(FORTUNE Magazine) – While all eyes have been on billionaire Paul Allen's adventures in space--the Microsoft co-founder recently spent more than $20 million launching a manned spaceship from the Mojave Desert--he's quietly been entering another realm: the oil and gas industry.

Through his Seattle investment arm, Vulcan, Allen is trying to spend $459 million to take over a publicly held pipeline company called Plains Resources, based in Houston. Allen's entry into the oil patch, however, has landed him in a nasty fight, one that promises to cost him more money than he'd initially planned.

Allen's not out to be an oil tycoon. Instead the Plains investment was originally part of a strategy to diversify his holdings out of his often disastrous investments in technology and telecom companies (which range from Metricom and RCN to Interval Research and Charter Communications). Allen and his sister, Jody Patton, last year cleaned shop at Vulcan and brought in a new investment team, including ex-Greenhill Capital investor David Capobianco, who scouted the Plains deal. (Now that Allen isn't just following his geek gut, he's actually in good company: Warren Buffett's Berkshire Hathaway has been investing in natural gas pipelines of late.)

But the brouhaha began late last year when Allen's group offered $14.25 a share for Plains, a small premium over its stock price at the time. The move seemed simple enough, given that the two top executives at Plains planned to invest alongside Allen. Then, earlier this year, Leucadia National, a New York investment conglomerate, complicated matters by offering $18 a share for the company. The Plains board rejected Leucadia's offer--being bought by a self-financing individual carries certain tax benefits for Plains shareholders--but only after Allen sweetened his bid to $16.75. (Allen's representatives declined to comment on the transaction.)

This fight's far from over, though. One of the two independent directors who formed a special board committee to evaluate the deal, longtime Plains shareholder William Hitchcock, has withdrawn his support, saying Allen's price is no longer adequate. Wall Street clearly expects a new bid, as Plains shares recently changed hands for $17. A shareholder vote is scheduled for July 22 at Houston's Four Seasons Hotel. --Adam Lashinsky