SEVERANCE AND RELEASE AGREEMENT

SEVERANCE AND RELEASE AGREEMENT

This Severance and Release Agreement (the “Agreement”) is between Russell L. Cohen (“Employee”), and Black Hills Corporation, a South Dakota corporation (“Employer”). Effective October 11, 2006, the employment relationship between Employer and Employee terminated.

Except for any outstanding vested Restricted Stock Units to which Employee is entitled under Employer’s deferred compensation plan, Employee acknowledges and agrees that he has received all wages, benefits, stock, stock options, and other compensation, including earned unused vacation, due to him by reason of his employment with Employer. Employee further acknowledges that he has returned to Employer all property, documents, and data belonging to Employer that previously was in his possession. Employer now agrees to pay additional consideration to Employee as a severance benefit.

For severance pay, if Employee signs and does not revoke this Agreement, Employer shall pay to Employee a sum equal to two hundred thirty five thousand dollars ($235,000.00), less applicable withholdings and deductions (the “Severance Amount”). The Severance Amount will be paid in one lump sum payment, less applicable withholdings and deductions, in a check made payable to “Russell Cohen” and delivered to Andrew Petrie, Employee’s counsel, on or before the tenth business day after Employee signs this Agreement.

Employee’s termination of employment is considered a qualifying event allowing Employee to continue medical/health insurance coverage and dental coverage (COBRA) for up to eighteen (18) months. Employer will provide Employee with the initial three (3) months’ coverage, October 12, 2006 through January 12, 2007. The three (3) months of coverage provided by Employer is taxable to Employee. At the end of the three (3) months, Employee will be responsible for payment of all premiums associated with continuation of coverage for the remaining months of eligibility. Employee will be informed of the details regarding continuation of coverage (COBRA) in a separate letter.

Employee will also be provided with an opportunity to receive outplacement services. Employer will provide an allowance of up to $2,000.00 for this service. This amount will include associated fees and preapproved expenses. Shannon Ross, Human Resource Manager, will assist Employee in securing these services. Employee will have up to sixty (60) days from the date Employee signs this Agreement to begin to receive these services. If Employee does not elect to receive the services within this timeframe, it will be determined that Employee elected to not take advantage of the services.

In consideration of receiving Severance Amount, three (3) months of COBRA, and outplacement assistance, (collectively the “Severance Benefits”), Employee hereby waives, releases and discharges all rights, remedies, claims and causes of action, known or unknown, suspected or unsuspected, that he may have against Employer, for any matter relating to his employment, or the termination of his employment. This release includes, but is not limited to any claim, right, remedy or cause of action arising under:

This release does not cover any indemnification rights to which Employee may be entitled under state law or Employer