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Exhibit 10.1

Forest Oil Corporation

Annual Incentive Plan

2005

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Forest Oil Corporation
2005 Annual Incentive Plan

Summary

Plan Objectives

        The Annual Incentive Plan (the "Plan") has been designed to meet the
following objectives:

•Provide an annual incentive plan framework that is performance-driven and
focused on objectives that are critical to the Company's success.

•Offer competitive cash compensation opportunities to all key employees.

•Reward outstanding achievement.

Basic Plan Concept

        The Plan generally provides annual incentive awards, which will be
determined primarily on the basis of the Company's consolidated results on
selected financial, operating and other performance measures. However, business
unit or department performance and individual performance should also be
considered in determining the actual participant award payout. Therefore, the
Company shall have the flexibility to adjust individual awards to reflect
individual/team performance.

Performance Measures and Weights

        Each year the Company will establish the threshold, target and
outstanding performance levels on each performance measure and its appropriate
weighting. These performance measures and their weighting will be reviewed over
time (and modified, if appropriate) in light of changing Company priorities and
strategic objectives.

        The recommended 2005 Company performance measures and their respective
weightings are described in detail on Attachment I.

Award Opportunities

        The 2005 Plan target awards for Plan participants by position (expressed
as a percentage of annual salary) are set forth on Attachment II.

Plan Administration

        The Plan will be administered by the Compensation Committee
("Committee") of the Board of Directors and the President and Chief Executive
Officer ("CEO") (for all positions except his own). Certain elements of the Plan
administration will be delegated to the senior Human Resources executive of the
Company. The Executive Vice President and Chief Financial Officer will verify
the performance calculation for the performance and operating measures in
consultation with the Senior Vice President, Corporate Planning and Development
who shall be responsible for the estimation of the Company's oil and gas
reserves.

        Actual performance goals, standards, award determinations and
modifications to the Plan design must be approved by the Committee.

Measure

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  Weighting (Example)

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  Total Shareholder Return   20 % Cash Cost   20 % Acquisitions   20 %
Production   20 % Rate of Return on Capital Investments   20 %   Total Financial
and Operating   100 %

        Once the total bonus pool has been established following the performance
calculations, the CEO shall have the discretion to distribute bonus monies
within business units and the corporate group or to move monies from one group
to another, based on his assessment (with advice of other senior managers) as to
individual or group performance.

Targets

        Targets for the total Plan will be set consistent with the following:

•Threshold—Level at which minimum payout occurs. The threshold percentage is 25%
of the target award percentage.

•Target—Level at which the participant receives the target award percentage.

•Outstanding—Level at which the participant receives 200% of the target award
percentage.

        Completion percentages between Threshold, Target and Outstanding will be
determined, with the exception of Total Shareholder Return, by interpolation.
Completion for results above Outstanding will be directly proportional to the
change in completion between Target and Outstanding.

        The Completion Percentage for Total Shareholder Return is defined on the
page describing the Total Shareholder Return measure. Targets shall be adjusted
for material changes made during the year to the business plan or scope thereof,
or to the capital expenditure budget.

Maximum Completion

        Although there will be no limit on completion of individual financial
measures, completion for the total Plan will be limited to 200% of target.

Performance Levels

        Performance levels will be set for individual measures. Results below
the Threshold will equate to a zero completion percentage.

        A minimum 25% completion threshold is required for the total Plan.

Completion Calculation

        Completion for total financial measures will be the sum of the weighted
completion for each individual measure. Weighted completion for each individual
measure will be equal to the completion percentage of each measure times the
weighting for that measure.

Property Sales

        In computing results, non-budgeted property sales are not to be
considered. To avoid non-budgeted property sales from affecting results, they
will be incorporated into performance measures as though they had been budgeted.

Participants

        The CEO of the Company shall determine which employees are to be
participants in the Plan. If a participant retires, dies or becomes disabled
prior to the payment of a bonus award, he or she (or the estate, in the case of
death), will receive a pro rata portion of the award based upon actual earned
salary in the award year. If a participant's employment with the Company is
terminated for any other reason prior to payment, no bonus award will be paid.

        Plan participants who change positions and/or have their individual
target incentive levels changed during the Plan year will have their award
prorated accordingly. All awards paid will be rounded to the nearest $100.

        Incentive compensation awards will be calculated based upon the
participant's base salary in effect at the end of the Plan year or earned salary
if the participant was a new hire during the year.

Board of Directors' Discretion

        The granting of any and all individual incentive compensation awards is
at the discretion of the Forest Oil Corporation Board of Directors.

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