The Cass County sheriff's office said it was "strongly recommending" that people in the town of Casselton and anyone living eight kilometres to the south and east evacuate last night. A shelter has been set up in Fargo, which is about 40 kilometres away.
Casselton has about 2,400 residents. The sheriff's office said the National Weather Service was forecasting a shift in the weather that would push the plume of smoke down, which could increase the risk of potential health hazards.
The cars were still burning as darkness fell, and authorities said they would be allowed to burn out.
Authorities hadn't yet been able to determine exactly how the derailment happened, but a second train carrying grain was involved. BNSF spokeswoman Amy McBeth said the train carrying grain derailed first, then knocked several cars of the oil train off adjoining tracks.
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Ryan Toop, who lives about 800 metres away, said he heard explosions and drove as close as about two city blocks to the fire, which erupted on a day when temperatures were below zero Fahrenheit (minus 18 Celsius).
The derailment happened amid increased concerns about the United States' increased reliance on rail to carry crude oil. Fears of catastrophic derailments were particularly stoked after last July's crash in a Quebec town of a runaway train carrying crude oil from North Dakota's Bakken oil patch. Forty-seven people died in the ensuing fire.
The tracks that the train was on yesterday pass through the middle of Casselton, and Cass County Sheriff's Sgt. Tara Morris said it was "a blessing it didn't happen within the city."
Morris said it could take up to 12 hours before authorities could get close to the fire. Jeff Zent, a spokesman for Gov. Jack Dalrymple, said the National Guard was on alert if needed.