The bill is prompted by the threat of losing $21 billion in federal transportation funds should not meet Environmental Protection Agency standards by 2010.
The proposed legislation would provide a total of $20 million to owners who convert their trucks, buses, locomotives and other diesel-run equipment to cleaner-burning fuels. It can cost as much as $34,000 to install a natural gas engine in a heavy duty truck.
A similar bill was vetoed by then-Gov. Pete Wilson last year.