The reason the Fall City station is on 98.5 is that frequency did not have an I.F. problem. Under current LPFM rules, you can't be close to another station on an I.F. Channel. An I.F. channel would be 53 or 54 channels (10.6 or 10.8 MHz) away from the LPFM, and I think within a 29 kilometer range. I.F. stands for "intermediate frequency". An engineer could best explain this but I think it has to do with harmonics or something.
There are no I.F. issues with 98.5, and thus it was a clear channel in that regard. But the Canadian station really boxes them in, for sure.
HOWEVER, rules change, and the FCC is now contemplating allowing a waiver of the I.F. rule for stations with ERP less than 100 watts. It might have already happened within the LPFM docket.
There are still a few good channels to hop to for that station, and I suggest they be like a bunny and do the frequency "hop" right away.