Where is the Microsoft.IdentityModel dll

How about a NuGet Windows Identity Foundation. Just add it you you project and away you go! Its one of the MS owned NuGets so should be maintained accordingly.

EDIT: In Windows 8 Windows Identity Foundation is installed (enabled) by turning a windows feature on in Control Panel > All Control Panel Items > Programs and Features > Turn Windows feature on or off the feature is Windows Identity Foundation 3.5. Installers linked in the answer above will not work on Windows 8

Have you installed Windows Identity Foundation and the companion WIF SDK?

If you've installed the WIF SDK, try :

C:\Program Files\Reference Assemblies\Microsoft\Windows Identity Foundation\v3.5\
   Microsoft.IdentityModel.dll

For Windows 10:

Right-click the taskbar Windows logo, select 'Programs and Features'.

Click 'Turn Windows Features on or off'

In the dialog box that appears, scroll down or resize the window and check the box next to 'Windows Identity Foundation 3.5'

Click OK.

This activates the required DLLs. Apparently Windows 10 keeps all of those features in the windows installation so that it can activate and deactivate them on demand.

I had this problem, but fixed it by referencing the DLL from "C:\Program Files\Reference Assemblies\Microsoft\Windows Identity Foundation\v3.5\Microsoft.IdentityModel.dll"

Go to reference properties and set Copy Local to True for the DLL. The DLL will now be included in the azure package.