Rails Dependency Problem? Error "Can't activate rails... already activated"

I am in the process of updating my application from Rails 2.0.2 to 2.3.5. It is working in the new version in my development server but in production, starting the application fails with an error:

Command used to restart application:
$ ./script/process/reaper --action=kill --dispatcher=dispatch.fcgi Resulting Error:
/usr/lib/ruby/site_ruby/1.8/rubygems.rb:233:in activate': can't activate rails (= 2.0.2, runtime) for [], already activated rails-2.3.5 for [] (Gem::LoadError)

    from /usr/lib/ruby/site_ruby/1.8/rubygems/custom_require.rb:35:in `require'

Any ideas as to what might be causing this or what I should do to troubleshoot?

I have searched my own code and cannot find any dependencies on Rails version 2.0.2. I have also tried disabling all plugins and the error persists. What else can I check to determine what the problem may be?