In rails 3, there's no need for an initializer. Instead we use a

Railstie. Additionally, we now default to app/stylesheets for sass files
and public/stylesheets for css files -- though they can still be changed
after installation or on the command line during project initialization.
Compass is now a gem plugin in a rails environment.

Lastly, in a rails3 environment the compass configuration can now be
changed without restarting the rails server process.

lib/compass/app_integration/rails/actionpack3/railtie.rb

@@ -0,0 +1,17 @@
+require 'compass'
+require 'rails'
+module Compass
+  class Railtie < Rails::Railtie
+    config.to_prepare do
+      # putting this here allows compass to detect
+      # and adjust to changes to the project configuration
+      Compass.reset_configuration!
+      Compass::AppIntegration::Rails.initialize!
+    end
+
+    # Might need to do this...
+    # initializer "compass/railtie.configure_rails_initialization" do |app|
+    #   puts "Initializing compass"
+    # end
+  end
+end

lib/compass/app_integration/rails/installer.rb

@@ -23,9 +23,11 @@ module Compass
             directory File.dirname(config_file)
             write_file config_file, config_contents
           end
+          unless rails3?
             directory File.dirname(targetize('config/initializers/compass.rb'))
             write_file targetize('config/initializers/compass.rb'), initializer_contents
           end
+        end
 
         def rails3?
           File.exists?(targetize('config/application.rb'))
@@ -73,6 +75,9 @@ NEXTSTEPS
         end
 
         def prompt_sass_dir
+          if rails3?
+            nil
+          else
             recommended_location = separate('app/stylesheets')
             default_location = separate('public/stylesheets/sass')
             print %Q{Compass recommends that you keep your stylesheets in #{recommended_location}
@@ -81,8 +86,12 @@ NEXTSTEPS
             answer = $stdin.gets.downcase[0]
             answer == ?n ? default_location : recommended_location
           end
+        end
 
         def prompt_css_dir
+          if rails3?
+            nil
+          else
             recommended_location = separate("public/stylesheets/compiled")
             default_location = separate("public/stylesheets")
             puts
@@ -94,6 +103,7 @@ NEXTSTEPS
             answer = answer.downcase[0]
             answer == ?n ? default_location : recommended_location
           end
+        end
 
         def config_contents
           "# This configuration file works with both the Compass command line tool and within Rails.\n" +

lib/compass/app_integration/rails/runtime.rb

@@ -4,6 +4,9 @@ unless defined?(Compass::RAILS_LOADED)
     require 'action_pack/version'
     if ActionPack::VERSION::MAJOR >= 3
       # TODO figure something out so image_path works with rails integration
+      %w(railtie).each do |lib|
+        require "compass/app_integration/rails/actionpack3/#{lib}"
+      end
     else
       %w(action_controller sass_plugin urls).each do |lib|
         require "compass/app_integration/rails/actionpack2/#{lib}"

lib/rails/init.rb

@@ -0,0 +1,2 @@
+require 'compass'
+require 'compass/app_integration/rails'