Kelly, a redshirt sophomore from Eagle, Idaho, beat out redshirt freshman Michael Eubank and sophomore Mike Bercovici, who was Brock Osweiler's backup in 2011.
At the end of spring practices, Kelly appeared to rank third and Bercovici first, but Kelly took control early in preseason practices and has been running with the first team most of the month.
While the initial announcement was made without comment, it's almost certain Eubank will see significant playing time. He's the best runner of the three, and first-year coach Todd Graham wants to use his quarterbacks in an option running game. Graham has repeatedly said that Eubank will see game action this fall.
Kelly, 6-foot-1, 203 pounds, was 4-of-4 for 31 yards last season, all in an appearance against Colorado.