Chlorine is extracted from brine by:

Oxidation

The correct answer is (1) Oxidation.

Chlorine is indeed extracted from brine through the process of electrolysis, and the chemical reactions involved in this process are correctly described. The overall reaction equation for the electrolysis of brine is as follows:
\[2 \text{NaCl} + 2 \text{H}_2\text{O} \rightarrow \text{Cl}_2 + \text{H}_2 + 2 \text{NaOH}\]
Therefore, the correct answer to the question is indeed (1) Oxidation. This is because the chloride ions \((Cl^-)\) at the anode are oxidized, meaning they lose electrons, to form chlorine gas \((Cl_2)\).

The other options are described accurately as well:
(2) Leaching:  Leaching is a process of extracting a soluble substance from an insoluble substance using a suitable solvent.
(3) Distillation:  Distillation is a process of separating the components of a mixture based on their different boiling points.
(4) Reduction: Reduction is a process in which an atom or ion gains electrons, leading to a decrease in its oxidation state.