Here's the list (which is officially announced here.) I'll include my own comments. (Please note that as an affiliate member of SFWA I do not have a vote.)
All the Birds in the Sky, Charlie Jane Anders (Tor; Titan)
Borderline, Mishell Baker (Saga)
The Obelisk Gate, N.K. Jemisin (Orbit US; Orbit UK)
Ninefox Gambit,Yoon Ha Lee (Solaris US; Solaris UK)
Everfair, Nisi Shawl (Tor)
As I said in my Hugo nomination suggestion post, I haven't read enough novels to speak with great authority. I did recommend All the Birds in the Sky, so I'm very happy with that nomination. Ninefox Gambit and Everfair are on my list of novels I mean to read soon and am excited about. I will confess abashedly that I have not even heard of Borderline (though I do recall enjoying a short story by Baker a couple of years ago). And of course I should also read The Obelisk Gate. Further comment will have to await a lot more reading.
Runtime, S.B. Divya (Tor.com Publishing)
The Dream-Quest of Vellitt Boe, Kij Johnson (Tor.com Publishing)
The Ballad of Black Tom, Victor LaValle (Tor.com Publishing)
Every Heart a Doorway, Seanan McGuire (Tor.com Publishing)
"The Liar", John P. Murphy (F&SF)
A Taste of Honey, Kai Ashante Wilson (Tor.com Publishing)
Again, some guilty not-yet reads in this list -- I've got a copy of A Taste of Honey, I think; and I certainly mean to get to it and to Every Heart a Doorway soon. I'll add Runtime, which had somehow escaped my notice, to the list. "The Liar" is a good story and I recommended it in my column. The Dream-Quest of Vellitt Boe is great, and I will be surprised (and pleased, mind you) if any of the stories I haven't yet read surpass it. I confess disappointment that Lavie Tidhar's "The Vanishing Kind", which I thought head and shoulders better than any novella I read last year save The Dream-Quest of Vellitt Boe didn't make the shortlist. The Ballad of Black Tom is strong work, and it would go second (as of now) on my (non-existent) ballot.
All that said, I think this is a pretty strong shortlist. And what a year for Tor.com, eh?
"The Long Fall Up", William Ledbetter (F&SF)
"Sooner or Later Everything Falls Into the Sea", Sarah Pinsker (Lightspeed)
"Blood Grains Speak Through Memories", Jason Sanford (Beneath Ceaseless Skies)
The Jewel and Her Lapidary, Fran Wilde (Tor.com Publishing)
"You’ll Surely Drown Here If You Stay", Alyssa Wong (Uncanny)
"The Orangery", Bonnie Jo Stufflebeam (Beneath Ceaseless Skies)
Three stories that showed up on my list of potential Hugo nominees. ("Red in Tooth and Cog" was on my Short Story list (my word count for it is 7000, making it technically a Short Story but eligible for nomination as a Novelette).) The other two are "Blood Grains Speak Through Memories" and The Jewel and Her Lapidary. (Curious that in length those three stories are at the very bottom end of novelette, right in the middle, and at the very top end.) The remaining three stories are decent work that I didn't have listed among my favorites of the year, but none of them strike me as poor stories. So, again, a pretty strong shortlist, with my personal inclinations favoring either Cat Rambo's story or Jason Sanford's story; with Fran Wilde's a close third -- a win for any of those would make me happy.
UPDATE: Apparently there is no deadband for Nebula nominations, and "Red in Tooth and Cog" has been declared too short for novelette. It would have been nominated as a Short Story, but Cat Rambo graciously declined the nomination.
This is a shame from my point of view -- Rambo's story is (to my taste) definitely one of the best couple of stories on either the short story or novelette list, and so the shortlist is diminished by its absence. ("The Orangery", the replacement novelette, is a fine story, to be sure, but not as good as "Red in Tooth and Cog" (in my opinion).)
This also makes the overall shortlist even more Fantasy-heavy (vs. SF), which is of course totally allowed, but to my taste again a bit to be regretted. I do think the Nebulas recently are tending to lean a bit heavily to the Fantasy side.
"Our Talons Can Crush Galaxies", Brooke Bolander (Uncanny)
"Seasons of Glass and Iron", Amal El-Mohtar (The Starlit Wood)
"Sabbath Wine", Barbara Krasnoff (Clockwork Phoenix 5)
"Things With Beards", Sam J. Miller (Clarkesworld)
"This Is Not a Wardrobe Door", A. Merc Rustad (Fireside Magazine)
"A Fist of Permutations in Lightning and Wildflowers", Alyssa Wong (Tor.com)
"Welcome to the Medical Clinic at the Interplanetary Relay Station¦Hours Since the Last Patient Death: 0", Caroline M. Yoachim (Lightspeed)
The only story here that was on my personal Best of the Year list (and which is in my book) is Sam J. Miller's "Things With Beards", which thus is my choice to win from this list. I read all the rest, and, as with the novelettes, i think they are all fine work. Caroline Yoachim's story was one of those I considered for my book but which didn't make the cut -- and it's pretty funny too, which is nice to see. So I'd rank it second, with Brooke Bolander's intriguing story third. Oh, and I confess I haven't yet seen A. Merc Rustad's "This is Not a Wardrobe Door", so perhaps it will push its way onto my top list when I read it.
Arrival, Directed by Denis Villeneuve, Screenplay by Eric Heisserer, 21 Laps Entertainment/FilmNation Entertainment/Lava Bear Films/Xenolinguistics
Doctor Strange, Directed by Scott Derrickson, Screenplay by Scott Derrickson & C. Robert Cargill, Marvel Studios/Walt Disney Studio Motion Pictures
Kubo and the Two Strings, Directed by Travis Knight, Screenplay by Mark Haimes & Chris Butler; Laika Entertainment
Rogue One: A Star Wars Story, Directed by Gareth Edwards, Written by Chris Weitz & Tony Gilroy; Lucusfilm/ Walt Disney Studio Motion Pictures
Westworld: ‘‘The Bicameral Mind’’, Directed by Jonathan Nolan, Written by Lisa Joy & Jonathan Nolan; HBO
Zootopia, Directed by Byron Howard, Rich Moore, & Jared Bush, Screenplay by Jared Bush & Phil Johnston; Walt Disney Pictures/Walt Disney Animation Studios
The only two movies I've seen from this list are Arrival and Rogue One. One of those things is not like the other (duh!), and, particularly when we consider that this award is supposed to be for the screenplay, not the finished film, I think it pretty obviously deserves to win. (That would be Arrival, of course.) OK, between those two, but I confess I really doubt any of the others are likely to be better (I do hope to see at least Kubo and possibly Doctor Strange sometime.)
The Girl Who Drank the Moon, Kelly Barnhill (Algonquin Young Readers)
The Star-Touched Queen, Roshani Chokshi (St. Martin’s)
The Lie Tree, Frances Hardinge (Macmillan UK; Abrams)
Arabella of Mars, David D. Levine (Tor)
Railhead, Philip Reeve (Oxford University Press; Switch)
Rocks Fall, Everyone Dies, Lindsay Ribar (Kathy Dawson Books)
The Evil Wizard Smallbone, Delia Sherman (Candlewick)
Presented for information and congratulations. I haven't read any of these. I do have a copy of Arabella of Mars, and I do want to read it; likewise, I plan to get to Delia Sherman's novel sometime, and, I really should start to catch up on Frances Hardinge: I've loved what I've read by her, but I haven't read anything lately.