California diesel fuel standards are close to if not better than European in terms of sulfur and aromatics. Much better than Federal. That's one reason why diesel costs more here than in the rest of the country. There are huge truck stops at the last interchange before the border on all the main highways that do a roaring business refueling out of state trucks before they enter CA. Off-road fuel sold in the State also must meet on-road formulation standards, so it's ultra-low-sulfur too. Transit and commuter lines like Escondido and Caltrain have to use that stuff.

Years back, Budd and others tried to modify heavy electric MU cars as are used Back East to diesel by hanging generators underneath. It was a bit of a kludge, and noisy, but it worked. Unfortunately, the market just didn't exist for such things at the time, and it still doesn't. Most lines that considered it at the time (a couple of NY area lines come to mind) went with push-pull locomotive-hauled trains. In some cases, the locomotives can run off the electric lines and shut down the engines once they get near the tunnels to the downtown stations, avoiding the need for some passengers to transfer. I don't think the North Bay has the dual-power issue, so standard diesel-hauled push-pull commuter trains would probably be more cost-effective than some kind of one-off (since Colorado Railcar is no longer with us) heavy DMU. At least, by the time they're ready to actually buy something (after the track rebuild gets going) Tier 4 engines (for emission control) should be available. For local examples of available gear, look at Caltrain - their newest locos are Tier 2 or better emissions.

One thing people need to understand about heavy rail is that it doesn't accelerate or brake like typical transit vehicles. Electric light rail, BART, and probably the diesels in Escondido can get up to 55 and back to a stop in 3/4 mile, and if the stops are a mile or more apart will cruise at top speed (usually 55 or so) for some time. Heavy rail, even electric MUs, needs several miles between stops to reach then stop from a decent (60+ mph) track speed. If you put enough power on heavy rail to accelerate at light rail rates, you'd probably break something, and certainly wouldn't get as much of the alleged fuel economy (lower GHG emission) benefit of rail. Similar to the difference between the power needed for 0-60 in 4 seconds from a Lotus (2500#, about 250 hp) vs. a Mercedes (5000#, 500+ hp).