I'd read they were interested in running a Merlin on methane for ISRU on the moon or Mars. Other than the ease of procurement, I don't think methane is all that much better than RP-1 (about 3% better ISP?) while presenting the cooling and leak hazards of LH2 (though without the horrible density penalty).
It's possible they want an excuse to say "fracking fuel" over a deep space radio network.
I wonder what misplaced name they'll give to the new engine? Their rocket is already confusing enough.
Merlin would be the guy in launch control in a funny vest who waves a wand at T minus zero, not the thing he commands to breathe fire and fly. A falcon is much smaller than a dragon, and a dragon belches smoke and fire, so logically the little capsule should be the Falcon and the booster should be the Dragon, because a little bird can ride on a dragon by a dragon can't ride on the little bird. The crewed capsule is called Dragon Rider, which should be the term for the people who ride in the capsule, not the capsule itself. And the second stage LH2 engine is called Raptor, but a falcon is species of raptor, piling on more confusion.
Perhaps all the nonsense started with PayPal, where the people you're paying are probably not your pals. If they were, it would let you pay with beer. If SpaceX was trying to baffle the Russians it might make some sense, but then the Air Force. who should've tried baffling the Soviets, ran all the X plane projects in perfect numeric sequence without a gap. If they'd have left gaps it would've caused most KGB agents to dig through trash looking for non-existent fighter prototypes. (I used to think the sequence jumped from the mid-90's (XF-94) directly to the Century Series, but sure enough, the sequence continued with upgrade projects that were dropped or renamed back to their parent designs, the XF-98 and XF-99 were missiles (Falcon and Bomarc), and XF-110 was reserved for the F-4 Phantom.).