I think the best approach is to follow what B31Ea recommend:

The seismic loading shall be specified for each three orthogonal directions (typically plant east-west, north-south and vertical). The seismic design should be based on either a three-dimensional excitation, east-west plus north-south plus vertical, combined by square-root sum of the squares (SRSS), or a two-directional design approach based on the envelope of the SRSS of the east-west plus vertical and north-south plus vertical seismic loading.

That means Method 2 should consider three spatial earthquake components or should be completed when consider two-directional earthquake components.

SRSS is often replaced by the 100-40-40 rule with the response spectrum analysis method to determine the maximum seismic responses from structural responses resulting from the three spatial earthquake component. See an article you can easy find "ON THE CORRECT APPLICATION OF THE 100-40-40 RULE FOR COMBINING RESPONSES DUE TO THREE DIRECTIONS OF EARTHQUAKE LOADING ". In my understanding Method 1 is not applying such rule.