Learn Dutch: Ik zag de pijl in de gang, maar de schat was er niet. - I saw the arrow in the hallway, but the treasure wasn't there.

er is the unstressed version of "there". You use it when the place is already known and doesn't need special emphasis. If you wanted to forcefully point and say "the treasure wasn't there!", you would use the stressed word daar.

What place is er replacing in this sentence?

It refers back to in de gang (in the hallway). Just like in English, instead of repeating "but the treasure wasn't in the hallway", Dutch uses the short pronoun er to make the sentence less repetitive.

Why is the order was er niet instead of was niet er?

Because er is a small, unstressed pronoun, it jumps as close to the conjugated verb (was) as possible. The negative word niet usually appears after pronouns, giving us the order was er niet.

I recognize zag as a past tense verb, but what is the infinitive?

zag is the singular past tense of the irregular verb zien (to see). If the subject were plural, like "we", it would become zagen.