We present spatially resolved Chandra HETGS observations of the Seyfert 2 galaxy NGC 1068. X-ray imaging and high resolution spectroscopy are used to test the Seyfert unification theory. Fe K-alpha emission is concentrated in the nuclear region, as are neutral and ionized continuum reflection. This is consistent with reprocessing of emission from a luminous, hidden X-ray source by the obscuring molecular torus and X-ray narrow-line region (NLR). We detect extended hard X-ray emission surrounding the X-ray peak in the nuclear region, which may come from the outer portion of the torus. Detailed modeling of the spectrum of the X-ray NLR confirms that it is excited by photoionization and photoexcitation from the hidden X-ray source. K-shell emission lines from a large range of ionization states of H-like and He-like N, O, Ne, Mg, Al, Si, S, and Fe XVII-XXIV L-shell emission lines are modeled. The emission measure distribution indicates roughly equal masses at all observed ionization levels in the range log xi=1-3. We separately analyze the spectrum of an off-nuclear cloud. We find that it has a lower column density than the nuclear region, and is also photoionized. The nuclear X-ray NLR column density, optical depth, outflow velocity, and electron temperature are all consistent with values predicted by optical spectropolarimetry for the region which provides a scattered view of the hidden Seyfert 1 nucleus.
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