, the Natural Gas Transmission bill, requiring natural gas transmission and distribution companies to expedite mitigation of hazardous leaks and reduce as practicable nonhazardous leaks, and providing utilities rate recovery to mitigate these leaks. Cascade collaborated with other Washington natural gas distribution companies on implementing the methodology for compiling data and estimating emissions. Cascade submitted its first report in March 2021 to the Washington Utilities and Transportation Commission and will be evaluating the potential to address nonhazardous leaks in the future.

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. In 2020, our utility companies replaced 79.3 miles of our distribution system and expect to replace 92.6 miles in 2021. 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’ service territory have expressed interest in adopting greenhouse gas emission reduction targets. Cascade engages with these communities on their goals to reduce GHG emissions, including partnerships on the integration of renewable natural gas, potential future hydrogen opportunities, energy efficiency and possible carbon offset programs.

Renewable natural gas

Renewable natural gas (RNG) is biogas that is produced from a number of non-geologic sources, upgraded to biomethane by removing contaminants and increasing the heating value, and processed to meet natural gas 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. RNG development has the potential to mitigate the carbon footprint associated with traditionally sourced natural gas.

MDU Resources’ natural gas utilities actively review, evaluate and pursue potential 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 1.36 million dekatherms of RNG through year-end 2020. 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 2020, the Billings Landfill Plant produced approximately 1.53 million RINs and 1,547 LCFS credits.

In Idaho, Intermountain Gas supports development of RNG projects and to date has provided pipeline services for three dairy digesters to transport and sell RNG. The first dairy digester project on which Intermountain assisted began delivering RNG into Intermountain’s distribution system in mid-October 2019. The two additional dairy digesters began injecting RNG into Intermountain’s system in August 2020 and September 2020. As of April 2021, the three producers had injected more than 480,000 dekatherms of RNG into Intermountain’s system. Intermountain is evaulating and pursuing a potential fourth dairy RNG project and is evaluating feasibility studies for four additional potential RNG projects.

Washington and Oregon have enacted policies allowing natural gas distribution utilities to supply RNG to customers. Cascade is committed to developing RNG programs for its customers under these policies and rules. The company also is committed to exploring opportunities to help communities meet their GHG reduction goals, including through RNG or potential future opportunities for hydrogen. The company has met with various entities regarding RNG projects involving municipalities, wastewater treatment plants, biodigesters and landfills. Cascade also has developed a cost-effectiveness methodology for evaluating RNG opportunities.

MDU Resources’ 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.

Environmental recognition

Cascade Natural Gas ranked at the top of the list of 31 utilities named as 2021 Environmental Champions on Earth Day. The national survey was conducted by Escalent, a top human behavior and analytics firm.

The results were based on a 1,000-point index scale and included 140 of the largest utility companies in the United States. Consumers surveyed cite significant improvements on utility support for environmental causes and dedication to clean energy. The average index score was 688. Cascade topped the list with a score of 751.

Escalent’s Cogent Syndicated 2021 Utility Trusted Brand & Customer Engagement Residential study was based on surveys among 74,224 residential electric, natural gas and combination utility customers of the 140 largest utility companies, based on residential customer counts.


Additional Information

Read more about environmental matters related to the electric and natural gas utilities in MDU Resources’ most recent 10-K.

Pipelines

AGA Reporting Table

WBI Energy, through its subsidiaries WBI Energy Transmission and WBI Energy Midstream, conducts both regulated and nonregulated natural gas transmission pipeline, natural gas storage and related operations. WBI Energy Transmission, the regulated business, owns and operates approximately 3,700 miles of natural gas transmission 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, 2020, its net plant investment was $548.3 million.

WBI Energy’s nonregulated business, WBI Energy Midstream, provides a variety of 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. WBI Energy believes it is in substantial compliance with these regulations.

Ongoing operations are subject to the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act and other federal and state regulations. Administration of many provisions of these laws has been delegated to the states where WBI Energy operates. Permit terms vary and all permits carry operational and compliance conditions. WBI Energy believes all required permits are in place and that it is in substantial compliance with all permit terms.

Environmental review of construction, abandonment and maintenance projects on WBI Energy Transmission’s natural gas transmission pipeline, compressor stations and storage facilities are conducted in accordance with FERC’s National Environmental Policy Act implementing regulations. Detailed environmental assessments or environmental impact statements, as required by NEPA, are included in the FERC’s environmental review process.

Fuel use reduction efforts

WBI Energy continually evaluates the efficiency and effectiveness of its operating facilities, and proactively 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 toward participation 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 2018-20. Additionally, WBI Energy companies did not incur any material environmental capital expenditures related to environmental compliance with current laws and regulations in 2018-20 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.

Additional information

Read more about environmental matters related to WBI Energy in MDU Resources’ most recent 10-K.

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 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 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.
  • 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.
  • Respect employees' differences and support an inclusive culture where everyone can feel valued.
  • 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 five men and four women. As of December 31, 2020, they range in age from 50 to 71.

Dennis W. Johnson, 71, is chair of MDU Resources’ board of directors. Johnson has served on the board for 20 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 10-K. [Ga, Gb, RMa]

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. [Ga, Gb]

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. [Ga, Gb]

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. [Ga]

  • 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, 2020, ranged in age from 42 to 65. [Gb]

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, 59, has been with the corporation for 38 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. The Good Government Fund chair has the authority to approve contributions of up to $1,000 without prior approval from the Good Government Fund board, but all such contributions are reported to the board.

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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