Sentence:  Shorty the Sixth, as he was sometimes called, had been a very winning puppy, and they had kept him at home until he began to exhibit the same tendencies that Duane's <WSD>blue heelers</WSD> always exhibited, that is, a tendency to herd children in the same way they would have herded cattle or sheep: they nipped their heels. 
Meaning of the word marked with <WSD> tags:  A blue-coated variety of the Australian Cattle Dog breed.