  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 Chandra's 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.
