A devoted Catholic, Kelly argued for educational concessions for Catholics in the province. Kelly had been in Dublin when Daniel O'Connell won his campaign for Catholic Emancipation in Great Britain, and tension over the place of Catholics in the British Empire also arose in Charlottetown. In 1870, the Liberal government of the province was split over whether or not to publicly fund St. Dunstan's College, a Catholic school. Kelly, strongly in favour of a separate school system, left the Liberal party over the issue, in spite of the fact that current Liberal leader Robert Poore Haythorne was also a supporter. Kelly, along with six other Liberal party Catholics, joined James Colledge Pope's Tories. The defection brought the Tories to power. Pope rewarded Kelly by giving him the position of Chief Commissioner of Crown Lands, a post he kept for two years, and regained through 1875 to 1876, until the school issue cost Pope his control of the House.