More than 80 cars from two trains derailed and one car leaked a powerful acid, releasing a vapour cloud that closed schools and forced hundreds of residents to evacuate. No injuries were reported.
More than 350 people were evacuated on Monday from the path of the plume of hydrochloric acid vapour for about 12 hours, said city administrator Sara Folsted.
The derailment happened at about 4 am when a BNSF Railway train pulled onto a siding and 61 of its cars derailed.
That "fouled" the adjacent main line track and caused 22 cars of a northbound train to jump the tracks, said company spokesman Steve Forsberg. He said the cause of the initial derailment was not known. The city said in a prepared statement the Clara City Fire Department applied a special fog to the plume to make it disperse more quickly.
MACCRAY School District Superintendent Greg Schmidt said a firefighter rang his doorbell just after 5 am and told him about the leak. He said he decided to cancel classes because he was told the acid cloud was sitting over the high school parking lot, which also served as a staging area used by buses for the elementary schools in nearby towns.
Hydrochloric acid is highly corrosive and can cause burns if it comes into direct contact with skin or eyes.
Clara City, with a population of about 1,340, is in western Minnesota 100 miles (160 kilometers) west of Minneapolis.