For more than a year, Union Pacific has been struggling with a surfeit of riches. Customers want to ship more freight than the railroad can handle.

This isn't good. UP's volume growth, revenue, profit and ability to provide good service to customers are limited. UP is using prices to ration scarce capacity, and intermodal shippers are prime candidates to pay more.

Capacity problems are the latest example of the changes in surface transportation. From a world of excess capacity in which railroads couldn't charge high enough rates or earn the cost of capital, they now face a world of constrained capacity where the pressure is to invest capital to expand capacity.

UP isn't alone, but its service trials and tribulations make it the poster child for the industry. It desperately needs to expand capacity, but finds itself locked into long-term contracts that limit the revenue and earnings gains needed to finance more capital spending. All railroads face similar problems, but some are closer than UP to so-called revenue adequacy and earning their cost of capital, and will more readily be able to fund expansion.

Jim Young, UP's president and chief operating officer, told last month's meeting of the North American Rail Shippers...