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It was not immediately clear whether the explosion occurred before or after the balloon hit the ground.
Fire officials say one person was severely burned. Two others had serious injuries, one had minor injuries and one person walked away safely.
Names and details about those on board were not immediately released.
The National Transportation Safety Board is investigating the incident as they do most aircraft crashes.
Hot air balloons often dot the sky on weekends in the area 60 miles north of San Diego.
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