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I had this issue ("Invalid input for operation: physical_network 'physnet1' unknown for flat provider network.") and I needed to update /etc/neutron/plugins/ml2/ml2_conf.ini to specify my list of physical_network names with which flat, vlan, gre, etc type networks can be created; e.g. under [ml2_type_flat] I set "flat_networks = *" to get around the issue.