I just purchased a 07' Dodge 3500 mega cab 4x4 from California. It had 6500 miles. It has the 5.9L diesel. The original owner install an Air Raid filter system, Banks Monster exhaust from the cat to back and 37x12.5x17 tires. I need some help.

Does California install more emission crap on diesel engines than other states?
Is installing a chip a bad thing?
According to the display in the truck, I am only getting 13 mpg. With so many chips on the market, which one do you purchase for mpg and hp?