If in Texas, under NCAA rules, #2 would be correct as A fouls behind LOS have previous spot enforcement. If in #1, the face mask occurred before the end of run, it would become a spot foul and the spot could have been around the LOS.
A little confusing. The statement said the foul was at the B-35, which is also the end of the run. Yeah, the foul is not beyond the Basic Spot (end of the run), and it is beyond the neutral zone, so, technically, it is penalized from the spot of the foul. Had the stiff arm with a facemask foul occurred behind the NZ, it would be penalized from the previous spot, regardless of the location of the end of the run.
Ironically, I had that exact scenario, myself, night before last. QB rolls out right, and is about 2 yards beyond the NZ when he stiff-arms a tackler, but grasps the facemask of the tackler, then advances another 8 yards. We penailzed 15 yards from the spot of the foul.