None of the answer choices are really right.

A - The participle modifier, identifying the best ..., should convey the result of the preceding clause or something about the manner in which the actions in the preceding clause were taken, not the means by which that which is described in the clause is accomplished. In order for this version to work you would have to have a preposition such as by before identifying.

B - In this case the placement of the participle modifier, identifying the best ..., causes the sentence to nonsensically convey that forest preservation, wildlife preservation and crabwood oil production somehow identify the best way to fell trees.

C - This version would work except that the plural verb form, identify, does not match the singular noun logging.

D - In this version, the modifier, which identifies ..., seems to incorrectly modify crabwood oil production.

E - This version is grammatically correct, but the meaning is off. Given the meanings of the other answer choices and what is said in this answer choice, the correct meaning seems to be that reduced-impact logging achieves things via identifying the best ways to feel trees, but this version conveys that reduced-impact logging achieves certain things, among them identifying the best ways to fell trees.

So while maybe one could argue that choice E is correct, really, none of the answer choices are correct.

I agree that E is best. Note that B and C substitute the active in the original sentence for the passive. Hence, they are unlikely to be correct. E has the parallel structure of "sustains"..."and identifies". E is the best answer and "the best answer" is the terminology used in the Official Guide. Sometimes we may be able to write a better answer, but that is not what is being tested. Our job is just to choose the best option from those presented.