Half-Life 2: Episode 3 never happened because Valve lead Gabe Newell thought just “pushing the story forward” wasn’t a good enough reason to make a game

gamesradar.com:

Valve founder and president Gabe Newell says there's a simple reason Half-Life 2: Episode 3 never came to fruition - and it's because he simply couldn't find a good enough reason to complete the final piece of the sequel.

Speaking in the recent 20th-anniversary Half-Life 2 documentary, Valve developers take a moment to look back at the shooter's never completed Episode 3 and why progress on it came to a halt. Level designer David Riller explains that the studio was struggling with "element fatigue" and felt it needed to "go bigger or do something else." According to Riller, devs had already "really explored a lot of what made sense in the Half-Life universe and setting."

Then Left 4 Dead entered the spotlight and the team working on Episode 3 moved on to help ship the zombie title instead. Engineer David Speyre reveals that the devs felt as though they had missed their opportunity with Episode 3 after Left 4 Dead successfully took off, and admits it was "tragic and almost comical" - thinking back "in hindsight," he feels that they "could've definitely gone back and spent two years to make Episode 3."

Gabe Newell, on the other hand, doesn't seem to think that wrapping Episode 3 up would've ever worked out as he couldn't find the reason to do so - and doing it solely for the story isn't good enough. "You can't get lazy and say, 'Oh, we're moving the story forward," says the lead, describing why that doesn't work. "That's copping out of your obligation to gamers. Yes, of course, they love the story. They love many, many aspects of it."

Newell continues: "But saying that your reason to do it is because people want to know what happens next, you know - we could've shipped it, it wouldn't have been that hard. The failure, my personal failure was being stumped." The founder "couldn't figure out why doing Episode 3 was pushing anything forward," so the project came to a standstill and never picked back up - and in the end, we got neither a Half-Life 2: Episode 3 nor a