The city on its website and Twitter posted that firefighters on the scene made the decision to let the fire burn out and urged motorists and pedestrians to avoid the area. It tweeted that the tanker cars were carrying crude oil and that three or four of them were breached. The city said 13 or 14 tanker cars were involved in the derailment.
Photos and video show several black tanker cars derailed and extensive flames and smoke.
The city said there was no impact on the drinking water for its 77,000 residents due to spillage into the James River. However, officials for the city of Richmond said its public utilities department is drawing from an old canal system instead of the James River as a precaution.
The train with about 15 cars was traveling from Chicago to Virginia when it derailed, CSX said in a statement. It did not say where the train was headed. The railroad operator said it is "responding fully, with emergency response personnel, safety and environmental experts, community support teams and other resources."
The National Transportation Safety said it is sending investigators to the scene.
Concern about the safety of oil trains was heightened last July when runaway oil train derailed and exploded in Lac-Megantic, Quebec, near the Maine border. Forty-seven people died and 30 buildings were incinerated. Rail and safety officials said they were surprised by the ferocity of the fire. They were used to dealing with sludge-like crude that doesn't ignite easily, but Canadian investigators said the combustibility of the 1.3 million gallons of light, sweet Bakken crude released in Lac-Megantic was more comparable to gasoline.
The city said on in a news release on its website that CSX officials were working to remove the portion of the train that is blocking workers from leaving Griffin Pipe Foundry located in the lower basin.
"We're used to kind of bangs and booms," said Gerald McComas, a security officer at foundry up river from the derailment site. "My first thought was it sounded like one of the guys started a motorcycle and then a realized, wait a minute, no ... that was more of a boom. We walked outside and there was the smoke rolling in."
A portion of the train was blocking the road allowing workers at to leave their parking lot, McComas said. Instead workers were walking along the tracks to get to the other side of the train in order to leave their facility.
"I'm walking home tonight," McComas joked.
A phone message left by The Associated Press with the Lynchburg Police Department wasn't immediately returned.
Gov. Terry McAuliffe said Deputy Secretary of Public Safety and Homeland Security Adam Thiel was dispatched to the site to provide officials with updates on the situation.
In one of her last acts before leaving office last week, outgoing National Transportation Safety Board Chairman Deborah Hersman warned the Obama administration that it needs to take steps immediately to protect the public from potentially catastrophic oil train accidents even if it means using emergency authority.
The safety board has long recommended that the Department of Transportation toughen its design standard for the kind of rail tank cars used to transport crude oil and ethanol.
The cars are too easily punctured or ruptured, even in low-speed accidents. Their flammable contents are then spilled, fouling the environment and often igniting.
"We are very clear that this issue needs to be acted on very quickly," Hersman told reporters at the conclusion of a two-day forum the board held on the safety of rail transport of oil and ethanol. "There is a very high risk here that hasn't been addressed ... We don't need a higher body count before they move forward."
Glen Besa, the executive director of the Virginia chapter of the Sierra Club, reiterated those concerns following Wednesday's derailment.
"This accident is a potent reminder of the dangers that come with our dependence on dirty fuels and reinforces the need for better safety measures and increased emergency preparedness," Besa said in a statement. "The safest place for dirty fuels is in the ground."
In 2011, the oil, ethanol and railroad industries agreed on voluntary measures that toughened standards for rail cars known as DOT-111s, which are the kind of tank cars used to transport most flammable liquids. However, there have since been several accidents in which cars built to the new standards ruptured. NTSB officials have said the voluntary standards don't go far enough.
There have been eight significant oil train accidents in the U.S. and Canada in the past year involving trains hauling crude oil, including several that resulted in spectacular fires, according to the safety board.
Associated Press writer Joan Lowy in Washington, D.C., contributed to this report.