Valve's Source 2 Engine in development, confirmed via Source Filmmaker code references

A sudden rash of curious coders have discovered references to a couple of projects being developed behind closed doors at Valve. Code references, very specific code references, in the recently released Source Filmmaker unveil Valve's development of a Source 2 engine -- also labeled as "next-gen", which may be significant. There are also slightly less direct mentions that allude to the development of Half Life 2: Episode 3, just folders named "ep3" and model-work featuring Half Life characters like Alyx.

One of the files in question, discovered by members of the Valve Time community, can be found at the path ".../SourceFilmmaker/game/sdktools/python/global/lib/site-packages/vproj/vproj.py", and the text therein is as follows:

Line 1387:

'''Return an str with the current engine version.

If key doesn't doesn't exist, assume 'Source', otherwise invalid -- assume next-gen 'Source 2'.'''

The file includes more 60 references to the Source 2 engine, thought the lines above are probably the clearest. And as the news gets out, more and more sites are reporting their various Source 2 findings from the code of Source Filmmaker. None are as outright declaratory as the line above, but at this point it's as clear as day Valve's Source 2 engine is a very real, and very tangible thing.

For instance, here are some of the icons from the development suite as discovered by Valve Time:

One last thing I wanted to note was Valve's use of the term "next-gen" in describing their Source 2 engine. While this term could certainly simply be pertaining to the fact that Source 2 is a generation apart from the original, next-gen is typically a very console specific expression. Could Valve be developing their engine to work in conjunction with next-gen consoles, especially considering their recent friendliness with Sony? This is all deep speculation of course, but something I couldn't help pondering.

Good news all around for Valve fans Half Life fans, as this at least confirms Valve is working on something. Personally, I find it borderline insulting Valve hasn't found it in them to release a Half-Life since Episode 2. There's a thin line between canceling/delaying projects because you're unhappy with their quality and withholding a property because it's impossible to live up to expectations. Make Episode 3, make Half-Life 3, and we'll all feel rewarded, Valve.