Rosevears independent MLC Kerry Finch and Labor MLCs Craig Farrell and Doug Parkinson were the only MPs who did not take the unprecedented step yesterday.

It is understood to be the first time MLCs have pre-empted legislation and taken such a strong, united and public stance in at least 17 years.

The action will effectively result in the withdrawal of $120 million in regional development funding that is tied to such reserves legislation passing the Tasmanian Parliament.

That did not appear to faze MLCs yesterday, who questioned the credibility of funding announcements made by the Commonwealth on Friday to support aquaculture and dairy operations in the state.

``You can't be substituting other industries while doing over the forestry industry. We need to have economic growth in the state and that means supporting forestry as well as other industries - not one or the other,'' Murchison independent MLC Ruth Forrest said.

Legislative Council president Sue Smith added: ``It is time the people of Tasmania realise this is spin when they (the state and federal governments) talk about $120 million. If they got it (such funding) in 2009 and 2010 in the North-West Coast why would they have not got the same amount of rebadged money in Circular Head (this year)?''

She called on the state government to pull Greens members of cabinet in line - or drop them.

Economic Development Minister David O'Byrne said the $120 million was new money that had been hard won.

He confirmed that without the intergovernmental agreement that amount would be lost to the state.

``We will sit down with the upper house and work through all the matters that need to be considered when dealing with the intergovernmental agreement,'' Mr O'Byrne said.

MLCs said they had made their decision based on research and a high-level of concern in their electorates.

Australian Greens leader Bob Brown described the decision as ``poorly thought out blackmail'' that was reminiscent of action taken against protecting the Franklin River in the 1980s.