Fixing RubyMine Compile Errors

This happens for every single project that I have tried: If I use terminal and say bundle install or rake db:migrate , it works fine, can see my website , works completely fine.
But If I open project in RubyMine and want to do the same tasks it gives me all sorts or errors. I just copy paster some of them as an example.
I am sure there is some small project setting that should be set somewhere. But don't know what and where
Note: There is a "edit configuration" that is always set on Rails 1.8 and although I change it to Rails 1.9 , still makes no difference.
I am running the latest version of RubyMine on Mac.

/usr/bin/ruby -e $stdout.sync=true;$stderr.sync=true;load($0=ARGV.shift) /usr/bin/rake db:migrate
/Users/JonyIve/.gem/ruby/1.8/gems/bundler-1.2.3/lib/bundler/spec_set.rb:90:in `materialize': Could not find i18n-0.6.1 in any of the sources (Bundler::GemNotFound)
    from /Users/JonyIve/.gem/ruby/1.8/gems/bundler-1.2.3/lib/bundler/spec_set.rb:83:in `map!'
    from /Users/JonyIve/.gem/ruby/1.8/gems/bundler-1.2.3/lib/bundler/spec_set.rb:83:in `materialize'
    from /Users/JonyIve/.gem/ruby/1.8/gems/bundler-1.2.3/lib/bundler/definition.rb:113:in `specs'
    from /Users/JonyIve/.gem/ruby/1.8/gems/bundler-1.2.3/lib/bundler/definition.rb:158:in `specs_for'
    from /Users/JonyIve/.gem/ruby/1.8/gems/bundler-1.2.3/lib/bundler/definition.rb:147:in `requested_specs'
    from /Users/JonyIve/.gem/ruby/1.8/gems/bundler-1.2.3/lib/bundler/environment.rb:23:in `requested_specs'
    from /Users/JonyIve/.gem/ruby/1.8/gems/bundler-1.2.3/lib/bundler/runtime.rb:11:in `setup'
    from /Users/JonyIve/.gem/ruby/1.8/gems/bundler-1.2.3/lib/bundler.rb:116:in `setup'
    from /Users/JonyIve/.gem/ruby/1.8/gems/bundler-1.2.3/lib/bundler/setup.rb:17
Comment actions Permalink

Are you sure that you have correct SDK selected in Preferences | Ruby SDK and Gems?

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well that's the tricky part:

here is what IDE shows me in that dialog:

Screen Shot 2013-01-21 at 9.40.23 AM.png

so looks like rails 1.8.7 ?

But I am using 1.9 and here is how I set it in edit config settings:

Screen Shot 2013-01-21 at 9.45.32 AM.png

But even more confusing is that there are much more to select from :

Screen Shot 2013-01-21 at 9.46.25 AM.png

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It's better to specify 1.9 SDK in project settings (Preferences | Ruby SDK and Gems) if you're doing development using 1.9 SDK


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