BASS Greens MHA Kim Booth is threatening to attempt to bring down the minority government over a taxpayer-funded loan to keep the Triabunna mill open.
Mr Booth told ABC radio he would move a no confidence motion in the Labor- Green government if a loan to private company Aprin enabling it to buy the woodchip mill from Gunns proceeded.
Last week Premier Lara Giddings accepted a recommendation from the Economic Department's Tasmania Development Board to lend an undisclosed amount, subject to conditions.
Mr Booth said the loan would amount to "gross malfeasance and corruption", forcing him to enact his pledge to move a no- confidence motion.
Ms Giddings said Mr Booth had no basis for his allegations given the loan application was considered as part of the board's regular activities.
"The board regularly considers applications from a wide variety of companies, and this application has been considered in accordance with normal processes," she said.
Mr Booth's motion may not even get the support of his Greens colleagues or the opposition, which supports the loan to ensure the woodchip mill is not closed.
Greens leader Nick McKim said the party did not support the loan, but he was not aware of any allegations of corruption in the process which would threaten the party's power- sharing arrangement with Labor.
"I'm not across all the detail of what went on in that process and that will be a matter we'll be chasing up in question time starting tomorrow," Mr McKim said.
He said he had not yet discussed Mr Booth's intentions with him or his Greens colleagues.
Bass Liberal MHA Michael Ferguson said his party would consider supporting Mr Booth's motion, despite being in favour of the loan being granted.
"We in the Liberal Party, we're not confident in this government. Why should we vote for a motion of confidence in this awful government?"
He criticised Mr Booth for handing power to Labor.
"He's actually part of the problem, he helped this government to get put back into office."
The terms of the loan are yet to be finalised.