Step-wise ABG reading angle: always name the disorder first, then separate cause from compensation.
The pH of 7.2 tells you the blood is acidemic. The bicarbonate is low (10 to 12), so this is a metabolic acidosis, since a primary fall in HCO3 lowers pH. Confirm with the pCO2: it is 35, a little below normal. A low pCO2 raises pH, so the lungs are compensating by hyperventilating. That makes option 2 a description of compensation, not the root cause, so it is out.
Now decide the primary mechanism. The defining abnormality is the dropped bicarbonate. Of the choices, renal bicarbonate loss (as occurs in proximal/type 2 renal tubular acidosis) directly produces a low HCO3 and this exact picture. Reduced renal H+ excretion causes acidosis too, but the option framed as a bicarbonate-lowering loss fits the low HCO3 best. Potassium handling is not the driver here.
So the metabolic acidosis here is best explained by bicarbonate loss by the kidney.
Ref: Ganong's Review of Medical Physiology, 26e.