We present initial results from a new 440-ks Chandra HETG GTO observation of the canonical Seyfert 2 galaxy NGC 1068. The proximity of NGC 1068, together with Chandras superb spatial and spectral resolution, allow an unprecedented view of its nucleus and circumnuclear NLR. We perform the first spatially resolved high-resolution X-ray spectroscopy of the `ionization cone in any AGN, and use the sensitive line diagnostics offered by the HETG to measure the ionization state, density, and temperature at discrete points along the ionized NLR. We argue that the NLR takes the form of outflowing photoionized gas, rather than gas that has been collisionally ionized by the small-scale radio jet in NGC 1068. We investigate evidence for any velocity gradients in the outflow, and describe our next steps in modeling the spatially resolved spectra as a function of distance from the nucleus.
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