Known simply as “Sonic Saturn“, it was another project that was in development in 1995 / 1996 by Sega Technical Institute (STI) along with Sonic X-treme. This prototype was created by Peter Morawiec, the coder of the Sonic 2 special stages, with an interesting 3D Engine that was more “realistic” than the ones used in X-Treme. It seems that Yuji Naka did not like this proto and so the Sonic Saturn Engine was never used to develope a full Sonic game. STI tried to use the engine to create some Bonus Stages to add in the Saturn version of “Sonic 3D”, but for the lack of time they abandoned them in favour of a 3D version of Sonic 2’s special stage.
Thanks to Matt3 for the contribution!