Solution – write the correct value into config/environment.rb’s ENV[''RAILS_ENV] while deploying.

So here is my 3 step fix -

Step 1.

I created a new file

lib/set_mod_rails_env.rb

# sets ENV['rails_env'] for mod_rails
# <a href="http://www.megasolutions.net/ruby/search-a-file-and-replace-text-50116.aspx" target="_blank">http://www.megasolutions.net/ruby/search-a-file-and-replace-text-50116.aspx</a>
# Robert Evans'
def ChangeOnFile(file, regex_to_find, text_to_put_in_place)
  text = File.read file
  File.open(file, 'w+'){|f| f &lt;&lt; text.gsub(regex_to_find,
      text_to_put_in_place)}
end

ChangeOnFile("#{ARGV[0]}/config/environment.rb", /#mod_rails_env_here/, "ENV['RAILS_ENV']='#{ARGV[1]}'")

Step 2.

Add the following code to config/deploy.rb

namespace :deploy do
  desc "set ENV['RAILS_ENV'] for mod_rails"
  task :before_restart do
    run "ruby #{current_release}/lib/set_mod_rails_env.rb  #{current_release}  #{stage}"
  end
end

Step 3.

Add the following code to config/environment.rb

# deploy.rb will swap this out for the appropriate rails_env.
# mod_rails apparently need this var in this file (not ./environments/qa.rb)
# do not change the following line. Ruby regexp looks for it.
#mod_rails_env_here

That’s it. Let me know if you know of an easier way.