* Once a Category 4, Earl weakens to tropical storm
* Diminished storm will pass near Cape Cod overnight
* Canada warns residents in Atlantic provinces
* Outer Banks earlier "dodged a bullet" - NC governor (Updates to show Earl downgraded to tropical storm)
By Scott Malone
HYANNIS, Mass., Sept 3 (Reuters) - Hurricane Earl, which earlier in the week was a storm of major proportions that threatened the U.S. East Coast, weakened to a tropical storm on Friday as it swirled offshore towards Canada.
Earl was delivering heavy rain and gusty winds to parts of New England en route to Canada's Atlantic provinces, but has caused far less damage than feared on its northeasterly path up the coast from North Carolina's Outer Banks.
Maximum sustained winds are down to 70 mph (110 kph) as Earl neared southeast Massachusetts, and were expected to weaken further overnight.
The storm, which is moving rapidly, is expected to pass Massachusetts' Cape Cod and nearby islands at around 2 a.m. (0600 GMT) and reach the coast of Nova Scotia on Saturday, the National Hurricane Center said.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For full coverage of Earl [ID:nN2005]
For an Earl graphic http://link.reuters.com/qeq29n
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The fading storm raised hopes that the Northeast will suffer only limited losses during the 3-day Labor Day holiday weekend, which airlines and other businesses bank on for a final flood of summer tourist dollars.
The hurricane center warned that Earl -- though no longer packing anywhere near the power of its peak ranking as a fearsome Category 4 storm on the five-step Saffir-Simpson scale -- could cause storm surges and localized flooding.
Tropical storm force winds could extend out 205 miles (335 km) from the storm's center, the center said.
BULLET DODGED
As residents from Cape Cod to Canada's Maritimes prepared to wait out the storm, those that Earl had mostly bypassed further to the south breathed a sigh of relief.
"For the most part, it appears we have dodged a bullet," North Carolina Governor Bev Perdue said.
Minimal damage was reported other than beach erosion from fierce waves on North Carolina's Outer Banks low-lying barrier islands. Flooding up to 3 feet (1 meter) 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.
"We lucked out. We never lost power," said Mike Howe, a resident of Salvo on Hatteras Island.
Earlier on Thursday, many residents and business owners on Massachusetts' Cape Cod and the islands of Martha's Vineyard and Nantucket were busy boarding up windows with plywood in anticipation of much worse conditions.
The Coast Guard closed ports in southeastern Massachusetts and Rhode Island. Dozens of flights were canceled to the area, National Guard troops were standing by, and extra utility crews were in place to respond to any power outages.
LOSING ITS PUNCH
At 11 p.m. EDT (0300 GMT Saturday), Earl's center was about 90 miles (150 km) south-southeast of Nantucket and moving rapidly, the hurricane center said.
For parts of the Massachusetts coast, Earl could still generate large, damaging waves and cause beach erosion. High surf was pounding Nantucket and Martha's Vineyard, with waves as high as 10 to 12 feet, local media reported.
Some streets in downtown Nantucket were reportedly flooded as the island was pelted by heavy rain.
No storm has threatened such a broad swath of the U.S. shoreline since Hurricane Bob in 1991.
Storm-related outages from North Carolina to Connecticut knocked out power to about 3,300 customers, the U.S. Energy Department said -- a small number that showed the mild impact of what was once shaping up to be a monster storm.
As oil refineries, drilling platforms and nuclear power plants along the Atlantic coast monitored Earl's path, EnCana Corp <ECA.TO> said it suspended drilling and pulled personnel from a Nova Scotia rig in Canada. [ID:nN02195719]
Imperial Oil Ltd <IMO.TO> shut down its Dartmouth, Nova Scotia, refinery as a precaution.
Exxon Mobil <XOM.N> said it had pulled nonessential staff from its Sable field in offshore Nova Scotia. [ID:nN02238430]
ConocoPhillips <COP.N> 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. Operations remained unaffected. [ID:nN03124548]
The U.S. Energy Information Administration said about 1.1 million barrels per day of oil refining capacity lies in the likely affected area in the United States. [ID:nWNA8910]
Coastal New England endured windy, rainy weather on Friday evening. Amtrak suspended train service between New York and Boston after falling trees damaged wires in Connecticut.
The Boston Red Sox baseball team postponed its scheduled game due to expected poor weather. Further south, though, the U.S. Open tennis in Flushing Meadows, New York, was hit by no more than a few rain-drops.
Canada warned residents in parts of the Atlantic provinces to be on alert for tropical storm conditions.
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 to a "remnant low" as it moved north over the open Atlantic toward Bermuda. At 11 p.m. ET (0300 GMT Saturday) it had top sustained winds of 30 mph (45 kph) and was expected to weaken further as it passed near the British territory on Saturday. (Additional reporting by Gene Cherry in Manteo, North Carolina; Tom Brown, Kevin Gray and Jane Sutton in Miami; Pav Jordan in Halifax and Jeffrey Jones in Calgary; writing by Matt Spetalnick and Ros Krasny; editing Anthony Boadle)
Our Standards: The Thomson Reuters Trust Principles.
