Usage of IT..and antencedent

gmatjeet wrote:Seldom more that 40 feet wide and 12 feet deep, but it ran 363 miles across the rugged wilderness of upstate New York, the Erie Canal connected the Hudson River at Albany to the Great Lakes at Buffalo, providing the port of New York City with a direct water link to the heartland of the North American continent.

A. Seldom more than 40 feet wide and 12 feet deep, but it ran 363 miles across the rugged wilderness of upstate New York, the Erie Canal connected -- usage of pronoun before the subject E. canal. usage of ran is not correct. POE.
B. Seldom more than 40 feet wide or 12 feet deep but running 363 miles across the rugged wilderness of upstate New York, the Erie Canal connected -- E.canal modifier is correctly placed here.running is correct usage in parallel with providing. Hold it.

C. It was seldom more than 40 feet wide and 12 feet deep, and ran 363 miles across the rugged wilderness of upstate New York, but the Erie Canal, connecting -- it is used more as a place holder here than referring to Erie Canal. wrong usage. POE.

D. The Erie Canal was seldom more than 40 feet wide or 12 feet deep and it ran 363 miles across the rugged wilderness of upstate New York, which connected -- which usage is wrong here. subject is placed far from the modifying clause. POE.

E. The Erie Canal, seldom more than 40 feet wide and 12 feet deep, but running 363 miles across the rugged wilderness of upstate New York, connecting -- E canal subject is placed far from the clause providing ..... POE

OA: B

I have only one query with C. What does "It" at the start refers to? In similar sentence how do we decide what IT refers to if its placed at the start of sentence. can some Sc experts pls help.