Hurricane Earl slapped North Carolina's coast with heavy wind and surf on Friday and then weakened as it swirled up the U.S. eastern seaboard towards New England and Canada as a much tamer storm than feared.

Forecasters downgraded Earl to a Category 1 hurricane with sustained winds of 85 mph (140 kph) as it sped away from the North Carolina shore, where its impact was less than originally expected.

But the hurricane, which had been a fearsome Category 4 storm on the five-step Saffir-Simpson scale only a day earlier, still threatened some disruption of tourism and air travel during the Labour Day holiday weekend marking the end of the summer vacation season.

For the most part, it appears we have dodged a bullet, North Carolina Governor Bev Perdue said.

Minimal damage was reported apart from beach erosion from fierce waves on North Carolina's Outer Banks low-lying barrier islands. Flooding up to 3 feet (1 metre) was reported in at least one island village, along with scattered power outages.

Waves surged over the road linking the islands, where 100,000 people were ordered to evacuate as Earl approached. But as the storm moved away, beaches and businesses reopened and some ferry service resumed.

We did OK, we lucked out. We never lost power. Except for some screen damage, I don't see any real damage, said Mike Howe, a resident of Salvo on Hatteras Island.

The hurricane centre said tropical storm-force winds were likely to reach the coast from Virginia northward to Maine on Friday night. A hurricane warning was in effect for Massachusetts, eastward around Cape Cod, including Martha's Vineyard and Nantucket Island.

Massachusetts Governor Deval Patrick declared a state of emergency, an administrative step that speeds storm relief. Residents, businesses and boat owners in the beach community of Cape Cod rushed to batten down.

While U.S. landfall was not expected, forecasters warned that hurricane-force winds still extended out 70 miles (110 km) from Earl's centre, so it would not necessarily require a direct hit to inflict damage from strong wind and high seas.

At 11 a.m. EDT (4 p.m. British time), Earl's centre was about 175 miles (280 km) northeast of Cape Hatteras, and about 350 miles (565 km) south southwest of Nantucket, Massachusetts, the U.S. National Hurricane Centre in Miami said.

GRADUAL WEAKENING SEEN

But with Earl losing power more quickly than forecast as it crossed colder waters, National Hurricane Centre director Bill Read said: It may even go below hurricane strength about the time it passes by southern New England overnight tonight (Friday night).

The U.S. Census Bureau estimated 26 million people in coastal counties from North Carolina to Maine could feel Earl's effects by the weekend. No storm has threatened such a broad swath of the U.S. shoreline since Hurricane Bob in 1991.

As oil refineries, drilling platforms and nuclear power plants along the Atlantic coast monitored Earl's path, EnCana Corp said it suspended drilling and pulled personnel from a Nova Scotia rig in Canada.

Exxon Mobil said it had pulled nonessential staff from its Sable field in offshore Nova Scotia.

ConocoPhillips said it implemented hurricane response plans at its 238,000 barrel per day refinery in Linden, New Jersey and a 185,000 bpd refinery in Trainer, Pennsylvania but operations remained unaffected.

The U.S. Energy Information Administration said about 1.1 million barrels per day of oil refining capacity lies in the likely U.S. affected area.

Continental Airlines said it cancelled 60 departures scheduled for Friday out of its Newark, New Jersey hub for its Continental Express and Continental Connection regional operations.

Many U.S. airlines were allowing customers in affected areas to change their weekend flight plans without penalty.

The Canadian Hurricane Centre warned residents in parts of the Canadian Maritimes to be on the lookout for tropical storm conditions, with winds gusting up to 70 mph (110 kph).

In Nova Scotia, where Earl is due to make landfall early on Saturday, residents stocked up on emergency supplies.

Behind Earl, Tropical Storm Fiona weakened as it moved north over the open Atlantic towards Bermuda. It had top sustained winds of 45 mph (75 kph) and was expected to weaken further as it passed near the British territory early on Saturday.

(Additional reporting by Tom Brown, Kevin Gray and Jane Sutton in Miami, and Joe Silha in New York; Writing by Tom Brown and Kevin Gray; Editing by Will Dunham)

Hurricane