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As the government moved to pass its Direct Action climate policy with the support of Clive Palmer, the Nationals very nearly torpedoed the whole deal.

In a stark reminder to the Liberal Party that the Nationals control twice as many senate votes as the Palmer United Party, Nats senators threatened at the 11th hour to split from the government to oppose the legislation.

“We had got the PUP but it looked like we were going to lose the Nats,” says a government source.

Environment Minister Greg Hunt had worked with senate crossbenchers for months to secure support for the controversial policy, which provides $2.5 billion for emissions reduction projects, including on farms.

Against tough odds, he had won over Palmer. That deal went down to the wire, with last-minute tinkering that delayed their joint press conference on the afternoon of Wednesday, October 29.

A day after Hunt and Palmer shook hands, the government brought the relevant legislation, known as the Carbon Farming Initiative Bill 2014, on for a vote in the upper house. The government was using the carbon farming legislation to establish the emissions reduction fund, which underpins its climate policy.

The debate started at 6pm and was scheduled to continue until the final vote.

The Nationals senators were not impressed. They had been given only a few hours to assess the detailed amendments hammered out between the government, the PUP and independent senator Nick Xenophon.

“To lob something like that on us without us being involved in it was a problem,” says Nationals senator Matthew Canavan.

“Carbon farming is very sensitive, because we don’t want a son-of-MIS [managed investment schemes], which are an absolute disaster for the bush.”

Another Nationals source says the message to the Liberals was clear and went beyond just the details of the carbon farming legislation. “We were putting them on notice and saying: ‘We’re loyal partners. We’re in the trenches together. We understand the need to deal with the crossbench. But don’t step over us again.’”

The Nationals’ senate team convened an urgent meeting to discuss the options.

One source called it a “crisis meeting”. Another disputed this description but confirmed that Nationals told the Liberals they were not ready to vote for the bill without understanding its impact on rural communities and that this unleashed panic in the government. “Shitting themselves” was one colloquial description of the Liberals’ reaction.

1 . Carbon farming

When carbon farming measures were proposed in 2011, by the then Labor government, Nationals leader Warren Truss told parliament: “The truth is that this is just another subsidised tree-planting scheme – an MIS on steroids.”

The Nationals believe such schemes, which provide incentives for particular uses of farmland, whether for orchards, wineries or carbon sequestration, distort property values and often end in bankruptcy, damaging rural communities.

Carbon farming projects already existed under legislation introduced by Labor – some 160 have been accredited – but the Nationals were concerned that the new amendments might result in extensive tracts of productive farmland being locked up for years as carbon sinks.

Twice in opposition, Nationals senators split from the Liberals over tax incentives for carbon sinks.

In 2009, the party’s then senate leader, Barnaby Joyce, now agriculture minister in the Abbott government, said: “Unless humankind is going to evolve into a higher form of termite, there is no point in carbon sinks legislation taking out of production prime agricultural land.”

Given this history, the potential for a flare-up on the issue should have been obvious. Yet it blindsided the Liberals on October 30, threatening to kill off the bill and humiliate Prime Minister Tony Abbott.

Throughout the day on Thursday, there was to-ing and fro-ing behind the scenes between the Nationals and Hunt, as well as Liberal senator Simon Birmingham, who is parliamentary secretary for the environment. The revolt was being led by the Nationals senators, rather than Truss. Canavan and fellow Queensland senator Barry O’Sullivan are believed to have taken the lead. O’Sullivan declined to comment, beyond saying the Coalition was strong and making progress on its agenda, and that he never commented on internal processes.

There were intense talks as the Nationals sought, and were given, reassurances about the details of the new amendments. Their support was still in doubt when senate debate started, but by the final vote at 1.30am, the Nationals were back onside with their Coalition partners.

An embarrassing split had been narrowly averted and the main story to receive coverage was Hunt’s success in securing the deal with the PUP.

The incident is significant because it reveals just how precarious is the government’s hold on the senate, as well as the risks it runs of alienating its own MPs by pandering to Palmer. For all the PUP’s internal issues, which were on public display this week as Palmer clashed with rogue senator Jacqui Lambie, the government still needs its senate votes.

It is worth remembering that the PUP is not the only party that can wield the balance of power.

If the Nationals are prepared to steer a separate course to the Liberals, they too can play that game. For some time, there has been rising frustration in the Nationals at the attention the PUP is receiving. This has been driven partly by the realisation that they are, in many instances, competing for the same voters.

2 . McEwen's foresight

A week before the flare-up over Direct Action, the Nationals gathered one evening in a committee room in Parliament House to celebrate the publication of a new edition of the autobiography of John McEwen, the legendary figure who led the Nationals’ predecessor, the Country Party, from 1958 to 1971.

His memoir, which was first published after his death in 1980, contains insights that remain relevant today. A young Clive Palmer was still at school when McEwen was one of the most influential ministers in the Menzies government, and briefly prime minister after Harold Holt disappeared.

Years later, Palmer would become a Nationals spokesman in Queensland and then the state party’s biggest donor, before severing ties and setting up a rival political movement.

Yet McEwen might as well have been gazing into a crystal ball and seeing Palmer on the horizon when he speculated about the emergence of a radical party that could cause grief for the Liberals.

“I am sure that if the Country Party were to disappear, if its members were to join the Liberals, then another Country Party would crop up almost next week,” McEwen said.

“This is because the Country Party represents a distinct and identifiable set of economic and social interests that would want to make their voice heard. I am also certain that this new party would be a radical one. And, looking at the history of Australian politics, you could be sure that there would be many occasions on which its members would hold the balance of power in parliament. If this were the case, the Liberals would find themselves in a much more difficult situation than they ever have done with the current Country Party as an ally.”

It is debatable whether the PUP represents the same economic and social interests as the Nationals. The latter still struggles with its dual constituencies of Akubra-wearing farmers and coastal tree changers, and the PUP’s policies are so eclectic they defy definition. But Palmer himself is a creation of the Nationals and he is targeting their votes.

On October 30, the Nationals were sending a message to Abbott that he must not take them for granted. That they chose to do this over climate policy was significant.

Back in 2009, it was the Nationals’ campaign against a carbon tax that created the conditions for the split in the Liberals over climate policy that ended Malcolm Turnbull’s leadership and ushered in Abbott’s.

As leader, Turnbull had been in favour of supporting Labor’s carbon pricing regime, but the Nationals’ relentless attacks on it had gained traction in the community, emboldening Liberal critics, who rolled Turnbull.

This history has forged a close relationship between Abbott and the Nationals, but the phenomenon that is the PUP could jeopardise it.

3 . Nationals breaking ranks

During the years in opposition, the Nationals agonised over their future, whether they should formalise a merger with the Liberals, as has happened at the state level in Queensland, remain a distinct party embedded in the Coalition, or pursue the West Australian model of an independent party.

Early in opposition, the Nationals broke ranks with the Liberals over wheat exports in what seemed to point to a more independent approach.

Although low-key leader Warren Truss is every inch a Coalitionist, some of the party’s senators are pushing for the Nationals to be more assertive within the Coalition.

On this occasion, the government managed to avoid a damaging public split, but tensions will flare again, be it over competition policy and the power of the supermarket duopoly, the renewable energy target or paid parental leave.

Already, some Nationals are concerned that the government is seeking to clinch a free-trade deal with China before making good on the promise of greater scrutiny of foreign investment in farmland.

The fact that these tensions are being managed largely out of the spotlight shows that Abbott has so far been able to keep the junior Coalition partner on side. It would have been a different story if Treasurer Joe Hockey had not decided a year ago to veto the takeover of wheat exporter Graincorp by the US-based Archer Daniels Midland.

Whether or not Hockey was swayed by the Nationals’ campaign against the takeover, the party was able to claim it as a win and an early and mighty dust-up in the new Coalition government was averted.

Other flashpoints are looming. But the biggest issue may be not just about policy but about how the Coalition government manages Palmer.