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Establishing the price for a site before a detailed feasibility study may be difficult because neither the owner nor the developer has sufficient information on costs and thus what a site is actually worth. A preliminary agreement, however, is necessary to pro- tect the developer from an owner who, knowing that the developer has already spent a significant amount on the feasibility study, holds out for an unreasonably high royalty. Conversely, a preliminary agreement protects the owner from the developer who offers an unreasonably low royalty after the site is tied up with a Federal Energy Regulatory Commission permit and the owner can deal with no other developers until the permit period runs out. A preliminary agreement may be reached prior to the feasibility study and prior to the end of the FERC notice period, which sets a minimum royalty payment of five percent and a maximum royalty payment of ten percent. When the site data is available from the feasibility study, both parties would then be free to negotiate a final agreement on a payment between these two limits once the data on the site were available from the feasibility study. If the royalty offered were under five percent, the owner would be freed from his obligation to the developer. Likewise, the developer would be able to proceed with the project with a royalty payment of no more than the maximum ten percent specified in the agreement. Such an agreement thus protects both the owner and the developer and sets reasonable limits on what either can demand in the negotiation process. Poten- tial hydro sites located in or near municipalities present unique opportunities for joint public/private development, with advantages to both parties. A discussion of these opportunities is found in Appendix A, on page 106. 18