Although this image is from June 2011, it documents an adult female with a brood of very young Common Mergansers resting on a log in Salmon Creek. The ducklings in Skip's photo are too young to fly, providing strong evidence that the mergansers nested somewhere nearby (or at least upstream).
Common Mergansers are cavity nesters, often utilizing old holes made by Pileated Woodpeckers. They will also nest on the ground in rock crevices, hollow logs, or holes in the ground.
Females incubate their eggs for ~28-35 days. After hatching, the young only remain in the nest for 24-48 hours. They are then led to the water by the female. The female broods the young for the first few weeks, but they can swim and dive within 1-2 days after leaving the nest. Although the juveniles form cohesive broods, the female usually leaves them before they can fly at approximately 30-50 days after they hatch.
P.S. Facts above from The Birds of North America account by Mallory and Metz (1999).